View from the Left

EMS Namboodirippad (2010), History, Society and Land Relations, New Delhi: LeftWord books, pp. 239.

EMS Namboodirippad was the leader of the first democratically elected Communist government in the world when he became the first chief minister of Kerala in southern India in 1957. A political leader and a Marxist thinker of immense influence, his essays are a great introduction to his critical approach to understanding Indian society and history. This is one of the two books of his collected essays in English (the other being The Frontline Years), both published by LeftWord. For the student who is interested in Indian history and society, his work is valuable because EMS was that rare breed of practitioner-theoretician, who had at his disposal data and field observations of considerable scale. Furthermore, he chose to analyze them academically, making the sources of his data and the methodology employed transparent. This is especially evident in his examination of the question of land ownership and social classes, a problem still relevant in many developing countries today.

The core thesis

This book contains 14 essays and one interview. The essays thematically span Marxist analysis of history (3 essays), the question of caste, class and the Indian national question (6 essays) and a detailed examination of the feudal system and land relations in Kerala (3 essays). There are two odd essays- one on the Marxist interpretation of the separation of idealist and materialist philosophy in India and the other on the possible trajectories of evolution of the Indian judiciary.

The core thesis of EMS’ analysis is that he sees Asian societies as exception (along with Germanic, Slavonic and Ancient classical societies) to the linear evolution of history from primitive communism to slavery, feudalism and capitalism of the European kind that Marx argued. Relying on Marx’s Notes (1956-57), EMS contends that these societies underwent a different form of transition into ‘village societies’ that was crucial in deploying property relations differently and eschewing slavery and serfdom. For example, in these societies, the individuals are never fully separated from the society and are tied by bonds of kinship or locality. Furthermore, property claims in land is differentiated from that of labour. Therefore, a land lord is not merely a rent collecting agent (economic role), but the head of an inherited social system (caste and its variants). This duality of economic and social relations needs to be considered whilst analyzing political and social questions in the contexts of such societies.

Barring a few typographical errors, the book is an important contribution to critical historical thinking in India. The essays are thematically presented with a brief introduction. Although the articles are rooted in their historical circumstances, the analytical method and the questions that the author evoke remain relevant to this day. A timely revisit to the old questions!

Deconstructing Financial Crisis

The Myth of the Rational Market, Justin Fox, Harper Business, pp. 340

Justin Fox is the editorial director of the Harvard Business Review Group and a contributor to Time magazine. In this fascinating historical narrative of the financial crisis of 2008 and the events leading up to it, Fox dissects ideas, people and their behavior. The perception of risk and the belief in market rationality is part of both economic thought and cultural history that consolidated the modern world of finance and investment. What the financial crisis did was, not only demolish fortunes, but also ideas put forth by intellectuals who battled to bring in a particular brand of capitalism.

Tracing history

The book is divided into five parts. This section-wise division elaborates the timeline leading up to the financial crisis. In the beginning of the twentieth century, it was unusual to associate the idea of market with rationality. The first serious attempt to apply the logic and reason of science into economics began with Irving Fischer. In his time, the idea that man was infinitely selfish and infinitely far sighted prevailed. Fischer took this assumption by the horns and argued that the uncertainty of the future could be ‘tamed’, if not eliminated. This was the beginning of modeling the future outcomes with variables available in the present.

Fischer’s work was taken a step forward by Harry Markowitz, who introduced the ‘statistical man’ to the market with the help of quantitative approach to investing. The world events of the time prepared such intellectual pursuit because of the emergence of strategic thinking in the Second World War. About a decade later, it was Paul Samuelson, who wrenched the idea of rational market that was on the fringes of the economic thought into the centre stage of academic research. Samuelson, who was in the habit of reading every paper that was published in the Quarterly Journal of Economics, came across the idea of ‘market randomness’. In a case of remarkable serendipity, a doctoral thesis of Henry Bechelier filled with dense description of market behavior caught his attention. He immediately recognized that the randomness of market mathematically described was similar to what Albert Einstein described about the Brownian motion of random particles. This paved the way for the belief in the market as rational and random.

