A Wednesday: Justifying Violence in the Name of Common Man

The latest bomb-blasts in Delhi and the numerous other bomb-blasts by terrorists have taken the lives of large number of innocent people. Each time a bomb-blast takes place, innocent people lose their lives. Each bomb-blast only brings out the fragility of the common man’s life in this country, the incapacity of the security system and the police to nub the terrorists before they strike and of course the ruthlessness of the terrorists who are killing at will. Each bomb-blast brings to us images of devastation and horror day in and day out through the 24 hours news channels and watching those images we thank our fortunes that we have escaped the latest terrorist attack and prepare for another day of hard work, while politicians pledge to fight terror. In this situation of insecurity and a kind of hopelessness, what can the common man do? What can be the common man’s answer to the menace of terrorism?

The film A Wednesday tries to provide answer to these questions. In the film a common man, Naseeruddin Shah, suddenly decides to teach the entire system and the terrorists a lesson. He uses the most sophisticated equipments, allegedly used by terrorists today, threatening to blow up bombs in Mumbai, unless four terrorists are released. The Police Commissioner, Anupam Kher, has no option but to accept his demands and the four terrorists are released. Three of them are then killed by a bomb-blast orchestrated by Naseerudding Shah. The fourth one is killed by the police, since Shah threatens to trigger bombs in Mumbai unless the fourth one is killed. The helpless Police Commissioner and the Chief Minister have no option but to agree, fearing a bomb blast.

This entire drama is played out by Shah in the name of the faceless common man, who has been the victim of terrorist attacks unable to get justice and security from the impotent security apparatus and the judiciary. An eye for an eye – that is the motto that Shah gives in the movie. He is doing no wrong. He is just cleaning the system of pests like the terrorists.

The movie has won accolades from critiques as well as the masses both for its technical and cinematic value as well as the politics that has been depicted in the movie. We however feel that the entire structure and the politics of the movie is deeply problematic and should be unequivocally rejected because of the following reasons:

The fact that common people are the sufferers of terrorism is undeniable. The amount of insecurity produced in the people after such attacks is also beyond dispute. But so is the case with victims of communal violence, like the Gujarat pogrom. Can anyone in Bollywood dare to make a movie where a common man suddenly decides to avenge the death of hundreds of people in Gujarat and kill somebody like Babu Bajrangi (a man accused of committing large number of murders during the Gujarat carnage)? The answer is an unequivocal no. The fact that the premise of the film was chosen as common man’s revenge against terrorism and not as common man’s revenge against communal violence shows that the film tries to play upon the deep prejudices against Muslims. That is why in the film, all the terrorists are Muslims and they say that they are proud of Mumbai-1993 and other such acts of violence. Nobody in the film talks about the plight of the Muslims after the Gujarat carnage. Even though the film is based in Mumbai, Naseeruddin or anybody else never mentions the wounds inflicted on the Muslim community in the post-Babri demolition riots in Mumbai itself. It is projected as if the only form of violence that claims innocent lives in India is bomb-blasts by terrorists.

The film is however, apparently, conscious about the problem of projecting Muslims as terrorists. In order to project another Muslim identity, the film shows Arif Khan, a honest and brave police officer who is given the responsibility to take the terrorists to the designated place. This character is also highly problematic. It is shown in the movie that the Muslim officer is the most ruthless officer in the force, who beats up people mercilessly. He has no family, unlike the other Hindu police officer, who has a caring wife who calls him almost every hour. This ruthlessness and violence of the Muslim police officer only strengthens the stereotype that Muslims are essentially violent.

The film is problematic on other counts as well. When Naseeruddin Shah calls the Police Commissioner and asks him to fix a negotiator, the Chief Minister relegates the responsibility to the Commissioner giving him unlimited powers to deal with the situation. At the same time the Chief Minister expresses his incompetence to deal with such situations. There have been constant attempts on the part of the media to denigrate the role of the political leadership in the country. It is projected that the political leadership is most worthless and inefficient. While it is true that there are problems with the political leadership in the country, they are the democratically elected representatives of the people. It is the right and the duty of the political leadership, who are accountable to the people, to take important political decisions. However, in the movie we see an immediate snub to the political leadership and a taking over of the police who are given unlimited powers.

