> Date:Wed, 21 May 1997 > From: [EMAIL PROTECTED] (Hendrik) > Subject: MAI: Globalisation is a disaster for India > > Reference: Global Times <[EMAIL PROTECTED]> > Copyright 1997 People's News Agency. > ------------------------------------------------------------------ > > GLOBALISATION OF THE ECONOMY > A disaster for India and other developing countries > > by Acharya Krtashivananda Avadhuta > > Supporters of capitalism make vociferous campaigns in favour of > globalisation of the economy. Multinational corporations (MNCs), with the > collaboration of Bretton Woods institutions (World Bank, International > Monetary Fund) and the World Trade Organisation (WTO) have imposed their > strategic plan through the General Agreement on Tariffs and Trade (GATT). > The strategy is to allow MNCs free access to all countries, removing all > trade restrictions. The similarities amongst the "standard menus" of all > these institutions is obvious: > > STANDARD GLOBALISATION MENUS > > IMF AND WB > * Reduction of budgetary subsidies > * Removal of subsidies for agricultural inputs > * Removal of food subsidies > * Pursuance of liberal economic policies > * Promotion of foreign investment > * Import liberalisation > * Privatisation of the banking sector > > WTO > * Reduction of subsidies > * Reduction of support for domestic agriculture > * Removal of PDS (food subsidies) > * Pursuance of free trade by developing countries > * Removal of restrictions on MNCs in utilities industries > * Removal of barriers on imports > * Lifting restrictions on entry of foreign investors > > In his speech as outgoing chairman of the Group of 77, Luis Ferdinand > Jaramillo of Colombia presented a sweeping critique of North-South > relations. He traced the decline of the U.N., multilateral programmes and > the Third World in global affairs to the rising power of Bretton Woods > institutions, which are under the control of Northern countries. He > commented, "The Bretton Woods institutions for their part continue to be > made the centre of gravity for the principle economic decisions that > affect the developing countries. We have all been witness to the > conditionalities of the WB and IMF. We all know the nature of the > decision making system in such institutions. Their undemocratic > character, their lack of transparency, their dogmatic principles, their > lack of purism in the debate of ideas and their impotence to influence > the policies of the industrialised nations. We all know the way > structural changes are imposed and how projects are formulated. And how > subsequently, when many of those policies and projects fail their authors > disappear from the facilities of Pennsylvania Avenue. > Nobody is then accountable for anything...." > > Dubious Benefits > > The question may arise whether globalisation is justifiable for countries > like India. > > An audit of the performance of the Indian economy after reforms were > initiated in July 1991 fails to reveal any spectacular achievements. The > opening of the economy to foreign capital has not succeeded in attracting > a significant flow of capital or technology into the country, especially > into the productive sector. Exports have picked up, partly as a result of > devaluation of the rupee and partly because of general improvement in > world trade. > > But after an initial slump, imports have grown rapidly, and present > indications are that there is likely to be a huge trade deficit by the > end of the present financial year. Foreign debt has increased > significantly and the WB has cautioned that the servicing of the debt and > repayment obligations may begin to exert pressure on the international > balance of payments in 1996-97 and beyond. > > It may be asked whether an increase in foreign investment will lead to a > higher growth rate and better absorption of rural labour in > non-agricultural employment. Employment in the private industrial sector, > which stood at 7.55 million in 1982-83, was only 7.67 million in 1990-91 > - that is, after nine years. This is only a 1.5 percent increase. At the > same time, gross capital formation at current prices rose by four times - > 400 percent. > > Modern industry is knowledge intensive. It may result in jobs for the > highly educated, but it is unlikely that jobs will be generated for the > poor, especially the surplus agricultural force of rural India, even when > the growth rate of investment is high in the private sector. > > Majority Unbenefitted > > The failure of the reform process is evident from the speech of G.V. > Ramakrsna, member of the Central Planning Commission, for the Garg > Memorial Lecture at the Institute of Naval Architects, New Delhi in April > 1995: > > "Where are we now and how far have we come in the reform process....? > After three years, different people are looking at the reforms from their > own perspectives. They have more colour TVs, more channels on cable, more > imported goods, and so on. Nobody is any longer ashamed of conspicuous > consumption. Then we have the middle class, which is seeing this as an > opportunity for its advancement to the upper class. Many feel making > money one way or the other will get them into the high consumption > category. Then we have the lower class. They are worried as they ask: > 'What is there in this for us? We don't know what liberalisation is. We > don't know what the capital market is. What is our net gain in the > package? We want jobs, less inflation,' and they ask, have we got any of > these?" > > Even former Prime Minister P.V. Narasimha Rao, while speaking to his > party workers in July 1995, attempted a similar audit of the reforms. > The report said: "He began by delineating the social structure's three > segments. The crust according to him consists of about 60 million people > (6.5 percent), who do not need to be canvassed about the economic > reforms. > > "The next layers he believes contain about 250 to 300 million people (27 > to 33 percent) belonging to the middle class, who are beginning to > appreciate the benefit of