The political significance of the global economic turmoil

Nick Beams

The continuing sell-off on global markets, which has sent stocks down by as much as 20 percent from their highs in 2015, is not simply an expression of mounting economic contradictions, significant as they are. It points to the emergence of a profound crisis in the very framework of capitalist rule over the past quarter-century.

Yesterday saw the Dow fall by as much as 566 points at one point, finishing up 246 down for the day, following a slide in markets from East Asia to Europe, with the British stock market plunging to the levels of 2003.

The fall on Wall Street continued the trend in which American markets have experienced their worst opening for any year in history. It was fuelled by the continuing fall in oil prices, which dipped below $27, having fallen 30 percent over the past year and 75 percent from the level of more than $100 per barrel in 2014. The oil price slide signifies that the so-called super cycle in commodity prices, which began in 2003 with the rapid industrialisation of China, has come crashing down in a concentrated expression of the recessionary forces now ripping through the global economy.

Yesterday was dubbed “Black Wednesday” for so-called emerging market economies, which provided a significant boost for the world economy after the 2008 financial crisis, as currencies fell sharply and concerns mounted over their financial stability in the face of growing problems in repaying their dollar-denominated debts.

The quantitative easing policies pursued by the Fed and other major central banks, which pumped trillions of dollars into the global financial system, led to an explosion of borrowing by corporations in emerging markets, which more than quadrupled their debt from $4 trillion in 2004 to over $18 trillion by 2014. Now this money is heading for the exits.

According to the Institute for International Finance, emerging markets saw a $735 billion capital outflow last year, most of it coming from China, a shift characterised by the organisation’s chief economist as an “unprecedented event.” Other estimates put the outflow even higher, with one economist telling the World Economic Forum being held in Davos, Switzerland that the capital flight from China had reached $1 trillion since mid-2015.

But the emerging market tailspin is only one of the most prominent symptoms of the deepening crisis of the global financial system. On the eve of the Davos meeting, William White, former chief economist of the Bank for International Settlements and now chairman of the Organisation for Economic Cooperation and Development’s review committee, warned that the global financial system was unstable and faced an avalanche of bankruptcies.

“The situation is worse than it was in 2007,” he said. “Our macroeconomic ammunition to fight downturns is essentially all used up.” Debts had continued to build up over the past eight years and it would become obvious in the next recession that many of them would never be repaid.

European banks already had $1 trillion of non-performing loans and were heavily exposed to emerging markets. “Emerging markets were part of the solution after the Lehman crisis. Now they are part of the problem too,” he said.

These views were reflected in comments by Zhu Min, the deputy director of the International Monetary Fund, to a panel at the Davos meeting. He warned that investors and wealth funds had been clustered together and asset markets had been dangerously correlated, meaning that any problems in one area would rapidly spread to the financial system as a whole.

“The key issue is that liquidity could drop dramatically… If everybody is moving together, we don’t have any liquidity at all,” he said, pointing to a situation where investors all try to sell at the same time and there are no buyers, leading to a market collapse.

Former IMF Chief Economist and now Harvard Professor Kenneth Rogoff told a television panel discussion at Davos that fear in the markets was being driven by the realisation that Chinese authorities were not “magicians,” and with interest rates close to zero or below in Europe and Japan, quantitative easing was now largely exhausted. “What’s driving this is that the central banks are not coming to the rescue,” he said. Companies were holding back investment because of deep anxieties and the events of the past year had dispelled the myth that China was a “perpetual growth machine.”

Underlying the growing financial crisis is not merely the fall in oil and commodity prices and slowing global growth, but something even more profound--the disintegration of the economic and political structures through which global capitalism has developed over the past quarter-century, since the dissolution of the Soviet Union in 1991.

Wrongly identifying the Soviet Union and the Stalinist bureaucracy that ruled it with socialism, bourgeois governments, political pundits, journalists and academics proclaimed this event as the final and irrevocable triumph of capitalism and the “free market,” and the birth of a “new world order.”

Now there is a growing sense that it has proven to be very short-lived. This mood was reflected in an article published Wednesday by one of the chief boosters of the “new world order” myth, New York Times columnist Thomas Friedman, under the title “What If?”

Pointing to growing economic and political turbulence, he wrote that it was “hard not to look around and wonder whether the recent turmoil in international markets isn’t just the product of tremors, but rather of seismic shifts in the foundational pillars of the global system, with highly unpredictable consequences. What if a bunch of eras are ending all at once?”

The causes of this disquiet are becoming ever more apparent. On the economic front, the boost to global profits by the transformation of China into the cheap-labour platform of world capitalism, and the opening up of new areas of the world to capitalist plunder made possible by the liquidation of the Soviet Union, has come to an end.

The European Union, which expanded after 1991, is in an advanced state of disintegration, with the emergence of deepening conflicts between its members. While these differences have been sparked by the refugee crisis, the imposition of austerity by Germany and the deepening contradictions of the single currency, they reflect, at bottom, the impossibility of harmoniously unifying the countries of Europe on a capitalist basis.

The end of the USSR was hailed as the onset of a “unipolar moment” in which the US could finally realise the ambitions of its ruling class for total world domination. The past quarter-century, beginning with the first Gulf war 25 years ago this month, has seen one war after another, with the ever clearer danger of a Third World War. The mad delusions of the American ruling elites that a single nation, even one as powerful as the US, could rule the world have turned into a global nightmare, with US imperialism confronting opponents on every front.

These and other processes have led to an acute crisis of confidence that is now feeding back into and interacting with the worsening situation in the financial markets and the world economy more broadly.

But the most significant factor in the new geo-economic and political environment is the mounting wave of social opposition, deeply rooted in the consciousness of billions of people, to the present order.

Over the past quarter-century, the essential relations of capitalism as a system of war, social inequality and repression in which governments function, as Marx explained, as nothing other than the executive committee of the capitalist ruling classes, have come ever more clearly into view.

There is not a single capitalist government around the world that is regarded as having any genuine political legitimacy. And nowhere is this crisis of bourgeois rule more concentrated than in the centre of world capitalism, the United States.

As Friedman pondered, “what if” the 2016 US presidential election “ends up being between a socialist (Democrat Bernie Sanders) and a borderline fascist (Republican Donald Trump),” under conditions where the government has no answers to the economic and social crisis?

As the World Socialist Web Site has explained, Sanders is in no way a socialist, but rather a thoroughly bourgeois politician who stands four-square in support of American imperialism. But the fact that he is regarded as a socialist opponent of Wall Street by millions of people and receives support on that basis is of crucial importance, reflecting deep-going changes in social and political consciousness. Those shifts are already finding expression not only in the United States, but globally. They will accelerate in the coming period as the breakdown of the world capitalist economy and the political structures within which it has operated continues to intensify.

At present, political consciousness takes the form of ever-deepening discontent and the feeling that the present order is intolerable. The crucial task is the transformation of this mass discontent into a conscious political struggle for the program of international socialism.

