Issue 66 Vol III, June 30, 2008

A N A L Y S I S

Capitalist economy: food shortages, rising oil prices and credit crunch - I
Pritam Singh

AS global capital moves East, developing economies need to understand the importance of not aping the entrenched lifestyles of the West. There are three interlocking crises currently haunting the global capitalist economy: food shortages, oil-price hikes and the credit crunch.

This convergence of crises in agriculture, energy and the credit market is linked, to some degree, to an ongoing spatial shift in global capitalism. The hitherto unquestioned economic dominance of older capitalist countries is now being increasingly challenged by the rise of new economic powers, particularly symbolised by the so-called BRIC countries – Brazil, Russia, India and China. To emphasise this global shift, researchers point to the 18th century as the ‘French’ era, the 19th century as British, and the 20th century as American. Now, they are suggesting that the 21st century will be an Asian century.

This changing balance is a manifestation of what can be thought of as the ‘law of uneven and combined development’. According to this idea, the world capitalist economy is one integrated whole. Its various national and regional components are shaped in different ways by the specific modes in which this economy functions. The national differences in technology, marketing, product range, agriculture and industry linkages, financial institutions, natural and human resources, political and legal structures, socio-cultural hierarchies, military institutions and the bargaining power of competing classes – all of these combine in complex ways to determine the competitive powers of various countries in the global economy.

Changes in the matrix of these forces inevitably lead to a decline in the economic, political and military power of some countries, and the rise of others. As such, the economic, technological and, more importantly, military hegemony of the United States was strengthened during the 1990s by the collapse of Soviet Union. This led to the triumph of the so-called Washington Consensus, led by the International Monetary Fund and the World Bank, as well as to the infamous boast by the political theorist Francis Fukuyama about the “end of history”. This triumphalism has by now been punctured, if not wholly reversed.

Hardly triumphant
At a military level, American hegemony has been undermined by the continuing crises in Iraq and Afghanistan. Due to the interventions in these countries, the American military, as with the militaries of its allies, is showing signs of having overstretched itself. Were this not the case, it is possible that the US would not have opted for what is essentially a non-interventionist approach to the radical political transitions that have been taking place in Latin America and, in the most recent instance, within South Asia as in Nepal.

In terms of economics, the neo-liberal triumphalism has suffered a serious setback due to the crisis currently taking place in the world’s largely unregulated financial markets. What is being referred to as the sub-prime-mortgage crisis, which started in America, is a direct outcome of fierce competition in unregulated markets, in which banking and other financial institutions resorted to unsustainable levels of lending for the sake of short-term gains. The sub-prime crisis has manifested itself in the credit crunch in the US, with fallout also extending to Europe due to the close integration of financial institutions across the Atlantic. The credit crunch, in turn, is leading to a rise in borrowing costs by businesses.

All of this is adversely affecting general economic activity, leading to a slowdown of economic growth rates in both the US and Europe. In an unprecedented move, the central banks on both sides of the Atlantic are being forced to come together to devise regulatory structures to deal with the credit crisis and its offshoots. Interest rates have been slashed in the US, UK and some other European countries, and the central banks are under significant pressure to pump extra liquidity into the credit markets. The deliberate supply of extra money is becoming necessary to ease the existing shortage in credit availability. This coordinated effort by the central banking authorities is a stark admission of the failure of the ideology of deregulation of markets, which had gained mounting favour in recent years.

In spite of the slowdown, the crisis is being further compounded by a rise in inflation, a result of the crisis in the agricultural and energy markets. Oil is a non-renewable resource, and its total global stock is relatively fixed. The political and military situations in West Asia, which has two-thirds of the world’s known oil reserves, is further contributing to a situation of reduced supply of oil in the present and of uncertain supply in the future.

As such, the search for non-oil energy resources is becoming a pressing imperative for the energy-intensive character of advanced capitalism. John McCain, the Republican candidate in the upcoming US elections, has recently been harping on the US’s oil vulnerability in light of the continuing military crisis in West Asia. He has promised an energy policy “that will eliminate our dependency on oil from the Middle East”, and has openly acknowledged a link between America’s oil and military strategies by stating that his promised energy policy will be aimed at preventing the US “from having to send our young men and women into conflict again”.

