Karnataka Bank - Founders' Day Lecture Series
GLOBALIZATION, GLOBAL
RECESSION
AND
THEIR IMPACT ON HUMAN
RIGHTS
Text of the address delivered by
'NAADOJA' DR. JUSTICE. S. R. NAYAK (Former Chief Justice of Chhattisgarh)
Chairperson, Karnataka
State Human Rights
Commission, on 18-02-2010
1.It is really a great honour and privilege for me to be here today and
participate in the Founders' Day Celebration organized by the Management of
Karnataka Bank Limited. Although
Banking in India originated in the first decade of 18th century with
The General Bank of India coming into existence in 1786, though we gained
independence in the year 1947, and though Republican Indian Constitution was
brought into force on 26th January, 1950, Indian banking industry
was not a critical tool, if I may say so, to monitor the growth and development
of the Indian economy till 1960. By the
1960s, the Indian banking industry became an important tool to facilitate the
development of the Indian economy. At
the same time, it had emerged as a large employer. Under the political leadership of Smt. Indira Gandhi, the then
Prime Minister of India,
by a swift and a sudden action, Government of India issued an ordinance nationalising the 14 largest commercial banks from the mid-night
of 19th July, 1969. A second
dose of nationalization of six more commercial banks followed in 1980. With the second dose of nationalization, the
Government of India controlled around 91% of the banking business of India. After this, until the 1990s, the nationalized
banks grew at a pace of around 4%, closer to the average growth rate of the
Indian economy. In the early 1990s , the
then Narasimha Rao
government embarked on a policy of liberalization and gave licenses to a small
number of private banks, which came to be known as New Generation tech-savvy
banks. This move, along with the rapid growth in the economy
of India, kick-started the
banking sector in India,
which has seen rapid growth with strong contribution from all the three sectors
of banks, namely, government banks, private banks and foreign banks.
2.
Karnataka Bank Limited occupies an enviable and pride position in the comity of
Private Sector Banks in the country today. I have some details of laudable
performances of the Bank. Karnataka Bank
has secured "A1+" rating for its
Certificates of Deposit programme from ICRA, thus indicating highest quality rating to short term
instrument. It is stated that
instruments rated in this category carry the lowest credit risk in the short
term. The financial results of the year
ended 31st March, 2009 of the Bank speak volumes for its
strong credentials. The total business
of the Bank surpassed Rs.32143 crore. Net profit of the bank went up to Rs.266.70
crore. Capital
funds of the Bank stood at Rs.1990.57 crore. The Capital Adequacy Ratio (CAR) of the Bank was
13.48 under Basel II and 13.54% under Basel
I, well above the RBI prescription of 9%.
The earning per share (EPS) was Rs.21.96. The Bank which has been consistently paying
dividend over the years has paid a dividend of 60% for the year 2008-09. The Bank has a highly dedicated team of
around 5300 employees ably patronized by over 74000 shareholders and over 4
million clientele base. Bank's Net NPA and the return
on assets stood at 0.98% and 1.25% respectively. The Bank's rural orientation programmes, services of NRIs and
its performance in user-friendly loan schemes are quite laudable and
astounding.
3. The
success of the bank is built upon sacrifices and services of its founders and
successive Boards of Directors and staff of the Bank. Karnataka Bank Limited, established in the
year 1924, thanks to a host of illustrious and imaginative founder-promoters,
is a highly progressive bank with a vision and mission of a unique corporate personality. The untiring efforts of the founder members
with their burning passion to serve the community have given the bank a firm
footing assimilating the past with astounding flexibility to adapt to the sea
changes sweeping the banking industry especially after nineteen hundred
nineties. Their selfless and
single-minded devotion to give their best to the society resulted in the birth
of the Bank, which occupies an enviable position in the comity of Private Sector
Banks in the country today. The seed
sown in a spirit of love and compassion by the founding fathers has grown into
a big tree bearing fruits on all its 461 branches spread across the
country. Over 85 years of its fruitful
existence has stood the test of time by its steady growth and vast, varied and
versatile dispensations marked by personalised and
dedicated services. This astounding
success should go to and be shared by its illustrious founders, 74000 patron-shareholders and over 4 million
patron-clientele, and above all, the
most dedicated services rendered by the successive Boards of Directors
and staff of the Bank, and all of them richly deserve compliments from the
society.
