Comment | The ‘shock doctrine’ in India’s response to COVID-19

Different government officials have said on record that the COVID-19 crisis is an “opportunity”. But an opportunity for what exactly? In 2007, Canadian author and social activist Naomi Klein wrote a book titled 'The Shock Doctrine: The Rise of Disaster Capitalism', where she argued that governments and ruling elites use crises and disasters as an opportunity to push through unpopular free market policies. Has the Indian government been trying something similar during the COVID-19 pandemic? As we pose this question to Dr Jayati Ghosh, Professor at the Centre for Economic Studies and Planning at Jawaharlal Nehru University, New Delhi, she contends that what India has been witnessing could more accurately be described as ‘disaster authoritarianism’ rather than ‘disaster capitalism’.

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Here is the full transcript of the conversation:

G. Sampath: Hello and welcome to The Hindu’s podcast, I am G. Sampath, The Hindu’s Social Affairs editor. In 2007, Canadian author and social activist, Naomi Klein wrote a book called 'The Shock Doctrine, the rise of disaster capitalism'. It soon became a classic, leading to new streams of Economic Research in journalism. The thesis of Klein's book is quite simple. She argues that national disasters of crisis are used by governments to push through pro big business neoliberal policies, especially policies that could meet with a lot of resistance during a normal time. But during a crisis, such as a war or a pandemic, people are emotionally distracted, and also want to see bold action from the government. So it becomes an opportunity for the state to push through policies that may be anti people, but without much protest from the people themselves. The question we're going to discuss today is, has the Indian state been trying to do disaster capitalism of sorts, using the COVID-19 crisis as an opportunity to push through neoliberal policies that have, for a long time been resisted by the people of India? To help us understand this better we have with us Dr Jayati Ghosh. Jayati is a professor at the Center for Economic Studies and Planning at JNU and one of the world's leading development economists. Welcome to the show.

Jayati Ghosh: Thank you. It's a pleasure to be here.

GS: Let's start with the basics here. Would you say that the Modi government has used the COVID-19 pandemic as an opportunity to follow through on a policy or policies of what Naomi Klein famously termed disaster capitalism?

JG: Yes, I think so. There has certainly been some element of disaster capitalism in terms of announcing a number of neoliberal policies. But perhaps the Indian version we're facing is something more like disaster authoritarianism. I think the Modi government is using the pandemic to push through a set of policies that is not just centralizing power, but is suppressing dissent, and is enabling it to do a range of things which would not normally be allowed. So you see, I think Klein’s doctrine is a very simple one, as you said, which is that in periods of shock, whether it is a financial crisis, or in this case, a health shock, they are much more vulnerable and much less able to think through the implications of different policies. And they're also looking for strong action and someone to say we're taking strong measures to protect against all this and you have to listen to us because we know what we're doing.

 And so they're more willing to accept a whole range of things which otherwise would come under question and would be subject to a whole range of usual democratic processes. I think what has happened here is that the Indian government has used the pandemic, essentially to, first of all, bring about an extremely brutal, abrupt lockdown, which did not serve the purpose of controlling the pandemic but itself several of its other own purposes. And then did not do anything really to control the health epidemic. It was raging and is raging even more now.

GS: So in this context, coming back to the economy, as such, how do you see the attempts to dilute labor laws, especially at the state level in states like the mother Pradesh, and so on, because they're to these measures are preceded by by a lot of misery being heaped on on migrants who are not allowed to travel. And now again this kind of imposition seems to be making life tough for them by suppressing their wages and so on.

JG: Yes, you're absolutely right that separate state governments have tried to bring in labor laws, not just fundamentally anti-labor, I would argue that they are fundamentally counterproductive, because they don't actually end up encouraging more investment. When you deprive them of minimum wages, when you force them to work longer hours, you don't allow healthy and safe working conditions, that doesn't improve labor productivity. And in fact, the stated objective, that this is to attract FDI- that has rarely worked, and it certainly will not work in this instance, either. Because we know that FDI was much more attractive to China over all the decades when wages were higher and conditions of Chinese workers were better. Had to fit far more conditions in China.

