Month: January 2010

A combustible mixture of race, religion and politics

The delicate political balance between Malaysia’s ethnic and religious groups has been rocked by a series of attacks against churches, blamed on Muslim fanatics. They began after the High Court ruled on December 31st that a Catholic weekly, the Herald, could use the term “Allah” in its Malay-language edition.

This overturned an existing ban and offended some Muslims, who claim that “Allah” is exclusive to Islam, even though the word means “God” in Malay, and is used by other faiths in, for example, Indonesia. The supposed fear is that Christians are plotting to convert Malays, who make up some 60% of the population and, under the constitution, must also be Muslims. So sensitive is the issue that on January 6th, after an appeal by the government and with the consent of the Catholic church, the High Court suspended its own ruling.

By then, tempers had flared. Several Islamic groups planned to stage protests against the ruling on January 8th. Hours earlier, arsonists descended on three churches in Kuala Lumpur. By January 14th nine churches, a convent and a Sikh temple across the country had been hit. The prime minister, Najib Razak, condemned the attacks, offered compensation, and stepped up security around churches. Prominent Muslims spoke out against the violence. In fact, many Muslims were unperturbed by the High Court ruling. The Islamic Party of Malaysia, or PAS, part of the main opposition coalition, argues that people of the “Abrahamic” faiths may indeed use the word “Allah”.

Some analysts saw the attacks as evidence less of a broader lurch towards extremism than of the fragility of Mr Najib’s own standing. Since an election in March 2008, when the ruling Barisan Nasional coalition suffered its worst-ever performance, competing groups have been jostling for influence. His United Malays National Organisation (UMNO), the main party in the coalition, is keen to be seen as the defender of Malay-Muslim identity. Opposition parties are meanwhile arraying themselves as beacons of moderation.

They accuse Mr Najib of pandering to UMNO’s far right. Last year the government dithered before prosecuting a group of Muslims who had offended Hindus by using a cow’s severed head to demonstrate against the building of a temple. And on January 7th Mr Najib said the government could do nothing to stop the planned demonstrations—though the government has had few qualms about squelching past protests. The extremists may have taken Mr Najib’s demurral as a green light.

Economist for more
(Submitted by reader)

Fifty Indonesian police officers have received special commendations from the National Police Headquarters for killing the Papuan independence leader, Kelly Kwalik, last month.

The Indonesian police shot Kelly Kwalik in the thigh on December 16, 2009, and he died shortly after. The exact circumstances of his death remain unclear.

The Indonesian military and police have a long history of extra-judicial killings, arrest and torture of those suspected of supporting West Papua’s independence movement.

Despite having been involved in rebel activities with the Free Papua Movement (OPM) in the past, Kwalik had for many years renounced violence and had committed to seeking independence by peaceful means. Only weeks before his death he met with senior Indonesian security officials, at their request. Many Papuans suspect that he may have been lured into a trap by the promise of another such meeting.

Police have defended his killing by claiming that Kwalik was involved in the 2002 ambush of a convoy of buses that killed three teachers near the huge US-owned Grasberg copper and gold mine. They also said they believed he was behind a number of attacks in the mine area last year which had left eight people dead. However, the police at the time of both the 2002 and more recent killings had rejected the suggestion of OPM involvement.

Survival is calling on the government of Indonesia to investigate the circumstances of Kwalik’s death fully and to ensure that those members of the security forces who commit acts of violence against the Papuan people are brought to justice.

Survival

by LANGSTON HUGHES

Let America be America again.
Let it be the dream it used to be.
Let it be the pioneer on the plain
Seeking a home where he himself is free.

(America never was America to me.)

Let America be the dream the dreamers dreamed–
Let it be that great strong land of love
Where never kings connive nor tyrants scheme
That any man be crushed by one above.

(It never was America to me.)

O, let my land be a land where Liberty
Is crowned with no false patriotic wreath,
But opportunity is real, and life is free,
Equality is in the air we breathe.

(There’s never been equality for me,
Nor freedom in this “homeland of the free.”)

Say, who are you that mumbles in the dark?
And who are you that draws your veil across the stars?

