WILL G-20 BE 2ND BRETTON WOOD?

(WIIL YOU CARRY ME TOO ?)

Will the forthcoming G-20 be 2nd Bretton wood or the media hype will collapse like the financial architecture of the west including America? It will be unravelled within a couple of days from now.

All developed nations seems divided on the issue as to what strategy should countries adopt so salvage the sinking economy. The Anglo-American lobby is of the view that all nations including the developing third world countries should imitate and prescribe for stimulus packages in order to inject liquidity into the economy. Before Obama, Bush has also enacted TARP in order to rejuvenate the ailing US economy. The 700 Billion dollars rescue and bailout package has sunk after making initial ripples. The 800 plus billion dollars 2nd rescue and rehabilitation Act enacted by Obama is yet make its healing effect felt. 

UK has already unveiled 786 US dollar rescue package but it too has failed to give any impressive positive improvement in the economy. Gordon Brown, one the other hand is to face general elections in his country next year. Tony Blair, his predecessor, who has earned a reputation of being a satellite to Bush has made his countries economy only subservient to the USA. His most of the statements used to be in resonance with that of Bush. Brown wants that this legacy of his predecessors to be carried forward. Thus, both Brown and Obama are staunch supporter of the view that the present global economic downturn can be turned around by stimulus packages and injection of more and more money into the financial systems. They advocate for more free trade, more lending by banks and more innovating steps by the financial systems, but conversely in their respective homes, they resort to protectionist measures. 'Buy American clause' in the Obama’s much publicised economic drug therapy to jerk start the terminally paralysed US economy, is an living example of protectionism trade policy. The restriction in H1B visa is another example of similar protectionist attitude of the Americans. The British followed the same trend. British's call 'british factories for britons' augument this trend and it seems that the champions of free trade and free society are scared themselves and are shutting down their own shutters to stop apprehended influx of job seekers.

Germany and France on the other hand are averse to those steps in which more and more money is injected into the economy . Markel is wedded to the idea of tightening the screws of financial institutions. She has blatantly refused the line of treatment prescribed by the duo,Brown and Obama.

Sarkozy also did not favour Obama-Brown’s prescriptions of pumping money into the economy. In fact in the garb of this whole financial and economic muscle flexing, the politics is being pursued that who emerges the leader of the world. Sarkozy and Brown, on the other hand are hornlocked to win the game. Those who win will be the european leader. Thus behind the curtain the issue is that who will lead the world. 

America revealed its unhidden desire to lead the world when Obama reiterated that US is ready to lead the world and the world should follow it. He has forgotten that US is no more in the pre-global recession period. Moreover, this contageion has originated and exported to the rest of the world by none other than the US itself. The unquestioned hegemony of Americans in the field of economic arena is being undermined. It has already under stress. Its treasury bills have been purchased by Asian giant, China. The new term ‘Chimerica’ coined by Niall Ferguson has projected the forthcoming global economy and position of China in it. ‘Together we swim and separated we sink’, a slogan given by Americans has made it clear that Chinese would definitely get a lion’s share, and not dragon’s share in the new emerging global financial order which is likely to emerge out of the G-20 London Summit.

Obama’s assertion that world needs America and so does America, discloses the gravity of situation. US, hitherto the self acclaimed economic and military leader of the world, has started talking about philosophy of coalition, cooperation and partnership. What a huge change of attitude! Continuing its state of inertia, even Obama is not pursuing consensul politics. If you continue to take unilateral decisions and expect that everyone would follow it, is not going to serve the purpose.

America needs world more desperately than ever before, but at the same time, it still wants to drive the vehicle of global economy by itself, a vehicle which met accident ( global economic downturn) due to its recklessness only. We therfore, need to change the driver itself and assume the steering the economic vehicle of the world so that the next journey is safe and it could reach destination. 

What, then we, ought to do at the G-20 summit? The world is standing at the threshold of a new era, a post American era. Let the leadership be changed. Emerging economies of the world, china, India, Brazil, South Africa, Japan, South Korea etc are in the waiting queue. Not only the World financial architecture but in fact the entire world order as whole, need to be changed. After all Obama, himself had said that the change has arrived.

CHINA STAKES CLAIMS IN NEW GLOBAL FINANCIAL ORDER

(WILL CHINA RULE THE NEW WORLD?)

