Tuesday, December 14, 2010

Growing 2G Scandal Exposes India's Crony Capitalism

India's multi-billion dollar telecom scandal, also known as 2G scandal, is continuing to grow with new revelations coming out almost every day, especially since the failure of the blackout attempt orchestrated by some of the biggest Indian TV channels and newspapers.

The main source of these leaks are over 100 tapes of 5,000 recordings made by India's Enforcement Directorate and Income Tax authorities as part of their surveillance of Ms. Nira Radia. Radia lobbied government ministers and politicians on behalf of India's business elite, including the biggest business magnates Mukesh Ambani and Ratan Tata.



NDTV journalist Barkha Dutt and Hindustan Times columnist Vir Sanghvi are among those implicated by the tapes in the growing scandal. Initially, attention was focused on Ms. Dutt, who was accused of agreeing to pass on messages from Ms. Radia to the Congress party. Ms. Dutt denied that and defended herself on Twitter, in a statement and on television, and said that at most she had made an “error of judgment” in how she conversed with Ms. Radia.

The focus is now on on Mr. Sanghvi's role, according a Wall Street Journal report. In one of the tapes, Mr. Sanghvi sounded on one recording as if he was agreeing to slant his column on the feuding Ambani industrialist brothers according to Ms. Radia’s suggestions. Ms. Radia represents elder brother Mukesh Ambani, who controls Reliance Industries. Anil Ambani, the younger brother, controls the Reliance Anil Dhirubhai Ambani Group. Mr. Sanghvi tells Ms. Radia the piece is “dressed up as a plea to [Indian Prime Minister] Manmohan Singh so it won’t look like an inter-Ambani battle thing except to people in the know.” She responds: “Very nice.” In another conversation, between Ms. Radia and an employee, she asks for questions to be prepared for an interview between Mr. Sanghvi and Mukesh Ambani, saying that “he has agreed to ask whatever questions we suggest.”

In a court affidavit filed last week, the Indian government said it had begun tapping Ms Radia's phone after an allegation that she was spying for foreign intelligence.

Ms. Radia's telephone was tapped by the Indian government for 180 days during two separate stints in 2008 and 2009. Several hundreds of those call recordings have so far been leaked to Indian media outlets in the past few weeks. Some of these recordings have been posted on the Internet by India's Outlook and Open magazines.

Stung by the disclosures, Indian Prime Minister Manmohan Singh has asked cabinet secretary KM Chandrasekhar to investigate and report within a month. Singh said he "was aware of the nervousness in the corporate sector" over authorized phone-tapping. The Tata group chairman has taken legal action after his conversations with a lobbyist were leaked to media.

Here are some of the key revelations to date:

1. Billionaire businessman Mukesh Ambani is quoted as bragging that the ruling Congress Party is "Apni Dukan" (our shop), implying that he owns the ruling party.

2. Telecom minister Andimuthu Raja left an estimated $40 billion on the table by accepting bribes in exchange for lower bids from Indian and foreign bidders on 2G cellular spectrum auction, according to a New York Times report.

3. India's Highway Minister Kamal Nath is alleged to skim 15% on all the projects his ministry oversees.


There have long been allegations of corruption against Indian government ministers and politicians, but the tapes now confirm the extent of graft that was accidentally discovered by Indian authorities who were looking for evidence of Radia's possible involvement in spying for foreign nations.

There has long been a nexus of crime, corruption and politics in India. Of the 278 current Indian MPs for whom records are obtainable, 63 have criminal backgrounds. Of those, 11 have been charged with murder and two stand accused of dacoity (banditry). Other alleged misdemeanors range from fraud to kidnapping, according to data collected by National Election Watch, the campaign group that has put together the data.

Most Indian politicians have used their election wins to significantly enrich themselves, according to their own pre-election declarations of assets. For example, the comparison of assets of candidates who won in 2004 and sought re-elections in 2009 shows that the wealth of UP politicians has grown by 559%, over five times, in five years, second only to their Karnataka counterparts who registered a growth of 693% in the same period, according to a report..

Commenting on the scandal, Wharton's Professor Jitendra Singh says corruption in India is "heterogeneous and multifaceted," ranging from a simple bribe to systemic corruption, "where retrograde cultural norms get well-established in specific settings, such that a non-corrupt newcomer may well find it impossible to survive." Inferior cultural norms are the toughest to tackle, and those values could prove very difficult to unhinge, according to Singh. "In its abstract form, the gains in a transaction get disproportionately appropriated by actors in relation to their role in the creation of this value," he says. "This distorts incentives and, ultimately, values in a society and leads to inequitable distribution of income and wealth, and inefficient allocation of capital." He warns of "collective consequences such as the institutionalization of inferior cultural norms [for example, 'in order to succeed, you have to be dishonest, because everyone else is dishonest'] that may take generations, even centuries, to sort out meaningfully."

The telecom scandal may just be the tip of the iceberg. A broader and more serious independent inquiry is now necessary to find any evidence of widespread corruption as powerful Indian businessmen like Ambanis and Tatas use their power, influence and cash to garner resources or projects, whether mining rights, gas fields, land, infrastructure projects or the electromagnetic waves known as spectrum that carry cellphone service.

