THE OTHER SIDE
The meeting of the Group of Twenty large economies at the summit level took place in Hamburg in Germany last week. While the G20 was formed in 1999 in the wake of the Asian financial crisis, annual meetings at the summit level started only in 2008, after the 2007-08 financial crisis. Both crises emphasised the need for greater economic cooperation between the large countries, both developed and emerging. Last week’s meeting was supposed to focus on climate change and the US withdrawal from the Paris Accord on the issue. While no progress was made on this, at least four leaders displayed the “bhaibhai” spirit, overlooking their differences on more contentious issues — the US and Russia on the one hand, and China and India on the other.
In Hamburg, US President Donald Trump was happy to have been “privileged” to meet his Russian counterpart Vladimir Putin. The two also had a long private meeting during which a lot of time was reportedly devoted to discussing Russian interference in the US presidential election. (A couple of months back, the head of the Federal Bureau of Investigation was sacked by Trump for investigating Russian interference in the presidential election.) Prime Minister Narendra Modi and Chinese President Xi Jinping complimented each other on their anti-terrorism stands; Modi also praised Xi for his leadership of the BRICS group, namely Brazil, Russia, India, China and South Africa. (Given the current confrontation in the Northeast, cynics remembered the “Hindi Chini bhaibhai” slogans of the 1950s, the nonaligned nations’ conference in Bandung, the 1962 war, etc.) To be sure, the International Monetary Fund and The World Bank’s head drew the attention of world leaders to trade issues, as did Xi. Meanwhile, there were large and violent protests outside the summit venue over the US withdrawal from the Paris Accord on climate change.
While the US was isolated on climate issues, on trade, the final communique seems to have been an uneasy compromise: It says, “We will keep markets open, noting the importance of reciprocal and mutually advantageous trade and investment frameworks and the principle of nondiscrimination, and continue to fight protectionism including all unfair trade practices and recognise the role of legitimate trade defence instruments in this regard.” It is beyond my understanding how the last part of the sentence reconciles with the earlier averments!
Before reaching Hamburg, in Warsaw, Trump complained that “radical Islamic terrorism” threatened “our civilisation and our way of life”. Two thoughts occurred to me:
For one thing, Islamic terrorists are a bigger threat to each other than to the rest of the world;
Second, has marauding finance capital become the “dominant minority” that takes far more from society than it puts back, which is the underlying cause of the fall of civilisations, according to British historian Arnold Toynbee?
As for Trump’s reference to “our civilisation”, in economic ideology, Western Europe and the Anglo-Saxons have differed at least since the 1980s’ Thatcher-Reagan era — the former comprising mostly social democracies with strong fiscal help to the worse off; the latter adherents of a far more neoliberal, laissez-faire economic ideology, and “light-touch” regulation of the financial sector. Arguably, the liberalised financial sector was at the heart of two major crises of the last 20 years — the Asian financial crisis of 1997-08 and the banking crisis of 200708, to which I will come back.
The Indian economy
Meanwhile, closer to home, some recent data lead to more worries about growth prospects. For one thing, incremental growth in fixed assets of listed companies is at a 25-year low — and today’s investment is tomorrow’s growth, though the stock market seems to think differently. One also wonders whether the Gujarat High Court’s objection to the Reserve Bank of India asking the National Company Law Board to give priority to 12 non-performing accounts facing insolvency proceedings would make the insolvency process as timeconsuming as court processes in India are prone to, delaying the resolution of large non-performing assets?
Nobel Laureate Paul Krugman, during his visit to Mumbai last week, emphasised the need for India to grow at eight to nine per cent; he also expressed the view that “monetary policy looks tighter than one can justify”. In an interview, he also said “it is surprising in so many ways that India does not export more manufacturing goods”. Surely, poor infrastructure, difficulties in doing business and the exchange rate have something to do with this, as I have often argued in the past?