Economics for the Common Man

AAP chief and its chief ministerial candidate for Delhi Kejriwal waves to his supporters in New DelhiAam Aadmi (AAP), or Common Man Party ran a  simple but formidable campaign, beating back the Bharatiya Janata Party (BJP) ambitions to gain political capital in a Delhi state election.    The message was simple, “Never underestimate the power of the common man.”

Economics for the Common Man  

Aam Aadmi Party Common Man Political Cartoon published on AAP website 10 February 2015

The rise of the AAP’s Arvind Kejriwal, Delhi’s new Chief Minister and former tax inspector provide important insights into the nature of politics at the grassroots level in India.  On the one hand, ‘pro-poor polices and clean government’ is the narrative for the ‘common man.’  Politicians functioning as intermediaries with the state acquire influence and amass political capital (Krishna, 2012).  On the other hand, a great deal of hard work is required to mobilize non-caste based political entrepreneurs who can deliver economic benefits and provide avenues for greater political participation (Krishna, 2012).  From this vantage point, it is imperative that the ruling party remain focused on redistributing wealth from the more advantaged to the less advantaged.

The Challenge for Economic Reforms 

In October 1929 Sir Basil Blackett characterized political unrest in India as an economic phenomenon of the middle class, the “outcome of discontent and maladjustment” (Foreign Affairs, October 1929).   Today, the challenge for economic reforms in India is inclusive growth.  Social unrest and protests similarly runs deep in resource-rich areas of central and eastern India, where rapid economic growth has been accompanied by rapidly growing inequality (HRW, World Report: 2012).

Prime Minister Narendra Modi swept to power with the biggest national election victory in three decades, promising to revitalize India’s economy, fix governance and push through reform legislation by executive decree.  However, economics for the common man is systematic.  The strategies and processes that create, break down, and recreate social coalitions in the party system require calculated tactical alliances (Swamy, 2012).   Institutions in the economic system must distribute rights and realize solutions.  When these transaction are taken into account, it turns out that the existence of firms, the structure of the financial system and even fundamental features of the legal system can be given a relatively simple explanation (see Coase, 1960).

BRICS to Discuss Creating it’s Own Rating Agency

BRICSBRICS experts will meet in March to discuss the idea of establishing an independent credit rating agency announced Brazilian Ambassador to Russia Jose Vallim Antonio Guerreiro.  The agency would become an alternative to the ‘big three’ firms: Standard and Poor’s (S&P), Moody’s, and Fitch Group.

The BRIC [Brazil, Russia, India and China] idea was first conceived in 2001 by Goldman Sachs as part of an economic modeling exercise to forecast global economic trends over the next half century; the acronym BRIC was first used in 2001 by Goldman Sachs in their Global Economics Paper No. 66, “The World Needs Better Economic BRICs”.

Today, their collective contribution (which includes South Africa) to global economic growth over the last decade has reached 50%, which makes this group of states the leading power in global economic development.   In addition, BRICS accounted for approximately 11% of global annual foreign direct investment (FDI) flows in 2012 (US$465 billion); and 17% of world trade with combined foreign reserves estimated at US$4 trillion.

“We may need to look for alternative indicators and broad approaches to assess the ‘health’ of economies,” said Ambassador Guerreiro. “I do not believe that the new agency will be something to resist the existing institutions.  They do their job, and certainly, there is a demand for their services.  But it is possible that the BRICS countries will elaborate a different approach”  (Office Group, SCO BRICS, Ufa 2015).

The challenge of course, is how the procedures of existing rating agencies can be applied more fairly to all economies.  The credit rating firm Standard & Poor’s will pay $1.5 billion to resolve a collection of lawsuits over its ratings on mortgage securities that soured in the run-up to the 2008 financial crisis, concluding one of the U.S. government’s most ambitious cases tied to the housing collapse.  The settlement comes after more than two years of litigation as S&P tried to beat back allegations that it issued overly positive ratings in order to win more business (Reuters, 2015).

Incentivizing Trade and Investment

The U.S.-India Business Council (USIBC) hosted President Barack Obama and Prime Minister Narendra Modi for a first-ever joint address to the U.S. and Indian business communities on Monday, January 26 in New Delhi along with the Government of India’s Department of Industrial Policy & Promotion (DIPP), the Confederation of Indian Industry (CII) and the Federation of Indian Chambers of Commerce & Industry (FICCI).