Dr. Susmit Kumar, Ph.D.

 

[Note: Immediately after BJP barely won the majority in Dec 2017 state elections in Gujarat, where Mr. Modi ruled for 12 years before taking over as the Prime Minister in 2014, this two part article was sent on Jan 26, 2018 to 1500+ people in India, which included PM Modi, Prime Minister Office (PMO), several Cabinet Ministers, Several Secretaries & Joint Secretaries, IFS officials at Ministry of External Affairs, 200+ officers at Niti Aayog, Professors at IIMs, IITs and premier universities in India, and fellows at think tanks in India.]

 

In December 2017 Gujarat elections, BJP, with 99 seats (against 115 in 2012 elections), was fortunate to win the majority of seats as it won 16 seats from the Congress Party, which won 77 seats, by less than 3,000 votes or less (Gujarat election: 16 Congress candidates lost by less than 3,000 votes, Hindustan Times/PTI, December 19, 2017). Had those seats gone to the Congress Party instead, giving Congress the majority, it would have been a disaster for Mr. Modi and BJP. Although there was a slight increase in vote percentage for the BJP against the 2012 elections, the party suffered a net loss of seats due to a steep decline in BJP votes in rural areas where people revolted against nearly two decades of Modinomics that has largely bypassed the rural areas.

During 2017 Gujarat assembly elections, the number of projected BJP seats nose-dived from the range of 144-152 in August opinion poll to 99 seats in final elections whereas during the same period Congress Party’s projected seats went up from 26-32 to 77 in the final election (Gujarat Legislative Assembly election, 2017, Wikipedia). In order to survive in politics, PM Modi needs to take a page from Indira Gandhi’s book. He needs to move to left-of-center in his economic policy. He does not need to nationalize major industries, but he needs to stop the naked loot of corporate profits by the shareholders which is the main reason behind the devastating inequality in India and elsewhere in the world. As shown in Chart below, although since 2010 the top 10% wealth in India has been increasing at the expense of the bottom 90%, the rate of increase has increased since Mr. Modi took over in mid-2014. In 2010, the bottom 90% had 31.2% of total wealth, reduced to 19.3% in 2016. At this rate, the wealth of the bottom 90% would be in lower teens at the end of Mr. Modi’s first term (2019).

If Mr. Modi wants to survive in politics, he has to reverse the course of inequality at the earliest. He must strike hard at the core of the money transfer (financial) instruments which transfer enormous amounts of money to the ultra-rich from everybody else. The entire world, including the US and Western Europe, will follow him. Also it is not only a question of survival of Mr. Modi and BJP, but of the survival of the Indian economy as well.

 

[Note: the chart is from my forthcoming book "India is a Country, not a Company - How Anglo-US 'Imported' Economists Misled and Mismanaged the Indian Economy" (out in two weeks). The book has 66 charts and tables to analyze the Indian, US, Chinese and global economies.]

 

 

[Note: The above data is from yearly Credit Suisse Global Wealth Databook from 2010 to 2016. In their 2017 Databook, the numbers are below the 2016 values which show a revision of the method of their calculation and not the trend. Not only in India but world-wide, the rich are becoming richer at the expense of all others.]

 

Shortly after Indira Gandhi took over the reins in 1966, food shortages occurred due to droughts, which worsened the national economy that was already reeling in the aftermath of the 1965 India-Pakistan War. The Mrs Gandhi therefore embarked on a trip to the United States with the main mission to get both food grains and foreign exchange. The USA had suspended aid to India due to the 1965 India-Pakistan War. For any aid or loan, the USA, along with the World Bank and the International Monetary Fund, demanded that India devalue its currency, the rupee. Without consulting the party heavyweights, Mrs Gandhi devalued the rupee by a sharp 57.5 % on the basis of a committee report consisting of right-wing ministers and advisors. But the party, controlled by old guards like Kamaraj who had earlier installed her as the prime minister after the death of Lal Bahadur Shastri, passed a resolution denouncing the devaluation. To make the matter worse, foreign donors reneged on their promise to provide $900 million a year for the next several years.