Age of Assumptions

      The decades that followed were notable for two major achievements. Modigliani and Miller came up with a simplifying assumption that argued that the market behaves only based on real considerations of how an investment would actually perform, and not on the packaging of the investment. Eugene Fama, a doctoral student of the Chicago school, proposed that the investor’s choice took random positions along a bell curve. The metamorphosis of the market from being rational to random and from there to being perfect was established. It was this cherished belief that was shattered in the financial crisis of 2008. Alan Greenspan, the chief of the Federal Reserve for 14 years admitted that the economists failed to anticipate the crisis and invite government intervention because ‘it (the market) has been working exceptionally so well’.

This book is an engrossing read that pays rich tribute to well-known and lesser acknowledged economists and thinkers of the twentieth century. The history of ‘risk and reward’ that the book captures brings out a lively account of the protagonists in the financial world and the anatomy of the financial markets.

THROUGH THE LOOKING GLASS

Ha Joon Chang, the Cambridge economist enjoys myth busting. His engaging work ’23 Things they don’t tell you about Capitalism’ explains how the economic system works in an increasingly capital intrusive world while deconstructing myths and beliefs about it. This book is both important and persuasive for this reason, and leads the way to open up other ways of understanding the global economy and how nations perceive it , act and interact in it. The financial crisis of 2008 was the second largest economic crisis in human history and paved the way for a systemic change in responding to perceived economic laws. There was a huge drive world over and significant pressure on the developing countries to reduce budgetary deficits through the curtailment of welfare entitlements and public investments. This push has been the result of a particular brand of capitalism called the ‘free market ideology’. This school of thought puts faith in the unlimited rationality of individuals and the capacity of the unfettered market to bring out just and efficient outcomes. The belief in the capability of the unrestrained individual and the market comes from the idea that wealth creation benefits everybody. It is this credo that espoused credit fuelled consumer boom and it is this line of thought that Ha Joon Chang’s work attacks.

Toward Active Economic Citizenship

23 things proceeds like a user manual to understand and critique free market ideology by dissecting 23 points that counterpoises general received wisdom about the economic system. The objective of the book, the author claims, is to equip the average citizen with enough robustness of judgement to question ‘expertise’ so that eventually capitalism works for all of us in a better way. The author begins with the important disclaimer that attacking the free market ideology is not the same as attacking capitalism itself. Capitalism is the best form of economic system that humans have invented so far. But the main challenge is to make it work for everyone, the developed and the developing, the expert and the novice, equally well. This calls for an active economic citizenship that enables each individual to defend her interests well.

In order that the way to enlightened economic participation begins, 23 different myths about our beliefs are engaged with in a lively and pertinent manner. These 23 things include the mundane, the abstract and everything in between. For instance, ideas about capital, capitalism, decisions of governments and the working of technology are discussed with trenchant examples and contrasts from different parts of the world. Propositions like whether the washing machine has revolutionised the world more than the internet has been taken afresh and debated with the logic of the economist and the author’s inimical humour. Nothing escapes the rigour of economic thinking. The instances are from everyday lives of peoples and nations, even though the explanations are lucid and the examples extra ordinary. Every myth begins with a statement of the obvious thinking and an analysis of that in the following passages with examples that prove the contrary. Active agency is implied throughout the work beginning with ‘what they tell you’ to the responsive counter arguments.

Chang does not just stop with critiquing the present model but goes a step further and proposes an alternate model for rebuilding the economy. He does not believe in the tinkering of the existing system through regulation, codes of transparency or restraints. What he challenges is the fundamental premise of such an economic thinking and hence looks for systemic overhaul. He believes that in order to organise capitalism in a more efficient and rigorous manner, recognition of the limits of human rationality, presence of human agency and the significance of moral core of humans is important. We have to separate the financial from the real economic activities. The emergence of a strong government and active economic citizenry is important in this respect. This deceptively powerful work is both a commentary on the present economic system largely followed in the world as well as a vision document for an alternate future.  

(This review was published in The CSR Analyst, November 2014)