Wednesday, July 11, 2012

Don’t clarify Mr. Chidambaram….what you said is true

Chidambaram may have been compelled to clarify his mineral water and icecream statement…..saying that he wasn’t mocking the middle-class, but he really didn’t need to. What he said was absolutely perfectly correct. The middle-class is a pampered lot; and its protests are usually related to its unwillingness to share the spoils of the economic boom we have seen in the last twenty years with those who have been left out. Inclusiveness of economic growth is an alien concept to the middle-class.

But let’s first define what the middle class really is. In my simple definition (not a hyper technical economic one!), the middle-class is largely urban, largely salaried or in own business, and largely educated. We can add the “better-off” rural folks, whether in agriculture, manufacturing or salaried jobs, to this definition. Middle-class does not include those employed as domestic workers in the urban areas (drivers, maids etc), nor rural farmhands and casual laborers. It does not even include the poorer sections of those defined above – so let’s leave the poor factory workers out in many cases. It includes all government servants, most private sector workers and most self-employed professionals. Not surprisingly, the middle-class is a largely urban phenomenon.

Now consider how this segment has fared economically in the last twenty years. In every single year, this segment has seen its salaries or incomes grow at rates higher than inflation. Even in a bad inflation period like the last two years, average income hikes have been upwards of 11-13%, at least 4% more than inflation. Further, even on social parameters……eg education – the middle-class has benefitted the most. The lower classes have also benefitted, but in absolute terms, they still remain in a disadvantaged position.

The reason the middle class cribs is because it is unwilling to share the benefits of the economic boom with its rural, poor and underprivileged brethren. When petrol prices are hiked, and fuel subsidies reduced, it helps the government divert those savings towards programs targeted at the rural poor. When fertilizer subsidies are retained, ditto. When MSPs (Minimum Support Prices) are increased, the beneficiaries are the millions of farmers who are otherwise unable to sell their produce profitably. Of course that increases the prices that the middle-class has to pay and they howl when they have to pay these higher prices. When the NREGA program puts money into the hands of those who cannot be employed by the organized sector in the rural areas, and when they stop migrating to the cities, the urban middle-class complains about the rising wage demands of servants, drivers etc. When NREGA wage levels are linked to inflation, the middle-class again chides the government.

The double standards of the middle-class are apparent also when it discusses Kapil Sibal’s initiatives on Right to Education and policies of Affirmative Action (compulsory 25% seats in even the most elitist schools to be reserved for the poor). If they had their way, the middle-class would like to keep all the resources to themselves and not share anything with those aspiring to join their class. In many ways, the entire 2G spectrum fees controversy – whether it should be given free to telcos so that the prices can be kept low or whether it should be auctioned at the highest possible price which would lead to a price hike leaving out vast sections of the poor from its fold – is a middle-class conspiracy. The middle-class doesn’t like the telecom subsidy (in the form of low or zero license fees) that benefits the poor the most.

The importance of the urban middle-class is vastly different to the BJP than the Congress. For the Congress, its primary constituency is the rural poor and the under privileged. For the BJP, it’s the urban middle-class. So I have no complaints in the BJP’s complaining – and its complaints finding resonance in some middle-class pockets – against Chidambaram’s factual statement. I am all for a political debate and even a polarization on this matter. Chidambaram needn’t have withdrawn his statement or provided an explanation because his statement serves his constituency very well. He was dead right. The BJP can continue to moan on behalf of his pampered urban middle class vote bank, but Chidambaram needn’t heed anything it says.

The same thing was apparent when it came to allowing FDI in multi-brand retail. The urban middle-class “baniya” (a large middle-class community) focused BJP opposed the move and a weak Congress couldn’t find the courage to take a decision which would have benefitted millions in its core farming community. This is a political battle. This is an example of differing political ideologies. The Congress must go ahead with FDI in multi-brand retail. Let the people decide whether they like this policy or not and vote accordingly. It’s a battle between the urban middle-class (most of whom in any case I feel support FDI in multi-brand retail) and the farming community (who favor FDI in a large way).

I have always maintained that the current inflation is a benign inflation. It doesn’t harm the poor. It is in fact, a result of the pro-poor social programs of the government. It’s a direct result of the NREGA transfers and the higher MSPs. The rural poor are not getting pinched by this inflation. Nor are the urban middle-classes in reality. If anyone is getting pinched, it’s the urban poor. Those who depend on the middle-class for their incomes. The drivers and maids and other helping hands who count on our generosity for their livelihood. In spite of our unwillingness to pay this section higher, there has been a forced change in their incomes. With states like Bihar and UP being able to provide more employment to their own people, and with NREGA stemming the flow of people from the rural hinterland to the urban areas, the salaries of even this section of the population has increased significantly. The stingy middle-class though continues to resist paying out willingly…..and complains the most when it has to pay more. It resists and protests everything that leads to a redistribution of wealth in favor of the poor. In that context and in a very metaphorical way – the middle-class is happy to buy more and more products (like water and icecream) for itself – but complains when it has to pay a little more for petrol. Chidambaram was indeed right!

The real truth is that Chidambaram owes no explanation for the truth he stated. His statement about the urban middle class is indeed correct. Every middle class member enjoys a far better life today in spite of the inflation. And yet, the middle class complains. Redistribution of wealth will not happen voluntarily. It will need to be forced down the gullets of the middle class….

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