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Special Report: How Washington Took The U.s. to The Brink

October 28, 2011 By Leave a Comment

(Yes News) -The world’s largest economy was headed toward an unprecedented default, and all Washington wanted to talk about was the manner in which the president had left a room.

A White House meeting in mid-July between President Barack Obama and congressional leaders had ended with sharp words as Obama clashed with the brash Republican House majority leader, Eric Cantor.

Now Cantor was back on Capitol Hill, dishing details to a scrum of reporters — a shift from the terse, vague statements that usually followed such meetings.

“He said to me, ‘Eric, don’t call my bluff. I’m going to the American people with this,’” Cantor said in his Southern drawl. “I was somewhat taken aback.”

Republican aides filled in the gaps. Obama had “stormed out of the room,” one said. At the White House, aides pushed back. One official demonstrated to reporters exactly how Obama had ended the meeting — lightly pushing his chair back from the table, standing up deliberately, walking away calmly. “He didn’t storm out. He just got up and walked into his office,” one said.

That evening — July 13, 2011 — was one of the lowest points in the struggle to avert fiscal disaster and put the nation’s budget on a sustainable path.

Congress needed to extend the country’s .3 trillion debt ceiling before Tuesday, August 2, the date the Treasury Department would begin running out of cash to cover the country’s bills. But Republicans and Democrats were deadlocked.

INSIDERS UNITE

As the deadline drew closer, the two sides abandoned a series of efforts to reach agreement, searching for the right combination of policies and personalities to get a deal done. In the end, it fell to two consummate Washington insiders to prevent the talks from collapsing.

A Reuters examination of the months-long showdown over the debt ceiling found that:

* Vice President Joe Biden and Senate Republican Leader Mitch McConnell emerged as critical players in the final stretch of the talks, as theirs was the only cross-party relationship built on decades of trust.

* Despite a belief among many rank-and-file Republicans that the government could muddle through a default, party leaders never doubted the Treasury Department’s warnings that economic catastrophe was a real possibility if they didn’t reach a deal by August 2.

* Although House of Representatives Speaker John Boehner, the top U.S. Republican, was eager to strike a bold deal with Obama, it was ultimately necessary for Boehner to distance himself from the White House to convince his House Republicans to back the final deal.

* The business community played an important behind-the-scenes role, with two White House foes — Wall Street and the Chamber of Commerce — rallying support for a compromise backed by Obama.

This account of America’s journey to the brink of default is based on interviews conducted over the past six weeks with dozens of elected officials, business lobbyists and aides in the House, the Senate and the White House.

A ZEAL FOR CUTS

The U.S. congressional elections in November 2010 set the stage for confrontation over the congressionally mandated cap on the outstanding total of federal government borrowings. Republicans had harnessed voters’ anxiety over the economy and soaring deficits to capture the House of Representatives.

Accusing Obama of overreaching with his stimulus package in 2009 and his drive for healthcare reform, Republicans vowed to slash spending and rein in the federal government’s size.

A campaign document — the “Pledge to America” — promised to cut spending by 0 billion in the first year alone, back to the levels in place in Republican President George W. Bush’s last year in office.

The newly elected Republicans, 87 in all, were not interested in compromise. Many felt a greater obligation to the grassroots Tea Party activists who had sent them to Washington than to the party elders who ran the place.

In a budget fight with the Democratic-controlled Senate that took the government to the brink of a shutdown in April, Republicans managed to cut spending by billion, the largest domestic cut in U.S. history.

Still, 59 House Republicans voted against the bill because it did not go far enough.

BOEHNER’S BATTLELINES

That was a mere skirmish. The big battle lay ahead as the government was fast running up against its .3 trillion credit limit and would need Congress to raise it further. In early May, Boehner laid out his conditions for a debt-ceiling increase: spending cuts would need to exceed the amount of new borrowing authority.

Instead of billions of dollars, the debate would be measured in the trillions.

It would be a chance for Boehner to show his new troops that he could use the levers of Washington to get results.

An avid golfer and a chain-smoker, the 61-year-old Boehner is from an older generation than many of the Tea Party conservatives whose election to Congress made it possible for him to become House Speaker.

The seasoned legislator and former businessman grew up in Ohio from a family of modest means and worked as a janitor to help put himself through college.

Obama, 49, had a comfort level with fellow Midwesterner Boehner despite their philosophical differences. The speaker reminded the president, a former state senator from Illinois, of Republican legislators he used to play poker with in Illinois and with whom he forged bipartisan deals.

Both men are even-tempered and view themselves as Washington outsiders. Each has ambitions of transforming Washington and making a big mark on policy.

Those aspirations drove their on-again, off-again talks aimed at a far-reaching, bipartisan “grand bargain” that would put the United States on sounder fiscal footing for years to come.

On a golf outing in mid-June, the two agreed to work together on a broad deficit-reduction deal. “Let’s give it a try,” Obama told the speaker.

The following week, at a secret White House meeting, they agreed to have their staff draw up options. The aim was to craft a plan that would cut deficits by roughly trillion over 10 years.

A ‘GRAND BARGAIN?’

The challenges were steep. Democrats would have to agree to rein in cherished social programs like the Medicare health plan for retirees and the disabled. Republicans would have to accept a tax-code overhaul that would increase revenues through the elimination of tax breaks and deductions.

Boehner’s enthusiasm for the “grand bargain” was not shared by his colleague, Senate Republican leader Mitch McConnell.

McConnell had confided to Vice President Joe Biden that he thought it was unrealistic to try to accomplish such a sweeping deal in the weeks before August 2 deadline.

The Senate Republican leader worried it would lead to a dead end when pressure was building to resolve the debt-limit standoff. Rating agencies were warning they might downgrade the country’s top-notch credit score and, while there was no sign of panic yet in financial markets, investors were growing nervous.

