Impact of neo-liberal growth: Absolute rise of those who don’t have spending power to ensure minimum human existence

kN KabraBy Prof Kamal Nayan Kabra*

Since 1991, Indian policy space has been under the sway of the deregulated market forces and external environment, and Indian and foreign capital entrusted with the leadership of the growth process. It is, however, now very clear that neo-liberal policies operating as the sole agent of development and macro-economic economic management have not been able to satisfy anyone. Nor have they achieved any recognizable outcomes for the nation as a whole. These neo-liberal policies have not enhanced the nation’s capability to pursue any national agenda nor have they any credibility in the eyes of India’s more than a billion people. As a result of these policies, corruption has spread.  This seems to be a natural response to the character and outcomes of the current policies, including unjust sharing of their costs and benefits.

It seems their cumulative impact is now visible. Even the net and disproportionately benefited classes and sections of society frequently voice disappointment over the tardy policy implementation. Actually they seem to be impatient with the political and managerial capabilities and vision of the policy establishment. The market players are so obsessed with their partisan ends that they show scant regard for the missing positive wider social effects. They seem to be so myopic that they do not see how these wider failures would   ultimately recoil on them as well.

It is a serious limitation of the current political scene that India’s two principal   combinations of political parties remain committed to the same neo-liberal   policy agenda. However, as a part of their street politics they try to allure the electorate with the promise of outcomes which, as a matter of logic, simply cannot follow from these policies. Their parliamentary legislative actions support the neo-liberal agenda, which they oppose at the level of the rhetoric.  One gathers an impression that almost every section of society, except the big business classes who want more of what all has been done, consider the past more than two decades of these policies as lost time, indeed a rather costly loss. Those who have done exceedingly well for themselves over the past two decades want more and rapid moves to complete the text-book model of neo-liberalism.

They seem to  be unconcerned with the loss of social credibility of  liberalization  owing to massive expansion of informality in the economy, to which The Economic Survey 2012-13 draws pointed attention  to (Box 2.5, and pages 44-50) and refers to  as “(T)he ‘exclusion’ view of informality”(p.47). Attention has also been drawn to the enormously large size of the informal work which is many times larger than the formal wage employment sector and this has been worsened by the depredations caused by the naked play of cronyism in the public–private interaction spread across the entire economic and political system. The latter is reflected in unbelievably massive and unending series of scams demonstrating the fusion of the political and the corporate classes, operating for practically all purposes as a single jointly operating entity. We seem to have reached a situation of popular perception that many more shenanigans may well be shrouded in the closets of official secrecy!

Disappointing Outcomes

The 1991 policy package has led us to a situation of negative and disappointing outcomes. Of course, this is an assessment from the point of the common citizen. But it has also invited a negative assessment and angry response even from the top Indian and foreign capital. A sample of the worsened socio-economic balance is worth pondering over. Economic Survey 2012-13 underlines the fact that “the total profit to output ratio grew from 3.5 per cent for the 1980s to 5.4 per cent  in the 1990s and further to 7.7 per cent in 2000s in the factories sector” (Economic Survey 2012-13, p. 16). The shares of emoluments, interest (on the savings supplied largely by the household sector), energy cost in the same most critical and largest part of the organized /formal sector have however fallen quite drastically (Economic Survey 2012-13, Table1.8, p 17). These trends are at the heart of the several imbalances which characterize the macro-economic and structural aspects of the Indian economy as it has emerged under the impacts of the so-called self-regulating market mechanism. Ironically, even so much disproportionate grabbing of the gains of growth clearly falls short of the bloated expectations of the big capital. Does it not call for a re-examination of the decision to assign the responsibility of leading growth and development of India to such sectarian forces?

These facts do not tell the whole story and thus the Economic Survey 2012-13 goes on to highlight that roughly 85 per cent of the workforce is engaged in the informal sector. Even after excluding the agricultural sector, the share of the workforce in the informal sector remains at 70 per cent and the same story continues to show that the “prevalence of informal employment workers in either informal or formal sector who lack employment or social security- is even higher… Even in the public sector, a third of all jobs in India are informal…” Among non-agricultural  wage  earners  more than three quarters have no written  contract, 70 per cent are not eligible for any paid leave and 74 per cent  are not covered by social security benefits (Economic Survey 2012-13, p. 46). This is how one can see  the enormous and growing  absolute number of persons unable to get access to spending power capable of ensuring  a minimum  human existence, let alone a dignified one. (These humane and democratic considerations form no part of the expertise of those who are entrusted with the technical task of fixing the poverty line!)

The picture is thus summed up in the above cited official document as, “Despite impressive economic growth over the past 20 years the vast majority of Indian workers continue to toil in informal employment. Roughly 85 per cent of the workforce is engaged in the informal sector. Even after excluding agricultural sector, the share of the workforce in the informal sector remains at 70 per cent” (Ibid).

How we are mutatis mutandis, still a replica of the conditions of the early industrial revolution days, can be seen in the above scenario of the Indian labour market, sketched in terms of the facts and analysis seen in the Economic Survey 2012-13.  Surely this is a situation that may well be regarded as the polar opposite of what the ILO considers a decent or good employment. The Economic Survey, 2012-13, we have drawn upon liberally gives a succinct formulation spelling out the most critical components for “inclusive growth”.  To quote from the Economic Survey once again, “Productive jobs are vital for growth. And a good job is the best form of inclusion” (p. 26).

Obviously it is nobody’s case that India, since 1991, actually going back to the entire planning for development period did not create enough productive jobs and nor good or decent jobs. Little wonder, it has not produced inclusive growth.  Those who moved to introduce neo-liberalism tended to suggest that once they succeeded in accelerating growth, good jobs could not be far behind, even though a torrential rain of good and plenty of jobs may not cause labour shortage! But now, after over two decades when even the growth seems to be faltering for India, planners to gloat about “inclusive growth” and good jobs would be making a grossly false statement. When we say that the neo-liberal ‘reforms’ have turned out to be a fiasco surely the above facts are a big element of what leads us to the unpleasant conclusion.

