No end of (digital) ink has been expended in understanding, analyzing and reporting on the rise in India of the politician, Narendra Modi. His career perhaps owes much, ironically, to what is also possibly its lowest point – the role he played as the leader of a state government over-seeing the law-and-order response to communal rioting in the state of Gujarat in February 2002.

This incident might have disappeared into the long list of deplorable and inhuman acts of violence and hatred that are all too common in the South Asian subcontinent, were it not for the fact that Mr. Modi has, in the intervening years, emerged as the prime ministerial candidate of India’s main opposition party, the Bharatiya Janata Party (BJP.)

The question of Mr Modi’s moral or criminal culpability has touched American shores because soon after the incidents in Gujarat, the State Department refused him a visa to enter the United States, stating his involvement in supporting or at least in failing to prevent communal violence. This decision has since been somewhat given new life by the introduction of a resolution in the House (now in subcommittee) to “commend the US government” for this denial.

A lot has changed in the United States since 2002. The act that enabled the denial of the visa was initiated and approved in 1998, a few years after the House had just elected its first majority-GOP membership in over four decades. When Modi’s visa was denied, the memory of the terrorist attacks of Sep 2001 was still fresh in the American mind.  At the beginning of the millenium, India’s economic surge had only just started, and the tumult of America’s involvement in two land wars had yet to commence. It was an atmosphere in which strong lines were easily drawn and Modi’s stature at the time was nothing significant enough to merit discussion about the consequences of the action, at any rate.

The United States has of course taken a sizeable hit to its reputation in the decade that followed. Its economy nose-dived and took most of the world with it, into a two year long recession. The two land wars ended inconclusively at best, and as an unqualified disaster to many.

India too saw considerable changes. In contrast to the previous decade, the naughts were a good year. Two governments completed their full terms, and power was transferred three times in an orderly fashion in national elections. The economy grew at a rate between 8% and 10% in most years between 2002 and 2013, and with it, everything that could be commercialized grew at a tremendous pace, including the size of financial scandals and bribe-taking at every level of government.

Today, the two countries face off in a different mood. The United States has become less relevant, as China and Russia have asserted themselves in many ways. While India too has receded from the public stage somewhat as it faces its own economic troubles, it is a country that has bright prospects.

The Hindu majority problem is that one way or the other, Hindu identity will need to assert itself as a major aspect of Indian identity. It is simply undeniable that India is a Hindu nation, as it is undeniable that America is a “white” one. This is a greater certainty in India, where being Hindu is a binary choice, unlike the question of “racial heritage.” There is no question of being one-sixteenth or one-eighth Hindu. There is barely even the possibility of being “half-Hindu,” raised in a family where only one parent is Hindu. As in all religions, you are how you are raised, and more so in Hinduism, where you are Hindu by virtue of simpler choices than the observance of rituals like church-going and being baptized.

The problem is that unlike other countries, India’s majority did not rule it until its own independence from the British. When the British left, the previous occasion when a Hindu had reigned over a large portion of the sub-continent was more than a millennium previously. Moreover, for a large part of the country’s independence, its religious identity was abjured by many of its leaders. Nation building had distracted everyone, and the question of what the majority culture’s role was in the polity seemed irrelevant.

I have started reading Jagdish Bhagwati’s In Defense of Globalization. In the introduction, he expresses confusion as to why idealistic youth tend to favor anti-capitalist rhetoric, even though in the twentieth century, there are innumerable examples of how bureaucratically established controls on resource rations have shown to favor the privileged few even more than capitalistic free markets have. He notes that he is

astonished at the number of well-meaning socialists … who continue to fall for the erroneous view that controls and direct allocations are an appropriate answer to inequality.

I thought about this confusion a bit, and realized that the allure of centralized market planning comes from two sources:

1. Socialist prescriptions are usually ameliorative in the short-term while capitalist prescriptions are destructive in the short-term.
2. Centralized allocation strategies are usually shortcuts for the application of intellectual theories, whereas market solutions will have to owe their power to the wisdom of the crowd, rather than that of the theorist.