I am the poor white, fooled and pushed apart,
I am the Negro bearing slavery’s scars.
I am the red man driven from the land,
I am the immigrant clutching the hope I seek–
And finding only the same old stupid plan
Of dog eat dog, of mighty crush the weak.

I am the young man, full of strength and hope,
Tangled in that ancient endless chain
Of profit, power, gain, of grab the land!
Of grab the gold! Of grab the ways of satisfying need!
Of work the men! Of take the pay!
Of owning everything for one’s own greed!

I am the farmer, bondsman to the soil.
I am the worker sold to the machine.
I am the Negro, servant to you all.
I am the people, humble, hungry, mean–
Hungry yet today despite the dream.
Beaten yet today–O, Pioneers!
I am the man who never got ahead,
The poorest worker bartered through the years.

Yet I’m the one who dreamt our basic dream
In the Old World while still a serf of kings,
Who dreamt a dream so strong, so brave, so true,
That even yet its mighty daring sings
In every brick and stone, in every furrow turned
That’s made America the land it has become.
O, I’m the man who sailed those early seas
In search of what I meant to be my home–
For I’m the one who left dark Ireland’s shore,
And Poland’s plain, and England’s grassy lea,
And torn from Black Africa’s strand I came
To build a “homeland of the free.”

The free?

Who said the free? Not me?
Surely not me? The millions on relief today?
The millions shot down when we strike?
The millions who have nothing for our pay?
For all the dreams we’ve dreamed
And all the songs we’ve sung
And all the hopes we’ve held
And all the flags we’ve hung,
The millions who have nothing for our pay–
Except the dream that’s almost dead today.

Poets for more

The ruling issued Thursday by the United States Supreme Court lifting long-standing restrictions on corporate financing of elections represents a far-reaching attack on democratic rights. The 5-4 decision ensures that the American political system will be dominated even more directly and completely by the financial elite.

The ruling is a naked assertion of the interests of the American financial elite. It lays bare the reality of class rule beneath the threadbare trappings of democracy in America.

The decision in the case Citizens United v. Federal Election Commission, which overturns more than 100 years of legal precedent, strengthens the grip of big business over the political process. It gives legal sanction to the buying of politicians and offices at every level of government to do the bidding of the rich.

The ruling cloaks this attack on democratic rights as a defense of freedom of speech. Its basic premise—that corporations are entitled to the same rights of speech and political advocacy as individuals—is patently absurd. It makes a mockery of the democratic and Enlightenment principles that animated the revolutionaries who led the American War for Independence and drafted the Constitution. Jefferson, for one, counted the influence of finance on politics as “more dangerous to our liberties than standing armies.”

The ruling is the outcome of decades of political reaction, the ever-greater concentration of wealth in the hands of a narrow elite, and increasing attacks on the social conditions of the people.

It culminates years of anti-democratic decisions by the Supreme Court. For the past three decades, the high court has whittled away at civil liberties and the ability of citizens to seek redress in cases of corporate criminality. In recent years it has upheld and expanded the ability of the executive branch to wage war, invade citizens’ private lives, and arrest and incarcerate without trial those the president declares to be enemies. The Supreme Court has consistently ruled against the rights of third-parties, especially left-wing parties, to ballot access.

Barely ten years ago, the same institution, in another politically-driven 5-4 ruling, halted the counting of votes in Florida in order to sanction the theft of the 2000 presidential election and install in power the Republican candidate George W. Bush, who had lost the popular vote.

The Democratic Party is complicit in the attacks on democratic rights, from its abject acceptance of the Supreme Court’s installation of Bush, to its support for the wars in Afghanistan and Iraq, to its cowardly refusal to mount a filibuster to block the confirmation of Bush nominees Justice Samuel Alito and Chief Justice John Roberts.

It was Roberts who played the critical role in seizing on Citizens United v. Federal Election Commission—a narrow lawsuit challenging the applicability of the McCain-Feingold restrictions on campaign advertising to a particular anti-Hillary Clinton documentary—and using it to undo all restraints on the corporate financing of politics.

