As the world tries to get back to normal business after three years of a pandemic, it appears that people are in the mood to take to the streets and protest. From UK and France to Mexico and Israel, people are demanding their fair share of economic and political rights.
Not content with all the relief and stimulus cheques and job protection programmes that the government had put in place during the pandemic, people across the UK are striking work to demand better wages. Not merely better, but wages that compensate them for inflation. Imagine that! From NHS staff to rail workers and teachers, everybody is protesting. This when the government also put together a package to help households manage the energy crisis during the winter months. There is also the possibility of Heathrow Airport staff going on strike, around Easter holidays.
Well, inflation in Britain is the highest it has been in four decades or so, not very different from the US. The levels are astounding, though – headline inflation of over 10% and core inflation of 5.7%. And despite all the interest rate hikes by the BOE, it doesn’t seem to be trending down nearly as quickly as people would like. Besides high energy prices, I think Brexit too is playing its part in keeping prices high, as are skilled labour shortages. Employers willing to pay higher salaries for the right people, is what is fuelling UK inflation, as BOE governor, Andrew Bailey hinted some months ago.
Across the Channel, France is engulfed in flames, as violent protests across the country continue for days on end. People are just not willing to accept Macron’s pension reforms, mainly the raising of the retirement age from 62 to 64. There is more to the pension reform than just the retirement age, but people are agitated over having to work more years, and I suspect, equally agitated by the way Macron pushed through the reforms without a vote in parliament. Surprisingly for France, there is some industrial action though not complete, but we shouldn’t rule it out either because most citizens support it as well. Macron has decided to stay firm on this reform and rightly so, I think. France is badly in need of welfare spending reform, and pensions are an important part of it. The country has the highest state spends on entitlements, and these do need to be pared down in view of an ageing demographic. Besides, an ageing, yet healthy demographic ought to be prepared to work longer.
Which brings me to the subject of bigger government, that everyone expected in the wake of the pandemic. Have governments really gotten bigger or do people now have the bargaining power, perhaps more than before? The Economist had written just as the pandemic was breaking that in trying to control the pandemic, governments across the world, especially those with access to technology, would get bigger and might even pose a threat to civil liberties. I didn’t subscribe to this view even then and wrote about it as well, saying that if governments don’t come to the rescue of their people, who will? The fact that governments would impose lockdowns, order mass testing, control the vaccination process, and use surveillance technology in the form of contact tracing and therefore begin to control their citizens is an unfounded fear, till date.
But what do we make of all these protests? As far as I can tell, it looks like governments aren’t doing a very good job of controlling inflation, even if they did manage to control the pandemic somewhat. And while governments in rich countries could afford to provide relief and stimulus cheques as well as keep people in their jobs, people now seem to have the upper hand. Not sure they can sustain the little extra bargaining power they now enjoy, but they are making the most of it. Businesses and government need people to return to work, but they run the risk of fuelling inflation if they give in easily to workers’ demands. Higher wages at a time when there is already upward wage pressure is likely to aggravate inflation. This along with slower growth could usher in a long period of stagflation, even if not outright recession.
From reports in the media, it appears that the UK government is already busy negotiating with the various sectors and their unions. On NHS, the service that Brits feel most beholden to, the government seems to have agreed to wage increases for last year and significant one-off bonuses as well for this year which together, from all accounts, does almost compensate for inflation. The UK government is said to be in talks with teachers’ unions, who have rejected the first plan on offer. I am concerned that if the UK government goes down this path any further, the country might see high inflation for an inordinate period of time and it also undermines the central bank’s policy decisions by working against them. At the same time, workers striking work across so many sectors for so long could seriously jeopardise economic growth.
I was wondering if wages and salaries of public sector workers in the UK and elsewhere aren’t protected against inflation, the way they are in my country, India. We have the largest public sector of any country I think, bar China, and their salaries are inflation-indexed to the extent that every six months, they receive a dearness allowance to compensate them for inflation. Only we folks in the private sector and the poor, suffer the effects of inflation.