As to the role of the media, the US Supreme Court Justice Louis Brandeis once said that "sunlight is the best disnifectant". Transparency is not possible when the mass media join the effort to block sunlight, as has been the case in India's telecom scandal. Instead of playing their role as watchdogs in a democracy, many in the Indian media have chosen to collaborate with corrupt politicians and greedy businessmen to enrich themselves. The Indian media are guilty of manufacuring consent in a favor of the powerful few against the interests of the vast majority of India's population that is among the poorest and the most deprived in the world.

To protect the future of democracy, sustain economic growth and ensure that the benefits of growth are shared equitably by India's population, emergence of an honest, transparent and ethical media are absolutely essential. I hope the sane members of the Indian media will now find a way to clean up their ranks and begin a serious self-policing effort based on a new set of sound standards of professional ethics.

Related Links:

Haq's Musings

Manufacturing Consent in India

Challenges of Indian Democracy

Poor, Hungry and Illiterate India

Radia Tapes and Transcripts of India's 2G Scandal

28 comments:

gunam said...

@riaz

democracy getting converted into dynasty. Land and license grabbing is the name of game in india. Journalist are also part of the loot.

Anonymous said...

Where is the so called cover up?

Media, in most parts of the world is not a single hegemonic entity, which can suppress such huge scandals.

There are hundreds of TV channels and thousands of newspapers discussing and beaming minute to minute developments, aided by various experts.

But you can take note of such realities?

You are right on your agenda.

Please carry on

Riaz Haq said...

Anon: "Where is the so called cover up?"

It's worse than coverup; it's the big Indian media's role as accomplices.

Major TV personalities from big media like NDTV (Barkha Dutt) and Hindustan Times (Vir Sanghvi) actively participated with Ambani and Tata to rob the Indian treasury of the revenue, and then they tried to block publicaion of the leaked tapes. If it wasn't for brave people like Manu Joseph of Open magazine, the big media would have succeeded in getting away with crimes against the Indian people.

gunam said...

@riaz

Knowing the way in which democracy works nothing will come out and all will go scot free as the person invovled are politicians. for all the mess even in usa only the business people have gone to jail not the politicians who had taken money and approved.

Riaz Haq said...

gunam: "even in usa only the business people have gone to jail not the politicians who had taken money and approved"

I agree with you, but there are exceptions such as US politicians Dan Rostenkowski, Duke Cunningham, Jim Trafficante and others who have been convicted and jailed in the for blatant corruption.

Unlike India, the US has a very elaborate and sophisticated scheme for politicians to get very rich very quickly at the expense of the people...it's called campaign contributions through registered lobbyists in PACs (political action committees) funded by big business.

Unlimited political campaign contributions have legal cover under the guise of "free speech" and recently upheld/legitimized by the conservative majority of the US Supreme Court judges.

Anonymous said...

All democracies are inherently corrupt because the government is by far the biggest single spender in any given economy and all industrialists want government contracts,tailor made regulations etc.

Mature democracies have more sophisticated ways of covering it up than new democracies but like bears to the honey industrialists always have and always will try to cultivate politicians.

Look at how Goldman sachs has successfully subverted the regulatory agencies in the US the world's oldest democracy or BAE has thwarted investigations in alleged kickbacks for saudi defense contracts to how the Chaebol families effectively are immune from prosecution in South Korea.

But...Mankind is yet to devise a bettrer system of governance than democracy.

Riaz Haq said...

Anon: "But...Mankind is yet to devise a bettrer system of governance than democracy.'

What you are seeing in the US and India now is not genuine democracy, it is the hijacking of democracy by moneyed special interests. It is certainly not Lincoln's democracy as a government of the people, for the people, by the people.

What we are seeing now is the power of the military-industrial complex that President Eisenhower warned us about.

Lincoln's democracy in US helped produce the likes of FDR and LBJ administrations which dramatically reduced poverty and constructed a large and prosperous middle class that helped democracy thrive until a couple of decades ago.

With the rise of the powerful banking and big business lobbies in Washington, the well-being of the American middle class is now threatened, as is the future of democracy itself.

Anonymous said...

It is certainly not Lincoln's democracy as a government of the people, for the people, by the people.

Lincoln's democracy was restricted to White males only.

Besides just because there wasn't much by the way of the popular press in those days who is to say special interests didn't run the US or every other country then or now.

Special interests have always 'hijacked' every democracy in the UK it was and is the upper class white male with the clepped oxbridge accent who call the shots,in France its the graduates of the ENA,in Japan its the nexus between LDP-big business and beuraucrats....

Anonymous said...

With the rise of the powerful banking and big business lobbies in Washington, the well-being of the American middle class is now threatened, as is the future of democracy itself.


the demise of the US and other I world middle class is due to globalization and other uncontrollable phenomenon in the 60s and 70s blue collar ford workers could be paid middle class salaries..today Ford will go bankrupt if forced to compensate workers with middle class salaries...

thats why the southern states with low wages are now the new autohub of usa.

Riaz Haq said...