Forecast 2016: Another Year at the Crossroads for Pakistan

Sushant Sareen

Much like in all the previous 67 years of its existence, Pakistan finds itself on the crossroads even in the 68th year. The good things that happened in 2015 on the economic, security, diplomatic and political fronts are fragile and not irreversible. In 2016, Pakistan will have to consolidate the gains made in 2015. If it does not, matters could go downhill pretty quickly. It is in this sense that Pakistan is at a crossroads once again; and whether it will be able to sustain the momentum of 2015 and stay on the bumpy road to reform; or whether it will change course and take yet another wrong turn; or even slip back down the path it traversed in 2015, will decide how 2016 will end.

OverviewOver the course of 2015, the real ruling establishment – the Pakistan military – opened up just too many fronts. Apart from continuing operations in North Waziristan against the ‘bad’ – Tehrik-e-Taliban Pakistan (TTP) – terrorists, the army also got very deeply involved in anti-terror and anti-crime operations in Karachi; anti-insurgency operations in Balochistan; anti-corruption drive in Sindh and within its own ranks; and anti-terror operations (albeit intelligence-based) in Punjab and Khyber Pakhtunkhwa. The army was called upon to supervise elections, provide security backup to the China-Pakistan Economic Corridor (CPEC) project, and become judge, jury and executioner in the military courts that were set up.

Its role in forging the foreign policy on India, Afghanistan, and the US became more hands-on and intrusive. The army chief was also the chief diplomat, and apart from hobnobbing with both the Afghans and the Americans, he was also trying to assuage the Saudis who were unhappy over Pakistan's refusal to participate in Riyadh's war against Yemen. In 2015, even as the army was encroaching in virtually every sphere of government activity and arrogating to itself the veto on every critical national decision, it continued to form and control the policy on India, not only sabotaging peace initiatives taken by Pakistani Prime Minister Nawaz Sharif but also deciding on matters of conflict and cooperation with India – whether on the Line of Control (LoC), or on issues related to trade, transit or terrorism.

It will not be easy for the military to maintain momentum of the myriad fronts it has opened; and even less so because, with every new front it opens, its list of adversaries and those who would like to see it falter if not fail, grows. This becomes even more critical given the sheer lack of capacity and capability in the civilian dispensation, which will find it difficult to benefit from the inevitable slack that will come as a consequence of the Pakistan army spreading itself so thin.

Political

The ruling Pakistan Muslim League-Nawaz (PML-N) will find itself firmly ensconced in 2016. The challenge that could have come its way from the Pakistan Tehreek-e-Insaf (PTI) was has been quite snuffed out over 2015. While the PTI will not roll over and play dead, the sort of pressure it was able to build on the government (with the hidden hand of the military propping it up), is unlikely in 2016.

Most issues on which the PTI agitated – e.g. election fraud – have more or less been settled and are unlikely to get any traction in 2016. However, the PTI is trying to latch on to new issues, most potent being the clamour over the CPEC. But this is a double-edged sword because while the PTI might be able to rouse public opinion in provinces like Khyber Pakhtunkhwa and Balochistan on the Punjab-centred CPEC, it is unlikely to go down well with the electorate in the province that is the controlling authority of Pakistan – Punjab. Without stirring Punjab up, the PTI will be unable to shake the PML-N. But, if the PTI can build up a solid movement against the PML-N on the CPEC issue, it can bring Nawaz Sharif under pressure.

Whether this will be enough to destabilise the PML-N government is another matter. Unless the PML-N government commits some very egregious mistake because of its proclivity for high-handedness, any challenge the PTI mounts will not cause too much trouble.

As for other political challengers, there are none on the horizon. The Pakistan Peoples Party (PPP) is practically on its deathbed and has completely lost the political plot. It is unlikely that the PPP’s fortunes will be resurrected by Bilawal Bhutto Zardari because none of his slogans – most of them taken from a different era of his grandfather and mother – strike no resonance with the public, and will not, in 2016. Religious parties could begin agitating against the government on the issue of the crackdown on terrorism and extremism, but if the army supports the government, or as is more likely, leads the drive against extremism, then there will not be much these parties will be able to achieve.

The danger, however, is that the army could just as easily use the religious parties to keep the government under pressure. After all, the military-mullah alliance has worked well for both the military and the mullahs. Of course, the mullahs will have to dance to the tune of the military and shed some of their pretensions of being autonomous in charting their political course.

Civil-military RelationsCivil-military relations will be the biggest political driver in 2016. Again, nothing new here. But 2016 is the year of transition in the military. Gen Raheel Sharif is to retire in November. There is already talk of whether or not he will get an extension. This will be a difficult decision for Nawaz Sharif to make – does he stick with the devil he knows or take his chances with the devil he does not? Gen Sharif has managed to assert himself and insert the military into the decision making processes of the government like it hadn’t happened since the end of former Pakistan Prime Minister Benazir Bhutto’s first government. But he has also let the civilian facade continue. His successor may not.

There is also a chance that the next General may have different ideas on controlling terrorism and extremism. On the other hand, Nawaz Sharif might decide to go for a new army chief because the next man would take at least a year before he comes into his own, long enough for the former to try and change the power balance. It is another matter that these sorts of calculations have a record of going terribly wrong, and no one knows this better than Nawaz Sharif who has had an uneasy relationship with every single army chief.

EconomyOn the economic front, 2016 is unlikely to see any major take-off. Cut through the window dressing of national accounts by the Chartered Accountant finance minister, and there isn’t very much to celebrate. The only bright spot, if at all it can be called that given all the controversies surrounding it and the fuzzy economics underlying it, is the CPEC. Apart from the investment coming under the CPEC, there is hardly any other green field investment in Pakistan. The macro-economic indicators, in spite of all the fudging, still do not look very good. Savings remain very low; investment has not quite picked up; revenue collection remains anaemic; public debt is spiralling; growth numbers are not anything to write home about; and the external sector remains fragile.

In 2016, it is unlikely if the Pakistan economy will be the toast of town. But if there are no major external shocks – destabilisation in West Asia, disruption of the remittances, oil shocks etc. – the economy will meander along.

Security2016 will be a crucial year on the terrorism front. The first few weeks do not seem to bear out the bombastic declaration by Gen Sharif that this will be the year in which terrorism will be defeated in Pakistan. A lot will depend on how the situation pans out in Afghanistan; and the portents are not good. Apart from the fact that Pakistan has continued to back its proxies among the Taliban, there are new players emerging due to the fragmentation in the Taliban ranks.

Despite Pakistan's efforts to get the Taliban faction supported by it into the driving seat in Afghanistan, it looks as though even Pakistan's own Afghan proxies might try to assert their autonomy from their patrons. If this happens, then the security situation, not just in Afghanistan but also in Pakistan, will go into a tailspin. The vast, ungoverned spaces straddling the border between the two countries will become the playground for all sorts of terrorist groups. The entry of the Islamic State (IS) into the AfPak region is also going to change the contours of terrorism.

