The Tribune, Chandigarh, India

Not by killings
Destructive politics is always dangerous

Merchants of hatred have a secret weapon up their sleeve. Once they have cast the first stone, both sides invariably make mistakes and the trouble starts multiplying automatically. That is what Raj and other Thackerays of his ilk have managed to do. They targeted north Indians in Maharashtra ruthlessly. There was inevitable reaction in Bihar which degenerated into a systematic destruction of railway property, as if the attacker was the railway employees and not MNS goons. That perhaps provoked a 23-year-old Rahul Raj to procure a weapon, commandeer a bus and try to get even with his namesake in Mumbai. The policemen proved to be more trigger-happy than him. They could have easily overpowered him, but instead gunned him down. No wonder, there is outrage in Bihar and it is being seen as yet another instance of bias against people from that state going to Mumbai for work. The situation has been made worse by the murder of a labourer from Uttar Pradesh by a few Marathi-speaking youth on a Mumbai local train.

Such tit for tat match can quickly go out of hand. Already, there are rumblings of bigger trouble ahead in Bihar and Uttar Pradesh. One will have to keep one’s fingers crossed. Ironically, Raj Thackeray must be gloating that the bushfire he had started was catching on and will make him a “big” name. There is no toning down of his incendiary statements so far despite the all-too-brief arrest or gag orders.

Such elements thrive only because the state government, instead of calling their bluff, humours them. In this particular case, there are even reasons to suspect that he is being deliberately given a long rope for political reasons. The trouble is that such Frankensteins are difficult to control once they become larger than life. Most often, they bite the very hand that fed them. This warning should be heeded before it is too late. This phenomenon was seen at its destructive worst when Bhindranwale was raised in Punjab with disastrous results, and in Sri Lanka where Prabhakaran was encouraged to become a force that ultimately devoured Rajiv Gandhi. The politics of the kind being played by the politicians in Mumbai can only lead to unintended consequences.

Congested metros
Why not shift offices to other places?

BY 2025, Mumbai will be the most crowded city of the world. Following close at the third position will be India’s national capital. This forecast by UN Habitat is, again, a bleak reminder of India’s lopsided urban growth, marked by dualism. While big cites are bursting at the seams, small urban centres are slowly being edged out by the metros. The examples of how big and also new cities are growing at the expense of small urban centres are far too many to be overlooked.

Urbanisation is the inevitable reality of modern India where 68 per cent of the population lives in villages. But by 2050, 55 per cent of the Indian population is expected to be dwelling in cities. If the urban staus quo continues, there will be still greater pressure on the over-populated mega cities. The government policy of “favouring a few and ignoring the rest” has many undesirable ramifications. The growing population in the metros strains the infrastructure, adversely affecting the supply of essential services. Moreover, the increasing crime rate in congested areas is a cause for grave concern.

To curtail the population outflow into bigger cities, we need to focus on providing jobs and civic amenities in small towns and rural areas. There is an urgency to facilitate the growth of smaller urban centres in the nation’s hinterland, not just those bordering the metros. Not too long ago, the idea of shifting the government offices away from Delhi and the state capitals was mooted, but it was never pursued. The Centre and the states need to pull the proposals out of the shelves to relocate several offices, moving these out of the capitals. The logic is simple — where the government goes, people will flock to. Besides the private sector may also be tempted to shift to new townships. The equitable distribution of population and resources is an imperative. India’s pursuit of fast track growth can materialise only if all of India grows at the same pace. Otherwise, the tethering mega cities can collapse and the small towns continue to rot.

Thought for the Day

The years teach much which the days never know. — Ralph Waldo Emerson

ARTICLE

Pak economy in crisis
The country is running out of cash
by G. Parthasarathy

Think-tanks and bipartisan groups in the US have worked feverishly in recent months on how the new US President should deal with the “single greatest challenge the world faces” today — dealing with Pakistan, which confronts “its greatest crisis since Partition in 1947”. A bipartisan report, reviewed and endorsed by Democratic Party Congressman and former Co-Chairman of the 9/11 Commission Lee Hamilton and the Bush Administration’s former Deputy Secretary of State Richard Armitage, has been prepared by a “Pakistan Policy Working Group” comprising experts from both sides of the political divide.

The report notes: “The US cannot afford to see Pakistan fail, nor can it ignore the extremists operating in Pakistan’s tribal areas” as American efforts in Afghanistan “cannot succeed without success in Pakistan and vice versa”.

