Two bright spots stand out in this gloom: booming stock markets, and the rise of artificial intelligence, which, on balance is likely to do more good than bad
The year that is drawing to a close has been violent, dominated by war and civil war, war-induced starvation and disease, economic slowdown, climate change-induced extreme weather events and the rise of right-wing politics in different parts of the world, creating schism and violence. Two bright spots stand out in this gloom: booming stock markets, and the rise of artificial intelligence, which, on balance is likely to do more good than bad.
War straggles on in Ukraine, with Ukraine’s counter-offensive having petered out and Russia being shocked, once in a while, by Ukrainian drone strikes that disable a warship in Crimea or even reach deep inside Russia. What goes on in Gaza is less war and more slaughter, human sacrifice to save Israel’s failure of a prime minister, Benjamin Netanyahu’s skin, dressed up as a mission to finish off Hamas.
Israel-Hamas conflict
Hamas offered this lifeline to Netanyahu, reeling from protests in which hundreds of thousands of Israelis marched against his proposals to hobble the judiciary, when it undertook a terror strike within Israel on October 7, killing 1,140 people, the majority of them civilians. Hamas fighters and some other jihadi groups accompanying them took over 200 Israelis captive and carried them off to Gaza.
Netanyahu has vowed to fight on till the Hamas is wiped out. This is an excuse for not ending the war: Hamas has a political wing, the leadership ensconced in Qatar, beyond Israel’s reach, besides the military wing fighting back in Gaza, which might theoretically be wiped out in its entirety. To end the war is, for Netanyahu, to face reckoning, not just for the massive intelligence failure that led to the biggest attack sustained by Israel since its inception in 1948, but also for trying to undermine Israeli democracy by subordinating the judiciary to the government of the day, not to speak of the corruption cases against him.
Civil war simmers on in Myanmar, Sudan, Yemen, Ethiopia, Somalia, the Central African Republic, the Democratic Republic of Congo and Libya. Many countries face jihadi and drug cartel insurgencies. These kill and maim thousands of people, and disrupt normal life and economic activity. The year has been a big one for migration, too. New permanent migrants to member countries of the rich club OECD stood at 6.1 million in 2022, and initial estimates suggest that similar numbers would have crossed borders in search of refuge or a better life in 2023, as well.
Global warming
As if this misery was not enough, global warming has been setting off forest fires, flash floods, cloudbursts, cyclones, and heatwaves, killing people, animals and smaller creatures, destroying established habitats and cropping patterns. Regions that grew cocoa and coffee are getting too hot for them, and certain kinds of grapes are no longer viable in their traditional growing regions, but become new crops in lands once considered too cold for them.
The Conference of Parties to the UN Framework Convention on Climate Change, in its 28th edition held in Dubai this year, under the presidency of an oil company CEO, urged the world to steer away from fossil fuels and set up a Loss and Damage Fund to compensate vulnerable nations for the damage caused by climate change.
Carbon dioxide removal (CDR) came into focus for the first time, much to the chagrin of traditional climate warriors, who see this as a ploy to not cut back on fossil fuels. But the math clearly shows that just by cutting down on additional emissions, however aggressively, the world cannot halt the globe’s onward march into the disaster zone of the average global temperature rising 1.5 degrees Celsius or more above pre-industrial times. The world needs to show negative emissions, meaning CDR, preferably for use, rather than for storage.
Policy-induced slowdown
2023 has been a year of policy-induced economic slowdown in the rich world, in an effort to combat inflation. Inflation had originally been stoked by supply-side factors, ranging from COVID-disrupted supply chains to fuel shortages arising from the West’s boycott of Russian oil and gas following Russia’s occupation of Eastern Ukraine. The excess liquidity that has been sloshing around the world’s financial networks, ever since the quantitative easing in the wake of the global financial crisis of 2007-09, was joined by another flood of money injected to alleviate the pandemic-induced distress. This kept demand buoyant, instead of consumption slumping in response to higher prices.
This led to a cycle of interest rate hikes in the US, Europe and much of the developing world. Developing countries cannot risk disturbing the interest rate differential between them and the US, so as not to induce depreciation of their local currencies, as such depreciation would import inflation into their economies via higher energy and commodity prices in local currency terms.
Higher rates have depressed growth everywhere, except in the US, which has grown at over 2% since the US Fed began to raise interest rates early in 2022, growth rocketing to 5.2% in the July-September quarter, almost on par with China’s growth rate of 5.3% for the same quarter. The growth rate for the Eurozone, as a whole, is forecast to be 0.6% for Calendar 2023, and negative for its biggest economy, Germany.
China is paying the price for excess leverage by its companies. Country Garden, its biggest property developer, postponed a loan repayment instalment and another property major, Evergrande, filed for bankruptcy, under a provision that gives it protection from creditors while it tries to turn itself around.
