Predatory Growth

7/27/2019 Predatory Growth

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commentary

apri l 19, 200 8 EPW Economic & Political Weekly10

Pd Gwh

amit bhaduri

The much-hyped story o Indias

economic growth hides the truth

about heightened inequality,

the blatant biases against the

poor, the hostility o the state

toward welare, and the misery

wrought upon the poorest o the

poor. Only an alternative path to

development that lays stress on

dignity and participation o all

sections can be an answer to the

ravages o predatory growth.

Over the last two decades or so, the

two most populous large coun-

tries in the world, China and

India, have been growing at rates consi-

derably higher than the world average. In

recent years the growth rate o national

product o China has been about three

times, and that o India approximately

two times that o the world average. This

has led to a clever deence o globalisation

by a ormer chie economist o the Inter-

national Monetary Fund (IMF) [Fisher

2003]. Although China and India eature

as only two among some 150 countries or

which data are available, he reminded us

that together they account or the major-

ity o the poor in the world. This means

that even i the rich and the poor countries

o the world are not converging in terms o

per capita income, the well above the

average world rate o growth o these two

large countries implies that the current

phase o globalisation is reducingglobal inequality and poverty at a rate as

never beore.

Statistical hal truths can be more mis-

leading at times than untruths. And this

might be one o them, insoar as the expe-

riences o ordinary Indians contradict

such statistical arteacts. Since citizens

in India can express reasonably reely

their views at least at the time o

elections, their electoral verdicts on the

regime o high growth should be

indicative. They have invariably been neg-

ative. Not only did the shining India

image crash badly in the last general elec-

tion, even the present prime minister,

widely presented as the guru o Indias

economic liberalisation in the media,

could never personally win an election in

his lie. As a result, come election time,

and all parties talk not o economic

reorm, liberalisation and globalisation,

but o greater welare measures to be

initiated by the state. Gone electiontimes, and the reorm agenda is back.

Something clearly needs to be deciphered

rom such predictable swings in political

pronouncement.

Livd expis

Politicians know that ordinary people are

not persuaded by statistical mirages andnumbers, but by their daily experiences.

They do not accept high growth on its ace

value as unambiguously benecial. I the

distribution o income turns viciously

against them and the opportunities or

reasonable employment and livelihood do

not expand with high growth, the purpose

o higher growth would be widely

questioned in a democracy. This is indeed

what is happening, and it might even

appear to some as paradoxical. The estive

mood generated by high growth is mari-

nated in popular dissent and despair,

turning oten into repressed anger. Like a

malignant malaise, a sense o political

unease is spreading insidiously along with

the near double-digit growth. And, no

major political party, irrespective o their

right or let label, is escaping it because

they all subscribe to an ideology o growth

at any cost.

Uqul GwhWhat exactly is the nature o this paradox-

ical growth that increases output and pop-

ular anger at the same time? India has

long been accustomed to extensive pover-

ty coexisting with growth, with or without

its socialist pattern. It continues to have

anywhere between one-third and one-

ourth o its population living in sub-

human, absolute poverty. The number o

people condemned to absolute poverty

declined very slowly in India over the last

two decades, leaving some 303 million

people still in utter misery. In contrast

China did better with the number o

absolutely poor declining rom 53 per cent

to 8 per cent, i e, a reduction o some 45

percentage points, quite an achievement

compared to Indias 17 percentage points.

However, while China grew aster,

inequality or relative poverty also grew

aster in China than in India. Some claim

that the increasing gap between the

richer and the poorer sections in theChinese society during the recent period

has been one o the worst in recorded

Amit Bhaduri ([email protected]) is

with the Council or Social Development andthe Jawaharlal Nehru University, both in

New Delhi.


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commentary

Economic & Political Weekly EPW april 19, 2008 11

economic history, perhaps with the excep-

tion o some ormer socialist countries

immediately ater the collapse o the

Soviet Union.