Indeed, America’s dependence on oil has been increasing, even as the price of oil on the global market has been skyrocketing. At the time of the first worldwide oil crisis, in 1973, 33 percent of America’s oil needs were being met by imports; now, the country’s import dependence has reached nearly 60 percent. According to some estimates, this will rise to 70 percent by 2020. The price of oil has risen from USD 26 a barrel, shortly before the Iraq invasion in 2003, to the record high of USD 130 a barrel now. And, according to estimates by Goldman Sachs, one of the largest Wall Street investment banks trading oil, it could rise to USD 200 dollars a barrel in the next two years, and possibly by the end of this year itself.

Foodgrains, oilgrains
Rising oil dependence, the uncertainty about future supplies from West Asia, and the rising price of oil are the driving imperatives behind the new, intense competition for biofuel alternatives to oil, in America and elsewhere. In the past, US foreign and domestic policy has been decisively influenced, if not controlled, by powerful oil corporations; likewise, the opposition of oil companies to research in non-oil resources has hampered efforts to develop renewable energy sources in the country. In the current context, however, the US seems to have charged to the forefront of the search for biofuels. Even the big oil companies have changed their long-held stances, and are now investing in developing biofuels.

The search for biofuels has had direct implications for the volume of global production, supply and availability of food. Large areas of land that were hitherto used for food production have been diverted towards growth of biofuel crops, such as corn in America and sugarcane in Brazil. The US is the world’s largest exporter of cereals, and has more than one-third share in the world exports of wheat and other food grains. In America, corn is currently the major source of biofuels, and this shift has inevitably resulted in diversion from food production. Globally, bio-ethanol production doubled between 1990 and 2003, and is projected to double again by 2010. As such, the global food shortage is significantly, though not wholly, the result of decline in food output as a result of the increase in biofuel production and the decline in land area used for food output. This is the supply-side dimension of the current global food shortage.

On the flipside, of particular importance is the increased demand for food as a result of the prosperity of some sections of the population in the BRIC economies. The past few decades of continuing prosperity in advanced capitalist countries, coupled with the emerging prosperity of a section of the population in the Asian and Latin American capitalist economies, have led to an increase in demand for meat products. According to the Food and Agriculture Organisation estimates, most of this increase in the next seven years will occur in the developing countries, where consumption is expected to grow by 2.7 percent per year compared to 0.6 percent per year in rich countries.

The mismatch between the supply of and demand for food is only one factor in the rise in food prices. These prices are also being pushed up by the rise in oil price, which manifests itself in rising production and transportation costs of food. Another contributory factor is the role of what is referred to as speculative capital. The speculative capital, through future markets and forward trading in foodgrains, can manipulate a rise in price that is disproportionately more than what would be warranted by the current forces of demand and supply. Speculative capital, by its very nature, feeds on food shortages and the misery caused by it. Back in 1918, responding to speculators’ roles in creating food shortages, Vladimir Lenin gave a famous speech in which he said, “We can’t expect to get anywhere unless we resort to terrorism: speculators must be shot on the spot.” While such drastic measures are questionable, stringent measures are needed to tackle speculation linked to food-commodity prices.

Unlike in advanced economies, in the developing world food constitutes a major component of household expenditure, and the rise in food prices is likely to push up wage demands. It is already leading to a series of social and political conflicts in several such countries, particularly in Bangladesh. Even in the advanced capitalist economies, such as the UK and Germany, trade unions are reporting unease and increasing militancy among their members over the rise in food prices, along with the rise in oil prices. The advanced capitalist economies had a long, lucky run over the past few decades, largely due to low commodity prices. But the rise in those prices is now putting a serious question mark over the sustainability of growth in these countries.

[Courtesy http://www.himalmag.com/2008/june/cover_balance.htm
Dr Pritam Singh is the Director of the Postgraduate Programme on International Management and International Relations at Oxford Brookes University Business School. He is the author of Federalism, Nationalism and Development: India and the Punjab economy published recently by Routledge, London and New York.]

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Punjabi renaissance
Ishtiaq Ahmed

MY essay last week "Punjabis without Punjabi" (May 24) evoked very strong emotions – mostly full of enthusiasm to do something to ascribe respectability to the Punjabi language. Before I present some ideas on that theme, a few corrections are in place with regard to basic data.

