Groupthink, Conflict, and the Middle East

Years ago, a friend and I spent an evening bemoaning groupthink. He in particular hated it and despairingly crucified it as the source of human conflict. With a cynical grimace, he put his finger on a hanging map. He was point at the Middle East, at the Levant. We were silent for a good while afterwards.

It goes without saying that his example wasn’t unique. Nor is it new. Western philosophers and critics have lamented the effects of collectivist discourse on human conflict for as long as Western philosophy has existed as a field. Indeed, most analysts will generally chalk up religious and ethnic loyalty as a root cause of conflict. Applying this framework to the tragedy in Gaza seems a natural next step. Israelis, Palestinians, Jewish state, occupation, anti-semitism, Nakbah, intifada, rockets, murder. Just the words divide up the belligerents into clearly distinguishable camps, each with their histories and hatreds.

But simply stating that groupthink is the base reason for all human conflict is too simplistic. For one, there is a tendency to confuse groupthink, a process by which consent is created in group discourse, with collective identity. They are indeed similar; both are likely evolutionary creations designed to harness collectivism for safety in numbers. But collective identity merely demarcates boundary lines in a conflict. Just look at the rival sides on the social media map created by Al Jazeera. The trigger of conflicts is reflected in a different evolutionary need: resources.

The current Israeli-Palestinian conflict traces its origins to the UN’s 1947 partition plan and the instability in the wake of previous Jewish immigration to the Holy Land. From this devolved everything else. Land inevitably spawned fights for water; the damming of the Jordan River and the harnessing of aquifers beneath the its Basin are obvious examples. Farm land in the Golan Heights was a huge issue following the Six Day War. Today, a major inhibitor of the peace process is the continued existence of Israeli settlements on what was supposed to be Palestinian territory. And need I even mention Jerusalem, ultimately a conflict over a holy city?

If we have the sides and we have the conflict, what then is left for groupthink to do? Perpetuation. Specifically, perpetuation through the corruption of narratives and discourse. How though? A hypothetical demonstration (the views expressed being completely my own) should be able to shed light.

To clarify, I enter the conversation with the presumption that any final settlement (no matter what the details may be), gives both sides an equal opportunity for self-determination and a chance to live peacefully and prosper. That’s key and isn’t often the case with the peace plans proposed.

The Demonstration

To start, I acknowledge the views of the average Israeli.Western media focuses intently on the rockets being fired, but Israeli border towns face the real danger of potential tunnel raids from Gaza. The isolation this military campaign has created leaves many Israelis feeling wrongfully victimized and blamed for what they perceive as a campaign to eradicate existential threats to Israeli security, and in the long run, the very existence of a Jewish state. They are frustrated by what they perceive to be a Palestinian failure to adequately deal with radical fundamentalists in their ranks, factions that didn’t go away even after Prime Minister Ehud Olmert’s unilateral withdrawal from Gaza. In their minds, this all vindicates the slowness in approaching a two state solution and necessitates a continued Israeli presence in the West Bank, partial or complete Palestinian disarmament, and absolutely no right of return (essentially a solution where Israel remains the dominant power of the two peoples).

I acknowledge the Israeli position. But don’t agree. The occupation of the West Bank has been atrocious and is a key component of fostering anti-Israeli sentiment, and anti-American sentiment by extent. Disengagement from Gaza didn’t mean the end to occupation conditions; Israel maintains an effective economic blockade that a UN Report found could seriously endanger the livability of the strip by 2020. Both these occupations leave a paper trail of human rights violations that enrage worldwide opinion. Bibi Netanyahu’s government can be further accused of ignoring the peace process. It does what it can to stall and evade the West Bank question, grandstands about the necessity of protecting a clearly secure Israeli position, and presides over an Israeli domestic situation that isn’t equal with regard to its non-Jewish residents. The bombing just extenuated these circumstances with a completely disproportionate amount of Palestinian deaths (1000+ now), worsening of living conditions in the Gaza Strip, and a strengthening of Hamas’ position just after it had agreed to a unity government with Fatah in April. To top it off, American aid to Israel damages our credibility in the peace process as we fund the very weapons killing Palestinian children while continually harping on Israel’s right to defend itself, as if that was ever in question.