China has demanded that a new global currency should be intruduced in place of US dollars. The Central Bank Governor Zhou Xiaochuan has said that the US dollar should be discontinued with as the global currency. It is pertinent to mention that USD has never been officially accorded status of global currency and it gradually ascended to this position. The Briton Wood Conference of 1944 held in Hamshire of USA which led to establishment of a new global financial order had earmarked gold as yardstick of monetary exchanges. It was however USA unilaterally abrigated this system in 1971 and gradually the entire globe including Europe adopted USD as global currency 

‘Bretton Wood system’ of monetary management came into being after a meeting attended by 730 delegates from 44 allied Nations who gathered in Mount Washington Hotel in Bretton wood, New Hampshire on 22nd July, 1944. 

This agreement led to establishment of two important financial institutions viz IMF and IBRD. This ‘duo’ played very important roles with respect to economic and financial order of the world thereafter. Although, this system sought to establish a just and equitable global financial order, it was hijacked by US and some European countries right from the outset.

The on going global economic crisis and subsequent worldwide recession has forced the world to think for a new global financial order based on more equitable and justifiable rights of nations across the world. The G-20 summit in London on 2nd April, 2009 is perhaps going to the 2nd Bretton Wood which would reshape global financial architecture.

China has emerged as one of the mightiest economic power of the world. The concept of Chimerica is being viewed in this perspective.At present China is holding US treasury bills worth of about 1 trillion dollar, equal to the total GDP of India. In a non-economic termnology, USA has begged money from China to save its ailing economic situation especially financial markets. What a great reversal of situation.This Asian dragon has in a way invaded USA, hitherto world's superpower both militarily and finanially. The growing economic power of China is also menifest in the fact that USA has accepted China's suggestion that both these countries i.e China and USA should form an another group G-2. USA has reported to have accepted China's proposal of holding a separate meeting with USA after G-20 meeting. The unconfirmed report suggests that this G-2 meeting would be held on 14 April, 2009. This acceptance has two global significance. Firstly, it has legitimised the claim of China vis-a-vis world number two economy. Secondly, it has testimonised the fact that USA is desperate enough to accept the Chinese suzerainty over its economy.

China understands its importance in the new world order. It wants a lion's share in the proposed new global financial order. It has started making its jittery felt in the world echelon so that its claim is properly heeded at in the forthcoming G-20 summit to be held in London.

China knows it very well that such demands would not be enthusiastically reciprocated by most of the nations. This is muscle flexing rather than real fight. It is an economic gesture which would pay divident to it. On the other hand India has done so far no exercise in this regard. What would be its agenda in the G-20 summit is also not clearly spelt.Unfortunately, during the summit India would be immensely busy in general elections and no minister, bureacrat or body is interested in even discussing this issue. Ironically the media has so far also not properly discussed this issue. There is no debate whatsoever on this vital issue,an issue which would determine the fate of Nations including India.

China's economy is growing with a considerably good pace.Its forex reserve is in happy situation. It has started staking claims for its share in the global order,alas we could have also thought in this way and could have mustered the courage to say what we want.It is an old Indian saying, only crying child gets milk feed.

CONVICTION VERSUS ELECTION

(WHERE TO BE KEPT?)

COVICTED PERSONS TO BE ALLOWED OR NOT TO FIGHT ELECTION

Sarita Yadav

Election and offence; poll and crime are like twin brothers and go side by side. The question that whether the convicted persons should be allowed to fight election or not has remained ambiguous in spite of clear cut provision to this effect made in Representation of People’s Act. In fact section 8(3) which reads as ‘A person convicted of any offence and sentenced to imprisonment for not less than two years [other than any offence referred to in sub-section (1) or sub-section (2)]shall be disqualified from the date of such conviction and shall continue to be disqualified for a further period of six years since his release.’

Apparently, it appears that the provisions are too simple to be interpreted and therefore should be easily and unambiguously enforced.

With the passage of time, the criminalisation of politics started and more and more numbers of politicians started pitching themselves into electoral fray. The matter came to fore only when the sitting MP or MLAs got convicted by the competent court in which quantum of punishment was more than 2 years.

In 1997 the ECI reiterated its legal stand and directed all the returning officers to disqualify any candidate who remained convicted for more than two years irrespective of status of appeal.

In this very year, this matter came into a legal battle between ECI and J.Jaylalitha. She had been convicted in TANSI case under provisions of prevention of corruption Act (PC Act 1988) for more than three years, therefore in view of the direction of the ECI, her nomination was rejected and she could not fight the election. 