We know that even today is much more likely to be FDI in countries like Vietnam and Thailand, which again, have better wages and working conditions. But I think that these are, if you like, the more symptomatic expressions of a deeper purpose. And that too I want to explicate in terms of the economic impact of so many of the government's responses which have seemed completely inexplicable to many economists. And it's not just me, I think across the board, economists have been wondering, what is the government thinking, why isn't it responding?

And there are three critical areas where the response seems utterly illogical. The first is the refusal to distribute more of the surplus foodgrain. We have currently more than 55 million tons of surface, some of which is clearly actually being left out in the open because the FCI doesn't have storage facilities that way in excess of its maximum storage. And some of which will go bad which will get eaten by that some of which is already very old and not fit for human consumption. So why are they not distributing this food grain when we know that there are hundreds of millions of people facing hunger, extreme hunger and deprivation?

The second is how they have actually devastated the bargaining power of informal workers. They never had much power, as you know. But this lockdown, first of all, it throws everybody out of jobs or livelihood immediately. For two months, you do not get any possibility of earning anything your own. And then you're even denied the possi So there was not just a deprivation in terms of denying people their own right driving. But then there was denial of their right to have the ability to go back home where they could at least be safe, and find some succour and some survival. Why would you do that? And I think that's part of a broader thing which feeds into the whole authoritarianism, which is it's a deep restructuring of domestic class relations in terms of a massive reduction in the bargaining power for workers. We are going to be faced with massive open unemployment, massive destruction of the livelihoods. And in those conditions, it's very hard for workers to demand anything. Whether or not state governments actually get rid of labor laws, you can pretty much be sure that those labor laws are not going to be implemented or recognized in most of the labor contracts that emerge in the post-Covid period. And then because there are no jobs available, there's no livelihood available, people will be desperate. And in that situation it's hard to know where the bottom will be in terms of wages.

GS: So coming back to the theme of disaster authoritarianism, where would you situate the whole normalization of state surveillance that seems to be happening through things like the Aarogya Setu app. Do you see such apps retreating once the pandemic recedes? Or do you think they are going to get here to stay?

JG: Unfortunately, I believe they're here to stay. I think the attempt of the government to basically monitor and survey the entire population was already evident in Aadhar which began as voluntary and then very quickly became effectively compulsory because there are so many things you can’t do without the Aadhar card.

It’s the same with Aarogya Setu. It is sufficiently voluntary still, but increasingly, they're making it impossible to do all kinds of things like get on a flight, or take a train, or presumably soon get into government offices or even get into private offices without using this app. Now, there are many concerns with this app, despite the pretence at making it open source, they are actually still not revealing the full application. And that in turn means that the government can use this in ways that it need not reveal. And I'm told that once you install it, you can't effectively delete it from your phone either. So there are many, many privacy concerns. There are many concerns with a government surveillance effort.

GS: Surveillance is of course, always an indicator of a much greater power being handed over to the state than what a democratic setup would allow for. Moving on, the Prime Minister in a speech he gave to the CII has promised most structural reforms across sectors. And he basically told the CII that they just needed to get back to him sector wise what they needed. And the government will positively respond with the right kind of structural reforms addressing those sectors So what kind of measures Do you see materializing from this? Is it likely to happen?

JG: No, I fear that it isn't only optics based I fear that they will bring in a whole lot of things which don't cost any money because one thing that is very evident is that this government is remarkably stingy in terms of when it comes to any spending. They're not going to do anything that requires spending. But anything that requires deregulation, they will be more than happy to deliver. And my fear is that they will, for example, further deregulate all of the policies about the environment, which will bring us one step closer to environmental disaster and will hasten the climate change without giving us adequate protection against it in terms of adaptation. I fear that they will also deregulate various other things, let's say even for health, I mean, all the opposite of the things that you should be doing. And because these are cheap for the government, and because these then win prizes from global capital, they're much more likely to bring those in than to actually make the real effort of doing things that would allow industries to revive.

GS: Speaking of prizes from global capital. Do you see Moody's downgrading of India's credit rating is likely to further add to the pressure on the government to do structural reforms?