The share in national income o the

poorest 20 per cent o the population in

contemporary China is 5.9 per cent,

compared to 8.2 per cent in India[Radhakrishna 2008]. This implies that

the lowest 20 per cent income group in

China and in India receives about 30 and

40 per cent o the per capita average in-

come o their respective countries. How-

ever, since China has over two times the

average per capita income o India in

terms o both purchasing power parity,

and dollar income, the poorest 20 per

cent in India are better o in relative

terms, but worse o in absolute terms.

The Gini coecient, lying between zero

and one, measures inequality, and increases

in value with the degree o inequality.

In China, it had a value close to 0.50 in

2006, one o the highest in the world.

Inequality has grown also in India, but

less sharply. Between 1993-94 and

2004-05, the coecient rose rom 0.25 to

0.27 in urban, and 0.31 to 0.35 in rural ar-

eas. Every dimension o inequality, among

the regions, among the proessions and

sectors, and in particular between urbanand rural areas has also grown rapidly in

both countries, even aster in China than

in India. In short, China has done better

than India in reducing absolute poverty,

but worse in allowing the gap to grow

rapidly between the rich and the poor

during the recent period o high growth.

A central act stands out. Despite vast

dierences in the political systems o the

two countries, the common actor has

been increasing inequality accompanying

higher growth. What is not usually

realised is that the growth in output and

in inequality are not two isolated pheno-

mena. One requently comes across the

platitude that high growth will soon be

trickling down to the poor, or that redistri-

butive action by the state through scal

measures could decrease inequality while

keeping up the growth rate. These state-

ments are comortable but unworkable,

because they miss the main characteristic

o the growth process underway. Thispattern o growth is propelled by a

powerul reinorcing mechanism, which

the economist Gunner Myrdal had once

described as cumulative causation. The

mechanism by which growing inequality

drives growth, and growth uels urther

inequality has its origin in two dierent

actors, both related to some extent

to globalisation.

Jblss Gwh

First, in contrast to earlier times when less

than 4 per cent growth on an average was

associated with 2 per cent growth in

employment, India is experiencing a

growth rate o some 7-8 per cent in recent

years, but the growth in regular employ-

ment has hardly exceeded 1 per cent. This

means most o the growth, some 5-6 per

cent o the GDP, is the result not o employ-

ment expansion, but o higher output per

worker. This high growth o output has its

source in the growth o labour productivi-

ty. According to ocial statistics, between

1991 and 2004 employment ell in the

organised public sector, and the organised

private sector hardly compensated or it.

In the corporate sector, and in some orga-

nised industries, productivity growth

comes rom mechanisation and longer

hours o work. Edward Luce oFinancial

Times (London) reported that the

Jamshedpur steel plant o the Tatasemployed 85,000 workers in 1991 to pro-

duce one million tonnes o steel worth

$ 0.8 million. In 2005, the production rose

to ve million tonnes, worth about $ ve

million, while employment ell to 44,000.

In short, output increased approximately

by a actor o ve, employment dropped

by a actor o hal, implying an increase in

labour productivity by a actor o 10.

Similarly, Tata Motors in Pune reduced

the number o workers rom 35,000 to

21,000 but increased the production o

vehicles rom 1,29,000 to 3,11,500 between

1999 and 2004, implying a labour produc-

tivity increase by a actor o our. Stephen

Roach, chie economist o Morgan Stanley,

reports similar cases o Bajaj motor cycle

actory in Pune. In the mid-1990s the ac-

tory employed 24,000 workers to produce

one million units o two-wheelers. Aided

by Japanese robotics and Indian inorma-

tion technology, in 2004, 10,500 workers

turned out 2.4 million units more thandouble the output with less than hal

the labour orce, an increase in labour

productivity by a actor o nearly six.1 One

could multiply such examples, but this is

broadly the name o the game everywhere

in the private corporate sector.