The traction the IS is gaining among a new set of terrorists as well as the its attraction to some of the breakaway factions of the Taliban will remain a source of concern; and worse, destabilisation in both Afghanistan and Pakistan. Any uptick in terrorist violence will not just further damage the investment climate but also could risk the CPEC on which Pakistan appears to be basing its entire economic future.

Relations with IndiaRelations with India will go through the familiar cycle of engagement followed by estrangement. Despite all the euphoria generated by the December 2015 thaw – the meetings between the NSAs of both countries, followed by the visit of the Indian External Affairs minister to Islamabad where she announced the ‘comprehensive bilateral dialogue’, and topped by the flying visit of Indian Prime Minister Narendra Modi to Lahore – among the incorrigible optimists, there isn’t anything on the ground to suggest that Pakistan has made a paradigm shift in its India policy. The Pathankot attack is one indication that nothing has changed insofar as use of terrorism as an instrument of state policy is concerned, or, for that matter, the ability of the powers that be in Pakistan to sabotage any engagement process between New Delhi and Islamabad.

Chances are that both sides will start the process of engagement. Pakistan will make a show of moving against the Jaish-e-Mohammad terrorist organisation. But once the attack moves out of the front pages, it will be business as usual.

Therefore, by all accounts, the familiar trajectory of India-Pakistan engagement will be repeated. The best that can be hoped for is that violence along the LoC will be kept under control. For how long, is anybody’s guess. There is high probability of terrorist violence inside Kashmir. Some of this will be Pakistan-driven but some will be driven by the international jihadist narrative. But all of it will tend to be linked with Pakistan (which too will be tempted to dabble in the affairs of Kashmir), which in turn will lead to tensions between the two countries. There is also a high probability of another big terror attack within a few months, especially if the Indo-Pak engagement gathers some pace.

The AIIB: Regional and Global Responses

Madhura Balasubramaniam

The Asian Infrastructure Investment Bank (AIIB) was formally inaugurated on 16 January 2016. The AIIB is a multilateral development bank envisaged to "promote interconnectivity and economic integration" in Asia. Headquartered in Beijing, China, the Bank has 57 Prospective Founding Members. In June 2015, the startup capital of $50 billion was increased to $100 billion. The Bank has aroused different reactions from each part of the world. The articles tends to analyse these responses at the regional and global levels.

The foreign policy and economic concerns that underlie the establishment of the AIIB include the need to bridge the infrastructure investment gap of $8 trillion in the East Asian region. The AIIB, with its initial capital of $100 billion to be invested in energy, transportation, rural and urban development and logistics becomes significant in light of the investment gap.  Other major reasons for China to promote the Bank include the under-representation of non-western economies in existing global financial institutions, and the need to channel surplus Chinese capital into overseas investment.

Beijing argues that because 75 per cent of the seats and shares in the AIIB are reserved for Asian countries, the imbalance in representation of non-western economies in the existing international financial system will get addressed. This is an attempt to attend to a broader Chinese foreign policy agenda of playing a more proactive role in global institutions. Finally, infrastructure investment via the AIIB is to serve as a vehicle to drain surplus capital - estimated at $137 billion in the second quarter of 2015 - as well as to address concerns of regarding the capacity of construction material.

Regional Responses

The AIIB has received mixed reactions in major Asian countries. The Philippines has decided to hold off its decision to participate in the AIIB citing the non-binding nature of the Articles of Agreement (AOA). Japan is not participating in the AIIB to avoid a potential negative impact on Tokyo-Washington relations. Vietnam and India, on the other hand, have decided to participate in the AIIB citing their infrastructure demands. The regional response to the AIIB is significant. The Philippines, Vietnam, India and Japan each have territorial disputes with China. It is possible that negotiating opportunities might present themselves as these countries balance their territorial disputes with their growing economic relations with Beijing.

The AIIB is also a new platform for Taiwan to advance its bid for international recognition. Taiwan submitted its bid to join the AIIB and it was rejected on grounds of nomenclature. This is in tune with Beijing’s policy of strictly opposing any representation of Taiwan as an independent state. The rejection of Taiwan on grounds of nomenclature, as opposed to compromises in other international organisations such as the ADB or WTO, is a clear indication that Beijing’s political concerns trump the economic agenda in the establishment of the AIIB. This raises concerns that the AIIB will serve as tool for China to pursue its geopolitical ambitions, particularly in the light of regional territorial disputes. It would, therefore, be significant to observe the AIIB’s response to Taiwan’s bid for ordinary membership in 2016.

Global Responses: EU and the USThe EU's response to the AIIB reflects the willingness of member-states such as UK, Germany and France to engage more closely with Beijing as well as to encourage China to assume a more significant role in multilateral institutions. As members, they do have a potential role to shape the Bank from within. However, the divergence in stances taken by EU members regarding membership bids reflect the need for a coordinated response.

The US had refused to join the AIIB and is also said to have lobbied against the bank, leading to an increasingly isolated position as key US allies joined the Bank. The establishment of the AIIB is viewed as an erosion of US’ influence in the region.

Washington's concerns about the AIIB presenting a challenge to the existing financial institutions, and on whether or not it would meet standards of governance and environmental safeguards, were addressed during Chinese President Xi Jinping's US visit in November 2015. In a joint statement released by the White House, the US acknowledged China's contributions to the financial infrastructure in Asia and beyond, reflecting a nuanced change in Washington's position in an attempt to perhaps mitigate some of the political costs it incurred due to non-participation as well as attempts to dissuade its regional and European allies from joining the Bank.

The establishment of the AIIB highlights China’s attempt to shape the international financial architecture in a manner that is economically beneficial to the region and also serves to portray China as a responsible stakeholder in the international system. Simultaneously, the regional and global responses reflect the complexity involved in each country’s decision-making process on participate in the AIIB; and the decisions are informed by both economic and political considerations vis-à-vis their respective bilateral relations with China.

You Are Brave, Rohith

Farooque Chowdhury

Our heart goes with you, Rohith. You are brave. We love your courageous protest. Our love is with your protesting soul, with your resurrecting spirit, Rohit. Our dream goes with you to stars, to the star-studded life, your dreamland that humanity will reach one day.

We share your pain, Rohit. We share your humiliation. We, the millions of downtrodden in lands crossing plains and deltas, crossing mountains and ridges, crossing valleys and deserts, crossing forests and crop fields, crossing brooks and rivers have the same experience, have the same humiliation, same pain, same dispossession, same silence. It’s a silence imposed by power, a brute power, a power constructed by capital, a power sustained by a coalition capital constructs. This power buys in feeble souls, purchases opportunists, leases in opportunity-seekers. It’s the reality, a reality to be changed, Rohit.