But that doesn’t mean Palestinians and Arabs are helping the situation. The existence of organizations like Hamas and Hezbollah and the positions of many Arab governments in years past seriously damages the image of the Palestinian position. No matter the role Israel had in creating those sentiments, they are the reason Western public opinion hasn’t been thrown completely behind the Palestinians. There’s also much to be said for the uselessness of Arab governments in championing the Palestinian cause and for elements within the Palestinian leadership benefiting from the continuation of the status quo (like the Israeli government). Ultimately, the losers of this conflict are who they have always been. Israeli and Palestinian civilians. Of the two, the ones in most immediate humanitarian need are obviously the Palestinians.

The Explanation

So where does groupthink factor in? I’ve stated my position like the tens of thousands on social media. But groupthink encourages us to classify a person’s loyalty immediately based on the content of their statement. The fact that I don’t think Palestinians are pure and innocent despite the obvious majority of violence they’ve endured doesn’t make a Zionist. The fact that I abhor Israeli human rights violations and condemn the actions of their government doesn’t mean I want Israel to go away. I simply desire what I said at the beginning, a solution that gives “both sides an equal opportunity for self-determination and a chance to live peacefully and prosper.”

The State of Groupthink

What groupthink enables is the destruction of nuance in public discussion. The rush to classify loyalties in any discussion generally has the effect of grinding that discussion to a halt. It focuses discussion on a predictable consensus that leaves out, not the differing opinions as they would be having separate discussions, but the nuanced ones, the views that may trend to one side but accept or acknowledge variations to their own narrative. Our solution up till now has always been to equally try and balance both sides. But all stories can’t be balanced; sometimes the solutions are somewhere other than the stale middle; sometimes things are irreversibly contradictory. This is why the classic American formula of compromise fails.

My friend’s a scientist and that’s another reason he deplores groupthink; he works in a field that’s been able to diminish groupthink’s effects. It’s not that science does it better because it’s an objective field. Israelis and Palestinians deal in objective problems. It’s that science, through a reductionist methodological process, was able to temper the ability of groupthink to automatically tilt sides. Our institutions of societal discourse can and must discover a method to do the same. The internet lays naked what can happen to discussion otherwise.

Chirag

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Coming Closer to a Conclusion

The horrific murder of over two hundred individuals on Malaysian Airlines Flight 17 stunned the world last week. Within minutes of the tragic news, pundits already came to conclusions; the attack was by the Ukrainian government, pro-Russian separatists, or Russia itself. Some pundits went further and concluded whether or not the attack was really an attack or an accident. The puzzling part about all of these conclusions, however, were the fact that they were made only several minutes after the attack. Information was scant and unreliable at best, so how on earth could anyone really jump to a conclusion with such confidence? I’m not going to say any of the suggestions above aren’t a valid hypothesis, but I was surprised how confident everyone felt with their conclusion before any official investigation took place.

Following the attack, everyone sprung into an investigation. The United States did what they could, the U.N. took the lead, and Russia immediately attempted to wipe their hands clean of this mess. While no official conclusions have been released yet, evidence is stacking up that pro-Russian separatists were the ones who shot down MH17. Russia might feel slightly vindicated that it wasn’t an official Russian force that shot down the plane, but their clear support for these separatists may have still played a role in the ultimate destruction of the plane. But even after investigations conclude that pro-Russian separatists, or any other organization executed the missile shooting, there are still plenty of questions that need answering before we can come to a true conclusion.

For instance, I want to know why there was a commercial flight flying over Ukraine. Building evidence is suggesting that Malaysian Airlines is one of the very few commercial airlines that were flying over Ukraine at all. Technically, the air space was free to use, and a few European airlines had elected to take their chances as well. Although, many of these flights were avoiding the areas with the highest tensions, something that Malaysian Airlines failed to do. This isn’t me accusing Malaysian Airlines of being the murderer of its passengers, but I do want to know why they would endanger their passengers like that. I’m equally as puzzled as to why the Ukrainian government still was allowing commercial flights over their country with so much instability right now. The Ukrainian government gave insufficient information about the severity of tension in the area. It just looks like the Ukrainian government was careless and Malaysian Airlines took the bait without considering that some areas would be worse than others within Ukraine’s airline space. I’d still like some answers though, not just my speculation, so we can hold everyone accountable.

