Columns/Op-Eds

The end of Davos man: West-led globalisation has reached its limits, new champions for it are needed

February 7, 2017, Times of India , Samir Saran and Ashok Malik

Original link is here

President Donald Trump’s initial policy pronouncements on migration and his increasingly evident determination for creating jobs in America itself are new markers in this post-globalisation era. They end an epoch that began 25 years ago today, when the Maastricht Treaty was signed, creating the European Union. Three years later WTO was inaugurated. By the turn of the century, Project Globalisation had gained unstoppable momentum courtesy the internet.

The vocabulary and ethic of globalisation was written in the liberal democracies of the West. There were some foundational assumptions: that as economies opened to trade, incomes would rise, consumer tastes would converge, and so would values and beliefs. The Davos Man (or Woman), as it were, would become the universal exemplar or at least aspiration. This made a whole generation of politicians, scholars, trade economists and stand-up commentators from the West robust evangelists for globalisation.

As is now obvious after Brexit, the revolt among European nationalities and the Trump mandate – several of those suppositions were flimsy. Additionally, the economic success of globalisation made it easy and convenient to ignore fundamental paradoxes in the international system. For instance, since the end of the Cold War it had been apparent that the multilateral order desperately needed updating. It had been crafted in the aftermath of World War I and metamorphosed into the United Nations 20 years later. Much of its institutional design was no more relevant.

Heady narratives enhanced the allure of globalisation and allowed for papering over many such discrepancies. They also obscured domestic tensions within societies and communities: between coastal and heartland America or rich northern Europe and depressed southern Europe. Since the financial crisis of 2008, the bottom has been knocked out of the West-driven globalisation model. Absent its economic deliverables, it is no longer able to stave off the challenge from societal tensions, political ghosts, institutional gaps and stakeholder inequities. This is happening both internationally and within nations. A “domestic South” is mirroring the grievances of a “global South”.

US elites, hitherto evangelists of globalisation, are numbed by the thought that the sun is setting on the “American century”. Its little people, on the other hand, are rudely rejecting the notion that globalisation benefits all. While rising inequality in emerging economies is widely commented upon, it is often ignored that the current generation in OECD countries will be the first in the modern age to have a standard of living worse than their parents. This has caused a new and sometimes irrational aggregation of grievances. It has resulted in, for instance, the paradox of down-at-heel Americans empathising with a gold-plated Trump.

Gradually, every pillar of the Atlantic System – American hegemony as a security guarantor of last resort; industrial capitalism; liberal trade and free markets; the irrevocable retreat of the state from the citizen’s economic life and well-being – is crumbling. Yet, the West is not alone. The industrial order of the past 150 years, with its stress on big manufacturing and relentless export, is being overtaken by the digital age. This has placed a question mark on the Chinese model, as currently practised. Services and innovation are the rising currency, not shop floors and industrial production. It is these factors that will drive growth in India and Africa.

Having said that, India’s economic transformation, China’s merger with the global political mainstream and Africa’s promise as the final frontier all require the liberal trading order to retain its essential vibrancy and osmosis. This is not necessarily due to any ideological belief in the inevitable universalisation of liberal values, but simply because of utilitarian benefits: market access, capital and technology needs. As such, the Indian state and Indian enterprise can live with, indeed embrace, the pressing reality of transactional capitalism. They are not dogmatically opposed to it, unlike free-trade ayatollahs who never face voters or meet real people.

In its own way, the past 20-25 years have written internationalism into India’s political DNA. In theory, it offers a halfway house and a proposition to moderate both the isolationist impulses of Middle America as well as the overreach of Brussels and the Eurocrats. In attempting this, India is only doing itself a favour. For its economic growth and well-being it needs partner countries, from the European nations to Japan to of course the US, to retain a certain buy-in to the open trading system.

The quest to reimagine the ethic and vocabulary of globalisation is not India’s alone. In January, President Xi Jinping donned the mantle of benefactor of the World Economic Forum in Davos and made a case for free trade (and China’s unfettered access to Western markets). On the same day, Prime Minister Narendra Modi opened the Raisina Dialogue in New Delhi by stating baldly: “Globally connected societies, digital opportunities, technology shifts, knowledge boom and innovation are leading the march of humanity … But walls within nations, a sentiment against trade and migration, and rising parochial and protectionist attitudes across the globe are also in stark evidence. The result: globalisation gains are at risk and economic gains are no longer easy to come by.”

The globalisation narrative is being reimagined by the leaders of both China and India. This has economic implications, but comes with political baggage too – for only one of these narratives is rooted in liberal democratic values. It is for India to promote its narrative, as much as for the West – even the transactional West – to make its choices.

Samir Saran is vice-president and Ashok Malik is distinguished fellow at the Observer Research Foundation

Moving towards a secure digital economy

The velocity of digitisation and technology adoption must necessitate a response different from what was the norm in the ‘public sector era’

by Samir Saran and Vivan Sharan, Live Mint, Jan 26, 2017

Original link is here

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A wider adoption of digital payments will invariably change the dimensions of risks, crime and security as well. Photo: Pradeep Gaur/Mint


Even as incessant political bickering is polarizing opinion on demonetisation, India is making a significant transition to a digital payments ecosystem. This project endeavours to breach the urban-rural divide, geographical exclusions of the real world, and income criteria that privileged only a few with access to certain private and public services. This new digital payments ecosystem is brutal in its attempt to alter the way India transacts, trades and is taxed.

A wider adoption of digital payments will invariably change the dimensions of risks, crime and security as well. If pickpockets were a common menace some decades ago, cybercriminals may dominate conversations in the days ahead as they eye digital and online transactions. While the “pickpocket” had to select a relatively “fat target” to make the effort and risk worthwhile, the cyber thief will have a low-risk environment (lack of forensic capabilities, human capacities and attribution challenges) and an expansive reach of technology that will make even “petty pickings” attractive. And although cybercrime will affect us all, it will harm the poor disproportionately. It could ravage the small savings of many, deprive them of their meagre means and, most importantly, result in erosion of trust in the financial ecosystem currently being built. It is, therefore, important that the government pay heed to small fraud.