4. As you
know, I am neither an economist nor a banker.
My exposure in these fields is almost nil. I am only a client of the Bank, I mean,
Karnataka Bank Limited. But, I have
considerable exposure in law in general, Constitutional Law and Human Rights
law in particular. Globalization and
recent global recession undeniably have their impact on Indian economy and
consequently human rights of the people in this country. Therefore, when I was called upon to speak on
any topic of my choice as a part of Karnataka Bank's Founders Day Celebrations,
I thought of speaking on the topic "Globalization,
Global Recession and Their Impact on Human Rights." But, at the outset, I wish to tell you that my
comments and observations in the course
of the lecture should not be taken to be an expert opinion, but, a feeling of a layman of this country, who wants to share
with an audience, which consists of
large number of experts on Indian economy, Indian Banking, Globalization,
Global recession. In other words, my
Lecture by no standard can be said to be a well-researched article. Having said
it, without much ado, I proceed to the subject of my lecture.
5. Globalization
intends to integrate the world into one capitalist political economy operating
under a neo-liberal free market ideology.
Economic globalization as witnessed in the world today is not a new
phenomenon. It has been evolving for the
past several years and gaining momentum day by day. The trend, at present, is a shift from a
world economy based on national market economies to a borderless global market
economy increasingly governed by one set of rules. In this context, globalization means global
economic liberalization, developing a global financial system and a
transnational production system which is based on a homogenized worldwide law
of value. The demise of the Cold War helped
the emergence of a new aggressive competitive global economic order. This was possible mainly due to the
integration of the newly industrialized countries and much of the developing
nations. Although globalization and
market liberalization have made some progress in terms of economic growth in
certain countries, it has also had many negative impacts in developing
societies.
6.Richard Barnet
of the Institute
of Policy Studies
describes globalization in terms of four increasing webs of global commercial
activity: (i) global cultural bazaar; (ii) the global
shopping mall; (iii) the global financial network and (iv) the global workplace. The global cultural bazaar promotes the
notion of uniform cultural values and products across the world. This idea influenced billions of people,
shaping their goals and homogenizing their tastes and attitudes towards a
desired fantasy lifestyle. The
unprecedented increase in global trade -- the buying and selling of goods and
services among countries - has created a planetary supermarket. The cultural bazaar and shopping mall
intersect through the vehicle of advertising.
Media has become a powerful player in the globalization process. In
fact, globalization of economies has also led to the globalization of media. Media
is used to impose the culture and power of the wealthy nations from the global
North. The global financial market has
created a new atmosphere to search for quick profits. The foreign exchange market is mainly dealing
with currency speculation, bet for or against foreign currencies. The increasing mobility of jobs has created
global workplaces and this has boosted international labour
migration. In other words, the
globalization and market-oriented economic reforms helped transnational
companies shift their manufacturing units to developing countries. Because of this more people are crossing
borders in search of jobs and in most conditions people are forced to work in
inhuman conditions for lower wages. All
these proved the fact that globalization is not a simple but a very complex set
of process that operates at multiple levels - political, economic and
cultural. In this era of globalization
humanity is pursued as fundamentally one, with a common destiny, that is the
result of technology revolution in information and communication and the
awareness of the unsustainability of the current way
of life.
7.
