Corporate Debt And The Idea Of Poverty

03/08/2015 8:28 AM IST | Updated 15/07/2016 8:25 AM IST
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India is chasing a dream of development and an idea of wealth that revolves around public policy, banks and a handful of corporations. The idea of wealth and success is pretty well defined in most minds. However, often this idea of wealth and material gain gets mixed with greed and dependency on a system of debt that can often leave a nation in a poorer state, ensuring further exclusion of the impoverished poor.

So at this stage as India aims for greater development, considering the idea of poverty in a truer sense is imperative. Who are the poor? Who are impoverished? Is debt the way to wealth creation? Are the wealthy poor? These are just some of the questions that determine the idea of poverty.

Back in the 19th century this was a hotly debated subject, leading to a significant shift in thought that poverty was not a natural condition but a social problem. These debates took into consideration those who were poor even if employed, those who did not have jobs and others who received charity from institutes such as the church. The poor law reformers of that time distinguished "in theory and policy, between the 'independent poor' and the 'dependent,' between 'labourers' and 'indigents' or 'paupers'," points out the American historian, Gertrude Himmelfarb.

"[H]eavily debt-ridden organisations have backed the government's Digital India programme with a commitment of over $70 billion...

In time, dependency changed. It was not limited to families and their pooled income or government support. Banks and the whole financial system stepped in. This is where the idea of poverty got far more complex as Thomas Fuller underlined the truth that "debt is the worst poverty". Just look at what happened to Greece (private debt became public debt) or how debt has killed farmers in India, and, more perplexingly, how banks themselves are under pressure with growing debt.

The late columnist Earl Wilson once said "there are three kinds of people: the haves, the have-nots and the have-not-paid-for-what-they-haves." When viewed in conjunction with the often-quoted view of John Maynard Keynes -- "If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours" -- you can see the poverty of debt for the scourge that it is.

In the Indian context, there is a reason to worry and ask ourselves some questions.

According to reports, as of March 31 this year Reliance Industries Limited (RIL) had a total outstanding debt of Rs 160,860 crore. Most of this debt has been restructured to stretch over a few decades. The combined debt of three Reliance ADAG companies is reportedly more than Rs 90,000 crore. The stand-alone debt of Vedanta Ltd (excluding liabilities of subsidiaries) was Rs 37,636 crore. Idea Cellular carries a debt burden of Rs 14,000 crore, while another telecom giant, Bharti Airtel, has a total debt of around $10 billion. Then there are steel companies, including Tata Steel, Essar Steel and Jindal Steel that together face Rs 1,96,000 crore worth of debt.

Yet, these heavily debt-ridden organisations have backed the government's Digital India programme with a commitment reportedly of over $70 billion! One wonders just how much poorer would these companies be and what impact it could have on the health of this nation. Ultimately, whose problem would this be?

Meanwhile, India lives and dies with a third of the world's poor. Reportedly 1.3 million children die every year due to malnourishment. India fares poorly in the Global Hunger Index, behind even our neighbours: Pakistan, Nepal and Bangladesh. Still, even with 39% of our nation's population being children, the Union Budget of 2015-16 slashed the total budget for them by 29%! The budget of the Ministry of Women and Child Development was cut by more than 50%.

It is often argued that "success" comes from hard work. Some say that by working enough, the poor can lift themselves out of poverty. But given that they were born into poverty and grew into joblessness what should they be working hard for? This is a question that has often been put forth to economists and governments, implying that the problem is systemic and not a creation of the poor. After all, as said by Eli Khamarov, "poverty is like a punishment for a crime you did not commit."

"[S]hould a nation perpetually allow the wealthy to pass on the huge self-created debt-induced poverty of their corporations on to our financial system?"

The poor do live with a sub-culture of poverty. They have a strong feeling of being marginalised. They feel helpless and "are like aliens in their own country, convinced that the existing institutions do not serve their interests and needs," points out the anthropologist, Oscar Lewis. This feeling gets exacerbated when they are exposed to the contrast between them and the rich of the land.

The truth is that the many of India's poor can't create assets in the manner that market economists would like them to. By the same token, this same population will never be able to create a debt burden that a few dozen corporations can impose on the financial system, in the name of wealth creation and development. The poor can't even be corrupt enough to be cronies to a government. At no point can they think of greed when they don't even have the basics.

Sadly, what Bob Dylan once said holds true even today: "Capitalism is above the law; it's said it don't count unless it sells." The impoverished, unfortunately, sell mostly in black-and-white photographs and cinema. The "wealth creator"/debtor makes it to the covers of magazines and is called to business schools to sell an idea of success which in many ways comes through a system of poverty called debt and at the expense of the poor.

There are surely no immediate answers to where we are and how we build inequality knowingly or unknowingly. But we must ask ourselves - should a system save lives and provide for the poorest of the poor, the ones who never made this choice? Or should a nation perpetually allow the wealthy to pass on the huge self-created debt-induced poverty of their corporations on to our financial system? What is our idea of poverty? After all, it is this idea that will determine how inclusive the nation's story of development can be.

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