Secondly, as far as the terrorists in the movie are concerned, it is never mentioned as to whether any case has been proved against them or not. Are they really responsible for the bomb blasts in Mumbai trains, which are constantly referred to in the movie? Has the judiciary pronounced its verdict on them? If yes, what is the verdict? Nothing is said. Naseeruddin pronounces them as guilty and kills them. In this entire process, the rule of law, the right of the accused to face free trial is completely subverted. No one in the film even utters a word of protest to what was being done in the name of common man. In the end, the Police Commissioner lets Naseeruddin go with pleasant words. Who has given the right to this so called common man to kill people? Moreover, who has given the right to the Police Commissioner to let him go? Today, we are seeing large scale resentments against the police and the media within the Muslim community because of their insensitivity towards the community. Every Muslim youth who is arrested by the police is pronounced guilty immediately. The film also does the same and further argues for mindless killing having scant regard for the rule of law.

The larger question however remains. At the end of the day what can the common man do in the face of such terrorist attacks? This question needs deep thinking on the part of the entire political establishment as well as the people. The answer cannot lie in the policy of eye for an eye. A culture of violence free politics has to be collectively cultivated. Secondly, the anti-Muslim prejudices have to be collectively shunned and the police must be made accountable to the people. This is only possible with democratic parties and voices politically marginalizing the fundamentalists of all varieties. In short, only a democratic political movement is an answer to terrorism. Neither a police state nor the common man turning himself into a terrorist can provide any solution.

The Crisis in the US Financial Markets

The international financial market is currently in a crisis the intensity of which is unprecedented since the Great Depression of 1929-30. Within a week we have witnessed the serial closing down of the biggest investment banks in the USA and the world, some of which, like the Lehman Brothers, survived the aftermath of the Great Depression. In order to put breaks to this slide, the US Government has been forced to intervene in the market in a big way. Even then, nobody is sure whether this crisis will end or not; nobody is even sure whether we have witnessed the worst phase of the crisis or more is yet to come. In this context the following questions are being raised:

How severe is the crisis?

It is argued by certain sections of the media that ultimately, the world has witnessed such crises in the past. In 1997-98 there was the East Asian financial crisis. So the present crisis is no different. This argument is way off the mark because of the following. To be sure, the East Asian financial crisis was very serious and affected a large number of countries, including Brazil and Russia. But it originated and caused problems for countries which were in the periphery of capitalism. Ultimately, the origin of the crisis and its effect were largely limited to developing countries, with limited impact on developed countries. Even India and China, although so close to the East Asian theatre were not affected by it. But the present crisis has taken place in the heart of modern capitalism, the USA. This alone points to the fact that this crisis is of a qualitatively different nature.

In contrast to this, it is also being argued that this is not the first financial crisis that the USA has faced. Even in the recent past, during the late ‘90s and early part of this century, the USA economy witnessed similar problems following a period of relatively better economic performance. Thus, this crisis will not pose serious problems for the US too. What is missed in this type of analysis is the fact that the present crisis engulfs not only the financial sector of the US economy but has serious repercussions for the real sector of the economy also. While this will be taken up later, it suffices here to point out that the biggest investment banks in the USA have collapsed and the government has come out with the biggest bail out plan in the history to save the financial sector in the USA and the world. At least, the US Government knows how serious the crisis is. According to renowned economist Paul Krugman, the broadest measure of unemployment in the USA, has risen from 8.3 percent to 10.3 percent over the past year, roughly matching its high point five years ago.

How did it all go so wrong?

Let us first look into the functioning of banks. If the banks are giving loans to the public they have an expectation and assessment regarding the public’s credibility to pay back the loans. This expectation is backed by the collateral of the loan or the valuation of the project for which the loan is claimed. As long as the banks have correct estimations regarding the valuation of the mortgage or the project, its expectation will be realized. If due to some reason, the value of the mortgage or the project suffers drastic decline, then the possibility of the banker getting back the loan reduces greatly. Now, loans given by banks are assets to them. In case of defaults, this financial asset for the banks becomes essentially valueless. On the other hand, based on these assets, banks take credit from other agents for various purposes. Now, if the asset position of banks weaken then there exists a risk that the Bank will not be able to pay back to its creditors. If this happens in a large enough scale then the bank has to go bankrupt.

Let us now see what happened in the US markets. Firstly, it should be noted that the economic growth in the USA is largely consumption driven, with housing forming a very important part of consumption demand. Owning a house in the USA is a matter of social prestige and security. But every individual who is investing in housing does not necessarily build it in order to stay but sell it at a future date to gain profit. There was huge housing price inflation in the USA, which was largely based on speculations and higher demand for houses. As a result of this high price of houses, many more individuals started to invest in housing.

