BOOK REVIEW: MUHAMMAD YUNUS: Utopia On Earth Or Wishful Thinking?

BOOK REVIEW: FOR THE SUNDAY PIONEER

TITLE:     A WORLD OF THREE ZEROS

THE NEW ECONOMICS OF ZERO POVERTY,

ZERO UNEMPLOYMENT,

AND ZERO NET CARBON EMISSIONS

AUTHOR:      MUHAMMAD YUNUS  with KARL WEBER

PUBLISHER:    HACHETTE INDIA, 2017

PRICE:          Rs. 599/- hardback

Utopia On Earth Or Wishful Thinking?

 This is Micro-Credit Maestro and Bangladesh’s Nobel Laureate For Peace (2006) Muhammad Yunus’s 4^th book.

It paints a broad swathe across the bigger alternative canvas of “poverty economics”. Yunus offers several conceptual panaceas here. They are thematically akin to the small-is-beautiful and people, well chosen, can be trusted world of micro-credit that he pioneered nearly fifty years ago.

He does quote the celebrity “inequality” economist Thomas Piketty, but the refreshing thing is Yunus spends little time and effort railing against the system. Instead he wants to persuade it to pay countless billions towards the more equitable changes he wants to bring about.

He sets about trying to charm the leading Capitalist nations, like an Economist Ismail Merchant of film-makers Merchant-Ivory fame, into rebooting into its alternative save-the-world avatar.

Yunus wants Capitalism to address the bottom of the pyramid as an act of global survival.  He starts in early by indicting traditional and indeed modern Capitalism for breeding inequality. The author says just 8 people in 2017 own wealth exceeding that of the bottom half of the world’s population, or 3.6 billion people. And that this rich- get-richer trend is getting stronger.

However, the wealthy, particularly in the West, he readily acknowledges, do give away billions of dollars in charity every year. Western Governments too pursue  extensive Welfare agendas to help the poorest of their number.

But Yunus wants them to do more. He wants Capitalism to change its very focus and cites the example of the Grameen Bank to illustrate how well his ideas can work. That he originally founded it in Bangladesh in the happening Seventies makes it confident and familiar territory.

Yunus highlights that what he began with a few rupees in credit, now lends $2.5 billion per annum to 9 million poor women. And this, not so much on the basis of collateral which they do not have, and track records which they often have yet to build, but on plain if not blind, trust. And yet, the Grameen Bank still enjoys a stellar repayment rate of 98.96%.

Muhammad Yunus is a Fulbright Scholar and former Head of the Economics Department at Chittagong University. He wants the “economic engine” to embrace the concept of  “Social Business” based on “Selflessness” as opposed to “Selfishness”,  in an almost Buddhist application of its “detachment” doctrine.

At the centre of Yunus’ Selflessness, is the controversial idea that profits cannot be taken out of enterprises to benefit only their investors, promoters, or owners. Instead, the enterprise must work like a cooperative to raise up its poor members.

Yunus  describes Social Business to mean : “ non dividend companies” dedicated to “solving human problems”. That it sounds Utopian does not seem to embarrass him.

He  goes on to emphasise entrepreneurship over jobs, and financial services designed to assist those at the bottom of the pyramid.

Most of his economic remedies are already being practiced in India by those with no access to pelf, power or much education. We call a good deal of it the “unorganised sector”, which actually employs over 80% of those holding jobs in India.

Yunus cites Uganda for his entrepreneurship model, where more than 28% of the population has started in business in the last 3.5 years. His concept of entrepreneurship at the grassroots could mean opening small shops for all manner of inexpensive consumables, milk production and animal husbandry beginning with a single goat or cow, a taxi service with a single vehicle, making a few handmade craft items for sale.

Small entrepreneurs are encouraged to open tailoring establishments, nurseries, craft businesses, rice mills, beauty parlours, restaurants, hair-cutting saloons, boutiques, copy centres, stamp paper vendors, fruit and vegetable dealers, courier services, tattoo parlours.

And the essential tool to finance Yunus style entrepreneurship: micro credit to the erstwhile unbanked demographic, and the few layers above.

Qualified professional people may have to do work like this too, because there are not enough mainstream corporate jobs to be found. Except perhaps in providing a plethora of imaginative services in tourism, telecommunications, real-estate, design, government services out-sourced, printing, interior décor, and so on. And India has grown best in the Services Sector, hopping over problematic manufacturing actually, and it accounts for more than 50% of its GDP now.

The problem of not enough jobs and even chronic unemployment ,Yunus states is not restricted to the poorer countries of the world.  Jobless people under 25 is at 18.6% on average in Europe, as of December 2016.

And in some individual EU countries, such as touristy Greece, Spain ( where resource rich Catalonia is attempting to break away now), and large, multi-faceted Italy - the rate is 40% plus. 

