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Biden’s American Social Welfarism

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by Kumar David

Here is my 4th of July special for readers surprised by zesty trends in America. Biden’s economic programme, Bidenomics, is shaping up, but it is uncertain whether it can power off into full flight because of dogged opposition of the Republican Party (GOP) but more because the consensus culture which prevailed since the end of the Civil War has evaporated. The country is more divided than I have ever seen before; not only in politics but across social attitudes. It’s not that people across the divide don’t talk to each other, they don’t even understand each other. What remains as a common factor is unalloyed consumerism.

Trump was not the progenitor of right-wing extremism nor of its dystopian creed that intones: “Immigrants are rapists, Democrats are selling America to China and that WASP civilisation is imperilled”. He is only its most mendacious practitioner. The extreme divide commenced with the ‘hated’ election of a Black President spawning mass right-wing white-populism initially in the Tea Party Movement (KKK, John Birch Society and McCarthyism are its forefathers) and festering into today’s Trump-Base which has taken control of the GOP.

Whether Bidenomics will erode this Base remains to be seen – I will make a comment on that anon – but the GOP has turned so obstructionist that getting Bidenomics up and running is going to be tough. Unlike FDR who had thumping majorities in both houses of Congress, the Democrats today are faced with a 50:50 split in the Senate and depend on Kamala Harris’s casting vote which will be unusable if even one Democrat defects on any Bill.

In a recent article bearing the title “The Bidenomics Revolution” in the web-magazine Foreign Policy dated June 9, Michael Hirsh argues that if Biden succeeds he “will cast 40 years of economic doctrine on history’s ash heap”. The essay is available on the web at https://foreignpolicy.com. Hirsh argues that Biden wants to “create a new paradigm: resurrecting America’s beleaguered underclass with a combination of education, health-care, and tax proposals and a new brand of industrial policy and economic nationalism that will, eventually, propel the United States past China. If he is able to follow through it will negate the ruling doctrine of Reaganomic trickle-down economics. Biden is setting his sights high, as revealed by the name he has given his program: the New Bargain, consciously echoing FDR’s New Deal”. Clearly he is seeking a new Social Contract expanding government support for the working class in a move that can obliterate the Trump’s base in the class. Biden, from a lower middleclass family, has suffered many tragedies in his personal life and he is trusted by workers. And unlike his immediate predecessor in office, he is not despised as a moral pariah by the educated classes.

America’s white working-class (that is white workers without a college degree) is the now the smallest it has ever been. It is now 40% of the total adult population and will fall below 50% of the working-class by 2032 — an all-time low, and down from 70% three decades ago. It is losing wealth and income, amplifying economic insecurity. The attitude of white workers has split from that of college educated whites, it has turned Republican and joined the Trump-Base. Educated whites – what I call the modern working class which has deluded itself into believing that it is a middle class! – has benefited from modest income gains, but not the working-class. Life expectancy of white workers has fallen due to social pressures, alcohol and opioid use.

Nevertheless the blue-collar working class even when it declines to 30 to 35 percent of the population, will roughly be the same as the lower middle class. The proportion of Hispanics in the working-class will rise from 20% now to 32% by 2032, whites fall from 62% to below 50% and the percentage of Blacks and Asians in the working-class remain unchanged at 15% and 3%, respectively. Asian Americans (5.7% of US population) belong to well-off income groups and few are in the working-class.

Biden has long believed that deficit reduction and government inaction on public investment are responsible for America’s domestic social malaise and its global decline. He is a social-democratic grandpapa in a liberal suit and tie who shuns Milton Friedman’s monetarism and Friedrich Hayek’s neoliberal economics. He thinks the US lost global leadership because it regressed economically. His team believes that high GDP growth and a flourishing stock market generate wealth for the top 1% and therefore misses the point that prosperity must extend down to low-income communities. This makes his team a toned-down Americanised version of social-democracy.

Furthermore, Biden says if America doesn’t stand up for globalization and open markets, who will? In May he elaborated saying “America’s global leadership depends on the country’s economic resurgence. And that depends on major government investment in every kind of infrastructure, from interstate highways to internet connectivity to new climate-saving technology. The basis of foreign policy is in our stature in the world. We must be No. 1 in the world to lead the world in the 21st century. It’s a simple proposition”.