But, we the downtrodden, dispossessed people in town shanties and city slums, in dark-dominated lower-middle class dingy rooms, in dust covered village huts are still alive as you are alive. You will remain alive as we will. You can’t die as we won’t. A spirit for justice, a spirit for equality, a spirit for a life with dignity can’t go dead. You personified those spirits. These are the spirits for liberation. These are our spirits also. So, you aren’t dead as we the people won’t be.

Rohit, you loved Science, Stars, Nature. (“Rohit Vemula’s Final Letter”, Countercurrents, January 18, 2016) These are our loves also. Rohit, you loved people. People love people. Bond of fraternity between peoples is thicker than blood. It’s a bond that grows up and develops over centuries of suffering, struggle and dream for liberation. It’s a long journey. No color, no custom, no creed, no other yardstick can install the dubious tales of division between peoples. These can’t and shouldn’t divide the peoples as everywhere people are in chains, people are exploited, people are subjugated, people are robbed of rights and just accesses to a fair life and dignity. So, Rohit, you and people stand together.

Science is taken away from peoples in lands. Rationality, scope for arguments and counter-arguments are taken away from peoples in lands. Science is made a tool for expanding the domain of profit and a tool to make gimmick so that peoples don’t understand science, so that peoples fail to identify contradictions, so that peoples fail to identify friends and foes, so that people live in dark dungeon. We all love science so that science comes up with its philosophy, so that trivial, unnecessary debates creating confusion and distraction are cast aside and real issues of life and dignity are discussed in an effective way. All advancements science makes are appropriated by the prevalent way of governance. Each foot-poundal science moves are snatched away from science by the prevalent system of governance so that peoples in lands don’t get benefit, so that they don’t get the illumination of rationality. This is done by narrowing down science to only into the world of physical/natural science, by ignoring social sciences. So we also love science, Rohit, as science helps us dissect the facts of rich-poor divide, the facts of exploitation and charity work, the facts of bond between all the exploited on this world.

Rohit, you would be around us always, in all our dreams for liberation from all forms of bondage, in all our struggles to get free from all forms of humiliation and indignity. Your letter is a live letter to us. It’s a song of life. It’s a song of pain.

We are not angry with you, Rohit. Rather, we are angry with our existing incapacity, with our misunderstandings, with division among us.

We know, you have no complaints on anyone of us. But we have complaints on the system that pushes Rohit, and many nameless-Rohits to many forms of death. It’s murder. The system commits murders. The murder has many forms, and the laws the system enacts don’t identify these murders.

Rohit, you always wanted to be a writer. You aspired to be a writer of science, like Carl Sagan. You are a writer, Rohit. You are a writer of one form of protest, one form of resistance. It’s not the last and only letter you have written. Your letters will be written each and every day in places of resistance, in all sparks of protests, in all risings like deluges.

The prevalent system has separated people from nature. You are correct, Rohit. “Our feelings are second handed. Our love is constructed. Our beliefs colored. Our originality valid through artificial art. It has become truly difficult to love without getting hurt.” (ibid.) A thin book said this also:

“It has degraded personal dignity to the level of exchange value; and in place of countless dearly-bought chartered freedoms, it has set up one solitary unscrupulous freedom – freedom of trade. In a word, it has replaced exploitation veiled in religious and political illusions by exploitation that is open, unabashed, direct, and brutal.

“[….] Doctor, lawyer, priest, poet, and scientists, have become its [the capitalist system] wage-laborers.

“The bourgeois has torn the veil of sentiment from the family relationship, which has become an affair of money and nothing more.” (Marx, Karl and Friedrich Engels, The Communist Manifesto)

We, the wage-laborers, are victims of capital. It terrifies, it snatches away dignity, it blocks access to education for all. We are victims of the system. The system stands before us as an obstacle to humane attainments.

You are correct, Rohit, as you write “The value of a man was reduced to his immediate identity and nearest possibility. To a vote. To a number. To a thing. Never was a man treated as a mind. As a glorious thing made up of star dust. In every field, in studies, in streets, in politics, and in dying and living.” (“Rohit Vemula’s Final Letter”) We are nameless, we are faceless, we are subject of charity, we are bank capital’s tools to expand capital. We are numbers to NGOs, which mobilize us in the vast rural areas and in urban slums to secure status quo.

Rohit, you were not wrong as you were always rushing. All of us have promises to keep. So all of us are rushing, trying to rush. All of us are, as you said, “Desperate to start a life.” (ibid.)

Your birth is not a fatal accident. It’s an output of historical circumstances. Childhood of all from poor, powerless families is actually full with loneliness. All the children from these families are unappreciated. It’s a loveless childhood, it’s a childhood-less childhood.

Rohit, you are not coward. You are not selfish, or stupid. It takes courage to protest, and protest takes many forms, and circumstances influence forms of protest. We exactly don’t know the circumstance that compelled you to resort to this form of protest. We don’t encourage the form. But we feel the pain activating the form, the desperate circumstance that compels one to resort to such form of protest. Organizations will grow up to have a better form, to have a scientific form.

We understand the burden of debt, Rohit. We see it in village after village, in slum after slum. Student loan, in many forms, is not only an India-scene. In the US, thousands of students are burdened with billions of dollars of student loan. The total amount, probably, of the student loan is more than a trillion dollar.

Rohit, your silent funeral will blossom with our pain, with our untold pain, with our tears. Pardon us friend, we can’t stop shedding tears.

The system is responsible for your act of killing yourself. The system has instigated you, we know, dear friend.

Rohit, our beloved brother, you will travel to the stars as you aspire. Our love will be travelling with you.

Women –The Key Motors In Rural Financial Democracy

Moin Qazi

Poor women now plan the village development agenda. Poor people are bonsai people. There is nothing wrong with their seeds. Only society never gave them a base to grow on. - Muhammad Yunus, Nobel Laureate

In remote crannies of developing countries, poor women are pooling their talents and resources to build a new synergy of collective empowerment to transform their lives. These small clusters or collectives of women are known as Self-Help Groups.

A Self-Help Group is a group of a few individuals—usually poor and often women—who pool their savings into a fund from which they can borrow as and when necessary. Such a group is linked with a bank—a rural, cooperative, or commercial bank—where they maintain a group account. For a period of time in the beginning, the women only save money. They deposit a small sum, ranging from 20 rupees to 50 rupees (67 rupees equal one U.S. dollar) each month. After six months, the women are eligible to take small loans. These loans can either come from the group savings account or through the bank. The group helps determine if the loan is appropriate for each member and serves as a screening point for the bank. Because the liability of the loan is shared among the group, it is in each member’s interest to ensure that all other members are capable of paying back a loan on time.

Loans are then given out to individual members from these funds upon application and unanimous resolution drawn at a group meeting. The bank permits withdrawal from the group account on the basis of such resolutions. Such loans, fully funded out of the savings generated by the group members themselves, are called ‘interloans’, and have a short repayment period, usually three to six months.