According to Nikhil Aziz, an
Asian scholar, globalization can be seen in two different perspectives:
Globalization from above, for short, (GA) and Globalization from Below, for short,
(GB). At the political level, GA
manifests itself in its action of the Western countries, particularly the United States of America, and global financial
institutions in pressuring countries of the South to democratize. This translates as the adoption of a
Western-style liberal democratic system of governance. They closely tie economic Globalization from
Above to the political aspect in that (1) the source of pressure for change
is the same, and (2) close links are alleged between the ideologies of free
markets and free societies. Economic
Globalization from Above entails countries of the South to accept - within the
parameters of the dominant World capitalist system -the imposition of
structural adjustment programmes, neo-liberal
economic policies, including the wholesale liberalization of domestic
economies, to allow unrestricted entry to transnational capital. On a cultural level, GA arises from the
control of the global information and communication networks by Western media
corporations; and the spread of modern technologies of a consumerist culture,
and Western cultural expressions as the global culture.
8.The transnational companies are the spearheads of
globalization and have become the dominant economic and political force in the
world economy. Increasing competition and pressure on transnational companies
to increase profits leads to a relentless search for cheap labour
markets. Many of the companies from the
developed and the Newly Industrialized Countries (NIC)
have shifted their manufacturing and service industries to developing
countries. For example, several major
airlines now have their global accounting done in India. A large number of computer software companies
from the United States are
developing software in Bangalore,
at less than one-fifth of the price in other countries. The German car manufacturing company BMW and Lorean car manufacturers like Daewoo and Hyundai have
already established their manufacturing units in Vietnam. The Export Processing Zones of many
developing countries are catering to the needs of the transnational companies
by way of providing cheap labour. The International Labor Resource and
Information Group based at the University
of Cape Town has
described these phenomena a race downhill in which countries underbid each
other. Because they cannot see an
alternative, workers also end up underbidding one another. The main arguments are competitiveness and
the need to survive. But for workers it
is a race to the bottom, and the bottom means slave like conditions. When work moves to less developed countries,
the shift does not automatically bring Western levels of employment and
prosperity to the host countries. What it does bring are very profitable
high-tech islands and Export processing Zones where they protect transnational
capital, with the help of the state, from social responsibility. There may be short-term advances in the
living standards of a small group of workers.
Nevertheless, when some workers elsewhere lead the race to the bottom, those jobs may
disappear. A report by UNCTAD notes that transnational companies encroach on areas
over which sovereign responsibilities have traditionally been reserved for
national governments. A situation has
arisen where many governments of developing countries no longer control the
flow of financial capital; so they can no longer control their own economies.
9.
Globalization has substantially contributed to the intensification of debt,
poverty and economic crisis in the developing world. The Structural Adjustment Programmes
(SAP) designed and imposed by the
global creditor institutions is a typical instrument to create a favourable atmosphere for globalization, which ultimately
affects developing countries. In order
to meet the mandates set by the SAP,
a country spends less by cutting back government expenditures, social services,
and economic investments so that resources can be placed elsewhere. More money is being spent on export
orientation, which results in local economies becoming dependent on the integration
with the world economy. The
international lenders demand poor economies to divert substantial resources
away from sectors serving domestic needs: withdraw all subsidies for poor
people, privatize the state sector, deregulate the market, and decrease
wages. In effect, this process opens up
countries to globalization. Thus
structural adjustment programs and import-export-led strategies of
industrialization were part of a political and economic restructuring process,
a prelude to globalization.
10.The relation between globalization,
development and human rights raises policy and legal questions. One such question is whether globalization of
market-oriented economic system is essential for development and protection of
human rights? While searching for an answer to this question we should analyze
how we perceive the concept of development and human rights, especially in the
context of developing countries. Human
rights have become an integral part of the process of globalization in many
ways. The Western countries are
increasingly using their view of human rights concept as a yardstick to judge
developing countries and to deal with economic and trade relations to extend
development assistance. At the same time
globalization intensifies impoverishment by increasing the poverty, insecurity,
fragmentation of society and thus violates human rights and human dignity of
millions of people.
11.
