Right to Food and Drought in India

The biggest drought/rain shortfall is looming over India since Independence. Current government estimates put the shortfall at 29% till now. If the moonsoons dont recover in these last days this number can get worse. Below is a compilation of articles on Right to food act in India and the drought situation.

It’s time for a New Deal for rural India - Himanshu

http://www.livemint.com/2009/08/18234120/It8217s-time-for-a-New-Deal.html


Drought of justice, flood of funds - P. Sainath
http://www.thehindu.com/2009/08/15/stories/2009081555920800.htm

Drought management for rural livelihood security - M.S.Swaminathan
http://www.thehindu.com/2009/08/17/stories/2009081752310800.htm


[Documenting the distress sale of cattle - a form of coping mechanism from droughts]
Till the cows no longer come home P. Sainath

When a week is a long time P. Sainath



Food for all - Jayati Ghosh (talks about making PDS and other food schemes universal rather than targeted)
http://www.flonnet.com/stories/20090828261713100.htm

The Food Economy: How will the government reach food to the target families? (Bhaskar Dutta, The Telegraph, 30 July 2009)
http://www.telegraphindia.com/1090730/jsp/opinion/story_11293380.jsp

Sen on RTF
http://www.righttofoodindia.org/data/amartya_sen_on_right_to_food_act_8aug09.pdf

Drought of policymaking vision

Biraj Patnaik

Indian voters deliver a stunner

As big as the 2004 BJP upset, Indians chose to give Congress another and firmer chance to run the government. Just some initial observations:

* Everyone got it wrong. Predicting a hung and fractured verdict, India actually gave a firmer verdict for the UPA.
* Left were the major losers in West Bengal (they keep winning losing in Kerala but its a first in WB). Nobody can say the exact reasons but Nandigram-Singur obviously paid a major role. (Lesson to congress, seriously consider land rehabilitation and SEZ land acquisition problem. In some ways SEZ's due to economy are declining so not an immediate issue overall)
* BSP didnt live to its expectations and thats a shocker to me at least. Lalu lost big and there is a decline in regional parties (they are not completely out though).
* BJP, on itself, did better only in Gujarat & Karnatka. It was average or far below in other states. Modi who was portrayed as next to Advani couldnt win votes outside Gujarat. Overall, without allies, they dont even exist in many major states in India so not really a national party in some sense. Generalizations across India that Hindutva lost are not true if you look at Gujarat and Karnataka and also Hindutva was not a major issue.
* Congress won big overall. They to some extent acknowledge that NREGA, Farmer Loan waiver and social sector reforms. But now given they dont need many allies and especially the Left the urge to push economic reforms will increase. I think though that within Congress some form of Left will develop which will slow down reforms (for the good) but it might be faster than before. Lack of financial sector reforms protected India during this crisis (Kamal Nath acknowledges this) so hopefully they take this into account. Lets see how it plays out.
* Chidambaram has lost!. But sadly will come as minister again.

* Personally, Manmohan Singh shouldnt be the PM. Rahul Gandhi or Sonia or some other politican should be ideally the PM. Politicans should do their jobs and be in Political positions. But it wont be that case at least for the next year or two I think.

This might be a new twist historically in Indian politics, time will tell. Indian voters delivered a stunner and its fascinating to disceet what was the intention. It easy to generalize but in every state there are multiple different things working.

Treasury Secretary

So how did Hank Paulson do as Treasury secretary?. D

-- Former CEO of Goldman Sachs till 2006 and then Treasury Secretary he completely failed to see the crisis.
Even the once revered Greenspan today admitted his ideology of self regulation was wrong and he made mistakes. He literally said in so many words that his whole world view formed over last 40 years has changed due to the crisis. Atleast credit should be given for that given for around 20 years he was GOD of the financial industry.

-- He let Lehman Brothers fail which is considered now to be biggest reason for escalation of the crisis worldwide. Given that in retrospective one can blame him but even today he doesnt agree that it was mistake. With constantly changing stances of why he didnt save Lehman it is surely fishy.

-- Bailout Bill - The first version of the bill he presented would have given him unlimited authority and pratically a blank check. He rejected all other ideas of capital injection into banks which Charles Schumer (Democratic Senator) and others had given at that time. Later after 2 weeks of playing around when Europe did capital injections he followed still not admitting he had done anything wrong.