After recording regular loan issuance and repayment for a minimum period of six months, the bank begins to lend to the group as a unit, without collateral, relying on self-monitoring and peer pressure within the group for repayment of these loans. The maximum loan amount is a multiple (usually 4:1) of the total funds in the group account. Once the group matures, and graduates to a business enterprise, the financing is more need-based and is directly linked with the capital needs of the business.

These women have now traversed a long path and are now part of the development landscape. Many of them have become panchayat leader and village pradhans in India’s villages and have become active The Self Help Group revolution which is also known as India’s indigenous microfinance movement has redefined the contours of women’s empowerment in the grassroots institutions that are engaged in village planning and development., The SHG movement which is India’s indigenous model for financial, social, and political empowerment of poor village women has proved to be a game changer for women’s destiny. The women of Self Help Grops have brought about a new transparency and imparted a vibrancy to rural governance .They serve as watchdogs to safeguard the development agenda of the grassroots government administration.

Participatory development has now adopted a more pragmatic approach . Participatory projects can also differ from one another in their nature and objectives; there is no easy single answer to how to implement them, but looking at what pitfalls to avoid can be a place to start..The ‘bottom up’ approach is about living and working with the poor, listening to them with humility to gain their confidence and trust. Their trust cannot be bought outright or manipulated with money, or by grafting urban assumptions of development onto existing rural practices, which in fact may destroy existing workable structures. We must first understand their economy at a granular level and, most important, thoroughly understand their local culture. That approach is a welcome contrast to the grandiose foreign-aid schemes that do more harm than good. Experiences show that governments too often derail the money intended to help the poor to pad the pockets of civil servants instead. Mired in bureaucracy and corruption, the benefits rarely reach those who needed them the most.

The bottom-up approach means that local actors participate in decision-making about the strategy and in the selection of the priorities to be pursued in their local area. Experience has shown that the bottom-up approach should not be considered as alternative or opposed to top down approaches from national and/or regional authorities, but rather as combining and interacting with them, in order to achieve better overall results.

The heroic stories of tenacious women scripting tales of economic success are great signs of a brighter tomorrow .For a world where people live on less than a dollar a day this is an important step. The journey of a thousand miles starts with a step. Truly, there is change in the air. Though not dramatic, not a headline grabber, it is a slow and quiet transformation that definitely is underway in remote and far-flung villages. Women who so far had been diffident and withdrawn are gradually shedding their earlier reticence and stepping out of the four walls of their homes to acquire an identity of their own. It is a silent effort in the country that is bound to accelerate progress on any indicator—economic, social, or political—the last fairly visible with most of the one million women elected over the years at the panchayat level coming out of the self-help groups.

This may not be a revolution- but at least it is a start.

What Do Almost All War Criminals And Dictators Have In Common?

Mickey Z.

Vice President Dick Cheney in Iraq. March, 2008. By soldiersmediacenter (iraq) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

For many people, the term “war criminal” means swastikas and concentration camps. Give it further thought and the more open-minded among us may recall grainy black-and-white images of My Lai. Hear the word “dictator” and perhaps your mind’s eye conjures up Hollywood-inspired images of Third World “banana republics.”

In reality, however, living under the yoke of relentless necrophilic rule provides an endless supply of despots, war-mongers, and the inevitable atrocities they command and commit. These criminals come from all walks of life, from every corner of the globe, e.g. Mobutu of Zaire, the Shah of Iran, Noriega of Panama, and Marcos in the Philippines -- to name but a few.

Manuel Noriega. By U.S. Marshals Service in Miami, Florida [Public domain], via Wikimedia Commons.

From Harry Truman and his terror bombing of Japan to Saddam Hussein’s mass murders in Halabja. From Suharto’s bloody rise to power in Indonesia to the Contras making Reagan proud in Central America. From Ariel Sharon in Sabra and Shatila to Henry Kissinger’s legacy amongst the Vietnamese, the Kurds, the Chileans, the East Timorese, the Bangladeshis, etc. etc. etc.

From the earliest of recorded history right up to Barack Obama and his drones, his kill list, and his Nobel Peace Prize, ruthless rulers are ubiquitous and seemingly inevitable.

But what do almost all of them have in common?

President Obama. 2009. U.S. Marine Corps photo by Lance Cpl. Michael J. Ayotte [Public domain], via Wikimedia Commons.

For starters, the list I offered above is made up of Americans, U.S. allies, and those funded and supported by the Land of the Free™ (I was just checking to see if you were paying attention.) However, I could spend another 1,000 pages discussing the catalogue of thugs that pre-date the founding of God’s Country™. Yes, the Home of the Brave™ is the current king of atrocities but is still merely the latest in a long lineage of murderous monarchs.

War criminals and dictators come in many age ranges, are found in just about every geographical location, and run the gamut of religions, ethnicities, and financial classes. So, if none of these is the most universal marker for recognizing such predators, what is?

Think it over. I’ll wait.

A few more examples, while you ponder: Bill Clinton, Idi Amin, Kenji Doihara, Augusto Pinochet, and Curtis LeMay.

Go ahead. Say it.

Adolf Eichmann, Tariq Aziz, Colin Powell, Kim Jong-Il, and Efrain Rios Montt.

You know what it is, so just admit it.

Kang Kek Iew, Robert McNamara, Charles Taylor, Donald Rumsfeld, and Benjamin Netanyahu.

Do the thing.

Tojo, Hitler, FDR, Stalin, Mussolini, Bush, Pol Pot… I could keep going for days.

Name the problem.

Please. Just name the problem, before it’s too late to address the problem.

Forecast 2016: Nuclear Issues That Will Dominate 2016

Manpreet Sethi


Ever since the power and potential of nuclear energy first entered human consciousness and inter-state relations, nuclear issues have always remained at the centre stage. Expansion of peaceful uses of nuclear energy and risks of nuclear weapons and their proliferation are twin dimensions that engage national and international strategists year after year. None of this is likely to change in 2016. In fact, one can safely predict some of the issues that will certainly hit headlines in the coming  12 months.

North Korea and its periodic demonstration of nuclear machismo was the first to grab eyeballs in 2016 when Pyongyang rather cockily claimed the detonation of a ‘miniaturised hydrogen bomb’ on 06 January, 2016. Conducting its fourth nuclear test over the last decade, the DPRK has been steadily ‘improving’ its nuclear deterrent capability, including via regular testing of its delivery systems.

Every nuclear act of North Korea brings immediate attention to China, its protector. Many strategic analysts have urged Beijing to rein in its 'dear friend', and despite all Chinese voices of condemnation and exasperation, the reality is that North Korea’s nuclear brinksmanship serves to keep China's rivals such as Japan, South Korea and the US unnerved even as its own stature as an important, influential international actor rises. The danger, however, is that a proxy that it has long built and sustained might already be beyond its control, much like what has happened in Pakistan and its relationship with terrorist organisations.  Sale of nuclear technology, material or even a ready made weapon to terrorist organisations by a cash-strapped DPRK is not unthinkable , and is indeed a matter of international concern.

