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Civility Will Not Do

by Ashok Mitra, 9 December 2010

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The Telegraph, December 3 , 2010

Economic inequality has to be fought on the political plane

Surely Amit Bhaduri is dead wrong. His recent book bears the title, The Face You Were Afraid to See. The “face” he has in mind is the stark reality of destitution, malnutrition, illiteracy and joblessness which is still the fate of a huge lot of citizens in independent India. The “you” Bhaduri addresses his epistle to are the roughly 10 — at most 15 — per cent of the nation at the top of the social ladder who, thanks to economic liberalization, had never had it so good: industrial tycoons, financial conglomerates, ruling politicians and assorted hangers-on of each of these species, including the media and the so-called intelligentsia. These latter categories, Bhaduri seems to assume, are scared to come face to face with the other India, the India of progressive immiserization and ruthless exploitation. Quite the contrary. For the first time since the British left, the richer layer of society has come to acquire an extraordinary self-confidence. The lurid contrast between how, on the one hand, its members are indulging themselves at spas, shopping malls, five star hotels and golf links and, on the other, the fact that at least 300 million of their countrymen exist at subhuman levels and, perhaps another 300 million or thereabouts, while not exactly starving, are bereft of a minimum of housing, education and healthcare, does not disturb them. The bizarre combination of happenings like India slipping down every year in the human development index constructed by the United Nations even as it attains the dubious distinction of having the largest number of billionaires after the United States of America is taken in its stride. More than half of Mumbai’s population lives in ramshackle jhoparpattys; awareness of this grim fact does not deter a tycoon from building in the city the obscenity of a mansion costing more than Rs 5,000 crore as his residential abode. Consider yet another instance. The loss to the national exchequer because of the 2G spectrum shenanigan, the comptroller and auditor general has estimated, is around Rs 1,80,000 crore. A public distribution programme covering the entire national population, which could reach food to each and every starving citizen of this country, would cost only one-half of that sum. But the powers that be are unwilling to endorse the programme; they even have the effrontery to suggest that public distribution reeks of corruption.

Such nonchalance gathers its sinews from the ongoing growth process, the offspring of liberalization, which has assured the nation’s rich that they need not worry over what transpires with lesser beings, even if the latter happen to be nine-tenths of the population. The focus in this growth process is on enlarging the scale of production of manufactures and services, with only a perfunctory attention to agriculture on which more than 60 per cent of the nation still continues to depend for livelihood. For the smooth functioning of the model, there is need, of course, of raw materials, as well as land on which to set up factories. Raw materials, including minerals, are extracted from the countryside at confiscatory rates. Land can be acquired compulsorily from the peasantry with the help of State power. The supply of labour, too, for running the plants and factories is now easy. Economic liberalization has reduced the trade union movement to a pulp. There is no longer any bar on substituting men by machinery. The induction of improved technology causes labour productivity to jump five or 10 or 20 times at one go. This cuts down the need for additional workers. Wages need to increase, at best, only marginally, the rest of the gains from improved productivity can be appropriated by employers. If workers dare to protest against the arrangement, they can be thrown out and replaced by even more automated equipment. The extra income accruing to the rich on account of higher labour productivity can be spent on greater consumption of luxury goods and services, the production of which expands simultaneously. Imports of such goods and services also splurge so as to meet the rising demand for them.

Land reforms and investment in agricultural infrastructure, such as irrigation and reclamation works, are capable of improving farm production and raising rural income. Politicians controlling the levers of power have, since liberalization, been rendered into cronies of corporate entities, who happen to be least interested in farm improvement. Public investment is instead shifted to developing such infrastructures as will accelerate growth in industry and services, especially of luxury varieties. If, for the lack of investment, farm growth lags behind and food prices shoot up annually by 15 or 20 per cent or more, it does not much matter to the topmost decile of the community: the outlay on food is a negligible proportion in their budget. That apart, their income too is perhaps going up by three or four or 10 times every year. The rise in food prices hurts the majority of the peasantry who have to buy food from the market. It also affects the working and middle classes. All these classes are further immiserized.

Everything is now hunky dory for expanding the scale of production in the services and industrial sectors. As the growth process takes wing, imports tend to go up, imports of both luxury goods as well as of material and equipment necessary as back-up for the fast growing manufacturing and service sectors. Foreign exchange is called for to cover such imports. Exports bring in foreign exchange and therefore assume importance. A large part of the exports that take place consists of minerals, raw materials and specific food items such as basmati rice. The much more important item, however, is the export of software services.

A number of key elements keep the growth mechanism ticking. The extent to which the working class can be squeezed by either substituting or threatening to substitute men by machines is one such. Also relevant is the rate of inflation which further transfers income from the poor to the rich. Yet another decisive factor is the potential for exports. Heavy subsidies as well as the waiver of taxes get built into the system. Even so, exports of merchandise keep falling behind imports, which grow rapidly as a direct consequence of the increasing prosperity of the rich. In this context, maintaining the tempo of export of software is a desperate necessity. Outsourcing by firms in foreign countries, led by the US, helps. Foreign exchange additionally flows in as portfolio investment by foreigners in Indian companies. The inflow of short-term capital, including of the so-called hedge funds, is greeted with much fanfare. Ruling politicians are tutored by the corporate sector on which side of the bread is to be buttered: exchange controls are off and share market transactions are tax exempt; the Americans are urged to take pity and not place any hindrance on outsourcing.

This model of growth will work beautifully till as long as two crucial conditions are fulfilled: (a) workers, peasants and the suffering middle classes lack the power to rise in revolt, and (b) foreigners do not develop reservations about outsourcing or exporting capital, short- or long-term, to India. Whether foreigners will not deviate from being benign to India’s rich is a matter as much of geopolitics as of the global financial climate. On the other hand, whether the kind of exploitation of the poorer classes that is the story of post-liberalization India can continue indefinitely depends entirely on domestic developments.

Bhaduri unravels these complex themes with an equal measure of acuity and elegance in The Face You Were Afraid to See. As one who identifies himself with the bottom 90 per cent of the community, he is, however, not satisfied with mere analysis; he is, so to say, stripped for action. And he has his own ideas regarding what activism should consist of. The established political parties, Bhaduri is convinced, are in cohorts with the ruling hegemony. He has equal contempt for the organized trade unions; these are, in his view, interested only in their own narrow interests and ignore such issues as the plight of villagers dispossessed of their cultivable land. He apparently forgets that the trade union movement, too, is itself a victim of the Machiavellian growth model fathered by economic liberalization. Any way, salvation, Bhaduri suggests, lies only in initiatives on the part of civil society groups in different spheres; these will then come together and accomplish the heroic task of smashing to smithereens the conspiracy hatched by corporate bosses and their crony politicians.

Bhaduri does not quite explain how this magic is going to come about. Civil society groups have certainly done magnificently in rousing social conscience on many vital problems afflicting the nation. But economic phenomena are the offshoots of political phenomena. If the constellation of any such phenomena has to be changed, should not the combat take place on the political plane and be aimed at preventing the arbitrary exercise of State power? Heterogeneous civil society groups will, alas, hardly fill the bill.