Sunday, June 23, 2013

What's Wrong With the Indian Rupee?

The Indian rupee has fallen to its all time low against the US dollar in the foreign exchange market last week after a double whammy blow, first from the RBI, and then the US Federal Reserve FOMC policy announcement on Thursday. The Indian finance minster is urging everyone not to panic and worry much about the weakening rupee, but there are reasons to worry. In my latest economic report I discuss the causes of rupee's depreciation against other foreign currencies, particularly the US dollar.     


Sunday, June 9, 2013

Individual vs. The State

I have just finished reading very important work of Columbia sociology professor, Robert Nisbet, The Quest for Community. This work is important because it draws our attention towards some major flaws in the philosophy of classical liberals and their Individualism. Individualism is the major philosophy rivaling the philosophy of collectivism. Individualists are pitched in a fierce battle against the collective powers of centralized States. The battle is between 'Freedom' on the one side and 'Political Power' on the other side. This book is divided into three parts: 1) community and the problem of order, 2) the state and community, and 3) community and the order of freedom.

Although this book was written and published in 1953, the thesis which Nisbet developed is still relevant today. I think it is more relevant today than it was in his time. Nisbet's warning against the rising power of the centralized State is haunting us today more than ever. This is the reason why it is urgent that we understand Nisbet's analysis.

Nisbet begins his work by bringing the problem of lone isolated individual in today's societies in clear focus. He discusses the problem of individual alienation. Every now and then we hear from the social scientists - e.g., see this 2013 farewell speech of Dr. Donald Kagan, Sterling Professor of Classics and History at Yale University -  that our societies are in a moral decay, the voluntary community associations like the family, the extended local community, religious institutions like Church/Temple/Mosques etc.,  various friendly societies, professional groups, labor unions etc., have lost their authority and function in individuals' lives. These voluntary associations are important because human beings are social animals, and they derive the meaning of their lives, moral values, different functions etc., from their associations with other human beings in the society. Social nature of human beings demands that they are tied to some form of associations. Individual uses these associations to fulfill various ends of their lives, and without these associations he becomes aimless, rootless. He loses meaning of his life; he loses his moral values. He becomes depressed, frustrated, anxious, insecure and vulnerable. We can clearly observe these signs of distress amongst individuals in our societies, especially in urban areas. Here is Nisbet in his own words: 
Our present crisis lies in the fact that whereas the small traditional associations, founded upon kinship, faith or locality, are still expected to communicate to individuals the principal moral ends and psychological gratifications of society, they have manifestly become detached from positions of functional relevance to the larger economic and political decisions of our society. Family, local community, church, and the whole network of informal interpersonal relationships have ceased to play a determining role in our institutional systems of mutual aid, welfare, education, recreation, and economic production and distribution. (p. 47)
And these problems are not only limited to the western world, but they are present in East also because of the influence of the western culture during the colonization period. Here is Nisbet:
The general condition I am describing in Western society can be compared usefully with social changes taking place in many of the native cultures that have come under the impact of Western civilization. A large volume of anthropological work testifies to the incidence, in such areas as East Africa, India, China, and Burma, of processes of social dislocation and moral insecurity. (p. 47)
Nisbet cites the case of India where these problems began during his time and since then have accelerated. Here is a small excerpt:
The beginning of the welfare state in India, for example, along with the creation of new private agencies of educational, charitable and religious activity, have led inevitably to the preemption of functions formerly resident (in however meager or debased manner) in the kinship and caste groups. (p. 49.) (see pp., 47-51 for full analysis because Nisbet doesn't support the oppressive caste system).  
With this problem of isolated individuals, we also see another problem of rising power of the centralized State in today's world. The governments around the world are becoming increasingly totalitarian and corrupt e.g, the recent revelations of illegal spying on individual citizens by by the US government, corruption scandals in India, riots in Sweden, Turkey etc., degeneration of Greece in a fourth world country, high unemployment rate amongst youth in most EU countries, protests in Singapore, Chinese government censorship, burning Iraq, Afghanistan, Syria and the middle east etc. etc. Why these two phenomena of isolated individuals and the powerful centralized State is showing up side by side in today's world? Nisbet provides the answer in his book. He says, that the rationalist individualist philosophy of the eighteenth and nineteenth century liberals is to be blame for the problem of isolated individuals:
These philosophers saw in the terror not merely fortuitous consequence of war and tyrannic ambition but the inevitable culmination of the ideas contained in the rationalistic individualism of the Enlightenment. In their view, the combination of social atomism and political power, which the revolution came to represent, preceded ineluctably from a view of society that centered on the individual and his imaginary rights at the expense of the true memberships and relationships of society. (p. 20)
By almost all English liberals of the nineteenth century, freedom was conceived not merely in terms of immunities from the powers of political government but, more significantly, in terms of the necessity of man's release from custom, tradition, and from local groups of every kind. Freedom was held to lie in emancipation from association, not within association. (p. 211)
With this rising philosophy of rationalist individualism, the centralized State was also rising side by side. It viewed these other voluntary associations as its competitor and decided to destroy them. The State steadily started to usurp the traditional functions of these associations in the name of helping the Individual free from his traditional ties. It is Nisbet's main thesis that the destruction of traditional voluntary associations is the work of the centralized State:
It is the argument of this book that the ominous preoccupation with community revealed by modern thought and mass behavior is a manifestation of certain profound dislocations in the primary associative areas of society, dislocations that have been created to a great extent by the structure of the Western political State. (p. 41)    
As the individual was isolated from his voluntary associations, he started looking for some other associations which can give moral, spiritual, economic and social meaning to his life. Because all other voluntary associations were mostly destroyed by the State, he was forced to give his allegience to the authority of the centralized State, which was the only strong institution last standing. Thus by dismantling the voluntary associations and usurping their authority and vital functions, the State was able to enslave the humanity. The free individual inevitable became slave citizen of the State. This insight is profound. In the zeal of freeing the individual, we should not make him cut off from his traditional ties with family, local community, religious institution etc. Human beings are social animals and they need social support. And when his traditional support is destroyed in the name of freedom, he is trapped in the powerful hands of the centralized State. As Nisbet, citing J N. Figgis, said, more and more it is clear that the mere individual's freedom against an omnipotent State may be no better than slavery  (p.236). The individualistic philosophy of past has thus directly resulted into the creation of the centralized totalitarian State of present!