McConnell, 69, had served in the Senate since 1985 and witnessed firsthand the divided-government battles of the 1990s, when Republican House Speaker Newt Gingrich and an earlier generation of firebrand conservatives went toe-to-toe with Democratic President Bill Clinton.

MEMORIES OF 1996

That confrontation led to a shutdown of the federal government and provoked a public backlash against Gingrich and his party. With the Republican brand tarnished, Clinton sailed to re-election in 1996.

McConnell, whose party is a minority in the closely divided Senate, viewed the 2012 elections as a chance to gain dominance in the chamber.

He feared the debt-limit fight would put that in jeopardy while also bolstering Obama’s re-election prospects.

If Treasury Secretary Timothy Geithner’s warnings were right — and both McConnell and Boehner believed they were despite skepticism among their rank-and-file — the fallout from a debt default would be calamitous, causing stocks and the dollar to sink and interest rates to surge.

Mortgage rates and business borrowing costs would spike, potentially sending the economy into another recession. That would mean Republicans — whom Democrats had accused of intransigence over the debt limit — would share in the blame for the economy’s woes and suffer voter wrath as a result.

Many in the White House viewed McConnell as more of a tactician than a visionary and someone more focused on party politics than on setting policy. In the quest for a grand bargain, Boehner would make a better partner, they thought.

But in the end, after Boehner twice broke off talks with the White House, administration officials relied heavily on McConnell as an emissary to the speaker, and came to view him as a crucial player.

A BOND BETWEEN RIVALS

The administration’s chief link to McConnell was Biden, 68, a 36-year veteran of the Senate with rock-solid Democratic credentials who nonetheless had a strong rapport with the Republican leader.

The two seemed to speak the same language from their years in the Senate together. Their bond grew closer when they worked together on a tax-cutting deal just before Christmas late last year, according to people who know both men.

“C’mon Mitch, you know what I’m dealing with here,” Biden would sometimes tell McConnell — Senate-speak to describe the pushback he would face from Democratic Party activists if he gave too much ground.

According to a former Biden aide, McConnell seemed to appreciate that Biden understood the GOP leader faced similar constraints within the Republican Party.

In April, Obama tapped Biden to lead a panel of lawmakers that would lay the groundwork for a deal. In an ornate corner room just off the Senate floor, the group pored through stacks of government and private-sector reports to identify more than trillion in mutually acceptable spending cuts.

As the talks stretched into June, Biden gradually built up a rapport with Cantor, the House majority leader, who was leading the Republican side.

REPUBLICAN RIFT

In less than 10 years in Washington, Cantor had quickly climbed to the top rungs of Republican leadership. But his sharp elbows had earned him enemies — some from within his own party.

He and Boehner had a cool relationship, say people who know both lawmakers. The rift extended into the lobbying community, where Republicans identified themselves as “Boehner people” or “Cantor people.”

At the end of June, Cantor abruptly walked out of the Biden talks, saying the two sides could not agree on taxes. The “principals” — Obama and Boehner — would have to take it from there.

Even before the Biden talks began, members of Boehner’s office dismissed them as political theater.

“This thing will ultimately get decided by Boehner and Obama,” a Boehner aide said.

After weeks of back-channel negotiations with Obama, Boehner decided on July 22 that he could not work with the White House and would have to forge a deal with Democrats on Capitol Hill.

The two sides had come tantalizingly close to a deal, but stumbled again over the tax question.

Boehner felt the White House had shifted the goalposts at the last minute.

White House officials believed Boehner’s departure stemmed from an unwillingness — or an inability — to take on the conservative rebels in his party. If Boehner had been willing to shake hands publicly with Obama on a “grand bargain,” they said, there would have been a way to woo enough mainstream Republicans and Democrats to pass the bill.

They also disagreed with any suggestions that they had shifted the goalposts.

‘A BOWL OF JELL-O’

“Dealing with the White House is like dealing with a bowl of Jell-O,” Boehner said angrily at a press conference that night.

Obama called him back to the White House the following day and told him he should not be left out of the process.

“Mr. President, as I read the Constitution, the Congress writes the laws. You get to decide if you want to sign them,” Boehner responded, according to his aides.

The action moved back to Congress. Like the deal that Boehner and the White House had abandoned, the latest plan would separate the relatively easy decisions — curbs on annual discretionary spending — from the difficult reforms to benefits and the tax code.

It wasn’t the “grand bargain” Obama and Boehner had sought, but it would deliver trillions in savings and cover the nation’s borrowing needs past the November 2012 elections.

There was one catch. The plan would require another debt-ceiling vote in a few months to ensure Congress would sign off on the second set of savings, and Obama had already ruled that out.

Around 10 p.m., on Saturday, July 23, Obama called Boehner to tell him he would veto the bill if it reached his desk. But he suggested that they could find another way to ensure Congress would actually follow through with the tax and benefit changes envisioned by the plan.

GOING SEPARATE WAYS

Congressional staff continued work on the plan the next day. Boehner told Fox News he would press ahead with his own legislation if the two sides could not agree. With no progress made on the enforcement mechanism, known as a “trigger” in Washington-speak, that appeared to be the case.

Boehner told Republicans he would unveil his version of the plan on Monday, July 25, while the Democratic leader of the Senate, Harry Reid, decided to advance a rival plan. Another effort had failed.

The final week would put Boehner’s leadership to the test.

Boehner unveiled his plan to Republicans that Monday in a meeting room in the bowels of the Capitol. It wouldn’t tie a debt-limit increase to the balanced-budget constitutional amendment, as many of them wanted, but it would deliver more than trillion in savings. A vote was set for Wednesday, July 27.

