Saturday, February 06, 2016

Commentary: Pakistan, Continued Achilles Heel of American Foreign Policy

I would not say it is all Sec. John Kerry's fault, but he has been one of the most sympathetic backers of Pakistan in USA. When he was in Congress as a member of Senate Foreign Policy Committee and now as the Sec. of State, Kerry symbolizes America's Pro-Pakistan policy tilt all along. This NYT article spells out consequences of such a blind eye to Pakistan.

One can speculate what things might be at work here:

- When USA is dramatically tarnished in Middle-East for not keeping with 'past friends' (that is the heart burn of Saudi's most as well as the feeling that Obama abandoned Syrian rebels so that Assad on the back of Russia can run over Aleppo); it is understandable that Foggy Bottoms would not want one more disgruntled friend created in extended Middle East. In other words, Pakistan is still earning 'dividend' of helping Mujaheddin in its war against Soviet Union during Reagan era. (WSJ and hawks - that is your policy at works!)

- Pakistan has nukes, so it is in a different class by itself; obviously needing the 'kid glove treatment'. It is not just Pakistani Army, but the danger of these nukes landing in hands of militants is real too.

- There is that Trump argument too: Messers Kerry, Obama and Susan Rice are simply 'gullible and bad negotiators'. In Trump words, they are simply 'dumb'; not up-to the job of conducting offensive negotiations i.e. putting pressure on Pakistan to relent here.

- Pakistani Army is doing a great job of deploying 'lobbyist' who buy good chunk of American Congress Members. That is a job well done for Pakistan. Knowing how 'corrupt our Congress is', clearly there is a room for Narendra Modi to deploy counter-lobbying efforts. There are no visible signs that Modi is succeeding in that. Some zany public meetings at Madison Square or 'man ki bat' with Silicon Valley power brokers do not translate in substantive policy influences; it is better that Modi Sarkar learns it fast.

Friday, February 05, 2016

Why crop insurance schemes will fail without good institutional design

Suicides by farmers distressed by failed crops have been a recurring cause of concern in several parts of India. Despite the furore that these incidents cause, nothing much has been done so far to hit at the root of the problem. While in some parts of India, agricultural loans are not difficult to come by and the peasants do not depend on the loan sharks to bail them out, repayments can become a problem when the crop fails. This is especially true of those regions where the farmers invest heavily in fertilizers, pesticides and irrigation whenever possible. The dependence on the monsoon however continues to remain the fundamental feature of agriculture in India. When the rains are scanty, the entire financial cycle of loans, investments on the crops, good harvest, good prices for the product gets completely disrupted. This is when the Indian bankers already distressed by enormous NPAs chase the farmer down, humiliate and threaten him in the manner of any other loan shark and often drive him to take his own life as the only route of escape.  

In a scenario like this crop insurance would seem to be the panacea that gives the farmers enough breathing space and waiting time as the next harvest gets ready. The trouble is in the world of finance loans and insurance are inseparable issues and there is a world of difference between the status of the indebted farmer and otherwise from the insurance viewpoint. This is not all – there are other problems that can choke an insurance scheme to death if corrective measures are not taken in time. This article lists most of them which just goes to prove that Indians have a problem designing their institutions and their operational norms.

In his last ‘Man ki Bat’, PM Modi put the idea of crop insurance in the forefront as an original brainwave, the fact being that the devil lies in the details and insurance for crops as such is not the panacea at all, unless a policy is formulated to remedy the pitfalls.

Monday, February 01, 2016

2016 Iowa Cattle Call - A Rough Cut

Here is my take so far on Iowa

1. Ezra Klein had said already and many others: once the invincibility cloak of Trump is shredded; chances of 'all down hill' from there are high. So we all may be seeing the start of Trump descend and that is a sigh of relief to America and to GOP especially.

2. Trump might have lost in another way too [a]: over 60% of Republicans in Iowa voted to a Cuban American or to an African American (among Cruz, Rubio and Carson). Yes, nomination contest is a long way and deeply racial states like South Carolina, Mississippi and their Southern Brethren are yet to vote where Trump will do well. But the start is not so great for 'white ethno-nationalism' implicit to Trump campaign and others in GOP who support such thinking. 

3. Israeli hack Jennifer Rubin at Washington Post will be simultaneously happy and unhappy. Happy because Rubio did so well, unhappy because her bete noire Cruz actually won Iowa caucus. That is just how convoluted punditry on Right side is on these matters. (Or is that how confused Jennifer Rubin always?)

