At 150, the leader of the October Revolution has lessons for a post-Covid world
GS Paper I
Topic: World history
Mains: Relevance of Lenin in the backdrop of the pandemic
What’s the News?
- April 22, 2020, marks the 150th birth anniversary of V I Lenin.
- At the beginning of the Great Depression, Lenin was leading the revolution in Russia. He argued that capitalism reached its highest stage in monopoly capitalism and thereafter, became parasitic and moribund.
- V I Lenin was one of the greatest theoreticians of Left politics after Karl Marx.
- He was an excellent strategist and tactician, who led the first socialist revolution in 1917, in Russia.
- He was the head of the first socialist country and founder of the Union of Soviet Socialist Republics (USSR).
- He changed the course of history by establishing a government of the working classes and laid the foundation for a new social order, there is a need to look at socialism in the context of the ongoing debate on the world post-Covid.
Recalling the Great Depression during pandemic and fall of capitalism
- The lockdown forced by the corona epidemic has triggered agitations by the hungry, homeless and jobless poor and migrant workers in many countries, including the US.
- The Great Depression is conventionally dated from October 28, 1929, when the Dow Jones Industrial Average fell more than 20 per cent in a single day. However, the depression began in the first decades of the 20th century.
- The crisis of overproduction and over-accumulation led to the collapse of purchasing power and investment, creating massive unemployment and other related problems.
- The economic depression during 1929-32 shook all of Europe and the US. During this period the economy of the US was in competition and conflict with Europe, generating homelessness, migration, hunger and unimaginable miseries.
- The crisis of capitalism and the conflict among the capitalist countries led to World War I. Half a century earlier, Marx had published the first volume of Capital, in which he established that capitalism is a crisis-ridden economic system.
October revolution and rise of Lenin:
- At the beginning of the Great Depression, Lenin was leading the revolution in Russia.
- He argued that capitalism reached its highest stage in monopoly capitalism and thereafter, became parasitic and moribund.
- His work, Imperialism: The highest stage of Capitalism was a response to the crisis.
- The October Revolution was waged in the backdrop of the Great Depression and World War I.
- The USSR was projected as an alternative to the capitalist order that ensured equality and justice to all.
Relevance of Lenin:
- It’s now 90 years since the Great Depression. Those experiences and lessons are relevant even today.
- The current stage of capitalist development has created unprecedented income and wealth inequality within the country and among the nations. Capitalism is in deep crisis.
- The world, after corona recedes, is not going to be the same. The economic crisis may worsen.
Economic ramifications for India:
- Even in the name of the coronavirus, attempts are on to spread fear and terror among the people in the name of religion. From Buddha to Ravidas and further to Ambedkar, there has been the enduring dream of Begumpura. In our times, Begumpura is the New India where people reside without fear and dread, worries and sufferings.
- Marx and Lenin would not hesitate to align with these leaders and thinkers of our country. But corporate capitalism will not allow any alternative outside the capitalist structure.
- Right-wing forces have already captured power in many countries, including India. These forces will dismantle democracy by encouraging fascist forces who claim to act in the name of radical national renewal.
When we pay tributes to Lenin, we should not fail to think about ways to liberate people from all kinds of exploitations and enslavement.
How COVID-19 is hurting the rupee’s exchange rate with other currencies
GS Paper III
Topic: Indian Economy, Science and technology
Mains: Difference between REER and NEER
What’s the News?
The economic disruption due to the spread of the novel coronavirus disease (COVID-19) over the past few months has adversely affected various aspects of the Indian economy.
Currency’s exchange rate:
- Currency’s exchange rate vis-a-vis another currency reflects the relative demand among the holders of the two currencies. This demand, in turn, depends on the relative demand for the goods and services of the two countries.
- If the US dollar is stronger than the rupee, then it shows that the demand for dollars (by those holding rupee) is more than the demand for rupees (by those holding dollars).
Typically, stronger economies have stronger currencies. For instance, the US economy is relatively stronger than India’s and this is reflected in one US dollar being equal to around 76 rupees. The rupee has been losing value (or depreciating or weakening) against the dollar over the past few months.
The Reserve Bank of India tabulates the rupee’s Nominal Effective Exchange Rate (NEER) in relation to the currencies of 36 trading partner countries.
- This is a weighted index — that is, countries with which India trades more are given a greater weight in the index. A decrease in this index denotes depreciation in rupee’s value; an increase reflects appreciation.
Real Effective Exchange Rate (REER):
- There is one more measure that is even better at capturing the actual change. This is called the Real Effective Exchange Rate (REER) and is essentially an improvement over the NEER because it also takes into account the domestic inflation in the various economies.
- Even in REER terms, the rupee has depreciated in March and fallen to its lowest level since September 2019.
- The difference between trends of NEER and REER was due to India’s domestic retail inflation being lower relative to the other 36 countries.
- As domestic inflation started rising, the REER, too, started depreciating like the NEER.
Dip in rupee:
- The rupee has been steadily losing value — showing the Indian economy’s reducing competitiveness— since July 2019.
- The dip in March was likely influenced by the net outflow of foreign portfolio investments from the Indian equity and debt markets — they stood at $15.92 billion in March as against net inflows of $1.27 billion in February.
Inflation affecting Exchange Rates:
- Many factors affect the exchange rate between any two currencies ranging from the interest rates to political stability (less of either results in a weaker currency). Inflation is one of the most important factors.
- Imagine that the Re-$ exchange rate was exactly 1 in the first year. This means that with Rs 100, one could buy something that was priced at $100 in the US. But suppose the Indian inflation is 20% and the US inflation is zero. Then, in the second year, an Indian would need Rs 120 to buy the same item priced at $100, and the rupee’s exchange rate would depreciate to 1.20.