Sunday, March 15, 2015

free ? market economy ?

The colonial powers gained economic strength through interventionist policies. But they now try to kick away the growth ladder of third world countries by advocating a ‘liberal free market’. 
Development Strategy in Historical Perspective
Kicking Away The Ladder takes a historical look at how the Western powers have grown economically and politically. It shows that the principles and tactics that have made them rich and powerful are counter to those they propose developing countries should live by.Learn how developed nations gained their prosperity by acting completely against what they tell developing nations to do.
If you switch on the news or read the newspaper, you’ll find a Western politician telling those in the developing world what they need to do to become rich and peaceful. Developing nations face international pressure to establish free-market economies, democratize their governments and improve workers’ rights.
These chapters show that Western leaders tend to preach one message of economic development, and practice another. Far from being the bastions of free trade and liberty, Western nations protected their economies from foreign competition and exploited their labor force. In short they built their economies by doing the “wrong” things.
High employment levels and just political rights are ubiquitous aims, though arriving at those standards can have a detrimental economic cost on developing nations. In these chapters, we will examine why fair economic and political standards can come at the cost of wealth and power, and how some countries have attempted to close the gap between fairness and prosperity.
These chapters will show:
  • why Britain employed child labor much later than you think;
  • why America wasn’t always a free-trade advocate; and
  • what prompted women’s right to vote in Switzerland.
  • The USA achieved dominant economic standing by protecting its industries.
What does the flag of the United States stand for?
Along with liberty and democracy, one of the most common answers to this question is free trade and the free market. The United States often represents the image of free economic practices, unfettered by controlling government interference or high tariffs.
Yet, despite this motto of free trade, the early history of the US shows it was actually governmental regulations that led to its prosperity and power.
In the late eighteenth century, after a long struggle, the United States threw off British rule to become an independent nation. The new country faced many problems: its industry was undeveloped and weak in comparison to the European powers.
The newly independent United States turned to the opposite of free trade:protectionism. This meant that any foreign product entering the country would be subject to a five percent customs duty. The policy kept the price of US products comparably cheaper, harboring domestic economic growth.
Protectionism continued as domestic industry grew; in fact, the customs tariff climbed. In 1812, to pay for another war with Britain, it was increased to 25 percent. When the war ended a few years later, the tariff continued to climb – to a whopping 40 percent by 1820.
Incredibly, protectionism policy continued well into the twentieth century. Before the Second World War, the US was considered to have the most protected economy in the world, second only to Russia.
Although long-term protectionism may sound counter to modern economic ideals, it was undoubtedly successful. Protected behind the customs barriers, US industry grew to become the strongest in the world.
Only when the US achieved this position of dominance did it open its borders to free trade.
Britain established economic dominance starting during the industrial revolution by protecting its industries.
Britain’s naval fleet ruled the waters in the eighteenth and nineteenth centuries, marking the small island’s status in world trade.
How did this little, cold and wet island achieve such economic standing? As with the United States, the answer lies in the country’s adoption of protectionism.
We have to revisit fifteenth century Britain to gain a deeper understanding of its protectionist strategy. At that time, England was a rather impoverished nation. Its main export was raw wool which it sold to the sophisticated textile industry of The Low Countries (modern day Belgium and Holland). England had very little industry of its own.
One English king, Henry VII resolved to change this. He wanted to build up England’s own textile industry and he realized that protectionism was the best way. So, beginning in 1489, he initiated laws protecting domestic industry.
First, England poached skillful workers from the Low Countries who had years of textile experience. Then the export of raw wool (needed to turn into cloth) was banned, providing English manufacturing with the materials to succeed, simultaneously depriving foreign competitors of the raw material. Henry VII’s new laws effectively spurred the growth of English textiles.
In fact, protectionism worked so well that Britain used it again in the eighteenth century to build its manufacturing industries.
Through trade tariffs, the government encouraged the import of raw materials like cotton and iron ore and the export of manufactured goods, such as cloth and steam engines. Its policies effectively capitalized on the low cost of abundant imported materials and the huge global demand of manufactured goods, turning the small nation into a world-leading economy.
Britain’s historical dominance over colonial interests shows how rich countries exploit poor ones.
Why do you think some countries are rich and others poor?
The reason, according to many people, is because certain wealthy and more powerful countries are able to use their position to exploit and impoverish the others.
Is this true? Well, if you look at the historical evidence it certainly appears this way.
Let’s look at one particular example from the past which displays this unfair relationship between rich and poor.
In the seventeenth and eighteenth centuries, Britain acquired colonies on the Eastern coast of North America. The British government resolved to use the resources of these colonies to make itself wealthy. The raw materials, abundant in North America, such as furs, tobacco and timber, were stripped domestically and sent for British manufacturers to use.