This in a country where corporate money already manipulates elections, bribes politicians and largely dictates government policy. As Justice John Paul Stevens noted in his dissent, “While American democracy is imperfect, few outside the majority of this Court would have thought its flaws included a dearth of corporate money in politics.”

World Socialist Web Site for more

by PRAFUL BIDWAI

In communist veteran Jyoti Basu’s death, India has lost its most illustrious politician and the last leader who embodied a personal link between the many phases of Indian politics since the early 1940s.

Basu was not just a major Left leader in a country with the world’s biggest Communist party outside China. He participated in numerous processes which shaped politics, including trade union and peasant movements, radicalisation of the intelligentsia, contestations between social-group identities, and crystallisation of the party system.

Unlike other distinguished communist leaders — S A Dange, E M S Namboodiripad, P C Joshi, B T Ranadive, Gangadhar Adhikari, P Sundarayya and A K Gopalan — Basu was neither a theoretician nor a mass leader. Nor was he an organisation man such as Harkishan Singh Surjeet, the last general secretary of the Communist Party (Marxist), or Pramode Dasgupta, who built and controlled the CPM party machine in West Bengal. Basu chose to concentrate on his greatest strengths — electoral politics, administration and governance.

Basu was a party pragmatist with a managerial style. He worked on the public side of the CPM and built successful election-oriented social coalitions. He was chief minister of West Bengal — a state with 80 million people — continuously for 23 years. This is a world record. Basu could have stayed on as chief minister beyond 2000 if he wanted to.

Basu was a maverick in many ways. When the undivided Communist Party split in 1964, he was the only individual from a group of privileged European-educated young communists who went with the CPM. All others, including Adhikari, Indrajeet Gupta, Hiren Mukherjee and Nikhil Chakravartty, stayed with the CPI, as did most party intellectuals.

More significantly, Basu unquestioningly accepted the CPM’s organisational hegemony. He was an unbending party loyalist, who believed in orthodox forms of discipline and “democratic centralism” — based on concentric circles of authority within the party, and the norm that party members must unquestioningly follow a decision taken after internal debate.

In 1996, Basu famously became “the best prime minister India never had.” The United Front unanimously offered the position to him. But the CPM central committee rejected the offer. The decision was driven by a narrow control-based consideration: with its 51 MPs, the Left wouldn’t be able to dominate the Front. But the Left would have gained much advantage, including prestige and mainstream acceptance, with Basu as prime minister. This would probably have delayed or prevented the BJP’s rise to national power in 1998. Ironically, those in the CPM who opposed Basu’s candidature the most later backed Mayawati as prime minister!

Basu was a pragmatist par excellence. On any issue, he would choose the most practical and least radical of the options made available by the CPM. This would satisfy both privileged industrialists — whom his party has been wooing for investment — and poor people, among whom it had its roots. In land reform in West Bengal, the Left avoided a radical transfer of ownership to the tiller and the landless — unlike in Kerala in the 1950s. Its Operation Barga registered tenants and gave them a 75-percent harvest share and tenure security.

In his first term as chief minister, Jyoti Basu said: “Let [the] capitalists understand us. We shall also try to understand their point of view.” No wonder he developed a close rapport with several industrial magnates, including Dhirubhai Ambani, Ratan Tata and R P Goenka. He favoured multinational takeovers of some of Bengal’s sick industrial units and wanted the West Bengal Electronics Development Corporation to form a joint venture with Philips.

Basu’s upper-class, upper-caste Bhadralok identity endeared him greatly to Bengal’s elite. But Basu’s politics largely excluded Dalits, Adivasis and OBCs — and even Muslims, who form one-fourth of the state’s population — from governance and political representation. In this respect, and in social development indicators, West Bengal lags behind many other states. The rate of decline in its rural poverty has halved since 1994.

Worse, according to the National Sample Survey, “the percentage of rural households not getting enough food every day in some months of the year” is highest in West Bengal (10.6 per cent), worse than in Orissa (4.8). West Bengal has more than 900,600 school dropouts in the 6-14 age group, higher than Bihar’s nearly 700,000. Of India’s 24 districts which have more than 50,000 out-of-school children, nine are in West Bengal.