The preamble of the Declaration of the Right to Development, adopted by
the UN General Assembly in 1986, describes "development
as a comprehensive economic, social, cultural and political process that aims
at the constant improvement of the well-being of the entire population and of
all individuals on the basis of their active, free and meaningful participation
in development and in the fair distribution of resulting benefits". The 1990 UN Global Consultation on the Right
to Development as a Human Right, stated that the right to development is an
inalienable human right with the human being as the central subject to the
right and that all the aspects of the right to development set forth in the
Declaration of the Right to Development are indivisible and interdependent, and
these include civil, political, economic, social, and cultural rights. It was further maintained that the right to
development is the right of individuals, groups and peoples to participate in,
contribute to, and enjoy continuous economic, social, cultural and political
development, in which all human rights and fundamental freedoms can be fully
realized. A development strategy that
disregards or interferes with human rights is the very negation of
development. The aims and objectives of
the so-called development models promoted by different governments or
international development agencies are not compatible with human rights
standards. A new model of development
ideology is being promoted that is based on the market and its logic. Several decades of discussion on alternative
development model is withering away and a dominant model of market oriented
development taking roots in that place.
As a result of the globalization process, more negative effects are
visible now. Global integration of the
structures, processes, and ideologies produce injustice, oppression,
exploitation and mal-development in society.
The systematic integration of the forces that are dominant in the
globalization process intensifies human rights violations.
12.Globalization has its winners and losers. With the expansion of trade, market, foreign
investment, developing countries have seen the gaps among themselves
widen. The imperative to liberalize has
demanded a shrinking of state involvement in national life, producing a wave of
privatization, cutting jobs, slashing health, education and food subsidies,
etc. affecting the poor people in society.
In many cases, liberalization has been accompanied by greater inequality
and people are left trapped in utter poverty.
Meanwhile, in many industrialized countries unemployment has soared to
levels not seen for many years and income disparity to levels not recorded
since last century. The collapse of the economies of the Asian Tigers are examples
of this. The Human development Report of
1997 revealed that poor countries and poor people too often find their
interests neglected as a result of globalization. Although globalization of the economy has
been characterized as a locomotive for productivity, opportunity, technological
progress, and uniting the world, it ultimately causes increased impoverishment,
social disparities and violations of human rights. That is what we see today.
13. This
takes me to Global Recession. A
recession is a disease of an economy, which grows over a period of time, tends
to slow down the growth as a part of the normal economic cycle. In other words, recession is a decline in a
country's gross domestic product (GDP) growth for two or more consecutive
quarters of a year. A recession normally
takes place when consumers lose confidence in the growth of the economy and
spend less. This leads to a decreased
demand for goods and services, which in turn leads to a decrease in production,
lay-offs and a sharp rise in unemployment.
Investors spend less; as they fear stocks values will fall and thus stock markets fall
on negative sentiment. Risk aversion, deleveraging
and frozen money markets and reduced investor interest adversely affect capital
and financial flows, import-export and overall GDP of an economy. This is exactly what happened in US and as a
result of contagion effect spread all over the world due to high integration in
the global economy.
14. While
people in developed countries are feeling the impacts of the crisis, there is a
global consensus that those who are already living in poverty, particularly in
developing countries, are the most vulnerable to the harsh effects of the
downturn. While the greatest impacts
may be difficult to quantify, as of today there is no doubt that the financial
crisis does not only have financial and monetary implications; the negative
impact of the crisis on the enjoyment and realization of human rights is both
evident and alarming. The financial
crisis has exacerbated the difficult situation of the extreme poor, who were
already greatly affected by dramatic rise in food and energy prices and by the
challenges posed by the impact of climate change. Roughly 150 million people have already been
pushed into poverty as a result of the food price crisis, and estimates project
that the current crisis may push many more million into extreme poverty in coming
years. Number of people suffering form
malnutrition, over a billion, is quite alarming. In the world, more than fifty million
new-born babies will not survive to see their first birth day due to
malnutrition. International Labour Organization has predicted loss of million and
millions of jobs due to recession. Not only will there be more unemployment,
but labour conditions are also likely to worsen due
to the shortage of opportunities. People
have already lost the capacity to achieve an adequate standard of living for
themselves and their families and they are denied of social protection and
justice.