augd Pf d mis

The maniold increase in labour produc-

tivity, without a corresponding increase inwages and salaries, becomes an enormous

source o prot, and also a source o inter-

national price competitiveness in a globa-

lising world. Nevertheless, this is not the

entire story, perhaps not even the most

important part o the story. The whole

organised sector to which the corporate

sector belongs, accounts or less than

one-tenth o the labour orce. Simply by

the arithmetic o weighted average, a 5-6

per cent annual growth in labour produc-

tivity in the entire economy is possible

only i the unorganised sector accounting

or the remaining 90 per cent o the

labour orce also contributes to the

growth in labour productivity. Direct

inormation is not available on this count,

but several micro-studies and surveys

show the broad pattern. Growth o labour

productivity in the unorganised sector,

which includes most o agriculture, comes

rom lengthening the hours o work to a

signicant extent, as this sector has nolabour laws worth the name, or social se-

curity to protect workers. Subcontracting

to the unorganised sector along with casu-

alisation o labour on a large scale become

convenient devices to ensure longer hours

o work without higher pay. Sel-employed

workers, totalling 260 mill ion, expanded

astest during the high growth regime,

providing an invisible source o labour

productivity growth [the data in Ranga-

rajan et al 2007 could be interpreted this

way]. Ruthless sel-exploitation by many

o these workers in a desperate attempt to

survive by doing long hours o work with

very little extra earning adds both to pro-

ductivity growth, oten augmenting

corporate prot, and human misery.

However, inequality is increasing or

another reason. Its ideology oten de-

scribed as neoliberalism is easily visible at

one level; but the underlying deeper rea-

son is seldom discussed. The increasing

openness o the Indian economy to inter-national nance and capital fows, rather

than to trade in goods and services, has


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had the consequence o paralysing many

pro-poor public policies. Despite the act

that we continue to import more than we

export (unlike China), Indias comortable

oreign reserves position is mostly the

result o accumulated portolio invest-

ments and short-term capital infows rom

various nancial institutions. To keep theshow going in this way, the scal and the

monetary policies o the government need

to comply with the interests o the nan-

cial markets. That is the reason why

successive Indian governments have will-

ingly accepted the Fiscal Responsibility

and Budget Management Act (2003)

restricting decit spending. Similarly, the

idea has gained support that the govern-

ment should raise resources through

privatisation and so-called public-private

partnership, but not through raising scal

decit, or not imposing a signicant turn

over tax on transactions o securities.

These measures rattle the sentiment o

the nancial markets, so governments

remain wary o them.

The hidden agenda, vigorously pursued

by governments o all colour, has been to

keep the large private players in the nan-

cial markets in a happy mood. Since the

private banks and nancial institutions

usually take their lead rom the IMF andthe World Bank, this bestows on these

multilateral agencies considerable power

over the ormulation o government poli-

cies. However, the burden o such policies

is borne largely by the poor o this coun-

try. This has had a crippling eect on poli-

cies or expanding public expenditure or

the poor in the social sector. Inequality

and distress grows as the state rolls back

public expenditure in social services like

basic health, education, and public distri-

bution and neglects the poor, while the

discipline imposed by the nancial mar-

kets serves the rich and the corporations.

This process o high growth traps roughly

one in three citizens o India in extreme

poverty with no possibility o escape

through either regular employment growth

or relie through state expenditure on

social serv ices. The high growth scene o

India appears to them like a wasteland

leading to the hell described by the great

Italian poet Dante. On the gate o his im-agined hell is written, This is the land

you enter ater abandoning all hopes.

Extremely slow growth in employment

and eeble public action exacerbates ine-

quality, as a disproportionately large share

o the increasing output and income rom

growth goes to the richer section o the

population, not more than say the top 20

per cent o the income receivers in India.

At the extreme ends o income distribu-tion the picture that emerges is one o

striking contrasts. According to theForbes

magazine list or 2007, the number o

Indian billionaires rose rom nine in 2004

to 40 in 2007: much richer countries like

Japan had only 24, France 14 and Italy 14.

Even China, despite its sharply increasing

inequality, had only 17 billionaires. The

combined wealth o Indian billionaires

increased rom $ 106 to $ 170 billion in the

single year, 2006-07 [inormation rom

Forbes quoted in Jain and Gupta 2008].

