Abstract

The set of Indian Big Capitals is represented by a singleton, Gautam Adani. The context is climate change. Adani Enterprises (AE) stands out on the international skyline in terms of magnitudes for its commitment to green production in the future. At the same time, coal- and gas-fired business as usual continues in the present. For the purpose, the daily round consists of entering into conflicts with local communities over the desecration of pristine environments. The essay is divided into two parts. In the first, we report on the tension in the time frame of AE including accounts of the strong and sophisticated protests of affected people. The second part is an Abstraction from the Concrete including reflection over the ethics that might drive the Indian Republic. In conclusion, A Socialist Manifesto is sketched as a resolution of the conflict.

1. Introduction

Not a day goes by without a report of the entry of AE into a fresh line of enterprise at home or abroad. Firms are associated with activities in which they specialise and reap economies of scale and scope over time. Colossus-like strides across wildly disparate businesses have never been seen anywhere before. The causes for worry include management and organisation thinly spread, the idiosyncratic technical requirements of industry not spread thickly enough. Evidence of cost-benefit analyses being conducted is hard to find, certainly not in large public-sector banks that rush pell-mell to provide slavish lines of credit. The Indian banking system is rotten with NPAs that have nothing to do with problems of asymmetric information or the turns of the business cycle and everything to do with being arm twisted and cajoled by bullies in the government and the private sector. Alarm bells have rung abroad over the highly-leveraged AE. For example, the State Bank of India has underwritten the entire debt of Rupees 12,770 crores for a green airport of Navi Mumbai International Airport Private Ltd, (NMIAL), a subsidiary of AE (The Hindu, 2022). Jeet Adani, son of Gautam Adani and Director, NMIAL, has described the contract as obtaining “financial closure”. Markets have looked askance at the burgeoning debt of the group. According to data compiled by Bloomberg, in September 2022 Adani Port’s dollar bonds fell in value below those of their Indian compatriots over the worrisome level of the conglomerate’s debt. Bonds of Adani Green Energy Ltd. and Adani Transmission Step-One Ltd. were at the trough of the Indian market. The leverage undertaken in its expansion into renewable energy is a “matter of concern” to the Fitch Group unit Creditsights. The debt is on the increase while the EBITDA (earnings before interest, taxes, depreciation, amortisation) path is fuzzy. The leverage ratio of pro-forma debt to EBITDA could worsen beyond the current four times, the report forecasts. At the time of submission of this essay, AE is planning a giddying public offer (The Economic Times, 2023). Is the borrowing for the purpose of producing goods and services? “The fundraising will help Adani cut debt. The group’s recent breakneck expansion across sectors, aided by buyouts and by setting up new plants, have been financed through borrowings.”

If economic metrics are brushed aside, what chance Social Cost-Benefit Analysis? For instance, at the end of November 2022, Adani was awarded the contract to develop Asia’s largest slum at Dharavi, Mumbai. The slum is a hotbed of innovative activity in consumer products catering to different tastes nationally and internationally. Gainful employment is rich and varied. These endeavours will be crushed under the homogenising heel of real estate development. Hapless residents will take what they get and vanish. Low-cost housing is a popular mantra cruelly invoked to make way for homes unavailable to low-income households. In Dharavi, the return therefrom will be dominated by the return on accommodation for the rich.

In the next section, we focus the evidence on our thesis.

2. The degree of impatience of Gautam Adani

It is not uncommon to find snippets like the following tucked away in the newspapers on the same day. Adani plans to inject US$2.5 billion into a cement firm and at the same time US$70 on green energy. The first item is maximization of current profits, the second maximization of future profits. The first is environmentally-unfriendly, the second environmentally-friendly. The degree of patience in the first case is zero, in the second it is unity. In the next subsection we provide illustrations of the schizophrenia. The following subsection draws theory from the practice.

