Antitrust Laws
A law which restricts anti-competitive behaviour can be traced back to the Roman Era where there were rules of prosecution if supply ships were to be stopped in their course. Cut to the modern times and Google, Amazon and MasterCard get slapped with Antitrust lawsuits that could cost the multinationals billions of dollars.
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The Sherman Act of 1890; followed by the Clayton Act and FTC Act in the US serve as the basis of various Anti-Monopoly and Competition Laws that came into being in the 20th century which aim to prevent the formation of unethical cartels and obstruct strategies of firms which seek to assume dominance unethically in a bid to ensure the competition in the marketplace is not hampered.
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India too has a Competition Commission of India that provides efficient legislation to dispense justice in commercial matters. Most of these laws are conceptualized to objectively promote consumer welfare and ensure that entrepreneurs have an opportunity to compete in the market economy where free and fair competition is indispensable.
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In the words of Winston Churchill, “the antitrust laws have the benefit of being better than the alternatives”. While these laws are often argued to be an expensive nuisance and a crippling burden for most successful firms, perhaps the need to keep trading abuses in check can only be done by stifling regulation or government intervention in the form of antitrust laws.
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Here, we present to you the popular divide of opinions surrounding these regulations.
In Favour
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The Competition laws, largely dubbed as “Anti-Trust Laws” , which came into existence in the US in the late 19th Century in response to the case of The Standard Oil Company trust (which practically controlled the market in oil, lead and whiskey) have long been the subject of contentious debate.
These laws were established to ensure that competition doesn’t get undermined due to dominance of a few firms.
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Within mainstream theories, society’s well-being is the most desirable outcome of competition and its repeatedly stressed that the perfectly competitive market situation, irrespective of how utopian and sought after it may be, is the way to it. Other points that are usually emphasized are efficiency, free and fair competition, and economic development.
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The Antitrust laws aren’t there in place to penalise successful or the most globally prominent players of this ever-changing dynamic era. These laws instead, are meant to redress the fundamental flaw that has proved to be intrinsic to unchecked competition.
In all practicality, it can be seen that market economies have been increasingly swayed by the presence of one firm or a cartel/collusion of firms that dominate the entire market.
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The resultant market witnesses the deterioration of competition and leads to the stifling of commercial fair play. Competition, often viewed as a long-term dynamic process, ensures sellers are in a neck to neck battle for capturing market share, and the antitrust laws oblige dominant competitors to be in their best behaviour and not abuse the interests of customers.
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A free-flowing competitive market works when competitors in a system set prices honestly and independently.
When there’s collusion, prices are inflated and the customer is cheated. Predatory pricing is also an infamous activity which heavyweights indulge in, where, under the garb of super-efficient competition, prices are driven down to a point where the smaller firms fall out of business. In France Telecom SA v. Commission, it was ruled that an internet company was to pay $13.9 million as the sole intention behind reducing their prices below production costs was to kill competition.
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We’re aware of how the volatile telecom sector in India suffered a blow when the Supreme Court ordered several carriers to pay $13 billion in accrued fees under adjusted AGR. Vodafone Idea Ltd., faces a bill of $7.5 billion, a burden that is projected to not be paid off until the next 15 years eventually leading to a duopoly of Bharti Airtel and Reliance Jio Infocomm as the only survivors of the “Great Indian Telecom Wars”. There’s a high possibility if and when a duopoly is established, prices will increase exponentially and customer interests will be neglected. That’s where regulations like Antitrust laws step in. Government intervention and policy protection for an ailing industry in such scenarios becomes necessary to prevent the catastrophic nature of negligible competition.
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Recently, Google was under the FTC scrutiny with fines up to $6 Billion.
The Competition Commission of India too fined the entity for its biased search results. The “Fair Search companies” – Expedia, Hotwire, Kayak, and Microsoft Bing – argue that Google abuses its dominance in search and online advertising to stifle competition. Competition authorities thus seek to inspect and prevent any malpractices by such giants in a bid to serve consumer interests better.
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Critics of the antitrust laws argue about their uncertainty and subjectivity but the alternatives are worse.
If there were no regulations in place, a dominant firm or an oligopoly might emerge, within the core sectors, such as telecommunications, energy markets and various others in which there are significant “barriers to entry” and could detrimentally affect these markets by leading to the exclusion of rivals from the market along with a probable imposition of unfair trade terms, due to the unprecedented control over partners, rivals and even the ultimate consumers.
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The antitrust laws have always been a safeguard against competitive malpractices and seek to protect and promote healthy competition and direct them across various lines of commerce. They are absolutely not in place to obstruct or discourage innovation.
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Antitrust laws have been considered pro-market and pro-business in the manner of their historical conception. They are in place majorly due to the lack of better alternatives, so that they can govern the actions of some of the most powerful and protect the interests of the society and consumers at large.
Against
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Antitrust Laws find their place in traditional micro-economic theory but have, over the course of a century, proved to be an unwarranted and superannuated concept, the application of which is lacerated with failures. The laws have become an instrument in the hands of the government using which it controls the expansion of monopolies and aggressively reduces their profits whilst putting on a facade of competition-promotion and consumer-welfare.
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In fact, modern economists have come up with what is termed the Antitrust Paradox; antitrust laws, a public policy that was designed with the objective of aiding consumers has come to hurt them instead. This public-choice perspective on the origins of antitrust law is reinforced by recent historical research and by the fact that more than 90 percent of all antitrust litigation involves one private firm suing another.