What to do to solve these twin problems?

Nisbet's answer is to reverse this process of centralization with the new Laissez Faire system of decentralization of power and authority where the Individual is not just an atomized isolated individual but part of his voluntary social groups like the family, local community, religious institution etc. Here is Nisbet again:
We need a Laissez Faire which will hold fast to the ends of autonomy and freedom of choice; one that will begin not with the imaginary, abstract individual but with the personalities of human beings as they are actually given to us in association. (p. 256)
Nisbet asks us to create diversity of culture, plurality of association and, most importantly, division of authority. He cites Montesquieu, who said, the only safeguard against power is rival power, and, Lord Action, who said, liberty depends upon the division of power. He says, freedom lies in the interstice of authority. These competing authorities will keep each others' power in check because if they become too totalitarian, then, the individuals will always have a choice of migrating under an authority which respects his rights to life, liberty and property. 

Nisbet pins his hope for this change on the liberal democracy and a benevolent State which allows this competing voluntary associations to flourish, but, as the history shows, he is mistaken in this hope. We have seen time and again, that wherever the State exists, its tendency is to grow its political power. The idea of a minimal State is a myth. As long as the State is in existence, it won't allow any other competing authority to come into existence. This is the reason why it is necessary to start building voluntary communities on our own without waiting for the State to do that work for us. I know this task is not easy, but not impossible also because the State itself is going through a crisis situation, mainly economic but also social, cultural etc., in present. Any totalitarian exploitative system has its own natural limits, and the moment it breaches those limits, its demise is inevitable. As, hopefully, the State will weaken in future, other voluntary associations will have a chance to flourish again. Decentralization of authority should be our goal if we want to free the humanity from the hands of the centralized totalitarian democratic State. Change is the law of nature, and no system remains in place forever. The State is also not going to be with us forever. It will become history one day.