An early warning of this was provided by the frisson of panic that followed the cautionary message from the newly launched Bharat Interface for Money application (BHIM app) on 4 January 2017: “Users please beware: Decline all unknown payment requests you may get! We will work on an update, which will allow you to report spam.” This response is inefficient and leaves the ecosystem vulnerable to malicious intent.

Governments around the world and here in India must respond to this new dimension, where “petty cash is big money” and digital pickpockets pose a range of threats to individuals, institutions and economic stability itself. Most governments have left themselves with little time to create the requisite mitigation capabilities. The velocity of digitization and technology adoption must necessitate a response from policymakers different from what was the norm in the “public sector era”, where Centrally controlled banks and enterprises offered a modicum of stability, privacy, and security (with less efficiency). To achieve this, a comprehensive approach for securing the digital ecosystem must be devised and some actions must be taken immediately.

First, there are a multiplicity of stakeholders operating networks and tools that pose varying degrees of risk. This, in turn, demands differentiated security responses. These include the Reserve Bank of India (RBI)-run National Electronic Funds Transfer (Neft) and Real Time Gross Settlement (RTGS), the National Payment Corporation of India’s (NPCI’s) Immediate Payment Service (IMPS) on which the Unified Payments Interface (UPI) currently operates, traditional card networks, mobile payments solutions, various banking apps. In a report released in December 2016, the Union ministry of finance’s committee on digital payments suggested a hierarchical approach based on the level of “systemic risk” posed by different tools and networks. This must form the design basis going forward.

Second, while industry is consulted by expert committees such as the one referenced above, an inclusive multi-stakeholder consultative process must become the norm for policymaking itself, to avoid arbitrariness. This can be done by instituting multi-stakeholder consultations that are transparent and inclusive. This is the model India has agreed is best suited to govern the Internet internationally, and it’s time to adopt consonant processes at home.

Third, while the “mobile” is being hailed as a replacement for physical wallets as well as a proof of identity through its widespread use in second-factor authentication of digital payments, government and users should be circumspect about the risks involved. For instance, there is evidence to suggest that distributed denial-of-service (DDoS) attacks—in which a multitude of compromised systems attack a single target, causing denial of service for users of the targeted system—are increasingly targeting the applications layer rather than the network layer of the Internet. In layman terms this means a sophisticated mode of cybercrime is being unleashed on unsuspecting users of mobile applications and popular software.

Mature hardware-based solutions, such as tamper-proof Universal Integrated Circuit Cards and Embedded Secure Elements, are being tested against the latest forms of cyberattack. Software-based solutions such as Host Card Emulation are also relatively secure but require upgrades through the cloud, placing large data demands on the user and testing the service capabilities of the issuer.

Globally payment solutions that have been able to integrate hardware- and software-based security exist, but domestic mobile payments providers are relying largely on software-based security solutions. And while the Indian government’s Computer Emergency Response Team, RBI and NPCI are undertaking security audits of payment solutions, it is important that users be given standardized information to make informed choices, particularly when the digital adoption drive is at its height.

Lastly, it may be useful for the government to think of the digital payments ecosystem, now anchored by the NPCI, as analogous to the Internet. And much like the Internet, the National Financial Switch (the infrastructure backbone of all Indian ATMs, operated by the NPCI) must acquire robust redundancies offered by private-sector partnerships in order not to be a vulnerable single point of failure—which can potentially be compromised by self-styled “legions” of hackers. The NPCI should be managed through multi-stakeholder groups that can help with standard-setting, and can ensure that the payments ecosystem serves the common citizen, making even a small transaction online.

Samir Saran and Vivan Sharan are, respectively, vice-president at the Observer Research Foundation and founding partner at the Koan Advisory Group.

 

 

 

 

Rethinking the Future of Asia: Moving Beyond U.S. Dominance

Asia needs to discover a bridge between multipolarity and multilateralism. India could play an important role as a “bridge power.”

By and , December 11, 2016
Original link is here

Asia will shape the 21st century as much as the Atlantic consensus shaped the 20th century, or Europe the 19th. But to get there, Asia has to pursue a new project, one that begins to create a political Asia.

Like the Atlantic order flourished on the basis of the Bretton Woods and UN systems, Asia needs a reordering of the global landscape. We need a new management, a new board of directors and a new security architecture.

Any usable platforms?

At the very least, this emerging Asian system needs to bring three resident actors (China, Japan and India) and two regional stakeholders (the United States and Russia) to the same table. Other sub-regional influencers should be drawn in as well.

Could the East Asia Summit, of which all these countries are members, serve as a possible platform for such an architecture? Not quite. The East Asia Summit cannot really address the concerns of Central and West Asia.

Alternatively, Ii an expanded mandate for the G20 (seven Asian countries, two more if one were to include Turkey and Russia) the answer? Or do we need to think about a greenfield institution?

Three possibilities

Three possibilities — distinct, but not mutually exclusive — emerge. At the commencement of the 21st century, Asia’s politics resembles the fraught, rudderless multipolarity of the beginning of the 20th.

It took 50 years and two world wars for that reckless order to settle into a multilateral equilibrium.

Asia has to do it better, faster and without the external “stimulus” of a “Great War.” As the dowager power, the United States can incubate new institutional arrangements in Asia, playing Greece to emergent Asia’s Rome, to borrow from Harold Macmillan’s description of the post-war relationship between Britain and the U.S.

Option 1: India as the bridge power

Should the United States choose to bequeath the liberal international order to Asian powers, India will be the heir-apparent.

However, India would not play the role of a great power, but simply that of a “bridge power.” Asia is too fractious and politically vibrant to be managed by one entity.

India is in a unique and catalytic position, with its ability to singularly span the geographic and ideological length of the continent.

But for that to become a distinct possibility, two variables will need to be determined:

1. Can the US find it within itself to incubate an order in Asia that may in the future not afford it the pride of place like the trans-Atlantic system?

2. Can India get its act together and utilize the opportunity that it has right before it to become the inheritor of a liberal Asia?