Boehner launched a two-front lobbying blitz, alternating between in-person meetings with wavering lawmakers and phone calls to conservative media figures like talk radio host Rush Limbaugh and columnist Charles Krauthammer.

On Monday night, he touted the plan directly to a national audience, as television networks granted him air time to respond to a prime-time speech by Obama.

‘READY TO DRIVE THE CAR’

Boehner’s rally continued on Tuesday morning at the Capitol Hill Club, a social club for Republicans. Boehner’s lieutenants took the lead. Cantor bluntly acknowledged that “the debt limit sucks.” Kevin McCarthy, the House Republican whip, or lead vote counter, showed a clip from “The Town,” a 2010 movie about bank robbers.

“I need your help,” said a character played by Ben Affleck. “You can never ask me about it later and we’re gonna hurt some people.”

“Whose car are we going to take?” asks another character.

The message: it was time to get the job done, no matter how messy. The film clip appeared to win over at least one convert.

Representative Allen West, an outspoken Tea Party-aligned freshman, stood up and shouted: “I’m ready to drive the car!”

OBAMA’S UNLIKELY ALLIES

But momentum shifted as the day wore on. Outside conservative groups like the Club for Growth and the Heritage Foundation urged a vote against the bill.

At the White House, aides were batting away suggestions that Obama had been sidelined.

“He’s working tirelessly, meeting with his economic team, doing a lot of outreach, exploring all opportunities for compromise,” said senior White House adviser Valerie Jarrett.

Obama worked the phones, talking strategy with Democratic leaders and developing options for the final endgame.

Jarrett, one of the administration’s envoys to the business community, said her phone was ringing off the hook with calls from retailers and other business owners worried about the prospect of another debt-limit fight in December if Obama was forced to accept Boehner’s two-step plan.

The White House was also actively reaching out to the business community to spell out the dire consequences of a default.

The administration found an ally in the Chamber of Commerce, a group traditionally aligned with Republicans, who now urged the party to back the bill.

The financial services industry was also on the same page as the administration on this issue, despite its many skirmishes with the White House during the debate over Wall Street reform in 2010.

JAMMED CIRCUITS

In his public address on Monday night, Obama had implored Americans to intervene directly by calling, emailing or posting messages on Twitter to their lawmakers.

Telephone circuits on Capitol Hill seized up, email messages bounced back and Web sites crashed under the load.

The anxiety at the White House was building.

“It’s fair to say that nobody here had any doubt that this was going to go right up to the line, even as we urged Congress not to take it right up to the line,” one administration official said. “That’s just the way Congress works.”

Still, the path toward a deal was far from clear.

Over at Treasury, Geithner was trying to figure out what to do if Congress failed to reach a deal in time.

Should the government make debt service a top priority to prevent a meltdown on Wall Street? That could delay paychecks to soldiers, benefit checks to retirees, and payments to government contracts, sending ripples through the economy.

Back at the Capitol, Boehner’s troubles mounted.

Representative Jim Jordan, a leader of the Republican Party’s right wing, predicted Boehner wouldn’t get the votes he needed from his own party. Democrats united against his bill.

The Congressional Budget Office, the official scorekeeper, said it would only deliver 0 billion in savings, rather than the .2 trillion it claimed. Late that evening, Boehner decided to rewrite the bill to make sure it complied with the party’s vow to extract spending cuts greater than the size of the debt limit increase. That put off a vote until at least Thursday.

‘FIRE HIM!’

The acrimony spilled into the open Wednesday morning, July 27, in the party’s basement meeting room.

Representative Greg Walden, a Boehner ally, read aloud an email from a Jordan staffer that urged outside conservative groups to convince undecided members to vote against the bill. Many lawmakers in the room viewed the message as a betrayal of the Speaker. As the Jordan staffer stood uncomfortably against a wall, lawmakers chanted, “Fire him! Fire him!”

The usually jovial Boehner turned the screws. “Get your ass in line,” he said. There was laughter, but the message was unmistakable.

As the meeting adjourned, lawmakers predicted the bill would pass. But a large number remained on the fence. Boehner spent the day listening to their concerns — the cuts weren’t big enough, the special committee might raise taxes, the balanced-budget amendment has been watered down.

Thursday morning, July 28: another meeting, another chance to rally the troops over fruit and doughnuts and signs that read “Play like a champion.” Representative Mike Kelly, an alumnus of Notre Dame University, drew upon his school’s storied legacy as he urged members to “put on your helmet, buckle your chin straps, run out onto the field and beat the shit out of your opponent!”

Doubters like Jordan stayed silent. As the meeting adjourned, they told reporters that their opposition had not changed.

With the rewritten bill ready to go, Republican leaders scheduled a vote for late Thursday afternoon. As debate started on the House floor, Boehner, Majority Leader Cantor and Whip McCarthy continued to meet with doubters, making the case that the party needed to stick together if it wanted an acceptable final product.

At 5:25 p.m., the Republican troika abruptly yanked the bill from the House floor with only one minute left of debate. They didn’t have the votes.

‘BLOODY AND BEATEN’

As floor action turned to naming post offices, Boehner summoned the holdouts to his office just off the Capitol rotunda. Whatever he was doing wasn’t changing any minds.

“I’m a bloodied and beaten ‘no,’” said Representative Louie Gohmert of Texas, one of several conservatives who had downplayed the consequences of a technical default, as he left the office.

At the beginning of the year, Republicans had enacted a ban on earmarks, the pet spending projects that had come to symbolize waste and corruption in the public imagination. That meant that Boehner had fewer carrots to offer reluctant members — no highway overpasses.

“It is the most refreshing thing in the world to see what is going on here. These kinds of negotiations a couple of years ago would have cost billion,” said Representative Jeff Flake of Arizona, whose anti-spending stance had made him an outcast in the party in the past decade.