He declared, also in May, that “100 percent of government investment will be guided by one principle: Make it in America.” Certainly there is a large degree of ‘Make it in America’ economic nationalism in his outlook; but this is unavoidable for any government expenditure plan. You can’t eat your cake without making it. Competition with China and Asia, in the economic sphere at least, will be heightened.

The Chinese and Europeans have faulted Biden’s approach as Economic-Trumpism without Trump. Economic nationalism and anti-China rhetoric usually go together, but political confrontation can be avoided so long as welfare-economics at home does not become aggressive, zero-sum foreign policy directed at China. This can be avoided by an Administration bent on respecting international treaties and global climate correction. Hostility to human-rights violators is likely to become a flash point. Other capitalist nations are watching in disbelief as blue-collar fathered Joe tones down the ‘world according to finance-capital’ doctrine in favour of a spending plan that would make Keynes blink.

Biden has proposed his third $2 trillion economic expenditure plan in a hundred days (it may be trimmed to $1.2 trillion by a bipartisan deal in the Senate) and claimed that his infrastructure spending scheme is the “the largest jobs plan since World War II.” In all he plans $7.5 trillion new spending, double America’s expenditure in inflation-adjusted dollars on WW II. Spending is focused on new state-led R&D, infrastructure and support for low-income Americans. The latter includes outlays on community colleges, health and child care, as well as federal spending in districts with concentrations of poor, black and less advantaged people. Luckily things are going well on the economic side: The World Bank has doubled its projection of US GDP growth from 3.5% to 6.8%, the fastest pace since 1984.

 

However, political opposition from the Republican Party is horrendous; it is determined to scuttle Biden’s spending Bills in the Senate. The GOP knows that if Biden’s New Bargain succeeds it will bury the Trump-Republican grip on the American working class for a generation. Hence many State Legislatures with a Republican majority are curtailing voting rights in a flagrant attack on electoral democracy and asserting control over the voting and counting processes. Local election officials affiliated to the Democratic Party are being removed. A threat to Biden’s programmes is that mid-term Congressional elections in 2022 will be “fixed”.

Biden’s splurge on reorienting the economy away from billionaires and towards the middle and working classes is also shifting the global ideological discourse. The Washington Consensus (neoliberalism) could well find its leading champion riding away into a semi social-democratic sunset. The unconditional virtue of free-markets, reproving state participation in the economy, privatization and foreign investment may be less forcefully shoved down the throat of developing nations hereafter. But don’t hold your breath for anything dramatic, it’s a matter of degree. In the eyes of the hard-left Biden is a lukewarm plain vanilla social democrat. Still for an American president – Wow! And of course don’t underrate America’s global sway for another generation. Rome declined for three hundred years before it finally fell.



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Prospects for NPP/JVP at the next election

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by Kumar David

Several months ago I brought to my reader’s attention a straw-poll that I had conducted among my friends on the left of the political spectrum, university colleagues and liberal intellectuals on two matters; (i) their own voting intentions, (ii) what they perceived were the electoral prospects of the NPP/JVP. The replies were consistent. Most said that they would vote for the NPP/JVP or that they were mulling over it. Almost all declared that would not seriously consider Sajith or Ranil led outfits and that anything linked to the Rajapaksa-Porotuwa garbage heap was out of the question. Regarding whether the NPP/JVP could win an election most people in my straw-poll had reservations. While they were themselves satisfied that the JVP would never again repeat the madness of 1971 and 1989-91 they reckoned that the electorate at large was still anxious (minissu thaama bayai). I am grateful to all who wrote to me (actually everyone I contacted replied) for their frankness and careful evaluation of ground realities.

The National Peoples Power (NPP), an alliance of about 28 political parties, trade unions and grass-roots organisations conducted a public seminar on January 24, 2023, which was jam packed, not enough seating room. The keynote speaker was Anura Kumara Dissanayake (Anura hereafter) who was very clever in how he handled the seminar by declaring right at the start “People are concerned about our economic policies; they want to know how we will handle the economy”. Now indeed this is true, but it also let him off the hook about the insurrectionary folly of 1971 and 1989-91 and allowed him to skirt the concerns of the ethnic and religious minorities. I will touch on all three issues, economy, minorities and political adventurism in this short article while giving priority to the economic discussion in the light of the enormous success of the January 24 Seminar/Symposium/Consultation.