The report defines US objectives and interests as requiring a “stable and responsive government” in Pakistan enjoying public support. It advocates the need to transform Pakistan into a “state that lives at peace with its neighbours — most notably India and Afghanistan”. The report is critical of the ISI for being “engaged with groups that support the Taliban and are killing American, NATO and Afghan government troops in Afghanistan”.

It also alludes to “well-sourced reports” on the ISI’s role in the bombing of the Indian Embassy in Kabul while noting that Taliban leader Mullah Omar is believed to be living in Quetta. The report realistically asserts: “Pakistan’s ambiguous policy on support for militancy is unlikely to change as long as the military — currently the only national institution — remains beyond the scrutiny of elected representatives”.

But, amidst belated realism on the ISI-Jihadi nexus the international community, including Pakistan’s “all-weather friends”, China and Saudi Arabia, is still searching for a strategy to prevent Pakistan from melting down economically. With its foreign exchange reserves rapidly declining to a level which would enable it to meet its needs only for six weeks of imports, Pakistan could well face a situation of defaulting on a sovereign debt when a $500 million Euro Bond matures in February 2008.

Prime Minister Yousuf Raza Gilani’s Finance Adviser Shaukat Tareen acknowledged on October 22 that his country needed $4.5 billion merely to stay afloat economically. While the US has put together a new consortium, including China and Saudi Arabia, named “Friends of Pakistan” to bail out Pakistan, Washington is not going to acquiesce in pouring money into that country if it remains a bottomless pit economically. So, aid is largely going to be withheld till Pakistan agrees to a major and painful economic restructuring.

Unable to pay for its oil imports, Pakistan approached Saudi Arabia for a $5.9 billion bailout for the supply of oil on deferred payment terms. The Saudis have yet to decide on how to respond. President Asif Zardari went to China hoping that Pakistan’s most trusted friend and ally with $1.9 trillion of foreign exchange reserves would immediately open out its wallet. When Pakistan sought a relatively small bailout amount — $500 million — in 1996 from China, its then Finance Minister Shahid Javed Burki received a sermon from Prime Minister Zhu Ronji on why Pakistan could not recover economically unless it raised its abysmally low rate of savings. After much hesitation, the Chinese chipped with an assistance of $500 million.

China, it appears, will not encourage Pakistani profligacy and will possibly join other “Friends of Pakistan” when aid is coupled with economic restructuring. But even IMF restructuring programmes could not end Pakistan’s economic bankruptcy in the 1990s when its programmes were soon jettisoned by Prime Ministers Benazir Bhutto and Nawaz Sharif.

In these circumstances, the “Friends of Pakistan” will use their economic leverage to see that Pakistan moves in the direction of ending support for terrorist groups and dealing with pro-Taliban groups operating across the Pakistan-Afghanistan border. It is in this background that one has to assess the rather shady role being played by America’s British allies, who are preaching virtual defeatism and surrender in Afghanistan, through both their military commander and Ambassador. The British quite evidently have no stomach for further casualties.

Over the past two years they have played a duplicitous role in establishing secret contacts with the Taliban, behind the back of President Karzai, who has reacted with rage, expelling a British national who was involved in clandestinely transferring money to the Taliban, and by pre-empting a British ploy to get Lord Paddy Ashdown, who had earned notoriety in Bosnia and is said to have had MI 6 links in his short career as a diplomat, as a UN High Representative to Afghanistan.

There can obviously be no military solution to the conflict in Afghanistan. But this does not mean that the Taliban and its ISI mentors should be led to believe that the Taliban could return to power. President Karzai does have members of the Hizb-e-Islami, led by ISI-backed Gulbuddin Hekmatyar, holding high positions in the Afghan government. But they have to function within the framework of Afghanistan’s democratic constitution.

However, a return of the exclusively Pashtun Taliban would be a recipe for not only an ethnic division of a country where 56 per cent of the population is not Pashtun, but also taking Afghanistan to an era where the terrorist groups across the world found haven in Afghanistan. The talks that President Karzai has initiated with Taliban representatives with Saudi Arabian facilitation are evidently an effort to set out the terms under which the Taliban could be accommodated in the political mainstream in Afghanistan. The Afghan Foreign Minister clarified in Islamabad on October 21: “Talks will be held with only those who are willing to lay down arms and those willing to (function) within the constitution” — akin to terms that Pakistan’s parliament has set down for talks with those who have taken to arms within Pakistan.

Islamabad is evidently seeking to link progress on Afghanistan with the international community “facilitating” dialogue on Kashmir with India and a reduction in Indian influence and profile in Afghanistan. The Pakistanis, using noted scholars like Ahmed Rashid, are also attempting to peddle the view that the Taliban’s sincerity should be accepted if the outfit merely “disavows” ties with the Al-Qaeda.