The five Republicans who represent South Carolina headed from Boehner’s opulent suite to the Capitol’s small, private chapel to pray.

As they knelt beneath a stained glass window depicting George Washington, they weren’t praying for guidance, just strength to maintain their stand.

“I think divine inspiration has already happened. I was a ‘lean-no,’ now I’m a ‘no,’” said Representative Tim Scott.

19 BOXES OF PIZZA

The action moved downstairs to McCarthy’s office. The jovial 46-year-old Republican whip, from California’s dusty interior, was a novice vote counter. He had presided over a few embarrassing setbacks earlier in the year. Now he was facing a true disaster.

As the night wore on, 19 boxes of pizza from Al’s Pizzeria disappeared into McCarthy’s office.

The holdouts weren’t looking for pork-barrel spending or other favors — though they didn’t refuse the pizza. Instead, they wanted to strengthen the balanced-budget clause. That would certainly doom the bill in the Senate, but at that point Boehner just wanted to get it out of the House.

Even with that change, Boehner still appeared to be short of the 217 votes he needed. At 10:30 on Thursday night, the House adjourned without a vote.

House Republicans met in their basement clubhouse again on Friday morning, July 29. The holdouts came under more pressure — this time from other rank-and-file members who said they were undermining the party’s negotiating position. But a final count showed that the votes appeared to be there.

“I love you guys,” Boehner said in a moment of levity.

The bill passed Friday evening on a vote of 218 to 210 — just one vote more than needed. The Senate defeated it two hours later, and the House retaliated on Saturday by defeating a proposal put forth by Harry Reid, leader of the Democratic majority in the Senate.

Another week had elapsed, and Congress was no closer to consensus.

While the legislative chess game played out, Biden called McConnell on Wednesday and Friday.

MCCONNELL’S BOTTOM LINE

Out of loyalty to Boehner, the Senate Republican leader had refrained from talks with the White House for most of the week.

On Friday morning, McConnell told Biden there was “no daylight” between the two Republicans, but told the vice president to try later in the day.

“Call me back after these votes and I will tell you what it will take to get my support,” McConnell said, according to a Republican aide.

Biden and McConnell spoke again Friday evening and in the early afternoon on Saturday. Negotiations began in earnest around 3 p.m., after the House defeated Reid’s bill.

Tuesday, August 2, was three days away.

White House chief of staff Bill Daley’s office became Grand Central Station for a rolling series of meetings among White House staff. The meetings moved on Sunday to the vice president’s office and later to the Oval Office.

On Saturday, Obama asked Biden’s chief of staff, Bruce Reed, whether his wife was angry that he was spending his wedding anniversary at the office.

“Previously, I was on negative watch but I’ve now been officially downgraded,” Reed deadpanned.

CLIMACTIC PHONE CALLS

After months of high-profile meetings, nearly all of the negotiations on the final weekend took place by phone.

In the big gatherings, participants tended to emphasize “talking points” because of the expectation that the conversations would spill out into the public. Smaller meetings allowed participants to cut to the chase, according to an administration official, and details could remain private.

On Saturday night, a media report surfaced that there was a tentative framework for a deal.

White House reporters seeking an update chased a top communications aide toward the Oval Office, only to be told later that the two sides had not arrived at a deal yet.

Indeed, the negotiations ended up going down to the wire.

At 5 p.m. on Sunday night, White House officials discussed whether Treasury Secretary Geithner should make a statement to the financial markets that evening or perhaps the following morning.

GEITHNER’S GAME

Geithner, in his former role as head of the Federal Reserve Bank of New York, was one of the chief financial firefighters during the global markets meltdown triggered by the collapse of Lehman Brothers in September 2008.

Asian markets were about to open. The crisis had already roiled U.S. debt markets and taken a toll on the dollar and Wall Street stocks.

Administration officials feared worse bloodletting if investors returned to their desks at the start of the week without clarity on whether there would be a deal.

Geithner and a small team of aides had been quietly working on contingency plans in case Congress missed the August 2 deadline to raise the debt ceiling. Treasury had planned to brief markets on those plans no later than Monday.

Private-sector analysts believed that in a worst-case scenario, Geithner would be prepared to tell markets he would put a priority on paying the government’s debt in order to avoid default — even if that meant taking the politically explosive step of delaying payments to Social Security recipients and others.

PULLING THE TRIGGER

But the Treasury secretary never had to show his hand.

The final sticking point in the talks centered on the terms of the deficit-cutting “trigger.” Democrats wanted automatic cuts in military spending if Congress balked at the second round of deficit reduction.

Biden and McConnell spoke four times on Saturday, five times on Sunday, circling around the two stumbling blocks that remained — the nature of the “trigger” and the size of the defense cuts that Democrats wanted. McConnell kept in contact with Boehner.

On Sunday, July 31, there were less than two full days before Default Day. As Obama’s budget director, Jack Lew, crunched numbers on the Republican defense cut proposals, the White House feared it might not get a deal. Biden spoke with Boehner around 4 p.m. and said, “We just can’t get there.”

McConnell floated a compromise to widen the trigger to all security-related programs — the State Department, veterans’ care, nuclear security — and not just the Pentagon.

At 8:15 p.m. Sunday, Obama made a final call to Boehner as White House aides listened nearby.

“Do we have a deal?” Obama asked.

There was a moment of suspense, then: “Congratulations to you, too, John.”

Filed Under: GOP 2012 Tagged With: , , , , ,

City of Chester election Special – 2010

October 2, 2011 By Leave a Comment

With a majority of just 917 in the last general election and a national swing away from labour, Christine Russell MP faces a hard struggle to keep Labour ahead in Chester.