Yes, there is considerable interest in the JVP’s economic programme since it has never been explicitly spelt out in the past except as simple anti-imperialist and anti-neoliberal slogans. Anura, as expected focussed on the great hardships the people were suffering because of the ongoing economic crisis, the unbearable increase in prices and the breakdown in public services – hospitals for example are short of medicines, dressings for wounds and beds.

I will begin by picking up six crucial economic issues that arose from the January 24 seminar without stating whether the questions were or were not adequately addressed by the panellists on the stage. It is the right answer to the questions that matters most not whether the panellists got it right or are still working towards adequate solutions. What’s the rush, the elections aren’t tomorrow?

Will an NPP/JVP government be friendly to private-sector businesses?

How will Small and Medium Enterprise (SME) be encouraged and financed?

What is the attitude of the NPP/JVP to loss making state enterprises?

How will foreign investment be encouraged?

What is the is the right approach to Free Trade Agreements with other countries?

How will digitisation of production and of enterprises be encouraged?

I will now proceed to comment on these seven economic issues without indicating whether my comments are the same or different from what the panel members said. There is lots of time more to the next election; we are in the midst of a discussion in progress. Let’s go step by step. Yes, the NPP/JVP should aim to consolidate a mixed economy and therefore the role of the private sector must the recognised. As will become clear when I answer questions lower down what has to be consolidated is a dirigisme economy where the state directs fundamental policy, emphasis being on the word fundamental. In Singapore, South Korea and above all in China (Deng Xiaoping onwards) the private sector prospered although the directive role of the state in the broad sense was retained.

Making resources available for SMEs has to be undertaken as a matter of policy. Certain banks must be identified for that purpose, policy instruments create and funding provisions made via the Treasury. Support for SMEs has to be a state responsibility.

In my view policy towards loss-making state enterprises needs to be well defined. White elephants like Sri Lankan Airlines should be sold off. Loss making state enterprises have to be divided between those who make a loss because they carry a huge consumer subsidy (electricity for example) and others which are fattening an excessive work-force (some portions of the petroleum industry). In respect of the former the NPP/JVP has to decide to what extent and for how long a subsidy is a political necessity, and in respect of the latter a ruthless but time diversified closure policy adopted. Time has to be given for people to learn new skills to find alternative employment avenues. Digitisation is a specialist topic and I was pleased with the response of the relevant member (I am unable to recall his name) of the Seminar Panel who spoke briefly on digitisation and showed an expert grasp of his subject.

From a left propaganda point of view to speak of the tremendous hardship that the sudden economic crisis and the post-Covid and post global-recession period, had created is straightforward. Anura drew attention to the great hardships of the masses, the need to provide additional resources and made a fairly straightforward moral argument. The practical point is how to get this done without cutting other contending demands and how to persuade China to restructure rather than defer (postpone) debt repayment. Though I am a member of the NPP and have been an electoral candidate on the NPP National List slate what I say in this article is not NPP policy, rather is an open-ended contribution towards the ongoing discussion and it is intended to help formulate NPP policy. There is a long way to go before the next election and the lot more water will have to flow under the bridge before the NPP finalises its positions.

It is in this spirit that I make the comment that the NPP needs to openly declare that its model can, broadly, be described as social-democracy. Obviously, it is absurd to focus on prescriptive details but alternatives such as a USSR type state directed economy or the outdated Cuba-Venezuela-Angola-Ne Win Burma models are out of the question. Pakistan with the tacit approval of the Imran Khan opposition, Bangladesh, Malaysia, Indonesia and Mongolia de facto, in the context of post-Covid, global recession threatened world, have explicitly or all but explicitly endorsed social democracy. The NPP must have the gumption and the courage to explicitly state that it stands for social-democracy. It must tell the JVP that the old model of in the Wijeweera days is all dead and useless.