There is also an effort to tell the Americans that “Islamist movements with local or national objectives” (read the Lashkar-e-Taiyaba and the Jaish-e-Mohammed) are quite different from an international terrorist group like Al-Qaeda and should be dealt with differently. India will have to evolve a comprehensive diplomatic strategy — including consultations with Russia, Iran and the incoming US Administration — to counter the moves designed to perpetuate terrorism from Pakistan and Afghan soil.

MIDDLE

Amateur dramatics
by Harish Dhillon

LAST week I witnessed the Annual Inter House Drama competition in my school. There were five one-act plays each of about 45 minutes duration. Each performance was excellent, even that of actors with walk-on parts. I envied the actors their supreme confidence and there brilliant acting.

My own rare forays onto the stage have always been unmitigated disasters. I went to a school which was liberal enough to encourage the children to write their own plays for their shows, and yet, strangely, was not liberal enough to permit boys and girls to perform on the same stage, So when the boys staged a play, Shakespeare like, the boys would have to enact the female parts, and when the girls enacted a play, they would perforce have to play the male roles. One year I had written the play for the house show. It had one female character and since none of the other boys was willing to do this role, for fear of being teased by their peers, my Housemaster bullied me into doing it. The rehearsals went off well and all were agreed that we had a good play on our hands. Mine was a small part and on the final day all went well till I appeared on stage. My entry was greeted with loud roars of laughter. I was a little disconcerted because there was nothing funny about what was being done or said on the stage. I bravely pressed on. Matters were made more difficult for me when I realised that even my fellow actors were trying desperately to control their laughter. When the final curtain came down I realised that all the hilarity was because I had forgotten to put on a petticoat under my sari.

Years later when I returned to school as a teacher I was roped into becoming a member of the Amateur Dramatic Society. The members of the society, the teaching staff, staged a full length play at Founders, and for almost five years, I was happy to be the prompter. Then in the sixth year the director cajoled me into doing a small part.

I came on for about five minutes, towards the latter half of the third act. The role involved a midnight assignation with another occupant of the house, which ended in a passionate kiss. The scene was rehearsed to perfection. The young lady would turn her back to the audience, and taking advantage of the cover she provided, I would raise the back of my right hand to my mouth and create the sound of a loud, resounding kiss. Imagine my dismay when on the final performance the kiss was received with a loud cry from a member of the audience, and then my little son’s voice rang loud and clear.

“Wait till I get home and tell mamma what you have been up to.”

The audience was convulsed with spasms of laughter and, mercifully, I went back to being a mere prompter.

OPED

Social revolution
Haryana needs to activate local bodies
by J. George

IT takes some political fortitude to recognise that the obverse of the economic development coin has been social regression in Haryana for over a decade.

The launching of a social revolution package on October 2, 2008, hence is indeed commendable. It is this day that has seen the launch of many innovative social development programmes in the yesteryear.

The "Apani Beti Apna Dhan (ABAD)" initiated on October 2, 1994, had innumerable problem spots that had a equal share of baiters both amongst beneficiaries and benefactors.

Secondly, the radical change anchored on the prohibition and women's development issues in 1996 saw a severe haemorrhage of the public exchequer.

The third occurrence in 1999-2000 came in the form of two equal and opposite socially powerful forces of decentralisation. The impulsive "Sarkar Apke Dwar" (SAD) and capricious "parallel bodies" usurped all functions and funds of local decentralised development institutions. The district rural development agencies were centralised within the Chief Minister's office.

The political economy fallout of all three has been extremely severe on the social fabric of Haryana.

A number of explanations are available for the deterioration in the social mosaic the foremost being that the social architecture was taken for granted. Consequently, social ethos got obscured and innate distrust of rural folks along with her representatives in particular ensured the state was unable to follow the inclusive growth path. Marginalisation and social exclusion gained supremacy and the head count ratio of rural poor increased.

Blinded by the euphoria of economic growth the sponsors forgot to look at the obverse side of the development-growth coin. Social regression worsened in the interregnum since schemes were whimsical and devoid of either blueprint or anchorage in the social realities other than the sloganeering in the hands of a few spin doctors.

Take, for illustration, the aggregate indices of the overall population sex ratio and the juvenile sex ratio between 1991 and 2001.