Anon: "the demise of the US and other I world middle class is due to globalization and other uncontrollable phenomenon in the 60s and 70s blue collar ford workers could be paid middle class salaries..today Ford will go bankrupt if forced to compensate workers with middle class salaries..."

I think the German model that maintains high-value manufacturing and export-driven economy shows how a strong, prosperous middle class can be mantained in a western industrialized economy.

The Germans have been very focused in grooming highly-skilled workforce in precision, high-quality engineering industries through their public-private partnership, and they have maintaind production of high-end Mercedes and BMW cars and various precision machine tools in their country that even the Chinese are forced to buy from Germans, tilting the trade balance in Germans' favor.

Anonymous said...

^^

As a rule the model is past its prime when it starts to receive the maximum praise.Japan frenzy reached its peak in the 80s which on hindsight was an unsustainable bubble.

BMW,MB,Audi produce more outside Germany than inside Germany.Audi will produce more in China than Germany in a couple of years..

Besides the German model will show its cracks once China slows which it invariably will this decade...

Riaz Haq said...

Anon: "As a rule the model is past its prime when it starts to receive the maximum praise.Japan frenzy reached its peak in the 80s which on hindsight was an unsustainable bubble."

I don't think the idea of a highly-skilled workforce producing unique, differentiated brand-name products is a fad about to disapear.

Anonymous said...

I don't think the idea of a highly-skilled workforce producing unique, differentiated brand-name products is a fad about to disapear.


Really?Firstly a few issues with Germany.
1.Superb education only to 25% of the children who attend gymnasium schools the rest are effectively DEBARRED from university education.

2.Negative growth rate of ethnic german population and a v high growth of muslim(mainly turkish population)

3.Chained to the broadly inefficient eurozone.80% of its exports are inside the EU at the expense of others.

4.Less strength in cutting edge industries IT,biotech,nanotech etc etc.Focussed on classic engineering mechanical etc.

...

Zen, Munich said...

@Anon

"Japan frenzy reached its peak in the 80s which on hindsight was an unsustainable bubble."

An average company in DAX 30 is several decades old. Most of these companies with the exception of SAP have survived 2 world wars, 2 hyper inflations and one depression. Add to this the uncelebrated champions in Mittelstand which employs around 70 percent of Germans and make everthing from artificial limps to specialized glass cases for Smartphones. Do you call this a bubble?

Mayraj said...

And Gee when did CBI wake up...reminds of the Bell and CA Attorney General coma (woken up by LA Times investigation!).
http://www.tehelka.com/story_main48.asp?filename=Ne010111Coverstory.asp

The house that Raja built
DMK chief M Karunanidhi seems to have been in the dark as A Raja and his coterie built a huge business empire. JEEMON JACOB unearths exclusive and mind-boggling details

http://www.tehelka.com/story_main48.asp?filename=Ne010111THEABCOF.asp

The ABC of the 2G Scam
Much has been said about the telecom scam, but little has really been understood. PARANJOY GUHA THAKURTA decodes the complex landscape
http://www.tehelka.com/story_main48.asp?filename=Ne010111incoldblood.asp
‘The Congress is doing things behind the PM’s back’
BJP spokesperson Nirmala Sitharaman tells VAIBHAV VATS that Sonia Gandhi’s talk about fighting corruption is hogwash
http://www.tehelka.com/story_main48.asp?filename=hub010111Implosion.asp
Implosion

Predicted to go from strength to strength, the congress looked besieged in 2010
http://www.tehelka.com/story_main48.asp?filename=Op251210Public_anger.asp
Public anger won’t die down unless the State stops selling itself to corporate interests
http://www.tehelka.com/story_main48.asp?filename=hub010111biscuit.asp
Biscuit



Just like the biscuit lobby, corporates are invading all sectors,including academics
http://www.tehelka.com/story_main48.asp?filename=Ne010111Who_Stole.asp
Who Stole My Onions?
The government’s regulation of the onion market came unstuck in December. SOPAN JOSHI examines how
http://www.tehelka.com/story_main48.asp?filename=Ws241210onions.asp
PM questions Pawar on onion prices
Promises Rs 400 crore assistance to Maharashtra farmers


http://www.tehelka.com/story_main48.asp?filename=Ne010111Now_Mamata.asp
Now, Mamata faces protests over land for rail projects
http://www.tehelka.com/story_main48.asp?filename=hub010111Let_Make.asp
Let’s Make A Superbug
India is home to a bad healthcare system. That’s why we need to live in fear of the next generation of diseases, says SAMRAT CHAKRABARTI
http://www.tehelka.com/story_main48.asp?filename=Ne010111SCREAMS_FROM.asp

Screams from the Valley
WikiLeaks disclosures on torture in Kashmir have fuelled fresh demands for repeal of the Armed Forces Special Powers Act. BABA UMAR reports on the plight of victims


http://www.tehelka.com/story_main48.asp?filename=Ws201210INTERNATIONAL.asp
Pak removes Indus commissioner
Reputed for his "hardliner" image in Indian power corridors, Shah was blamed for rocking India-Pakistan talks on water issues

Riaz Haq said...