Accountability isn’t being looked for from Ukraine or Malaysian Airlines, but not from Russia as well. In all three cases, this seems misguided and shouldn’t be left unchecked. If pro-Russian separatists really did fire the missile, we need to know if the missile was provided by Russia. Even if Vladimir Putin didn’t sign off the firing of the missile, if he provided it to the eventual perpetrators, he needs to be held accountable. Putin has been supportive of most actions of the separatists so far, despite international calls for him to rescind his support. Perhaps he would reconsider his position if his separatists are found responsible for this attack. If he declines to, I hope an international effort to pressure Putin will occur. The critics who claim President Obama hasn’t done enough with Putin often fail to recognize that no other nation is really taking initiative at all. This time is already beginning to look different, with the public denouncement of Putin by Prime Minister David Cameron of the United Kingdom. It may be a little pre-emptive, but evidence is mounting to suggest that the separatists caused this.

We still need to answer a very crucial question though: why? Was this attack deliberate or an accident? Even if the attack was deliberate, did the perpetrators realize they were shooting down a commercial airline plane or did they have reason to believe they were shooting down something else? None of these scenarios will justify their actions, but it could show the world how inept these individuals are, whether they are separatists or a government force. If I use the leading narrative right now, the picture drawn is a bunch of pro-Russian separatists were trigger happy and unknowingly shot down a commercial airline plane, using weapons provided by Russia. If this narrative is indeed accurate, then the international community shall move forward to ensure organizations are held accountable for their roles in this tragedy.

I’m beginning to jump to conclusions though. These questions will be answered in the coming weeks, and I am confident we will know in the matter of days who actually fired the missile. Until then, I ask for patience of everyone and to do our best not to solidify our opinions until all of the evidence has been presented. Critics, such as Senator Lindsey Graham (SC-R) claim this deliberation can come off as “indecisive” or “weakness”, but I’d prefer to be right than the first to speak. Otherwise we could be spending months arguing over which narrative is correct, while the true narrative fades into the backdrop and leaves this tragedy without any solution to truly bring justice for the victims of flight MH17.

Peter
http://www.thewire.com/global/2014/07/the-mh17-flight-path/374684/
http://www.politico.com/story/2014/07/david-cameron-vladimir-putin-ukraine-rebels-109146.html?hp=l5
http://www.cnn.com/2014/07/18/politics/russia-ukraine-world-relations/index.html?hpt=po_c1
http://www.nytimes.com/2014/07/20/opinion/sunday/A-Week-of-Agony-From-Eastern-Ukraine-to-the-Gaza-Strip.html?ref=todayspaper
http://www.washingtonpost.com/blogs/the-fix/wp/2014/07/18/the-tricky-game-of-playing-politics-in-the-wake-of-a-tragedy/

Sorry, but Obamacare is Working (but it could be better)

The current condition of the Affordable Care Act is almost night and day compared to where it was at the beginning of 2014. A website failure, pathetic enrollment numbers, and an overall sense of defeat was present. By the time the enrollment deadline hit, many were anticipating less than 7 million enrollees. Surprisingly, the final count was above 7 million. Immediately the concern shifted to whether or not individuals would actually pay their premiums. While there is a little debate, the overall consensus is that well over 80 percent of enrollees paid their first premium on time without any issue. Critics then began to decry the lack of quality of care, while continuing to beat the drum that millions became uninsured because of the law. Evidence is beginning to surface that both of those claims are false.

Gallup polling has attempted to gather data regarding what is happening to the uninsured population in the United States. The most recent poll says 13.4 percent of Americans are still uninsured, the lowest it has even been since they began polling in 2008. New figures from the White House and independent groups suggest that anywhere from 8-9.5 million individuals received coverage this year due to the federal health care law. These are just the individuals who previously had not been covered. It is true that some individuals saw their plans change, but many of them were immediately placed onto a new plan with minimal adjustments; usually in the form of more coverage. And while it is possible that thousands of individuals genuinely lost their coverage from the law, many of their plans could’ve been saved under the grandfather clause of the law, meaning the law didn’t guarantee the demise of their plan.