Then juxtapose them against the then policy initiatives of the ABAD, primary education, i.e., district primary education programme (DPEP), integrated women's empowerment and development programme (first time in the country) commonly called the "Sanjeevani programme" of Narnaul, the health sector reform in three pilot districts, and a number of old age social welfare schemes.

The emerging inverse relationship between the economic growth and social development indices is, undeniably, frightening. Do we then conclude that the ABAD was a bad initiative or the DPEP and health sector did not give the desired outcome?

The empirical inference concurs with the unanimous prognosis carried out by former students in the administration participating in the economic policy analysis course. These policy initiatives, in as much as follows the dictum "for the babudom, by the babudom and of the babudom" is doomed to miss the intended outcome.

The proof of the pudding is in eating. The ABAD, while a novel initiative, had a tortuous "rights and obligations" operating protocol. Certainly, user-friendly procedures are feasible.

The erstwhile economic reform measures brought in a number of international development funding for the soft social services sector that stoked the babudom dictum. For instance, the DPEP in seven districts of Haryana missed out on the intended ERA — enrolment, retention, achievement — outcome.

For all practical purposes the generous and pertinent DPEP fund was translated into "daily piyo English piyo". The contrast can be used for reflection and deriving moral strength.

The recent initiative of social revolution, in fact, is too diminutive and has come too belatedly. Unlike the economic development template it will be suicidal to borrow a social development template. A meaningful social development blueprint can be prepared following the participatory process of consultations.

The state bureaucracy is a necessary evil, indeed, in the pursuit of socially desirable objectives delineated in the consultative process. A three-step action plan, hence, is inescapable and merits consideration to get a correct grip over the ensuring social revolution.

First, the need is to expand the knowledge base of babudom so that the performance bar is raised instead of the currently prevailing downward spiral. The nexus of information asymmetry and inaction needs to be broken with knowledge-based capability enhancement strategies.

There already exists state specific tested change management building blocks in the form of "Prashant-George Model (P-G Model)" for the babudom. This is the most invaluable strategic economic management tool tailor-made for Haryana's balanced socio-economic growth. The mantra for success is sharpening competence levels of the competent authorities at different tiers.

Secondly, it is well known that effective decentralisation is the best prophylactic against corruption. The constitutionally mandated local bodies and the bureaucracy need to develop a partnership instead of running them down or forcing down their gullet a bitter pill of outsourcing and public-private partnership.

Thirdly, it is the spring cleaning in the decision-making cohorts to eliminate all deadwoods. It should start at the top and then go down the hierarchy.

The social re-engineering agenda is too precious for missing the society for the social revolution. The economic literature is unanimous in suggesting that going back to the social transformation drawing board has always been profitable and vitalising.

It is reiterated that the absence of a blueprint, lax oversight and a blind faith in spin doctors will lead merely towards "privatisation of profit and socialisation of cost" as one can witness today in the aftermath to the global financial crisis. The constitution of a non-bureaucratic Haryana Commission for Social Development has, indeed, become imminent.

As Porsche should know, even a hedge fund can be abused
by Jeremy Warner

They've flogged them the car, and now they've successfully fleeced them for everything else as well. The damage inflicted by Porsche on London's hedge-fund industry is hardly going to have anyone weeping tears of condolence.

On the contrary, to many Germans it will look like a form of victory to see the greed- fuelled "locusts" of Mayfair punished for thinking they can trounce the pride of the European car industry, even though they are also some of Porsche's best customers.

Anything up to $20bn (£12.6bn) may have been lost by hedgies on what was once considered one of the safest short plays in the markets. Coming on top of everything else, some of them will struggle to survive.

After the scramble to unwind posit-ions post the Lehman's collapse, this will be the final nail in the coffin. Yet though no one is in "hug-a-hedgie" mood right now, there are serious issues of abuse to be answered here.

This looks like one of the most flagrant cases of market manipulation seen in years, even if what Porsche has done, under its chief executive, Wendelin Wiedeking, appears to be perfectly legal. The fact that for once, the hedge funds were on the wrong end of it doesn't excuse the apparent determination of the German authorities to turn a blind eye to it all.

Bafin, the German regulator, has announced in a laid-back sort of way that it will be examining share price movements around the episode to see if there was any insider dealing, but it already seems to have adopted the view that Porsche didn't do anything wrong.

In other words, it is going to investigate the hedge funds, who are the victims of this sleight of hand, and not the perpetrators. Like so many things in these extraordinary markets, the origins of the problem go back to the collapse of Lehman Brothers, through which a number of hedge funds were running big short positions in Volkswagen (VW).

With recession looming, the German motor manufacturer looked classically overvalued, even though Porsche had announced its intention to raise its stake over time to 50 per cent.