JG: Well you know, rating agencies along with other elements of finance, capital have always been doing this. They always use the pressure of the ratings to force particular policy changes. But here I think the government has gotten a bit of a flat stick, because the rating agency will also inevitably put in its own assumption of future GDP growth as an element of its rating. And that has certainly been the case. Moody's has definitely included it's rather pessimistic and I would believe accurate perception of what's going to happen to GDP in the economy in the near future. And that's one of the reasons for the downgrade. Because when the economy is going down then obviously various other activities do not remain profitable. But of course the sting in the tail is that Moody’s has also said that the fiscal deficit is going to be higher than expected and they haven't kept to their fiscal deficit targets in the past. And this is where the government will then use that to avoid spending more, which I believe is foolish in the extreme. I believe that it's completely counterproductive. Because when you actually don't spend in fear of having a higher fiscal deficit, if the economy's declining, then you make the economy decline even further. So then what happens when the economy falls when output falls tax revenues fall even further. So even with the lower level of spending, you can end up with a higher fiscal deficit because your revenues have collapsed. And then the fiscal deficit to GDP ratio is even larger because the GDP has collapsed. So actually, I don't think the government has thought this through and has realized that cutting spending at a time like this will make all of these indicators worse.

GS: So what is the possible way forward? If they continue on this path? Because at the end of the day, they would need to generate cash. Does this mean they're going to be borrowing more?

JG: Well, they have, they have already announced a higher borrowing limit of I think 2.1% of GDP. And the fiscal stimulus such as it is, I don't want to call it that today, additional fiscal spending that they have announced doesn't amount to more than 1% of GDP. So probably they're assuming that the next 1.1% is because tax revenue will fall and they're going to keep cutting expenditure and less and to the point where they keep that. As I said, that's extremely counterproductive. And if GDP then falls beyond their expectation, they will end up With a higher fiscal deficit to GDP ratio,

GS: So this seems to be the path which Greece was following until the entire economy collapsed. The following of classic austerity economics.

JG: Exactly. That's exactly what Greece did. And that's why Greece has had now a decade of a collapsing economy, where, you know, incomes are still 40% below what they were in 2009. So, definitely, this is a very, very foolish path. Greece, at least the Greek government was forced to do it. It wasn't its own idea. We have a government here in India, which is doing this on its own, which is actually completely unbelievable. Why would you choose to take such a completely counterproductive path?

GS: On the one hand, you know, people have been saying that the pandemic has exposed the limits of neoliberal capitalism and free market economics. Especially by underscoring that public health is a social good that needs to be state funded because unless you have state capacity to deal with a public health crisis, it's going to make worse things worse for everybody. But at the same time governments are also pressing ahead with typical disaster capitalism modes that further entrench neoliberal policies. So how do we understand this contradiction? Yo?

JG: Well, I think the real issue here is the power balances within societies and economies. Because let's face it, we saw in 2008, with the global financial crisis, that, you know, deregulated finance is a disaster. And it not just creates crises and immense volatility, but it doesn't really serve society in any meaningful way. But what we got afterwards is the continued power of global finance.

Similarly today, unfortunately, yes, this crisis has exposed the weakness, the fragility, the hollowness of neoliberal capitalism, the fact that it doesn't deliver basic services to the people, that it can unleash pandemics that not just create massive health hazards, but even destroy the workings of market economies and therefore destroy a lot of capital. It's exposed all of that. But until the relative power balances change, we're still not likely to get major changes in society. And that's the problem. In a way, it's a bit so you know.. capitalism can keep devastating itself and having crisis after crisis. And it can in a way, effectively die on itself. But as long as there's no one to move the dead body out of the way we are still stuck with it, it will still be there like a shroud over us destroying humanity. So we really need to generate alternatives that have political traction. I believe there are many sensible alternatives out there. I believe they can be achieved. And they are, they would be socially desirable across the board for everyone. But that requires changes in power equations. And so in a way, it really means that these good ideas of how to resolve this crisis of how to take humanity forward of how to deal with the next existential challenge of climate change. All of these ideas have to get much wider political traction, to the point where states have no options but to act on them.

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