“The illusions of Keynesianism create a morally corrupt society”
Interview with Jayant Bhandari: Part I of II
The global economic shutdown has inflicted unprecedented damage and caused widespread destruction both in the economy and in our societies. While the true scale of the crisis is yet to be revealed, we already have enough data to support the case for a deep recession that will likely last for a long time. And yet, mainstream media reports and “expert” commentary has so far largely been focused on the impact of the crisis in the West.
We keep reading analyses and seeing footage from European and US cities and hospitals, while our perception of the economic and human toll of the corona disaster is restricted to a Western point of view. On the rare occasions that the situation in emerging economies is mentioned in media reports, the coverage is mostly shallow and superficial, thus failing to capture the everyday reality on the ground and to accurately reflect the full extent of the human suffering in those countries.
The case of India is a prime example of this bias. Both the harshness of the lockdown and shutdown measures of the Modi government and their terrible consequences have barely been documented by Western media. We know next to nothing about the average Indian citizen’s experience and the economic disaster that is unfolding in a nation that up until recently was heralded as the next EM success story.
This is why I turned to Jayant Bhandari, to get an accurate account of the situation in India, but also to pick his brain about what we might expect to see on a much wider scale in the economy, in precious metals and in the mining sector. Jayant is a globetrotting institutional investment consultant, who has amassed extensive international experience in the mining and natural resource sector. Apart from his investment insights, he has published numerous interesting analyses on political, cultural and social issues, while he also runs a yearly seminar in Vancouver, “Capitalism & Morality”.
Claudio Grass (CG): The corona crisis and the global economic freeze was an unprecedented shock to the system, hitting the global economy on so many different levels. The damage caused by the shutdown measures was immense, but so were the monetary and fiscal “relief” packages that followed. Do you think this historic printing and spending spree will be enough to counter the effects of the economic freeze?
Jayant Bhandari (JB): Keynesian economics and Modern Monetary Theory (MMT) aspire to create something out of nothing. Underpinning them is the magical thinking of those who have physically grown to adulthood but who have failed to give up the romance of childhood. These “theories” also work very well for psychopaths who aspire to rule over and feed on gullible masses, and to rise to the positions of leadership. It is this marriage of magical thinking of the masses and psychopaths that enables Keynesianism to survive and has now been made worse by MMT.
No doubt, there are a lot of brilliant people in the position of setting the economic framework of society. These smart people are convincing, because their Ivy League schools taught them how to make the vast majority of people swallow their childish “theories.” Mostly, they never got a real-life experience of how the world works. From mommy’s lap, they went to Ivy League schools and then on to $250,000 jobs at the IMF, World Bank, or the government. Moreover, working for these organizations, they are further incentivized to adopt and promote Keynesian ideas, while they are surrounded by virtue signalers and liberal limousine leftists.
It is this intellectual mess the society is in today. Populism has replaced meritocracy, and there is no way out of it, given our current democratic system. We do more wrongs to correct prior mistakes. This problem afflicts not just the monetary policy and how we deal with Covid-19, but a much broader spectrum of issues in society.
The response of the world to Covid-19 was hugely out of proportion to reality. Businesses are closed, unemployment has increased massively, and with nothing productive to do, people have suffered emotionally. All this happened because our leaders lack the skills and foresight to weigh options and to do a risk-reward, cost-benefit analysis. They do not have an intellectual framework to make appropriate, independent decisions. Swedish leadership, East Asian countries, and Trump have been exceptions to this rule.
The cultural inertia of Keynesianism is so vast and it is seen as the panacea for all ills. But, alas, magical thinking leads to no real solutions. Printing currency does not create wealth. It merely creates an illusion of wealth, while leading to a misallocation of capital, from savers to consumers, and from those who can use it more efficiently to those who are politically connected, making the economy increasingly suboptimal. The illusions of Keynesianism create a morally corrupt society. So, no, currency printing cannot undo the massive damage inflicted by the lockdown and if anything, it will make it far worse.
CG: A lot has been said and written about the Covid crisis in India and the Modi government’s handling of it. How do you assess the response and how was India impacted by the corona crisis, both economically and on a human level?
JB: On 24th March 2020, India declared a curfew across the country. A country of 1.38 billion people came to a complete standstill. Every flight and train and all road transportation were immediately banned. There was no advance notice. It was a real curfew. People were not allowed to leave their homes and were ruthlessly beaten by the police if they did, even if they just went grocery shopping.
If your teenage daughter had flown out for a day when curfew was declared, she would have been stranded wherever she was for more than two months. If she didn’t have enough money or a safe place to stay, it was her problem. There was no remediation available.
This poorly thought-out curfew had all the ingredients to create a massive humanitarian crisis in a country where GDP per capita is barely US$2,350.