15. The
world faces its worst recession since the 1930s. In India, the impact of the crisis has
been deeper than what was estimated by our policy makers although it is less
severe than in other emerging market economies.
The extent of impact has been restricted due to several reasons such as-
(I)
Indian
financial sector particularly our banks have no direct exposure to tainted
assets and its off-balance sheet activities have been limited. The credit derivatives market is in an
embryonic stage and there are restrictions on investments by residents in such
products issued abroad.
(II)
India's growth process has been largely
domestic demand driven and its reliance on foreign savings has remained around
1.5 per cent in recent period.
(III)
India's comfortable foreign exchange
reserves provide confidence in our ability to manage our balance of payments
notwithstanding lower export demand and dampened capital flows.
(IV)
Headline
inflation, as measured by the wholesale price index (WPI),
has declined sharply. Consumer price
inflation too has begun to moderate.
(V)
Rural demand continues to be robust due to
mandated agricultural lending and social safety-net programmes.
(VI)
India's merchandise exports are around
15 per cent of GDP, which is relatively modest.
Despite these mitigating factors, India too has
to weather the negative impact of the crisis due to rising two-way trade in
goods and services and financial integration with the rest of the world.
16.As already said by me, the world's
poor and disadvantaged are bearing the brunt of the suffering resulting from
the current global financial crisis and ensuing economic turmoil. The downturn in economies around the world
has already undermined access to work, affordability of food and housing, as
well as of water, basic health care and education etc. Therefore, it is
necessary that the State should ensure that domestic policy adjustments,
particularly those in fiscal spending, are not taken at the expense of the poor
through cutbacks in basic services and social protection mechanisms and programmes. A human rights approach will contribute to
making solutions more durable in the medium and long run. The State should also identify the specific
needs and entitlements of vulnerable groups and individuals, particularly women
and children, migrants, refugees, indigenous peoples , minorities and persons
with disabilities, because, they stand at the frontlines of hardship, and are
most likely to lose their jobs and access to social safety nets and
services. It is already seen that as an
impact of recession migrant workers are already being affected in many
countries, and that there is a clear risk of increased xenophobia as a result
of the crisis. These workers are most
likely to be the first in line to losing their jobs not only because their
status is called into question, but also because they are employed in sectors
that are particularly affected by the economic crisis. Worse, we see, recession may give rise to
xenophobic passions, discriminatory practices and even attacks against migrants
and their families. Taking into account
the scenario pictured above, Ms. Navi Pillay, UN High
Commissioner for Human Rights, in her address to a Special Session of the Human Rights Council
on 20th February, 2009 called on the international community
including the World Bank and the International Monitory Fund to draw on the full range of their policy advice and
resources, as appropriate, to help developing countries and countries with
economies in transition to strengthen their economies, maintain growth and
protect the most vulnerable groups against the severe impacts of the current
downturn. She also appealed to the
States and the corporate world to ensure that their policies and practices do
not jeopardize peoples human rights.
17.It is apt to notice what Amnesty International, which is an
international non-government human
rights monitoring organization, in the
400 pages report published by it, has opined.
According to Amnesty International, security issues, the response to
global terror and the pursuit of economic recovery after the global economic meltdown has
led to severe Human Rights violations amongst 157 countries. It has warned that the rising poverty in
these countries could lead to instability and mass violence. According to it, sustained economic recovery
will not happen unless governments tackle human rights and bring an end to
armed conflicts. In view of these
findings, Amnesty International has launched a new campaign titled - Demand Dignity: It has called on the world's strongest
economic powers to set an example and defuse what is described as a human
rights time bomb. In the report of the
Amnesty International, many factors were credited for the increasing levels of
hunger and malnutrition, and too little, they claim,
is being done to provide people with their basic needs. It has opined that structural policies based
on market economics have widened the gap between the rich and the poor, and
left hundreds of millions of people vulnerable to poverty with no safety net to
catch them. It has claimed that
increasingly authoritarian governments have ignored the problem at hand. The opinion of the Amnesty International deserves
to be viewed very seriously by the States and it is their responsibility to
take conducive and effective steps and measures to fight the vicious impacts of
Globalization and Global Recession so as to ensure that the people of the world
particularly marginalized segments of the people live with human dignity and
decent living conditions of life.
