The New Security Dilemma

Narendra Modi, India's Prime Minister, left, speaks to Shinzo Abe, Japan's Prime Minister.  Photographer Shizuo KambayashiBloombergLast month – Japan (Narendra Modi, India’s Prime Minister, left, speaks to Shinzo Abe, Japan’s Prime Minister), Germany, the UK among others – pledged commitments to India’s economic security.  The pledge, “special” strategic and global partnership, along with vocational training and infrastructure projects, renewable energy or the remedying of environmental damage, especially in river basins across the country – and millions of dollars for public and private investment and financing.   India’s ambitious economic and social transformation has created a security dilemma.  In the offing, a consistently more competitive and dangerous world (Glaser, 1997).

The Security Dilemma

The security dilemma exists when “many of the means by which a state tries to increase its security decrease the security of others” (Jervis, 1978).  First, it provides the rational foundation for what Jervis termed the ‘spiral model’, which describes how the interaction between states that are seeking only security – economic or otherwise – can fuel competition and strain political relations (Glaser, 1997).   Second, Jervis explains that the magnitude and nature of the security dilemma depend of two variables: offense-defense balance and offense-defense differentiation.

Offense-Defense Theory

Offense-defense theory argues that the relative ease of offense and defense varies in international politics.  When the offense has the advantage, military conquest becomes easier and war is more likely; the opposite is true when the defense has the advantage.  The balance between offense and defense depends on geography, technology, and other factors (Brown et. al., 2004).

 Cooperation or Competition?  

The reality is mass cooperation and participation in creating energy efficiency, clean technology at affordable prices, food security, and building model towns with facilities for solid waste management and waste water treatment is a boon for growth and competition.  That said -a large scale resetting of extant decision structure mechanisms and strategy is underway.  Needless to say, powerful interest groups that will benefit from this change have every reason to exaggerate the dilemma.

THE TIMES OF INDIA GROUP. © BCCL. ALL RIGHTS RESERVED. American agronomist, Father of the Green Revolution and Nobel Laurate Dr. NOrman Borlaug advising farmer on wheat development programs during visit to Bombay March 14 1971

The Increasing Complexity of Class Conflict and Caste Cleavages

Caste remains a focal point for political mobilization in India.  But recent research also suggest that class and caste politics is being modified in new and unexpected forms.

First, political cleavages are being reflected in new policy demands such as the demand for reservation by subgroups (Jayal and Mehta, 2011).  While some agriculturalists call for a second green revolution to meet the ever-increasing demand for food, others remain skeptical of the technology and its consequences.  The chemical fertilizers that helped increase crop yields also killed important vitamin A-rich weeds; also, the geographic distribution of emerging agricultural research remains disproportionate.

The Green Revolution helped India move from being a massive food importer, heavily dependent on aid, to a food exporter.  Reaching self-sufficiency in food had huge political implications.  Now the prospect of re-revolutionizing with bio-crops, for example, would mean strengthening employment and food security for tribal population and farmers in some states.

Second, class is complex interacting with new forms of identity including caste and gender.  The National Human Rights Commission (NHRC) recently issued a notice to Punjab Government after the Commission took suo motu cognisance of a media report that 105 families belonging to Scheduled Castes have been facing social boycott by upper caste people in Baopur village of Moonak Sub-Division of Sangrur district since May 15.

Reportedly, they are facing this situation since they decided to cultivate 26 acres of Panchayat land reserved for the Scheduled Castes.  Earlier, this land was being cultivated by the upper caste people who allegedly used to get it on contract through auction in the names of Dalits.  The Commission has observed that the contents of the press report, if true, raise a serious issue of violation of human rights of Dalits.

It’s possible a solution may be found in restructuring legal regimes that govern property, labor and natural resources to make them hospitable to new forms of identity.  Major economic transformation and the emerging middle class, notwithstanding its uneven rates of political participation has increased the complexity of class composition.  While caste will remain important, there is a possibility of several new and shifting coalitions emerging (Jayal and Mehta, 2011).

Economic Inclusion, Time-Tested Strategy For Political Power

India National FlagIndia became free at the stroke of midnight, on August 14, 1947.  In contrast to the world structure in 1947, India is far less under the sway of others,  and stands firm as a potentially great power.  However, India’s aspiration for political power must include a strategy for economic inclusion.

Human development policies must be advanced from the point of view of their contribution to national power.  As an added incentive, ensuring access to education for underprivileged children, retaining girls in secondary education, and opening opportunities in higher education will work to improve access to finance and to enhance social protection coverage for the more than 90% of the labor force that works in the informal sector (World Bank, 2014).

Pandit Jawaharlal Nehru Independence Day Speech 15 August 1947Jawaharlal Nehru became the first Prime Minster of free India and continued his term till 1964.  Giving voice to the politics, economic ambition and and social sentiments of the nation , Prime Minister, Pandit Jawaharlal Nehru said,

Long years ago we made a tryst with destiny, and now the time comes when we will redeem our pledge, not wholly or in full measure, but very substantially. At the stroke of the midnight hour, when the world sleeps, India will awake to life and freedom.  A moment comes, which comes but rarely in history, when we step out from the old to the new, when an age ends and when the soul of a nation, long suppressed, finds utterance…. We end today a period of ill fortune, and India discovers herself again.

