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The praful bidwai column

The Left in the ascendant as markets fail

There's a lesson in this for South Asia. Many of our policymakers live in a time-warp. They believe that the market is infallible. It's high time they changed course and adopted a "social economy" approach, which believes in prudent state intervention or direction.

Praful Bidwai writes from New Delhi
AN unforgettable recent photograph shows Spain's new defence minister, Carme Chacon, reviewing a parade by crisply uniformed soldiers, with her sevenmonth pregnancy evident through a belly bump.
Ms. Chacon, who has no military experience, is one of 9 women in socialist Prime Minister Zapatero’s 17-member cabinet, probably the world's only cabinet where women outnumber men. Equally noticeable is the contrast between the macho, aggressive culture of the military in keeping with its lethal role, and the symbolism of new, tender life coming into being.
Ms. Chacon's appointment as defence minister is the boldest statement of gender equality by a government which has legalised gay marriage, streamlined divorce procedures, forced political parties to field more women candidates, and passed a law to promote gender balance in workplaces.
Spain is only one of many countries, which have witnessed pro-democracy, or more radical, shifts in 2008. Pakistan is an important example of the first. The second category includes Cyprus, Nepal and Paraguay, where committed Left-wing parties have come to power.
Like 2007, when Mr. Nicolas
Sarkozy won in France, 2008 too witnessed Mr. Silvio Berlusconi's victory in Italy. But Mr Sarkozy's approval ratings have fallen from 71% to 32%. And Mr. Berlusconi is outraging people by mouthing foul antiimmigrant rhetoric. Neither government is expected to do well.
By contrast, the pro-Left changes appear more lasting and carry new possibilities.
In Cyprus, Mr. Demetris Christofias became the first communist in a European Union state to come to power after the Cold War's end. He scored a convincing victory in an election seen as key to the reunification of the island partitioned between its Greek and Turkish communities.
For the first time since the 1974 Turkish invasion, Cyprus's Greek and Turkish communities will be headed by politicians willing to negotiate a settlement.
The Green Line dividing them has aleady been crossed -- for the first time since 1963. This generates hope for a historic reconciliation, with wide implications
Nepal represents world-historic change. Its evolution as a federal, democratic republic holds out hope for all of South Asia. Equally significant is the South American nation of Paraguay, where the Colorado party of former dictator Alfredo Stroessner was defeated after 61 years by former Catholic bishop
Fernando Lugo.
Mr. Lugo, who inherits the great tradition of Liberation Theology, stands for radical reform in a country that has the region's second-worst distribution of weal th.
He's part of a social movement which has protested since the 1990s against land shortages suffered by poor farmers and demanded expropriation of large landholdings illegally' gifted to army generals and cronies.
Paraguay has now joined Brazil, Venezuela, Argentina, Chile, Bolivia and Ecuador, which have recently experienced shifts to the Left/Centre-Left. This is a major change in the balance of forces within the US "sphere of influence," in which America has repeatedly intervened to sabotage radical movements and topple elected governments.
No less important is the antiglobalisation revolt sweeping through Latin America, which is now the world's most strongly anti-neoliberal continent. That's because it went through the most severe enforcement of the World Bank-IMF's "Washington Consensus" policies for over two decades.
Although a few of these new progressive governments, especially Brazil's, have adopted a centrist course, they're now under pressure from more radical regimes, such as that of Venezuela's Mr. Hugo Chavez, to
join efforts at containing US influence in the region. Venezuela, flush with oil revenues, has offered generous funding, besides subsidised petroleum, for this.
Last October, Venezuela, Brazil, Argentina, Bolivia, Ecuador, Paraguay and Uruguay established Banco del Sur, a development bank championed by Mr. Chavez to consolidate regional trade and growth based on indigenous resources.
The bank will create a new financial architecture for South America to ensure that its "development won't be put at the service of other countries." This initiative has huge implications. These far-reaching developments are occurring amidst a spiralling crisis in the global financial markets.
Economist Paul Krugman calls this "an epic crisis." Former US Federal Reserve Chairman Alan Greenspan says the crisis is likely to be judged in retrospect as "the most wrenching" since World Warll.
The Financial Times' arch-neoliberal ideologue Martin Wolf declared March 14, when the Bear-Stearns bailout was announced, as "the day that the dream of global free-market capitalism died."
The crisis, precipitated by reckless lending by US banks to unsecured high-risk borrowers, is unfolding into a disaster that will cost the world $ 1,000 billion.
There's growing agreement even among free-marketeers that the Anglo-Saxon model of capitalism is in grave crisis. This has dominated the world's most powerful economies since the 1980s.
The crisis is rooted in market failure related to the incalculable risks of loans, which banks deliberately concealed in the hope that hiding the risks would minimise them. The result was the opposite: enlargement and spreading of risks, which still remain incalculable.
To reduce the risks, neoliberals, who for years condemned state intervention and multi-billion dollar handouts to rescue failing banks, are now begging for intervention!
Everybody, from IMF economists to private bankers, has suddenly discovered the virtues of the state and Keynesian policies of putting purchasing power into the people's hands.
The crisis isn't confined to the financial markets. It's spreading to the real economy. There's a significant slowdown in the US and European Union, aggravated by high oil prices, food shortages -- private stores in the US and Japan are rationing the amount of rice consumers can buy -- and a sharp rise in primary commodity prices.
The question is no longer if there will be a recession, but how severe it will be, and whether even big state bailouts will merely postpone the day of reckoning.
There’s a lesson in this for South Asia. Many of our policymakers live in a time-warp. They believe that the market is infallible. It's high time they changed course and adopted a "social economy" approach, which believes in prudent state intervention or direction. Praful BJwai rs an i Indian columnist.