The official Human Development Report (2004) admits that spending on and access to health services have stagnated. Some indicators — immunisation, antenatal care, women’s nutrition, and doctors and hospital beds per 100,000 people — are below the national average. West Bengal has not opened a single new primary-health centre in a decade. West Bengal has the lowest rate of generating work under the National Rural Employment Guarantee Act — 14 person-days per poor family. The national average is 43. (The promise was 100.)

India’s worst recent food riots have occurred in West Bengal — especially in poor districts like Purulia, Bankura and Birbhum — when starving people raided the storehouses of dishonest ration-shop owners, all CPM members. Purulia is one of India’s poorest districts — with 78 percent of its population below the poverty line. More than two-fifths of West Bengal’s poor don’t have ration cards, which entitle them to subsidised food. Meanwhile, some of the gains of Operation Barga are eroding. Seventeen percent of registered tenants have lost their land and another 27 percent are in insecure possession.

Clearly, the Left Front has failed the poor in numerous ways during its 32 years in power. The rationale of the CPM’s tenure in office has eroded. Basu bears a good share of responsibility for this.

Basu, then, is akin to Yasser Arafat, the tallest leader of the movement for an independent Palestinian state, who died in 2004. Arafat put Palestine on the world agenda — a great historic contribution — but signed the Oslo Peace Accords under Western pressure. These imposed a hideously unjust settlement on his people. Arafat’s once-secular and -progressive Fatah has lost its credibility. The Islamicist Hamas won a plurality in a free and fair election. The CPM might similarly lose West Bengal to the Trinamool Congress.

The News for more

by MANDY VAN DEVEN

Anyone who has ever sat through the frequent and painstakingly choreographed musical numbers in a Bollywood film can tell you that dance is an integral part of Indian culture. From Bhangra in the Punjab province to Kathakali in Kerala, each part of the country has its own distinctive combination of body movement, facial expressions, and hand positions which form the regional style. But nowadays in urban India, dance is not simply used as a form of cultural expression. Women of means are being seduced by a type of dance that is a little more, shall we say, exotic.

Lessons for striptease, burlesque, lap dancing, and pole dancing are the newest class offerings at local fitness centers and dance studios in cities such as Mumbai, Delhi, and Bangalore. Housewives, college students, magazine editors, and professional businesswomen have found a common way to explore their dormant sexuality and burn calories by swaying away the stress of living in a demanding modern society. These women juggle the same roles as their Western counterparts—wife, mother, professional—and the contemporary affluent Indian woman finds a space of her own to relax, have fun, and get in touch with her inner diva while taking lessons in exotic dance.

When asked about the appeal of these erotic moves, Sneha Krishnan, editor and co-founder of the feminist webzine Sa, says, “I think one big reason is Bollywood. Sexy dances have become, increasingly, the symbols of liberation in Bollywood cinema, and as always, Indian women are following.” The bikini is the newest fashion sensation appearing in Hindi cinema, and if you pair exposed flesh with certain sensual choreography, you can see the “adult” appeal.

The influence and increasing prevalence of American pop culture also plays a part. Every Café Coffee Day, the Indian version of Starbucks, plays a constant rotation of MTV videos that glamorize the openly sexed up moves of pop starlets like Britney Spears, Katy Perry and the Pussycat Dolls. The Dolls themselves were a burlesque troupe before entering the mainstream, and their music is used in the classes to inspire the student’s inner vixen to come forth and be a “hot freak” like the quintet. Fulfilling the simultaneous desires to craft thin yet curvaceous bodies and claim a sex appeal of their own, exotic dance classes help women shed pounds and inhibitions, see their bodies as beautiful, and demand a right to their own sexuality.
http://globeistan.com/wp-admin/post-new.php
“These classes have become popular with young Indians in particular because they are seeking out innovative ways to stay in shape, and they give them a confidence that comes with doing something different and unique,” says journalism student Hamsini Ravi.

