Bapu's Write-up on 'Financial Terrorism'

My blogpost of 17th July 2012 about the book that Bapu gifted me, mentioned the article 'Financial Terrorism' written by Bapu for the Marathi weekly, 'Lokaprabha' (issue dated 22nd August 2003). A comment from one of my friends includes a request to make the article available. So here is the English translation of the article: 

In the Marathi folklore there is a popular rhyme (somewhat on the lines of a limerick), that urges the rain to come, on the promise of giving it money; the money proves to be virtual, and yet the rain poured heavily. 

Even today, one comes across little children singing this rhyme with the same intensity that the children of yesteryears did. However, one equation in the rhyme that is difficult to figure out is, how is it that the rain gets charmed by the virtual money, money that is actually materially non-existent and gives such an abundant response? Not only that, the question that gradually grows on one’s mind is what exactly is virtual money? It is precisely this ‘reverse equation’ that has, today, become the key to the arithmetic of global finance. This realization has dawned on many social scientists and economists over the past three decades. How many of us, today, are aware of the horrifying fact that, in time to come, ‘virtual’ money will be the real money and real money will cease to exist? Here, I am not at all referring to black money and white money. The thought that has been going on in my mind is about the very existence of currency. Globalization has virtually condensed the world into a tiny village and it is in this context that the question arises as to whether poor and weak nations will be able to sustain their independent existence. Whether, at the bare minimum, they will be able to survive, has indeed become the most vexing question. Although it is high time that we addressed this issue, we find it more convenient to look the other way. This is indeed most unfortunate and can have destructive consequences in time to come. 

The entire global map underwent a significant change in the first fifty years of the twentieth century; firstly on account of the two world wars and secondly due to the rapid technological development. An inevitable consequence of the Second World War was the decline in the age old dominance of England and Germany. USA and Russia, the two new superpowers, became increasingly powerful. In the second half of the twentieth century the socialist revolution in the Soviet Union became increasingly perverted and socialism was reduced to mere tokenism. The superiority of the Soviet Union came to an end with its collapse due to the break up of the member states into independent countries. Not only that, there has been a resurgence of capitalism in China and the breakaway nations of the erstwhile USSR. Due to these aforesaid reasons, USA has become the world’s only powerful capitalist country and undisputed king. An important aspect of note is that the US has very cleverly avoided fighting any wars on its own soil. As a result, it never had to undergo the sufferings of its devastating consequences. Arms dealing and financial manipulations have made the US an increasingly powerful country. The US has basically five objectives for perpetuating its status as a global superpower:  

1. Not allowing any competitor to emerge - and towards that end, either ensuring that Europe, Japan, Brazil and India are under their financial control or contriving to keep them under the constant threat of war (India and Pakistan) by seeing to it that they are engaged in crossing swords with one another.

2.  Conspiring to divide India and China on the same lines as Russia.

3. Using the United Nations Organisation to legalize its own selfish agendas.

4. Bringing all oil producing countries under its control in order to secure its own business interests.

5. The Iraqi people had to undergo untold misery on account of the economic sanctions imposed upon it. Once a prosperous country, from 1990 onwards Iraq began sliding towards the depths of poverty. Its per capita income reduced drastically from USD 3,500 to USD 400 by the year 2000. After making repeated pleas, in order to tide over the acute shortage of foodgrains and the resultant starvation deaths, in the year 1996, Iraq was finally granted concession of obtaining foodstuffs and foodgrains in exchange for sale of oil at cheaper rates. According to the estimates of United Nations Children’s Fund (UNICEF), even before the war had commenced, more than half a million Iraqi citizens had perished due to starvation. Three hundred thousand of these comprised of children below the age of five. Saddam was cruel, but the cruelty of the US was no less; quite on the contrary, it was more frightening. 

Wars are always fought between two countries or two groups of countries. However, USA has, after the Second World War, on the backing of an all round technological advancement, used globalization for its own benefit, and in the process also conspired to ensure that no other country has it own independent financial and cultural existence. USA’s financial empire, upto this moment, has spread to every single country of the world. The bygone era of colonialism has now been replaced by USA’s newfound financial imperialism, which will reduce to tatters every individual’s self-esteem. It must be noted that the International Monetary Fund (IMF), United Nations, World Bank and World Trade Organisation (WTO) are all headquartered in the US. The US stock markets are today dominating the markets of many a country. Prior to the Second World War, all financial dealings were limited to the needs of the country. International trade and the global marketplace functioned on the concept of limited cooperation. But now it appears as if the control over the flow of capital of all the countries is centred around one location. Since the year 1965, transnational companies have increasingly come in the forefront. Developing and poor countries had no choice but to accept these multinational entities; because had they not done so, who would provide capital for their businesses?

Since these companies possess enormous amounts of financial muscle, they are in a position to bring any other established business down to its knees and then acquire them. They also have the capacity to expand into new businesses and in the process achieve speedy financial consolidation.

With the new financial equations established by the US over the past five decades, and due to changes brought about by it in the area of global finance, nearly 70% of the countries of the world have increasingly fallen into the debt trap. 

In the year 1971, USA officially brought about changes in its monetary policy. The U.S. Federal Reserve brought an end to the inter-linking between its currency (dollar) and the gold held by the U.S. government. As a consequence, from then on, the production of currency came to brought about through a new ‘vicious' process called ‘Bank Loans’. This new poison weakened the currencies of all countries, who had trade relations with the US, due to which they were forced to change their monetary policies so as to bring them in sync with the stand taken by USA.