2.1 The indiscreet charm of the bourgeois

The first example is obeisance to the present. Over early November 2022, Adani Ports and Special Economic Zone (APSEZ) entered into an agreement to buy Oiltanking Inia GmbH’s 49.38% equity stake in Indian Oiltanking (IOT). IOT is one of the country’s largest developers and operators of storage of crude and finished petroleum products. Mr Karan Adani, CEO, expressed the “ambition to become the largest transport utility globally” (Economic Times, 2022). He emphasised that the acquisition was consistent with the strategy of the company to focus on goods and services with maximum realisations and margins. The second example is a hand wave to the future. A target to which the group is committed is entry into the global club of companies with $1 trillion valuations (Times of India, 2022). Green investments are a part of the portfolio towards this end. The plan is $50-$70 billion in green hydrogen along with another $23 in green energy over the next 5-10 years with $7 billion in electricity transmission, $12 billion in transport, $5 billion on roads, $6.5 in cloud services, $9-$10 billion in airports, $10 billion in cement, $2 billion in petrochemicals, $1 billion in copper. The third example returns to the depletion of current resources. A huge coal-fired plant is to rise from the ashes of lush greenery and human rights in Godda shortly (Shih et al, 2022). Few Indians will benefit. Instead, all the electricity generated is for Bangla Desh which is burdened with excess capacity. The Prime Minister had pledged the plant during a state visit in 2015. According to the terms of the contract, Bangla Desh must pay approximately $450 million a year for capacity and maintenance charges irrespective of whether it generates any electricity. Not having completed its end of the transmission line, it is unclear when electricity to Bangla Desh will be transmitted. Since Bangla Desh at present has 40% more capacity than peak demand this lavish spend is a waste! The costs of interrelated tie ups with Adani is five times the running of Bangla Desh’s Kaptai solar farm. The crime is outrageous. The poor especially, in a sun-drenched country, are price “gouged” (as one analyst described it) for coal power they could do without. In addition, experts and the villagers in Godda are vociferous about the despoliation of nature to be wrought by the project but the clearances were granted regardless. The degree of monopoly of AE is rounded off when it allegedly overcharges public utilities for electricity by inflating the cost of imported coal. True to form, promises of employment to dispossessed farm workers, shoes, clothes, schools, running water, latrines for the people were not kept.

What is the common denominator in the examples? Absent is even an insincere but argued case of the need to source non-renewable resources today for national purpose. The easier flourish to the future in terms of green techniques of production is not made. The objective is to be numero uno in size and market valuations (different from value).

It is not possible for the sway of monopoly capital to reach imperial proportions without the active support of the State. Thus, in a fifth report tabled before the Gujarat Assembly in September 2022, the Public Accounts Committee (PAC) noted that as a result of the incorrect classification of forest land transferred to Adani Chemicals by the Department of Forests and Environment, the company had saved Rupees 58.64 crores (Indian Express, 2022). Connivance by State functionaries means tearing asunder laws and legislations and bludgeoning people. Prior to embarking on a project in a forest in India, permission must be sought and granted by the central government. Evidence must be provided that at least half of the adults whose livelihood depended on the forest had acquiesced in the scheme. Proof has to be offered that the villagers were not only apprised of but understood the nature of the project, the environmental and social implications, and the plan for their relocation. Close conversations with a spectrum of those affected deliver a unanimous verdict: the rules are followed in the breach rather than the observance. The dense Hasdeo Arand forest in Chhattisgarh, home to vanishing species of flora and fauna and animals, is scheduled for obliteration so that coal can be mined by AE (Paliwal, 2022). The area is home to the Gonds, tribals who have been living and working there for thousands of years. Only in 2006 was a law passed to recognise their rights over their land. In yet another manifestation that portends hope for the future, villagers across the social hierarchy united to protest against the invasion of their land. Letters were sent to the local government with signatures and thumb impressions. The resistance survived for four years. Not all the seduction was charming. Government officials with police accompanied AE executives on visits to promise villagers third-degree farewells if they continued to protest. Of the six coal blocks earmarked for mining, the fact that AE bagged four is eloquent testimony to the degree of competition presided over by the government. More than 2.5 million Indians have been displaced by coal mining projects since 1950. This calculation was made in 1998 and the figure might have escalated exponentially. The process of privatisation has been pursued with zeal in recent times and particular attention has been paid to liquidating the 90% ownership stake of the government in coal. Here is surely a fatal step in the move to climate change mitigation because only governments can steer the delicate transition from coal to sunlight.