Aparnaa Venkatesh agrees, “A lot of women attend these classes because they want to express their sense of freedom and identity, or perhaps because of the thrill factor of doing something that doesn’t toe the line of conventionality.” This brand of freedom, however, still has some constraints.

Women’s International Perspectives for more

by NINA G. JEBLONSKI

Recent findings lay bare the origins of human hairlessness—and hint that naked skin was a key factor in the emergence of other human traits

Key Concepts

* Humans are the only primate species that has mostly naked skin.
* Loss of fur was an adaptation to changing environmental conditions that forced our ancestors to travel longer distances for food and water.
* Analyses of fossils and genes hint at when this transformation occurred.
* The evolution of hairlessness helped to set the stage for the emergence of large brains and symbolic thought.
Among primates, humans are unique in having nearly naked skin. Every other member of our extended family has a dense covering of fur—from the short, black pelage of the howler monkey to the flowing copper coat of the orangutan—as do most other mammals. Yes, we humans have hair on our heads and elsewhere, but compared with our relatives, even the hairiest person is basically bare.

Scientific American for more

Military still ‘calling the shots’ in political and judicial process, report reveals

Pakistan’s powerful military has actively worked to undermine efforts by the elected government
to improve human rights in the country, according to a new report. It also tried to destabilise the elected government, and force out President Asif Ali Zardari.

In a damning critique of the military establishment, Human Rights Watch (HRW) said the armed forces
had opposed efforts to end its intervention in the political and judicial process. It had also resisted attempts to locate some of the scores of people who were “disappeared” in the restive province of Baluchistan during the years of General Pervez Musharraf’s rule. “The Pakistani military continues to subvert the political and judicial systems in Pakistan,” said Ali Dayan Hasan of HRW.

“After eight years of disastrous military rule and in spite of the election of a civilian government, the army appears determined to continue calling the shots in order to ensure that it can continue to perpetrate abuses with impunity,” he said.

Independent for more

(Submitted by Abdul Hamid Bashani Khan)

by VINAY LAL

On 1 November 1755, a massive earthquake struck the city of Lisbon. It is thought to have been 9.0 on the Richter scale: whatever the precise measurement, its magnitude may be judged by the fact that the earthquake nearly leveled Lisbon, and caused widespread damage elsewhere in Portugal, and even in Spain and Morocco. Together with the tsunami that came in its wake, the earthquake, by modern estimates, is thought to have wiped out about a fifth or sixth of Lisbon’s population of 200,000. According to some sources, nearly every church of any consequence in Lisbon was destroyed. That, in a country intensely Catholic, was alone calculated to leave an ineradicable impression on its inhabitants.

Though the destruction was extraordinarily widespread, the Lisbon earthquake of 1755 has entered the annals of history for reasons other than as an illustration of nature’s furious unpredictability. The earthquake would provoke a wide-ranging discussion among many of the greatest minds of the day; indeed, even into the twentieth century, the Lisbon earthquake would be summoned to point to both the inscrutability of God’s ways and the uses of seismology. One of the regnant ideas of those days had been best adumbrated by the philosopher Leibniz, who adhered to the view that whatever happens happens for the best, or, in slightly more elegant language, God’s ways could be justified to men if one recognized that one lived in the best of all worlds. Among the most eminent men of the day who felt the tremors of the quake in Paris was Voltaire. In his novel Candide (1759), the eponymous hero, who at first vividly subscribes to the view that “all is for the best in the best of all possible worlds”, in time comes to reject this optimism. The Lisbon earthquake is enough to cure him of this theodicy, just as it sufficed to make Voltaire reject the optimism of Leibniz.

One of the other supreme figures of the age who attempted to make some sense of the earthquake was Immanuel Kant, whose interest in this would be captured by Walter Benjamin in a radio talk prepared for school-children 150 years later: “No one was more fascinated by these remarkable events than the great German philosopher Kant . . . At the time of the earthquake he was a young man of twenty-four, who had never left his hometown of Konigsberg – and who would never do so in the future. But he eagerly collected all the reports of the earthquake that he could find, and the slim book that he wrote about it probably represents the beginning of scientific geography in Germany. And certainly the beginnings of seismology.” In the typical fashion of the day, Kant’s slim volume bore the longish title, History and Natural Description of the most Remarkable Incidents of the Earthquake that Shook a Large Part of the Earth at the End of the Year 1755.