For the unfortunate few who actually lost their coverage, they will be happy to know that coverage from the exchanges is pretty well received. According to the Commonwealth Fund’s most recent survey, well over 70 percent of recipients were pleased with their healthcare. Specifically for people who had their previous plan cancelled, 77 percent are pleased with their new care. Over half of individuals on health plans from the exchanges said they could keep the doctors they wanted, and a much higher number the insurance they had was better coverage than what they had before. Yes, it does seem like things are looking up for Obamacare.
There are still some obstacles and some adjustments that need to be made. Skepticism remains high after the disastrous rollout of Healthcare.gov. President Obama hasn’t issued a formal apology for misleading individuals about keeping their healthcare plans, since it was truly impossible to guarantee that for every individual. The Commonwealth Survey indicated that many still found the website at least somewhat difficult to navigate. These changes are a bit more cosmetic and technical; the reassurance and apology of a president would go far with people, coupled with a strong push to improve the site even further now that it’s stable. I wouldn’t call these decisions easy, but they are directly the responsibilities of President Obama.

The greater issues are beyond his control. The employer mandate has gotten a lot of flak, and now President Obama is being sued over his actions regarding the mandate. Too many businesses are cutting hours in order to avoid the mandate. This unnecessarily throws more people onto the Medicaid plan, but creates a hole of individuals who would qualify for Medicaid but won’t receive it due to their state not expanding Medicaid. At the very least, the employer mandate should drop the hour minimum to provide coverage, removing the incentive of a business to cut hours. I feel like that will lead to some low wage workers being cut, so I would suggest abolishing the employer mandate all together. It would give workers more choice in their benefits by going through the exchanges, and would loosen up money from large corporations to raise their wages. Even if they didn’t raise wages, we would collect more money in taxes from these corporations, which would help offset the cost of potential subsidies to pay for the insurance of their employees. Or should I say Medicaid?

Currently, many of these employees at the larger corporations who are seeing their hours cut don’t make enough money to even be offered a subsidy. Instead, they are placed on Medicaid. However, there are still over 20 states that aren’t even considering expanding Medicaid. Some of these states have a gridlocked legislature, but many are states with Republican governors who absolutely refuse to expand Medicaid based on a faulty principle that the law is a failure. It’s impossible to declare the law a failure when you aren’t actually implementing the law though, leaving governors like Bobby Jindal (R-LA) and Rick Perry (R-TX) looking ignorant.

What really shows their ignorance is the fact that they continue to lambast Obamacare as being a waste of taxpayer money, but they are the ones wasting money. When those Medicaid dollars are collected by the federal government, they are used to fund the expansion in all of the states. But if a state refuses to take the money, it is just held by the federal government. At a recent fundraiser I attended, Governor Beebe (D-AR) pointed out that if Arkansas hadn’t expanded Medicaid, Arkansas tax dollars would have gone to fund other states’ Medicaid expansion, or just be held for no reason. At least with the expansion, Arkansans were receiving a benefit from their tax dollars. Governor Beebe even joked that he calls Governor Jindal to tell him that Arkansans are benefitting from Louisiana tax dollars.

The resistance to Medicaid expansion really is a waste of taxpayer dollars, and hurts millions of individuals who otherwise would gain coverage. Republican governors are playing politics, and in the end, the uninsured and taxpayers everywhere feel the pain. I’m sure you fall into at least one of those two categories. Obamacare has quite a few changes that need to be made, but all of the doomsayers should be disregarded at this point, as it is clear that Obamacare is working, even if some don’t want it to. Since it’s clear the law is working, it’s time to get past all of this silly talk of repealing and begin to work on the employer mandate, continue to improve the website, and place more pressure on states to stop wasting taxpayer dollars and help their uninsured residents by expanding Medicaid! Real leaders don’t just complain about the hand they were dealt, they deal with it. And increasingly, the hand looks better than we once believed.
Peter
http://www.nytimes.com/2014/07/11/upshot/newest-health-insurance-customers-are-generally-happy.html?_r=0
http://www.commonwealthfund.org/publications/issue-briefs/2014/jul/Health-Coverage-Access-ACA
http://www.commonwealthfund.org/acaTrackingSurvey/index.html
http://www.politico.com/story/2014/07/obamacare-lowers-uninsured-108789.html?hp=l17

Where Does Freedom End?