With increasing automation and digitisation, there is no easy solution in sight, even in the long run.

Yunus urges unsuccessful “job seekers” to turn entrepreneurs and become “job creators” instead. But it is not all glibness. He makes multiple suggestions from the bottom of the pyramid.

For “Zero Net Carbon” he wants to structure environmentally sustainable micro businesses that sell goods and services that address deforestation, plastic trash, potable water, and so on.

He wants the G20 to cancel $55 billion of debt owed by the poorest countries. Note the number when his Grameen Bank, even today, deals in just $ 2.5 billion. Yunus wants the United Nations (UN) adopted Millenium Development Goals (MDGs) which include items such as eradication of extreme poverty and hunger, universal primary education and other such lofty goals, acted upon urgently.

The true significance of such a book that soars over the inequities of the world, is in its sincere attempt to create wealth and promote equity for the poorest in every country, and not just in the Third World.

And to achieve this, Muhammad Yunus, who did win his Nobel Prize for Peace, says his model of “Social Business”, and not Capitalism’s core profit motive, will overcome poverty, and ensure: “peace among people”.

For: The Sunday Pioneer BOOKS

(984 words)

October 20^th, 2017

Gautam Mukherjee

BOOK REVIEW: THE GLOBAL TAX AVOIDANCE INDUSTRY

BOOK REVIEW for THE PIONEER ON SUNDAY-BOOKS

TITLE: BLACK MONEY AND TAX HAVENS

AUTHOR: PROF. R. VAIDYANATHAN

PUBLISHER: WESTLAND PUBLICATIONS LTD.

CATEGORY: NON-FICTION

PRICE: Rs.  350/-

Year of Publication: 2017

The Global Tax Avoidance Industry

Prof. R Vaidyanathan, recently retired after 30 years of distinguished teaching at The Indian Institute of Management (IIM) Bangalore, is one of the small tribe of right leaning economists close to the evolving thinking of the Bharatiya Janata Party (BJP).

He has served as a committee member of national regulatory bodies such as the Reserve Bank of India (RBI) and Securities & Exchange Board of India (SEBI), and on the boards of several leading companies. He is currently the Cho S. Ramaswamy Visiting Professor of Public Policy at Sastra University, Thanjavur, in Tamil Nadu.

The subject matter of this book, has interested the author ever since NDA I, under Prime Minister AB Vajpayee, around the millennium year 2000.

Later, Prof. Vaidyanathan has served on a team constituted by then leader-of-the–Opposition LK Advani, with Ajit Doval, the current National Security Adviser, eminent lawyer Mahesh Jethmalani, and  ideologue and financial expert S Gurumurthy. 

Their report on Black Money and Tax Havens was released in two parts, in 2009 and 2011.

However, not much was done by the Government of the day about the issue, and it is only now, under the Modi Government, that the menace of Black Money is receiving the political will and policy attention that it deserves.

So, the release of this book, in October 2017 is indeed timely. That the erudite scholar-author has written this primer so simply for the layman, is by way of a very special benefit.

Just how much Black Money is there within India? It is anywhere between 10 to 20% of GDP- between Rs. 15 lakh crores and 30 lakh crores of the 2016-17 GDP of Rs. 150 lakh crores. But when the Indian economy was smaller, black money accounted for 51% of it, according to studies conducted in the eighties.

After demonetization, almost 100% of this 20% cash of today’s shadow economy entered the banking system willy-nilly. And a proportion of it is still hiding in plain sight within the banks.

The Modi Government, in its own version of “nudge” economics that has recently won a Nobel Prize for the US behavioral economist Richard Thaler, is deliberately shorting the amount of currency in circulation ever since.  

There are restrictions and penalties applied on cash transactions exceeding Rs. 2 lakhs. The quantum of digital transactions in white money, the use of mobile wallets, debit and credit cards, an an expanded access to the erstwhile unbanked, have all increased dramatically. The linkage between bank accounts, PAN cards, driving licences etc. and Aadhar cards will further make it difficult to fake identities.

The shadow economy is under siege and is being forced to join the mainstream via the online indirect tax system, the General Sales Tax (GST) also. Though still a work in progress, it is operative via multiple slabs and notable exceptions, since July 2017.

Direct tax collections too have already grown 16%. Lakhs of new assesses have been added. Hundreds of Income Tax probes are underway with regard to the larger unexplained cash deposits running into over Rs. 3 lakh crores.

Abroad, the Indian share of the illicit money lying in the tax havens of the world is estimated at a minimum of Rs. 65 lakh crores, nearly 50% of the 2016-17 GDP.

Between just 2002-2006, Global Financial Integrity Organisation (GFI), the Ford Foundation aided organization, headed by a Harvard and Brookings scholar, Raymond Baker, says Indians stashed Rs. 6.88 lakh crores ( $ 137.5 billion) in tax havens abroad.