“Pepe” Mujico (Jose Mujia) the 40th president of Uruguay from 2010 to 2015 is described as the world’s humblest head of state. He donated 90% of his $12,000 monthly salary to charities. He was an outspoken critic of capitalism. A former guerrilla with the Tupamaros, he was tortured and imprisoned for 14 years by the military Uruguayan dictatorship (1973-85). Military dictatorships are the foulest and most abominable of regimes in the world. In Argentina for example the military dictatorship (1976-83) threw its opponents, alive into the sea out helicopters and that included pregnant women. Have no doubt that a military dictatorship in Sri Lanka will do the same. Have we not had enough experience of what unfettered military power can do? Sixty thousand young men and women perished when military power ran unchecked in 1989-91. But this comment is by the way, what I wish to say is something else; it’s about social-democracy. Pepe’s most famous quip is that if Uruguay was a big European country it would have become famous as the home of modern social-democracy. The point then is that in this complex and uncertain period the correct model to explicitly assert is social-democracy. The NPP must openly and explicitly declare itself a social-democratic entity.

I promised to comment briefly on minority concerns and the insurrectionary history of the JVP before I sign off. I would like to see the NPP explicitly reject the Wijeweera-Somawana storylines. That is reject Wijeweera’s fifth lecture and his general antipathy to plantation Tamils. Likewise, I would like to see the NPP dissociate itself from the Somawansa – Sarath Silva intervention that dissolved N-E provincial unity. More broadly I would like to see the NPP declare itself in favour of devolution to minority communities and to provinces. Obviously specific details remain to be clarified and that should be the topic of many fruitful discussions in NPP forums.

On the matter of apologising for the insurrectionary excesses and anarchist folly of 1971 my friend Prof Eich persuaded me that this is an unrealistic expectation and I should drop the matter. I agreed and remained silent for about two years. But as the NPP/JVP influence spreads more broadly into the Sinhala petty-bourgeois and rural classes the topic is raising its head again – (minissu bayai). An election winning strategy cannot plaster over that. The pathological madness that, as in the Cultural Revolution, the past has to be utterly destroyed in order to build the world anew may have influenced some in the extremist ranks of the JVP some decades ago. I have indeed run into many admirers of the Cultural Revolution in “those” times. However now the NPP must be uncompromising; there is no room for sympathy for any of this in its commitment to social-democracy.

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75 Years: How a halcyon start became a horrible sorrow – A tale of two compacts and two economies

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by Rajan Philips

Sri Lanka, then Ceylon, became independent in the best of times. Almost all contemporary accounts said so. A model colony was becoming independent unexpectedly soon with no struggle or sweat. No other emerging polity apparently had it so good. The economy was on a roll by the measures of foreign reserves and local consumption levels. As a small island it was easy to be overcome by modernization. Road and rail networks crisscrossed the island, telecommunications and postal services were bringing people closer. Public education was free and public health was looked after, the two anchoring a robust welfare system that was unique among comparator colonies. The population was under seven million and even though the vast majority of the people were relatively deprived, there was optimism that there was opportunity for everyone.

Universal franchise had been introduced 17 years earlier, in 1931, and the people had had a head start in experiencing electoral democracy – uniquely among non-western polities and well ahead of quite a few western ones. Independence arrived on the back of a new constitution, which was a simple text crafted by unassuming legal drafting and not the exalted product of a ponderous constituent assembly. Yet Sri Lanka’s first constitution, unlike its successors, was a compact document that possessed too many virtues and too few faults. Most importantly, it underwrote the communal compact that was the necessary and sufficient prerequisite for the colonial rulers to handover power to their local successors.

“Communal Compact” (AJ Wilson) is the idea that the (Soulbury) Constitution and the granting of independence were the result of a political agreement among the country’s constitutive “communal groups.” Put another way, the British had to either assume or believe that there was such an agreement among the Sinhalese, the Tamils and the Muslims before deciding on the timing and the terms of their departure. Before long, however, the communal compact came under stress and eventually broke.

After 75 years, the controversy is over a different and somewhat narrower compact – the ‘devolution compact.’ Equally, the seemingly salubrious economy that greeted independence in 1948, has now become a deflated and damaged economy requiring intensive treatment in 2023. Hence, the tale of two compacts and two economies. But how did we get here?

Broken Economy

The answers go back to the circumstances in which Sri Lanka became independent. There was more to them than the rosy pictures painted by contemporary accounts. There were already economic fissures and sociopolitical fault lines. These fissures and fault lines defined the political questions of the day and the political alignments that arose out of them. How they unfolded is the story of Sri Lanka after independence. It is an overtold story, but there are always new takes on them as new generations come along to live through the same old problems.