liberalisation.... It is the next segment, of > 550 to 650 million (60 to 71 percent) of lower income and poor people who > remain unappreciative of the changes in the economy." (The Hindu > Standard) > > -------------------------------------------------------------------- > SIDEBAR The Indian Rich 49 years after Independence > > Annual income (in US$): No. of households > > More than 13,150: 1,402,000 > More than 26,300: 577,000 > More than 52,600: 238,000 > More than 131,600: 74,000 > > Out of a total number of Indian households of up to 200,000,000 > > "The number of 'very rich' continues to be too small to make a viable > consumer base for any serious manufacturer." > > - India Today, Nov. 15, 1996, p.135 > ---------------------------------------------------------------------- > > Amongst these lower income groups the largest consists of agricultural > labourers, who constitute 26 percent of the labour force. It is a sad > commentary on economic and political policies that almost half a century > after Indian independence more than half of her people are in that kind > of plight. > > To allow globalisation of the economy via financial markets, without an > appreciation or analysis of its implications, is bound to be disastrous. > > Preparation Required > One can cite the example of Taiwan, which has recently opened up its > markets to imports, as proof of the merit of following reforms like > India's. But that country prepared for this for over 30 years. The same > is the case of Japan and South Korea. India needs to modernise its > financial institutions gradually before she throws the system open. It > must be realised that by this measure, India will lose control over her > domestic interest rate policy. In a primarily agricultural country, > opening the economy to large inflows and outflows of "hot money" moved > around to take advantage of quarter percentage point interest rate gains > would be disastrous. > > Also, Taiwan has an annual trade surplus of approximately US$40 bn and > sound foreign exchange reserves. India has a trade deficit, weak foreign > exchange reserves and huge debts (about $70 bn). Its industrial base is > also weak. Is it judicious at this moment to open up the stock exchange > to international capital movements? Before embarking on globalisation, > India should strengthen its village economy on a decentralised basis, > modernise its entire economic and financial system and strengthen her > international competitiveness. > > It has been claimed that allocation of resources is best when done under > a free market system. Unfortunately, with the present distribution of > income and wealth, there is no such thing as a free market in India. The > globalisation of India's financial sector would put the bulk of it into > the clutches of money lenders. > > India at present needs to expand and strengthen its basic industrial > sector. Small scale industries, artisans, farmers, handloom weavers and > cottage industries should be encouraged through decentralised planning, > just allocation of resources and increasing credit facilities and > training. > > Without basic preparation, the introduction of so-called globalisation is > passing economic control on to MNCs, and whatever basic economic > infrastructure exists will be ruined instead of enhanced. > > General mass reaction to such policies has thrown the previous Congress > government out of power. In the present "rainbow" coalition, Finance > Minister Cidambaram and Industry Minister Murasoli Maran are advocating > policies recommended by Harvard economist Michael Porter. > > Chidambaram is a former Harvard scholar, and was Commerce Minister in the > previous Congress Party government. He is a strong supporter of the free > market and liberalization of the economy. There is no reason to believe > that he has radically changed his ideas and policies. The present > quasi-nationalistic coining of words - done at the insistence of his > communist colleagues in the present government - is only to camouflage > the real policies, which indiscriminately open India to the international > economy. > > Porter has show in his book Competitive Advantage of Nations that the > competitive edge acquired by specific industries in various countries in > global markets has not come from mere "laissez faire". Advantage is > rather the outcome of deliberate policies of governments that develop > those specific industries in a competitive way. > > But this policy does not at all address the basic problems of > strengthening the village economy, decentralisation of industrial > development and streamlining of financial institutions. It is incorrect > to say that present government policy is radically different from that of > the previous goverment. In addition, it is also similar to policy > followed in the 1980s. Capital formation is not the only criteria to be > considered for India's economic recovery. As mentioned, just allocation > of resources considering the economic future of the poorest people should > be the priority. This has been utterly neglected by all governments, > including the present one. The centralised character of the Indian > economy must be dissolved, or the people will revolt again. > > Acharya Krtashivananda Avadhuta is Proutist Universal global office > secretary and author of numerous books on history, politics and > economics. > > Copyright 1997 People's News Agency. All rights reserved. Material > provided by PNA may be reprinted if the author is mentioned and if the > following information is included: "Reprinted with permission of People's > News Agency, Platanvej 30, 1810 Frederiksberg C, Denmark, > [EMAIL PROTECTED]". Please send clippings to this address. PNA is a > news, views, analysis and literature service for the progressive-minded. > The agency is sponsored by Proutist Universal from its global > headquarters in Denmark, and serves progressive publications around the > world. > ...................................................................... > > Bob Olsen Toronto [EMAIL PROTECTED] ]:-) > >