Option 2: An Asian “Concert of Nations

The second possibility for a future Asian order is that it resembles the 19th century Concert of Europe. That would mean opting for an unstable but necessary political coalition of major powers on the continent.

The practical result would be that the “Big Eight” in Asia (China, India Japan, Saudi Arabia, Iran, Australia, Russia and the United States of America) would all be locked in a marriage of convenience (one hopes).

To be sure, aligning their disparate interests for the greater cause of shared governance, in one way or another, is a desirable outcome.

Difficult as it would be to predict the contours of this system, it would likely be focused on preventing shocks to “core” governance functions in Asia.

These include the preservation of the financial system, territorial and political sovereignties and inter-dependent security arrangements.

Given that each major player in this system would likely see this merely as an ad hoc mechanism, there is a potential major downside: Its chances of devolving into a debilitating bilateral or multi-front conflict for superiority would be high — very much like the (European) Concert of Nations eventually that gave way to the First World War.

Option 3: Sidelining the U.S.?

A third possibility could see the emergence of an Asian political architecture that does not involve the United States. This system — or more precisely, a universe of subsystems — would see the regional economic and security alliances take a prominent role in managing their areas of interest.

As a consequence, institutions like ASEAN, the Shanghai Cooperation Organization, the AIIB, the Gulf Cooperation Council and the South Asian Association of Regional Cooperation would become the “hubs” of governance.

The United States, for its part, would remain only distantly engaged with these sub-systems. It would be neither invested in their continuity nor be part of its membership.

Which outcome?

Rather than crystal gazing these three possibilities, our objective is to gauge the political underpinnings behind an emerging Asian architecture. Very simply, the question is: Will it be defined by contestation or cooperation?

Quite a bit will depend on the stance of the United States. Can the U.S. incubate a political order that is largely similar to existing multilateral systems? Or will the cost of creating disruptive institutions keep Asian countries from buying into them?

Beyond the U.S. dimension, can any credible pan-Asian governance institution successfully absorb — or at the very least acknowledge — the cultural, economic and social differences that characterize the continent?

Conclusion

The quest for the Asian century is not about finding the Holy Grail of shared governance, but diagnosing the right means to reach a sustainable and inclusive platform.

Rethinking the Future of Asia: Moving Beyond U.S. Dominance – The Globalist

About Ashok Malik

Ashok Malik is a Distinguished Fellow, and Head of ORF’s Neighbourhood Regional Studies Initiative.

About Samir Saran

Samir Saran is Vice President of the Observer Research Foundation.

India’s perspective on post-Paris climate negotiations

ORF, Expert Speak, Nov 8, 2016

Original link is here

Fletcher Forum: How do you propose an amenable bridge between global responsibilities of combatting the legacy of historic emissions from OECD countries versus controlling increases in current (and future) emissions of BRICS nations?

Samir Saran: The pre-Paris paradigm of “strict” differentiation with regards to mitigation responsibilities has now evolved into that of “universal action.”

However, the induction of the term “climate justice” still attempts to ensure the existence of a bridge between global historical responsibilities and the future emissions of developing and emerging economies. Climate justice, defined as the recognition of equitable rights to use the atmospheric global commons, is weighed in terms of mitigation and adaptation costs. Any effort to redistribute the emissions between the OECD and the global south will need to account for the cost of differential impacts caused by reduction or avoidance of emissions. In many ways, climate justice takes forward the moral arguments of the CBDR (Common But Differentiated Responsibility) and Equity debate while discarding the rigid politics that have evolved around these concepts and made agreements impossible.

That being said, there are four distinct yet overlapping future potentials of “just” climate action:

One, developed countries will have to achieve their self-designed pledges on climate finance and support for technology transfer. Greater political leadership and action from the global north will encourage developing countries to walk an extra mile in meeting their Nationally Determined Contributions (NDCs). For instance, Indian and Brazilian NDCs have mentioned additional commitment to climate action provisional to availability of finance and technologies from the industrialised economies.

Second, a global set of rules could be developed to tax or regulate the higher emissions by corporations, institutions, and other parties across the globe, irrespective of their country’s development status. This type of normative framework must be universally agreed upon. All corporations above a certain size in certain sectors and irrespective of their geographical location must adhere to a framework of efficiency and climate awareness.

Thirdly, technology transfer from the west won’t be enough to strengthen climate action to the level that is required to limit global temperatures at two degrees or below two degrees Celsius. Indigenisation of technology innovation — both products and processes — will be critical to resolving the climate-development nexus. A more transparent knowledge sharing approach along with technology transfer will have to be put in place to support long-term climate resilience.

Fourth, “loss and damage” in the longer term must be operationalised. The Paris Agreement’s weak language regarding loss and damage, mainly the exclusion of a non-liability clause, was perhaps part of an effort to generate consensus on minimum level of commitment. Going forward, we can’t escape from setting an institutional apparatus to compensate for climate related losses that especially affect Small Island States, Least Developed Nations, and developing countries.

Global per capita emissions are negligible for India, but 13 of the 20 most polluted cities in the world are in India. What is your take on the environmental policies undertaken by some of the state governments? Do you feel there is sufficient political intent to address environmental concerns at the central level, particularly on issues like forest cover?

SS: Environmental policies alone cannot resolve India’s urbanisation challenge. There is an underlying structural and political issue, which gets veiled under the supposed “techno-managerial” clarification. A case in reference is the odd-even license plate scheme in Delhi aimed to decongest traffic and reduce air pollution. In the absence of robust infrastructure and comprehensive regulatory measures, the odd-even scheme hit a dead end. Lack of an efficient public transport system, misdirected notions of how the mega-city’s transport system should work, and the conception of the scheme itself, wherein the focus was on the number of vehicles on the road rather than the time they spent, are a few shortfalls that failed the broader intended impact of the odd-even scheme. But as I have written elsewhere, this scheme needs to be re-introduced accompanied by a slew of other measures including ‘congestion charge’, ban on diesel vehicles, rationing of vehicles per household and relooking at the notion of ‘home office’ which becomes increasingly an attractive option with communication technology and digital connectivity.