18. In
this scenario, what is the role of banking industry? As we all know the banking industry is a
highly regulated industry with detailed and focused regulators. Each regulatory agency has their own set of
rules and regulations to which banks and thrifts must adhere. The changing economic environment has a
significant impact on banks and thrifts as they struggle to effectively manage
their interest rate spread in the face of low rates on loans, rate competition
for deposits and the general market changes, industry trends and economic
fluctuations. It has been a challenge
for banks to effectively set their growth strategies with the recent economic
market. So how can we manage our banks'
challenges? The banking industry is far
one of the most difficult type of business to manage. It is simply the business where stocks are
hard to analyze, unstable and most of all, clients are demanding. We have to realize that in the current
situation of recession, the banking industry is being hit hard. This is mainly because money circles around
banks. One of the major problems of
banks is money laundering. Money
laundering is simply the practice of engaging in financial transactions to
conceal the identity, source, or destination of illegally gained money. Money laundering happens in almost every
country in the globe. A single scheme
typically involves transferring money through several different countries so
that the origin would not be tracked. In
our current situation, it is predicted that banks will fail due to
recession. The banks that are smaller
are the ones that will most likely be hit by this recession since they can't cope up with
the declination of the economy.
19.Experts enlist banks challenges into major
and minor issues. Major issues mainly
include the issues arising out of global recession. Global Banking plays a big role in our
economy. Today, banks are being used in
different ways. Some store their money
in the banks and eventually it will increase because of the interest; others
use banks for business transactions or borrow money from the bank for emergency
or business purposes. Banks ought not to
be parties for money laundering, because such acts on the part of the banks undeniably are
anti-national and anti-people. The most common types of criminals who need to
launder money are drug traffickers, embezzlers, corrupt politicians and public
officials, mobsters, terrorists and con artists. Drug traffickers are in dire need of good
laundering systems because they deal almost exclusively in cash, which causes
all sorts of logistic problems. The
minor issues are the problems with employees who fail to follow the prescribed
rules, regulations, norms and business standards. Earning trust from the people
and quality of service is a must for all banks. A single mistake may reduce
number of people who transact with the bank.
Further, interests of the investors will be in jeopardy. For small banks, building a good-will from
the public is the most difficult thing to do, and we cannot deny that this is
one of the necessary factors in order to succeed in this competitive world.
20.In the past, banks were seen as
individuals and solo branches with no integration in them. The scenario is altogether different
today. We are in the new age and as we
all know, technology plays a big part in every aspect of businesses around the
world. Especially in this recession,
banking should really be involved on how to respond to it. New technologies are always being introduced
that is why banks should also focus on finding these technologies to help them
cope up. It is stated that there are
three concerns that affect the banks' performance critically and sometimes
dramatically. These are customer
retention, cost pressure and increased competition. Banking industry, as a whole, has a critical
and dynamic role to play in containing and overcoming the impacts of
globalization and global recession as well as in nurturing and protecting human
rights of the people by adopting customer-centric services, cost reduction and
product differentiation. I have no
doubt that under the able and pragmatic stewardship of Sri Ananthkrishna,
Chairman and Sri P. Jayaram Bhat,
Managing Director and Chief Executive Officer, who are well-known economists
and bankers at the national level, and host of other distinguished
personalities who constitute the Board of Directors of Karnataka Bank Ltd. with the kind of concern, commitment and
devotion possessed by the managerial and ministerial staff of the bank,
Karnataka Bank would rise to the occasion and serve the interest of banking
industry as well as humanitarian interests of the large populace of this
country, particularly, the interests of marginalized segments of the society
like Dalits, tribals,
women, children and other backward classes in the expected measure in the
critical years ahead. I wish them all
the best in their pursuits.
Thank you all for your patient hearing.