-- Sweet Deal to WallStreet - A man from Wall Street he got the banks a sweet deal. Each of 9 big banks got $25 billion at 5% with very limited restrictions and small possibility of upside when the stock markets recover. He did not insist on cutting dividends which Europe has done. Out of $125 billion, $25 billion will go to investors as dividend next year. IS this a bailout when banks are giving money?. 5% interest rate is far lower than what Warren Buffet got for exactly similar deal it did with Goldman Sachs. He has stated clearly that he does not want to be punitive to the banks. I dont understand WHY?. Banks are in this mess because of their own misdeeds so shouldnt they be punished.

-- Implementation of the Bailout - As expected he has hired people from Goldman Sachs to mange the bailout details. Isnt there a clear conflict of interest?. How will government price securities which it buys from Goldman Sachs. The people who will runt he bailout are the same people who were part of creating the crisis and still beleive in the same ideologies which seriously failed.

Markets still throwing a tantrum

Just like a tennager who doesnt get his/her way and starts throwing tantrum - the stock markets fell 777 points the day the bill failed in Congress. Most of media said it was indication that market needed the bailout bill and how important it is for the economy or what would happen. Some others have compared this to a person pointing a gun to its head and saying if you dont do it then I will kill myself. 

Now the bill was passed under pressure for the markets and the media. Whats the result?. The teenager is still not happy with what it got and wants to throw more tantrum. The markets fell 159 points after the bill was passed .... ya after it was PASSED. So will Congress to calm the teenager put in more money and meet the markets new demands. The market want accounting rules changed, tax benefits and much more till Congress is ready to satisfy it. 

A sad day .... 

Different bailout plan

The more important concern in this crisis should be for people who have houses foreclosed. Foreclosure is a truamtic event - whole families being kicked out of houses/communities where you have stayed for multiple years and have memories, which are sort of tough to recover. If govt is spending so much money why not force banks to stop any foreclosures - govt can pay them also for doing that. Forecloursers from pure economic sense also are great losses. A typical foreclosed home is very tough to sell as most of the house is vandalized when people leave as they are angry and these houses sell for pittance even compared to prevalanet market prices of the area. Foreclosed house also reduces the value in the area. 

The second concern should be that people have access to credit to do day-to-day stuff like buy houses, run small businesses etc. This means a way so that economy does not suffer a severe recession. Other concerns include avoid job losses, save taxpayer's money etc.

Saving banks/other institutions should be a side product of these concerns. If a failing bank/institution does not materially impact the above two goals I would let it go down. 

Once we have the priorities of concerns finalized lets think about how a plan might look like.  

Govt can hold on to foreclosed houses and let family stay for a few years, renegotiate the mortgages from ARM to fixed over a longer duration, make banks share in the loss of value of houses by reducing mortgage amount, give govt guarantees for part of the amount. Bank lobbies are strongly opposed to that and so this has not come up as serious option at all. In the bailout package currently being considered banks are hoping that government will buy the mortgage securities at higher prices than they can be sold in the market and hence their balance sheets will improve. In short , banks hope that through current bailout they will transfer the losses to government which they might not be able to in the foreclosure case. Secondly republicans are strongly opposed to any foreclosure sort of plan as that would be socialism. I think US is going from so called "capitalism" to wrong type of "socialism" where its socialism for corporations/banks and capitalism for home owners/individuals (BTW this always existed but not as pronounced and in the face). 

There should be a completely different bill, bailing out individuals/families directly rather than banks/corporations. If banks/corporations need to be bailed out then it should be highly punitive. First even now banks are giving out dividends to equity holders. I dont know how govt can talk about bailout when banks are giving money to shareholders. The bailout will give banks money but it seems they have money to give out!!!. 

In a punitive bailout plan, equity and bond holders should be wiped out. Govt should take over as was done in case of Washington Mutual and auction off things to private parties. If there are none then nationalize the entities. Otherwise do as Warren Buffett did, give loans at high interest rates with option to buy shares later at pre-fixed low prices (he did this for Goldman Sachs & now GE). Stop all dividends, fire any CEO/management who made the risky bets, create separate authority not the treasury which will doing the bailing out as was done in 1987/1930, bailout only in cases where absoutly necessary and after two years put a tax on profits of financial firms which benefited from bailout to recover costs). 