My colleague at ISAS, Dr Sridharan, pointed out that the figures of 54 percent Muslims, 29 percent Hindus and 14 percent Sikhs refer to the 1941 Punjab census, which included the predominantly Hindi-speaking areas of the Ambala division of pre-partition Punjab inhabited mainly by Hindu Jats. If those areas are subtracted, then the percentage of Muslim Punjabis should be greater than 54 percent, while Sikhs probably are greater in number than Punjabi Hindus. In my opinion, however, there is another angle to this. Pakistan's 1981 Census shows Saraiki as a different language and not a dialect of Punjabi. It returns 48 percent as Punjabi-speakers and nearly 10 percent as Saraiki-speakers. Counting this way, the number of Punjabi-speaking Muslims should go down.

Another friend, Moni Chadha, was of the opinion that if the Jammu Hindus and some from Himachal Pradesh who speak Dogri (a dialect of Punjabi) are included, then probably Punjabi Hindus and Sikhs are equal in numbers. I think someone should look into these figures and update us with more accurate statistics. Also, some Sikh friends pointed out that one Indian president has been a Punjabi: Giani Zail Singh (1982-1987).

The problem of identity is most tricky and in the social sciences we are still struggling to understand this phenomenon. My own take is that identity is always multidimensional and people adjust and respond according to circumstances. The tragedy of many of us is not that we cannot distinguish between religious affiliations and our linguistic and cultural roots. We all speak Punjabi but are not literate in it. I cannot read the Gurmukhi script that is used in Indian Punjab, and with considerable difficulty read the Persian script (these days called Shahmukhi). For someone like me who has lived most of his life outside Punjab but wants to learn Punjabi, nothing is more attractive than to want to do it in a script that helps him follow what Punjabis are thinking in both Punjabs as well as globally. The Roman script would be the easiest to begin to read and write in Punjabi. Natasha Shaikh, a student at Toronto University, Canada, expressed the same preference for the Roman script.

Learning Punjabi in Roman script would by no means render Gurmukhi and Shahmukhi redundant. The Turks, Malaysians and Indonesians use the Roman script while Bengali Muslims use the Bengali script deriving from Devanagri. I see no reason why Muslim, Hindu, Sikh, and Christian Punjabis cannot begin to communicate with one another in the Roman script. They speak a common language but have no common script to relate to each other.

In my essay I argued that Punjabi has never been the language of an independent sovereign state, though in Indian Punjab it is the official language. This can be considered an advantage in the 21st century as it frees us from impossible political adventures. The second half of the 20th century was the era of decolonisation and creation of nation-states in Asia and Africa, with tightly demarcated international boundaries and border controls. They replaced the earlier frontiers and borders that loosely indicated the realm of different rulers. Pakistan and India came out of the logic of such territorially-demarcated nation-states.

The 21st century is going to be a movement in the opposite direction. International boundaries between states, especially in the same region, will become less and less functional and more and more symbolic, because trade and commerce will set in motion processes that will require the movement of capital, goods and people on a grand scale. Moreover, the need for cooperation on the environment, water resources and so on will render autarky unworkable. Regional integration is bound to come and it will be irreversible.

Given the history of 60 years of mutual antipathy and hostility, India and Pakistan are not going to become friends easily or quickly. Whenever that happens, it will have to be preceded by Punjabis on both sides and in the Diaspora playing their historical role in building trust and solidarity. As the most globalised of all South Asian nationalities, Punjabis are placed in a strategic situation to uphold cosmopolitanism and internationalism. Therefore, we would need a Punjabi idiom, vocabulary and script that are commensurate with regionalism and globalism.

The Punjabi renaissance must pick and choose from the variegated and contradictory legacies and heritages that have devolved upon us in the historical process. We need to discuss freely and frankly what is good in our heritage and what is bad, and expunge from our lives those aspects of our heritage that have justified oppression of one sort or another. All this presupposes that a strong and vibrant Punjabi intellectual movement is in place to lead the Punjabi renaissance.

The Academy of the Punjab in North America (APNA), under the very able leadership of Safir Rammah, already provides classical and contemporary Punjabi writings in both Shahmukhi and Gurmukhi scripts. APNA's journal, Sanjh (Common Bond), launched last year simultaneously from Lahore and Ludhiana, is a pioneer in connecting the two Punjabs. APNA also advises on software tools and programmes to enable translations into the Roman script. We need many more such initiatives but also concerted efforts to write in Roman to effect an efflorescence of Punjabi culture that is inclusive and not exclusive.