FIIs' sell-off plunged Sensex by 454 pts as recently as Dec 9, according to Financial Express:

The BSE benchmark Sensex today recorded second biggest fall in a month by losing over 454 points today on year-end selling by foreign funds in banking and realty sectors, amid rise in food inflation that could signal a possibility of interest rate hike.

The Bombay Stock Exchange benchmark Sensex, which had lost 285 points in last two trading sessions, tumbled by 454.12 points to 19,242.36, after dipping to 19,160.87 as financial and realty stocks continued to be battered. On November 16 the index fell 444 points.

The National Stock Exchange index Nifty fell by 137.20 points to 5,766.50, after touching the day's low of 5,742.30.

Major market players pressed 'panic' button on reports of the deepening crisis over the 2G spectrum allocation scam and food inflation rising to 8.69 per cent from 8.60 per cent for the week ended November 27.

Already battered banking and realty segments on hike in deposit rate concerns, fell further as investors felt that food inflation might fuel overall inflation and could lead banking regulator RBI to raise interest rate for the seventh time since March.

The reports of Employees Provident Fund suspending further investment in LIC Housing Finance, further fuelled the down-trend in last one-hour trading. The LIC Housing stock tumbled by 7.26 per cent to Rs 894.10.

Besides, foreign funds were off-loading on approaching year-ending in the absence of any positive trigger from domestic front and uncertainty in the global economies, especially European.

In the 30-BSE index components, 27 stocks declined while three others ended with gains. The consumer durable index was the biggest loser followed by realty, metal and banking.

The banking index suffered further losses by falling 3.24 per cent to 12,645.15. State Bank of India, the largest lender, slid for a sixth day to its lowest level in almost four months. HDFC, a mortgage lender, fell 1.85 per cent.

Another interest-linked Realty sector index was lower by 4.76 per cent to 2,704.95, on fears that the RBI's policy rate changes might impact the sale of houses and developments.

Riaz Haq said...

Here's a BBC report about alarm over rising corruption in India:

A group of eminent Indians says they are "alarmed" by the rising corruption which is "corroding the fabric" of the nation.

In an 'open letter', they have expressed concern about "widespread governance deficit almost in every sphere of national activity".

The group includes businessman Azim Premji and ex-central bank governor Bimal Jalan.

A number of corruption scandals have shaken India in recent months.

"Possibly, the biggest issue corroding the fabric of our nation is corruption. This malaise needs to be tackled with a sense of urgency, determination and on a war footing," the group wrote in an 'open letter to our leaders'.

The letter said that independent anti-corruption bodies should be set up "speedily".

The Congress party-led government is battling allegations of corruption over the allocation of telecom licences - why so-called 2G spectrum phone licences were sold in 2008 for a fraction of their value, costing the government $37bn (£23bn) in lost revenue, according to the national auditor.

Another high-profile inquiry is continuing into claims that organisers of the Delhi Commonwealth Games swindled millions of dollars from the October event.

'Disease'

Congress party president Sonia Gandhi said recently that corruption was a disease in India.

The group wrote that it was also "alarmed at the widespread governance deficit most in every sphere of national activity covering government, business and institutions".

"Widespread discretionary decision making have been routinely subjected to extraneous influences.

"The topmost responsibility of those at the helm of the nation's affairs must be to urgently restore the self-confidence and self-belief of Indians in themselves and in the State as well as in Indian business and public institutions which touch the lives of every Indian."

A recent report by US-based group Global Financial Integrity said the illegal flight of capital through tax evasion, crime and corruption had widened inequality in India.

Many also accuse governments and politicians of corruption in India.

Riaz Haq said...

India's corporate mafia is fuelling corruption, says Prashant Bhushan, according to newKerala.com:

"The corporate mafia has come to control every institution of power and governance, be it politicians, bureaucracy, police and, to an extent, judiciary also," Bhushan told IANS in an exclusive interview.

"The corporate houses have become monstrously large and a law unto themselves. They get the law and policies made and decision taken including judicial decisions," he said, adding "very often they decide what the media will report or not report".

Bhushan, the son of eminent jurist and former law minister Shanti Bhushan, said any fight against corruption and for redeeming democratic institutions had to commence with transparency.

"The situation today is much worse than what it was in the early 1970s. At that time we did not have the corporate mafia controlling all the institutions. That was a situation when a powerful prime minister temporarily choked off democracy. Today, this corporate mafia is accountable and more dangerous," Bhushan asserted.

"This system is so bad. There is no point in preserving the illusion of functional democracy when it is clear that most institutions of democracy have crumbled or are non-functional. We need to restore proper democracy in the country and not preserve an illusion of democracy."

The lawyer said the only prescription for rescuing Indian governance from "corporate mafia" was "transparency" and people's right to know about the functioning of the state apparatus.

"Unless we wake up and start engaging in public issues and affairs, we are heading towards disaster," said Bhushan, who is facing contempt of court proceedings for highlighting the alleged misconduct of an apex court judge.

It was Bhushan who convinced the Supreme Court to monitor the Central Bureau of Investigation (CBI) probe into the allocation of 2G airwaves to telecom companies. He also spoke on his fight against corruption and allegations against Central Vigilance Commissioner (CVC) P.J. Thomas.