Let us examine these two assertions in greater detail.

Short-term Amelioration

All things being equal, in a society with inequities, a socialist solution will tend to make things better. Most socialist solutions are ad-hoc, or “just-so,” solutions. They propose a redistribution of resources precisely at the point in the system where the most inequities exist. If, for example, the rich own an inordinate proportion of real estate, then the redistributive solution du jour will be rent control or the strengthening of tenancy rights. If it’s an economy that relies on service workers and an inordinate proportion of profits accrue to owners rather than be paid out in wages, then the solution is a minimum wage.

Hence, the solution is always guaranteed to be politically attractive, in a populist sense. The solution is not one that was predictable by some theory of how economic actors would be expected to react – in other words, the policy prescriptions are not preventative, but curative, and by virtue of that, they are palatable. It’s easier to support taking a bitter pill when one is sick, than it is to agree to daily exercise that would have prevented the sickness in the first place, easier still when the connection between the exercise and the illness is tenuous.

There are certainly plenty of leading indicators of coming inequities in any society. Currently, in the United States, we can predict that the dropping high school graduation rates, and the increasing incarceration rates in some sections of the population, will lead to economic inequities. However, these issues are less sexy and less amenable to immediate solutions, than protesting gentrification that is causing displacement right now. The kids dropping out of high school might or might not have a hard time finding jobs ten or twenty  years from now – if they were forced to get back into school, the positive effects won’t be felt for quite a while.

So while the black high school dropout does have some protesters rallying in her favor, they aren’t as vocal or visible as the ones objecting to the bailout of banks, even if the net effect of those bailouts on the American middle-class, in the long run, is insignificant compared to what the lack of skills in the coming generation will do to some sections of the populations.

All things being equal in a regulated economy, on the other hand, a free-market solution is disruptive in the short-term and only effective in the long run. The many choices that individuals make translate slowly into growth, and have to be tested against the market. There are no guarantees, and the effects usually seen in the aggregate.

Many regulated economies were built with the goal of providing adequate food and shelter – which translated to calories and space, rather than choice of food and and the ability to speculate in real estate. The application of the free market to such an economy can result in bread lines, displaced populations, cash crop dependence, and urban slums, as people adjust to the new reality where individuals have to make economic decisions they were not prepared for.

Some number of farmers are bound to over-plant a cash crop that exposes them to competition while denuding their land of the food they grew to feed their families, helping to stoke the common anti-capitalist rhetoric that the free market is bound to destroy our ability to “live on and by our land.” Such rhetoric fails to observe that the vast majority of farmers, at least if they haven’t been fraudulently deprived of their property rights in the liberalization mêlée, will have benefited from being able to sell produce that they can trade beyond the borders of their country.

Analytical Attractiveness

The second reason regulatory mechanisms are attractive to the idealistic and youthful intelligentsia is that the underlying analytical methods applied reflect their rebellious zeal. Free-market arguments tend to be “drier”: more analytical and quantitative, and need to be couched in the same (mathematical) language that is used by the proponents of those theories. In other words, mathematical equations are not value-based, but the conclusions are. This tends to be, for those who idealize the notion of anarchy and subversion of norms, an unattractive aspect of using mathematical theories.

This cognitive route to selecting one social structure over another is very fashionable even in non-economic circles. It lends itself to anti-technology protests as well – the use of technology itself being value-neutral, tools and technologies are themselves rejected in some analyses of power dynamics. But because one cannot be a Luddite, or an Amish hermit, technology per se is not rejected wholesale. Rather, certain proprietary structures or license regimes deemed objectionable or even immoral, just as free market analyses are rejected less on the basis of their merits and more by virtue of who’s performing the analyses.