[The writer is a professor of political science and a visiting senior research fellow at the Institute of South Asian Studies (ISAS), National University of Singapore. Email: isasia@nus.edu.sg]

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Preventing a ‘1962’ in our seas
Randeep Wadehra & Amar Nath Wadehra

Remember Diego Garcia? This fleck of an island in the Indian Ocean had sent the Indian political as well as military establishment into a convulsive rage, screaming blue murder, when the USA had established a full fledged naval base during the Cold War era. Indian diplomats pulled out all stops and feverishly mobilized world opinion to get the Indian Ocean declared a zone of peace, in vain though. All this when the island is located a good 1600 Km away. However, when Sri Lanka – which is just one Hanuman leap away from the Indian shores (Rameswaram) – signed a strategically significant Acquisition and Cross-Servicing Agreement (ACSA) with the Americans – virtually enabling them to acquire a naval base for a song – India didn’t let out even a yelp. What could the reasons be? It’s a simple sounding one with deep and long term ramifications for India’s commercial and strategic security, viz., the changed post Cold War scenario.

India has a vast, 7,500 Km long coastline – with Bay of Bengal in the east and Arabian Sea in the west – and an exclusive economic zone totaling 2.2 million sq. km and another 1.5 million sq. km may be added in 2009-10 if India’s claims under the United Nations Convention for Laws of the Sea (UNCLOS) are accepted. All these offer tremendous potential to meet India’s growing needs for food, fuel and minerals. Add to this the various island territories that could be gainfully harnessed for economic and strategic purposes. Moreover, India imports crude oil and natural gas from West Asia, Africa and even East Asia as well as the Russian Far East and Australia. In the past decade various Indian oil companies have acquired stakes in countries like Cuba, Venezuela, Russia, Australia, Vietnam, Malaysia and Myanmar. The petro-products from these installations are supplied not only to India but also to other countries. Moreover, thanks to globalization the international trade has witnessed exponential growth. The Indian Ocean has acquired unprecedented importance as a major waterway for global trade and commerce. Half the world's containerized freight, a third of its bulk cargo and two-thirds of its oil shipments pass through the sea lanes of Indian Ocean that connect Africa, the Middle East, South Asia and East Asia with Europe and the Americas. But there are straits, termed as chokepoints because these can be used by hostile navies to blockade trade routes; the critical chokepoints are the Strait of Hormuz and the Strait of Malacca, to name just two. This has attracted lots of active interest on the part of major powers like China, America, Japan and scores of other countries. This has triggered off a race among big powers to consolidate their presence in Indian Ocean; hence the frenetic wooing by China and USA of the littoral states. This suits the latter who look askance at India’s growing military and, lately, naval power.

China has emerged as a major arms supplier to Pakistan, Myanmar, Bangladesh and Sri Lanka in the region. It is also engaged in building or upgrading ports in Pakistan (Gwadar), Bangladesh (Chittagong), Sittwe (Myanmar) and Hambantota (Sri Lanka). All these factors have contributed to enhancement of India’s strategic imperatives. Presently, it is engaged in multipronged diplomatic initiatives that would prevent destabilization of the Indian Ocean region. The confidence building measures vis-à-vis Pakistan and Bangladesh are already on. Instead of taking a hard line on Myanmar’s junta India has preferred to go ahead with trade deals and expand mutual ties in other fields. However, although the Indian Coastguard has been conducting joint patrols with the Sri Lankan navy, and India has a presence in Trincomalee, much more needs to be done. It is time to help the island nation stamp out the LTTE menace and usher in peace. The disturbed conditions in Sri Lanka are facilitating the presence of powers not all of whom are friendly to India. The growing Chinese presence in the region can prove to be detrimental to our strategic interests, especially if a face off becomes inevitable.