He said India was in a "very serious situation" and the "biggest threat was corruption that had spread in every vital sphere of the state's functioning".

The crumbling democratic institutions could be "repaired and restored" provided there was a "very strong people's movement in the country that would bring pressure on the institutions".

"Though the judiciary can play a useful role in that process", in the final count it needed the backing of a strong people's movement, he said.
--------
"I think all problems have to be dealt with simultaneously. You cannot shut your eye to a problem in one institution in order to highlight it in another institution. This is a shortsighted policy which does not pay in the long run," he said.

Advocating an independent media, he said that the media should not be controlled by corporate houses or those who have a direct or indirect interest in other business.

Mohammad said...

Is India in coma? asks Mohan Murti in an Op ED the Hindu:

A few days ago I was in a panel discussion on mergers and acquisitions in Frankfurt, Germany, organised by Euroforum and The Handelsblatt, one of the most prestigious newspapers in German-speaking Europe.

The other panellists were senior officials of two of the largest carmakers and two top insurance companies — all German multinationals operating in India.
----

European disquiet

Questions ranged from “Is your nation in a coma?”, the corruption in judiciary, the possible impeachment of a judge, the 2G scam and to the money parked illegally in tax havens.

It is a fact that the problem of corruption in India has assumed enormous and embarrassing proportions in recent years, although it has been with us for decades. The questions and the debate that followed in the panel discussion was indicative of the European disquiet. At the end of the Q&A session, I surmised Europeans perceive India to be at one of those junctures where tripping over the precipice cannot be ruled out.
--------
In a popular prime-time television discussion in Germany, the panellist, a member of the German Parliament quoting a blog said: “If all the scams of the last five years are added up, they are likely to rival and exceed the British colonial loot of India of about a trillion dollars.”
One German business daily which wrote an editorial on India said: “India is becoming a Banana Republic instead of being an economic superpower. To get the cut motion designated out, assurances are made to political allays. Special treatment is promised at the expense of the people. So, Ms Mayawati who is Chief Minister of the most densely inhabited state, is calmed when an intelligence agency probe is scrapped. The multi-million dollars fodder scam by another former chief minister wielding enormous power is put in cold storage. Prime Minister Manmohan Singh chairs over this kind of unparalleled loot.”

An article in a French newspaper titled “Playing the Game, Indian Style” wrote: “Investigations into the shadowy financial deals of the Indian cricket league have revealed a web of transactions across tax havens like Switzerland, the Virgin Islands, Mauritius and Cyprus.” In the same article, the name of one Hassan Ali of Pune is mentioned as operating with his wife a one-billion-dollar illegal Swiss account with “sanction of the Indian regime”.

A third story narrated in the damaging article is that of the former chief minister of Jharkhand, Madhu Koda, who was reported to have funds in various tax havens that were partly used to buy mines in Liberia. “Unfortunately, the Indian public do not know the status of that enquiry,” the article concluded.

“In the nastiest business scam in Indian records (Satyam) the government adroitly covered up the political aspects of the swindle — predominantly involving real estate,” wrote an Austrian newspaper. “If the Indian Prime Minister knows nothing about these scandals, he is ignorant of ground realities and does not deserve to be Prime Minister. If he does, is he a collaborator in crime?”

The Telegraph of the UK reported the 2G scam saying: “Naturally, India's elephantine legal system will ensure culpability, is delayed.”

Blinded by wealth

This seems true. In the European mind, caricature of a typical Indian encompasses qualities of falsification, telling lies, being fraudulent, dishonest, corrupt, arrogant, boastful, speaking loudly and bothering others in public places or, while travelling, swindling when the slightest of opportunity arises and spreading rumours about others. The list is truly incessant.
-----------
Europeans believe that Indian leaders in politics and business are so blissfully blinded by the new, sometimes ill-gotten, wealth and deceit that they are living in defiance, insolence and denial to comprehend that the day will come, sooner than later, when the have-nots would hit the streets..

Riaz Haq said...

Here are some excerpts from an interesting Op Ed by Prof Lev Ginsburg on democracy in developing world, as published in Aljazeera English:

The basic reason for democracy's lack of solutions to such problems (poverty, economic disparity) is that its principles have been formulated in industrialised capitalist societies characterised by considerable cultural homogeneity and relatively small economic gaps.

Democracy is a set of formal principles developed in Western Europe with the aim of facilitating the representation and articulation of the middle and working classes and designed to contain peacefully the conflicts between them and the upper class.

In the absence of a balance of power between classes, and a consensual unifying national identity, the automatic installation of formal democratic principles might only make matters worse.
----------
When there is a systematic link between cultural identity and economic status, democracy becomes a problem, rather than a solution. It exacerbates cultural conflicts to the point of violence, because it provides a formal opportunity for the majority to force their will on the minority.