Such structural problems are mirrored by the water and waste management sector. Yamuna Action Plan I, II, and III, and the latest “Maili se Nirmal Yamuna Revitalisation” Project 2017 have endeavoured to clean one of India’s most polluted rivers. None so far have produced the desired results. This is a result of infrastructural shortcomings for waste disposal, derisory and fraudulent penalties and punishment for polluting, and growing waste generation. So we now have a situation where judicial and socio-environmental activism has maintained the pitch of the debate, but political deafness to the challenge is palpable.

How would you suggest enacting reforms in India’s overburdened and inefficient utilities or the coal sector?

SS: The Indian coal power sector is growing. In 2015–2016, coal production rose to 638 million tons (from 70 million tons in 1970s), and imports dropped by 43 percent from the previous year. The current government’s thrust on modern technologies combined with reforms in coal imports, auction, mining, extraction, and evacuation have started showing signs of sectoral improvement. However, an ambition to double coal production to 100 crores tons by 2020 will require massive improvement in the efficiency of both the product and process. Investments in research and development for clean coal technologies, improvements in boiler efficiency, and super critical technology are the lowest hanging fruits. Two aspects are critical in this sector from a climate perspective.

First, since OECD countries are neither investing in nor are mandated to develop coal technologies, the emerging economies will have to pick up the baton on research on mining technologies and boiler efficiencies. Second, every percentage gain in coal energy across the mine to power plant value chain will reduce Indian annual emissions equivalent to the entire annual emissions of some countries in Europe and elsewhere. This is a low hanging fruit that is not being bagged due to the evangelical anti-coal sentiment that is blind to its inevitable use in OECD countries and developing world.

There is much enthusiasm surrounding India’s focus on renewable energy — what lessons can India provide to other countries to develop their renewable energy sector?

SS: India’s renewable energy development trajectory presents a unique case. The country is endowed with an estimated 896 GW of renewable energy potential in the form of biomass, solar, wind, small hydro, and tidal. Besides this, the energy deficit in rural areas, increasing energy demands, and climate concerns have been the key drivers of renewable energy development in India.

To exploit this potential, India created a separate Ministry of New and Renewable Development, set national goals for biomass and solar generation, and made ambitious targets to increase the share of renewables in the total energy mix from 32 GW (2014) to 175 GW by 2022.

To provide further thrust to the sector, Prime Minister Modi along with France launched the International Solar Alliance in Paris in 2015. This group of 121 countries aim to mobilise one trillion dollars for solar investments by 2030 and improve access to solar technologies.

While it too early to present India as a successful case to learn lessons from, its vision to balance green growth along with the sovereign obligation to meet at least the lifeline energy needs of its population is an endeavour with no precedence. In a country of 400 million energy poor people, renewables offer only a fraction of a solution for energy security and economic growth. Yet, an impressive 175 GW target from renewables demonstrates the new ambition of India’s political leadership and the sense of responsibility towards global climate action. To put this ambition in perspective, India is seeking to install more renewable capacity in the next decade than the total capacity installed in Germany over multiple decades of industrialisation.

If India can pull this off, its model will be unique. India would be the first country in the world to move from a low-income society to a middle-income economy, driven significantly by renewable energy and climate conscious infrastructure. It would also be a model that is exportable to other countries similarly placed on growth ambitions and development priorities.

This interview originally appeared in The Fletcher Forum of International Affairs.

Why India should sign a free-trade deal with itself

World Economic Forum, Monday 3 October 2016,  in collaboration with Quartz.

Original link is here

High-rise residential towers under construction are pictured behind an old residential building in central Mumbai September 9, 2011.

Image: REUTERS/Vivek Prakash

India is currently in the midst of two large but different endeavours.

The first is to complete the unfinished agenda of the previous decade, providing the country with the modern infrastructure, rural amenities, social services and connectivity that any developed economy needs. And the second, the most ambitious of the two, is to create jobs, wealth and value to accommodate a young and aspiring population, eradicate poverty and boost GDP growth.

 

But these two projects are being undertaken at a time when global headwinds are deeply unfavourable. Today there are five hurdles that stand between India and its ambition to join the club of developed economies.

 

India’s challenges

 

The first is the advent of this new age where the open, free, and democratic global trading system has become a pale shadow of its previous self. The multilateral trading system—and the preference for this kind of model—has waned considerably. It is being replaced by free trade arrangements between smaller groups of countries and regions, where a handful of stakeholders are able to decide the terms of trade.

 

This is coupled with a stagnation in global financial flows, because of weak growth, and the growing disquiet over globalization, curiously enough, in the developed world. From the European Union to the United Kingdom to the United States, politicians are using globalization as a convenient culprit for all that ails domestic economies and societies.

 

It’s against this backdrop that India has to discover new markets, new sources of funding and new trading arrangements.

 

Second, the advance of technology and the expansion of the digital economy, along with the advance of robotics, is in many ways closing the window for export-led manufacturing growth. They have significantly eroded the advantages that cheap labour typically provides for developing countries. Industrialization, when seen through the narrow prism of manufacturing, therefore already looks improbable, if not impossible.

 

End of manufacturing as we know it

 

Emerging economies will be stuck with the traditional disadvantages of weak governance, cumbersome bureaucracies, quality and competence issues, fragile supply chains and a lack of skilled labour, even as they compete with machines and machine learning. Large labour pools are unlikely to provide any competitive advantage unless the labour force is reoriented, retrained and reimagined.

 

That’s going to make things difficult for India. Even though the country might benefit in the next 5-10 years from weak energy prices, industries exiting China, and inflows of foreign direct investment, it’s going to get harder to compete in manufacturing.

A case in point is the relocation of textile and garment production to the developed world. This was previously a sector most sensitive to cheap labour and therefore the first to be off-shored to the developing world. Today, it’s now returning to robotized factories in the US and the EU.

 

Indeed, it can be argued that with 3D printing and artificial intelligence, manufacturing as we know it may be coming to an end. Whatever form that manufacturing takes in the future, we can safely assume that it will based on high competencies in design, material science, resource management, super-computing, and precision engineering, all delivered by machines or sets of machines and requiring minimal labour.