We conclude with a description of spirited protest against the might of AE. At the end of October 2022, fisherfolk had entered the fourth month of protest against the construction of a Rupees 7,500 crores Adani Vizhinjam International Seaport (VISL) in Kerala. Following a familiar format, the state High Court provided police protection for the work to proceed while granting the locals their right to continue to agitate. Earlier, a four-member study team endorsed the decision to proceed with the work. The community to be impacted was not represented on the committee. The fisherfolk claim that work on the project that began in 2015 had caused erosion of the coastline and impacted negatively on their homes and livelihoods. The accusation is that the construction of a breakwater for the port has resulted in large changes in tidal movements. In addition, quarrying in the hinterlands to feed the huge need of the breakwater for rocks has aggravated landslides. Knowledgeable experts providing support state that the culprit was the construction of groynes, artificial sea walls erected as part of the project. Subsequently, another government advisory body nixed the construction of an underground railway tunnel, allegedly an essential ingredient of the project. Apart from the planned tunnel burrowing under residences and gardens, it would encompass an area of huge tectonic disturbances. Besides, the value added by the project was unclear with the loss of employment in agriculture, coir, and tourism. At the same time, in Udupi in Karnataka, local groups continue with their fierce opposition to a power plant there with AE seeking legal recourse against the US$ 6.7 million penalty imposed on the company.

We step back in what follows and reflect on the principles implied.

2.2 A tutorial in the fundamentals

The accumulation of capital is the commitment of fixed capital and variable capital over varying horizons. There will be land and indivisible capital investments, expenditures on upcoming technologies like Cloud Computing, as well as the employment of labour of different skills and at different intensities. Investment can be the expansion of existing resources or the choice of a different technique from the available blueprints in, say, the production of coal. On the other hand, as in the case of climate change investments, where the technology is nascent and R&D runs concurrently with outlays, the uncertainties and costs go sky high. The first stab into the splitting of hydrogen as a source of clean energy bombed and it is hoped that the second foray into green hydrogen, to which Gautam Adani is hugely committed, does not suffer the same fate. In a clean fight, competition between capitals results in normal profits with price equaling marginal cost. Innovation is spurred and new technologies and products emerge. Welfare is enhanced with the entry and exit of firms. Obsolete capital is junked for fresh capital, workers are retooled and retrained, output and wages and profits increase. All along, the State has been a benevolent behemoth in the background, quietly setting up the costly infrastructure in basic science institutions that have paid off in terms of discoveries that could be marketed.

Both theory and practice, unfortunately, prove another theorem with competition regressing to monopoly. Price markups go up and profits increase. The extra-economics escalation cannot occur without politics. The State becomes an unbenevolent despot, clearing the path of competition for the roughshod ride of the monopolist. The likelihood of the folding up of a monopoly, though, is not less than that of the exit of a competitive firm. Only, when a Goliath is felled, ‘what a fall there is my countrymen’! Nary a squeak is heard when a small firm is a casualty of the process of competition but the collapse of a star firm can ripple through the economy leaving the destruction of the unconnected and innocent in its wake.

Under both competition and monopoly, the motive force is the expropriation of surplus. Environmental damage is not factored in if it does not fall in the purview of the drain of the surplus. Standard economics has a solution to so-called negative externalities in pricing and pollution certificates crafted by the government to disincentivise ‘bad’ behaviour. These policies operate on the margin of choice and are inadequate to deal with large, interrelated, irreversible damages to the ecology. In any case, the State enters. It is a matter, now, of scaling up investments in the landscape with extensive quantity and price setting to reconstruct the terrain bulldozed by the private sector.

