Shivakantjha.org - 'In a Nutshell' - 7: Vodafone: FDI: This craze at loggerheads with wisdom

'In a Nutshell' - 7

In the Vodafone Context

FDI & Our Consolidated Fund

By Shiva Kant Jha

April 7, 2012

We are being taught in these locust-eaten years that our constitutional mission is not expressed in our Constitution, but in the writings Prof. Hayek, Milton Friedman and all those who reject the ideas of ‘social justice’ and ‘equality’. The worst specimen of the Devil quoting scriptures is when their devotees and the propagandists invoke our Constitution only to break its heart. Lavng the larger issues for later days, let me reflect on the FDI to see whether it is an unalloyed boon, or an outright bane.

Joseph Stiglitz has an undoubted authority to speak on the relevance of FDI, and he has posed serious embarrassing questions about it in his Globalization and its Discontents. Some of his points are cryptically quoted from that book for my readers to reflect on them to draw, and to appraise what follows from them. Stiglitz says:

“There is more to the list of legitimate complaints against foreign direct investment. Such investment often flourishes only because of special privileges extracted from the government.”

“The foreign direct investment comes only at the price of undermining democratic processes. This is particularly true for investments in mining, oil, and other natural resources, where foreigners have a real incentive to obtain the concessions at low prices.”

‘There is more to the list of legitimate complaints against foreign direct investment. Such investment often flourishes only because of special privileges extracted from the government. While standard economics focuses on the distortions of incentives that result from such privileges, there is a far more insidious aspect: often those privileges are the result of corruption, the bribery of government officials. The foreign direct investment comes only at the price of undermining democratic processes. This is particularly true for investments in mining, oil, and other natural resources, where foreigners have a real incentive to obtain the concessions at low prices.” (at p. 71

The way FDI is invited in our country, and the way it operates in our economy, is, it seems on good grounds, only designed to help the extractive investors, who reap short-range profits somehow, and vanish without any loyalty for our country. What goes into the productive process that too becomes worrisome as its maximum benefits are reaped by a few only. A lot of that is siphoned off to other jurisdictions, some of which are brought back through layerings facilitated by corporate structures from the foggy lands and misty space, about which I shall have many things to say in some other articles.

It is time for us to consider that the effect of more and more FDI is to make a small band of creatures amass lot of wealth trying to appease the critical eyes by theorizing on the ‘trickle down effect of their wealth’. If the tax laws are bent to promote FDI, a horrendous consequence would ensue. The rich would get richer, but the Consolidated Fund of India is likely to suffer unless we believe that by providing abundant cake to the rich, the poor can hope to get some scrums sometimes someday. The judgment is likely to promote neo-liberalism, rather than the vision of the constitutional socialism dear to our Constitution. It would delight those who believe in neo-constitutionalism, and the neo-liberal agenda of the Economic globalization. This point can be appreciated if we keep in mind the role of the Consolidated Fund, to which the taxes and other public resources go, in discharging public commitments and obligations. My reflections had led me to make the following comment in my book On the Loom of Time (p. 362)

“I fail to understand the wisdom to starve our Consolidated Fund meant for welfare of our nation by crafting such terms in the Double Taxation Agreements which facilitate our country's loot, even unmindful of national security issues, thus creating the evident conditions for the emergence of two Indias: one of the common-run of 'We, the People', the suffering millions whose existence is being fast forgotten, and the other, the 'High Net Worth Individuals', corporations, fraudsters, tricksters, masqueraders operating through mist and fog from various tiny-tots of the terra firma and cyberspace.”

.Article 292 of our Constitution ‘provides that the executive power of the Union extends to borrowing upon the security of the Consolidated Fund of India’. In terms of Article 266, all revenues, go to the Consolidated Fund of India are to be spent in accordance with our Constitution’s provisions, and under a close Parliamentary control. Such resources are under trust to meet expenditure for public cause. FDI, on the other hand, comes and goes for the corporate benefits, and the High Net Worth Persons, and the global economic gladiators over whom, under the present-day WTO regime, our Parliament has no control. Greed is their loadstone, and Deception their strategy.