 

Third, energy derived from fossil fuels may no longer be a given in any new industrialization effort. In a “climate-aware” world, it is apparent that there is a willingness to compromise with low incomes and poverty but little appetite to allow the developing world too much carbon space.

 

Fourth, global finance is increasingly agnostic, if not outright unfriendly, to the idea of traditional industrial growth. An IMF working paper suggests that “investors such as pension funds, insurance companies and mutual funds, and other investors such as sovereign wealth funds, hold around $100 trillion in assets under management.” This study estimates the infrastructure-funding gap between $1 trillion and $1.5 trillion each year, with the deficit significantly higher in developing countries. This paper and other studies have argued that this stems from a lack of financial instruments and a lack of appetite to invest in the industrial ventures of the past. Global capital and even local commercial capital in developing countries are being crowded away from investing in infrastructure.

 

Fifth, innovation itself has a spatial flaw. Discovery and invention are still the preserve of the Atlantic system while consumption and absorption are witnessing greater uptake in the Asian economies and in Africa. This new innovation divide, when combined with restrictive intellectual property regimes set up for the benefit of Western corporations, is bad news for developing countries. It’s likely that they will merely transform from being labour sources, marginal consumers, and resource-rich spaces to markets for innovation, sources for the data that drives the process, and part of a value chain where the largest wealth will still be created in the old economies.

This will ensure that their purchasing power remains low. Without large-scale, export-driven manufacturing, and without the revenues that would accrue to the owners of technology, there is a high possibility that developing countries that are not yet middle-income will remain trapped in a low-productivity, low-wage spiral.

India: GDP in current prices from 2010 to 2020

Image: Statista

The better way forward

 

So what should India do, given these five trends in global economic development?

 

First, India must get its own house in order. One-fifth of humanity is a market and a productive base in and of itself. But for the country to take advantage of its size, it must sign a free trade deal with itself.

 

Currently the 30-odd states and union territories that comprise the Republic of India are nominally a single economy. But in reality they’re less integrated than the economies of Europe. India’s states and union territories often have sharply different regulations and incompatible tax systems. As a result, trading across state boundaries is a nightmare and India really needs to focus on creating a trade association among these regions.

 

As a single tax, the GST is the first step in the right direction as it will allow new manufacturing units set up under the “Make in India” programme to have access to multiple markets.

 

And there are other government policies that also fit well with this endeavour:Digital India knits markets together, allowing for vast e-commerce and business-to-business opportunities, and Start-up India gives new entrepreneurs access to the finance and incubation required for them to take advantage of these opportunities.

 

Secondly, the attitude towards informal employment needs to change. It’s time to stop thinking of the informal economy as a bad thing, particularly since an overwhelmingly large number of Indian workers (over 90% by some estimates) are currently employed in the sector. The government should instead focus on creating support systems that will allow for India’s vast informal workforce to become more secure, productive, and, where feasible, more entrepreneurial.

 

Finally, India must think big. It must consider the possibility that it will have to leapfrog over the industrialisation process itself. It must imagine itself becoming the epicentre of the robotics and AI world, much like Japan become the hub for electronics, Germany for automobiles, and China for manufacturing everything at a tenth of the cost.

To prosper in a world that is suffering from the absence of growth and the disruption of old models, India must strive to become the principal stakeholder of the digital revolution—and ensure that its teeming millions partake in it gainfully, even if informally.

 

 

 

 

 

 

Brics Summit in Goa: Ahead of 8th conference, the bloc must focus on institution-building

Original link is here

When India hosts the 8th Brics Summit in Goa next month, it will need to be the ‘B’ along with the ‘I” in Brics. The ‘bright spot’ that infuses direction, ideas and momentum into a collective whose individual members have certainly seen better days. With a relatively strong economic performance and a vigorous and imaginative foreign policy (on most counts), India has the capacity to help the Brics plurilateral discover a new ethos that will channel cooperative sentiments into concrete objectives, durable institutions and constructive internationalism.

For the Indian Brics presidency to achieve this, it would need to get all members to agree on the need for creating new and agile institutions that can help the group and others respond to the current economic and political realities, and the visceral gridlock that plagues multilateralism and global governance generally.

In a recent article penned by the authors, two organising principles had been proposed as being fundamental to the Brics regimes even as they seek to reform, reshape and steer the contemporary geopolitical and geo-economic environment. The first was the principle of ‘sovereign preponderance’ and the second the principle of ‘democratic equity’. As per the former principle, the state remains the primary and inviolable unit in the international system and its imperatives override all other concerns in setting the international agenda. Intra-state cooperation is possible insofar as such cooperation leads to greater state agency. This higher agency is then channelled to meet the unique developmental needs of each country and, through it, the global community.

(from left)  Michel Temer, Narendra Modi, Xi Jinping, Vladimir Putin and Jacob Zuma ahead of the 8th Brics Summit. Twitter @BRICS2016

The principle of democratic equity holds that the international order, in the economic, political or security spheres, should be shaped equitably after taking due cognisance of the increasing heft and aspirations of emerging powers and economies. These two principles do indeed shape various Brics regimes that contexualise developmental and economic goals, both within the member-states and in the international system at large. They also motivate the stated ambition of this group to redress unfairness (perceived and real), intrinsic to the extant global political and economic governance architectures. With these organising principles as the basis, it becomes apparent that ‘institutions’and ‘institutionalisation’ are imperative for the collective-action plans of the Brics.

The very act of institutionalisation within Brics gives the Brics regimes lives of their own, even while there is contest and conflict on some issues among member states. Institutionalist literature and studies have recognised this aspect. This literature suggests that institutions persist, since the costs of setting up new institutions are often much higher than the benefits that would accrue by dissolving them. Sunk costs (into building institutions) also lock institutions into a path of dependence that leads to increasing (as opposed to decreasing) returns over time.

Institutions codify cooperation and convergence of expectations. They also specify limits to cooperation by delineating formal agreements on some instances and looser norms of cooperative behaviour on others. The former is, by definition, binding while the latter allows wider sovereign leeway.

Taking a leaf from this body of work, the Brics must seek to further their agenda through the creation of four new institutions and institutional arrangements with varying degrees of formalisation.