After being heavily rebuked in public due to the sharp devaluation and no aid, Mrs. Gandhi was advised to shift to the left ideologically by her close advisors, especially by P.N. Haksar, her principal secretary who had replaced L.K. Jha, the chief architect of the currency devaluation. During his studies at London School of Economics in the 1940s, Haksar had been greatly influenced by socialism and had acquired communist friends. He was a friend of Firoze Gandhi, Indira Gandhi’s husband, another student companion from the London days. The ideological shift also helped the new PM to get rid of old party heavyweights, called the Syndicate. In the February 1967 national elections, her party lost 95 seats, barely winning the majority (282 out of 520 seats), and lost majority in seven states. Until the 1967 elections, the Congress Party had been in power at the central level and nearly in all the states, barring one or two. A number of Syndicate leaders lost their seats, notable among them Kamaraj, the party president. On the other hand, Indira won her own seat by a large majority. On the advice of Haksar, she went for the nationalization of banks, bitterly opposed by Morarji Desai, the then Deputy Prime Minister and Finance Minister. Then in May 1967, she announced a ten-point program which included the social control of banks, nationalization of general insurance, state trading in import and export trade, ceilings on urban property and income, curb on business monopolies and concentration of economic power, public distribution of food grains, land reforms, provision of houses for the rural poor, and abolition of princely privileges, granted to the former royal family members who merged their states with India after 1947. This led to a split in party in 1969 and Mrs. Gandhi, heading a minority government (220 out of a total 520 seats in the lower house), was able to survive in parliament only with the help of the CPI, some regional parties, and some independents. Without CPI support she would not have had a majority. During the 1969 spilt, along with her supporters, CPI cadres also took part in rallies to support her.

The Green Revolution in Punjab and Haryana in 1967-70 greatly increased the national grain production, erasing the memory of famine. On the advice of Haksar, Indira Gandhi brought the national elections forward by a year. In the 1971 elections, her party won a two-third majority in parliament, trouncing the entire opposition. Partly due to the victory over the archrival Pakistan, Mrs. Gandhi’s Congress Party was able to capture 70 per cent of the seats in the 1972 State Assembly elections.

During early years of her prime minister ship, Indira Gandhi was at her best when she had left the policy formulation and day-to-day affairs of the Prime Minister Office (PMO) to PN Haksar, her principal secretary. But once Sanjay Gandhi took over the Prime Minister Office (PMO) after banishing Haksar, her regime was worse than Laloo Yadav’s regime in Bihar (read my article: Modi, the Best PM, India Has Ever Had, but He Needs to Stop Viewing India from the Prism of Gujarat).

Due to misdeeds of Sanjay Gandhi and atrocities committed during the 1975-77 Emergency Rule, Mrs. Gandhi suffered her nadir when her party, including herself, lost the elections in 1977. But after the collapse of the Janata Party government due to the in-fighting, she came back to power in the 1980 general elections. Mrs. Gandhi had produced results during her initial six years (1966-1972) and hence the voters gave her a second chance in 1980.

In the 2014 Parliamentary Elections, the BJP was able to win the majority of seats by selling the idea of Mr. Modi as “the Development Man”. This was possible due to his outstanding twelve-year history of Gujarat’s development. But the opposition parties and economists failed to highlight his defective development in Gujarat laid bare in the December 2017 Gujarat assembly elections. During his three and a half years rule at the center, India has witnessed jobless growth, with the middle class in India is being squeezed and pushed down towards to the lower class. If the voters oust Mr. Modi due to his failure as the “Development Men,” he would not get a second chance from the voters.

 

Part II

 

Indira Gandhi was an opportunist and not a leftist ideologue. Back in 1959, she had pressurized her father, then PM Jawahar Lal Nehru, to dismiss the Communist government in Kerala. At that time, she said that the major danger to India was from Communism and even questioned the patriotism of Communists (Inder Malhotra, Indira Gandhi, Northeastern University Press, Boston, 1989, p. 65). Mrs Gandhi was the national president of Congress Party at the time.

After she moved left, she even had a Communist, V.R. Krishna Iyer, nominated as a judge to the Supreme Court. Iyer was a lawyer and a minister in the 1959 CPI government in Kerala, which was dismissed by the then Prime Minister Mr Nehru under pressure from his daughter Mrs Gandhi. Yet, some twelve years later she nominated Iyer as a judge to the Supreme Court.