There are principally two explanations offered in the justification of the paradox:
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One, that Antitrust regulation was never intended to protect consumers. It was intended to shield some firms from the efficiency of other firms and, like tariffs, was fundamentally protectionist. This is reinforced by the fact that more than 90 percent of all antitrust litigation involves one private firm suing another.
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Two, that theoretical ambiguities might've contributed to massively misdirected antitrust enforcement effort. This essentially means that the regulators, the courts, and the academics that rationalized antitrust enforcement were fundamentally confused about certain basic economic concepts such as “competition” and “monopoly power.”
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Discrepancies between theory and application started developing just after two decades of their inception. The inherent faults of the laws became evident when companies like Standard Oil of New Jersey, American Tobacco and Alcoa were taken to court.
US v/s Standard Oil of New Jersey (1911)
"Standard Oil monopolized the oil industry, destroyed rivals through the use of predatory price-cutting, raised prices for consumers, and was punished by the Supreme Court for these proven transgressions."
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But what the government-funded media agencies forgot to bring to light was the fact that Standard's share of the market declined for decades prior to the antitrust case (64% in 1907) and there were at least 137 competitors (firms like Shell, Gulf, Texaco) in oil refining in 1911, along with how the Supreme Court never made any specific finding of guilt on the conflicting charges of predatory practices; and that petroleum market outputs increased and prices declined for decades during the alleged period of "monopolization" by Standard Oil.
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The Standard Oil case is a testament to how vague Antitrust Laws can be.
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The laws fail to clearly define what constitutes an antitrust violation. Instead, the onus is left on the bureaucrat who could be using the government given authority to fleece these organizations.
In this case, the Supreme Court effectively used Antitrust Laws to break up the Standard Oil holding company.
US v/s American Tobacco (1911)
"American Tobacco put together a large diversified tobacco company through merger with smaller specialty companies. The American Tobacco holding company was broken up by the Supreme Court because it discerned some 'vague' intent to monopolize through mergers."
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But the company was incompetent in monopolizing the tobacco industry as the government alleged, because it was unable to raise the prices of tobacco products due to increased competition from several thousand tobacco companies entering the market owing to easy availability of raw materials. There was a total absence of demonstrable injury to consumers of tobacco products.
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This case effectively demonstrates the fact that Antitrust Laws make Mergers and Acquisitions difficult.
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In fact, mergers and acquisitions lead to economies of scale whereby enterprises are able to reduce costs by increasing production. By preventing them, antitrust laws impede the most efficient arrangement of capital. These laws protect inefficient managers at the cost of the greater economic good.
US v/s Aluminium Company of America (1945)
"Alcoa faced 150 separate government charges including monopolization of bauxite and waterpower sites for power-generation. An appellate court in 1945 (acting in lieu of the Supreme Court) decided that expanding outputs and lowering prices illegally excluded rivals from the opportunity to compete and thereby violated antitrust law."
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But before the appellate court passed its judgement, Alcoa battled at a subsidiary court for 13 years and was dismissed of all the charges on accurate grounds. It was held that Alcoa innovated rapidly, expanded aluminium refining capacity and outputs continuously while taking a very modest return on its investment. The final judgement, however, proved that economic efficiency in service to consumers now counted as illegally exclusionary and ultimately a violation of law.
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The defeat of Alcoa is testimony to a limitation of the Antitrust Laws that has hitherto been ignored: they seize consumer power in influencing decision-making in the economy. Consumer needs are best met not by extensive mechanisms and utopian regulations but by free markets. Antitrust Laws undermine the market mechanism itself.
But one needn’t look outside the nation to impugn the laws, India itself provides several instances—like the CCI probe into e-commerce platforms in the country—where the faults of the laws become evident.
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CCI Probe (2019)
"The Competition Commission of India (CCI) stated that exclusive arrangements between mobile phone brands and e-commerce platforms, as well as allegations of e-commerce companies giving preferential treatment to certain sellers "merits an investigation". CCI has asked the Director General to investigate the alleged predatory practices of Amazon Inc. and Walmart's Flipkart after being approached by the Delhi Vyapar Mahasangh.”
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The investigation is the latest setback for Amazon and Walmart's Flipkart, which Indian brick-and-mortar traders allege, violate the country's foreign investment rules and burn billions of dollars to offer steep discounts that hurt smaller traders.
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A threatening possibility lingers over these e-commerce giants in India: lack of innovation due to persistence of antitrust laws, consequently killing their businesses. The underlying objective of any company is to earn maximum profits and grow to its maximum potential. The problem with antitrust laws is that it prevents the company from growing beyond a certain point. As a result, technological development stagnates. Also, since competition is restricted by antitrust laws, innovative companies cannot reach the marketplace. The end result of antitrust regulations is that innovation is stifled and economies perform at a suboptimal level.
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Since antitrust regulations unambiguously lower the efficiency of the market process and impede innovation, there’s little reason to support the continuation of such regulations.
To Sum It Up
Written By
Mann
Mihir
Raghav
Shobhit
Universal Basic Income
The thought of a basic income can be traced back to the period of the Renaissance. “Instead of inflicting these horrible punishments, it would be far more to the point to provide everyone with some basic means of livelihood, so that nobody is under the frightful necessity of becoming first a thief than a corpse.” These were the words from Thomas More’s Utopia. Clearly the idea of Universal Basic Income (UBI) or any minimum guarantee scheme that is widely debated around in the 21st century is nothing new and is believed to be the economic salvation in the midst of the current crisis.