This 60 per cent increase in wealth would

not have been possible, except through

transer on land rom the state and central

governments to the private corporations

in the name o public purpose, or

mining, industrialisation and special

economic zones (SEZs). Estimates based

on corporate prots suggest that, since

2000-01 to date, each additional per cent

growth o GDP has led to an average o

some 2.5 per cent growth in corporateprots. Indias high growth has certainly

beneted the corporations more than

anyone else.

Ater several years o high growth along

these lines, India o the 21st century has

the distinction o being only second to the

US in terms o combined total wealth o its

corporate billionaires coexisting with the

largest number o homeless, ill-ed and

illiterates in the world. Not surprisingly,

or ordinary Indians at the receiving end,

this growth process is devoid o all hope

or escape. Nearly hal o Indian children

under six years suer rom under-weight

and malnutrition, nearly 80 per cent

rom anaemia, while some 40 per cent o

Indian adults suer rom chronic energy

decit. Destitution, chronic hunger and

poverty kill and cripple silently thou-

sands, picking on systematically the more

vulnerable. The problem is more acute in

rural India, among small children, preg-

nant emales, dalits and adivasis, espe-cially in the poorer states [Radhakrishna

2008], while market-oriented policies and

reorms continue to widen the gap

between the rich and the poor, as well as

among regions.

I elsiiis Dd

The growth dynamics in operation is

being ed continuously by growing

inequality. With their income rapidlygrowing, the richer group o Indians

demand a set o goods, which lie outside

the reach o the rest in the society (think

o air-conditioned malls, luxury hotels,

restaurants and apartments, private cars,

world class cities where the poor would be

made invisible). The market or these

goods expands rapidly. For instance, we

are told that more than three in our

Indians do not have a daily income o $ 2.

They can hardly be a part o this growing

market. However, the logic o the market

now takes over, as the market is dictated

by purchasing power. Its logic is to pro-

duce those goods or which there is enough

demand backed by money, so that high

prices can be charged and handsome

prots can be made. As the income o the

privileged grows rapidly, the market or

the luxury goods they demand grows even

aster through the operation o the

income elasticities o demand. These

elasticities roughly measure the per centgrowth in the demand or particular goods

due to 1 per cent growth in income (at un-

changed prices). Typically, goods con-

sumed by the rich have income elasticities

greater than unity, implying that the

demand or a whole range o luxury

goods consumed by the rich expands

even aster than the growth in their

income. Thus, the pattern o production is

dictated by this process o growth through

raising both the income o the rich aster

than that o the rest o the society, and

also because the income elasticities oper-

ate to increase even aster the demand or

luxuries than income.

ai-P

The production structure resulting rom

this market-driven high growth is heavily

biased against the poor. While demand

expands rapidly or various up-market

goods, demand or the basic necessities

o lie hardly expands. Not only is therelittle growth in the purchasing power o

the poor, but the reduction in welare


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Economic & Political Weekly EPW april 19, 2008 13

expenditures by the state stunts the

growth in demand or necessities. The

rapid shit in the output composition in

avour o services might be indicative o

this process at the macro level [Rakshit

2007]. But specic examples abound. We

have state-o-the-art corporate run expen-

sive hospitals, nursing homes and spas orthe rich, but not enough money to control

malaria and tuberculosis which require

inexpensive treatment. So they continue

to kill the largest numbers. Lack o sani-

tation and clean drinking water transmit

deadly diseases especially to small chil-

dren which could be prevented at little

cost, while bottled water o various brands

multiply or those who can aord. Private

schools or rich kids oten have monthly

ees that are higher than the annual

income o an average unskilled Indian

worker, while the poor oten have to be

satised with schools without teachers, or

class rooms.