Political sociologist Michael Mann has shown that in these cases democracy only serves to intensify conflicts among racial and ethnic groups, to which I would add, in the Middle Eastern context, the conflict between confessional groups and between the religious and the secular.
----------
The oldest case, mind you, is the US - the cradle of the democratic constitution which announced a "government of the people" and began the massacre of the American indigenous people because they were not considered part of "we, the people" of America.
--------
Whoever wants democracy under these conditions must first come up with a creative and consensual formula, according to which each cultural group would be free to live its unique cultural life without attempting to force its identity and customs on the entire citizen body.

In other words, demonstrating for democracy is not enough. What the countries of the Middle East require is political consensus on mutual recognition of rights and coexistence, guaranteed by a constitution and institutionalised by electoral procedures and representative institutions.

Egypt does have to worry, however, about economic inequality and the severe daily hardships suffered by most of its population. Without providing solutions to these problems, even the most democratic regime can be toppled by massive protests, possibly leading to new forms of dictatorship. A good example of such a failure of democracy was December 2001 in Argentina, when the masses flooded the streets calling for "all politicians to go home" and toppling five presidents in a row.

This happened only two years after democratic elections swept a broad leftwing front to power, which had promised to bring the country out of its deep economic crisis, but failed. The elected government pursued the policy dictated by the International Monetary Fund (IMF), which protected the interests of foreign investors against those of the local middle and salaried class. The crisis caused all holders of local bank deposits to lose 70 per cent of their money, with the blessing of the IMF.

Therefore, Egypt must realise that although democracy is essential, any formal constitution or system of government will not solve its economic problems. Immediately after the elections, Egypt's new policymakers will have to switch from the formal liberal discourse of democracy to face and discuss the fundamental questions of Egypt's economic structure. In the process, they are liable to discover that it is far more difficult to uproot a corrupt economic regime than to topple a single dictator.

Riaz Haq said...

Soutik Biswas of BBC on "Why India's big, fat weddings will never stop":

The big, fat Indian wedding returned to the front pages of newspapers this week: reportedly a $55m gig with 20,000 guests, a Bell helicopter as dowry, a 100-dish menu, a dozen TV screens showing a video feed of the proceedings, and even a $5,000 tip for the groom's barber. The groom's father - a rich Congress party politician and real estate magnet, exemplifying the intersection of politics and new money in India - wryly remarked that the media reports of the wedding were speculative.

For the Congress party-led government whose credibility is battered by a tsunami of corruption scandals, the hugely ostentatious wedding by a party member should come as an embarrassment, many here feel. One minister is reported to have said recently that nearly 15% of India's grain and vegetables is wasted through "extravagant and luxurious functions". Party chief Sonia Gandhi has pleaded with her workers to be frugal and her MPs to fly economy class. The embattled PM, Manmohan Singh, had feebly exhorted businessmen to refrain from ostentatious displays of wealth because such "vulgarity insults the poor". But what he possibly forgets is that the poor in India are actually insulted every day by many of the men and women they vote into power.


The government is apparently working on a law to curb waste at extravagant weddings and functions. No law will be able to change soon a people and society that remain deeply hierarchical, feudal and class-conscious. At one end of the scale a hapless farmer may take ruinous loans from money-lenders to host a wedding beyond his means. At the other end a billionaire unabashedly builds the world's priciest home (more than $1bn) in Mumbai where half the people live in slums. All this is symptomatic of a society which thrives on perpetuating inequity. With near double-digit growth, there's going to be more money to throw around and flaunt. So don't expect any lame law to curb India's vulgar, overblown weddings any time soon.

Riaz Haq said...

The authorities in India have arrested a stud farm owner accused of tax evasion and money laundering, according to the BBC:

Hasan Ali Khan is alleged to have hidden $8bn (£4.9bn) in Swiss banks.

Mr Khan was detained in the western city of Pune and later taken to Mumbai (Bombay) following searches at his home and offices. He denies wrong-doing.

Last week, the Supreme Court criticised the government for not having the "will power" to act against those illegally funnelling wealth overseas.

The Supreme Court set 8 March as the deadline for the government to tell it how it proposes to tackle so-called "black money".

In an angry outburst last week, its judges demanded to know why Mr Khan and others were not being taken into custody and questioned.

"What the hell is going on in this country?" they asked, using unusually strong language for court.

Mr Khan insists he has not acted illegally. "I am innocent. I haven't done anything wrong," he told reporters after his arrest on Monday.

The US-based group Global Financial Integrity estimates that India has lost more than $460bn in illegal capital flight since Independence.

Almost three-quarters of the illegal money that comprises India's underground economy ends up outside the country, it said in a report last year.

India's underground economy has been estimated to account for 50% of the country's GDP - $640bn at the end of 2008.

Authorities say the government is taking measures to bring back the illegal money, but say there are difficulties in sharing the information because of confidentiality treaties between countries.

Riaz Haq said...

The BBC is reporting that widespread corruption in India costs billions of dollars and threatens to derail the country's growth, according to a survey.

The report by consultancy firm KMPG said that the problem had become so endemic that foreign investors were being deterred from the country.

It was compiled by questioning 100 top domestic and foreign businesses.

Its release comes as Prime Minister Manmohan Singh struggles to cope in the battle against corruption.

Earlier this month the head of the country's anti-corruption watchdog was forced to resign by the Supreme Court on the grounds that he himself faces corruption charges.