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Impending decimation of jobs due to automation along with poor results of current welfare schemes and the ongoing economic crisis leave UBI to be the inevitable choice, or that’s what many advocates believe it to be. UBI is a model for providing all citizens of a country or a geographical area with a given sum of money, regardless of their income or employment status.
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UBI currently seems to be the ultimate policy of the 21st century as it could be the much-awaited change in electoral politics. Various governments and political parties believe that UBI would be the alternative to the old and monotonic policies which have failed miserably in their purpose of catering to the needs of citizens and safeguarding their interests. Andrew Yang, the US presidential candidate for 2020 elections, has proposed Freedom Dividend, a form of UBI to protect Americans from Silicon Valley-fuelled job losses. Even the economic survey report of India calls UBI a radically new vision and the shortest path to eliminating poverty.
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Countries like Kenya, Canada and Finland have also piloted versions of UBI experiments where proponents believe UBI to be the solution for eradicating poverty and ensuring social security among the citizens. Critics, however, argue it to be contradicting its own purpose as such plans are too costly, not practical, and would disincentivize people to find jobs.
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The unconditional nature of UBI, feasibility of the scheme and its impact in the long run makes it a contentious policy and the recent decision of Finland to opt out of its UBI pilot programme beyond 2018 has raised questions amongst economists about the sustainability of the model.
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Here we present to you various arguments regarding UBI, presented in the signature “Divide” style- with the left side arguing one end and the right, another.
Automation
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The progression of time has always been accompanied by augmenting productivity. In the 21st century, this augmentation is being carried out by Artificial Intelligence. While the increase in productivity has always led to a higher income for most people, the revolution driven by AI may not necessarily continue this trend. Instead, it aspires to replace human beings in every possible profession.
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According to a McKinsey report, AI can potentially leave 800 million people jobless globally by 2030.
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One could argue that once AI has established its firm presence in the economic setup, there will be increase in job openings in the technology sector and employment pattern would shift towards technology driven jobs but for developing countries like India where expenditure on education is substantially low, it will take much longer for the job seekers to cope with the changed employment patterns, creating a situation of extensive unemployment.
The current state of affairs thus warrants the remodeling of existing welfare policies and call for government intervention in the form of UBI.
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With advent of UBI, people will be able to fulfil their basic needs safeguarding the world economy from catastrophic consequences of AI. Elon Musk, Richard Branson and Sam Altman have all supported the idea of paying everyone a monthly sum without means testing, as robots and AI threaten to take over existing jobs.
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The basic premise behind UBI is that it provides financial independence to people so that at least their basic necessities are fulfilled even when they are unemployed.
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Need For UBI In India
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Other than the threats presented by Artificial Intelligence, there exist other reasons as to why UBI should be implemented, specifically in context of India.
Money wasted in the inefficient distribution of subsidies is money that is not available for other developmental activities. The Economic Survey underscores why the current system of price subsidies in India is a leaky bucket. Owing to these subsidies, the government runs up big deficits year after year and is perpetually short of cash to fund new projects. The program ends up being rather prone to corruption, because the very people involved in monitoring the program often block payments. Consequently, the impoverished communities are deprived of any material improvement on the economic and social front. This is where UBI steps in.
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The Economic Survey of India estimated that an annual transfer of 7,620 rupees to 75 percent of India’s population would push all but India’s absolute poorest above the 2011– 12 poverty line.
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Nobel Laureate Abhijit Banerjee strongly advocates the idea of Ultra UBI, a proposal which assumes that it would be fairly easy to exclude 25% of people from the welfare program. It may indeed be possible to introduce a mild form of self-selection. This would require each beneficiary visit an ATM every week and put their biometric ID into the system, whether or not they take out the money and would have the dual advantage of eliminating ghost claimants and making it too much of a hassle for the wealthy to want to claim the benefit in a bid to battle the problem of poor targeting under most welfare schemes.
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The pilot program conducted in the state of Madhya Pradesh in India resulted in improvement of basic living conditions in basic income villages starting with improvement in sanitation and better access to drinking water, especially in tribal villages. It had a statistically significant impact on children’s nutrition (in both general and tribal villages) particularly on nutrition levels of female children and improved capacity of households to buy from the market, resulting in a qualitative shift in their food basket. Interestingly, more money did not result in increased expenditure on alcohol.
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Besides, UBI would present financial security to more than 80% of the Indian population, which is still employed in informal sector and would help Indian women gain greater financial independence thus enhancing gender equality. Lack of income has long restricted women from making their own choices, even in situations of abuse and violence. A UBI would empower them with autonomy to take life decisions.
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One of the most commendable features of UBI is its ability to encompass a wider target base when compared to other existing social welfare programs. Some of these programs require people to be unemployed and have no assets i.e. these programs come into picture only when people have hit the rock bottom. UBI strives to prevent these people from sinking to that bracket in the first place. The UBI pilot project executed in Dauphin, Canada stands to be one of the most successful UBI projects implemented globally and highlights how UBI can contribute towards reduced hospitalization rates and improved education and health index.
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Demotivate Workforce?
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A very popular argument surrounding UBI is that it demotivates people from working. Let’s take a look at results from Alaska to get an insight into the credibility of the said argument. The Alaska Permanent Fund, a state-owned investment fund established using oil revenues has since 1982, paid out an annual dividend to every man, woman, and child living in Alaska. In 2015, the dividend totaled $2,072 per person.