A further unattractive aspect of mathematical analyses is that they cannot accommodate many intangible costs and benefits that constitute what is commonly understood as the “common good” – happiness, beauty, community, satisfaction, self-actualization, and the like. Regulatory mechanisms, typically being political rather than economic solutions, proceed from these notions first, and incorporate numerical ideas later, or sometimes not at all, as an antidote to how market models, because they start from quantifiable notions, too-frequently fail to incorporate more human desires in any satisfactory manner.

Ultimately, this debate is not as confusing as it seems, because it plays itself out in the human condition in many ways. In some sense, it’s a debate about whether Man is a moral animal first, or an economic animal. Evidently, he’s not merely one or the other – if monetary transactions motivated by self-interest and gain in profit were indeed the strongest impulse followed by most humans, then we’d have few restrictions on what can be traded for money, which has never been the case. Conversely, if all decisions were made by humans on the basis of intangibles such as Beauty and Truth, then we’d be far more contemplative beings than we are in reality.

The inscription on Karl Marx’s tombstone in London’s Highgate Cemetery
reads, “Workers of all lands, unite.” Of course, it hasn’t quite ended up that
way. As much buzz as the global Occupy movement managed to produce in a few
short months, the silence is deafening now. And it’s not often that you hear of
shop workers in Detroit making common cause with their Chinese brethren in
Dalian to stick it to the boss man. Indeed, as global multinational companies
have eaten away at labor’s bargaining power, the factory workers of the rich
world have become some of the least keen on helping out their fellow wage
laborers in poor countries. But there’s a school of thought — and no, it’s not
just from the few remaining Trotskyite professors at the New School — that
envisions a type of global class politics making a comeback. If so, it might be
time for global elites to start trembling. Sure, it doesn’t sound quite as
threatening as the original call to arms, but a new specter may soon be
haunting the world’s 1 percent: middle-class activism.

Karl Marx saw an apocalyptic logic to the class struggle. The battle of the vast mass against a small plutocracy had an inevitable conclusion: Workers 1, Rich Guys 0. Marx argued that the revolutionary proletarian impulse was also a fundamentally global one — that working classes would be united across countries and oceans by their shared experience of crushing poverty and the soullessness of factory life. At the time Marx was writing, the idea that poor people were pretty similar across countries — or at least would be soon — was eminently reasonable. According to World Bank economist Branko Milanovic, when The Communist Manifesto was written in 1848, most income inequality at the global level was driven by class differences within countries. Although some countries were clearly richer than others, what counted as an income to make a man rich or condemn him to poverty in England would have translated pretty neatly to France, the United States, even Argentina.

But as the Industrial Revolution gained steam, that parity changed dramatically over the next century — one reason Marx’s prediction of a global proletarian revolution turned
out to be so wrong. Just a few years after The Communist Manifesto was published, wages for workers in Britain began to climb. The trend followed across the rest of Europe and North America. The world entered a period of what Harvard University economist Lant Pritchett elegantly calls “divergence, big time.” The Maddison Project database of historical statistics suggests that per capita GDP in 1870 (in 1990 dollars, adjusting for purchasing power) was around $3,190 in Britain — compared with an African average of $648. Compare that with Britain in 2010, which had a per capita GDP of $23,777; the African average was $2,034. One hundred and forty years ago, the average African person was about one-fifth as rich as his British comrade. Today, he’s worth less than
one-tenth.

Although many Americans get worked up about absurdly inflated CEO salaries and hedge fund bonuses, a hard economic fact has been overlooked: As the West took off into sustained growth, the gap in incomes among countries began to dwarf the income gaps within countries. That means a temp in East London may still struggle to make ends meet, but plop her down in Lagos and she’ll live like a queen. If you’re feeling bad about your nonexistent year-end bonus, consider this: Milanovic estimates that the average income of the richest 5 percent in India is about the same as that of the poorest 5 percent in the United States. Like banks and multinationals, wealth and poverty are now globalized. The lowest municipal workers in Europe and the United States are far richer than their counterparts in poor developing countries (even when purchasing power parity is taken into account), and they’re almost infinitesimally better off than the majority of people in those countries who still survive off the earnings of small farms or
microenterprises.