All protests taking place around the world aren’t the same, however. If the strikes and protests in UK and France are over economic matters, those in Mexico and Israel are over political and civil rights. Mexico experienced a wave of protests in February this year to obstruct president Andres Manuel Lopez Obrador’s plan to push through electoral reforms that would undermine and weaken their chief electoral body. And in Israel, Netanyahu’s new right-wing government is trying to push through judicial reforms that would give the executive greater powers in selecting judges to their highest court. With several cases of corruption against Netanyahu dragging on for years, it would suit him fine to pack the court with his appointees.
If these sound like power-grab tactics, which they are, these are by no means the only countries attempting them. Poland and Hungary in Europe have tried and succeeded to some extent, and the tussle over appointment of judges is on in India as well. The difference is that in many other countries people are much more involved with the political process and more vocal about their rights. In India, there are no protests at the moment. We seem to be enjoying our moment in the sun as it were, what with the G20 presidency and economic growth too not doing badly. Inflation ought to be a huge concern, as core consumer price inflation has stayed stubborn at or around 6% for a few years now. Ordinarily, the ruling government ought to be very worried, as governments have been toppled in the past on account of raging inflation. But with the opposition in complete disarray, who would the electorate vote for even if they wished for a change.
Then, we have unemployment at stubbornly high levels as well. At least that isn’t such a huge concern in western economies, and in the US the job market is said to be quite strong, making the job of the US Federal Reserve that much harder. In a largely informal economy such as India, employment is hardly considered when looking at interest rate decisions, or at controlling inflation. Such high unemployment too is known to bring down governments, but this is India. The New India. Where big corporates enjoy tax breaks in the eternal hope that they will increase investment and create jobs. And where the ordinary Indian is made to suffer high fuel prices for years on end, on account of government taxes and duties. Where large companies are incentivized to increase investment through a process akin to License Raj, and poor folk are won over through freebies, not better and more employment opportunities.
And yet, no protests. The last protests that India saw were farmers from a few states protesting over agricultural reforms which have since been shelved, and young military recruits from poor, lower middle class households protesting over the Agnipath reforms. The former represents the landed rich who are too accustomed to guaranteed agricultural prices from the government. The latter are the rural poor for whom a job in the armed services was a way out of poverty. True to form, the government caved in to the demands of the rich farmers from Punjab and elsewhere, and shortchanged the poor youth of their chance to serve the country by offering them short service commission and promising them lucrative careers elsewhere, which in all probability will never materialize. Never mind that the real reason behind the Agnipath reforms was the mammoth defense services pension bill that the government was staring at.
For the greater part, as I have written before, the middle class that is seeing reasonable improvement in their lives are too comfortable, to voice their protest. They have been coopted into the world created for them by the nexus between business and government. This would be true of many countries, not India alone.
Incidentally, I recently read The London Review of Books’ review of Martin Wolf’s new book, The Crisis of Capitalism, and according to the reviewer, David Runciman, Martin Wolf presents the latter half of the 20th century as a great marriage between democracy (read state) and capitalism (read business), which in Wolf’s view has broken down. I haven’t read the book yet, so any comment would be premature on my part, but I wondered if Wolf wasn’t making a mistake in conflating democracy with the state. After all the state is a democracy only if and when the people decide to make it so.
If, as I say, people have given up or are too indifferent to voice their opinions and protest, democracy has already died. It doesn’t only take governments to crush or stifle democracy, it can be the citizens as well, who by their silence, or fear of persecution remain mute observers of all that goes on in the nation. In this context, I have another observation to make, even if unsubstantiated. In the rich, developed economies people who suffered job losses and were left behind by the steady advance of technology and globalization, were ready to make their voices heard and to protest. On the other hand, poorer, developing countries that have been beneficiaries of globalisation and economic growth, are witnessing the rise of a middle class that is too comfortable with the progress it has made to protest or voice an opinion. It is this middle class that needs to develop the capacity for change, and that requires realizing that protest too is an instrument of democracy.
We don’t have to wait four or five years for elections to come around in order to make democracy work. It is worth protecting, if only we can summon the will to fight for it every day.