Over the last six months India has been hit by a series of corruption scandals including a multi-billion dollar telecoms scandal, alleged financial malpractices in connection with the Commonwealth Games and allegations that houses for war widows were diverted to civil servants.
Mega scams

"Today India is faced with a different kind of challenge," the report said.

"It is not about petty bribes (bakshish) any more, but scams to the tune of thousands of crores (billions of rupees) that highlight a political/industry nexus which, if not checked, could have a far reaching impact.

"Corruption poses a risk to India's projected 9% GDP growth and may result in a volatile political and economic environment."

Critics of the government say that recent scandals point to a pervasive culture of corruption in Mr Singh's administration - adding to the difficulties of a politician once seen as India's most honest.

The government denies the claims and has set up a parliamentary inquiry into corruption.

The BBC's Sanjoy Majumder in Delhi says that most Indians routinely pay bribes for a number of services such as getting a driver's licence or a passport.

But, our correspondent says, the KPMG survey makes clear that corruption is now no longer about such petty bribes but mega scams where billions of dollars are siphoned off by government and industry.

The worst-hit areas as identified by the report were real estate and construction - a priority for Delhi which plans to spend $1.5tn over the next decade to improve its over-burdened infrastructure.

The report said that the country's telecommunications industry was also badly affected.

Telecoms Minister Andimuthu Raja resigned in November, denying allegations that he had undersold billions of dollars worth of mobile phone licences. He is now under arrest.

However the KMPG report was not all gloomy. It said that despite the murky regulatory environment, business remained active in India with more than half of those surveyed saying they were unaffected by corruption.

More than 80% of respondents disagreed that corruption had reduced their ability to access domestic or foreign funds, while 55% disagreed that corruption had affected their business.

Riaz Haq said...

Here are some excerpts from The Economist story on India's "oligarchic" capitalism:

MANY Indians take justifiable pride in the rise of “India Inc”. Since winning independence from the licence and permit Raj 20 years ago, Indian companies have grown in size and scope, venturing into overseas markets and snapping up foreign companies. But even as Indians celebrate the rise of their country’s companies, they fret about the longer shadows those firms now cast. They worry that India’s corporate titans are too firmly entrenched, and too deeply ensconced in the corridors of power.

In the telephone conversations of a corporate lobbyist, tapped by the tax authorities and leaked to the media, Indians have heard ministries described as ATM machines and the ruling party referred to as “our shop”. They have read reports of companies wildly overcharging the government for the Commonwealth games and underpaying for mobile-telephone spectrum. The fear is that Indian capitalism is turning oligarchic.

Oligarchs begin as oligopolists: market power and political power tend to go hand-in-hand. Many people assume that 20 years of liberalisation has largely stripped India’s corporate establishment of its market muscle. But a 2009 paper* by Laura Alfaro of Harvard Business School and Anusha Chari of the University of North Carolina at Chapel Hill documented an economy still surprisingly dominated by incumbents. The authors drew on a database kept by the Centre for Monitoring the Indian Economy, which covers every firm that files financial statements.

As the economy opened up, the database recorded the birth of thousands of new, private firms. By 2005 it contained 8,864 firms under 20 years’ old, amounting to 56% of the total. But these firms’ clout did not match their numbers. They accounted for only 15% of corporate assets, 17% of sales and 13% of profits. About three-quarters of the economy was still in the hands of state firms and old, private firms born before 1985.

In a new paper**, Ashoka Mody of the IMF, Anusha Nath of Boston University and Michael Walton of Harvard echo this finding. Looking at companies listed on the Bombay Stock Exchange, they find that stand-alone, private firms increased their share of sales from 1989 to 2008, largely at the expense of state firms. But state firms hung on to a 37% share and India’s big family-owned conglomerates, known as business houses, actually increased theirs

Riaz Haq said...

Here's NY Times on the widening iron ore corruption scandal involving politicians and oligarchs in India:

MUMBAI, India — India’s wave of corruption scandals has hit yet another industry, iron ore mining, implicating companies that include the flagship of one of this nation’s richest men.

As a result of a government investigative report issued late last week, several stocks have lost value — including shares of Adani Enterprises, the biggest piece of a mining, port and power plant empire built by the billionaire Gautam S. Adani, India’s sixth-wealthiest person.

Adani Enterprises has denied wrongdoing. But it and several other big Indian companies are facing tough questions from investors and policy makers.

The 466-page report, by a former Indian Supreme Court justice who is now a public ombudsman, contends public officials and companies cheated the government of Karnataka state out of billions of dollars in royalty, tax and other payments from a lucrative domestic and foreign trade in iron ore. The ore is an important raw material for steel that has been in great demand in fast growing China and India.

“Huge bribes were paid,” said the report, written by Santosh Hegde, the former justice. “Mafia type operations were the routine practices of the day.”

Analysts say Mr. Hegde’s findings provide evidence of corruption in important parts of the Indian economy, including land and natural resources, that are still tightly controlled by politicians and corporate executives — even as other sectors, including consumer goods, banking and information technology, have become more competitive and open.