For all its consumption complacency, the economy in 1948 was the “classical colonial export economy”. Plantation exports paid for consumption imports and left a not too small Sterling surplus as bonus. However, the situation was structurally unsustainable. A fast growing population and a politically demanding consumption culture could not be supported indefinitely by the export earnings from tea, rubber and coconut alone. Within a decade, foreign reserves fell from one year worth of imports to four months of them. There has been no looking back since, albeit the wrong way.

The decades following saw severely imposed import restrictions that did not, however, serve the textbook purpose of stemming consumption and accumulating aggregate savings for productive investments. Import scarcities also had to pay a heavy political price. Unemployment became the new scourge along with the chronic mismatch between the outputs of free education and the labour needs of the economy.

Free education expanded the imparting of academic learning and not the technical mass education needed for the development of industries. Industrial development itself was circumscribed by the small national market of the island, its total lack of non-agricultural raw material resources, and indiscriminate import restrictions. State led industrialization proved to be too capital intensive and addressed neither the unemployment problem nor the needs of consumers.

The open economy alternative did unleash the potential for private industrial development and shifted the economic base from its sole reliance on plantation exports. But skyrocketing consumption levels, privatization of education that serves no social or economic purpose, criminal neglect of and corruption in the vital energy and transport sectors, and economically inappropriate and graft generating infrastructure investments have brought the national economy to its current parlous state.

In the assessment of Sri Lanka’s current President, there is no economy left to be reformed! He is promising, among many other promises, a new take off for a better landing at the hundredth anniversary of independence, which neither he nor his followers and critics will be around to witness.

One beam of light that needs to be added to this rather bleak recounting is the story of domestic agriculture, which has been an impressive one in terms of overall growth, if not quite so in terms efficiency of input allocations and certainly not in terms of the distribution of its outputs. Whether comparatively advantaged or not, agriculture is the bulwark of livelihood for the majority of Sri Lankan households; and inclusive of the plantations, it also provides the main domestic base for local industries. Any government can ignore agriculture only at its peril, and the punishment for anyone choosing to monkey with it will be the swiftest and the severest. The organic fertilizer fiasco just proved that, and rightly so.

In 1966, concluding his monograph, Ceylon: An Export Economy in Transition, Donald Snodgrass saw only one certainty “from the historical perspective of 120 years of modern Ceylonese economic development;” and that was, “the search for an economic system that will provide a politically acceptable and economically viable replacement for the classical export economy will continue.” The economy now is far more diverse than what was there in 1948. But the point about the elusiveness of the search for a “politically acceptable and economically viable replacement,” is spot on, 75 years on.

Broken Politics

Of the two, political acceptability and economic viability, it is the political part that has been playing the weightier role in Sri Lanka’s political economy. Politics itself has been swayed by non-economic pressures and compulsions than it has been informed by economic imperatives. The current debate over devolution would suggest that nothing might change even now. Economic doldrums, notwithstanding.

Political divisions along party lines were in their embryonic stage at the time of independence in 1948. The newest political party, the United National Party, had just been formed by DS. Senanayake to contest the 1947 parliamentary elections on a rightwing platform. GG Ponnambalam had formalized his Tamil Congress a few years earlier. And the country’s oldest political party, the Lanka Sama Samaja Party, that had just been freed of its proscription was already in two parts marking the second of its many splits. Rounding off the Left was the Communist Party that had come into being as the first splinter of the LSSP.

Many candidates ran as independents in 1947 and an unhealthily large contingent of them were returned as MPs. The UNP did not win an overall majority (50 of its 92 candidates lost in the elections) but was able to form the new government with the help of independents and Appointed MPs. The efforts of non-UNP MPs, through their historic gathering at Yamuna, the Havelock Road house of highly respected lawyer politician, Herbert Sri Nissanka, to present an alternative bid for power ended in failure, marking the first of many such failures to come. (To be continued).

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Sri Lanka at 100

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by Ram Manikkalingam

Sri Lanka’s future is hanging in the balance as we turn 75.