Hobby Lobby appears to have opened an entire can of worms with its victory early last week, allowing “closely held” companies to opt out of covering birth control by claiming it is against their sincere religious beliefs. Just days after the Hobby Lobby ruling, the Supreme Court expanded its ruling, deciding that non-profit Christian colleges may opt out of the contraception mandate as well for the same reasons. The argument made by Hobby Lobby and Wheaton College was contraception is an unbearable burden on them morally. Supporters of Hobby Lobby cheered for their perceived notion of religious freedom being upheld, while detractors decried the very real possibility of women being prevented from having access to contraception.

Contraception didn’t literally vanish once the ruling was issued last Monday morning, but to many women nationwide it may as well have. The costs of contraception out of pocket aren’t enormous, but for women who make minimum wage or slightly more, the cost could be devastating. This case leaves the potential for countless women to be left without access to affordable birth control, even for non-pregnancy purposes. Even though Hobby Lobby has attempt to defended itself by asserting only certain types of birth control, primarily morning after pills, are the only types not being covered, I don’t think we can give the benefit of the doubt that every other company impacted from this decision will take the same course of action. After all, Hobby Lobby opposed the morning after pill because the owners believed it was the equivalent of an abortion.

But scientifically, that is inaccurate. If the owners of Hobby Lobby want to believe that, they can, but it holds no kind of academic merit and shouldn’t be taken as an equal opinion to the evidence presented in front of us. The morning after pill prevents ovulation, meaning conception never takes place. There is no contact between egg and sperm when a morning after pill is utilized. The other forms of contraception that will no longer be covered, IUD’s, are small items inserted into the woman and prevent the sperm from making contact with the egg; once more, conception does not occur. An abortion requires conception to have taken place, which is why the mantra of the Pro-Life Movement is “Life begins at conception”. While there is indeed an “abortion pill”, that was not being disputed by Hobby Lobby because coverage of that pill isn’t mandated by the Affordable Care Act. Yet, it seems that life begins even before conception to the owners of Hobby Lobby. But how can we even begin to defend this position when there is an established, proven position that refutes it?

If we deem that opinion permissible, despite the clear indications that it isn’t true, the court has just allowed other companies to refuse to cover any form of contraception on the grounds of false premises. This case sets the precedent that just because one believes something strongly enough, it immediately is an equal to facts. It’s disturbing because it says religious liberty can trump scientific evidence, at least in certain cases. Conservatives are quick to point out that this case only applies to birth control, not vital medical procedures such as blood transfusions. But that argument just shows the state of sex education in the United States, where many individuals don’t seem to understand that birth control can be used for purposes beyond pregnancy prevention, and again, that there is no conception involved with these forms of contraception. Selectively accepting science has already been observed in cases of climate change and evolution, but this is a whole different level.

The Supreme Court endorses selective science with their ruling. This can leave companies with a way to opt out of covering birth control just because they don’t understand or agree with the science behind it. Selective view of science allows employers to cite religious liberty in their opposition to the contraception mandate by concocting a false moral burden. Even if this burden conflicts with the “sincerely held” religious beliefs, it isn’t an actual moral burden. Religious liberty cannot possibly be infringed upon when the supposed burden doesn’t actually exist. Everyone has the freedom of religion, and no one should take that right away.

However, why would we expand freedom of religion to mean imaginary burdens can circumvent the law, especially if in the process we harm other individuals? There are religious sects that oppose vaccinations and blood transfusions. That isn’t religious liberty, it’s simply an unfortunate case of a misinformed employer, and the court doesn’t allow them to get away with their flawed information. Why should we treat contraception any differently? Freedom only goes as far as not infringing upon the freedom of others. The endorsement of selective science is going to harm individuals, rather than help anyone. Had Hobby Lobby been required to provide birth control to its employees, no one’s freedom would have been infringed upon. Instead, many women will be harmed financially or medically in order to preserve a very skewed definition of religious liberty. It isn’t a loss of a constitutional right for women by the Hobby Lobby decision, but neither would a loss for Hobby Lobby have meant the loss of constitutional rights for the owners. But the decision does harm women; Hobby Lobby wouldn’t have been harmed either way. Leaving me with one question: Did we really preserve freedom last week?
Peter
http://www.politico.com/story/2014/06/supreme-court-hobby-lobby-decision-contraception-mandate-108429.html?hp=t1
http://www.newrepublic.com/article/118469/hobby-lobby-court-case-shows-we-government-should-provide-insurance
http://america.aljazeera.com/articles/2014/7/1/emergency-contraceptivesbiology.html?utm_campaign=ajam&utm_source=facebook&utm_medium=SocialFlow
http://politics.suntimes.com/article/washington/supreme-court-suspends-contraception-rule-wheaton-college/thu-07032014-642pm
http://www.plannedparenthood.org/health-info/morning-after-pill-emergency-contraception
http://www.plannedparenthood.org/health-info/abortion/the-abortion-pill
http://www.thefederalistpapers.org/us/facts-liberals-dont-want-you-to-hear-how-many-kinds-of-contraception-hobby-lobby-offers-its-employees
http://www.supremecourt.gov/opinions/13pdf/13-354_olp1.pdf