Then at the same time, the colonists themselves were prevented from growing their own industries. For example, Britain outlawed the construction of rolling and steel mills in America. This act forced the colonists to specialize in more primitive, less profitable products like pig and bar iron, instead of high value steel production. Of course this benefited British steel manufacturers as it limited the competition.
Thus, the colonies of North America were deliberately kept poor in order to grow the British economy.
In addition to exploiting its own colonies, Britain used its power to also dominate other nation-states, forcing them to sign humiliating, unfair treaties.
For example, by using its military might to defeat China in the Opium War (1839-1842), Britain forced the Chinese to acquiesce control of their customs duties. The British set the duties at cheap rates, allowing British goods to flood China, stifling domestic industry.
We have now seen how Western nations grew rich and powerful through exploitation and protectionism. The next chapters show how those countries coach developing nations to grow through entirely differing methods.
It’s false that democracy is responsible for Western economic power.
What do you think makes a country prosperous?
Many will argue, democracy. It seems obvious: A huge proportion of the world’s most successful economies are democratic. Therefore, democracy must be a key factor, right? However, looking back into the past you can see that the link between democracy and economic development is unclear.
For a start, when most NDCs (Now Developed Countries) such as the USA and the UK became economically powerful, they weren’t expressly democratic.
For example, in France between 1815 and 1830, only males over 30, who paid at least 300 francs in taxes, could vote. This limited the franchise to just 0.25 percent of the total population. Then, when voting rights were expanded in 1848, only males were given the vote.
In most countries, this lack of women’s suffrage was common until relatively recently. It wasn’t until 1903 that Women could vote in Australia, 1928 in the UK and in Switzerland women were barred from voting until 1971.
Yet, even when the right to vote was slowly expanded in the NDCs, the democratic process was hardly open or transparent.
Take secret balloting. In order to make elections fair, who you vote for should be kept secret. Most of us take this for granted now, but in the past it wasn’t so. For example in Prussia until 1919, a lack of a secret ballot left voters at risk of bribery and intimidation. In France, it was only in 1913 that a voting envelope was used to protect one’s precious vote.
So what does this tell us? That developing countries should be less democratic to get better economic results? No, of course not, but we must be aware that rich nations achieved success using methods we would frown upon. This way we can judge developing nation’s growth more fairly.
The following ideas offer more examples of how western nations used undemocratic methods to build their wealth and power.
The history of Western economic development is marked by property rights violations.
How would you feel if, after spending your entire life building up a prosperous business, the government claimed it?
It’s very unlikely that you would make the mistake of building a business again and society would lose its entrepreneurial spirit.
In order to avoid this situation, Western politicians and economists argue for strong property rights. These rights legally protect someone’s property from seizure by the state. Property rights are meant to promote an entrepreneurial spirit: as entrepreneurs know that the rewards for their enterprise will never be stolen from them, they are incentivized to work hard.
However, if we look at how the NDCs developed their economies, we see that economic development doesn’t always require strong property rights.
For example, take Britain in the eighteenth century. Over this century there was a huge advance in the sophistication and size of the British textiles industry. Behind this development was actually the government’s violation of property rights. Britain’s leaders took the common land, considered public domain, and gave it to private landowners, who then filled it with sheep. It was this act of government “theft” that led to an increase in the supply of wool which fuelled the textile boom.
And it is not only the violation of physical property rights that can fuel economic development; stealing peoples ideas, violating their intellectual property rights, can have the same effect.
When the NDCs grew economically, the theft of ideas and inventions was liberal. For example, before 1852 the British government allowed its citizens to patent foreign ideas for their own use. This meant that if a German had a great invention, a British person could steal, manufacture and sell it in Britain, under the full protection of the law.
So, although we might think property rights are crucial to economic development, the opposite has also been true.
Abuse of workers’ rights was rife in the NDCs, before regulations were established.
Certain working practices seem diabolically inhumane: forced 15-hour work days and child labor are two, for example.
As a result, governments, charities and NGOs (non-governmental organizations) work to ensure a world free of such inhumane practices. However, although exploiting workers is condemned now, in the past it was not the case.
In fact, the NDCs actually took advantage of such practices as they were developing.
Take Britain, for example, the world’s first industrial power. In the late 1700s and early 1800s, British industry was reliant on the employment of children, both in the textile mills and factories, and in coal mines.
Children working in the coal mines could be expected to work in horrific conditions for very long hours. In the 1820s, for example, it was common for children to work underground for 12 to 16 hours every day.
The early history of the United States shows another example of how child labor was central to economic life. In 1820s half the labor in the cotton industry were children under 16; and there were still 1.7 million people working in the industry by the end of the nineteenth century.