Russian President Putin, Indian Prime Minister Modi, Brazilian President Rousseff, Chinese President Xi and South African President Zuma smile at a group photo session during the 6th BRICS summit in Fortaleza

Power, Authority and the United Nations of BRICS

The creation of two new international financial institutions: New Development Bank (NDB), and the Contingent Reserve Arrangement (CRA) in a conference of five governments demonstrates the explosive growth, global reach and speed of contemporary capital movements (short-term as well as long-term).  Indeed, the relative ease with which such flows could occur represent a distinct reversal of the general national policy preferences evident during the years immediately following World War II (Pauly, 2002).

The July 15 meeting in Fortaleza, Brazil demonstrates a profound shift in market-authority, and as such  Brazil, Russia, India, China and South Africa (BRICS) now have room to maneuver independent policy choice in the global financial order.  In practical terms, the growing influence of the BRICS, which account for almost half the world’s population and about one-fifth of global economic output, means power to restructure cross-border financial markets, public authorities and expand activities in the field of sustainable development.

On the domestic front, it is increasingly understood that this economic expansion, facilitated by international financial markets comes with new risks for governments, societies, and individuals (Pauly, 2002).  Markets will continue to “reward or punish according to their judgment of how any government manages its money supply, its fiscal deficit, its foreign debts, or improves the efficiency of its banks and it local credit” (Hall and Biersteker, 2002).  India, for example, will have to continue promoting necessary adjustments in internal policies.

The policy-related observation is that the “silent revolution” of economic liberalization has fueled a boom in emerging markets. Following the exodus of capital from emerging markets and scaling back of U.S. monetary stimulus, it is clear that financial regulatory power is dispersing and no particular national authority is truly dominant.  As Pauly writes, stabilizing the market involves two dimensions: managing systemic risk and ensuring that modicum of symmetry in adjustment burdens required to sustain the logic of interdependence (Pauly, 2002).

Thinking About Thinking About A Bali Deal

U.S. Secretary of State John Kerry (L) shakes hands with Indian Prime Minister Narendra Modi at the Prime Minister's residence in New Delhi August 1, 2014.India has blocked a landmark trade treaty, the first global trade reform since the creation of the World Trade Organization 19 years ago.  This collective action problem demonstrates the constraining character of previously dominant political and economic games.  Policymakers everywhere are seeking to restructure the state so that it can play new roles in the future (Cerny, 1995) of global governance.  India, included.

On the one side, a firmly held conviction that the decisions that ministers reached in Bali (2013) cannot be changed or amended in any way — and that those decisions have to be fully respected.  And on the other side of the debate some believe that those decisions leave unresolved concerns that need to be addressed.

U.S. Secretary of State John Kerry, who was on a visit to India, told Prime Minister Narendra Modi  that India’s refusal to sign the trade deal had undermined the country’s image.

A labourer spreads wheat for drying at a wholesale grain market in the northern Indian city of ChandigarhIndia says it is willing to sign a global trade deal, but just not yet.  The country’s unresolved concern is food security.   India’s new nationalist government has insisted that a permanent agreement on its subsidised food stockpiling must be in place.

My view is that the multilateral trading system is important not just to support economic growth and development, but also to deal with global issues of governance.  However, domestic politics matter, for either side.  The reality is Indian incomes are increasing rapidly, but not as rapidly as one would infer from official labor income data and growth statistics (Piketty, 2014).  Food security is a supreme national interest.

The possibilities for collective action through multilateral regimes have increased, but these operate at least one remove from democratic accountability (Cerny, 1995).  As Putnam (1988) puts it, it is fruitless to debate whether domestic politics really determine international relations, or the reverse.  Think about it.  The answer to that question is clearly, “Both, sometimes.”

States, Not Markets, are Responsible for Economic Security

Kashmiri demonstrators clashed with Indian police during a protest in the northern city of Srinagar Jammu and Kashmir Feb. 28. Tauseef MustafaAgence France-PresseGetty ImagesThere is good reason to think that the internal and external security problems across India have much to do with the social effects of market-oriented reforms.  The beneficiaries of reforms, the argument continues, should bear the cost of negative externalities.  However reforms, when properly governed, is in fact a powerful force for social good (Bhagwati, 2007).  States, not markets, are usually held responsible for security (Leander, 2008).

The economic security of the state is significantly weakened with abuses by the police and security forces.  The most significant human rights problems in India include extrajudicial killings, torture and rape, as well as corruption at all levels of government (India 2013 Human Rights Report).  According to the report commissioned by the U.S. Congress and published by the State Department separatist violence, life-threatening prison conditions, sex trafficking of children and an atmosphere of impunity resulting from the overburdened judicial system is endemic.

Smaller acts of human agency thus matter.  On the basis of available evidence, such acts can be divided into three categories: movement politics aimed at electoral politics, nonelectoral civic interventions, and initiatives led by local administrations (Varshney, 2002).  How lasting the effect of this political shift depends on what kinds of civic institutions are put in place.