 

In fact the City of Chester constituency could hold a fascinating insight into what may happen in Westminster as a whole. Last time round, there was a large swing away from labour to other two main parties, but not quite enough to take the seat from Labour. This time round, it may actually be a surprise if Labour manage to hold on. With local elections becoming more and more based on leadership of the main parties and personalities rather than policies becoming the order of the day, this seat is so close to cal that any of the main three parties are in with a chance. Just a 8.5% swing from Labour to the Lib Dems would put them in.

 

Lets look at the individual candidates this time round at the Election 2010.

 

Born in Lincolnshire and became MP for Chester in 1997 unseating countdowns finest Gyles Brandreth. Her re-election campaign includes that Chester has been her home for 36 years, will always be her number one priority.

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In Parliament she has championed things that matter to local people from free nursery education to better support for pensioners. She goes on to say that she will always make sure Chester receives its fair share of Government funding for education, health, housing and the police.

 

She says her task now is to secure a future that is fair for all.

 

Stephen is married and has two young children, lives in  and has done for nearly 15 years and claims to be well known across the City of Chester. 

After graduating from Nottingham University, he went on to work for IBM for 4 years then set up his own IT Consultancy.Chester

 

He has since then diversified into property management.  

He has longstanding relationships in the central African country of Malawi. He has also been the personal guest of the Minister of Agriculture when on a visit to the country and has hosted visits by Malawian officials and politicians to the United Kingdom. He will be standing for election for the first time and replaces Paul Offer who stood last time around.

 

Elizabeth, or Lizzie as she prefers to be known, is a former ecological washable nappy manufacturer. She is a grandmother and mother of four.

She wants to you vote “for someone you believe will best represent you in parliament – someone you know will make things happen & someone whose policies you agree with.

The other candidates for the seat are

 

 

We expect the result to be a close call, as this traditionally Tory stronghold looks to be regained by the Conservatives. But will the City of Chester still be Labour come May 7th or could the Lib Dems sneak up the middle?

Filed Under: Election Issues Tagged With: , , , ,

Vision Shopsters: 2010 Election Special: Impact Scenarios for Telecoms & Media Regulation in the UK

August 31, 2011 By Leave a Comment

 

The outcome of the General Election on 6 May 2010 will have a direct bearing on the future evolution of the Uk media telecommunications industry.

*This report analyses the impact of the 2010 Election on the key stakeholders in the UK broadcast and telecoms industry under a range of outcomes

*Companies analyzed include BT the BBC, Channel 4, Five, ITV, BSKyB and local media groups including those competing for IFNC contracts

A Conseravative government will present a new Communication Bill to parliament within 24 months of taking office

The Digital Economy Bill is likely to continue on its current legislative trajectory, with the exception that a coalition becomes unworkable and a second election is called later in 2010

Commercial broadcasters and Channel 4 are likely to benefit from a Conservative victory. The BBC would see pressure in any outcome but will be hit the hardest by a Conservative victory.

*Understand the impact of Conservative media and telecoms policy on the UK commercial landscape

*Understand how Conservative media policy is likely to influence M&A activity and extend the scope of existing of existing media groups

*Understand how the future roles of the different regulatory bodies will evolve including Ofcom, BIS (the former DTI) and the DCMS

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Visionshopsters expertise in providing comprehensive collection of online market research reports, events, seminars bookings, country reports, company profiles, latest books and magazines, customized research services offering informative solutions worldwide.

 

Filed Under: Election Information Tagged With: , , , , , , , , ,

Political Economy of India’s Special Economic Zones: a Conceptual Frame Work

July 3, 2011 By Leave a Comment

 

 Every country stands for its own development. For this purpose the state introduces and implements new policies and programmes such as Special Economic Zones Act. After 60 years of its independence India with its 110 core population has evolved a new paradigm of its political economy which is confusing. The policies and programmes initiated by Indian government to create a ‘global village’ based on free market economy and free trade among nations cutting across all barriers, abolition of national boundaries and dismantling the nation –state system giving priority to ‘market’ over the ‘state’ . After the enactment of Special Economic Zone Act 2005, it created tremendous effects on political economy of the country.

            The term ‘political economy’ came from the two Greek words ‘Politiko’ and ‘Oikonomia, where ‘Politiko’ stands for the state and society and ‘Oikonomia’means managing the house hold economy. Political economy thus means a study of the state, society and house hold economy. The concept of political economy arose historically as the economic doctrine of a new class – the capitalist class. It has been evolved since the days of Aristotle who gave a model of public good through guaranteeing each person private possession of what he was rationally and morally entitled. Private property was elaborated later by Locke, Adam Smith, Ricardo and the physiocrates, who came to be known as the Laissez Fairists in Economics, or, the liberal democrats in politics. Adam Smith referred to political economy as a branch of the system of civil government. It was concerned with public policy.

            In Marxian view, political economy can be regarded as a subject which studies the social relations evolves between different classes of people in course of production, distribution, exchange and consumption. Political economy belongs to the broad land of economics, which opens on to political science. After a prolonged period of hibernation, the subject has again been resurrected.

Marxist political economy makes a study of how the productive forces are used under the given relations of production taking account of the lines and trends in technical progress; political economy studies the influence of production relations on such progress and its socio economic consequences. Marxist political economy starts from the assumption that human vital activity is objectively based on social material production which includes man’s interactions with the nature and whole range of relations which arise in the process. It has been realized that every political action has its obvious economic repercussion, and every economic action has had its political implications.

 The liberal school of political economy offers economic implications of political facts and factors. The liberal school has economized politics. The liberal system focuses on the atomistic individual as the relevant unit, on the description of economic behavior in terms of subject choices among alternatives, on the notion of social welfare as the maximizations of individual utility sums. The socialist system views the entire economic system as the basic unit, views economic progress in terms of the growth of the forces of production and focuses on ‘relations of production’ ‘surplus value’ and the rapid increase of social product.

