INDIA ABROAD, APRIL 13, 2007
PRINT EDITION, PAGE A-40
'THE HIGHER THE GROWTH, THE GREATER THE ANTAGONISM'
Economist Prabhat Patnaik discusses the dark side of India's economic growth
with Senior Editor Suman Guha Mozumder
India's economy may be booming, its industries thriving, its middle class heady
with the promise of a great future. But Prabhat Patnaik, a professor of
economics at Jawaharlal Nehru University, worries what the changes augur for
the rest of the nation. Patnaik was in New York last month to take part in a
public conversation on 'An Emergent India: Problems and Prospects' along with
Nobel Laureate and Columbia's economics Professor Joseph Stiglitz. In an
interview with INDIA ABROAD after the discussion, Patnaik, who is also
vice-chairman of the Kerala State Planning Board, talked about his concerns
about modern India.
Q. There were concerns, especially during the rule of the government led by the
Bharatiya Janata Party earlier that while India was shining -- a slogan coined
by the BJP -- it was not shining on all its population. Have things changed
under the Manmohan Singh government?
A.I think they are continuing pretty much the same way. But one of two things
that have happened is of some importance. One is the passing of the Employment
Guarantee Act, which promises every rural household 100 days of guaranteed
employment. It was initially launched only in 200 districts but it's understood
that it will be extended to the whole country.
A lot of campaigning was done to get this through. This act differs from every
other previous employment program as it actually makes it a right [to be
employed]. But the only problem with it is the state machinery is so enmeshed
in neo-liberalism that I do not think that even though it is rights based --
even though it is the case that anybody who demands employment and does not get
it can take the government to court -- much might happen. The problems of
non-implementation are to be found almost everywhere. Poor and unemployed
people do not take the government to court. They just cannot. But, at the same
time, I think this is something that gives us a handle, at least when public
and political organizations take the cause of the poor and fight on their
behalf. So it is a very enabling thing to do. The basic directions of
neo-liberal policies have not changed, but because of intensive campaigning,
this act has been passed, which is of potential significance.
Q. If the basic policies have not changed and, as you mentioned, poverty is
actually increasing in India despite the growth ...
A. I would not even say that poverty is increasing despite the growth. I would
say that the kind of growth we are experiencing in India is actually based on
an exacerbation of antagonism. As a result it is growth where to expect a
trickle-down effect would be absurd. In fact, the higher the growth, the
greater the antagonism. Suppose you have higher growth. Then there will be even
more demand for, let us say, a Wal-Mart to be opened. Therfore, there will be
an even greater dispossession as far as petty and retail traders are concerned.
So, it is a kind of growth where it is not that higher growth would pull
everybody up, but on the contrary higher growth would actually make things
worse for a whole lot of people at the bottom.
Q. Could you elaborate?
A. When you have higher growth, there is more income at the upper level.
Because of the kind of growth, which inequalizes growth any way, there will be
more demands, let's say, for a golf course, or luxury apartments and therefore
agricultural land will be taken away and there will be more dispossession of
the peasants. So, it is not just that higher growth is associated with greater
poverty, but actually this is a kind of growth where it is part of the
intrinsic nature of the growth itself.
Q. So you mean this kind of higher growth would spell out displacemement from
traditional occupations like agriculture and, in turn, lead to poverty?
A. Yes. That is the kind of situation I am talking about.[The result can be]
unemployment, dispossession and displacement of petty producers and peasants,
and a greater agrarian crisis etc. Suppose you have an even higher growth rate,
there will be more people demanding that an airport be constructed. If there
are more people demanding such things, investments will go there and not to
social sectors or to the rural infrastructure development. So, in that sense,
the increasing growth on one side and the increasing poverty on the other side
are in fact interlinked.
Q. So, as they say, the rising tide will not lift all the boats.
A. Exactly. It's futile to expect that higher growth will actually have a
trickle-down effect. Even now, higher growth has not touched the poor; if we
still have even higher growth, it is not going to touch the poor. That is not
going to happen.
Q. Tell me then, how does one go about industrializing a country like India?
Obviously, you need to acquire land. Given the resistance against acquisition
these days, what is the way out?
A. The point is, the peasants who are displaced must themselves have an
interest in the industry that is being created for them. They should be
employed. Also, you need to give them equity. Let them get compensation.
If you look at the case of Orissa, the tribals were given compensation, but
within two years, their land value has gone up 10 times. Now they feel cheated.
Therefore, for the foregone capital gain they would have made, you have to give
them an equity share. You have to work a whole package, not just make promises,
before taking their land, [ensure] they are compensated for the land,
compensated for the loss of employment and for the capital gains foregone and
share equity.
Q. Recently, a member of India's Commerce Ministry's Parliamentary Consultative
Committee said in New York that the government is considering giving them
equity and will announce that very soon. Do you think once that is done, the
problems relating to land acquisition will be resolved?
A. My fundamental point is that these issues have to be settled through social
consultations and negotiations. These are not issues about which you can just
impose [a solution] on the peasants. In other words, legally, it is true that
the government has the right to take land [after providing] adequate
compensation for building something there for the public good. But here, we are
talking about building industry by the private sector, so you cannot use the
old principle or the law. It has to be negotiated properly with the peasants.
It has to be done on the basis of democratic consultations.
Gone are the days when you could just tell peasants that you are taking their
land and just give them some money in lieu. In a way they [protests] are good.