Crisis of Disorder

The great irony is that even this extreme partisanship towards big capital, the other name for neo-liberalism, does not bring enough satisfaction to its almost exclusive beneficiaries. Even after accessing labour as a dirt cheap commodity to be used, rewarded, discarded, abused and treated purely as an instrument for producing profits (the same way as capital treats nature ignoring the organic linkages and our only and irreplaceable support prop for survival), the captains of industry, so conservative in hiring, are pitching for winning the legally sanctioned right to fire! The end of communities under commodification and corporatization gives rise to a capitalism which has place only for the carrot and wants to work without any stick, wants to produce on a growing scale but without disbursing enough purchasing power to escape the blocked markets and piling up of excess capacities. Given such a perspectives, there seem to be little doubt that what we are witnessing in India today is not only a crisis of an intense order caused by blind adherence to the neo-liberal path but also a crisis of the neo-liberal path itself.

In fact, the  journey that began in 1991, instead of  delivering  the good, as expected, by enabling people to freely use their energies  and resources  spurred by the market stimuli and facilitated by the state, seems to be heading for a total fiasco. The system does seem to have enough mileage left in it unless a big course correction is taken up earnestly. To the chagrin of the policy establishment, such perceptions are tending to become a part of the conventional wisdom too.

Thus, what the dominant structures and interests wanted and obtained has ended in a whimper. True, everything of what the big capital wants the state to do cannot be done in an electoral democracy, numerically dominated by the deprived and negatively discriminated   masses. Nor does it seem feasible to change the power and influence of the big capital here and now, and pave the way for introducing genuine collective mass empowerment as an alternative. Even though the  policy establishment is bending over backwards to propitiate big Indian and foreign capital, it is clear that genuflection is no policy response especially in a globalized world where capital and the MNCs take their business decisions on a no-nonsense comparative calculus and the roadshows hardly count, as they do for selling  cosmetics. The lessons of the period since 1991 do not seem to have been learned; no, no one seems inclined to do so.

The big Indian capital is pitching for investment out of India, both legally and secretly. Tremendous private accumulation of wealth, irrespective of its clean or tainted character, in the form of precious goods (more than the macro level investment-savings gap, as shown in our national accounts statistics) and real estate and investment in the political market and vulgar and callous display of wealth and  spending in the goods markets are the offshoots of  a perverse set of outcomes produced by the neo-liberal dispensation.

The intermediate strata have by and large been co-opted, dumbed and/or mesmerized.  Except for a tiny  fraction, it has been converted into silent clogs in the neo-liberal mechanism. They are firmly wedded to the  me – first me – last ethos and asocial value assiduously cultivated  and propagated by the new socio-economic and cultural leadership and consciously created and eulogized icons and the page three  celebrities. It is, therefore a situation which looks likely to remain stalemated for the time being.

Despite  clear signals from the  recent experience, the ruling  interests  seem   excessively committed to the  neo-liberal ‘reforms’. They are bending over backwards to woo Indian and more particularly the foreign capital. The contributions to the present volume  examine the assumptions and processes  which  have led to the present impasse and seem to suggest that  more of the same would  only deliver more of he same! The political, economic and financial oligarchies,  which are in practice  in several clandestine ways  closely intermeshed with each other, can hardly  bring  about any cheer to the  real India of  about one billion citizens.

Hypocrisy of Political Class

That these situations would continue to cause massive outflows of investible resources is too obvious to require  elaboration. The time has come to see that we do not remain open to multiple subjectivities, vulnerabilities and  cocoon-like behavior  as seems to be emerging from the grey political economy that has emerged as the logical and dynamic  morphing of the infamous and ubiquitous black economy which has flourished for long and has led to this point. The  hypocrisy of the whole political class too becomes manifest in the  open and frequent admission of failures, hedged, of course, by tall promises; when they are in the midst of the common man but change track altogether when they throng the various chambers  of commerce and industry and the financial  oligarchs  or at  places such as Davos!

Thus, the exclusion thrust on the labour power is a potent threat that could turn our latent  demographic dividend into a curse  unless at least some options are seriously pursued. One such move is clearly towards good employment. It is no radical measure to turn to the tax-transfer mechanism, relied upon by every enlightened market democracy, to make an incremental dent at the margin in favour of the working people and  thus cumulatively  usher in a qualitative change without  hurting  any part of the propertied. Actually when the home market is increased the policy mechanism provides the ultimate incentive for investment: a ready market to lap up what they produce as appropriate to their existential needs and mental and cultural satisfaction.

For moving in such directions, you have to put  an end to  perverse  public spending, as  seen in the form of massive foregone revenue for the benefit  of a tiny minority, and token and niggardly allocated resources for the  building of capabilities, for the communities (infrastructure), particularly at the bottom of the pyramid  in order to  reach the socio-economic lower and other  aversely affected groups. Fiscal policy and development planning have to be the main arenas of social action. Produce a just and fair inclusion-enhancing  budget and  five year plans, not as rhetoric but one that can be demonstrated  as a numerical sum on the  TV screens of  the people watching the presentation of these potentially most pro-people instruments of state action.

Presently Malcolm S. Adisheshiah Chair Professor, Economics of Development and Decentralized Planning, Institute of Social Sciences, formerly Professor of Economics at the Indian Institute of Public Administration, New Delhi. The above article by Prof Kabra is a slightly abridge version of his paper in “Alternative Economic Survey 2012-13: Ne-liberal Economic Policies — ‘Gods’ that Failed”   


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