Even well into the twentieth century, was child labor still prevalent in many Western societies. Denmark took until 1925 to establish stringent laws for worker rights.
But, why are these historic examples relevant?
If we want to see developing nations reach the heights of the NDCs, then we must realize that they are limited in their options compared to how the West built their economic wealth. They cannot lie, cheat and exploit their way to the top in such an unregulated fashion as the West did.
Contemporary developing countries are developing faster than the now developed countries at similar stages.
So we should now realize that the currently developing nations have to approach economic development in different ways than the NDCs did.
However, rather than something which we bemoan, we can view this challenge as a positive change. In fact, the majority of developing nations are currently far more “developed” than their Western counterparts were at the same stage in their development.
Take the institutions vital for a fair and prosperous society: the institutions of bureaucracy, welfare or democracy. In currently developing nations they are much stronger than they were in the historical NDCs.
For example, the UK income per capita in 1820 may have been twice that of modern India (adjusted for inflation), but India is far more developed in its institutions: India has universal suffrage, a central bank and strong labor regulations, none of which existed in nineteenth century Britain.
Why was institutional development so poor in the developing NDCs?
Partly it was because those who had control of the government, were also those who benefitted from the unfair system.
That’s precisely why, for example, it took well into the twentieth century for Britain to ban child labor. The House of Lords, which decided policy in the nineteenth century, was dominated by rich men who owned the mines and factories that the children worked in. To ban child labor would mean that they lost a ready supply of incredibly cheap and docile labor.
Yet in developing countries, at least those with universal suffrage, such powerful forces have less control, therefore development is required for solutions – spurring greater development.
Seeing that developing nations are growing within the bounds of modern regulations makes them far more advanced than the NDCs that developed at the hands of unjust practices. Many people in these countries have rights that were unavailable to the people of eighteenth century Britain or America.
Final summary
The key message in this book:
When advising developing nations what to do, NDCs often conveniently forget to tell them how they got there. Yet, partially because developing nations cannot grow at the hands of unregulated exploitation, they have been building their economies in more advanced ways.
-------------------------------------------------------------------------------------------------
Intro: Without the Hindu grand narrative as the anchor and foundation, it is difficult to develop a viable narrative for India as a unified country.
Most major countries have a well-defined grand narrative that projects who they are as a collective identity. This is invariably a positive self-image based on carefully selected historical facts, mixed with exaggerations and even outright falsehoods. For examples, US students learn with great pride of their founding fathers – but Thomas Jefferson’s lifelong practice as a slave owner is not mentioned. Similar narratives of pride are the staple of education and media portrayals in France, Britain, China, Japan and Russia, to name a few. Besides modern countries, the Abrahamic religions each have their own clear-cut grand narratives, each premised on a singular historical event recorded in the corresponding holy book.
Such narratives serve an important function in establishing collective identities, the ideals worth aspiring, and a broad trajectory—both for interpreting the past and guiding the future. 
Unfortunately, I find Indians, especially Hindus, confused about this matter, often in denial about its significance, and even outright hostile to the very idea of having such a narrative. Many elites in Delhi have criticised my suggestion for narrative debates and discussions, calling such an activity divisive. They see India through the lens of fragments, with separate and conflicting narratives, and Hinduism as the scourge inflicting our society’s health and viability.
I have written extensively about the Hindu grand narrative as an open architecture. It is adaptive and fluid, accommodating to fresh ideas and new members. It is based on the discoveries made by rishis in their inner laboratories through adhyatma-vidya (inner sciences). The Hindu inner sciences are now at the cutting edge of research in neurosciences in the West, where the Hindu sources tend to be erased as part of the frenzy for appropriation. The fields of medicine, self-improvement and management are each benefiting in major ways from the goldmine of Hindu ideas. Sanskrit is a language of the future, not a museum relic from the past. 
Such a profound narrative is more like science (of the inner domain) than like a typical “religion” in the Abrahamic sense. It is free from aggressive mandates by an angry God demanding violence against non-believers. It is free from claims of exclusivity that have caused much of the world’s violence for several millennia. Rather, the open architecture is a network that hosts a multitude of smaller narratives introduced by diverse communities.
For instance, the notion of ishta-devata (“my deity”) is a powerful foundation that supports Hinduism’s broad spectrum of deities and paths in a harmonious manner. I can worship the ultimate reality through my ishta-devata, and I have no issue with someone else worshipping through their different choice of deity. However, such respect must be mutual: the other party must also respect people’s right to choose different deities and paths. This means that exclusivity claims of religions 
are to be rejected as dangerous devices that invariably bring tensions, and eventually turn violent. 