Potential Pitfalls of Indian Economic Policy

You’ll likely have noticed a lull in the postings on India since Steven’s last article. There’s a reason and it’s simple. In terms of policy moves, the new Prime Minister has had to wait for his budget release dates. Till now, he’s made decent impressions on regional allies, bungled a railway-fare hike, taken precursory measures to tackling India’s lumbering bureaucracy, and gotten into a mess over interfering with judicial independence.  Nothing important right? But now that the budgets are being released this week, our writing has returned. 

Our Western audience, based entirely in the United States, likely won’t be used to this scenario. To give you an idea of how important budgets are in Westminster Parliamentary systems like India, let’s turn to the country from whom India copied much of its governing architecture. The British Prime Minister, David Cameron defined his government’s entire economic policy around the 2010 Emergency Budget which he released soon after his governing coalition was formed. Cameron’s every economic move since can be traced back to the austerity he kicked off four years ago. 

That’s not to say Narendra Modi’s budget will necessarily define his entire premiership; India is in a totally different set of circumstances than Britain after all. But it’s an indicator of how important budgets are. Unlike the United States, parliamentary systems demand regular, complete budgets. If they don’t pass on time, new elections are called immediately. There are no shutdowns, no continuing resolutions, and no legislative fiascoes without consequences. 

That doesn’t mean ballyhoos can’t be raised over what’s actually in those bills; they are, and Modi has plenty of room for error. Steven made a very pessimistic prediction a few weeks ago in which he worried that the fiscal discipline Modi promised would necessitate draconian cuts to social welfare programs. That’s a sound basis for worry. The Prime Minister, despite the uniqueness attributed to him by Indian media, resembles most right-of-center politicians with a pro-business bias. On economic stimulus, their professed focus is largely on infrastructure, human capital, and research investment as opposed to social welfare programs (an all together legitimate and economically sound preference). However in practice, their budgets end up slashing more spending than they adequately invest. This has been true of Tony Abbott in Australia, David Cameron in Britain, and Stephen Harper in Canada.

But unlike those three Western Prime Ministers, Modi has a track record in massive infrastructure projects through his tenure in Gujarat where he received widespread praise for dams, road building, and power grid projects. Immediately upon entering office, he set his sights on creating a “Diamond Quadrilateral,” a cross national high speed rail project that pays homage to his BJP predecessor’s “Golden Quadrilateral,”  a national highway which was finished under the last two Indian governments. Additionally, Indian economists and businessmen aren’t nearly as hawkish on the deficit as their Western counterparts; instead they’re demanding expanded investment. It would boost India’s productive capacity, increase the ease of doing business, and likely raise demand. Makes sense right?

But unlike Australia, Britain, or Canada, India actually has a “deficit problem.” India’s cross breed currency regime (alternating in the midway between a fixed and floating currency) leaves dangerous room for a crisis should India’s balance of payments deficit continue. In this kind of crisis, one where India would run out of foreign reserves to pay for imports, the rupee would have to rapidly lose value or public expenditure would have to be drastically cut. For now a far off event, India got a shadow glimpse at it when the rupee’s value plunged in 2013. Considering that no politician or Central Banker in India is even remotely interested in adjustments to India’s currency regime, the focus on curtailing deficit spending will continue in the short-to-medium term. That’s why Arun Jaitley, India’s new Finance and Defense Minister, joins his boss in calling for fiscal retrenchment even while advocating increased investment.