Procedurally, it is unclear what will happen next. Mr. Hegde does not have the power to prosecute the companies and individuals he accuses in his report. That is up to Karnataka’s government, which has previously played down concerns about mining, or to the judicial system.

India’s Supreme Court on Friday temporarily suspended all iron ore mining in Bellary, the region that was the main focus of the inquiry. The court in recent years has often led the charge to prosecute officials accused of corruption, and anticorruption advocates hope that it will do so in this case.

The scandal forced the chief minister of Karnataka state to resign on Sunday, although he has denied wrongdoing.

Shares of Adani Enterprises were down nearly 23 percent on Thursday and Friday, but they regained almost 9 percent on Monday.

The stock of another company implicated in the report, JSW Steel, fell more than 10 percent late last week. JSW’s shares dropped by an additional 10.3 percent on Monday, after Citigroup downgraded the stock and put a sell rating on it.
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In the case of Adani Enterprises, Mr. Hegde’s report says the company helped mining concerns export illicitly obtained iron ore to China and other countries from the port, while engaging in a systematic bribery campaign that covered virtually every level of government. He recommended that the company be “barred from participating in any future contract, grant or lease, etc. by the government.”


http://www.nytimes.com/2011/08/02/business/global/indias-iron-ore-industry-is-called-graft-ridden.html?scp=4&sq=india&st=cse

greatguy said...

Hi Riaz

There is a better system thn democracy it is called the

resource based economy

Look up www.thevenusproject.com

It is better than capitalism, socialism, fasccim and anything you care to think of.

You are a good man and I feel you could do better by looking at the Venus project and the Zeitgeist movement.

Riaz Haq said...

Has the explosion of media in India been a mixed blessing? asks BBC's Soutik Biswas:

With more than 70,000 newspapers and over 500 satellite channels in several languages, Indians are seemingly spoilt for choice and diversity.

India is already the biggest newspaper market in the world - over 100 million copies sold each day. Advertising revenues have soared. In the past two decades, the number of channels has grown from one - the dowdy state-owned broadcaster Doordarshan - to more than 500, of which more than 80 are news channels.

But such robust growth, many believe, may have come at the cost of accuracy, journalistic ethics and probity.

The media has taken some flak in recent months for being shallow, inaccurate and sometimes damagingly obtrusive. Former Supreme Court judge and chairman of the country's Press Council, Markandey Katju, fired the first broadside, exhorting journalists to educate themselves more. Predictably, it provoked a sharp reaction from the media.

Economist Amartya Sen is the latest to join the list of critics after being wrongly quoted in the mainstream media a couple of times recently. There are at least two huge barriers, writes Dr Sen in a recent article, to the quality of Indian media.

One is about professional laxity which leads to inaccuracies and mistakes. The other, he says, is a class bias in the choice of what news to cover and what to ignore.

Dr Sen offers unexceptional solutions to ensure accuracy - newspapers should publish corrections (a few like The Hindu and Mint already do) and journalists should be given more training. He suggests that reporters should make use of recorders during interviews rather than take rushed notes for accuracy - in fact, many reporters do use recorders and even when they don't, they usually do take correct notes. But stories can sometimes get mangled on their way to publication, resulting in inaccurate headlines.

Dr Sen's worry about lack of training is more pertinent. Most Indian newsrooms have no legacy - or practice - of editorial training. They still host energetic, sharp and argumentative journalists. But analysts say many newsrooms do lack rigour and there is a crying need for some serious, consistent training in fact checking and reporting ethics.

Dr Sen's other grouse about the class bias in Indian newsrooms is valid but again unexceptional....

Does this also have to do with low minority participation in newsrooms?

A 2006 study by the Delhi-based Centre for the Study of Developing Societies found that of the 315 key decision-makers surveyed from 37 Hindi and English publication and TV channels, almost 90% of decision makers in the English language print media and 79% in television were from the upper castes. There is virtually no representation of Dalits (formerly known as untouchables), who comprise some 20% of India's population and live on the margins. This accounts for a serious lack of diversity in Indian media.
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A 71-page Press Council investigation named leading newspapers that had received money for publishing information disguised as news in favour of individuals, including senior politicians. Paranjoy Guha Thakurta, an independent journalist who was one of the investigators, says a lobby of big publishers pushed the Press Council to water down the report. Even Vice President Hamid Ansari regretted the development, saying that the Press Council's inability to come out with the report was "a pointer to the problems of self-regulation and the culture of silence in the entire industry when it comes to self-criticism".

How do you stop this? Journalists like Mr Guha Thakurta argue for increased transparency, self-regulation and competition regulation.

http://www.bbc.co.uk/news/world-asia-india-16524711

Riaz Haq said...

Here's a BBC report on "paid news" in Indian elections:

In recent years, India has seen a growing phenomenon called 'paid news'. This is where money changes hands in return for sympathetic press coverage.

There have been hundreds of cases involving politicians, celebrities and businessmen paying for favourable reports in the media dressed up as real news.

With the country gearing up for elections soon, the issue has been in sharp focus, but is there any chance of tackling the problem?


http://www.bbc.com/news/business-26689192