Having a strategic pact with Sri Lanka would be in our interests for several reasons. Firstly, it would break the ‘necklace of pearls’ that China is fashioning so assiduously – right from West Asia to South East Asia. Although this ‘necklace’ is ostensibly being made for protecting Chinese trade by sea its military significance cannot be ignored. With Sri Lanka as our strategic ally and a friendly American presence at hand India can pre-empt the replication of 1962 in the South. If tons of explosives could be smuggled by sea into Mumbai, undetected, for perpetrating the 1983 blasts, think of the havoc that a fleet of Chinese submarines can wrought on our offshore strategic and economic assets.

[Email: randeep_wadehra@yahoo.co.in]

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European parliament votes jail for asylum-seekers
David Cronin of IPS writes from Brussels

IN what has been described as one of the European Union's "darkest days", the European parliament has voted to allow rejected asylum-seekers be detained for up to 18 months before being deported.

The EU's "returns directive" -- approved by members of Parliament (MEPs) Jun. 18 -- is officially designed to provide a common approach to the length of time under which migrants facing expulsion can be kept in custody. At present, there is no mandatory limit on the duration for which migrants can be held in seven of the Union's 27 countries.

Under the new law, a threshold for the maximum length of detention would be set at six months, yet this could be extended for a further 12 months in many circumstances.

The MEPs' decision was taken despite strong opposition from a wide coalition of churches and groups campaigning on human rights and civil liberties, who regard the 18-month limit as an excessive measure, particularly given that most migrants have not been convicted of any crime.

Souhayr Belhassen, president of the International Federation for Human Rights, argued that the timing of the European Parliament's vote was particularly unfortunate as the 60th anniversary of the Universal Declaration of Human Rights will be celebrated later this year.

"By adopting this text, the European legislator lets us understand that migrants are not human beings like any other, provided with rights and to whom states owe obligations," Belhassen added. "They are dehumanised."

Bolivian President Evo Morales was also highly critical of the directive, which he denounced as a "huge infringement of human rights."

"Mothers with children could be arrested, without regard to family and school, and be put in detention centres, where we know depression, hunger strikes and suicides happen," he said. "How can we accept it?"

Writing in British newspaper The Guardian, Morales called on Europe to recognise the positive contribution that migrants bring to the continent's economy, rather than seeking to lock them up.

"The EU is now the main destination for migrants around the world, because of its positive image of prosperity and public freedom," he said. "The great majority of migrants contribute to, rather than exploit this prosperity. They are employed in public works, construction, cleaning, hospitals and domestic work. They take the jobs that Europeans cannot or will not do."

It is not just the provisions on jailing asylum-seekers that have proven contentious. Amnesty International has opposed the five-year ban that the directive would place on a deportee re-entering EU territory, complaining that this sets "an extremely bad example to other regions in the world." According to Amnesty, the law does not contain sufficient safeguards to ensure that child migrants who are unaccompanied by their parents will have their needs taken care of.

Other groups have protested that the directive would allow for deportations to occur to countries where they would be at risk of torture, harassment or even death. In some cases, migrants would be expelled to countries other than their own, according to some interpretations.

"The text allows -- in an implicit manner -- an unaccompanied minor from country A to be expelled to country B," said Patrick Peugeot, president of the French pro-refugee organisation Cimade. "How can we imagine something like this?"

Within the Parliament, however, the directive was defended by its major political groupings. MEPs voted 367 in favour of the proposal, with 206 against and over 100 abstentions.

Patrick Gaubert, a member of the assembly's largest group, the centre-right European People's Party, said that while the directive is "not perfect", it contains a number of safeguards. Detentions would be subject to judicial scrutiny and in principle deportations would take place with the consent of the individuals involved, he argued, claiming that the arbitrary standards in place until now would be replaced by proper rules.

"While the propaganda talks about a 'xenophobic move', Europe is actually taking its responsibilities seriously, and refuses to leave these vulnerable persons in a legal void," said Gaubert.

Dutch Liberal MEP Jeanine Hennis-Plasschaert supported his view, arguing that the proposal approved by a majority of her colleagues followed much bargaining between the Parliament, the European Commission and EU governments. "It should be crystal clear that this compromise package puts in place rules where none existed before," she said.

But Giusto Catania, an Italian left-wing MEP, accused EU governments who have supported the directive of taking an "authoritarian approach".

"This week may go down as some of the darkest days in the EU's history," he said. "These measures will be decisive for the eight million irregular migrants present in Europe, decisive for those men and women, who, escaping wars and hunger, try to reach our shores." [IPS]

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