Now, in order to invest, the investors needed loans from the banks, which were provided against a mortgage. Since there was a housing price inflation, many borrowers managed to pay back the loans between 2000 and 2003. This increased the expectation of the banks that giving loans for the housing sector is actually profitable, since in the past loans were recovered based on the housing price inflation. Moreover, with the housing price inflation continuing, the banks estimated that by selling the houses, in case of default, the loan could be reclaimed. This reduced the bank’s scrutiny of the mortgages and resulted in giving more loans to borrowers whose creditworthiness was low, which are essentially the sub-prime loans. In 2006, 20.1% of all mortgage backed loans were sub-prime.

This did not cause any alarm, as long as the housing price inflation continued. But this could not continue for long due to a simple economic factor. With the housing price inflation a large number of investors invested in the housing market which resulted in a steep increase in the supply of houses. At the same time the demand for houses could not increase more since there was a slow down in the growth rate of GDP and increase in unemployment between 2001 and 2005. Both these factors had to bring the price of houses down which started to decline sharply from December 2005. This resulted in problems for the banks through two routes. Firstly, the valuation of the project (houses) for which the loans were taken declined. Secondly, loans were issued against mortgages of lower valuations to begin with. This resulted in a situation where the banks could not recover their loans and suffered losses.

The above discussion raises two issues. Firstly, why were such sub-prime loans given in the first place? Secondly, how did the problem in the housing market and the sub-prime mortgage market become such an all encompassing problem for the financial sector?

The answer to the first question lies in two facts. One is that there have been substantial de-regulations in the USA following the decline in the earnings of commercial banks in the United States in the 1980s. Secondly, the unbridled quest for profits is also responsible. Every bank is thinking that if I do not give the loans somebody else will give and earn profits. Hence, in the end, every bank starts to provide these sub-prime loans.

On top of this, the banks engaged in myriad forms of financial innovations which resulted in contagion of the problem in the housing and the sub-prime mortgage markets to other financial segments. What was essentially been done is the following. Suppose person A takes a sub-prime loan from a bank. Now for the bank this is an asset, since this will generate a future stream of income. Subsequently, the Bank floats another subsidiary or the Special Purpose Vehicle (SPV) to which it sells this asset. With the selling off of this asset the risk associated with it is also transferred by the bank. The SPV issues papers called securities to sell in the market and mobilize funds to buy the asset. The return to these papers is linked with the performance of the original asset. Moreover, these papers are itself assets to its holders against which loans can be taken. (This process is called securitization. It is estimated that 80.5% of the sub-prime loans were securitized in 2006.)

Now, if the person A defaults in his payment commitment to the bank, then there is no income flow that is coming from the loan as an asset. If the mortgage is not securitized then the initial bank from which the loan is taken suffers loss. On the other hand, if it is securitized, all those who are holding securities on this asset do not get any return. As a result with the initial asset becoming valueless, a chain of assets become valueless. This results in problems for large section of the players in meeting their payment commitments. More financial instruments such as these were produced in the US market which resulted in the contagion of the problem of the housing and sub-prime mortgage markets to the entire financial architecture resulting in bankruptcies as has been mentioned above.

In short the financial de-regulation of the financial sector along with the banks’ profligacy in providing sub-prime loans, based on wrong assessment, along with the innovations of various financial instruments led to the massive crisis in the financial sector in USA.

This crisis essentially has resulted in a loss of confidence in the financial sector, resulting from massive defaults, where people are not sure whether they will get back the money that they are lending. As a result people who are willing to borrow money from the market are not being able to get it. This is harming investment prospects in the economy. Moreover, massive job cut in the financial sector is also causing a decline in the aggregate demand in the economy. Both of these are slowing down the US economy.

What does the crisis signify?

There is a theory in economics which says that the Government is inefficient and can never be a solution to economic problems. In fact it was believed that the Government is a problem and not a solution as far as working of markets is concerned. The first casualty of this crisis, apart from the US economy and the banks, is this orthodox belief in the ultimate efficacy of the market mechanism. This economic myth was proved wrong during the Great Depression and again has been proved wrong today. The crisis proves that unbridled free market orthodoxy results in massive crises. Now, it is the US Government which has to step in with a massive bailout plan of $700 billion to save the private banks and other players in the financial market.

Secondly, the invincibility of American capitalism has been questioned like never before, at least not since the Second World War. For all those, who are talking about how good the US economic system is, please hold your breath and look at the mess that the US is in right now. The present crisis should also be a wake up call for all those who want to mould the Indian economy like that of the USA.

Thirdly, for Indian Government this is a wake up call against the policies of financial liberalization that it wants to pursue. Clearly, the model of unbridled financial liberalization has failed in the USA. It is high time that our Government drops the idea of putting us voluntarily into the possibility of a crisis that the USA is currently faced with.