On its 75th birthday Sri Lanka is divided. There is a stand-off between the people and the political institutions. The people reject Parliament and the President. And Parliament and the President fear the people. This standoff cannot last indefinitely. It will lead to authoritarianism, anarchy or reform. The decisions made, not only by politicians who control our political institutions, but also by the people who want them changed, will determine where we end up.

If there is one person, who has a decisive role in where our country will be in 25 years, it is President Wickremesinghe. While parliament and the people can no doubt make a difference, their decisions must come through political persuasion and mobilization. But President Wickremesinghe can act on his own.

He was picked by the Rajapaksas to protect their interests. But he is not of the Rajapaksas. He protects the Rajapaksas indirectly, by protecting the system that they, and other politicians have benefited from. This system is a combination of rentier capitalism and majoritarian democracy. Businessmen make their money from permits, contracts and quotas provided by politicians. In turn, these businessmen fund the politicians, who run campaigns that favour the majority. Breaking out of this is not what the leading politicians of Sri Lanka want. When the Aragalaya peaked, and the Rajapaksas found themselves rejected, they looked for the next best leader. Someone who would maintain the system the Rajapaksas required for their survival. So Ranil Wickremesinghe was chosen. But he also has a choice.

He can hang onto the Rajapaksas and let the Rajapaksas hang onto him. Or he can begin a serious process of reform that by its very definition will require ditching the Rajapaksas and their ilk.

If he chooses the former option, he will preside over the rapid erosion of the economy and the gradual deterioration of democracy. Because the Rajapaksas very much represent the faction against both political and economic reform. This would prevent him from making the kind of economic reforms required to restructure our debt with the creditors, attract investors, promote equality, and improve public services. As anti reformists, the Rajapaksas would prevent Wickremesinghe from making critical changes required to move the country forward. Instead, they will act as a reactionary force, hostile to any democratic impulse and economic changes that reduce their corrupt grip on power.

This alliance between Wickremesinghe and the Rajapaksas would, in terms of policy, transform itself into an alliance between Sinhala extremism and neo-liberalism. This would precipitate political opposition, not just from political parties, but also from newly mobilized political groupings, including the youth, the students, the middle class, the trade unions and civil society. This opposition, in turn, can lead to state repression, as the government uses its control over the security forces to crack down on the newly revitalized Aragalaya, leading to authoritarianism or anarchy.

Ordinary people, spooked by threats and suffering under the burden of a rapidly deteriorating economic situation, would not even have the wherewithal to protest. They would be struggling to make ends meet, feed, clothe and educate their children, while taking care of the elderly and their struggling kin. The result would be a dispirited country, submitting, once again, to the authoritarianism of a narrow political elite, that unites in the face of popular mobilization.

Instead, the crackdown may also lead to greater mobilization, spiraling out of control despite the armed forces using excessive force. And in an echo of last year, gets rid of the President and this time the parliament, as well. In the absence of a sensible political programme, this systemic change brings neither reform nor revolution. Instead, Sri Lanka becomes saddled with a series of unstable governments that lack the capacity to advance democracy or the economy. Sri Lanka becomes a country where governments come and go, not because of fundamental political changes, but because an influential faction in or out of government is dissatisfied with a particular policy or leader.

This leaves Sri Lanka with a narrow path to political and economic reform that must be picked within the next couple of months.

At the end of February, President Wickremesinghe would have the power to dissolve parliament. He may fear doing so, because the new parliament will be dominated by political parties that are his rivals. He will then have to negotiate reforms with a prime minister who may have more popular support than he does. But does he really have the power to enact reforms, today? Even his positive efforts to release military occupied land and PTA prisoners, and implement the 13th Amendment are being met with hostility by his own faction in parliament. Moreover, any effort to balance the budget, strengthen welfare measures for the poor and vulnerable, raise taxes, restructure loss making State Owned Enterprises – would require a government that has the support of the people, not one that fears them. It is not too late for President Wickremasinghe to lead such a government that includes all political parties.

Sri Lanka has a narrow window to begin a process to deepen democracy and enact economic reforms that would bring us dignity and equality when we celebrate our centenary.

(Ram Manikkalingam is Director of the Dialogue Advisory Group. He was an adviser to then President Kumaratunga and was a Visiting Professor at the University of Amsterdam)

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