However the global total of this “illicit” money is estimated at $11.5 trillion growing at about $1 trillion per annum.

Tax Havens, old as ancient Rome, don’t however just cater to criminals and dictators. They have uses for legitimate Governments too.

Prof.Vaidyanathan quotes Nicholas Shaxson to state more than half of world trade passes, at least on paper, through nearly 100 tax havens around the world - some with no tax,  others with very little tax, yet others with tax exemptions for corporations.

Over half of all banking assets, and a third of Foreign Direct Investment by multinational corporations are routed offshore, as a measure of discreet tax planning, secrecy, and to take advantage of various bilateral and multilateral tax treaties.

The US Government reported that 83 of the USA’s biggest 100 corporations had subsidiaries in tax havens in 2008. Richard Murphy’s Tax Justice Network says 99 of Europe’s 100 largest companies use offshore subsidiaries. The International Monetary Fund ( IMF) estimated in 2010 that small island tax havens alone accounted for $18 trillion on their balance sheets, a third of world GDP at the time. So tax havens are not about to close down!

What affects India most adversely is their being used for arms supplies and terrorism against it. And , of course, the widespread laundering of clandestine and ill-gotten gains.

Along with a number of other countries, including the US, at G-20 and other fora, India has been seeking intelligence on deposits made by Indians, entities owned by them etc.  This, with increasing success.

However, money being easy to move, the focus is shifting to real estate and property, often financed by monies routed through tax havens and shell companies.

Prof. Vaidyanathan’s book on Black Money largely concentrates on how it is generated and whisked away, mostly to tax havens abroad. It is a mine of fascinating information, engagingly written. To an extent it is a comparative study of how the nations of the world are attempting to tackle the ill effects of the phenomenon that is nearly universal. 

However, the legitimate uses tax havens are put to, and the benefit to their economies, cannot be wished away.

The happy thing is that the Modi Government has started in, implementing at least some of the many suggestions made in this worthwhile and good read of a book.

For: The Sunday Pioneer, BOOKS

(945 words)

13^th October 2017

Gautam Mukherjee

For Growth & Speed: Say No To Non-Performance, Negligence & Corruption

For Growth & Speed: Say No To Non-Performance, Negligence & Corruption

How does the Prime Minister get a bloated, self-indulgent Government to deliver? Remember, in its political train, there is a gargantuan Semi-Government establishment, the Public Sector, and a wider “quango” universe too. Plus a country-wide bureaucracy that runs to lakhs of employees.

The case for permanent tenure, long a thing of the past in the private sector, has worn thin in Government as well. Directors make poignant films on the plight of erstwhile “Company Men” now, and not just in Japan.

And for good reason. In the face of persistent abuse of “permanency”, by Babus, covenanted Academics,  Government Hospital Doctors running private nursing homes on the side, absent but salary-collecting teachers and administrators in Primary Schools etc. what can be done?

Is there is an urgent case for reform? But where does it say in the Service Rules that going slow or lacking diligence is a sackable offence?

There is a vague provision, little used, that those in the Central Government may be compulsorily retired at age 50, provided the target joined service before the age of 35. This, after a prior review,  and in the “public interest”. The All-India Service Rules also work on the same lines.

But in practice, mostly what would get a Government Servant fired, is proven corruption, entered on his service record, because words like “integrity” and “conduct” are the chief markers.

Non-performance, willful negligence, flouting of deadlines etc. are probably seen as abstractions too difficult to measure objectively. Annual reports from superiors rarely cite such issues, lest the blame spill over. And politicians, till the strict Modi Government took over, were often in cahoots.

Even the Indian Judiciary has seen to it that it has become an insulated and nepotistic Cabal of the increasingly corrupt. The uniformed cadres, save the regular Armed Forces in the main, are also affected.

Bastar in Chattisgarh and the Kashmir Valley have demonstrated, time and again, CRPF  personnel  ambushed and massacred by Naxalites and Terrorists, partially due to flouting of standard procedures, slack oversight, discipline issues,  all leading to grievous loss of life.

And the regular Police are given to abuses of power in imaginative ways. These include rape, intimidation, extortion, illicit trades, falsification of evidence, and endemic graft.

The service rules for the Indian Administrative Service (IAS), the Indian Foreign Service (IFS), the Indian Police Service (IPS), let alone the lesser all-India cadres, do not actually have specific provisions that focus on non-performance.

Corruption too, as defined in the Service Rules, does not embrace the province of subtle external empire building, facilitation of post retirement careers, all but the most obvious benami acquisitions, gratification in kind, influence peddling to facilitate vested interests and so on. It sticks pretty much to unearthing “assets disproportionate to known sources of income”.

Zero tolerance for non-performance and negligence must become the new normal.  Suspicion of corruption too has to be looked at on an enlarged canvas, so that it does not stay so hard to prove, except against the most cavalier officials.

