Shivakantjha.org - Triplet 4 - Financial Meltdown: 'Those who sow the wind shall reap the whirlwind'
Financial Meltdown: 'Those who sow the wind shall reap the whirlwind'
By Shiva Kant Jha
December 26, 2008
THE term ‘meltdown’ (“the melting of the structure, esp. the overheated core ….”) suggests the nature and the cause of the financial crisis illustrating the doom and wreck of the neo-liberal paradigm that painted a rainbow of upstream hope, and strove to build an eldorado which has come crashing of late. The leaders of the Group of 20 groped for its causes. They summarized them thus in their “Declaration of the Summit on Financial Markets and the World Economy," on 15 November 2008: in the words of self-castigation but unmindful of who bore the responsibility for it in the last resort:
"During a period of strong global growth, growing capital flows, and prolonged stability earlier this decade, market participants sought higher yields without an adequate appreciation of the risks and failed to exercise proper due diligence. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy-makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions.”
But soon the cat is out of the bag. They devised a stragey to give a shot in the arm of the failing economic archtecture dominated by the present-day rogue financial system under the corporate dominance and the U.S hegemony. A system for closer macroeconomic cooperation was attempted to be forged with sleight of hand. There is no remedy prescribed for the sick system other than some ersatz version of remedies pilfered and plagiarised from Frederick von Hayek, Milton Friedman, Feldstein, Ben Bernanke, Alan Greenspan , et al, or the agenda of a Thatcher, Bush, IMF, WTO, and the like. The Declaration does not mince matters when it said: “We are committed to advancing the reform of the Bretton Woods Institutions………” Then comes their stategic action plan:
“We underscore the critical importance of rejecting protectionism…. In this regard, within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports. Further, we shall strive to reach agreement this year on modalities that leads to a successful conclusion to the WTO’s Doha Development Agenda with an ambitious and balanced outcome.”
Lot of tears are being shed by the creatures in chorus to have a repeat of the merry days. The bailouts (direct or dressed-up) in trillions [ by depleting the existing and potential public resources meant for people’s welfare] to salvage the economic crooks are provided on the speciously pleadings of the verigated go-getters all around us. The governments, which were advised to roll-back, are now being persuaded to be pro-active in their service. Thomas Balogh said in his The Irrelevance of Conventional Economics: “The modern history of economic theory is a tale of evasions of reality.” Galbraith rightly said:
“Here another great constant in economic life: as between grave ultimate disaster and conserving reforms that might avoid it, the former is frequently preferred”.
The real cause of the crisis in the global economic architecture is Greed which subsumes into its sinister service inventiveness and imagination. Needs have been created, dreams have been sold. and an economy of dispensable goods has been created. This environment breeds distrust, and those who gyrated up with aggrandizing needs and waxing desires, get driven to think of their basic needs alone, to negotiate with things by getting down to the brass tacks.
Alfred Russel Wallace, at the end of the 19th century, dealt with certain problems which are also at the heart of the present-day Economic Globalization. In Bad Times, he examined the depression in trade, tracing its sources in the enormous foreign loans, excessive war expenditure, the increase of speculation and of millionaires, and the depopulation of the rural district. And this scientist of great stature suggested certain remedies which we can forget only at our peril. He concluded his tract with words which time has not made stale:
“We thus see that the evils under which we have suffered, and are still suffering, are due to no recondite causes, to no laws of inevitable fluctuation of trade, but wholly to our own acts and to those of other civilised nations. Whenever we depart from the great principles of truth and honesty, of equal freedom and justice to all men whether in our relations with other states, or in our dealings with our fellow-men, the evil that we do surely comes back to us, and the suffering and poverty and crime of which we are the direct or indirect causes, help to impoverish ourselves. It is, then, by applying the teachings of a higher morality to our commerce and manufactures, to our laws and customs, and to our dealings with all other nationalities, that we shall find the only effective and permanent remedy for Depression of Trade.”
Wallace was as much concerned, as we are now, by a morbid mismatch inter se the exponential growth of technology and the stagnant morality fraught with the hazards of chronic potential for instability caused by crisis, both political and socio-economic, when the shapers of our affairs in the public realm show dismal “capacity for reasonable prognostication.” After perceptively noting Wallace’s ideas expressed in the fin de siecleof the Victorian era, Prof. Gould, holding a sort of an inquest over the 20th century, almost at its end-point, was led to repeat the concern which was the burden of Wallace’s song. Gould, with remarkable succinctness, observed in his article on “Tragic Optimism”in the Encyclopedia Britannica 1999 Book of the Year:
“As the 20th century (an entire millennium) draws to its close, we can only reaffirm Wallace’s hopes and fears with increased intensity …….. How dizzying fast we move, yet how stuck we remain.”
The real cause is, when all is said, the inexorable operation of the Law of Karma. Krishna was right in telling Arjuna that we are ourselves our friends and foes.
ITAT under judicial scanner
In a recent case, the Bombay High Court [2008-TIOL-579-HC-MUM-IT] reiterates the judicial concern at the undue delay in the passing of orders even after final hearing, and often without recording reasons on appreciation of materials presented. The High Court reiterated and underscored what the Supreme Court had said on several occasions in the past. We hope that the great ITAT may not become a Peter Pan who refused to grow in J. M. Barrie’s novel. There should be a commitment in this institution’s collective conciousness not to give grounds to anyone to put a flashlight on its flaws even though such lapses are few and far between.