The most recent North Korean action sought to draw attention to itself, perhaps in the hope that if 2015 was the year of the nuclear deal with Iran, 2016 will bring some bargaining benefits for Pyongyang. Washington will be working overtime to crack this issue. But the US election process will not allow any serious action on the matter. Kim Jong-un may have to continue to make nuclear noises this year for it to be heard by the new US president soon after he/she takes office.

While lack of transparency hampers a clear assessment of North Korea's exact nuclear weapons capability, the fact that South Korea and Japan, and the US by extension, are concerned is evident. Their focus immediately shifts to protecting themselves through deployment of ballistic missile defences. Tokyo has also debated a reconsideration of its ‘no nuclear’ policy even as Seoul has hinted that the US should bring back tactical nuclear weapons to buttress deterrence. Whether or not such measures enhance national defence, they do add new value to nuclear weapons and take away from the possibility of their elimination. In fact, if anything, the current trends in all nuclear armed states indicate an increase in reliance on these weapons in their security strategies.

The latest development in this context is the news that the US has tested small, smart nuclear weapons to address a new class of threats. Previously, micro-nukes were considered during former US President George Bush's tenure, but the idea was abandoned for the adverse impact it could have on international security. Indeed, no nuclear weapon, however micro in yield, could avert a disaster with huge repercussions in space and time.

However, on 11 January 2016, the New York Times reported the test of the "nation's first precision guided atom bomb" by the US Energy Department and Pentagon. Russia and China are bound to move in the same direction. 2016 may then well prove to be the year to herald a cascade towards the so called low yield nuclear weapons with 'low' collateral damage. But this could also increase temptation for their use, thereby blurring the lines between conventional and nuclear, and adversely impacting the taboo against nuclear use.

The implementation of the Joint Comprehensive Plan of Action with Iran will be another issue that will dominate 2016. The conclusion of the agreement has initiated a long journey that will be closely monitored in many capitals. Iran-Saudi tensions that broke out early in the year will pose a challenge to the smooth implementation process, since there will be a tendency to politicise everything in Tehran and in Washington. As it is, critics of the agreement abound, and it will be a struggle to stay the course. Nuclear concerns around Iran, and by extension, around the West Asian region, are unlikely to fade in 2016 despite a ground breaking deal in 2015.

Nuclear security will be the flavor of the Spring season this year given the scheduled Nuclear Security Summit in Washington. Over the last six years, these meetings of over 50 heads of governments and over 100 organisations have travelled across two nations before returning to the US capital for the last of such Summits. The initiative was kick-started by incumbent US President Barack Obama, whose 2010 Nuclear Posture Review had identified nuclear terrorism as the most potent threat to the US. He also realised that this was not a problem that he could tackle just by securing national borders. Weak links had to be removed worldwide, by getting every nation possessing nuclear and radiological material to do the needful on its own territory.

Since the first Summit, there has been a tremendous increase in the awareness of nuclear security concerns. Enactment of national legislations that criminalise unauthorised possession of such materials and memberships of international conventions that provide best practices on nuclear security has evidently grown. At every Summit, country heads have presented national or regional gift baskets comprising actions taken to secure nuclear materials. The April 2016 Summit, one hopes, will not mark the end of focus and attention to a matter that must remain a topmost national and international priority in order to minimise chances of nuclear terrorism.

It is likely that participants will put their weight behind the International Atomic Energy Agency (IAEA) to carry this process forward. However it remains to be seen as to how much human and material resources will be additionally proffered to the IAEA to be able to fulfill a new task.

Nuclear energy programmes that had suffered from a public perception issue in the immediate aftermath of Fukushima in 2011 are likely to gain lost ground in 2016.

Over the past five years, nuclear establishments across the globe have proactively engaged with the public to address concerns, reinforce safety and security at nuclear reactors, and invest in research and development to devise new designs and technologies to make risk free nuclear energy a viable option. Meanwhile, growing concerns about the adverse environmental impact of fossil fuels on climate change has also drawn attention to nuclear energy as a sustainable source of base-load electricity. While huge energy deficient countries such as India and China never gave up the nuclear option despite Fukushima, and are today witnessing the largest amount of nuclear construction, others that had suspended their programmes for a while seem to be returning to the option. Vietnam, the UAE, and Bangladesh are likely to be some of the new nuclear kids on the block whose programmes will see greater activity in this year.

From the Indian perspective,  2016 will be an important year for at least two reasons – the first relates to the implementation of the many peaceful nuclear energy agreements that the country has signed with a number of countries after its exceptionalisation in 2008. Australia, Japan and Canada are three of the newer nations that have agreed to support India’s nuclear energy ambitions and some of the pending wrinkles might get sorted out during this year. On the indigenous front, it is expected that the Prototype Fast Breeder Reactor would go critical later this year. Long delayed, the operationalisation of this reactor at Kalpakkam will mark a step into the second phase of India’s three stage nuclear programme.

Secondly, India’s full accommodation into the nuclear non-proliferation regime with its membership into the four export control groups is also likely to dominate the work and discourse of Indian nuclear diplomacy. High level inter-state politics prevented the Missile Technology Control Regime from granting India membership to the body that controls transfer of missiles and related technologies in 2015.

Since all the groupings work on the principle of consensus, the process will not be easy. And despite India fulfilling basic criteria for membership of the groups, it will be the political lay of the land that will determine whether the task is completed this year. However, India will have to maintain a high octane nuclear diplomacy to continue to make its case and undercut any attempts to hyphenate it with a similar deal for Pakistan.

Alongside its efforts towards building a credible nuclear deterrent, while regular testing of missiles shall continue to achieve operational readiness for Agni V and the conduct of user trials for other missiles, the major development that can be expected in 2016 is the formal induction of INS Arihant into the Indian Navy after a series of successful sea trials through 2015. Though this first nuclear submarine does not provide an operational sea-based deterrent for India yet, it nevertheless marks a huge step in technology demonstration that the country should well be proud of.

In a nutshell, 2016 promises to be another busy year for nuclear watchers. Happy new year!!

Forecast 2016: Pakistan, Aberrated Strategies and Strategic Stability

Vijay Shankar


In the immediate aftermath of the 26/11 terrorist assault on Mumbai, a grisly prayer was being intoned in many of the two lakh mosques of Pakistan. The Qunut-e-Nazla, a prayer in times of war, was accompanied by a fervent imprecation that al Qaeda and the Pakistan Army fight India jointly.  The verity of this statement is borne out by Azaz Syed in his recently published ‘tell-all book’, Secrets of Pakistan’s War on Al-Qaeda (Al-Abbas International 2014, P 69). The aim of the linkage was the creation of an Al-Qaeda State in Pakistan in the wake of a nuclear war between India and Pakistan.