The first such formal institution must be the New Development Bank Institute (NDBI), the ideational arm of the NDB and perhaps of the wider Brics project itself. The notion of the NDBI was proposed by Prime Minister Narendra Modi last year who described it as “a bank of ideas, a storehouse of experience and a knowledge powerhouse”. The NDBI must become the institution that defines the pathway for the bank but more expansively becomes the laboratory where Brics produces new narratives, discovers new ideas and develops new solutions for the political and economic future. It must seek to become an OECD-like think-tank of and for the emerging world, where issues of economy, currency, credit rating, political risk, industrial models and development options are agitated and sought to be responded to.

A second key arrangement must be developed for trade and commerce. It is apparent that the Brics, more than any other significant group, is invested in the open and democratic trading system led by the WTO, even as the progenitors of the WTO are seeking to subvert the system with mega free trade agreements involving group of similarly placed economies and some others with little choice or agency. One area within this rubric would be the setting up a body that would develop and set Brics-wide standards and benchmarks. While a Brics free trade agreement appears far-fetched, a body that sets benchmarks and standards is in everyone’s interest. It allows Brics to engage on an aspect that decisively shapes global trade and would contribute to strengthening the multilateral trading regime, even as it furthers intra-Brics trade without a formal FTA.

The very act of institutionalisation within Brics gives the Brics regimes lives of their own, even while there is contest and conflict on some issues among member states.

A third key Brics institutional framework that must be created, is for the digital economy where Brics members are already key stakeholders. Currently, the Atlantic powers are embarking on a major programme to shape the norms that will govern the digital space. The proposed ‘Digital 2 Dozen’ principles of the Trans-Pacific Partnership, and the digital regulation initiatives of the European Union are examples of this. As leading consumers as well as creators of digital technologies, products and solutions, Brics needs to be influential voices in the norms-making space. They must act to shape the discursive space around the digital world and inform debates around contentious issues such as encryption, supply chain integrity, data management and data flows and appropriate stakeholder models to manage these aspects.

Finally, Brics must formalise institutional collaborations that explore the unique opportunities and challenges lying at the intersection of the twin imperatives of economic growth and sustainable development. The Brics development agenda should be one that promotes the latter without sacrificing the former. This could be tasked to a standing conference on development partnership, an initiative to discover and promote a Brics development agenda. It would also catalogue experiences of member states and others, diffuse lessons learned to those who seek it, and track progress unobtrusively within a voluntary and democratic framework.

It will follow and measure Brics’ implementation of the ambitious multilateral agreements pertaining to sustainability and climate action, but in a way that does not constrain imperatives of states as they chart their unique developmental trajectories. This new ethos of managing development and assisting others in their own endeavors correspond to both the organising principles of sovereign preponderance and democratic equity.

Samir Saran is vice-president and Abhijnan Rej is a fellow at the Observer Research Foundation. This article is drawn from a forthcoming monograph by the authors titled Thinking BRICS: A Theoretical Inquiry Into Emerging-Powers Plurilateralism

Kashmir crippled by lazy politics, needs greater outreach

Aug 12, 2016,  Analysis,  Hindustan Times,Aug 12, 2016

Original link is here

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As prime minister, it is incumbent upon Narendra Modi to expand those options and enhance that outreach. The instruments, dialogue channels and specificities are for him to choose (AFP)

Each time Kashmir erupts, as it has over the past month, a familiar set of opinions and debates comes to the fore, especially on social media and in prime time studios. The discourse is trapped between an overdone nationalism, a hyperbolic romanticism and a mutual denialism. It is important to identify the limits of what can and cannot, and what should and must be achieved in the Valley, keeping five realistic parameters in mind.

First, international appetite for experiments with self-determination is at its lowest since World War I. In recent times, interventions by global powers in Syria, Libya, Iraq and several locations in Africa have — whether militarily or politically — carved new territories and regimes. Moral and strategic arguments for and against these have been made, but there is near unanimity that such interventions have led to instability and created hotspots for radicalism, terrorism and human misery.

Why is this relevant to an understanding of Kashmir? It tells us the desire of the global community for a quasi-independent or unshackled Kashmir, as a manifestation of some libertarian notion of popular aspiration, is near zero. The opening of spaces for potentially Islamist regimes is a non-starter. This explains why, despite the ongoing turbulence, world pressure on India has been minimal. While not sacrificing cherished positions, stakeholders in the Valley have to factor this in.

The idealism of Kashmiriyat, first discredited with the cleansing of Pandits in the early 1990s and then through repeated violence against minorities in the state, is now viewed largely through the prism of “Islamiyat”. Cruel as this sounds, images of stone-pelting protestors being tear-gassed and shot today evoke less horror in the rest of India and the planet than do visuals of masked young men, dressed in black, carrying AK-47s and promoting a mix of religion and armed rebellion. In a post-9/11, post-Islamic State world, the proposition that Islamists are fighting for freedom is neither sellable nor credible.

Second, related to the first point, the backlash against unbridled self-determination is occurring just as the Westphalian system and nation-state territoriality are making a ferocious comeback across the United States, Europe and Asia. There is no patience for redrawing borders. Violence and protests in Kashmir, police action, curfew and suspension of civil liberties, constitute bad politics and poor democracy. Even so, these are seen as sovereign actions the world has left India to take, deal with and live with.

Ironically, this is a consequence of some in Kashmir wanting to “internationalise” their cause. As it happens they have done so by hitching their grievance to global jihad and locating it within an Islamist agenda. This has singularly allowed huge sovereign space for India to act against what is seen as a systemic non-negotiable.

Third, while the Westphalian comeback secures India’s autonomy in Kashmir, it also accentuates the Indian government’s obligations and responsiveness to its citizenry, disaffected or otherwise. Anti-terror crackdowns and operations in Kashmir and the decidedly imperfect democracy in the Valley are not incompatible with the idea of an efficient development state with the rule of law. China, South Korea and others have demonstrated that less-than-optimal political structures do not preclude efficient social and economic development and governance.

