Globalisation and Development
by Sunanda Sen
National Book Trust, 2007
“The United States completely rejects,” the US representative to the Asia Development Bank imperiously stated in 1985, “the idea that there is such a thing as ‘development economics’.” This was an unabashed volte-face from the 1940s, when a triumphant US had coined the idea of ‘development.’
In fact, after 60 years of independence and 16 years of economic reforms, India continues to spiral into an abyss of de-development. Its human-development-index numbers have slipped to 128th out of 177 countries; 80 percent of the population is living below the per-capita income of INR 100 a day; half of its children are malnourished, while an even larger proportion suffers from anaemia.
Meanwhile, corporate-led market forces are working overtime to skew the distribution of income, wealth and opportunity even further. But India’s elites are slow to learn. ‘India Shining’ remains the slogan of the hour when they argue that economic globalisation is the solution to India’s ‘development’ issues. In reality, large swathes of India are dying – and globalisation is clearly part of the problem, not the solution.
In Globalisation and Development, Sunanda Sen explores key issues involved in the “globalisation sans development” that has been experienced in India, by offering an overarching view of the impact of globalisation in the country since 1991. Backed by robust evidence, Sen disputes the theoretical foundation on which the entire adventure of ‘corporate globalisation’ has been premised. Challenging “the myth which views globalisation alone as a panacea for achieving development,” the author criticises the fundamental tenets of mainstream economic theory by pointing out that, increasingly, market efficiency comes without growth, and growth itself without development. Rather, in globalising India, the state, far from being a regulator of corporations, has become a full-time promoter of global financial interests, defying not just economic logic and ethical values but also political wisdom. To remedy this state of affairs, Sen calls for citizens to demand that the state discharge its primary responsibilities: those of serving the needs of the people.
There is currently a view, in fashion among certain intellectuals, that there is nothing new about globalisation. Sen rejects this facile stance outright. Earlier episodes during the modern era (1870-1914 and 1945-73, the eras of European and US empire, respectively) and the preceding centuries of colonialism notwithstanding, the current phase of globalisation has brought about a “qualitative change for society, economy, institutions and world order”, in addition to consolidating the “informal hegemony” of rich countries, particularly the United States. Responsibility for such domination, of course, is placed squarely on the shoulders of the so-called multilateral institutions. Additionally, comprador elites in Third World countries have entered into new kinds of alliances with those in the rich world to enlarge their own privileges. In India, this trend has grown significantly since the imposition of structural reforms in 1991.
The growing monetisation of the Indian economy since 1993, when capital markets were made accessible to Foreign Institutional Investors (FII), gobbled up much of Indian’s gross domestic product – as much as 37 percent by 2006. Financial reforms in India, Sen notes, “have neither been for growth in terms of the creation of physical assets nor for a fair distribution of the financial flows which are not only equitable but also productive. Instead the country has provided opportunities for speculation in financial assets in a manner as has never been witnessed before.”
The routine financial exclusion of a large cross-section of the Indian population, largely forestalled after bank nationalisation in 1969, has now become a fact of life in India. Credit has been withheld repeatedly from small- and medium-scale enterprises as much as for credit-worthy projects of the poor; at the same time, automobile, housing and retail loans have been pushed aggressively in the cities. Credit for investment in agriculture has all but dried up, contributing in no small measure to the tens of thousands of suicides by farmers in recent years.
Employment growth indicates that all is not well in India’s economy. Within the formal market economy, the growth of employment has slowed down significantly, barely constituting over one percent, compared to the 8-9 per cent GDP growth rate per year. During the 1980s, when the GDP growth rate was a little over 4-5 percent, the employment growth rate was more than twice that level. In agriculture, new crops have reduced the demand for labour, and there is the lurking peril of growing mechanisation and industrialisation. Ironically, agriculture still remains the lifeline for hundreds of millions, at a time when labour is fast becoming increasingly disposable in both the agricultural and other sectors. Job losses in urban areas, especially since the recent rise of the rupee, have also been staggering, running into the several hundreds of thousands.
Where working people are able to find jobs, they now live at the mercy of the labour regimes that foreign investors and multilateral institutions have successfully demanded. This implies declining real wages, despite rising productivity in a large number of industries. Sen also notes the increasingly casual nature of labour in India, as well as the rapid rise in working hours that are involved. Perceptively, she argues that labour has been turned into a risk-bearing factor of production. To add insult to injury, prices of essential items such as food have been on the rise, something that hurts all the more due to the fact that the country’s public distribution system has been progressively wound down over recent years.