By contrast the Gandhian system eschews both the notions of the atomistic autonomous individual maximizing his utility in a self regulating economy and the notion of processes of production autonomously effecting changes in the organization of production ,class relationship and the magnitude and distribution of social product instead of the Gandhian model suggest that the fundamental attribute of human economic behaviour lies in the relationship of individual to socioeconomic micro groups and the relationship of micro groups to society .The basic economic act is neither the choice between economic alternatives nor the social division of natural products, but the adjustment between individual and the micro groups to which they belong, and of those micro groups to society .It is this collaboration which is the basic theme of the Gandhian system of political economy.

The Gandhian system is viewed in micro groups that are fundamental constituents of the economic system and given full scope to develop their potential in the context of no coercive forms of political control. Social welfare is defined in terms of the functioning of the collaborative micro groups vis –a-vis its members. Gandhi believed that the introduction of technology and patterns of development must be consistent with the full employment objective.

Today economist speaks of sustainable development and ecological values. Gandhi was not against industry but as he predicted it could not give people more employment. His constructive programmes were to give employment to all people whether it be kadhi, gobar gas or tree plantations, where all can be engaged in constructive work. Gandhian economics is an alternative to overcome the exploitation of both capitalism and communism for the exponents of human social order.He was against the large scale use of machinery which kept millions without work. Swadeshi is one of the core elements in the socio-economic organisation of Gandhian system.

Gandhi observes

                       “Life here will not be a pyramid with the apex sustained by the bottom, but it will be an oceanic circle whose centre will be the individual, always ready to perish for the village, the latter ready to perish for the circle of the villages, till at last the whole becomes one life composed of individual, never aggressive in their arrogance, but ever humble sharing the majesty of the oceanic circle of which they are integral units’. The idea of the circle stands for integrating, fullness and self-sufficiency. He wrote that independence must begin at the bottom. Thus every village will be a republic or Panchayat having full powers. It follows therefore, that every village has to be self sustained and capable of managing its affairs even to the extent of defending itself against the whole world.”

 Politics and economy are considered as two basic factors in determining the nature of the state and society. They are interrelated to such an extent that the changes in one affect the other, and hence both are ‘dynamic’ and ‘flexible’ ingredients of the national and the international systems. Politics and economy taken together as political economy refers to ‘managing the economy of the state’. Conceptually political economy connotes the relationship between the state, society and the economy, the cause–effect relationship between technological change and the process of development, the economic relations among the different nations of the world.

            A special economic zones is a geographical region that has economic; laws more liberal than a countries typical economic laws. According to the SEZ Act 2005, A SEZ is a ‘specially delineated duty free enclave and shall be deemed to be foreign territory for the purpose of trade operations and duties and tariffs. A SEZ also been viewed as “a geographical region with different economic laws than a countries typical economic laws with the main goal of attracting foreign investment’. “A SEZ or a Free Trade Zone (FTZ) is typically an enclave of units operating in a well –defined area within the geographical boundary of a country where certain economic activities are promoted by a set of policy measures that are generally not applicable to the rest of the country”.

            The concept of special economic zones is not new. In an International Labour Organization (ILO) report traces the roots of the concept to 13th centaury Spain and in more recent times to Ireland and Puerto Rico, which established Export Processing Zones (EPZ). Export Processing Zones is the former name of the Special Economic Zones. The countries like China, United Arab Emirates, Malaysia, India, Jordan, Philippines and Russia have utilized the concept of SEZ. In 1986, there were 176 zones across 47 countries. Now the number has increased to over 5000 across 147 countries.  

The zones are known by different names in different parts of the world. Most often these are Free Trade Zones  (FTZ),Industrial Free Zones (IFS) Export Processing Zones (EPZ) Bonded Free Zones and Special Economic Zones (SEZ).

          Export Processing Zone is the ancestor of SEZ. An Export Processing Zone is relatively small geographically spread area within a country. The purpose of which is to attract export oriented industries, by offering them especially favorable investment and trade conditions as compared with the reminder of the host country. The EPZ is just an industrial enclave but SEZ is an integrated township with fully developed infrastructure. The UN Industrial Development Organization (UNID) identifies five basic attributes of EPZ s are:

 ? EPZs are dominated by market mechanisms.

 ? EPZ are restricted to a limited region.

 ? EPZs specialize in the production of exports goods and offer special incentives for such production.

 ? Their major aims are to attract foreign investments, earn foreign exchange and to  generate employment

? Secondary aims are technology transfer, development linkages and regional             development .

Policies taken by the governments for the development of the nation obviously affect the people. SEZ policies are for the development of the country. These Developmental projects have economic, political and social impact. In Gandhian political economy, village level development is needed. Land needed for the establishment of the SEZs projects also affected the political economy of the country. Tax incentives, Foreign Direct Investment, New type of employment generation also affect the political economy of the country. The macro economic changes driven by SEZs will push the countries down the path of increasing socio-political crisis.  

India became independent in 1947 and chose self- sufficiency along with economic autonomy. The Industrial Policy Resolution of 1948 marked the beginning of the evolution of the Indian Industrial policy. The Resolution not only defined the broad contours of the policy. But it delineated the role authorityof the state in industrial development both as an entrepreneur and as an authority

The industrial policy Resolution of 1956 gave the public sector a strategic role in the economy. It categorized industries, which would be the exclusive responsibility of the state or would progressively come under state control and others. Earmarking the pre-eminent position of the public sector, it envisaged private sector coexisting with the state and thus attempted to give the policy framework flexibility. India opted for a planned economy with emphasis on state sponsored industrialization. The argument was that capital being scare in India, it was essential to regulate the flow of the available capital in to socially desirable channels. This was achieved by an elaborate system of industrial licensing and state monopoly and control over key industries.                                                                                                                        

More than 80% of the Indian population is still living in agricultural field. Agri-centered model of development was prevalent during the 1950sand the 60s. Agriculture contributes approximately one-fifth of total gross domestic product (GDP). It provides the means of livelihood to about two-thirds of the country’s population. The Sector provides employment to 59 percent of the countries workforce and is the single largest private sector occupation. Agriculture accounts for about 10 percent of the total export earnings and provides raw material to a large number of industries.