Recent reports indicate that the Modi Government, as part of its “Perform or Perish” mantra for a “New India”, has taken “action” against 381 civil service officers  inclusive of  27 from the IAS. This, for being corrupt, redundant and/or “non-performers”.  Some of these officers were dismissed via forced resignations and prematurely retirements, others had their pensions cropped.

The action, against just 381, came as a result of a review of the records of 11,828 Group A officers, including 2,953 from all India services, such as the IAS, the IPS and the Forest Services. The service records of 19, 714 Group B officers were also reviewed. The three digit total of those actioned came from an examination of as many as 31, 542 officers!

This sarkari excavation, with its attempt at objectivity, contrasts quite sharply with another recent report that said out of 52 CEOs appointed in 2010 in the private sector, 24 were shown the door within 5 years. These highly paid executives were dismissed for non-performance, just for not meeting stated objectives in the view of their governing boards.

The Prime Minister’s “Probity & Performance” drive probably needs to incorporate much more stick. His Government will have to fire people for incompetence, non-performance, negligence, dereliction of duty etc. on par with corruption.

Right now, shirking of duty, gross negligence, sloth, apathy, passing the buck, absence without permission, etc. go routinely unpunished. This often results not only in low morale amongst the better class of officer, but losses to the public exchequer, and all too often, needless, and callous loss of life.

Cases in point are the recent stampede that took 22 lives and injured 30 at Mumbai’s Elphinstone Road-Parel station overbridge, unimproved since it was erected in 1972. This even after then Union Railway Minister Suresh Prabhu sanctioned Rs. 12 crores odd to revamp it in 2016. But local officials concerned did not even put it out to tender.

Then there are the scores of avoidable deaths from lack of ICU Oxygen in Government hospitals, the series of railway derailments and deaths, bridges and flyovers collapsing, planes and helicopters crashing, hit-and-run road accidents, murders, rapes, pilgrimage disasters, all slothfully handled by the unscathed authorities concerned.

There is actually no real accountability of people whose job it is to ensure safety, compliance with normatives, and implementation of time-bound objectives.

Yes, Commissions of Enquiry and probes are ordered, mea culpas recited, and compensations announced, if not paid, every time. But the eventual reports from tardy investigations usually find a minor player or two to act as scapegoats.

A Government that has succeeded, with enormous determination and in the face of considerable obstruction, to push through matters stuck for decades, such as the GST, the Armed Forces Pensions, the Bankruptcy Law, a new Benami Law with bite, can indeed reform the bureaucracy too.

The standing bureaucracy is however, truly formidable. Not only does it do little effective work, but incredulously want to add lakhs of jobs to their number, claiming there are vacancies that need to be filled.

Many of the lakhs of Government servants, appointed and sustained, even pampered by tax-payer money, to “work” on matters of public weal, simply don’t. Great numbers in their ranks, high, middling, and low, use their positions to blatantly ignore the interests of the citizenry, even while being very alive to their own.

Of course, the near unaccountability of elected representatives, their overlords - in Parliament, in the State Assemblies, also acts by way of an evil role model.

The public does have the Right To Information (RTI), and there’s public interest litigation, and of course, peaceful street agitations and demonstrations, but it all seems to bounce off the thick-skinned political class.

It is clear however that, even at the top, they cannot allow themselves to continue with their brazen lack of public spiritedness and abuses of privilege in this age of 24x7 TV news coverage bolstered by the Social Media.

The credibility of this present Government’s ability to deliver is at stake.  Even as it contemplates a range of stage-two structural economic reforms, such as long pending changes to Labour Laws that would attract investment, domestic and foreign, towards new and expanded industries, creating much needed jobs.

But first, and perhaps on an ongoing basis, Modi must change the chalta hai culture of this country. He is certainly working on it. Swachh Bharat promotes civic cleanliness and toilets for everyone. Our foreign policy and engagement with other countries has been revamped to a new high. This, along with a new attitude towards our national security paradigms that has not only attacked terrorism in the Kashmir Valley but  held  China and Pakistan at bay.  Corruption in high places is non existent. There has been an unprecedented war on black money ongoing. The General Sales Tax (GST), implemented on an Information Technology (IT) backbone, makes it difficult to evade.

The linkage of Aadhar with PAN, driving licences, mobile numbers, bank accounts, Income Tax returns, subsidies, and so on, is already preventing tax evasion and vast pilferage of welfare benefits to the poor via identity theft.

But the deeper malaise to tackle is in how this country sees itself.  While that is a multi-faceted and complicated thing, it is certain that if we are to join the first rank of nations within ten years, promptly sacking Government Servants who don’t deliver will be salutary.   

For: The Sunday Guardian

(1,397 words)

October  3^rd, 2017

Gautam Mukherjee