All over the world, motor manufacturers are in trouble, while in the US they may even be going bust. In any case, hedge funds believed that by shorting VW ordinary shares and going long of the preference stock, they were on to a sure-fire winner.

Unfortunately for them, the stock lent to Lehman's to support the short positions became frozen in the subsequent administration. The stock lenders – predominantly German pension funds – then moved to cover themselves by buying more VW stock using the Lehman holdings as collateral. The price of VW shares thereby started to move seriously against the hedge funds.

But what really did for the hedgies was that, unbeknown to the outside world, Porsche was secretly raising its stake through derivatives and options to a smidgen under 75 per cent.

Together with the 20 per cent stake held by the government ofLower Saxony, this left hardly any stock available to close out the roughly 10 to 15 per cent of the company that is being shorted.

As hedge funds scrambled to close their positions on Monday and yesterday, the VW share price rocketed, making VW briefly the biggest company in the world by market capitalisation and sending Germany's main index, the Dax, soaring.

The only party sitting pretty is Porsche, which may or may not be a long-term holder of the 74 per cent of the company it appears to control.

Hedge funds doubt it has the financial resources to go so high, but that was before it squeezed the life out of the hedge funds, who may unwittingly have provided Porsche with all the firepower it needs.

According to Bafin, Porsche was under no obligation to disclose the options, and therefore appears to have acted legally throughout. On one level, it is really quite heartening to see the vultures of Mayfair get their come-uppance at the hands of the industrialists of Zuffenhausen.

If a few speculators get killed in the grand plan to consolidate the German car industry, who cares. Oh what joy for the Germans if it is true that Chris Hohn's TCI, scourge of the Deut-sche Borse a few years back, is one of the hedge funds trampled in the dash for the exit. Yet even in such moralising times as these, the integrity of the capital markets have to be upheld.

Porsche and its brokers, with the apparent backing of the German authorities, have singularly failed to do this. Even hedgies can have a fast one pulled on them, and that's precisely what seems to have happened here. The fact that it ill becomes the hedge-fund industry, masters of sec-recy, to complain about lack of transparency is neither here nor there.

— By arrangement with The Independent

Not, please, in Marx's name...
by Claire Fox

I used to publish Living Marxism magazine: I must, people assume, be like a cat that's got the cream, gleefully dancing on the grave of capitalist excess.

Wrong: this is no time for feeling smug. In today's climate, it's not just capitalism that's under attack but humanist and political values we should all hold dear. And all too often it's pseudo-Marxist commentators who are the worst offenders.

Kicking greed has too easily become an attack on an important human driver – the aspiration to better oneself, to want more than the basics.

It is not just fat-cat bankers who stand accused of avarice, but the rest of us – house-buyers who may have overstretched ourselves and anyone with a credit card debt. Wanting more is seen as degenerate: tighten your belts – it's your unrealistic dreams that have caused this mess.

The new "age of austerity" is less a necessary response to economic challenges, and more a moralistic dig at excessive consumption.

Long before the sub-prime crisis, consumption had been castigated for everything from the decline of the family to destroying the planet.

The hardship of real cuts in living standards is not something that any radical should relish.

For the record, Marx wasn't a fan of austerity. His critique of capitalism was not that it was excessive, but the opposite.

His life work revealed the limitations of the capitalist system as a mode of production precisely because of its inability to consistently develop the productive potential of society – that is our potential. He was resolutely pro-economic growth.

For Marx, capitalism wasn't up to the job, its limitations curtailing social and material progress for all. Today's anti-capitalism is all too often not about a progressive desire to replace capitalism with something better. Its creed has become economic restraint and the downgrading of individual aspirations.

Prosperity and belief in people shaping their own destinies has been replaced by fatalism. One of the most irritating vulgarisations of Marxism is the inevitability theory, where capitalist collapse is a sure-fire thing.

Marx was no determinist. If he argued anything, it was that no system simply collapses – we shape the world and it is we who make or break any system. This Marx is antithetical to today's more pessimistic attitude towards human authorship.

Today, the public are presented as hapless victims, helpless in the face of forces beyond their control, reduced to seeking advice from "financial experts" on radio phone-ins.

We are all referred to as "tax-payers" as though that is our only leverage. But what happened to the idea of citizens, active political agents, who can effect change?

Marx's theory of crisis was not a prediction or a blueprint for understanding the present. But his favourite motto is worthy of resurrecting: "Question everything", even turning Marx himself into a new poster boy for the recession.

— By arrangement with The Independent