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Interestingly, even after the implementation of this program, each Alaskan worked at the same rate as seen in other comparable states such as Utah and Wyoming.
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The findings can be explained by the fact that when people get extra cash, they tend to spend it. Surrounding businesses, witness increased sales and hire more employees to handle the boom. The two put together end up having no detrimental impacts on employment.
Decades of research on cash transfer programs have revealed that the only people who work fewer hours when given direct cash transfers are new mothers and kids in school. In several studies, high school graduation rates shot up. In some cases, people even started working more, clearly reflecting that apprehensions over UBI disincentivizing people from working are uncorroborated. A Harvard and MIT study also refutes the said argument by revealing how no effects of cash transfers on work behavior have been brought forth yet.
The Silicon Valley Argument
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Tech titans and academicians across the world are concerned that the robots and artificial intelligence they’ve built will rapidly displace humans in the workforce, or at least push them into dead-end jobs. It is from this sphere that much of the resurgent interest in UBI stems. Tech billionaires justify their position against UBI in what is termed as the Silicon Valley Argument. One of the biggest problems, they say, is that a base sum that would allow people to refuse work and look for something better would turn out to be awfully expensive proposition, costing most countries around 5-35 percent of their GDP.
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The system of UBI has already been experimented in several countries like Finland, Switzerland, Scotland, Germany and Namibia but nowhere was the rejection of the idea as overwhelming as in Switzerland in 2016.
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The main reason why Swiss voters refused to abide by UBI was its fiscal implications. Even in India, most of the arguments in favour of the system are based on several assumptions, which fail to correspond with the economic reality. Let’s discuss some of them in detail.
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The amount of money being spent on various subsidies is justified.
Constituting 14% of the country's GDP, this expenditure on non-merit-based subsidies should be minimised since this assumption is grossly incorrect. In fact, these savings should be used to boost capital spending which India currently needs.
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In the face of the current economic slowdown that the economy is battling with, tax collection has grown by just 1.4 percent. With such negligible growth in revenue, losing out money on subsidies to finance a UBI scheme seems farfetched. The likelihood of India witnessing implementation of UBI in any form in the near future thus seems remote.
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The roll-back of subsidies will be easy.
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Subsidies on necessities will be especially difficult to roll back. Even if subsidies are successfully withdrawn, this will put the subsidy-receiving sections of the population at a comparative disadvantage to the relatively well-to-do. Politically, therefore, it will become even more difficult to arrive at the amount that will need to be transferred under UBI if subsidies are rolled back.
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The reduction in revenue given up will increase resources for UBI.
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The revenue forgone is a reflection of the problems in governance, particularly tax administration which needs urgent reforms. The government funds are not looking at any actual rise as such that they can be diverted to financing the basic income initiative.
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Logic ‘on a sabbatical’
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At the core lies the idea of UBI lacking sufficient reasoning. Instead of doling out money to the entire population (including those who do not need it), the focus of the government ought to be on investing resources to build productive capacity in the economy; it should increase capital formation, improve quality of work force and enhance the utilisation of factors of production.
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Let’s take a look at Finland’s experiment of UBI, which is very similar to the proposed model of Universal Basic Income.
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In Finland’s experiment, the control group was 173,222 unemployed Finns. The treatment group was a randomly selected group of 2,000 also unemployed Finns. The treatment group was given a basic income instead of unemployment benefits while no variable in the control group was changed. The main aim of the Finish experiment was to consider the effects of the basic income on employment and subsequent income. The notion was that with a basic income, people would have the security of developing skills, building personal and professional credentials, and taking the time out to seek gainful and meaningful employment, and start businesses.
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In this regard, the experiment was not a stunning success. There was little difference between the benefit and control groups, with the basic income recipients achieving only half a day extra employment in the open labour market compared to the control group, with only 1% more people in the recipient group having any other earnings and income from self- employment compared to the control group. Even though there was a 17% increase in part-time employment, the amount of subsequent income was in fact lower for the trial group.
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The single greatest problem with the design of the basic income experiment, aside from the exclusion of employed Finns, was that the treatment group continued receiving 83.3% of the conditional benefits as the control group. This shows that the experiment did not test the removal of the work disincentive that conditional benefits create. It only slightly reduced them. Summing up, the results reveal that although this experiment did show improvements in social indicators like health, life satisfaction and trust, areas like employment and income, which were the target areas of UBI, experienced negligible improvements.
What if not UBI?
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Too high a level of basic income is potentially a drain on the public resources and could create disincentives to work, while too low a level would be ineffective in addressing core issues of income inequality and poverty alleviation.
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A level of UBI aligned with the costs of a range of goods and services, and some additional disposable income needs to be worked out.
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Another alternative to UBI would be a negative income tax system that would offer benefits only to those under a certain income limit and reducing, on a sliding scale, the amount of income transfers as personal income increases. Compared to a proper basic income, a system based on negative income tax would be more responsive, for instance, to the type or amount of assistance needed as family circumstances change.
To Sum It Up
For
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Solution for Automation
With Automation and AI aspiring to replace human beings in every possible profession, the establishment of UBI will provide financial independence to people so that their basic necessities are fulfilled even when they are unemployed.