The failure of development under globalisation that India has experienced is hardly unique. China, in the midst of a growth fever, has also been experiencing rising inequalities and regional disparities since globalisation was fully introduced during the 1990s. After taking into account taxes and subsidies, the average urban income in China is as much as six times higher than in rural areas, and 44 percent of the Chinese population continues to live without sanitation. Perhaps unsurprisingly, there were more than 100,000 public demonstrations during the last year alone, which largely went unreported. Significant growth and poverty likewise coexist as the divides deepen in Pakistan, Malaysia, Indonesia, Bangladesh, Thailand and elsewhere. Abandoned by the state, the poor are being excluded from economic participation in numbers that are growing ever larger.
Can anything be done to reverse these negative effects in India? Yes, the author argues, but only if the government is willing to regulate tax speculative finance, and to evolve policies to give impetus to investment in real, physical capital. Examples of this could be imposing higher taxes on purely financial transactions. The likelihood of this happening is thin, however, because of the fortunes affluent investors in rich countries have involved in the lucrative functioning of ‘emerging markets’ in poor but growing economies such as India’s. To make matters worse, multilateral institutions have been controlling the levers of policymaking in India for a long time now. Not surprisingly, recently published data shows that annual returns on the Sensex – somewhere around 43 percent – are the highest in the world. In other words, Indian stock markets are offering the world’s highest returns to global Indians, replaying the tune of economic imperialism that India has been the victim to so many times before.
Overlooking some numbers
Is development actually possible under globalisation? Sen comes to an undeniable conclusion: in reality, globalisation has meant growth for the rich minority, and increasingly stretched survival for the poor majority. Development, which should ideally have left us a world of people who are neither overfed nor underfed, is conspicuous by its absence.
At the same time, however, there are several notable shortcomings in the author’s analyses. For instance, Sen shares the economist’s blind spot with respect to environmental limits. This is a particularly serious issue during a time plagued by real anxiety as to what to do regarding climate change and oil demands, both of which are impacting the prices of essential goods. Take, for instance, watersheds. When they go dry, agriculture does not receive the water it needs, and productivity is adversely affected. Food then has to be imported, in a situation in which there are also rising costs of transports due to higher fuel costs. Food prices in the domestic markets increase as well, due to the shortages. What are the long-term implications of India’s strategy of rapid resource-intensive growth – an approach that it has essentially adopted by default?
Sen also fails to adequately engage with the underlying stagnation in the patterns of international trade in which India is currently engaged. The balance-of-payments crisis – which, after 1991, led Indian policymakers to take a massive International Monetary Fund-offered loan, and hastily and obediently alter the country’s entire policy framework – may not actually have gone away, with the trade deficit currently rising by more than seven percent every year. Indeed, the country’s much-touted USD 275 billion in foreign-exchange reserves does not appear quite so large when one considers a host of additional statistics: annual imports are USD 250 billion; foreign debt stands at almost USD 200 billion, of which at least USD 30 billion is short-term; and the rupee may be made fully convertible in the near future, under pressure from global finance.
Ultimately, a few hours of aggressive private trading could readily cause current reserves to disappear, essentially returning India to the predicament of 1991. Most importantly, Indian hard-currency reserves, unlike those of China (which are five times larger) are not based on exports, but on FIIs. Since debts need to be repaid in foreign currency, Indians will have to resort to the reserves, or take up a new debt to repay the old one. Either way, Indians are locked into a debt-trap.
Globalisation and Development also neglects the plans that global agribusiness might have for India. Doing so could have shed some crucial light on how and why the economics of small-scale farming has been so undermined over the past decade. Realistically speaking, given resource limits, India will never be able to catch up with the West in terms of high-end consumption. With this understanding, it is inevitable that smart transnational corporate strategy would seek to control India’s essential items – water, the food chain, medicine and energy – just as we see currently happening. Indeed, this is a particularly fearsome prospect.
Backed by the vast evidence, it is difficult to disagree that ‘development’ is little more than a political slogan that suits the short-term interests of the national elites and the avarice of global finance. But while Sen has mounted a dramatic condemnation of ‘development’, perhaps the largest drawback of Globalisation and Development is her failure to provide outlines for an alternative policy framework, particularly within the context of employment-led growth. Finance and inequality-led growth is clearly not acceptable, but where do we go from here?
~ Aseem Shrivastava has taught Economics in India and the US. He is based in New Delhi.