It is a case of assertion by ordinary people, assertion of peoples' democratic
rights and expression of a voice of people who are marginalized.
I welcome it, in fact, because normally such people would be brushed aside in
the name of development. But if somebody stands up and says 'sorry, I'm not
interested in giving you land,' then you have to negotiate with him. Now that
is basically the assertion of a democratic right.
Q. Although this is not for a special economic zone, the Left Front government
in West Bengal has taken land in Singur apparently with the consent of the
farmers. Despite this, one is seeing protests and resistance building up there
and elsewhere almost daily. Do you think it is a case of peasants being
frustrated by the Left's turnaround after fighting farmers' rights and for the
equitable distribution of land?
A. Actually, if you look at the details of the land acquisition, the West
Bengal government's terms were probably better than many other states. In
Orissa, I know those who were agitating against land acquisition used to demand
the same terms as those of Bengal. There are two problems. One of course, is
that many peasants who had given their land to the government for reasonable
money, believed at the time of the sale that there was no option. Later, they
found out the truth and began harboring second thoughts. The other thing is
there is a problem with land acquired in West Bengal. Some of the unrecorded
sharecroppers there have to be compensated.
The West Bengal government arranged for compensation for those who are recorded
tenants. But, apparently, there were some unrecorded sharecroppers in the
Singur area. This is not official as yet, but the government is going to
compensate them as well. This is something being worked out. The issue is not
just whether the West Bengal terms are good or bad, the issue is different.
What is happening now is that various states in India are engaged in cutthroat
competition to attract private investment.
The logic of capitalism is that capitalists compete against one another. But
here, the capitalists have a monopoly and these governments are ruthlessly
competing against each other to attract investments.This is absurd and West
Bengal is caught in the same trap. I think the states and the [federal
government] should get together. I think what is more worrying is that public
exchequers are being used by the various state governments to subsidize
capitalists.
Q. I remember you talked about the dwindling social sector expenditure by the
government. Do you think the present unrest, incidents like peasants' suicides,
etc. have something to do with the decrease in the social sector expenditure,
especially in the farm sector?
A. Without a doubt. What many people do not understand is that obviously, when
the peasants' prices fall or the costs rise, peasants' income dwindles and when
that happens, if the peasants have access to a whole lot of things like free
education, free healthcare, they have some security. They feel that while their
income has dwindled, there are other areas from where they can have some
security.
But, simultaneously [along with income decrease], if you find that your social
sector expenditure is also dwindling, you have a situation that, when your
father falls ill, you are forced to go to a money lender to be able to take him
to hospital. At that point of time, you are not thinking about the fall in your
income.
But if you had a proper government-funded medical service, some of these
problems would not arise. The peasantry is driven to desperation because of
reduced income that has been accompanied by reduced social security. The two
together has actually made it impossible, which is why most of them are
indebted to money lenders. The health expenditure, in fact, is a very important
cause of debt to money lenders.
Q. Do you find it ironic that, somehow, the decline in social sector
expenditure has coincided with the rising growth story of India?
A. That is quite correct. [Economist] Amartya Sen started this idea of the
Kerala model. It was a wonderful case of social sector expenditure, covering
all levels of human development, but when that was happening you found that
growth was very little. On the other hand, in more recent years, growth has
picked up, and social sector expenditure has dwindled. So it is a very clear
example of how growth does not really enable you to have larger social sector
expenditure. In fact, social sector expenditure requires a degree of commitment
by the government.
Q. It is often felt that, in India there has been over emphasis on tertiary
education and under emphasis on primary education. How do you link this to
development?
A. I reject that view. I think it is not a question of one versus the other. In
fact, the education sector as a whole has been neglected. Our total expenditure
on education as a proportion of GDP is less than what the South African
government used to spend on blacks during the apartheid era. So, India's
expenditure on education as a proportion to GDP has been meager. It has to be
raised; unfortunately, we had this idea for a long time of raising education
expenditure to 6% of GDP, but we have come nowhere near it and are way below it
even today.
How can you run a modern economy without ideas generated? Ideas are generated
in universities. I think freedom of a country depends on having independent
ideas. You can't borrow other countries' ideas and then expect to remain free.
That being the case, this idea in some quarters that somehow India is spending
too much on education is wrong. In fact, we have to spend more on education,
both primary and tertiary.
Q. But there has been opposition from the Left to the entry of foreign
universities in India.
A. That is right. It services no purpose. You have to strengthen your own
universities because this whole business of foreign universities does not work.
Our problems are different; our societies are different. In other words,
education is not something like a supermarket. It must address itself to
societal needs and, for that to happen, you cannot just have a little branch of
Harvard or Columbia. It has to be specific to the country and society.
Q. Do you see any fundamental change coming in the 11th five-year plan?
A. Not really. I think the original approach paper was very conservative. There
is a lot of criticism. It is pretty much going along the old way. I do not see
any significant change in the five year plan.
Q. Where is India going, as far as development is concerned?
A. Let me put it this way. If the notion of development consists of becoming a
big power, a major player in international arena and so on, then India has
taken it seriously. But that is not my notion of development. Development is an
improvement in the living condition of the people, and if that is the notion of
development, I believe India is not doing well at all. To me, big-power status
is irrelevant. What is relevant to me, as Mahatma Gandhi once said, is wiping
away the tears from the eyes of every India. That is what we have to do.
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