4. Not necessarily I buy Clinton Campaign spin here that "Bernie Camp had projected win if there is a high turnout; but in the end despite the high turnout HC prevailed". But I am with Jonathan Bernstein of Bloomberg - in the end Hillary will prevail as more Southern State primaries start. So one speculative thought - will Hillary choose Bernie as her VP candidate given the strong 'market' for Socialistic ideas with Dem Voter Base? I think no, if Rubio or Cruz is the eventual GOP nominee (Iowa showed it need not be Trump); she will least afford to pick anyone apart from Julian Castro. That is just the way arithmetic of Hispanic Vote Block would work.

5. Which all means, it may be the last time we will be hearing Hillary saying "she is for universal health care" as she did in her Iowa victory speech. That was the nod to Bernie. Which also means, as Bernie would fade[b] in later part of the race; we will hear much less about Income Inequality or shenanigans of Wall Street Bankers. Between pet nominees Rubio and Cruz on ascend and opponent Bernie slowly fading; big boys of Wall Street will have a sigh of relief too. It may not be all Hillary's fault, but when your GOP opponents are all going to talk about "tax cuts for rich, death to ObamaCare, carpet bombing till sand shines in desert at night" she will have to project herself as the only 'savior' which stands between barbarians at the gate and Obama's achievements. That is the battle she will be forced to play and not the battle against Bankers which Bernie plays now. Well, that is America's tragedy, but I guess we common Americans will manage to scrap through that too. 

6. Finally, it is possible that Cruz owes his victory to the Big Data / Analytic firm his buddy runs. That may be Cruz's the secret weapon. Others will realize soon, but we will see who adopts that and pays hefty dollars for it. Trump famously relied upon his celebratory status only. But now that he has seen limits of that in Iowa, it will be interesting to watch whether he adopts Analytics or not - he has millions to spare. With Hillary and Dems, they still do not give the confidence that they have mastered the art of Big Data as like Obama deployed.....in so many ways, Hillary is still a weak campaigner even though her ground game in Iowa improved lot compared to 2008 humiliation.

7. One thing we will have to give credit to Sen. Ted Cruz for - he did not pander infamous Ethanol Industry of Iowa, knowing fully the political cost. Trump tried to play on that as well as on Cruz's Canadian birth. But it seems like Iowans either did not notice these issues sufficiently or simply ignored those arguments. Considering the overall enthusiasm shown by Iowa's caucus goers, it seems unlikely that most voters would not have heard the Trump arguments in these regards. On that possibility it is encouraging that Iowans, and potentially many other American Voters in all other states, show openness to policy ideas which do not necessarily fit the standard political straight jacket.[c]

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[a] - As reported by Ed O'Keefe of Washington Post on Twitter.

[b] - Not soon, Bernie will peak in NH next week and till then he will raise Millions and Millions on the force of Iowa showing.

[c] - Hence Matt Yeglesias needs to gloat less about how crazy Cruz ideas are.

Sunday, January 31, 2016

Chinese Communist Party - Root Cause of Global Market Turmoil?

My basic thesis is because ruling Chinese Communist Party does not have any legitimacy typically awarded by regular elections, we are facing turmoil in global capital markets. Mao' Party for sure had the legitimacy in early decades of People's Republic of China as it defeated imperialists and established people's raj. But at some point Chinese rulers needed to renew their legitimacy lease on continued basis from people's mandate. Due to dictatorial instincts of Communist Party Leaders as well as developed vested interests of party apparatus; PRC avoided democratic elections resulting in legitimacy drought of Chinese Communist Party. 

Given this state of illegitimate rule of Chinese Communist Party; lately party's leaders are pressed to run after ambitious goals to impress Chinese People by gimmicks - all just to remain in power. After Tienanmen Square, it was liberalization of Trade under Zhou Rhongji[1] for admittance to WTO. Hu Jintao chased the glory of 2008 Beijing Olympics; all to hoodwink Chinese People to push structural problems of Chinese Economy under the carpet and postpone questions about legitimacy about the Party.

With Xi Jinping - the problem is exasperated. Nowadays, there is much less demographic dividend to be had. Bills of largesse paid in terms of 2010 stimulus have to be repaid. There is no more any room for 'debt-fueled-state-company-behemoths-driven-growth' since Chinese banks are saddled with non-performing loans. Result is - Xi's chase of national glorification by muscle demonstration in South China[2], unprepared ascend to IMF reserved currency status at a great cost and grandiose dreams of modern day Silk Road by way of Asian Infrastructure Investment Bank.

