Viable middle class key to growth
by Sandhya Jain on 03 Jul 2012 13 Comments

The harsh truth of the American economy has forced Nobel laureate Joseph Stiglitz to admit that conventional wisdom about ‘trickle-down economics’ is a fraud, and that a country without a viable middle-class is teetering at the edge of a precipice. This means that every nation must tax the rich in proportion to the wealth they cream off the economic pie, empower the middle class to meet its aspirations, and ensure opportunities for those below to rise according to their enterprise and ability. It’s a well known formula that has been turned on its head in recent years by peddlers of derivatives, toxic assets, and infamous bailouts.


In India too, liberalization-turned-globalization spells growing misery for increasing numbers. As in the halcyon days of the license-permit raj, the middle class is being squeezed under the vice-like grip of rising prices, falling incomes, stagnant growth; it is worse-off than the hardworking poorer rungs of society which don’t pay taxes on their earnings.


The disposable incomes of the poor often match that of an average middle class family. Hence, long before private schools were forced to reserve 25% seats for free education for EWS children, inspired dhobis and drivers of urban India began sending their wards to good English medium schools (I say this with respect).


So, while the lowest rung of society thrives on various entitlements, ability to earn, and freedom from taxes, the topmost layer commandeers the largest share of national resources in concert with the political-bureaucratic class. The middle class, however, is being pushed towards the poverty line.


Worse, the political masters want only to serve rich, low-performance corporates at the expense of the rest. As Stiglitz points out, globalisation gives capital a freedom and mobility denied to workers, who can find themselves wage-less at a moment’s notice when such rootless capital quits a country for higher profits elsewhere. It is the logic of such capital to seek and perpetuate depressed wages. Hence it can never create, much less sustain, a middle class. Only a vibrant domestic economy with rooted capital can do that; a conventional wisdom overthrown by predatory capitalism.


The evil effects of economic de-nationalization are beginning to be understood in countries around the world. Contrary to the spin doctors’ hype, globalization has not produced growth, social and political stability, or a more egalitarian society, because it has failed to produce equal opportunity.

Hence the growing concern over the unwavering commitment of the political class (barring the left parties) to the virtual loot of non-renewable national resources; and the privatization of vital necessities like electricity and water. Whatever the old Indian experience with the Nehruvian rate of growth and shortage economy, a new generation of professionals in various public sector organizations have struggled to improve institutional performance and integrity; the Delhi Metro, VSNL, BSNL, ONGC (under late Subir Raha) are a few examples. We have also seen the rise of whistleblowers who paid the ultimate price for demanding integrity – Satyendra Dubey and Manjunath to mention only the early martyrs to the public cause.


Hence, the canard that government corporations do not perform as efficiently as the private sector is not true. Yet the private sector was allowed to takeover gigantic public assets in the name of infusing capital and improving efficiency. After over 12 years of privatization of the Delhi power sector, citizens have only seen the electronic meters replaced thrice for more ‘efficient’ billing and an unconscionable rise in bills for the ordinary man, while the political elite in Lutyens Delhi has received privileged treatment. Sadly, no political party objected to the NDMC being created as a non-elected body to cater to politicians and bureaucrats; there should be a single municipal agency and equal service to all citizens.


Delhi chief minister Sheila Dikshit is unspeakably arrogant – recall her callous statements when young girls were abducted, raped, murdered; her mean comments when raising bus fares in order to finance the extravagant low floor buses with low capacity to carry commuters. After some initial reports about their huge maintenance costs, a kind media has abandoned the truth about the financial outlays and performance of these white elephants.


Electricity privatization was always to benefit the private sector; the latest 26% hike in tariff aimed at maintaining profit margins. The Delhi Electricity Regulatory Commission is widely seen as serving the discoms, just as TRAI served the telecom operators. No one accepts the legitimacy of the hike just ten months after last year’s 22% raise. If the purported losses of Rs. 6000 crores incurred by the private players are genuine, they should admit that privatization experiment has failed and hand electricity back to the State government. We should return to the system of integrated power generation and distribution, with stringent checks on theft.


Meanwhile, a CAG audit of power company balance sheets since the launch of privatization is imperative, along with an annual list of investments made by each power utility, if any, in infrastructure development. If it transpires that all that the companies have done is distribute power generated by the public sector at a higher profit margin; changed meters without saying what was wrong with the ones being replaced, some heads must roll. We must also be told why the enhanced tariff is steeper than what the discoms demanded.


Moreover, the private companies were selected on the basis of financial standing and experience. So why did they fail to pay the dues of the State-owned NHPC, DVC and NTPC, and force the city to suffer outages?


Overall, this nearly 50% power tariff hike comes on top of unprecedented food and fuel inflation, with no respite on the horizon. A repeated failure to undertake rainwater harvesting has generated a severe water crisis; citizens are being bilked by private tankers who buy water from the Jal Board and sell it at huge profits. The Jal Board is the next target of privatization.


Thus, with water bills set to rival power bills, the common citizen lives in a surreal world where the Centre is absorbed with saving a multinational corporation from a retrospective tax and a municipal corporation ruled by an opposition party wants to solve the city’s woes by demolishing a lovely market to build a shopping mall! As Queen Marie Antoinette advised, ‘If there is no bread, then let them eat cake.’


The author is Editor,

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