Kant’s avid interest in the earthquake was not confined to a scientific assessment of the natural circumstances that had led to the calamity. “Whatever is, is right”, Alexander Pope had famously declared in his Essay on Man (1733), and his affirmation of Leibniz’s theodicy had many supporters who rather agreed with Leibniz’s reasoning that though the presence of evil could not be denied, evil itself existed for the sake of a greater good. As Rousseau and Voltaire, whose repudiation of theodicy in Candide was prefigured in his “Poem on the Lisbon Disaster” (1756), tangled over the ‘meaning’ of the earthquake, Kant would step into the debate later with a distinct philosophical articulation of the idea of the sublime. When the imagination reaches its limits, Kant argued, pain is experienced; but this pain may be compensated for with the pleasure produced by the mind. The “beautiful” was not to be equated with the “sublime”: if the former belongs to the realm of “Understanding”, the latter belongs to “Reason”. A sublime event was not to be comprehended through the understanding, indeed the enormity of the sublime – “we call that sublime which is absolutely great”, he wrote in the Critique of Judgment – passed all understanding and demonstrated the inadequacy of one’s imagination. And, yet, the supersensible powers, through which one comprehends an event as whole, and which inform both nature and thought, bring one to a realization of the sublime.

When we consider the philosophical level of public discourse that the Lisbon earthquake could engender, the depths to which public discourse has sunk in our times becomes all the more transparent. Pat Robertson has been known over the years for his outrageous announcements, and one should not be utterly surprised that he should, on the present occasion of the earthquake that has devastated Haiti, have displayed the same dim-wittedness and callousness for which he has nearly an unsurpassed reputation (barring, perhaps, only the likes of Rush Limbaugh and Glenn Beck). As he put it in a televangelical broadcast, “something happened a long time ago in Haiti, and the people might not want to talk about it. They were under the heel of the French. You know, Napoleon III and whatever. And they got together and swore a pact to the devil. They said, ‘We will serve you if you will get us free from the French.’ True story. And so, the devil said, ‘OK, it’s a deal.’ And they kicked the French out. You know, the Haitians revolted and got themselves free. But ever since, they have been cursed by one thing after the other. Desperately poor.” America deplored Haiti’s independence in 1804, refusing to recognize the country until 1862, and it appears that even today there are some Americans such as Robertson who evidently believe that some people are born to serve others. Colonialism, we know, continues to have its defenders; but Robertson’s remarks disguise many more profound anxieties, none as acute as the fact that the only genuine revolution, gone astray for reasons that I shall attempt to comprehend in subsequent blogs, in the Western hemisphere took place in Haiti rather than in what would become the US.

Insanely stupid as Robertson’s remarks are, they nonetheless point the way to a debate that cannot be resolved under the sign of secularism. In a very different time, equally removed from the energetic debates of the Enlightenment and the mental vacuity of a Robertson, Mohandas Gandhi and Rabindranath Tagore would have a lively public exchange over the equally devastating Bihar Earthquake of 1934. Gandhi described the earthquake as God’s chastisement of upper-caste Hindus for their oppression of Harijans; Tagore, revered almost as much as the Mahatma, expressed shock that Gandhi would adhere to a view which was openly dismissive of scientific reasoning and likely to encourage the Indian masses in their superstitious thinking. The intricacies of that exchange aside, Gandhi was firmly persuaded that communication with the masses could not succeed in the language of secularism – even if he was, in his own fashion, resolutely wedded to the idea that the Indian state perforce had to be secular, scrupulously fair to the adherents of all religions. Moreover, the secular imagination cannot, Gandhi would have argued, countenance the idea that natural events may have their counterpart in the life of the soul. Perhaps, in howsoever unpleasant a way, Robertson’s remarks suggest that we do not live only under the sign of secularism.

Lal Salaam for more

by JAYATI GHOSH

Without policy efforts to deal specifically with issues such as reduced incomes and unemployment, the global economic crisis will be far from over.