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UBI in for Developing Economies
The idea of Ultra UBI as advocated by Nobel Laureate Abhijit Banerjee for developing economies, would eliminate the problem of poor targeting faced by most welfare schemes with the introduction of a mild form of self-selection.
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Success of Pilot programmes
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Various pilot programmes have resulted in improvement of basic living conditions and financial independence of women. The success of these programmes contradict the arguments of disincentivizing people from working.
Against
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Expensive Proposition
One of the biggest problems that tech-giants say is that a UBI, that allows people to refuse work and look for something better would turn out to be awfully expensive, costing nearly 5-35% of a country’s GDP.
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Flaws in Assumption
Instead of doling out money transfers to the entire population, the current scenario of Indian economy needs focus on improving the capital formation, quality of workforce and enhancing the utility of factors of production. Thus, there is no possibility of implementing a UBI anytime in the near future.
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Failure in Key Areas
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Although the Finland experiment showed improvements in social indicators like health, life satisfaction and trust, areas like employment and income, which were the target areas of UBI, experienced negligible improvements.
Written By
Gautam
Mann
Pavithran
Suchet
Utsav
MAKING AND UNMAKING OF ARTICLE 370
With the abrogation of Article 370 and Article 35A on 5th August, 2019 the political status of the state of Jammu and Kashmir was dramatically overhauled. The J&K Redistribution Bill, introduced on the same day, bifurcated the state into two union territories - Ladakh and J&K. The centre's move caught the world by surprise and has been the topic of discussion ever since. While some believe the move is a masterstroke, which will go down in the history of India in golden letters, others are hailing it to be a murder of the Indian democracy.
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Here we present to you both sides of the debate surrounding this unprecedented move.
The abrogation of Article 370 is being purported to spell relief for the region of Jammu and Kashmir. The three domains which the arguments in favour of the abrogation touch upon are – economic development, legislature matters and the prevailing geopolitical atmosphere.
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Fundamentally, Article 370, which granted special status to Jammu and Kashmir, had resided in the Indian Constitution only as a short term, temporary measure.
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Ever since its introduction, the provisions of the Article had been a growth dampener in the state. Opportunities for investment, business, and quality educational institutions had lagged behind compared to the nation. The 3-party contestation prevailing in J&K had deterred the funds given by the Centre from being utilised for public benefit and corruption had been plaguing the region for long.
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The youth had been brought up in a state of alienation with the unjustified tag of being ‘privileged’. While the abrogation will assist the government in introducing the Kashmiri youth into the mainstream by breaking down the existing barriers, it has been intended to address the woes of people who have spent decades confined to a region marked by turbulence and economic challenges.
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The strongest argument for revoking the Article lies in the economic revival of the region.
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While it’s true that the state has performed well in human development indices, the literacy rate is relatively high, income inequality is low and per capita income is decent, the fact that the region has been facing economic stagnation can’t be neglected. The gross fixed capital formation in J&K today is the same as it was in 2006 at 645 crore and foreign direct investment levels are pitiful. FDI equity inflow in Haryana, Punjab and Himachal Pradesh combined, from April, 2000 to March, 2019, was 11,000 crores while, Jammu and Kashmir had received a meagre 39 crores in the same period. The unemployment rate hit 24.6% in 2016 as per the state’s own economic survey. Provisions of the Article had prevented non-permanent residents from purchasing land in the state. Some exceptions were made to these provisions and allowed industrialists to hold land on a lease basis, but it was a far cry from what was required. The revocation will lift this blockade and improve access to the market thus paving the way for an open economy.
The Article had also blocked legislature passed by the Centre to be directly applicable in the state (barring matters pertaining to foreign affairs, defence and communication), requiring the State Assembly to pass them once again.
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Owing to this, J&K had been deprived of welfare schemes and landmark acts; The Right to Education Act, Prevention of Atrocities Act (Scheduled Castes and Tribes Act), reservations for minorities and schemes like Indira Awaas Yojna being a few examples. With the new changes, the government’s allocation of funds would be under their discretion, which will ensure proper allocation towards the healthcare and education sectors. The Indian Penal Code which would now prevail in J&K, will empower the women by granting them equal property rights and will give a boost to the subnational economy of J&K by providing opportunities to strengthen investments. The move was also welcomed by the people of Ladakh, for whom it spelled the culmination of an arduous struggle of gaining recognition as a separate entity from the state of J&K.
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Anne Patterson, who served as the United States Ambassador to Pakistan from July 2007 to October 2010, presented a theory on the revocation of Article 370. A possible justification behind this sudden action, she explains, could be the US-India relations. The US is seeking Pakistan’s cooperation to strike a deal with the Taliban, which once successful would immediately improve US-Pakistan relations. Going forth with this move once the US and Pakistan are on good terms could’ve been detrimental for India’s relations with the United States. Now, with a possible American intervention, the likelihood of turning the LoC into an international border, a long- awaited settlement could be reached.
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While the abrogation will go a long way in enhancing the economic and social landscape of the state it’s imperative for the government to handle the apprehensions prevailing among the people responsibly. Although there might be an initial unsettlement in the area, owing to Kashmir being a disputed area between two countries for so long, normalcy of a better kind will eventually return and the economy of the state will be infused with a new life and vigour. While Kashmir and the entire nation stands at the cusp of a historic move with the positive ramifications being extensively debated, it is important to remember that ‘Rome wasn’t built in a day’. The government should now focus on the creation of an efficient local administration, and elections to the Legislative Assembly should occur at the earliest to avoid radicalism.