3. “Moral Mathematics”

A well-known opposition exists between the so-called shorttermism of finance which demands the tracking of mark-to-market returns in continuous time and longtermism which is the commitment of so-called patient capital to projects designed to stave countries off an environmental Armageddon. Longtermism is the case of a horizon equaling infinity ((Uzan, 2022). The case of infinite horizons is hard to grasp. For instance, our chances of finding habitable planets for future populations to reside is infinitesimally small. However, in the event of success, we can permit the habitation of quadrillions of people in space. In that case, expected value theory would prioritise space exploration over a global assault on poverty which can save billions of lives today. The standard economics validation is that the market will provide incentives and opportunities to ameliorate future crises. Policy makers should address problems of inflation and unemployment today independent of their impacts on climate change. Yet, even on its own terms, the framework cannot embrace an economy where most of the production and consumption is informal. The social equilibrium is supposed to be Pareto-optimal, that is nobody should be better off by making somebody else worse off. The criterion is market-based. The metric is deaf to the cries of agricultural labour, the urban proletariat, petty producers.

The mainstream model has no answer to the universal concatenation of circumstances in the collapse of mass demand, broken supply chains, and inflation. Answers have been found in epochs in the modern history of the western world. During similar episodes in the last century, the triumvirate of Capital, Labour, and the State called a truce. Capitalists reduced the degree of monopoly, workers earned wage increases to match increases in productivity, and the State confined itself to ensuring the minima of the components of the social wage. Everyone can be better off without making anyone worse off in a cooperative equilibrium if the State underwrites the uncertainties of climate change investments including the employment and training of the workforce. Supply chains will be mended and a broad-based increase in demand will ensure an increase in profits. The coordinated solution must embrace those outside the pale of the market.

Existential Risk Studies (ERS) is a growing body of work inspired by the looming possibility of shocks of different kinds hitting the planet and designing measures to counteract these blows. Within the field a subfield called the “techno-utopian approach” (TUA) has emerged as an elaborate articulation of the issues concerning the extinction of our species. Cremer and Kemp (2021) critique the postulates on the grounds that they are a rarefaction of what people believe. Thus, TUA offers a future of expected total utility in which attributes like purpose, love, justice, are absent. One controversial axiom is “strong longtermism”, the axiom that potential future life is morally equivalent to present life. The conclusion is that the end of the world and possible futures are tied up with value considerations. Risk analysis must include mulling over what risks are worth taking.

The usual manner to deal with the aforesaid is insurance. The market is extended to include catastrophic insurance and protection against so-called black swan events. Underlying the contracts is an information asymmetry. Moral hazard means that the insured have every incentive not to take non-polluting actions, for example, on the expectation that the insurer will pick up the tab. The extreme instance of moral hazard is the undertaking of polluting activity. The agent is believed to be self-serving. Another view of people is other-regarding. “Moral opportunities” replace moral hazard (Schelkle, 2022). Thus, members of the Euro Area (EA) see increasing solidarity as the only way to survive. The case for risk-pooling is powerful but the Frugal Four of Austria, Denmark, the Netherlands, and Sweden unequivocally reject debt mutualisation or an increase in the EU budget. The message is that conviviality is constantly tested and has to be mobilised and implanted in institutions. In the case of the EU, mechanisms that favoured the expansion of risk sharing between states were at play over time. Risk sharing between states evolved from reasons other than comradeship. The supported institution would start out being self-centered but find that protection may not be forthcoming when needed without helping those excluded from the institution. An institution displays solidarity if its risk-sharing abilities are widely recognised, especially during a crisis. The formation of community is regarded as the fruit of fraternal practices build up through regular reinforcements. Insurance is analysed in this light. Sharing the risks of profitable but hazardous activities creates the environment for association building and raises the standard of activities that can and should be insured. Monetary-financial integration can be regarded in this light. The challenge is to demonstrate the possibility of flowering in the teeth of the most divisive institution of sovereign bailout funding in the form of the European Stability Mechanism (ESM). The conditions imposed on countries that seek assistance are onerous.