Everyone who decides materially against someone’s interest must give reasons. Reasons expose the nature of the nexus between the materials presented, and decisions arrived at. The flawlessness and inevitability in the process of judicial reasoning must be made clear with precision. This helps the members themselves in exploring right solutions, this helps the Superior Courts to maintain judicial control effectively on the ITAT’s adjudication; it helps the supervising authorities to subject the institution to better administrative supervision; it instills in the litigants faith and trust in the appellate process; and it provides an opportunity to all to hold the institution at work under vigilance. Giving reasons comes within the rubric of Natural Justice. Its breach may even render a decision simply non est. This norm is fundamental for all judicial institution, Lord Bridge very wisely counseled, from the British Court of Appeals in Goldsmith v. Sperrings Ltd  2 ALL ER 566 at 590: “ ... I do not think that this Court should [ not] adopt in its own procedure any lower standards than those it prescribes for others.” But while recording reasons none should forget that unreason often simulates reason to trap the unwary. Aurobindo’s dig at reason in Savitri was aptly quoted by Bhagawati J. in Judges Case 1982 2 S C R 367:
Accepting every brief she pleads her case,
Open to every thought she cannot know.
The problem of the judicial delay is best solved by balancing what is stated in the well-known dicta: “Justice delayed is justice denied” and “ Justice hurried is justice buried”. To work this calculus one requires skill and judicial sensibility.
But the members too have their problems. The authorized representatives should avoid cruelty to the Benches on whom they hurl the hailstorm of irrelevant facts, and irrelevant decisions. Legal presentation should not be like a Hanuman presenting the mountain itself so that the vaidy could find a tiny herb growing thereon somewhere. Exclusion of the issues from consideration may not be improper if the matter is set aside on a basic point; or if the case can be decided even without flogging them much all. If the decision of an appellate authority is approved for reasons given by that authority, then one can reasonable think that they get incorporated by implication in the ITAT order. Many other situations can be conceived but there is no scope here to cast net so wide.
These problems cannot be solved through administrative Guidelines which the Court requires the President of the Tribunal to issue. We do not have in our country an inspecting institution like the Council on the Tribunals in the U.K. Hence, options available are: (i) the judicial exposition of ‘thereon’ as used in Sec. 254(1) explaining that this seminal term implies the consideration of all the aspects of a case presented; (ii) enactment of a statutory provision in Sections 254 or 255; and (iii) the framing of a rule prescribing the norms in exercise of the rule-making power under Section 255(5) of the Income-tax Act.
The Goddess of Justice
In the Triplet II I had quoted Justice Jagannadha Rao describing the icon of Goddess of Justice in the mural on the tiles configured artistically between the two entrances from the Judge’s wing, as one enters the Chief Justice’s Court. The eyes of the goddess are not blindfolded. On seeing her lot of ideas well up in mind. The Goddess is a conflate of several noble ideas from different civilizations. In the ancient Hellenic world, she was ‘Themis’ representing the cosmic moral order whose commandments were administered by her daughter, Dike (the instrument of justice” who carried scales to weigh the acts and deeds of the humans. In her early icons, Themis was not shown blindfolded, nor did she carry a sword. How could Justice be blind? In the tragic dramas of Aeschylus and Sophocles she administers her even handed justice weighing pros and cons with remarkable agility and unfaltering certainty. Her Roman version was Lady Justice, a brilliant this anthropomorphic representation of Justice. But she was neither blind-folded nor did she carry the sword symbolizing the brute majesty of the Roman Empire. Rome had become hegemonial but its moral declension was becoming a gruesome fact illustrated grossly in the system of justice under the Herodian establishment which executed Jesus as he had become a threat to the imperial power and the economic exploiters who had spell over that. Goddess was rightly portrayed blind, and aptly carried sword illustrating what could be the worst when blind justice is allowed to have its sway. The mind, which selected this image for the mural at our Supreme Court, must be good and great. It invited the Hon’ble Judges to read the high poetry of the imagery presenting a rich sensuous shining forth of noble ideas. It is believed that the Goddess, with a blindfold, suggests the detachment without which administration of Justice is impossible. But Justice must see realities of our society to respond to the deeds of Adam Smith’s ‘invisible hand’ of the Market, and also the misdeeds of the economic gladiators of our day. But the Goddess without a blindfold may not always be just. First, total objectivity is a total nonsense as the consciousness of the decision--maker colours one’s vision. Besides, the eyes have a limited role in perceiving and responding. One sees only what one’s mind wants to see. Problems and realities provide external stimuli which our neurons carry to the matrix of mind. The response that a judge makes is controlled and conditioned by his consciousness where is at work ‘pre-conceived notion, concealed reference, cultural orientation, and various noble or ignoble extraneous factors’. This was the insight which led Marx to infer that the economic structure of a given society determines its political and legal superstructure. He considered judiciary its integral part existing in the service of the dominant vested interests: often cajoled, often coerced, often hoodwinked; at times knowing, but often in mere inertia. Ultimately, the most needed pre-requisite for justice is the judicial sensibility of the judges. Justice Cardozo explained how the best judges worked “informed by tradition, methodized by analogy, (and) disciplined by system”.
In life’s frustrating criss-cross, Goddess of Justice assures some soothing vernal breeze. More she reigns with majesty, higher we ascend in culture and civilization.