All these dreams of Xi and his simultaneous attempts:
- to quell unrest which can be caused by rationalization of public sector when labor is shed in millions, 
- to stabilize stock prices which were oversold by Communist Party[3] or 
they are not working. These contradictory policy imperatives are unlikely to make job of Xi Jinping any easy. Lack of elections means relentless pressure on Chinese Communist Party Leadership to keep producing economic miracles. No wonder, the party leadership in the end runs out of ideas and corners itself by various past actions result of which could lead to a disaster.

One way for Xi Jinping to avoid this chaos is to come clean with his own people. But because Xi Jinping's own legitimacy is questionable; it is unclear whether Chinese People will trust him even if he wanted. Xi Jinping is not elected by Chinese people, he just maneuvered Party Machinery to grab the power and is simply perpetuating Communist Party tradition of committing to grandiose, over ambitious plans to keep away people's distrust of party. Also, there is no political catharsis possible as like how ruinous economic policies of previous regime are swiped aside by a new leadership with a healthy dose of new economic policies with a fresh start. When elections happen, a new leadership comes in; people's expectations are reset. There is no such luxury to Chinese People.

So long as that is the game in Beijing, periodic bouts of lack of confidence in Chinese Capital Market, and by consequence in Global Capital Markets, are unavoidable.

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[1] - Zhou Rhongji has been the only competent money and economy manager Communist Party has produced in last 3 decades.

[2] - Xi's northern neighbor Vladimir Putin has been practicing 'rabid nationalism' as a substitute for governance for a while now.  

[3] - These stock prices are going down because of slowing Chinese Economy and weakening Yuan; wiping out Trillions of domestic Chinese investors who were exhorted by the party to buy stocks as some kind of patriotic duty.

Friday, January 29, 2016

Commentary - His Father's Son

The incumbent chief minister of Jammu and Kashmir, Mufti Mohammed Sayeed, died of multi-organ failure on 7th January 2016. He wasn’t ailing as such, except for the last bout of illness that lasted for less than a month. So, though he was almost 80 when he died, his death was rather unexpected. 

His political heir was supposed to be his daughter, Mehbooba Mufti. And she seems to be buying time before taking over. Very likely, she is playing patience, to make the BJP jittery. BJP could never think of ruling JandK, certainly not on its own. Though the National Conference had allied with BJP earlier, it was during Vajpayee’s tenure. Vajpayee era is now a distant past. So if Mehbooba’s PDP snaps ties with BJP, it will be back to opposition for BJP. PDP, NC and Congress can play all the possible permutations and combinations without any hassle. 

So far, it seemed to be a tale of political one-upmanship. But in a true filmi style, the twist in the tale has become apparent. Mehbooba’s younger brother, who had kept himself completely away from politics so far, has been introduced to the party. And he has started speaking politicalese with real ease. This interview is enlightening in more ways than one.

It re-underlines the Indian reality that politics is primarily a fiefdom of the incumbents, irrespective of the eligibility of the new entrant. In this case, Tassaduq Hussain Mufti, is an established cinematographer, known for Vishal Bhardwaj’s ‘Omkara’ and ‘Kaminey’. For all known records, Tassaduq had crafted a career far away and far different than his father and sister. Furthermore, in this case Mehbooba is already well-entrenched in politics. So why did she feel the need to introduce her brother? Is it a manifestation of the male-dominant society? Or is it the kind of insecurity that gripped Indira Gandhi and made her install Sanjay (and later Rajiv)?

Read the interview, and you realize that Tassaduq is making mundane and inane noises and nothing more. In a true ‘political’ style, he has spoken a lot without saying anything.

One dumb question – if Tassaduq is prevented (for whatever reason/s) from working as a Cinematographer, can he install one of his family members to replace him?

Thursday, January 28, 2016

Golden Jubilee of Hereditary Politics in India

On 24th January 1966, Indira Gandhi became the Prime Minister of India. She succeeded Lal Bahadur Shastri, who died a sudden (and to many, mysterious) death in Tashkent, hours after signing a peace accord with Pakistan to end the 1965 India-Pak war.

Indira was not new to politics. She became the President of Congress Party in 1959. It was a very prestigious post (till then), and her ascendance to the post was primarily due to her familial connection; she was her father’s unofficial secretary.

Feudal attitude or nepotism or hereditary entitlement has always been a blatantly integral part of the social, cultural, political and industrial fabric of India. But till then, political ruling class was relatively free of this malice; the class of ‘political rulers’ was just a couple of decades old.

