Labour in the Time of Corona

By Rahul Varman [1]

Back in the headlines
Even as we were getting used to a new set of technical terms and headlines, from the brand new name of the virus to social distancing to quarantine, suddenly there reappeared a word that we all assumed had receded for ever from the front page, namely, labour.

When is the last that we heard of ‘labour’ attracting the headlines and the attention of the elite commentariat on our pages and screens? All this while we have been hearing about the aam aadmi, about Hindus or Muslims, Dalits or Brahmins, women or  men, but we thought ‘labour’ as a category was a thing of the past. Somehow it was taken for granted that 21^st century capitalism, with its entire production machine, can work without labour, or labourers could be pushed to remote places in China and elsewhere, placed on the margins of the whole system, made invisible like Mr. India. When have you last met someone who holds the labour beat in any of the media conglomerates, a labour-related function in the corporate sector, or a job learning and teaching about labour in the academia? At best labourers were some numbers, with employment going up according to the State agencies, going down according to the critiques, so many employed in this or that industry, but who cared; anyway there was too much population!

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Underestimating GDP Loss Due to the Lockdown, and Thereby Understating the Need for Additional Government Spending

Government officials stick to the version that national income will grow in 2020-21, even bizarrely claiming that it will grow by 1-2 per cent in the April-June quarter, two-thirds of which period will have been under the lockdown. It is now amply clear to any real-world observer that the economy will not grow in 2020-21, but shrink; the question is to assess: by how much. This assessment may be useful in order to gauge the extent of suffering of people and the damage to the nation’s productive capacity, and accordingly to assess how much the Government should spend to alleviate that suffering and revive productive capacity.

Why does the Government persist in unreal optimistic predictions of growth? Because it carries out the above two steps backwards: it first assesses how much it can spend without angering foreign investors, then understates the economic loss so as to justify such a low increase in Government expenditure. Since the Government has decided (in the economic packages of March 27 and May 12) to make only a tiny increase in expenditure, its official economists must claim that GDP growth will remain positive, only slowing in one quarter, followed by a rapid recovery to earlier levels.

The Prime Minister’s speech of May 12
On May 12, the Prime Minister announced what he called a Rs 20 lakh crore (Rs 20 trillion) package, amounting to 10 per cent of GDP. At first glance, the figure seems huge. The media have by and large swallowed the Government claims about the size of the package, and inundated us with details of sundry schemes and slogans.

The package, however, turns out to be empty. For three days the Finance Minister has held press conferences reading out laundry lists of assorted schemes, virtually devoid of actual Government expenditure. There is little point in our discussing the details; they merely confirm that the Government’s response to the biggest economic crisis in post-1947 India will rank among the most meagre in the world. Instead of spending in order to provide services and to compensate people for the effects of the lockdown, most of the measures announced relate to making more credit available to different sections (which will flow to big business, if the past is any guide). The burden of even such paltry measures has thus been thrown onto the shoulders of the public sector banks. However, even before Covid-19, big businesses were not interested in investing, for lack of demand. Banks have no interest in lending to medium, small and micro units. And for small and micro-units, loans are no solution for the devastating loss suffered due to the lockdown: this is akin to knocking down someone’s home and offering her/him a loan to re-construct it.

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IV. What Explains the Government’s Refusal to Spend?

In the previous instalment of this article, we had ended by saying,

No doubt the Government will come forward with another stimulus package shortly, but it is hesitating and dragging its feet. Why? We address this question below.

The second stimulus package has since been announced on May 12. While it talks of a sum of 10 per cent of GDP, it turns out to be virtually devoid of expenditure by the Government. At best there are some schemes for extending credit to different sections, which will be of little use in addressing the unprecedented depression we are now witnessing.

In order to understand the Government’s policy, let us look at three questions:

(i) Why does the Government fear increasing its expenditure even in the face of an unprecedented crisis?

(ii) What is the Government’s alternative growth strategy, since it has ruled out any significant increase in spending?

(iii) What accounts for the political confidence of the Government in embarking on a policy which has caused such upheaval and may spark mass unrest?

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The Prime Minister’s ‘Self-Reliance’ Speech, and Its Real Implications

In our previous post (May 10), part of a longer article, we noted the extraordinary miserliness of the Government’s economic package in the wake of Covid-19 – officially 0.8 per cent of GDP, in reality perhaps half that. We said: “No doubt the Government will come forward with another stimulus package shortly, but it is hesitating and dragging its feet.” The Government had on May 8 announced plans to borrow an additional Rs 4 lakh crore, or 2 per cent of GDP, beyond its earlier estimates. This indicated that the additional spending would be in the range of 2 per cent of GDP.

However, in his speech of May 12, the Prime Minister announced what seems, on the face of it, to be a big economic package:

The economic package that is being announced today, if added, comes to around Rs. 20 lakh crores. This package is about 10 percent of India’s GDP. With this various sections of the country and those linked to economic system will get support and strength of 20 lakh crore rupees.

In a speech of over 2,000 words, the Prime Minister chose to provide no details of this package. This vagueness ensured that the night’s news and the following day’s headlines would be dominated by the figure of Rs 20 lakh crore, or 10 per cent of GDP, without the slightest notion of what it means. There is no hint of the respective shares within this of additional spending, re-labeling of existing spending, RBI liquidity measures, credit guarantees, and so on. Apparently all that is to be revealed by the Finance Minister over the next few days:

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III. The Impact of the Lockdown in India’s Conditions

The Indian rulers’ response to Covid-19 has been to ‘lock down’ the entire country for at least 54 days (or more, if the lockdown is extended on May 17). This is an action without historical parallel. It finds few comparisons globally even in these times of a ‘pandemic’; the New York Times called India’s lockdown “the largest and one of the most severe anywhere”. It has been backed by punitive measures, left to the imaginative coercion of local authorities and the police in different regions.