In spite of it she was sworn-in as CM of Tamil Nadu by the Governor, Fatima Bibi, a retired SC Judge. There were lot of legal battle and finally she had to quit till her conviction was stayed. Supreme Court however ruled that anyone can be appointed as CM of a state as per article 164 of the constitution but the matter remained unresolved that whether the convicted person would fight election or not.

This matter remained unresolved and hardly any person could be disqualified by the ECI from fighting election on the ground of conviction in accordance with the provisions of RP Act.

This issue again come in light when sitting MP of BJP and cricket star Navjot sidhu was convicted by the Punjab and Haryana High court in December 2006 under section 304 of IPC for 3 years. Sidhu resigned and subsequently bye election was announced. Sidhu sought to fight the election again. The matter was taken to the Supreme Court and the apex court gave reprieve to sidhu and temporarily stayed his conviction, thus siddhu fought election and won.( Navjot sidhu vs state of Punjab and others appeal (cri) 59 of 2007. 

The stay of conviction by appellate court in general is interpreted in favour of the convict and nominations of such candidates are accepted by the RO. 

This ruling of the apex court in Navjot Sidhu case has opened a Pandora box vis-a-vis conviction versus elections.

In the present general election 2009 for constitution of 15th Lok Sabha, so many convicted persons have either filing nominations or aspire to fight elections. Sanjay Dutt, the film star, Md Sahabuddin, Surajbhan, Pappu Yadav, all sitting MPs from Bihar have been convicted by courts. Now all of them are on bails. Md Shahabuddin has been granted bail only two days ago by Patna High court. He has however been denied from fighting elections. Sanjay Dutt has already been convicted under Arms Act, 1956 for which minimum quantum of punishment is 7 years. Thus Dutt’s case is also a fit case of disqualification from fighting election. In UP the mafia don Bablu Srivastava has also been convicted but he has not been granted bail. The question is that whether he should be allowed to fight the fray if he gets bail. If yes, then how people like Abu Salem, Kasab, Afzal etc will be prevented and disqualified from fighting elections.

In UP and Bihar names like Anand Mohan, Muktan ansari, Atik ahmed, Raja bhaiya etc have either been convicted or facing trials for offences like murder, attempt to murder etc, most likely many of them would be successful in fighting election due to the prevailing situation which is far from satisfactory. Lawyers like Prashant Bhusan categorically say that the judgement of Apex court in sidhu’s case was not correct. In fact this judgement has become a case of precedent. Ours is a law of precedent and the judgement passed by the higher judiciary becomes as good as law itself. Taking the advantage of this provision, the criminals make mockery of the entire system. 

Coming to the crux of the matter, legal issue involved in these cases is that whether stay in conviction should be treated as acquittal. If the provision of the Representation of People’s Act, 1951(section 8(3)) is taken into account, it is clear that once the person is convicted, he will disqualified and cannot fight election for the next 6 years after his release.

The legal luminaries are vertically divided on this issue. One school of thought is of the opinion that a person cannot be held guilty till the last legal option available to him is exhausted. It means that a person cannot be said to have been convicted if he has filed an appeal before the superior court and the court has accepted it for hearing. Some legal experts however say that acceptance of petition for admission and suspension of conviction is two different and separate things. They further maintain that if the conviction is suspended only then the person can be said not guilty or convicted. 

The problem in our country is that if this proposition is accepted, hardly any criminal can be prevented from fighting elections because in India the provisions of appeal, in different nomenclature like SLP, LPA Single Bench, and Double Bench etc are numerous and they can go on years and years before all options are exhausted. In fact taking advantage of this very provision, large number of criminals succeeds in fighting elections and makes a mockery of section 8(3) of R.P.Act, 1951.

The other side of the story is that if this provision is implemented in Toto, large number of political activists would be deprived of their political rights to fight elections, because instances of fabrication of false cases against political rivals by party in power are abundant. It is therefore a balance has to be strike and ensure that the criminals do not fight elections. 

The time has come that we should make suitable amendments in RP Act because the provision of 2 years imprisonment for disqualification has become obsolete after amendment in section 41 of Criminal Procedure Code which prohibits arrest by Police in a case in which imprisonment is less than 7 years. The RP Act should be made an integrated, comprehensive and complete law for election matters which may incorporate provisions of model code of conduct also, because right now we do not have any special law for model code of conduct and this code is nothing but a compendium of circulars and instructions issued by ECI time to time. Model code of conduct as such is not enforceable in the court of law until it is reinforced by other penal provisions prevailing in different parts like IPC, Public property defacement act, Laud speaker Act etc.

