Odd things are afoot at the Reserve Bank of India (RBI). Recently, in his JRD Tata Memorial lecture, RBI governor D. Subbarao quoted, of all people, Mao Zedong. Said the governor, “When chairman Mao was asked what he thought of the French Revolution, he said it was too early to say. People who take a long view of history—as did chairman Mao—would say that it is too premature to talk about the lessons of the crisis.” This is probably the first time any central bank governor anywhere in the world has had the guts to quote the late chairman of the Chinese Communist Party. Even the governor of the Peoples Bank of China prefers to remain mum on Mao. I’m hoping this was Subbarao’s first revolutionary step and in future speeches he’ll quote not just Mao, but also Marx, Lenin, Stalin and, who knows, perhaps even Kim Jong-Il.
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Obviously, the governor admires the Great Helmsman. It’s unfortunate, though, that the wisecrack about the French Revolution wasn’t Mao’s at all, but was by premier Zhou En-Lai. Clearly, the governor needs to study his Mao. I would be glad to do my bit to help, which is why, at the risk of appearing presumptuous, I’ve made the following rough draft of a speech the governor can use whenever he’s in a Mao-quoting mood:
A spectre is haunting the world — the spectre of Keynesianism. The current crisis is a crisis of capitalism. The West, as chairman Mao pointed out, is just a paper tiger. The imperialist running dogs are on the…er…run. Some dogs, such as Bear Stearns and Lehman Brothers, are not even running—they’re dead. Citigroup, UBS, AIG are limping. This is the right time for RBI to strike. In a charming poem fascinatingly titled, “Reply to Comrade Guo Moruo”, the chairman wrote, “We must seize the day, seize the hour/The four seas are rising, clouds and water raging/The five continents are rocking, wind and thunder roaring/Our force is irresistible/Away with all pests.” Clearly, the poem foretells the financial crisis and exhorts us to seize the opportunity to fashion a new monetary policy. The “pests” are probably the International Monetary Fund and the World Bank.
The current economic situation is extremely uncertain. As Karl Marx said, “Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones.” And when the everlasting uncertainty and agitation develop into a full-blown crisis like the one we’re seeing now, then the bearded one added, “All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real conditions of life.” He was referring to the disappearance of the investment banks, the profaning of the holy grail of monetarism and the loss of all those bonuses, which has compelled once high-flying merchant bankers to face the reality of lunch at McDonald’s without a Martini.
Unfortunately, the crisis has affected not only the decadent West, but the prairie fire has spread to our country too. The Great Teacher taught us, “The cardinal responsibility of leadership is to identify the dominant contradiction at each point of the historical process.” At the current juncture, the principal contradiction is between the government’s huge borrowing programme and the fear of rising interest rates. How should we resolve it? In his Little Red Book, chairman Mao has a chapter on “The Correct Handling of Contradictions Among the People”. That states very clearly, “The only way to settle questions of an ideological nature or controversial issues among the people is by the democratic method, the method of discussion, of criticism, of persuasion and education, and not by the method of coercion or repression.”
The finance ministry needs to study that chapter carefully. I have been warning them about the dangers of inflation. As comrade Lenin pointed out, “The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.”
The other serious issue we face is that commercial banks have not been reducing their lending rates. I want to send out the simple message that if they don’t do so, I will be forced to demonstrate the truth of the chairman’s famous proposition that political power flows from the barrel of a gun. I will also remind them that force is the midwife of every old bank chief executive officer pregnant with a new one.
I now turn to the need for inclusive banking. Mao said, “The people, and the people alone, are the motive force in the making of world history.” The banker must move among the people as a fish swims in the sea. The people have nothing to lose but their chains. I applaud the efforts taken by microfinance institutions that lend to women. As the chairman said, “Women hold up half the sky.”
And lastly, I would also like to demystify the office of the governor. Even governors do not know everything. As chairman Mao modestly observed, “The masses are the real heroes, while we ourselves are often childish and ignorant, and without this understanding it is impossible to acquire even the most rudimentary knowledge.” We need a cultural revolution at RBI. Let a hundred flowers bloom, let a thousand schools of thought contend.
Manas Chakravarty looks at trends and issues in the financial markets. Your comments are welcome at email@example.com