While there’s been plenty of fuss around the Article itself and how it isolates Kashmir from the rest of India, it wouldn’t be far-fetched to say that New Delhi began watering down the state’s ‘special status’ almost as soon as it was granted. Five years after the article was passed, a series of Presidential Orders were issued to give more power to the Centre in Kashmir. This systematic attrition was only possible because Sheikh Abdullah had been put behind bars the year before, much to the anger of common people.
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Integration’s slow march was always rationalised as an attempt to endear Kashmiris to India. Yet, throughout this process, while New Delhi continued to gain greater control of the state, the people of the state kept drifting away.
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Multiple reasons were cited time and again to accentuate the Central Government’s say in the machinery of the state. Lack of economic development and alienation called for financial integration and election malpractices need to be checked and resolved by the Election Commission.
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The period starting from 1960s also saw vocal support for complete abrogation of the article. Endorsed by politicians across party lines, their aggressive stance belied the true motivations behind the call for ‘integration’. All along, the process had less to do with winning the trust of Kashmiris and more to do with Indian identity and vote bank politics.
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At its core, the movement has been about finishing the nationalist project, which goes a long way back.
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The present-day landscape in Indian Politics only goes on to contribute towards making the move look like an ultra-nationalist appeasing scheme.
Even the staunchest of the move’s supporters have shied away from talking about the manner in which it was executed. The move was quite evidently accompanied by the kind of measures one normally associates with a police state – the furtive introduction of major constitutional changes, the lack of adequate time for debate and deliberation, arrests of mainstream political leaders in Kashmir, prohibition of public gatherings and the lockdown of communication.
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The argument that preventive measures were taken for silencing potential uprisings and helping the people transition into new norms peacefully leaves plenty of room open for naysayers to contend that uprisings will still take place, and might possibly escalate, given the way in which the move was brought about. An unspoken universal principle for democracies suggests that good intention needs to be supplemented by ethical execution. And while all the reasons in the world might point to the move in itself being inherently good for J&K in the long run, the actions that were taken to rush this through flouted the ideals of a participative democracy.
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Many have asserted that the new UT status will allow the region to harness its growth potential and will allow the deprived sections of the people to fully exploit the development dividend, something it was previously bereft of.
Upon evaluating data and hard facts, the claim that the special status of J&K has been a growth dampener looks like an eyewash. Poverty, one of the biggest challenges staring at the Indian economy today stands at just 10% in J&K against an alarming 22% of national average. The income inequality in the state is quite low, making it one of the most egalitarian states in India. Under the current governance, the state also enjoys the lowest incidence of indebtedness in the country.
While it is being claimed that the major reason for the revocation is to introduce the region to the fruits of economic development, the dearth of public investment in the state over the decades clearly reflects the lack of action and concern on the part of the Centre to give a boost to development in the state.
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The listing of Article 370 as a ‘temporary provision’ often leads some people to believe that it does not fall under the basic structure of the constitution and can hence be done away with. The institution which did possess the powers to do so, i.e. the J&K Constituent Assembly, stands dissolved and Mr. Shah’s interpretation of what the Constituent Assembly meant in the present day, where he equated it to the Legislative Assemble of J&K (which was also dissolved), sounds pretty convenient on the face of it and definitely raises a couple of eyebrows.
According to the constitutional expert A.G. Noorani, the Article’s provisions are temporary so far as the state government’s authority to give its ‘concurrence’ to presidential orders lasts only till the state’s constituent assembly is ‘convened’. Moreover, the President cannot exercise his power to extend the Indian Constitution to Jammu and Kashmir indefinitely.
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Besides, Article 35A is the consequence of the autonomy given to Jammu and Kashmir under Article 370. It was certainly not passed as per the amending process outlined in Article 368. It was inserted by a presidential order on the explicit recommendation of Jammu and Kashmir’s Constituent Assembly. Any challenge to it may open a Pandora’s box about the validity of several other presidential orders.
Article 3 of the constitution also throws up a few question marks on the bifurcation of the state which has taken place as it says that before the parliament can consider a Bill that diminishes the area of a state or changes its name, the Bill must be “referred by the president to the legislature of that state for expressing its views thereon”.
The sentiment in and around Kashmir taken aside, a thoughtful reflection on the move could lead one to think that India has in essence, betrayed its own constitutional promises. We’ve had many asymmetric federalism arrangements outside of Kashmir.
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Jammu and Kashmir is not the only state, which has a special status accorded to it in the Constitution.
Under Article 371A, Nagaland has special status and no Act of Parliament is automatically extended to Nagaland unless its legislative assembly so decides in matters of the religious or social practices of the Nagas, ownership and transfer of land and its resources. There are special provisions for many other states as well like Assam, Manipur, Andhra Pradesh, Maharashtra, Sikkim, Mizoram, Arunachal Pradesh and Goa.
This act potentially sets the precedent for invalidating all of them.
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Offering Nagaland asymmetric federalism but denying it to Kashmir pushes a very strong narrative of looking to change the very demography of the region. Besides, by denying the people of J&K the opportunity to have a voice in a momentous decision pertaining to the legal status of their state, the move brings with itself the possibility of further alienation of the Kashmiris and can invite catastrophic consequences.
To Sum It Up
The turn of events this past month really have provided for their fair share of divisiveness. Moreover, it has not been uncommon to see people caught up between agreement on a set of issues and disapproval on how everything unfolded, the way it did.