REGULATION VERSUS INNOVATION

(SANK ALONG WITH DREAMS OF MILLIONS OF PEOPLLE)

The collapse of financial institutions including Lehman Brothers, Merrill Lynch and a host of such Banks has raised the issue of regulation versus innovations in financial institutions across the world. The immense financial leverage, excessive and bottomless greed amognst the money managers of the financial markets are among the most important causes of the present global economic meltdown and subsequest recession.

According to one estimate, the financial leverage which hovered around 108% of the Global GDP in 1980s, swelled and balloned upto 600% in 2007-08. The global GDP in 2008 is estimated to be around 54 Trillion dollars, it means that the financial markets inflated this ammount to about 32400 trillion dollars. What a greed and what an illusionary state of affairs in the financial markets!

Anyway, the catastrophe in the financial markets has spread like contageion and the subsequent infections are taking tolls in sectors other than the financial market.The world is facing a situation which is even worse than that of 1930s, the first depression the world experienced. Jobs are being cut and rate of unemployement is soaring.The most robust economy of the world is begging money from China, the asian dragon. The financial ailment is menifesting in social and political spheres in forms of suicides, pychiac problems, social tensions, strikes and processions.

All these unrests have compelled the govt as well as civil society to recommend to and prescribe for certain restrictions and regulations in the financial sectors in particular and other sectors in general. The financial sectors especially Banking sectors and stock markets are averse to these regulations. They advocate against any regulation because, they say that it is against the principle of free market economy. They argue that regulations would stifle and nip the pace of innovations.

The questions which obviously everyone would like to ask that all innovations so far made, have they come from these instituions? Have these institutions been architect of any such innovation in the past? If it is true then they have a valid point in favour of their arguments. But the facts available with the financial history says that a very few or negligible number of innovations have come from these institutions. Conversely these institutions have prescribed for complications only. They do mame innovation, but not for the shake of common people or for the betterment of the nation as a whole, but for making money, fudging balance sheets as they have done it Satyam, enhancing the price of shares and above all for the overall interests of big corporate houses. The fat documents which one common investor has to sign before investing a penny in the stock market is beyond the understanding of even a savvy investor. The jargon of words printed in tinny alphabets which cannot be read without a magnifying glasses is certainly not an innovation, these institutions are talking about.

Moreover, there is no synchronisation whatsoever between manufacturing sector and financial sector. The amount of money involved in speculatory markets are much more higher than the real value of the manufactured goods at a given point of time. This over stretching of financial markets have been going on for years. This resulted in extremely inflated balloning of financial transactions. In fact it reached to a point of burst, because it was bound to burst as it happened in case of America or other parts of europe. We call it 'housing bubble.'

On the other hand the innovations per se have mostly or perhaps invariably come from government institutions rather than private commercial or investment banks. In India for instance, the new economic policy of 1990s propounded by Narsingh Rao govt with Manmohan Singh as finance minister had been architect of financial reforms. This came from govt not from private institutions. Infact the private commercial and investment banks in India and around the world also always innovate for their own monetary interests and not for private individuals.

In America, Eugene Fama's 'efficient market hypothesis'which later became the basis of less regulations in financial markets did not belong to any commercial or investment bank, rather Fama belonged to academia. Thus the very logic of these institutions that the regulation would stifle the pace of innovation sounds hollow and is without any merit.

The time has come that we should strive for framing rules that protect the interests of the common investors in general and poor citizen in general. After all the govt can not be allowed to be minimised to a titular authority and a hopeless and silent spectator. The manner in which AIG has spent the hard earned money of tax payers which it received as bailout package from the federal govt, has revealed the urgency of some statute which can prohibit such reckless, shameful and irresponsible actions on part of such financial institutions. Even after Obama's clearcut instructions and warnings with regard to bonus being paid by company which has received money from govt, AIG in an outright desregard spent or better call it misused the money on the executives at whose fault the catastrophe occurred. Thanks to Obama who lost no time and framed a law which would levy 90% tax on bonus given in the company which has received money by govt to bail them out.

Few months back, Man Mohan Singh made similar requests from the Corporate houses to trim the fat salaries being paid to executives, but it was laughed at by many CEOs saying that grams can attract only monkeys. Such nouns are utter disregard to our constitution and authority of the land. We too require such laws, after all how can we allow oasis to develope in the deserts. 600 millions have no electricity, similar number live in BPL, 700 million can not spend more than 12 Rs/ a day on them. These facts and figure are not only the statistics of economists but are the hardcore and harsh realities of our nation.