The link between sub-conventional warfare and nuclear war fighting is at best a tenuous one. Conceptually, no nuclear policy, by the very nature of the weapon involved, can conceivably be inclusive of terror groups. And yet the strategic predicament posed by Pakistan is perverse, for their stratagem on select terror groups is that they are instruments of state policy. Now, consider this: Pakistan promotes a terrorist strike in India, and in order to counter conventional retaliation, uses tactical nuclear weapons, and then in order to degrade massive retaliation, launches a full blown counter force or counter value strike. This extreme chain of events would suggest the reality of a self-fulfilling logic of nuclear apocalypse.

A Pakistan that is controlled by a military-ISI-jihadi combine, is plagued by an obsession for parity with India and an inspiration that wallows in the idea of India as a threat in perpetuity (in great part to provide a reason for the army’s pretentious existence). One is spoilt for choice while discerning instances of Pakistan’s military-intelligence links with terrorist groups. It began at the time of partition, when tribal lashkars along with regulars invaded Kashmir; the clumsy and doomed Operation Gibraltar in 1965; state-sponsored insurgencies in the Kashmir valley during the 1980s and 90s; war following the 1999 invasion of Kargil; the failed attack on the Indian Parliament; the Kaluchak massacre of 2002; the 2008 Mumbai attacks; and the continuing low level insurgency across the Line of Control (LoC); and the latest manifestation was the failed assault on the Pathankot airbase on 02 January 2016 - coordinated with the failed assault on the Indian consulate at Mazar-e-Sharif, Afghanistan, on 03 January 2016.

For India to suffer the violent effects of covert action in silence makes for poor internal as well as external policy. It is here that Pakistan will have to pay for Indian restraint (now frayed to the extreme), which in turn places before the Indian planner a host of considerations and a set of possible responses that include covert action against targets across the LoC or border who are known to have liaison with jihadi forces. Planners will do well to heed that it is Pakistan’s policy that has to be targeted; and more specifically, it is control of that nation by the ‘deep state’, by which is implied that the sway of the military-intelligence-jihadi combine must be subordinated.

Recently, this author engaged the US Secretary of State John Kerry’s International Security Advisory Board (on Strategic Stability, chaired by Dr. Raymond Jeanloz) in a dialogue on sub-continental strategic stability. During the deliberations with the group, two issues became apparent. First, the State Department group was split down the centre as to what defined strategic stability. The proposition on one side was the cold war paradigm that perceived stability through the ‘nuclear equilibrium’ prism - of survival through a nuclear first strike and then retaliating massively. A mirrored rationality of survivability and credibility of retaliation was of essence. The equilibrium between nuclear weapon states, from this perspective, was given surety by developing a nuclear war fighting capability and retaining a ‘limited nuclear option’ at hair trigger notice to control the escalatory ladder. This “Strangelovesque” advocacy appeared to disregard the fact that limits on use of nuclear weapons (by the nature of the weapon) defied escalatory control.

Second, the group also perceived the potential of terrorists being armed with nuclear devices justifying collaboration with Pakistan at any cost; this presented a strategic irony since it was the Pakistan deep state that made terror groups an instrument of state policy in the first place.

On the other side of the divide was the group that saw, in the contracting role of the US in Afghanistan, a diminishing utility of Pakistan. The sense that emerged was the need for strategic recalibration of their Pakistan policy. A common discernment in this group was that time had come to contend with the deep state in Pakistan for its’ duplicity throughout the US' war on terror, beginning with the evacuation of jihadis at Kunduz; providing a haven for al Qaeda; providing vital intelligence to various terror organisations; screening the AQ Khan network; or indeed, providing sanctuary to Osama bin Laden. This group also found definition in a holistic analysis of the various determinants that contributed to strategic stability (in line with this author's presentation). The determinants ranged from historical wholeness to geographic recognition; politico-social-religio conformity to economic friction; purpose and adequacy of military power; to the quest for a stasis; and lastly, the correlation between leaderships.

The question then reduced to what manner, intensity and degree did the interplay of determinants influence inter-state relationships? While it was generally accepted that transactions between determinants could either spell proclivity towards a symbiotic approach in relations, or it could persistently precipitate friction and conflict. In both cases, the basis of outcomes were largely predicated on discernability and rationality of both polity and leadership.

Unfortunately, the South Asian context is blurred by three contumacious factors. First, Pakistan’s cultivated reluctance to accept the anthropological reality of their identity as sub-continental Muslims, the preferred fiction is in favour of Arab or Central Asian descent rather than the truth of the vast majority being descendants of converts. This poses a unique dilemma when leveraging civilisational empathy as the basis of amity. Second, military power without political accountability views itself as the sacred keeper and absolute champion of national interests; and this presents an awkward predicament as to who is in charge when dealing with that State. But the most impious obstacle promoted by the deep state is its one track agenda of hostility towards India as the basis of its ascendancy. After all, if the question is put to the Pakistan establishment as to whether they accept a regime of strategic stability, the answer will most certainly be in the affirmative, with the caveat that control of the nation remain in the hands of the military-intelligence-jihadi nexus.

The strategic nuclear ‘self-fulfilling logic’ mentioned earlier cannot be the basis of doing business with Pakistan. For far too long, the world, and the US in particular, has taken an ambiguous and at times set double standards for terror groups and their sponsors. What needs to be recognised is that terrorism emanating from Pakistan is, unequivocally, a global scourge; and no other interests can justify their continuation. For as former US Secretary of State Hillary Clinton famously put it, Islamabad could not keep "snakes" in its backyard to strike its neighbours. She said, "It's like that old story - you can't keep snakes in your backyard and expect them only to bite your neighbours. Eventually those snakes are going to turn on whoever has them in the backyard."

The establishment that promotes it as an instrument of state policy must be targeted internationally through exacting sanctions while the perpetrators of terror along with their handlers and infrastructure must be struck by covert military action.

More US drug price hikes in 2016

Brad Dixon

US drug makers kicked off the New Year with a new round of drug price hikes despite growing public anger and political backlash.

At the top of the list was Pfizer, which recently announced a $160 billion merger with Allergan that will make the new firm, which will keep the Pfizer name, the world’s largest pharmaceutical company—in addition to substantially cutting Pfizer’s tax rate.

According to reports in the Wall Street Journal and other news outlets, on January 1 Pfizer raised the prices of 105 of its drugs. The average price hike for 60 of its branded drugs was 10.6 percent, including the intravenous muscle relaxant Quelicin (42.3 percent), the erectile dysfunction drug Viagra (12.9 percent), the pain drug Lyrica (9.4 percent) and the breast cancer drug Ibrance (5 percent). Eight of the company’s products saw price increases of 20 percent or more.

Meanwhile, Allergan boosted the prices of 40 of its brand drugs by an average of 9.1 percent. Horizon Pharma increased the prices of five of its drugs by 9 to 10 percent.

Endo International raised the price of its pain drug Percocet by 25 percent—this is in addition to the 25 percent increase in 2015 and 30 percent increase in 2014. Vanda Pharmaceuticals likewise raised the price of its new drug to treat a sleep disorder in blind people by 10 percent, to $148,000.