Sorry, Karl: The simple fact that poor people in Europe and America are in the income elite according to the standards of South Asia and Africa is why the workers of all lands have not yet united. The second congress of the Communist International, in 1920, condemned the despicable betrayal by many European and American socialists during World War I, who “used ‘defense of the fatherland’ to conceal the ‘right’ of ‘their’ bourgeoisie to enslave the colonies.” The gathered representatives argued that the mistrust generated could “be eradicated only after imperialism is destroyed in the advanced countries and after the entire basis of economic life of the backward countries is radically transformed.”

Yet all that might soon be changing. Globalization may have been the watchword of the 1990s, but it’s still a work in progress. As interconnected global markets get ever more
interconnected, average incomes are converging. The last 10 years have seen developing countries grow far more rapidly than high-income countries, closing the gap in average incomes. Economist Arvind Subramanian estimates that China in 2030 will be about as rich as the whole European Union today and that Brazil won’t be far behind, clocking in at a GDP per capita of around $31,000. Indonesia, he reckons, will see a GDP per capita of $23,000 — about the same as tech powerhouse South Korea today.

Put simply, this means that within the space of hardly a generation, a good chunk of the world will soon be rich, or at least solidly middle class. According to forecasts I’ve developed with my Center for Global Development colleague Sarah Dykstra, about 16 percent of the Earth’s population lives in countries rich enough to be labeled “high
income” by the World Bank. If growth rates continue as they have in the past decade, 41 percent of the world’s people will find themselves in the “high income” bracket by 2030. In short, if developing countries continue growing at the rate we’ve seen recently, inequality among countries will shrink — and inequality within nations will return as the dominant source of global inequality.

Does that mean Marx was right — if just a couple of centuries off on his timing? Not exactly.

The reality is that this new middle class will have lives that Victorian-era working-class Brits could only dream about. They’ll work in LED-lit shops and offices rather than in dark, hellish mills. And they’ll live nearly 40 years longer than the average person in 1848 based on life expectancy at birth. But will they share common cause with their fellow factory workers an ocean away?

Maybe, but not because the barricade is the only option. Marx predicted that the global working class would unite and revolt because wages everywhere would be driven to subsistence. But as wages increase and level out around the world, the plight of the proletariat — hard work, low pay — today more than ever means easier work and
better pay. And it’s bringing hundreds of millions of people, in China alone, out of poverty. Clearly, the communist revolutions of the first half of the 20th century proved far, far worse for living standards than the well-regulated markets of the latter half.

But that doesn’t mean Warren Buffett should breathe easily. In fact, it is exactly because the rich and poor will look increasingly similar in Lagos and London that it’s more likely that the workers of the world in 2030 will unite. As technology and trade level the playing
field and bring humanity closer together, the world’s projected 3.5 billion laborers may finally realize how much more they have in common with each other than with the über-wealthy elites in their own countries.

They’ll pressure governments to collaborate to ensure that their sweat and blood don’t excessively enrich a tiny, global capitalist elite, but are spread more widely. They’ll work to shut down tax havens where the world’s plutocrats hide their earnings, and they’ll
advocate for treaties to prevent a “race to the bottom” in labor regulations and tax rates designed to attract companies. And they’ll push to ensure it isn’t just the world’s richest who benefit from a global lifestyle — by striving to open up free movement of labor for all, not just within countries but among them. Sure, it’s not quite a proletarian revolution. But then again, the middle class has never been the most ardent of revolutionaries — only the most effective. The next decade won’t so much see the politics of desperate poverty
taking on plutocracy, as the middle class taking back its own. But it all might put a ghostly smile on Karl’s face nonetheless.

Modi’s making waves now in the Bay Area. Ro Khanna etc.

The nonprofit tech sector is a very singular community, and one that’s still evolving its identity. I’ve been involved in it, to an increasing degree every day, for about five or six years, and only just gotten to understanding it enough that I can formulate my own position within and in counter-point to prevailing norms to some degree of clarity.

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