As a result, today finance is no longer equated with national wealth; the equation of finance with debt has come to stay. Nowadays, whenever a country seeks to globalise its financial arrangements, the fresh currency that is circulated is entirely through the means of bank loans. Once this arrangement comes to be accepted, from then on, the gold reserves, industrial production and national efforts, cease to be the means of generating finance. Not only that, even the deposits of customers in banks also cease to be the means of generating finance. The efforts of the workers and the production capacity merely serve to redistribute the capital ‘created’ by the banks. It is when a bank sanctions a loan and ‘credits’ the loan amount to the account of the borrower, that the real currency is generated and mind you it is out of nothing and nothing alone that this wealth is created. What does this mean? It means that before the loan was sanctioned, the loan amount was not in existence at all. It is commonly accepted that the currency is considered to be circulating in the economy only when the loan amount availed is spent by the borrower. 

Now the question that arises is regarding the repayment of the debt. When the debt is repaid out of the proceeds from the output of the borrower (?), that’s when the currency that was created at the time of creation of the borrowing, be it yen or dollars, ceases to exist. In reality the money which is used for repayment of the borrowing exists neither with the banks nor in fact anywhere at all; and certainly not in circulation. The money equivalent to the amount to be used for repayment of the debt is actually removed from circulation. What this means is that when the situation is conducive for repayment of the borrowing, people actually repay their loans and thereby reduce the amount from circulation. In such a situation it is but natural that a fiscal deficit is created and so is the share of everyone in the same proportion. This itself provides the answer to the following questions:

1. Why are workforce levels constantly required to be reduced?

2. Why are the returns always less in proportion to the work input?

In today’s financial system, there is only one alternative that has remained for making good the monetary gap - debt. As a result, in order for developing countries to become debt free, they have to, time and again, resort to borrowings. Because of the constant debt burden, there is not enough money available for circulation and when the debt is repaid the money which was temporarily in circulation is removed from the financial system. However the interest accrued on the borrowings is not made good leaving an uncompensated deficit in the system. What this implies is that today’s financial system is operating under a scenario of ‘inadequate capital’. Consequently, there is a cut-throat competition between nations for accumulating dollars. One who is the most selfish, unscrupulous and ruthless is the winner; the rest have no chance of survival. As a result, corporate spendings are aimed at gaining control over the marketplace through unscrupulous means, rather than for the benefit of the customer, in terms of price and quality of goods. 

Poor and developing nations are allowed to progress by the developed nations, only to the extent that they provide the marketplace for sale of goods produced by them. USA’s policy has been to continuously exploit the poor and developing nations under the garb of providing aid and support to them.

The new monetary systems that America set up in 1971 came to be known as “Debt Dollars”. As a consequence of this new financial system, many of the state owned businesses are going into liquidation. Multinational companies of many countries are spreading their net across developing countries on a large scale and creating a monopolistic situation. This they achieve by keeping the prices of their products at abnormally now levels, against which the domestic companies are unable to compete; and once they gain a monopolistic hold on the market, they then raise the prices of the same products to abnormally high levels. Gradually the global markets are increasingly coming under the control of these multinational companies, who in turn are controlled by the American financial system. The US Government is but an agent, who is willing to go to any length to ensure that the American companies flourish and at any cost. In such a situation, the Government of any country would be at the mercy of these monopolistic companies. This, in turn, means that Governments of these countries are no longer independent. Are these countries eventually going to be suppressed under the remote control of the US?

India has, of late, opted for liberalization in the sphere of inflow of foreign and capital investments. However, in doing so, if proper attention is not paid to the framing of the right policies that give valid scope to competition in business, the multinational companies, with their monopolistic designs, will ensure that very little monetary benefit will come India’s way. This is what India should be fully aware of and guarded against. After 1983, the per capita income of the unorganized sector has been falling in comparison to that of the organized sector. Further, during the same period, the per capital income of the rural population has been increasingly falling, in comparison to that of the urban population.

With the onset of globalization, lofty claims were made as to how all countries would benefit financially and how there would be all round development. However, that does not seem to be happening. Quite on the contrary, due to globalization there has been an enormous loss both in the human resources as also natural resources. In the process of the illogical pursuit of profit by all countries, the deterioration of the environment is taking place at a dangerous pace.

Due to the depletion of the ozone layer in the atmosphere, deforestation, extinction of many species, the genetic mutation in the various species of bacteria and viruses as also global warming and changes in rainfall brought about by globalization, within a span of 100 years the population of the world will be reduced to that of a village.

Due to globalization and USA’s financial imperialism, whatever political, social and cultural rights people had come to acquire through various social movements, are now being destroyed. 

A significant impact that financial imperialism has had, not only in India but in other countries as well, is the decline in the labour movement. It is true that the labour movement in India, which was, once upon a time, running very smoothly, did assume a destructive form for some time. Thereafter, from 1980 onwards, we have got to see the pathetic sight of the weakening of all labour organizations, or rather labour organizations being rendered weak. A democratic form of government as also a democratic social setup, both are essential for the all round development of a country. However, without individual freedom democracy cannot remain unblemished and that is the ultimate truth.

It is the urgent need of today’s times to create a common man who is aware of his social and national rights and to teach him to develop his senses towards his social and national duties. This is because USA’s financial imperialism is now slowly winning over the culture of every nation and the day is not far off when every country’s culture would have been Americanized to a large extent. It must be clearly borne in mind that in the process of achieving financial progress, if the basic human values are set aside, any development arising therefrom can only have destructive consequences. 

Post the Havana conference held in April 2000, a historic incident took place. Apart from other nations of the world, opposition starting building up against globalization within America itself. However, unless we, the common people, do not very properly understand this problem, this danger will keep hovering around and keep making preparations for the destruction of the entire earth.

The original Marathi article is as under:

Lokprabha Article of Bapu from samirsinh