Looking back after fifty years, it marks a watershed in India’s politics for a variety of reasons. It explains her innate sense of insecurity, which resulted in Emergency. It lays the foundation for the rise of her son, Sanjay Gandhi, which was cut short by his accidental death. It leads to the ascendance of her other son, Rajiv Gandhi, who succeeded her as Prime Minister.

But it marks a watershed for another reason. It provided an established role model for other political parties, mostly regional parties. Only the communists and BJP can be said to be a reasonable exception. BJP is still in the learning mode – currently only two (Phadnavis of Maharashtra and Scindia of Rajasthan) out of its eight Chief Ministers have hereditary connections. And communists have their own Brinda Karat, who became a Rajya Sabha MP on the very day (11 April 2005) her husband became the Party General Secretary.

But for all other political parties, the picture is beyond scary. Because the malice is spreading and affecting the supply of young blood to politics.

Let us look at the Lok Sabha. This report indicates that all the MPs who are below the age of 30 have hereditary connections. Of the MPs below 40 years, 65% have hereditary connections. For age group 41 – 50, the percentage is 37%. The percentage decreases steadily till it reaches zero for age above 81 years.

Let us look at it from another angle and leave aside the numbers. Is there any major political party that doesn’t have familial connections as the ‘necessary and sufficient’ condition to get in? BSP ( Bahujan Samaj Party) and ADAM (Anna Dravida Munnetra Kazhagam) seem to be the only two names that would be obvious.

The malice is scary because contrary to popular belief, it has grown with the growth in technology, increase in the standard of living and overall ‘globalization’ of all paths of life. Politics has become a field where no eligibility criteria is needed whatsoever. This is very apparent in case of politicians who die naturally/accidentally. Take the case of R R Patil, a first generation politician from Maharashtra, who really worked his way up from the lowermost rung. He died of cancer in 2015. His widow Suman Patil, till then completely away from politics, won by a huge margin. Let us move to Uttar Pradesh; when Charan Singh was nearing the end, he hastily installed his son Ajit Singh, a computer scientist by profession, as his successor. Continuing the tradition, Ajit Singh has further installed his son Jayant Chaudhary. In Odisha, Naveen Patnaik joined politics after the death of his father Biju Patnaik. After ruling the state for the last fifteen years, he still doesn’t know Odia language.

If one keeps digging, one can unearth many such squirming worms from the level of the local corporator to the highest level. Even in ‘apolitical’ RSS, the spokesperson M G Vaidya was replaced by his son Manmohan Vaidya.

On the golden jubilee of Indira Gandhi’s ascendance, let us reflect on this. Hereditary politics is like diabetes; it doesn’t kill by itself, but it aggravates every other known and unknown ailment. And the similarity doesn’t end there; there doesn’t seem to be any cure for hereditary politics as well, at least not in India.

Wednesday, January 27, 2016

Why the Nepali press is prejudiced against Madhesi movement

The Madhesi movement in Nepal now promises to enter what may turn out to be a dangerous as well as decisive phase. After nearly six months of agitations along the Indo-Nepal border and above fifty deaths in police firings, the agitators, especially the youth may turn to violence and their leaders may not be able to dissuade them. There is already some talk of marching to Kathmandu and confronting the government in a decisive faceoff. Nepal’s new constitution is an outcome of several years of negotiations among the different political groupings and is supposed to be celebrated according to some. But the Madhesis feel that the constitution gives them a raw deal as second class citizens. There is even talk of the hill people, particularly the upper castes among them treating the terai [plains] as their colony and a captive breadbasket. With the terai area responsible for above fifty per cent GDP and with a thirty per cent population, the terai populace is placed very strategically – in a landlocked Nepal, they can shut off the borders and create a calamitous lack of supplies as they have indeed already done. Whether India is complicit in this action along the borders is not very relevant at this stage. As the article in question demonstrates, it is the internal dynamic and the deeply entrenched pig-headedness of the privileged hill elite that is responsible for what seems a manageable mess at this point but may not remain so too long.

This article written by a foreign journalist who spent several months in Nepal unveils why we are not getting a true picture of the goings on across the border except some occasional scrappy murmurings in the Indian regional press. The Nepal media itself it seems is heavily dominated by the doggedly opinionated advocates of the hill elite. This is probably for the first time in many months that someone with a close view from the ground is reporting on Nepal. The article appeared in a Delhi-based monthly and not even a daily which only goes to show how oblivious of our immediate neighbours the Indian mainstream media can be.