During the Jawaharlal Nehru’s period, foreign collaborations were promoted in certain sectors and foreign investment was encouraged. First Export Processing Zone (EPZ) was set up in 1965 at Kandla, in Gujarat. This was a predecessor of the Special Economic Zone in India. The Santa Cruz EPZ in Mumbai became operational in 1973.

After the death of Jawaharlal Nehru, Indira Gandhi became the prime Minister of India in 1966. She also did a lot for the economic development of the country. The Foreign Investment Board was set up in 1968. In 1973, Foreign Exchange Regulation Act (FERA) was enacted.. India set up the Santa Cruz Electronics Export Processing Zone (SEEPZ) between1973-74. It was the first EPZ which was dedicated to the electronic industry.

Doors of the Indian economy were opened during the 1980s, by Indira Gandhi and later by Rajiv Gandhi. From 1984 to 1989, the policy was to enable the middle class to consume more so as to raise the internal demand. This resulted in the raise of imports and the growth of Foreign Direct Investment. The government tried to raise the level of exports in order to balance this phenomenon. In 1984, the Free Zone policy received a fresh start. By 1991, the Indian economy was opened up for linking up the Indian market with the world leading to free flow of trade and commerce .The multilateral Financial Institutions like the World Bank and the International Monetary Fund while assisting the developing countries like India also insisted upon restructuring the polity and the administrative machinery. Following a change in the policy regime in this period and the formation of the World Trade Organization (WTO) with India becoming its founder member, it opted for a liberalized capitalist strategy. There had been introducing policies since July 1991 particularly in the industrial sector.

De-reservation of industries for the public sector was one of the major step taken by the government as part of the policy changes in the industrial sector. It was against the earlier 17 industries were reserved, there are now industries like defense production, atomic energy, coal and lignite, railways and mineral oils reserved for the public sector. Core industries like iron and steel, electricity, air transport, shipbuilding, and heavy machinery industries such as heavy electrical plants telecommunication cables and instruments are now open to private sector participation. Besides, equities held by the government in selected public sector enterprises like ONGC etc are now available to mutual funds, financial institutions, the general public and workers through a policy of divestment

In1998, the first private SEZ started its operations in Surat .This was under the jurisdiction of the Mumbai (SEEPZ)Development Commissioner, who was a nominee of the central Government.

From the beginning of the 21st century, most of the developing countries in the world have recognized the importance of facilitating international trade for the sustained growth of the economy and increased contribution to the GDP of the nation. As part of its continuing commitment to liberalisation, the Government of India has also adopted a multi-pronged approach to promote foreign investment in India. The Government of India has pushed ahead with second-generation reforms and has made several policy changes to achieve this objective.  The annual growth rate ranged between six and nine percent.

Bharathiya Janatha Party (BJP) government decided to re-launch the Free Trade Zone Policy in 2000. It changed the name of Export Processing Zone (EPZ) to Special Economic Zone (SEZ). The policy intended to make SEZs an engine for economic growth supported by quality infrastructure complemented by an attractive fiscal package both at the Centre and the State level with the minimum possible regulations. 

The salient features of the SEZ scheme are:

v No licenses required for import

v Manufacturing or service activities allowed.

v SEZ units to be positive net foreign exchange earner within three years.

v Domestic sales subject to full customs duty and import policy in force.

v Full freedom for sub contracting.

v No routine examination by customs authorities of export/import cargo.

  The United Progressive Alliance (UPA) government Currently in power enacted Special Economic Zone Act, 2005 which was passed in June 2005 and came into force on 10th February 2006 with the notification of the SEZ Rule in 2006. The Act provides for drastic simplification of rules and single window clearance on matters relating to the union and state governments .The state governments have also been enacted their own SEZ laws to cover State subjects.

The Act provides for single window clearance mechanisms for developers and operators for ensuring orderly development of SEZs, the responsibility is assigned to the Board of Approval, constituted by the union Government. The Union Government may set up a SEZ on its own or on the basis of proposals of the state government or private developers after the Board of Approval has duly screened them .At the regional level, the Development Commissioner and his /her office will exercise administrative control of SEZs. The Labor Commissioner’s power is also delegated to the Development Commissioner. There is an approval committee to approve /reject /modify proposals for setting up units in SEZs. All suits of civil nature and notified offences in SEZs will be tried and settled by specially notified courts and affected parties may appeal to high courts against the orders of the designated courts. The  corporate units operating under SEZs will enjoy special privileges and protection granted by law.

          The Act offers a special fiscal package to the units set up in the SEZs. This package includes, exemption from customs duties, central excise duties, service tax, central sales taxes, and securities transaction tax to both the developer and the units set-up, tax holiday for 15 years like 100 percent tax exemption for five years ,50 percent for next five years, and 50 percent for the ploughed back export profits for the next five years.100percent income tax exemption for 10 years in a block of 15 years for SEZ developers.

 There is a three-tier administrative structure. On the top, a Board of Approval at the level of the Union Government has been set up for the functioning of the SEZs. Next an authority has been created by the state governments for creation and promotion of the infrastructure within each state. Finally, in SEZ mechanism /authority is provided for single window approval.   According to the 2005 Act, these zones can be set up by the developers, who could be private real persons, companies, both Indian and foreign, as also the State governments or the central government by themselves or jointly with private parties. It is also being envisaged that some of the existing Export Processing Zones would be converted into Special Economic Zones.  The SEZ Act, 2005 supported by SEZ Rules, has come in to effect on 10th  February 2006.