In this new orientation, insurance changes the likelihood of bad states of the world but not through its incentives on individual behaviour. Rather, the set of events that are considered adverse calling for collective action expands. Insurance impacts on culture and invigorates mutual aid. Even the standard contract that underlines the independence of the beneficiaries underscores the existence of a summation of risk that makes the independence possible. In addition, insurance generates funds. Thereby, investments in risk-reducing activities are made possible. Conditionality might seem contrary to the principle of solidarity. However, it is not unfamiliar in social insurance. Availability for work, for instance, is a condition of unemployment insurance. Conditionality seeks to ensure that legitimate cases arise only from bad states of the world, not bad behaviour. In the case of Europe, the expectation is that crisis-hit countries will demonstrate reforms that ensure no negative spillovers on neighbours. For instance, credible measures would be tax collection in Greece, close scrutiny of Irish banks, and the implementation of steps to stop money-laundering in Cyprus. In turn, a country has the right to reject policies where the case of moral opportunity is not made.

4. Conclusion

Radical socialism claims that the dichotomy of the title is false. Production and consumption take place in real time. The present is a prisoner of the past and merges into the future. Climate change is upon people and the planet cannot countenance the prevarications of private capital. We will not be the first to record the fallacy of composition that the constraints of private individuals like budget constraints are the constraints of governments. Neither are the opportunities. Capitals come and go, the State endures. The Reserve Bank of India enjoys the monopoly of note issue and government expenditure can choose the private investment to crowd in and the private investment to crowd out. The slightest blimp on the radar of financial markets, green technologies will be dumped and portfolios rebalanced. The signals might be as well false as true. In the case of the former, only the State can bear short-term blows in the interest of victory at the end, and carry projects to fruition. The end is the empirical lifetime of projects not a chimera like infinity. Not a prisoner of mark-to-market, public sector green investments can endure periods of zero or negative returns as long as the present value of the projects is positive.

Investments must pass the muster of social audits in town and country. Mechanisms like Panchayati Raj and citizen groups must be rejuvenated through broad representation. Farmers and tribals and fisherfolk embody the congealed capital of eons of living in harmony with nature. Any mode of production will need to be respectful of this data and exploit the complementarities between human and artificial intelligence. Vibrant discussions by communities affected by the invasion of monopoly capital continue and must be the prime source of signals for monopoly-busting relations of production. Only in the embrace of the vast numbers of the marginalised will the thorny issue of the transition from the necessity of fossil-fuel-using practices today to renewable sources of energy tomorrow be made.

References

Cremer, Carla Zoe and Luke Kemp, 2021, Democratising Risk: In Search of a Methodology to Study Existential Risk, unpublished manuscript.

Paliwal, Ankur, 2022, ‘It was a set-up, we were fooled’: the coal mine that ate an Indian village, The Guardian, December 20, 2022.

Schelkle, Waltraud, 2022, Monetary solidarity in Europe: can divisive institutions become ‘moral opportunities’? Review of Social Economy, published online February 26, 2022.

Shih Gerry, Niha Masih and Anant Gupta, 2022, How political will often favors a coal billionaire and his dirty fossil fuel, The Washington Post, December 9, 2022.

The Economic Times, 2022, Adani Ports Acquires 49.38% Stake in Indian Oiltanking for Rs 1,050 crores, November 10, 2022.

The Economic Times, 2023, Adani Enterprises Files Papers for Rs 20kcr FPO, January 17, 2023.

The Hindu, 2022, SBI underwrites the entire debt of Rupees 12, 770 crores of Adani’s Navi Mumbai airport, Special correspondent, March 31, 2022.

The Indian Express, 2022, Rupees 58 crore loss to Gujarat due to inappropriate land allotment to Adani firm: PAC report, Express News Service, September 23, 2022.

The Times of India, 2022, Adani Group to invest $150 billion, focus on green, Times Business, October 31, 2022.

Uzan Elai, 2022, Moral mathematics, Daily Bulletin, November 29, 2022.

(Aneesh Correa and Romar Correa are independent scholars in Mumbai, India.)