Modern capitalist states are all welfare states. Enormous bureaucracies have been created to tax the rich, regulate business, provide subsidies and special schemes to the needy, thwart environmental harm and health hazards, and so on. The list is long and keeps growing.
It could not be otherwise in democracies. Contrary to Marx’s assumptions, legislators get elected by catering to the masses, even while taking money from corporations. Legislators constantly create new rules and regulations to protect consumers, retirees, and other vote banks. Hence, the US has become a land of rising red tape.
Between 1970 and 2006, the number of pages in the Federal Register (which lists all regulations) shot up from 20,036 to 78,000. The number of regulators in the service of the federal government rose from 90,000 to 241,000. In the first six years of the George W Bush era (2000-2006), the number of pages of regulations increased by over 10,000, and regulators by over 65,000. Refer http://praja.in/bangalore/blog/murali772/2008/07/30/just-how-regulate-wisely-remains-question-today
This is galloping socialism, often criticised as bureaucracy run amok. The US is less welfarist than European countries, but is not too far behind. The US legislators have expanded entitlements for the aged and sick so greatly that state spending on social security, Medicare and Medicaid is projected to rise from 7% of GDP today to almost 20% by 2020. So much for the myth that the US is a heartless capitalist ogre. In fact, it combines capitalism with welfarism, and often tilts toward the latter when the two conflict.
Since US politicians get elected by constantly promising to save citizens from pain, they have now saved citizens from corporate bankruptcies that would threaten the whole economy and throw millions of lives into disarray. This is no more than an extension of the safety net principle.
This is very different from Indira Gandhi socialism. Her nationalisation aimed to give the state a stranglehold on industrial production, and seize the commanding heights of the economy. These measures did not benefit ordinary folk at all, and were soon exposed as ‘‘amiri hatao’’ rather than ‘‘garibi hatao’’ measures.
The US takeovers, by contrast, are temporary affairs, to be followed by re-privatisation once the crisis is resolved. The corporations will be obliged to sell chunks of their assets to pay off debts and attain stability. They will then be re-privatised. They will emerge greatly shrunken, and perhaps broken into smaller units.
Nationalisation is a misleading word for this process. It is better called forced restructuring by the government, as a pre-emptive safety net. It aims to save citizens from pain, but within a market economy framework.
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Muralidhar Rao
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Welfarism
My 2 rupees
Interesting to note that as capitalism increases so does regulation. What does this tell you? The more you let loose competition, choice etc the more you need to regulate to ensure the businesses remain honest and dont take people for a ride. Unfortunately recent events in the US have established that while profits are privatised losses are public.
India's minimum wages and social security are still abysmal contributing in no less part to the low standard of living. While we need to move towards a capitalistic economy we should ensure we retain and, in Indias case, enhance some welfare measures to ensure sanity and equal distribution of wealth.
Good Governess is required not any "ism"
Murali sir's blog entry went over my head. It was only after talking to him I could clear my head of these isms. I think humanity has progressed much more than the isms of yester years. I mean we do not have that luxury any more.
If one has no competition one cannot excel. If I appreciate any one of my grand children I will be cutioned by my family. It is best to leave them to fend for themselves in the open (like a Trapeze artist) with a safety net below.
The democratic model with the number of good citizens exceeding the half way mark (>50%) is what we need. The not so fortunate have to be carried along. High living with unbridled resource plundering should be avoided. It is a skilled balancing act. Please allow me to forget about the isms. I do not understand them.
Perils of Inclusive Loans
Inclusive finance - giving loans to everybody, including the poor - is desired by politicians in India, and in all democracies. Yet, the current US financial crisis shows the perils of taking this goal too far.
The crisis arose from the bursting of a housing bubble. That bubble was created, fundamentally, by government policies and institutions seeking home ownership for all Americans, including low-income ones. Politicians rooted for such inclusive finance. But this ‘inclusion’ extended finance to ever more borrowers with fragile and low incomes, causing disaster. This holds lessons for India.
Wall Street investment banks like Lehman Brothers and Merrill Lynch have been pilloried, rightly, for magnifying the bubble. Yet, they did not create it - that job was done by politicians and government-backed institutions.
In sum, financial inclusiveness is fine in small doses, but leads to disaster on a really large scale. India is just at the start of financial inclusion. But as it prospers, political pressures for cheap loans to the poor will grow. The lesson from the US is that inclusive loans on a sufficiently large scale can sink the whole financial system.
So, the poor and needy should be given grants, not loans that they cannot repay, or may be encouraged by politicians not to repay. We have already received warning of this from the fiasco of IRDP, India’s first inclusive loan programme in the 1980s. The US crisis drives home a similar lesson.
For the full text, click on:
http://epaper.timesofindia.com/Repository/ml.asp?Ref=VE9JQkcvMjAwOC8wOS8yOCNBcjAxMjAw&Mode=HTML&Locale=english-skin-custom
Muralidhar Rao
It wasnt the "meter baddi"