As Jean Dreze notes, the word ‘lockdown’ does not capture what India has done: “it’s more like a curfew, or an attempted curfew.” A staggering 114 million lost their jobs/livelihoods in the month of April 2020. Locked out of their jobs, with negligible savings after months of labour, millions tried to return to their villages, many of them walking hundreds of kilometres, some of them attacked by the police on the way. Those who were forced to stay back in the cities were trapped in slum rooms or tiny tenements, starving, many forced to line up for food hand-outs. Agricultural supply chains were disrupted, agricultural markets stopped functioning and cultivators made huge losses on perishable crops. More than 5 lakh trucks were reported to be stalled at state borders. All this, and many other aspects, are now well-known.

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II. The Crisis before Covid-19

The present economic calamity has overshadowed the immediately preceding one. But even to understand the present situation, we need to remind ourselves of the situation prevailing before Covid-19.

By 2017-18 itself, Government surveys were revealing a dire economic situation. The following two years, 2018-20, showed even further deterioration. These matters are usually discussed in an abstract way, as relating to something called ‘the economy’, but it is important to see in them the lives of the people. We will look at employment, poverty, wages, and consumption. We will also touch on the state of industry and investment, as these indicate the state of employment and prospects for the future.

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I. The Choice Posed Once More by the Covid-19 Crisis

Continuing Subordination to Global Finance, or Taking a Course of Democratic National Development

Summary 

This article makes the following points.

1. Even before the advent of Covid-19, India’s economy was in a depression. The condition of vast masses of people, particularly those in the unorganised sector, was grave.

2. In its response to Covid-19, the Government imposed the most stringent lockdown measures in the world. Given the character of India’s economy, this had a particularly severe impact on vast masses of people.

3. At the same time, the Government’s spending to cushion the impact of these measures on the people has been vanishingly small. In comparison with other countries in the world, the Indian government has committed among the least additional spending (as a percentage of GDP). While some further expenditures will no doubt be forthcoming in the coming weeks and months, it is already clear that, taken together, they will be abysmally low. As a percentage of GDP, the maximum expansion of spending being talked of is much below the expansion of India’s fiscal deficit in the wake of the Great Financial Crisis of 2008; whereas the crisis in the real economy now is far, far greater than it was in 2008-09.

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Opinions Column: Regrets, Lies and Truths

By Dr. Annavajhula J.C. Bose
Department of Economics, SRCC (University of Delhi)

(Reprinted from the Unravel Economics blog)

Suppose you are serious about understanding the economy and changing its functioning towards greater social well-being. And so, you have made up your mind to pursue economics after completing your school education.

You might regret later that you had innocently wasted your precious time doing economics as nothing but mathematics of maximization. Peter Radford sums up this regret thus: “Too many people are wasting far too much time talking about economists as if they study the economy. They don’t. They really and truly don’t…economists had been steadfastly denying fact, ignoring reality, and living in a wonderland of their own creation. Economists study economics. And economics is not the economy. It is a self-contained set of ideas, models, theories, mathematical intricacies, and axioms, that are designed to provide exciting intellectual sport for those so inclined to busy themselves with such activity…Another attribute of economists is their portrayal of the dispassionate observer of society gravely describing the ‘deep laws’ humans are foolish to push back against. They project the air of sober analysis. They attempt to inject a discipline and rigor into the messy pool of human interaction. They want us to believe that what they describe is inevitable. So they take upon themselves to act as caretakers of what ought to be…So: my advice is to study the economy by taking classes in politics, sociology, philosophy, business or organizational theory. Get steeped in information theory. Build those agent based models. Go and talk to workers, shopkeepers, and all the other people in the real world. But stay away from economics. Especially if you’re serious about the economy.”

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May Day 2020 and the Creators of Wealth

It is very unusual for Narendra Modi to praise his political rivals, but on April 27, during his video conference with chief ministers of different states, he lavished praise on the Congress chief minister of Rajasthan. According to news reports, he said:

Every state has some party in power, which realises that it has a chance to take the country forward…. Hamein reform bhi karna hai. Agar reform karne ki disha mein rajya initiative leta hai,aap dekhiye yeh sankat ko hum bohot bade avsar main palat sakte hain. Main Ashok Gehlotji ko badhai dunga. Unhone kai initiative liye. Unhone labour ke liye samay seema ki bhi badhotri ki hai. Theek hai alochana thodi hue hogi, lekin Rajasthan ne disha dikhayi hai (We have to carry out reforms too. If a state takes an initiative for reform, we can turn this crisis into a big opportunity. I want to congratulate Ashok Gehlot. He has taken several initiatives. He has increased the time limit for working hours as well. No doubt there must have been some criticism of this, but Rajasthan has shown the way).[1]

The Prime Minister was apparently referring to the Rajasthan government’s decision to increase working time in factories from 8 hours to 12 hours; he urged other states to follow suit. Indeed other states have already joined in this drive to extend working hours: Gujarat, Madhya Pradesh, Haryana, Himachal Pradesh, and Punjab have amended the Factories Act of 1948 through executive orders to effect this change. In several of these states, the overtime hours will not be paid at higher rates.

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