Climate Change, and the Disciplining of States

india-climate-change-2010-1-24-12-11-17 Associate PressIt seems evident India’s high vulnerability and exposure to climate change will slow its economic growth, impact health and development, make poverty reduction more difficult.

The latest report from the U.N. Intergovernmental Panel on Climate Change (IPCC) indicates India is already one of the most disaster-prone nations in the world and many of its 1.2 billion people live in areas to floods, cyclones, and droughts.

Though the report doesn’t have country-specific predictions, its region-wise findings brought out conclusions for states .

Aromar Revi, lead author of one of the chapters of this report, said the impacts of climate change would be felt severely in Indo-Gangetic plains, affecting poor people in the entire region.  “The areas which are facing frequent floods these days may face drought like situation in the distant or near future.  We cannot ignore the changes which are taking place either in the Indus river basin or in Brahmputra river system over the longer period,” said Revi, explaining the implications of the report in Delhi.

Villagers walk through a flooded road at Ibrahimpatnam in Krishna district of Andhra Pradesh India. Mahesh Kumar Associated PressThe responsibility now lies in the hands of the Modi administration to begin organizing responsibility, by endowing states with certain fundamental rights, powers, duties (their sovereign rights), establishing norms of conduct (Aalberts and Werner, 2008) for addressing climate change.   In this way, it becomes possible to discipline states, mitigate risks, and address direct and indirect impacts of climate change on human security.

 

RBI Logo

Financing For Infrastructure Development and Affordable Housing

The Reserve Bank of India (RBI) has taken bold step towards ensuring adequate flow of credit to core industries sectors, maintaining price stability and public confidence in the system.  On July 15, the RBI announced operational guidelines for flexible structuring and refinancing of new project loans to infrastructure and for issuance of long term bonds by banks for financing infrastructure project loans and affordable housing.

Shri Arun Jaitley Finance Minister of IndiaIn the Union Budget 2014-15, presented on July 10, 2014, the Honorable Finance Minster, Shri Arun Jaitley announced that:

“Long term financing for infrastructure has been a major constraint in encouraging larger private sector participation in this sector. On the asset side, banks will be encouraged to extend long term loans to infrastructure sector with flexible structuring to absorb potential adverse contingencies.  On the liability side, banks will be permitted to raise long term funds for lending to infrastructure sector with minimum regulatory pre-emption such as CRR, SLR and Priority Sector Lending (PSL).”

The reality is there are substantial risks associated with infrastructure at the construction phase, which requires flexible bank financing.  Post-construction, suitably structured long-term loans can be “taken-out” by long term lenders, such as infrastructure funds, pension funds, and insurance companies.  Therefore, banks need the flexibility to structure loans to mitigate risks as well as to ensure easy refinancing.

Infrastructure and affordable housing need relatively long term financing compared to the standard bank loan.  If banks finance such long term loans with short term deposits, they create a risky asset liability mismatch, as well as a need to maintain liquid assets to mitigate the risk of illiquidity.

Photograph by Robert Wallis Corbis

Innovation, Technology and Competitive Growth

India’s rapidly expanding economy demands innovation and power-generation technology.  The first wind turbine developed and engineered specifically for India’s low wind speed conditions, allows greater energy capture and improved project economics.

GE-Wind-Energy-Turbine. Credit Carsten E. CC BY SA 3.0The result, India is rapidly increasing its power generation using renewable energy.  Renewables now constitute over 5 percent of India’s energy mix by production and 12 percent by installed capacity.

The cost of wind power in particular is now close to grid parity and advancement in technology is making its generation more predictable.

India is poised to deliver high-efficiency output and even more competitive growth.

Narendra Modi chairs the June 4 Meeting of Secretaries.  New Delhi.  Photo source www.pmindia.nic.in

Trust, Confidence and Making Local Government Work

It is of course only an illusion to think that any government will strike a perfect policy balance between government and governance. Power in the Indian political system, for example, has historically emerged from coalition formation at the lower levels, everyone engaged in it has had a vested interest in keeping the “democratic” game going, though, once again, the stakes are not the same for everyone. (Mitra, 2001). The true challenge lies in devising a scheme where local democracy, elites, and experts can play complementary roles.

“I believe government has no business to do business. The focus should be on Minimum Government but Maximum Governance.”
- Prime Minister Narendra Modi

Prime Minister Narendra Modi propose the judicious use of local government. “Simplifying and streamlining the administrative rules and procedures to make them people-friendly” is certainly a good start. Local government is at its most effective when local institutions enjoy the trust and confidence of local elites and are simultaneously accountable to the local electorate (Mitra, 2001).

Drawing on survey data relating to popular attitudes towards local government and the analysis of case-study and interview Mitra (2001) finds that the experimentation in local democracy has been the least successful in those regions where no autonomous empowerment of subaltern social groups has taken place. Accordingly, the judicious use of local government will infuse new political resources into the political system and enhance the resiliency and legitimacy of the state.

Follow

Get every new post delivered to your Inbox.