FOR most economic commentators, 2010 begins on an optimistic note. Just a year ago, there was much gloom about the world economy. The worst financial crisis since the Great Depression had broken out in full fury; asset markets in the United States, Europe and then most developing and emerging markets had crashed and were exhibiting extreme volatility; world trade collapsed; volatile capital flows made things much worse even for developing countries, which had been fiscally and externally “disciplined”, as they were affected by a crisis that was not of their creation.

Compared with that bleak scenario, the current situation seems to be a sea change. Developing countries (particularly those in Asia) were the first to come out of the crisis; indeed, many of them had experienced a deceleration of still positive growth rather than negative growth. The U.S., the United Kingdom and the Euro Area have all been recently declared to be out of recession, as income has recovered, especially from the second quarter of 2009. Stock markets are upbeat once again, and lending has resumed to some developing countries (though not all). There is renewed optimism that the world economy will grow again in 2010 with especially rapid recovery in the developing world.

Much of this is related to the apparently uncoordinated but nonetheless synchronised recovery packages that were introduced in the wake of the crisis. Across the world, governments – even the ones like Germany which openly disdain the so-called Keynesian policies – responded not only with huge bailouts of troubled financial institutions but also with large fiscal stimulus packages that were effective in staving off depression, at least in the short term.

Is the optimism warranted? Is the global economy out of the woods and can we now proceed with business as usual after this somewhat unfortunate blip? This seems to be the response of most commentators, not only in India but everywhere.

Unfortunately, such a conclusion would be premature at best, and in all probability absolutely wrong. Certainly output growth in the world economy is recovering after the extreme lows a year ago. But there are two sets of reasons for this not to continue. On a more structural level, the basic imbalances that caused the most recent crisis of international capitalism have still not been resolved: the imbalance between finance and the real economy; the macroeconomic imbalances between major players in the international economy; and the ecological imbalance that will necessarily become a constraint on future growth because of not only climate change but also other environmental problems and the demand for energy.

These structural features are in turn reflected in a number of more conjunctural issues that characterise the current situation. These imply that the only complete reliable prediction for the immediate future is uncertainty and continued volatility.

First, the problems in finance remain just below the surface. They have not been adequately addressed or dealt with, and are therefore likely to strike again quite soon. This is partly because the underlying problem of stagnating real estate markets continues to fester in the U.S. and in other major countries, and will sooner or later once again become a problem for financial institutions that are implicated in them. The near-default of Dubai World was just one example of the problems that continue to fester in the real estate sector. Meanwhile, sovereign debt issues have emerged as the next new thing to worry about for financial markets, and as the examples of Greece and Ireland indicate, these concerns are no longer confined to developing countries in the global periphery.

But financial problems may even have increased because the crisis response has been faulty. Enormous financial bailouts may have saved the economies from collapse but they created disincentives for “efficient” behaviour in financial markets in the form of moral hazard that is greater than ever before. Banks that were “too big to fail” have become “too bigger to fail”, and incentives are still skewed towards excessive and unsustainable risk-taking. Appropriate regulation to control the incentives and activities of various financial players – banks, hedge funds, private equity firms, index traders and so on – has still not been enacted.
Food and oil prices

So the problems in finance are far from over, and are likely to return with even greater ferocity in the foreseeable future. Second, this has direct implications for some global markets for food and fuel that directly affect people’s lives. It is now an open secret that the huge price volatility in food and oil prices, which has created so much havoc, especially in the developing world, was significantly related to the involvement of financial players in such markets. This was particularly so because futures contracts allowed the emergence of “index investors” who simply betted on changing prices and thus drove up prices far beyond any real changes in demand and supply.

Such forces are on the prowl once again, and there has been no regulation of commodity futures markets. As the economic recovery gains ground, it is more than likely that commodity prices will once again rise, overshooting any real demand-supply imbalances. Many people in developing countries are still reeling under the impact of rising food prices, and if their global prices rise once again, the effect on real incomes, hunger and undernutrition is likely to be devastating.

Frontline for more