Without doubt India has failed in being an efficient development state in Kashmir. Exaggerated talk of the Kashmir valley being among the country’s highest per capita income regions has skewed ambition and design of projects and of human development. Poor integration of the region with key economic centres is a case in point and has allowed a de facto seclusion of the Kashmiri people and their prospects. Article 370 is not the roadblock for this; fundamentally, it is a failure of imagination. Episodically enlightened civil servants and even army commanders do display such imagination, but there is little to institutionalise their initiatives.

Fourth, this poor governance is best (or worst) manifested in the incompetence in managing protests and uprisings. Better riot-police training, more efficient crowd-control methods and upgraded gear and hardware would have resulted in lower casualties. Information management and developing counter-narratives need to be best-in-class as blanket bans on people (curfews) and conversations (media and telecom prohibitions) have deleterious consequences. On social media, separatist propaganda is sophisticated; the Indian State’s information warfare is prehistoric or at least pre-millennial.

To be fair, such renewal is necessary across India and not just in Jammu and Kashmir. It is part of a policing protocol and culture invented by the colonial state after 1857 and suitable for an “occupying” power and “subject” people, not for a government dealing with citizens. This is a challenge India faces in several states, but Kashmir is as good a place as any to invest in 21st century methods, machines and mechanisms.

Fifth, since 1947 the Indian State’s approach to its “frontiers” — whether in the Northeast or Kashmir — has similarly borrowed from the limiting and self-defeating “pacification” tactics of the Raj: bolstering and incentivising local elites and adopting select families for whom networks in Delhi matter more than popular legitimacy or a commitment to widen the sphere of formal politics. Dynasties are frowned upon nationally but over-relied on in these regions. In Kashmir, the Instrument of Accession has been replaced by the Inevitability of Succession.

This is lazy politics. After 70 years of blood and tears, sacrifice and investment, surely India needed to show more options and a greater outreach than just the Abdullahs and Sayeeds? As prime minister, it is incumbent upon Narendra Modi to expand those options and enhance that outreach. The instruments, dialogue channels and specificities are for him to choose.

Ashok Malik is distinguished fellow and Samir Saran is vice-president, Observer Research Foundation

The views expressed are personal

 

Beyond #Brexit: What Ails the European Union?

Samir Saran and Britta Petersen, Issue Briefs and Special reports, July 19, 2016, ORF

Original link is here

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The European Union (EU) had been lurching from one crisis to the next even before a majority of British voters expressed their desire to leave it. While staying away from the Brexit debate itself, its implications for UK and EU, and the politics and motivations in the run-up to the vote, this paper argues that at the very least the referendum is a wake-up call for Europe to begin to address some of its structural and operational shortcomings in a substantial manner. Accordingly, a few observations from ‘a’ Indian perspective are put forth and may be worth considering as the EU moves towards a renewed and reformed version of itself.

 

 

 

The multipolar Asian century (part 2): Contestation or competition?

By Samir Saran, Senior Fellow and Vice President and Ashok Malik, Senior Fellow, both of the Observer Research Foundation. Part 1 can be found here.

In the seven decades since 1945, the US largely succeeded in scripting some significant rules that still survive, and they have guaranteed the stability of global institutions that are the bedrock of contemporary multilateralism. The UN system, the key security treaties, conventions and norms for managing common spaces, all emerged from the conversations of that era. The period since 1990 saw the triumph of the liberal order, and placed the globalisation project firmly within the Atlantic consensus.

The economic imperative to rebuild post-war Europe inevitably necessitated some of these political responses and military instruments. Superpowers became the global guarantors of predictability, whether in trade and commerce or the security domain, and by extension, of multilateralism. This task is now devolving in Asia, but in an Asia that has not been dominated by one sovereign power since the times of Genghis Khan, and an Asia that is stubbornly multipolar.

Asia needs to discover a bridge between multipolarity and multilateralism.

This is occurring at a moment when many holdover institutions are flailing, if not failing. The UN resembles not an NGO, as is often suggested, but a think tank. It offers a good platform for talking about norms and rules, but is ill-equipped to enforce any. Inaugurated in 1995, the WTO is in a premature midlife crisis. So where are the new institutions for the Asian century? Where are the important conversations taking place, and among whom? Or, is it time to face up to the harsh truth and accept that rules, actors, institutions, arrangements and ethics that may be able to serve the Asian century are yet to be discovered, born, written and even conceived?

Perhaps, it is time to pursue a new project, one that begins to create a political Asia. Like the Atlantic order needed to flourish on the basis of the Bretton Woods and UN systems, Asia needs a new management, a new board of directors and a new security architecture. At the very least, this system needs to bring three resident actors (China, Japan and India) and two regional stakeholders (the US and Russia) to the same table. Other sub-regional influencers should be drawn in as well.

The East Asia Summit, of which all these countries are members, has been suggested as a possible fulcrum of such an architecture. Yet, the East Asia Summit is insufficient to address the concerns of Central and West Asia. Is an expanded mandate for the G20 (seven Asian countries, two more if one were to include Turkey and Russia) the answer? Alternatively, is a greenfield institution inevitable?

Three possibilities — distinct, but not mutually exclusive — emerge. At the commencement of the 21st century, Asia’s politics resembles the fraught, rudderless multipolarity of the beginning of the 20th. It took 50 years and two wars for that reckless order to settle into a multilateral equilibrium. Asia has to do it better, faster and without the external stimulus of a great War. As the dowager power, the US can incubate new institutional arrangements in Asia, playing Greece to emergent Asia’s Rome, to borrow from Harold Macmillan’s description of the post-war relationship between Britain and the US.

Should the US choose to bequeath the liberal, international order to Asian forces, India will be the heir-apparent. India would not, under this circumstance, play the role of a great power — because Asia is too fractious and politically vibrant to be managed by one entity — but simply that of a ‘bridge power’. India is in a unique and catalytic position, with its ability to singularly span the geographic and ideological length of the continent. But two variables will need to be determined. Can the US find it within itself to incubate an order that may not afford it the pride of place like the trans-Atlantic system? And, can India get its act together and be alive to the opportunity it has to become the inheritor of a liberal Asia?