The open-architecture of Hinduism is an example of Hinduism’s unique and valuable contributions to the modern world. It is not only the fabric for India’s pluralism, but is also exportable as a model for harmonising various other world religions and ideologies. 
For instance, neither Christianity nor Islam has the internal resources to reconcile their theological conflicts with one another, without one side defeating the other. Only through an open architecture could they ever expect to achieve the much needed harmony between them. Of course, this would necessitate reinterpreting their holy books without dependence upon exclusivity claims or hostility towards infidels.
Another vital quality of Hinduism is its openness to critiques and change. New smritis are to be developed for each epoch, and old ones reinterpreted and adapted to different contexts. Unlike other major religions, Hinduism has never had a conflict with scientific discoveries. It has not fossilised into fixed dogmas of the kind that enslave the members of many other faiths. Hindus have been able to get out of dilemmas and predicaments by creatively applying their own internal resources. 
It is a common misunderstanding that Hinduism does not engage the external world in a positive way. It is alleged to be “world negating” and a form of escapism from the challenges facing society. Hence, the criticism goes, Hindus neglect their poor, sick and other suffering fellow humans, because they are only interested in pursuing an escape from empirical reality. Such interpretations are false. Prominent Hindus have always been deeply concerned about alleviating suffering, and have pursued the development of society in practical ways. That is why there was so much advancement in medicine, sophisticated architecture and civil engineering, as well as in social and political thought. Artha (material prosperity), kama (legitimate desires) and dharma (engagement at various levels) are all included as parts of Hinduism. Moksha is only of the legitimate pursuits. 
The name “Hindu” might be relatively modern, but the entity it represents is very ancient and has a long history of continuity. I am writing a book on how Hinduism has already impacted other major faiths profoundly, even though these appropriations tend to get disguised.
We need to introduce texts like Mahabharata, dharma-shastras, artha-shastras and raj dharma discourses into mainstream teaching and debates. Sadly, Hindu leaders have limited themselves too much in what they teach. Much of the vast repertoire of resource material is being neglected.
Without the Hindu grand narrative, it’s difficult to build a viable narrative for India as a unified country. There are many divisive narratives at work in the opposite direction. My book, Breaking India, explains the dangerous nexus between internal fragments and certain foreign entities, which are operating as centrifugal forces pulling India apart.
Meanwhile, the West, China and Islam each have their own powerful grand narratives that are competing for global market share. India is a prime target for each of these nexuses competing to export its own grand narrative worldwide. In fact, India is the largest soft target available to them for expansion. Because India lacks a sufficient consensus on what its grand narrative is, it is highly vulnerable to these forces. Though aspiring to be a global power, India has not invested in the development and public discourse of its core narratives. In fact, there is not enough appreciation among its elites on the importance of this issue. 
While China controls the discourse on its civilisation, India has largely abandoned the fields of India Studies and Hinduism Studies to outsiders. The British Orientalists dominated such research in the colonial era. Now it is American Orientalists who have taken over this role. Indian scholars have been bought off as junior partners in this enterprise, supplying their foreign sponsors with data that fits into American theories and agendas. The most prestigious journals and university degrees on Indian civilisation are located outside India, and are under the control of Westerners. The Indians involved tend to be appointed and supervised by Westerners. Many Indian universities take great pride in importing Western models into the humanities and social sciences. This is not a recipe for becoming a superpower, but a recipe for the mental re-colonisation of India. It will produce a nation of mental coolies looking to impress others as a way to feel legitimate.
Far too many Indian intellectuals are basically regurgitating and parroting Western thought which they have been trained to disseminate. Suffering from inferiority complexes, some Indians are uncomfortable articulating publicly what bothers them privately. Those who raise such issues and call for open debates typically get branded in Indian mainstream forums.
I see this as a crisis of Hindu leadership. Many of our leaders lack the intellectual sophistication that comes from purva-paksha (reversing the gaze) of the West, China and Islam, and from years of encounters. They thrive in cocoons with “like minded” people. They fail to get out of their comfort zones to get the required experience in the intellectual kurukshetra. As a result, there is shoddiness and lack of rigor in research on civilisations. Such leaders tend to be bombastic and dismissive of opponents, rather than studying them seriously. I find our youth searching for mentors and leaders, and becoming restless about the present state of affairs. Such youth are our hope, provided we can upgrade the caliber of our leaders.
The Hindu grand narrative must become a major topic for forums, such as conclaves, literary festivals and television discussions. It is a serious discipline and not a matter of chasing the latest sensational news item. It requires competent intellectuals and think tanks with a long-term commitment to pursue the issues professionally.
Rajiv Malhotra (The writer lives in Princeton, USA, and is an internationally acclaimed author. For more information you can visit www.RajivMalhotra.com)
------------------------------------------------------------------------------------------------------------

No comments: