Industrialisation without employment

If multi-party parliamentary democracy means giving the people a wide range of political choices, then there is plenty of it in India. The Indian citizenry can certainly have its pick from numerous political parties, small and large, with a variety of labels. But if voters have to choose with regards to actual content, particularly regarding economic policy, there is hardly any true choice anymore. Indeed, there has been a breathtaking convergence among political parties – less apparent in their rhetoric, but unmistakably clear in their deeds. One could be led to believe that this is the result of the inevitable compromises of coalition politics. But when the same economic convergence takes place in the states of India, there is little room left for any illusion about what is truly going on.

'Economic growth', 'industrialisation', 'development' – these are grand terms that politicians use with abandon. But in the midst of this rhetoric, a simple, crucial question remains unanswered: If a high growth rate necessarily entails a certain type of industrialisation, is this industrialisation then synonymous with development? If development requires giving a different content to industrialisation, we must be able to specify it as part of a new politics.

The type of industrialisation that is accompanying India's recent high growth has three characteristics, which make it unmistakably neo-liberal. First, it is led by corporations. Second, these are mostly private corporations. Third, the role that the government plays at both the central and state level is that of a promoter, an agent of private corporations – not of a regulator between the corporations and the public at large. Each of India's parliamentary parties now speaks this same neo-liberal language. They theorise only to obfuscate and hide the poverty of their economics and politics.

Voters are repeatedly told that sacrifice is needed for industrialisation. But it is invariably left unsaid that such sacrifices need to be borne by those least capable of bearing them, the poor and most marginalised. The corporations, on the other hand, need to make no sacrifice, share no cost. On this point, the traditional 'pro-poor' left and the traditional 'pro-rich' right are completely united. Insofar as the traditional left is concerned, first Singur and then Nandigram has driven home the point that the politicians of this bent are no different from the politicians at the centre of the political spectrum, living as they do on the oxygen provided to them by the World Bank, the International Monetary Fund and the Asian Development Bank. The cultural nationalists of the Hindutva variety, meanwhile, are tremendously aware of their culture when it comes to vande mataram, but likewise extend their welcome to foreign multinationals when the doors of the boardroom close.

Eminent domain
Indians are now living in a beautiful world of neo-liberal harmony, where the left, the right and the centre converge to insist that industrialisation proceeds corporate-style, with the state as the agent. Indian democracy thrives in the name of high growth, industrialisation and development, even as it works ruthlessly against the poor majority, denying them real political options within the orbits of existing parliamentary democracy. As such, a spectre of despair and popular anger is stalking all corners of the country. Farmers are committing suicide by the hundreds, because the government wants to usher in a new type of commercial agriculture under the auspices of the World Trade Organisation, with expensive inputs supplied by multinationals. In Jharkhand, in the name fighting extremism, Adivasis are being forcibly evacuated from their villages by the thousands, as corporations eye their mineral-rich land (see Himal December 2007, "Chhattisgarh's purification hunt").

According to the Indian Constitution, whether to acquire land, and with what degree of coercion, is largely the prerogative of the governments in the states. In an attempt to win corporate favour by various state governments, land is being acquired in a competitive race to the bottom. As such, the arguments go: 'If we don't do it, Uttaranchal will' or 'We can be more ferocious that Orissa' in pleasing the Tatas or the Jindals. Even while all of this has the full legal and moral support of the central government, it is the state that retains full constitutional power to chart out its own path of industrialisation. This is important to remember.

Land is being acquired under many guises – for mining, for industry, for special economic zones. But always it is taken under the clause of eminent domain, which allows the state to override private property rights regarding space that is deemed to be in the 'public interest'. Land is the most visible symbol of livelihood for communities living in rural areas. Therefore, it also becomes the most obvious case of forcible transfer of resources from ordinary people to the private corporations. It is often said there are invariably those who gain and those who lose in any such economic process; the economist Joseph Schumpeter referred to the "creative destruction" that takes place under capitalism. But used in the present context in India, this is at best a half truth.

Such a sentiment is used to serve the corporate interest. If such 'creative destruction' were simply part of the normal process of capitalistic development, it would be unnecessary for the state to intervene, in the guise of the 'public interest', on behalf of private corporations. This process should involve a transaction between two private parties, the corporation and the land-owning peasants. The function of the state should thus be to ensure that this transaction is voluntary, which would then mean that corporations would have the option of acquiring land at a price at which peasants are willing to sell it. What we see instead is the state using violence under a cloak of secrecy to hide information from the public – all with an eye to helping the corporations.

Urban gloss
Although land is the most visible symbol of transfer of resources to corporations, the problem goes somewhat deeper, and demands an understanding of the nature of industrialisation in a primarily agrarian economy. Despite the fact that two-thirds of India's population is able to subsist due to agriculture, each of the country's recent five-year plans has allocated less than five percent of planned investment in this sector. Instead, mammoth projects – fancy malls, underground metros, flyovers – are increasingly used to try to generate the impression of urban gloss. Meanwhile, most take it for granted that such public utilities are essential for efficiency, for improving quality of life, even for attracting investment.

These arguments are not false, but they are one-sided. Few places need higher efficiency and better quality of life than does rural India, where the country's majority lives. So why does this bias exist, and whom does it benefit? Certainly it is a boon to the urban population, even while also leading to uncontrolled urbanisation, as mega-cities increasingly hunger for energy, water and housing. In this struggle for the survival for the fittest, the state is on the side of the richest. So, slums have to be cleared without providing resettlement, and livelihoods have to be destroyed in the process of modernising cities.

But this is only the surface shine. The modes of transport that are being created, the types of shopping complexes that are being promoted, the types of housing that are being encouraged – these are not merely iniquitous, but also far more energy intensive. And the majority of India's citizens, despite not having access to these amenities, still have to pay for these patterns of consumption, either directly or indirectly. As such, farmers get less water for cultivation, or are starved of electricity during critical periods.

There is a statistical illusion created that industry is efficient, while agriculture is not. But with almost two-thirds of India's workforce in agriculture producing little more than one-fourth of the national output, output per worker in the agricultural sector is only around 40 percent of the national average. In contrast, industry produces some 70 percent more, and services more than double the national average. As such, higher growth is achieved by transferring more and more resources to the high-productivity sector, and by favouring large corporations that organise this pattern of production. The privileged of India then become the beneficiaries, while the other India watches in despair and anger. Do we need the kind of leftism that is party to this process, or should we be striving for an economic alternative on the basis of a new politics?

A new development
An economic alternative, one that creates another kind of development, is indeed feasible, and elements of it already exist in India's current political system. Such an alternative needs to be based on three basic premises. First, India must learn to rely far more on the internal rather than the external market. The largest driving force of the internal market is the purchasing power of the ordinary people, derived from employment growth. The country's record on this score has been abysmal in recent years, with an eight-percent growth in output being accompanied by a one-percent growth in regular employment, and an increasing number of casual labour contracts. It is foolish to expect that corporate-led growth can create employment on any larger scale, due simply to the fact that corporations are in the game of making profit by cutting costs, including labour costs. Meanwhile, the more we accept globalisation unconditionally, the stronger becomes the relative importance of the external market, which would mean that cutting labour costs would become even more pressing. Growth of the internal market through rapid employment growth therefore requires a far more selective approach to globalisation.

Second, economic growth must be the outcome of employment growth, not the other way around. India's benchmark should be a time-bound programme for full employment. How much the growth in employment contributes to growth in output naturally depends on how productively labour can be employed. Public policy in India has performed poorly in this respect, mainly due to a bureaucratised system of central control that kills local initiative. Instead, in looking for alternatives, policymakers will have to start at the opposite end of socialist orthodoxy, not by accepting neo-liberalism but by forging a new combination. On the one hand, India will have to get out of the grip of corporate-led industrialisation by making agriculture and the rural economy the centre of attention. On the other hand, the country will have to break the grip of centralised decision-making. This can be done by extending the present national employment-guarantee scheme to an ambitious full-employment programme, and giving over decision-making powers entirely to the panchayats and local bodies – something that no government, central or state, has yet been willing to do.

Finally, there is the question of finance. Where would the money come from for such an ambitious employment programme, and how could taxpayers be assured that it was being spent effectively? The money for employment generation can be kept in separate accounts in nationalised banks, with credit lines to be extended to panchayats. This would avoid duplication of institutions, while a system of mutual checks and balances between the panchayats and local-branch banks can be devised based on their performance. Banks could decide to lend the next round only if the previous project succeeds, and the panchayats could borrow the next round only if the money is well spent. It is this mutuality of interest that has to be strengthened in creating the new form of financing for development.

In addition, the 2003 Fiscal Responsibility and Budget Management Act, which effectively tied the government's hands in spending money for some of the country's most pressing needs, including employment guarantee, must be scrapped immediately. With this legislation in hand, the Centre has pushed privatisation as a way to raise money, while restricting basic health and educational expenditure, and restricting the role of public policy in the name of financial discipline. Such moves certainly suit the IMF, World Bank and various national and multinational corporations that want state promotion but not regulation. But this is exactly where the Indian left should have fought its biggest battle. Instead, they went along with only a whimper of protest, allowing corporate-led industrialisation.

— Amit Bhaduri is a professor of Economics at Jawaharlal Nehru University, New Delhi.