Acorda Pharmaceuticals raised the price of its multiple sclerosis drug Ampyra by 11 percent. The company has raised the price of the drug several times since it was first introduced in 2010. It now costs more than $23,650 per patient and generated $315 million in sales for the company in the first nine months of 2015.

Drug companies often increase prices at the start of the year, and, in many cases, continue to do so over the course of the year. For example, last year Amgen raised the price of its anti-inflammatory drug Enbrel by 8 percent in May, 10 percent in September, and an additional 8 percent in December. The drug now costs $36,000 a year, nearly four times as much as the $10,000 it cost when it was first approved in 1998.

Christopher Raymond, an analyst with Raymond James, told the Journal that the price hikes for Enbrel and other drugs “seem to have increased in magnitude and frequency.”

Rebates may offset some of the price increases, but companies generally don’t make the amounts public and repeated increases can offset the rebates.

According to the Truveris OneRx National Drug Index, drug prices rose an average of 10.4 percent in 2015 (compared to 10.9 percent in 2014). Last year branded drugs rose by 14.8 percent (the same as in 2014), specialty drugs went up by 9.2 percent (9.7 percent in 2014), and generics increased by 2.9 percent (4.9 percent in 2014).

“We’re in our third year of double-digit [price increases],” A.J. Loiacono, the chief innovation officer at Truveris, a firm that tracks drug prices, told theWashington Post.

According to the Centers for Medicare and Medicaid Services, US prescription drug spending grew 12.2 percent in 2014 to $297.7 billion, largely due to increased spending on specialty drugs such as those that treat Hepatitis C, compared to the 2.4 percent rise in 2013.

Mary Brainerd, chief executive of the non-profit HealthPartners, told theJournal that drug-industry practices “are becoming increasingly intolerable for consumers, health plans, doctors and hospitals.”

The drug companies are moving ahead despite public outcry over the price hikes, criticism from the leading Democratic presidential candidates, and recent congressional hearings and investigations.

This “signals there’s still pricing power,” Jeffries analyst David Steinberg told the Journal. “Unlike other countries, there’s no mechanism whereby regulatory authorities can control price.”

Democratic legislators recently made a half-hearted proposal.

US representative Lloyd Dogget, a Texas Democrat, issued a letter on January 11 signed by more than 50 other House Democrats asking the National Institutes of Health (NIH) to exercise its “march-in rights” as a method of controlling prices. As part of the federal 1980 Bayh-Dole Act, the NIH was given the authority to “march-in” and issue patent licenses for drugs developed using public funding if the patent holder does not make the drug “available to the public on reasonable terms.”

“The failure to act in the past has undoubtedly sent an unfortunate signal that prices for federally funded inventions can be set as high as a sick or dying customer will pay,” stated the lawmakers’ letter.

The proposal by the Democrats is simply a smokescreen for the elections. NIH Director Francis Collins has stated in the past that it is not appropriate for the agency to exercise this authority to control drug prices. Thus, the NIH is unlikely to follow the suggestion, although it is preparing to respond directly to lawmakers.

The Democrats, however, were careful to emphasize that even this limited measure should be used sparingly, only “when wrongdoing occurs” so “innovation should not be threatened.” The goal is not to address the underlying cause of skyrocketing drug prices—an economic system where health care is subordinated to the profit interests of corporations—but, instead, to protect the profits of the pharmaceutical industry as a whole by reining in the worst offenders.

“There is a difference between earning a profit and profiteering,” stated Dogget in a press release.

Nonetheless, the drug industry responded belligerently to the proposal. The biotech industry trade group BIO stated that it would “disrupt the biopharmaceutical innovation ecosystem with intrusive governmental intervention,” according to Bloomberg BNA . The group issued a veiled threat that the drug industry stop developing federally funded inventions if the NIH acted on the suggestion.

At this month’s annual JPMorgan Healthcare Conference in San Francisco, Ron Cohen, the chairman of BIO, claimed that profiteering by the pharmaceutical industry was “a perversion of reality,” while calling public anger at rising drug prices “an abomination,” according to STAT News.

Protests over high drug prices were staged at the conference aimed at Gilead’s pricing of its HIV and Hepatitis C drugs. Gilead CEO John Milligan dismissed their concerns as “more of a campaign issue than an actual issue,” reported the San Francisco Business Times. According to a Senate Report released last month, Gilead priced its Hepatitis C drugs (Sovaldi at $84,000 per treatment and Harvoni at $94,500) to maximize profits, knowing full well that the “prices would put treatment out of the reach of millions and cause extraordinary problems for Medicare and Medicaid,” in the words of Senator Ron Wyden.

The rising prices do not correspond to any significant increases in demand for the drugs. For example, in October, the Wall Street Journal examined the wholesale pricing data for 30 top-selling drugs in the US. It found that the growth in prices (76 percent) and revenue (61 percent), far outstripped the rise in prescriptions (20 percent).

To justify the price hikes, drug companies often argue that the added revenue is pumped back into research and development to produce new drugs. An analysis of how drug companies spend their revenue, however, belies this argument.

A recent investigation by CBS Mone y Watch looked at the 2014 financial data for 16 publicly held pharmaceutical companies, including their annual revenue, spending on R&D (research and development) and SG&A (sales, general, and administrative, which includes marketing), and net income (profit after taxes). The news outlet then listed these figures as a percentage of annual revenue. For example:

· Pfizer ($49.6 billion revenue; $9.14 billion profit): R&D spending as percentage of revenue (19 percent) versus sales, general and administrative (SG&A) spending as percent of revenue (28 percent).

· AstraZeneca ($26.1 billion revenue; $1.23 billion profit): R&D spending (19 percent) versus SG&A (42 percent).

· Sanofi ($34.11 billion revenue; $4.39 billion profit): R&D spending (14 percent) versus SG&A (27 percent).

· Novartis ($55.63 billion revenue; $10.21 billion profit): R&D spending (17 percent) versus SG&A (28 percent).

· GlaxoSmithKline ($23 billion revenue; $2.76 billion profit): R&D spending (14 percent) versus SG&A (33 percent).

(According to Fortune, in 2014 Pfizer spent $8.4 billion on R&D, but spent 14.1 billion on sales, informational and administrative costs, including advertising, and $12 billion on share buy backs and dividends to investors).

“In all cases but one, corporate overhead was higher than R&D, and often significantly so,” CBS reported. “In half, after-tax profits were higher than the research-and-development expenses the industry typically points to as the major reason for high costs.”

The CBS story referred to a May 2015 Credit Suisse report that found that drug price increases were the key driver for profit growth. Credit Suisse estimated that “whilst traditional SG&A grew only 4 percent in 2014, when this spend[ing] is combined with rebate expenses, overall promotional costs rose 17 percent, well ahead of reported sales growth.”

“One way of looking at this is U.S. consumers pay more to subsidize marketing activities and profits than to finance new-drug research,” the CBS report concludes.