While Jammu & Kashmir has truly come about to show how intricate an issue it has always been with all the multifaceted aspects of the matter now coming in to play, one thing has been established very firmly so far. That we’re steadfastly moving towards a new India, riding on the wave of a calculating decisive government at the helm, and an unwavering group of supporters, many of who have had very different reasons for supporting the move.
That being said, if the coming months pan out exactly the way the current government had intended, it might find itself comfortably helmed at 7, Lok Kalyan Marg for years to come.
The above graphs reflect the opinion of 390 undergraduate students of Delhi University. Following are the colleges which have been covered under the opinion poll:
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1. Hindu College
2. Kirori Mal College
3. Shri Ram College of Commerce
4. Hansraj College
5. Lady Shri Ram College for Women
6. Motilal Nehru College
7. Miranda House College
8. Daulat Ram College
9.Shri Guru Tegh Bahadur Khalsa College
10. Atma Ram Sanatan Dharma College
11. Shaheed Bhagat Singh College
12. Guru Gobind Singh College of Commerce
13. Deshbandhu College
14. Satyawati College
15. Shaheed Sukhdev College of Business Studies
16. Shyama Prasad Mukherji College for Women
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The sample size of 390 has been arrived at by assuming a population size of 1,00,000 undergraduate students in Delhi University and reflects a confidence level of 95% subject to a margin of error of 5%.
Written By
Nishtha Gupta
Ayush Dubey
Harnoor Kaur
A WORLD WITHOUT TAX?
Taxation and welfare; these are two words that have taken root in our society that we just can't imagine life without. These are two systems that have been monumental in shaping nations and dethroning Kings. Take Louis XVI for example, the french monarch faced the end of his autocratic rule via the French Revolution due to the staggeringly high taxes imposed on the peasants and the rising bourgeoisie. However the other end of this complex system is the welfare programs which have led to countries such as Norway and Denmark becoming the dream destination for immigrants. The strong unemployment parachute, healthcare programs and pension schemes have led to these nations being called welfare states. Both ends of the spectrum have their benefits and their downfalls yet the question of which is better is a matter of personal choice.
Given below is the examination of these two systems in the signature "Divide" style- with the left side arguing one end and the right, another.
So, which side are you on?
'LEFT' WITH NO CHOICE
'RIGHT' ON POINT
Welfarism is a concept that places the state/government at a pedestal above the rest of the participants in a nation state. It is based on the implicit social contract that has existed for millennia as a means of maintaining peace and harmony. It assumes the government to be morally superior and knowledgable. Thus tax system and the corresponding welfare expenditure is a consequence of this.
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So what is the issue?
It can be thought that this system of welfare is inefficient on principled as well as practical grounds. Principally, the implied social contract which we live under never comes from individual consent. Furthermore, the principles of fundamentally opposed systems of Capitalism as well as Communism go hand in hand in refuting the basis for a welfare system within the state. Practically speaking, the entire process of implementing welfare programs, starting with identification of the absolute poor to ensuring all identified beneficiaries get their due amounts is steeped in inefficiency that leads to more leakages and harm to the nation than good.
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For starters, the fact is that as an individual, one has never personally explicitly consented to giving up certain rights in return for the state maintaining some sort of illusion of order. It has always existed within structured society, always been implicit, and always without any perceptible alternative. Thus one is normally just born into it, without ever being given an active choice. Any choice that exists is present only within the existing structure – such as which part of party to vote for in a democratic election- and only beyond the legal age. This sort of indoctrination and manufactured consent lies at the base of the inherent problem with the state being responsible for welfare.
Socio-economic Darwinism and the capitalist concept of meritocracy go hand in hand to oppose the system of welfare that prevails. The fact is that people who do more or are more capable in terms of productivity and output tend to deserve more. This comes irrespective of race, caste, religion- something pointed at by Amartya Sen in his “Capability Approach” theory. In this case people who aren’t productive or otherwise talented are a liability to the nation state. Here, survival of the fittest needs to prevail and people at the bottom of the productivity pyramid need to find ways to survive socio-economically, without expecting altruism which tends to make them lax and indifferent. Further, if under meritocracy, if someone with any merit in any form depending on the time-set accumulates wealth, she/he deserves it and said wealth shouldn’t be taken away.
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Communism, which seeks to establish a classless society, is fundamentally opposed to the very existence of the state. It attempts to establish a uniform platform which places everyone at the same pedestal. It can be interpreted to oppose the moral/intellectual superiority that the state supposedly assumes because then the state is at a higher pedestal than others. Further, since under the school of thought, as all assets and wealth are divided equally- there is no “surplus” that can be taxed and no requirement for welfare programs because everyone exists at the same economic standpoint.
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State inefficiency and the problems with accruing power stand against the welfare system. Simply put, power corrupts. Once the state is endowed with the power to collect and utilise money as it wants, it loses incentive to be efficient. Corruption and other bureaucratic hurdles follow the sentiment that the state is above the law. It often times fails to collect and optimally allocate resources in a manner that benefits those who may need it. Further, there lacks a distinction between the absolute poor, those who’s survival entirely depends on the welfare mechanism; and those who are not incentivised to be productive due to the availability of the mechanism. The state dependency that ensues can be touted as a long term consequence that has the potential to kill the economy. Further, because the state is considered morally superior, it attempts to influence and morally police into whatever they believe to be right, which normally aligns with the majoritarian narrative.