In India SEZs are divided in to three categories, Multi-product SEZs Sector specific SEZs, Free Trade and Ware housing Zone (FTWZ). The first category signifies a SEZ where units may be set up for manufacture/rendering of services of two or more goods in a sector or good/services falling in two or more sectors. For multi-product service SEZ, a contiguous area of 100 hectares or more is required. 

The second category defined as a zone meant exclusively for one or more product/services. The minimum area requirement is 100 hectors of contiguous and vacant land. Within sector specific SEZs, Bio-technology, Gems and Jewellery, Non conventional energy, electronics, hardware and software SEZ-including IT can be set up with minimum area has been relaxed to 50 hectares for Assam, Meghalaya, Nagaland and, Arunachalpradesh, Uttaranchal, Sikkim, J&K, Goa and the Union Territories.

 Free trade and warehousing zone (FTWZ) is the third category which minimum area requirement is 40 hectares of contiguous and vacant land. Built up area should not be less than 10 hectares.

There are 19 functional SEZs in the country which were set up prior to SEZ Act, and 154 SEZs that were notified under SEZ Act 2005. The maximum numbers of SEZs are coming up in the IT sectorThe total land requirement for the formal approvals granted till date is approximately 44,268 hectares. Out of this, about 87 approvals are for State Industrial Development Corporations (SIDCs) State Government ventures which account for over 21,169hectares 

One of the main issue is related with SEZ is locating land for SEZs. Many state governments are in the process of establishing SEZs. The issue of displacement, that of compensation or land price, rehabilitation, residential property development and land speculation, the threat of possible relocation of units from other parts of the state to SEZs and the consequent loss of revenue have been flagged . Farmers are protesting against the forced acquisition of their lands. The development of SEZs would lead to the destruction of employment of peasants whose land will be acquired and will create very little employment for high tech or high skilled persons and total net employment generated may well be negative. Handing over thousands of hectares of land cheaply to promoters of industry and relaxing the laws of the land, including those that relate to the welfare of the industrial workers, protection of the environment, taxation, etc, would automatically promote industrialization and solve the nagging unemployment problem of the country overnight. The farmers/peasants in various states such as West Bengal, Orissa, Maharastra, and Punjab have opposed acquisition of their land for SEZs. The highest level of opposition has been observed in West Bengal when land was acquired by the state government for the Tata group at Singur and Salim group of Indonesia at Nandigram.  Besides the loss of agriculture land, concerns have also been raised about the project affected People.

Using water for SEZs is one of the major problems rising from different parts of the country. Mundra SEZ as per official website of the SEZ, it expects to get at least 6 million liters per day from the Sardar sarovar project, as promised by Gujarat water infrastructure Ltd.

The another main issue is rising from different parts of the country, the labour laws applicable to the rest of the country have been relaxed for the SEZs. The existing laws are well intentioned and they promote worker welfare. Relaxing such laws exclusively for the SEZs shows the government’s lack of conviction in its own commitment to social justice.

In some SEZs, the state governments are joint venture partners. In the case of some, special incentives by way of concessional electricity and water tariffs have been offered .In almost all the cases, valuable lands have been given away at concessional prices.

Considering the SEZ Act, it violates the letter and spirit of the Indian Constitution; it infringes the Fundamental Rights of the citizen guaranteed in part 3rd of the Constitution. Relaxation /inapplicability of many labour Laws (including under the Industrial Dispute Act, Contract Labour Act, Factories Act, Minimum wages Act, Trade Union Act), Environment (Protection) Act is inapplicable to SEZs ,No environmental clearance needed.  Violates  Panchayat Raj Act (1996) for local self government, violating laws granting rights and control to adivasi communities over their land, violating many international conventions on human rights.

To sum up, SEZs and other emerging developmental issues can be seen in a broad perspective and theoretical underpinnings of neo-liberalism. As far as Indian polity is considered the implications emerging from SEZs may cause increasing socio-political crisis because the society is far more complex than we assumed and that will result in organized or unorganized resistance and that may even cause anti-neo liberal political forces. So, in order to avoid the polarization of the society, civil society should engage to create a consensus on developmental issues. More over, in order to understand the continuities and changes that are taking place in the developmental scenario it needs further study.     

Endnotes

Bijoiny Mohanthy and S.C Hazary(Ed), Political Economy of India Retrospect and Prospects (New Delhi: APH Publ).

 S.C Hazary, Political Economy of India Retrospect and Prospects, ( New Delhi: APH Publi,1997.)

 

Sukhendu Mazumder, Politico-Economic Ideas of Mahatma Gandhi  (New Delhi: Concept Publishing House, 2004.).

B.Mohanan,(Ed), Gandhis Legacy and New Human Civilisation, Gyam publishing house, New Delhi,1999.

Vineetha Sharma, ‘Implications Of A Special Economic Zone on Project Affected People a case study of Reliance Haryana SEZ”, Man & Development, Vol.39,Dec,2007.

Jermy Grasset and Frederic Landy, ‘Special Economic Zones in India Between International integration and Real Estate Speculation’, Man &Development, Vol. 39,No.4, Dec, 2007.

India 2008, A Reference Annual, Publication Division, Ministry of Information and Broadcasting , Govt:of India, New Delhi,2008.

Partha Mukhopadhyay, “The promised land of SEZs” Seminar, Jan, 2008

.

Sheetal Sharma and Kishan Pratap,  “ The Prosperous Few and the Pauperized Many: A Perspective on Special Economic Zones”, Mainstream, February,23-March,1,2007.

 

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