With two of China’s three major growth drivers, property and exports, done in, respectively, by excess debt, and by the global slowdown, growth depends on its tech industry, the most dynamic segments of which had had their wings clipped a couple of years ago by Xi Jinping’s insistence that no part of Chinese society should feel free to fly above the limits of the Chinese Communist Party’s wisdom. Consumption is constrained by the traditional habit of saving and the diffidence towards splurging, induced by a slowing economy, paucity of jobs that appeal to university graduates, and the prospect of savings invested in housing going up in smoke, as large property companies go down.
Highly skewed growth
In India, the economy has been projected to grow at 7% this fiscal year, after the economy registered strong growth of 7.6% in the July-September quarter. However, the evidence suggests that the growth that is taking place is highly skewed towards the rich, with the less well-off yet to participate fully in the ongoing recovery from the pandemic. Small cars and affordable housing have witnessed lacklustre sales, even as big homes and big cars have been seeing brisk offtake. Fast-moving consumer goods have been belying their name this year, especially in rural areas, and FMCG majors pin their hope on recovery in 2024.
The hopeful sign is that bank credit growth has touched 20% year-on-year in December 2023. At the same time, the RBI has sought to curb retail credit, which could hurt credit access by unincorporated enterprises.
The government has been the biggest driver of fixed capital formation. Only when the private sector starts investing on a large scale can growth pick up on a sustainable basis. The economy has seen a slew of initial public offerings by companies, many of them to enable exits by venture capital investors, but also to raise capital to finance new investments.
Deteriorating polity
If the economy is on the mend, the polity is deteriorating. Enactment of three new laws to replace colonial-era laws, the Indian Penal Code, the Criminal Procedure Code and the Indian Evidence Act, restricts citizen’s freedoms further, arms the police with excessive powers, including arrest without a warrant in special cases, to attach property without the sanction of the executive magistrate required at present, to handcuff those arrested, and to keep them in custody for as long as 90 days, instead of 15 days as at present.
Parliamentary democracy, such as it is in India, is on the decline. The ruling party’s grip on power has tightened, as has its willingness and ability to use it ruthlessly, sometimes merely to demonstrate the degree of power it enjoys ¬¬– for example, the recent suspension of 146 MPs and passage of crucial laws in the absence of much of the Opposition in Parliament. More sinister has been the readiness to let Manipur burn, in order to score propaganda points outside the Northeast, about fighting a Christian conspiracy to undermine the integrity of Hindu India.
North-South divide
The Congress won two states in the South but lost three in central and western India. The Congress holds office only to the South of the Vindhyas, while the BJP dominates the political landscape north of the Vindhyas. This has given rise to talk of a North-South divide. This ignores the steady inroads being made by the BJP into the political consciousness of South India, using the mixture of religion and nationalism that seeks to subvert constitutional values.
Instead of any serious attempt to put its house in order, the Congress leadership has decided to set out on yet another fruitless yatra. Its leaders, the Gandhis, face assorted charges of financial impropriety. As a demonstration of its absolute grip on power and ruthless readiness to wield it, the government could well arrest the Gandhis. Absolute power, it would appear, allures absolutely, in the case of the average Indian. Overweening power that corrupts democracy acts like a charm on Indian voters, instead of repelling them.
Endorsing govt stance
The judiciary places itself on the right side of both liberal opinion and the government: the one, by obiter dicta and public lectures that have no operational imperative, and the other, by endorsing the government’s position on matters in which the government has a serious stake.
On Article 370, the Supreme Court has endorsed its removal, while faulting the attempt to substitute an amendment to the Constitution with a Presidential Order. The court has ruled that Parliament can make laws with far-reaching implications for a state while it has been placed under the President’s rule, leaving it to the court itself to decide the boundaries of the exercise of such authority.
Enhancing global profile
India has raised its global profile as a regional power, by leveraging its crucial role in containing China to strike an independent note on Ukraine. While a successful G20 summit in India has given the ruling side plenty of scope for self-aggrandisement, and encouraged the prime minister to offer to host another global summit, the COP on climate change, in the penultimate year before the next general elections after the ones in 2024, the fact remains that global standing derives from economic and military heft and the readiness to wield it. On that score, India has a long way to go, to become a global player.
Alleged assassination attempts against Sikh separatists abroad have drawn much public and diplomatic attention to New Delhi’s conduct. This has the advantage of curbing any enthusiasm for external adventurism aimed at securing domestic influence in the run-up to the 2024 elections.
The coming year presents all generations of Indians who missed fighting for freedom from the British a chance to join a second freedom movement, to build democracy in India, going beyond the form and its rituals, to realise its substance.
(The Federal seeks to present views and opinions from all sides of the spectrum. The information, ideas or opinions in the articles are of the author and do not necessarily reflect the views of The Federal)