Increasing income inequality hurts the country’s economy as it inhibits job growth. Let us consider the following three cases – if you give one crore rupee to:

 

(1)  to a rich (one crore), he would buy a Ferrari car.

(2)  to 10 middle class persons (each 10 lac), they may buy 10 houses or 10 cars.

(3)  to 100 poor people (each 1,00,000 rupee), they will spend on food, children (spending on food (retail stores etc.), clothing, school/college, doctor/medicines, plumber, carpenter, auto, etc.

 

Now it is easy to find out how many jobs would be created in these 3 scenarios.

 

As discussed in my previous articles, everyone in US, rich and poor, had similar growth in their income till early 1980s. But after early 1980s, the rich are getting richer at the expense of all others. The reason is that time and again the US legislatures have passed laws, especially since the Reagan Presidency, creating financial instruments by which rich people have been making enormous money at the expense of the rest. For an example, stock buyback was illegal until the US Securities and Exchange Commission (SEC) in 1982 made it legal during the Reagan Presidency.

If Mr. Modi takes steps to reverse the course of inequality, he would win 400+ seats in 2019 Parliamentary Elections, winning seats even in states like Tamil Nadu, West Bengal and Kerala. He must strike hard at the core of the money transfer (financial) instruments which transfer enormous amounts of money to the ultra-rich from everybody else. He needs to implement German “Codetermination’ policy (Codetermination in Germany, Wikipedia), with some modifications, in the industry which allows the employees to have a say in running the company. The entire world, including the US and Western Europe, will follow him as inequality has been creating havoc in nearly all developed and developing countries.

Mr. Modi and BJP should not be complacent that people would vote for Mr. Modi because there is no other alternative due to absence of a strong leader in opposition. Rahul Gandhi is not at all fit to be the prime minister; he will be a disaster. But Indians may go for Rahul if they do not see any hope (in economic terms) from Mr. Modi. The job growth under Mr. Modi is horrible as compared to job growth during the UPA government. Question is – Who will you vote for - UPA (which in past had put food on your plate, i.e. gave you a job) or Mr. Modi under whom job growth is horrible?

 

[Note: the chart is from my forthcoming book "India is a Country, not a Company - How Anglo-US 'Imported' Economists Misled and Mismanaged the Indian Economy" (out in two weeks). The book has 66 charts and tables to analyze the Indian, US, Chinese and global economies.]

 

 

 

In the 2016 US Presidential elections, Hillary Clinton and nearly the entire US media had written off Trump and thought it to be a cake walk for Clinton to win the election. The inequality in US and loss of jobs in last 20-25 years, resulting in middle class being squeezed and pushed down towards to the lower class were behind the elections of both Obama and Trump. You need to visit Rust Belt states to find out why Americans elected an African American with a Muslim middle name, i.e. Barack ‘Hussein’ Obama as President not once but twice and then a known white supremacist, racist, serial liar and misogynist who had never hold any elected position, in the 2016 US Presidential election, over the Wall Street favorite Hillary Clinton. Trump won mainly due to getting votes in the US Rust Belt (Midwest) where people voted for him on just one hope that despite being not a perfect person, Trump might bring back the factory jobs, lost to foreign countries, in the recent three decades and more. It is worth to note that both Obama and Trump won all the Midwest states.

On December 12, 2017, the Editorial Board of the USA Today wrote following about Trump in bold letters (Will Trump's lows ever hit rock bottom?, USA Today, December 12, 2017) – (If the most advanced country in the world could vote for a fraud like Trump, then Indians also can go for the UPA under Rahul Gandhi.):

 

“A president [Trump] … is unfit to clean toilets in Obama's presidential library or to shine George W. Bush's shoes.”

 

[Note: USA Today shares the position of having the widest circulation of any newspaper in the United States with The Wall Street Journal and The New York Times (USA Today, Wikipedia) Every day It is printed at 37 sites across the United States and at five additional sites internationally]

 

During the last Gujarat assembly elections held in December 2017, the number of projected BJP seats nose-dived from the range of 144-152 in August 2017 opinion poll to 99 seats in final elections whereas during the same period Congress Party’s projected seats went up from 26-32 to 77 in the final election (Gujarat Legislative Assembly election, 2017, Wikipedia). Hence if it happens in the 2019 Parliamentary Elections also, it will be disaster not only for Mr. Modi and BJP but also for the country.