But that’s impossible. You can’t cut your cake and eat it whole. Provided that nothing about the rupee’s exchange mechanism or India’s trade imbalance changes, Narendra Modi will face this impossible duality in all his future budgets. Steven’s prediction was that Modi would err on the side of massive cuts. Considering the circumstances, his first budget will likely try and balance the two opposing forces of cuts and investments instead.

How is this possible? The thinking goes that the government cuts in areas where there’s massive amounts of unneeded or even harmful spending. To placate Steven’s concerns, this isn’t in welfare programs; rather, India has a subsidy problem. The Indian government subsidizes spending on everything from oil, to food, to pesticides. It keeps prices down and while holding populist anger at bay. But economists frequently criticize these subsidies as wasteful market distortions. To someone like Modi, they’ll be an easy target and his electoral mandate may just let him try what his predecessors couldn’t. Accordingly, the government then theoretically directs investments to attract foreign capital and make it easier for business to operate. The thought is that this slowly brings down the trade imbalance by increasing the capital account surplus (the foreign investment coming in) while decreasing the current account deficit (the money flowing out). The combination of these two then decreases the balance of payments deficit (a negative total of current account + capital account excluding reserves) which hopefully starts to turn positive over time. Therefore, the government offsets the possibility of a currency crisis while increasing internal business activity. A win-win right?**

Here’s the problem. It’s a delicate strategy that’s next to impossible for even the most disciplined governments to pull off. The angel that used to save these governments in the past was that massive trade deficits run by the United States would create a huge market for foreign companies. But the United States is still recovering from its own recession and has been slowly pulling back on monetary stimulus (likely thought to be the trigger for much of the recent economic trouble in developing countries). On top of that, without the surge in foreign demand, India’s internal demand is likely to suffer from subsidy cuts on consumer goods. It’s easy to criticize subsidies but they came into existence (and stuck around) for a reason; they’re popular because they make goods cheap. India’s still a terribly impoverished country and it’s easy to forget that while walking in affluent sectors of Mumbai or Delhi. 

There’s another problem. Its pretty well accepted by this point that Modi will increase infrastructure investment, which is good. But not all investments are created equal. Take Indian Railways, a sector so important that its budget is released independently of the main budget. High speed rail would be a great addition to India’s transportation system, but it would cater to a select population of rich and (maybe) middle class passengers who’ve already been defecting to airlines in recent years. But the railways are still the abode of the poor man in India. The old trains and their tracks, which still dominate India, are in drastic need of repairs and upgrades. If the repairs aren’t made, then the government will have nothing to show for the recent price hike. There’s a worry that funds spent on high speed rail could sap money for basic improvements that would be felt far more broadly. In short, will the new government focus on the big flashy projects, or the more subtle, less visible, but more effective improvements? 

My predictions of a balanced strategy comes, as you can see, with huge drawbacks. If the upcoming budget takes this trajectory, then growth likely wont return back to 8-10% for some time. But that wouldn’t entirely be Modi’s fault. More than we realize, political leaders can be helpless to events beyond their control and their nation’s economic performances are often dictated more by those events than by those leader’s actions. That’s not to say reforms don’t count; on the contrary, reforms often exacerbate or soften trends. But India’s situation is reflected in other developing countries for a reason. American policy in particular is a huge determinant of what goes on worldwide and it isn’t in the developing world’s favor right now. 

That being said, on July 7th, Narendra Modi will demonstrate his vision of Indian economic policy to the world. I truly hope that he beats my predictions; perhaps there’s a way out of the conundrum that I haven’t foreseen. But it looks grim. On a more positive note (which I think the new Prime Minister would appreciate me ending on), his electoral clout allows him to push things in a manner that Indian governments haven’t been able to since the eighties. In that, there lies the possibility for renewed focus on corruption and managerial competence, two things India needs as much as a change in economic policy.

It could lead to other policies as well, ones not as great. But either way, we’ll be there to witness it. 

Chirag 

**Technical Note. When I indicated the term “Balance of Payments Deficit (or Surplus),” I was speaking in the narrow sense of not including the effects of foreign exchange reserves when totaling the capital account. Had those been included, balance of payments would have been zero since Capital Account + Current Account = 0

The deficit India has just means that India is having to buy Rupees on the foreign exchange markets by selling its own foreign exchange reserves. However, should India run out of foreign exchange reserves, the  equation above would have to be drastically altered inducing the Balance of Payments Crisis.