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Therefore to conclude, it makes more sense for a society to function without taxation and a welfare scheme for the greater growth of the state- the key is to incentivise hard work and entrepreneurial spirit.
The idea of taxation and welfare advocates flow of income from the rich to the poor. In very basic terms, it is the redistribution of income and wealth in order to establish equality in terms of economic well-being in the society. It is also a source of funds for the State/Government to provide basic facilities to the citizens and run the society. However, there is a counter side to this concept as well. It binds people in a sort of social contract where in people who earn more or are more productive in a sense are forced to give up something which they have earned for other inefficient units of the society. In this article we will look to establish how it is our moral duty to abide by this social contract and why the idea of taxation and welfare is integral to the very bases of a society.
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Taxation has Ancient Roots
The concept of taxation and welfare is one which has existed ever since societies have existed in a civilised manner, so as to enable societies to function in a balanced way. Societies all over the world have flourished with this system, where the State/Government is assigned the duty of managing and maintaining its resources and provide basic services like security, infrastructure etc. which are used by all members of the society. The idea here is that one of us is not in a position to perform a task on such a large scale and so we require a central authority to pool all of our resources and utilise them for the benefit of the society.
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It is not just this but another very important scope of taxation is redistribution of income and wealth in order to maintain equality in the society. Taxes collected from the well-off are used to provide subsidies and basic amenities like food and shelter to the poor in order to improve their standard of living and provide them equality in terms of opportunities which the rich receive.
The Accident of Birth
People might argue that they have never explicitly consented to this social contract, that people who are more productive should deserve more and not be made to give up their rights. Well in a large sense, the accident of birth determines one’s social and economic status and hence also the opportunities that they have access to. So there is nothing that an individual does to get those opportunities or be devoid of them, it’s only a matter of chance.
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That is why the concept of taxation is used to provide all members of the society an equal pedestal so that no person becomes a liability to the society because in the end it is the well- being of everyone which contributes to the prosperity of the society. Hence the State shells out crores of rupees in welfare schemes in order to uplift the poor.
Here again, people might argue that these schemes are highly inefficient and they fail to optimally allocate resources. Well where do state inefficiencies not exist and why wouldn’t they? When you implement a plan on such a large scale and for a group with such diversity, you are bound to have inefficiencies. However they are completely independent of the welfare they offer at the same time. No doubt corruption and bureaucracy are hurdles to efficient use of resources but that doesn’t take away anything from the importance of the concept of taxation and welfare. If anything it points out that we should continually look to improve our systems and never look to settle.
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This argument stems from the idea that when you place the State in a position of such authority, you place them with immense power; and "absolute power corrupts absolutely." But then if it’s in our hands to place that power, then it’s also in our hands to take it away. We live in a democratic world where we have the power to change the people in power if we don’t associate with their decision-making, their ideals or their morals. Accordingly the State enforces order in the society where again taxation plays a huge part in terms of preventing people from consumption of things that are harmful, not only to them individually but to the society as a whole like tobacco or materials which cause pollution like diesel vehicles.
To sum it up, taxation and welfare forms the very backbone of a healthy balanced society. It is vital for the functioning and well-being of a community which harbours diverse individuals with various backgrounds. It is our moral duty because none of are born by choice, it is all by chance and it is this chance which everyone should be allowed. No society can function with the benefit of some and ignorance of others. We require taxation so that we can provide welfare for everyone in this community and the next.
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What is Welfarism?
"For starters, the fact is that as an individual, one has never personally explicitly consented to giving up certain rights in return for the state maintaining some sort of illusion of order."
"The fact is that people who do more or are more capable in terms of productivity and output tend to deserve more."
"State inefficiency and the problems with accruing power stand against the welfare system.
"But then if it’s in our hands to place that power, then it’s also in our hands to take it away."
"Well in a large sense, the accident of birth determines one’s social and economic status"
"The idea here is that one of us is not in a position to perform a task on such a large scale and so we require a central authority to pool all of our resources and utilise them for the benefit of the society."
To Sum It Up
Welfare is the provision of a minimal level of well-being and social support for citizens without current means to support basic needs.
The distribution and redistribution of resources is central to the provision of welfare, and the process begins with the identification of those in need, which is flawed both principally and practically.
Principally, the system of society we are born into isn't a voluntary choice we make while, practically, the entire process of execution has evidently failed multiple times, leading to further oppression of the already oppressed and not the contrary.
Social welfare is a concept that is inherently moralistic, but in turn its provision is in the hands of states and governments assuming absolute power. It goes without saying, that achievement of moral ends through immoral means which are so embedded in the present system, that the entire purpose of it fails.
Individualism and competition are fundamental to capitalism and individuals are responsible for protecting their own interests, whereas communism believes in a classless structure of society eyeing equal opportunity for all its citizens. Hence, both the ideologies in a way refute the very mechanism of the provision of welfare.
Taxes are what we pay for a civilised society. It gives public goods and services for the benefit of the society.
Taxes are important for providing basic services like infrastructure, security etc. which may not be provided otherwise.
Taxation aims at uplifting the poor by giving them an equal pedestal so that no person is considered as a liability to the society.
Tax on goods like tobacco are improving the standard of living.
Tax cuts which reduces the National Savings and increases deficits may give the future generations a weaker economy and poor standard of living
Written By
Siddhartha Tandon
Jayati Jain
Ravish Usman