The second possibility for an Asian order is that it resembles the 19th century Concert of Europe, an unstable but necessary political coalition of major powers on the continent. The ‘big eight’ in Asia (China, India Japan, Saudi Arabia, Iran, Australia, Russia and America) would all be locked in a marriage of convenience, bringing their disparate interests to heel for the greater cause of shared governance. Difficult as it would be to predict the contours of this system, it would likely be focused on preventing shocks to ‘core’ governance functions in Asia, such as the preservation of the financial system, territorial and political sovereignties and inter-dependent security arrangements. Given that each major player in this system would see this as an ad hoc mechanism, its chances of devolving into a debilitating bilateral or multi-front conflict for superiority would be high — very much like the Concert that gave way to the First World War.

A third possibility could see the emergence of an Asian political architecture that does not involve the US. This system — or more precisely, a universe of subsystems — would see the regional economic and security alliances take a prominent role in managing their areas of interest. As a consequence, institutions like ASEAN, the Shanghai Cooperation Organisation, the AIIB, the Gulf Cooperation Council and the South Asian Association of Regional Cooperation will become the ‘hubs’ of governance. The US would remain distantly engaged with these sub-systems, but would be neither invested in their continuity, or affiliated to its membership.

Rather than crystal gazing these three possibilities, our objective is to gauge the political underpinnings behind an emerging Asian architecture. Very simply: will it be defined by contestation or cooperation? Can the US incubate a political order that is largely similar to existing multilateral systems or will the cost of creating disruptive institutions keep Asian countries from buying into them? And finally, can any credible pan-Asian governance institution successfully absorb — or at the very least acknowledge — the cultural, economic and social differences that characterise the continent? The quest for the Asian century is not for the Holy Grail of shared governance, but diagnosing the right means to reach a sustainable and inclusive platform.

Original link is here. 

Photo courtesy of Flickr user Studio Incendo.

The multipolar Asian century (part 1)

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By Samir Saran, Senior Fellow and Vice President and Ashok Malik, Senior Fellow, both of the Observer Research Foundation.

Original link is here

 

Since the collapse of the Soviet Union, the global political and economic architecture has been undergirded largely by one superpower, which set the stage for an unprecedented period of globalisation managed through multilateral institutions and actors. Now that unipolar moment is giving way to an era of diffused powers, with countries like the US, China and Russia each bearing considerable disruptive capacities, and each struggling to stitch together new norms and rules for these rapidly changing times.

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This phase, the beginning of which was marked by the Global Financial Crisis of 2008 and characterised by America’s two bruising wars in Iraq and Afghanistan, has seen a vacuum emerge. Many are seeking to fill it, most determinedly China, but with a push back from countries such as Japan and India. Separately, ISIS and radical energies in the Middle East also seek to grab new space. Russia has chosen this very moment to signal its ability to muddy the Eurasian fields and intervene in the Middle East. The fact is, there is not enough room to accommodate all of these ambitions.

A median will have to be arrived at, but who will sacrifice what?

Today’s ‘multi-power’ reality is most visible in Asia and this can be attributed to the lack of a unifying political and security architecture for the Asian region (or regions). The question then arises: Will the Asian century be defined by contestation or cooperation? And how will Asian powers reconcile multipolarity and multilateralism, a process for which there are no handy 20th Century templates? The trans-Atlantic political and economic regimes that were the ‘hub’ of the liberal international order has no parallel in Asia. And the single guarantor of good behaviour (certainty and/or predictability) is clearly absent.

The quest for global or regional leadership is the quest for control of common spaces. If in the earlier centuries, territorial borders and maritime frontiers were the crown jewels, today’s common spaces have been rendered seamless by digital arenas and technology that straddles deep oceans and outer-space. What makes the Asian century unique is the differing conceptions of common spaces by major actors. Continental trade regimes and economic integration will sculpt Asia’s future, but these terms are by themselves contested. How can the competing agendas of, for instance, the Regional Comprehensive Economic Partnership, the Trans-Pacific Partnership and One Belt, One Road be reconciled?

On the digital front, is the internet of today the ‘Splinternet‘ of tomorrow? Is cyberspace the new coliseum for digital gladiators? Asian powers and every power engaged with the region is excited by the potential of the digital economy, but many perceive the virtual world through the territorialism of pre-digital politics. Can the internet be a force for collaboration or is it destined to be a contested arena within and between countries, communities and peoples? How can multilateralism sit with this new paradigm where the power of transnational corporations make the equations more complex?

To be sure, the old fault-lines remain active. The Indo-Pacific system is the world’s greatest maritime trading zone, but political ambitions, too, sail across its seas and waters. In the absence of an Asian equivalent to the Monroe Doctrine (sole power dominance in the region), sovereignty is being contested everyday on the high seas. Robust military capacities sustain these conflicts in the Indian Ocean and Pacific littorals. Will the waters of Asia connect and empower, or will they divide and devastate?

Perhaps the most significant policy question for the Asian century is ensuring the realisation of ‘human value’. How will demographic realities in Asia translate into economic, and by extension, political transformations? The region hosts the youngest as well as the most rapidly ageing populations in the world, suggesting that demography can both be a dividend and a disaster. Growth models of decades past are being rendered obsolete by technological advancements and digitisation. These cripple the notion of a demographic dividend. What are the livelihood avenues available to 21st Century Asians? Will unemployment continue to fuel the high-octane nationalist and sub-nationalist movements that Asia is witnessing? Does this detract from the ability of Asian actors to ‘sacrifice’ and ‘compromise’, something that multilateralism demands?

Asia needs to think through these pressing questions and so does the world. After all, the Asian century is not exclusive to Asia. It is as much about the rise of Asia, Asian actors and Asian institutions as it is about others who engage with the continent. Challenges and transformations in the region will define not just this continent’s century, but that of the planet.

Asia will shape the 21st Century as much as the Atlantic consensus shaped the 20th Century, or Europe, the 19th. In Part 2 of this two-part series, we will suggest some possibilities regarding the future political architecture of Asia.

Photo courtesy of Flickr user Thomas.