Depending on how you count them, there are as many as 100 million migrant workers at any point in time in India. They earn $3 or so a day. They live hand to mouth. They share a “room” in a claustrophobic and disease-ridden slum, often with many of them sharing the same bed. As they had no money to pay the rent, the landlord threw them out. They had no money for food, and the police waited outside to brutalize them.
Starved and thirsty, they started walking, in some cases for 1,500 km, to their rural homes. To avoid getting brutalized by the police, they walked on train-tracks or through the forest. Scores died in the process. Women gave birth on the way and then kept walking.
The government and the courts did nothing to deal with this massive humanitarian crisis they had created. India’s leadership demonstrated that they have no vision, no decision-making power, no empathy, and that they shoot from the hip. It also pays to remember that at least 200 million Indians live under extreme poverty. A much larger number of people was driven to starvation by Modi.
Despite the fact that India imposed a total and complete curfew, the most atrocious in the world and lasting almost seventy days, longer than anywhere else, Covid-19 cases have continued to grow exponentially. And this had to happen, for the rules apply to citizens, but not to those in the government.
Bureaucrats, nurses, and doctors, too afraid to do their job, decided not to show up. Nurses and doctors stayed away from patients. The government made fancy promises of starting to produce ventilators and of converting trains into ICUs, but nothing came of them. They failed to build temporary hospitals. Instead, patients are occupying spaces under the bridges and elsewhere.
The situation is so bad, that if people suspect they may have caught Covid-19, they prefer to go into hiding than let the authorities know. They know that they are in a huge danger—because of utter apathy—if they end up in the hospital. Corruption has also sky-rocketed.
I have been stuck in India throughout this ordeal. You have to be here to appreciate the level of the utter incompetence of the Indian government. China was watching all this flabbergasted, shocked at how incompetent the Indian government is. So, they simply moved into a large part of Indian territory, and it took India a long time to realize this.
My view is that India, within two months, will have the most Covid-19 cases in the world. Even before Covid-19 came, Indian hospitals had no beds available on a good day, and people used floor spaces. Ambulance services don’t work. In general, medical infrastructure is non-existent. This is why imminent disaster is arguably inescapable; not necessarily because Covid-19 itself is dangerous, but because India cannot cater to a simple increase in any disease.
India is an utter failure on so many levels. There are no institutions. Nothing works. Everything has been degrading since the time the British Left. The country is on a fast track to a massive humanitarian crisis, with Covid-19 acting as a catalyst. I do not think India will ever recover. It is passing into the dustbin of history.
CG: One of the most important implications of the corona shock was the moves by many companies and states to limit their reliance on China. As a result, we’ve already seen an early wave of interest in India, as companies seek to shift their production and realign their supply chains. Do you see this as a sound strategy for Western companies and do you think India could one day replace China as the world’s production hub?
JB: Irrespective of China’s culpability in the Covid-19 pandemic, the key role of the country in the global economy cannot be ignored. It is the manufacturing powerhouse of the world and it will stay that way. The Chinese are extremely smart and focused on improving themselves. I love China, although Xi Jinping, because of his heavy-handedness, might harm China’s prospects in the short-term.
Modi and some of his senior ministers have been making public statements on how Covid-19 will turn out to be a blessing for India. They were relishing the misfortune of China. If not for the sake of common decency, had they done some math, they would have realized that India would soon have more Covid-19 cases than China.
Furthermore, when it comes to infrastructure, institutions and even basic services, there is simply no comparison between the two countries. During my many visits to China, I happily travel on buses and find it easy to buy a train ticket. I never use Indian buses, which are unclean, overcrowded, dangerous, and have no sense of time. Unless you can fight your way to the front of the blob of humanity to get to the ticket counter in India, with its sleepy or missing officer, who might need to be encouraged with a bribe, you have no hope of getting a train ticket.
Getting a plumber or electrician is also virtually impossible in India. One must really ask around to find a competent worker of any kind, and even then, prepare to be disappointed. The so-called “educated” class is no better. If the bank or credit card company makes wrong charges on your account, the error might never be corrected. Once I bought a flight ticket online. Money left my bank account and never arrived at the booking agent.
Those in the West who import India’s IT services, if they are unafraid of sounding politically incorrect, will often tell you about the pain they suffer from the horrible services they get. It is true that India has very low labor costs. But what looks cheap at first glance, eventually turns out to be very expensive.
The same chaos is found in infrastructure. Indian roads make Chinese traffic look world-class. India does not have a work ethic, respect for contracts, or the rule of law.
Anyone who claims that India can ever replace China has no real experience of the two countries. India has failed to develop a manufacturing sector, and there is nothing to suggest that it ever can. Moreover, as I mentioned earlier, India is on a suicidal path. I see no growth and no recovery in the cards. India is on its way back to the dark ages, as it slowly destroys the institutions that the British left behind.
In the upcoming second part of the interview, we discuss the wider implications of the corona crisis and the response to it, while Jayant also shares his insights into the precious metals market and mining sector prospects.