To protect from effects of job losses increase unemployment insurance duration, introduce infrastructure projects to raise employment. Finally someone has to pay for all this so increase taxes on the super rich and wall street also has to pay higher taxes in a year or so when it recovers to pay for all this and more. 

A note on costs of current bill:  what media doesnt mention is that costs are not just losses which might be incurred by govt but also opportunity cost of putting the $700 billion. Clearly, even though candidates dont say it, many of the programs will have to be scaled back or not introduced at all which has huge social costs. Because this $700 billion will be stuck for years to come govt will have to scale back funding health insurance programs, alternative energy, ...whole bunch of stuff. The costs of not acting on other issues like global warming, health insurance is as serious or higher than not acting on this bailout. Global warming is almost exactly like this issue there is unpredictability on how soon things can go bad and how bad and hence one can argue action is needed NOW (even if u agree with republican argument that global warming is not caused by humans they admit there is unpredictability in that which I can argue is with not acting on bailout of whether its necessary). Infact global warming would actually wipe human race from Earth unlike the financial crisis. 

Relief on failure of bailout package

I know that people claim the failure of the bailout package resulted in sharp losses in stocks, made it difficult to get loans for busineeses and indiviuals, reduced 401(K) portfolio of so many people ....might lead to some more institutions failing, recession, depression,...... the sky feel off, moved human race closer to extension and so on.......

There will be another package which the US Congress will pass in few days similar to the one failed, maybe even worse in some respects but even then it feels good for now that it failed atleast once. Why?

First and foremost even in the US, even now there is influence of the voters, constituents, of the person on the main street. The bill failed because many in congress got emails, letters, calls from constituents that they were angry at the package at bailing out wall street. And more than 2/3rd of representatives who are up for relection in close races voted against the bill. They were listening because they wanted votes. The media has potrayed this as negative but I find this a GREAT positive. Representatives who voted against were liberals, conservatives but that doesnt matter what matters is voter sentiments had a role to play in this. 

Secondly, strong wall streest lobbyists lost out against the voice of voters atleast for now. In media there are articles filled with how banking association lobbyists lobbied hard to get the provisions they wanted. For example: all provisions of exceutive compensation, equity stakes in banks, taxing the financial industry for any losses after five years are highly diluted in the bill to the point that they are as good as not there. So its good that bill didnt pass in its form. 

The urgency, the excessive executive authority to treasury, the non-transparency of the bill (what prices will govt pay) made it a bad bill. The urgency shown by treasury, media, president was huge. I understand that there are severe repurcussions for not acting but there were no serious alternatives considered. Why not follow the Swiss model in which Swiss govt. bought stakes in banks and shared in the upside, or the good bank model - instead of buying bad assests buy the good ones. The man leading all this is a former Goldman Sachs CEO who would be given unprecedented powers. AIG was saved by a loan to $85 billion and current CEO of Goldman Sachs was present in the meetings because it would have caused Goldman huge losses had AIG collapsed. This raises questions like did Paulson bailout AIG because of Goldman connection and not Lehman which didnt have that much impact on Goldman. Who would he hire to manage the $700 billion, people he knows in the industry which created the problem. 

Lastly the claims that $1 trillion in market valuation was lost in the stock markets yesterday such a big number. Does that really matter?. See today more than $750 billion of that $1 trillion has being regained. Market valuation changes are not losses to be taken seriously, these are market fluctuations which come and go. Retirment or 401(K) accounts are not lost, markets regain value. 

Lastly business media claimed yesterday that by falling the market was giving an indication to politicans that they matter and should be taken seriously. I would advise against these fluctuations being of significant import. $700 billion is a huge amount and if govt is spending it on bailing out then it should be thought through carefully. Who is bailed out? What are the costs? How it is done? What are the alternatives? Does everybody deserve a bailout?

An alternative view to save the financial market

NY times article: This describes the plan very nicely and provides a "good bank" alternative

http://executivesuite.blogs.nytimes.com/2008/09/27/and-now-for-something-completely-different/