Over time an increasingly irreversible

production structure in avour o the rich

begins to consolidate itsel, because the

investments embodied in the specic

capital goods created to produce luxuries

cannot easily be converted to producing

basic necessities (the luxury hotel or spa

cannot be converted easily to a primaryhealth centre in a village, etc). And yet, it

is the logic o the market to direct invest-

ments towards the most productive and

protable sectors or the ecient alloca-

tion o resources. The price mechanism

sends signals to guide this allocation, but

the prices that rule are largely a conse-

quence o the growing unequal distribu-

tion o income in the society. The market

becomes a bad master when the distri-

bution o income is bad.

Highd mis h P

There are insidious consequences o such

a composition o output biased in avour

o the rich that our liberalised market sys-

tem produces. It is highly energy, water

and other non-reproducible resources

intensive, and oten does unacceptable

violence to the environment. We only have

to think o the energy and material con-

tent o air-conditioned malls, luxury hotels

and apartments, air travels, or private carsas means o transport. These are no doubt

symbols o world class cities in a poor

country, by diverting resources rom the

country side where most live. It creates a

black hole o urbanisation with a giant

appetite or primary non-reproducible

resources. Many are orced to migrate to

cities as ertile land is diverted to non-

agricultural use, water and electricity are

taken away rom arms in critical agricul-tural seasons to supply cities, and develop-

mental projects displaces thousands.

Hydroelectric power rom the big dams is

transmitted mostly to corporate indus-

tries, and a ew posh urban localities,

while the nearby villages are let in dark-

ness. Peasants even close to the cities do

not get electricity or water to irrigate their

land as urban India increasingly gobbles

up these resources. Take the pattern o

water use. According to the Comptroller

and Auditor General report released to the

public on March 30, 2007, Gujarat

increased the allocation o Narmada

waters to industry veold during 2006,

eating into the share o drought-aected

villages. Despite many promises made to

villagers, water allocation stagnated at

0.86 million acres eet (MAF), and even

this is being cut.

Water companies and sot drink giants

like Coca Cola sink deeper to take out pure

groundwater as ree raw material or theirproducts. Peasants in surrounding areas

pay, because they cannot match the tech-

nology or capital cost. Iron ore is mined

out in Jharkhand, Chhattisgarh and Orissa

leaving tribals without home or livelihood.

Common lands which traditionally pro-

vided supplementary income to the poor

in villages are encroached upon systemati-

cally by the local rich and the corporations

with active connivance o the government.

The maniest crisis engulng Indian agri-

culture with more than a hundred thousand

suicides by armers over the last decade

according to ocial statistics is a pointer to

this process o pampering the rich who use

their growing economic power to domi-

nate increasingly the multitude o poor.

n Pl h Ps

The composition o output demanded by

the rich is hardly producible by village

artisans or the small producers. They nd

no place either as producers or as consumers;instead, economic activities catering to the

rich have to be handed over to large

corporations who can now enter in a big

way into the scene. The combination o

accelerating growth and rising inequality

begins to work in unison. The corporations

are needed to produce goods or the rich,

and in the process they make their high

prots and provide well-paid employment

or the rich in a poor country who providea part o the growing market. It becomes a

process o destructive creation o corporate

wealth, with a new coalition cutting across

traditional right and let political divisions

ormed in the course o this road to high

growth. The signboard o this road is

progress through industrialisation.

The middle class opinion makers and

the media persons unite, and occasionally

oer palliatives o air compensation to

the dispossessed. Yet, they are at a loss as

to how to create alternative dignied liveli-

hoods or those aected by large-scale dis-

placement and destruction in the name o

industrialisation. Talks o compensation

tend to be one-sided, as they ocus usually

on ownership and, at best use rights to

the landed. However, the multitude o the

poor who eke out a living without any

ownership or use right to landed property,

like agricultural labourers, shermen, or

cart-drivers in rural areas, or illegal squat-

ters and small hawkers in cities, seldomgure in this discussion about compensa-

tion. And yet, they are usually the poorest

o the poor, outnumbering by ar, perhaps

in the ratio o 3 to 1, those who have some

title to landed property. Ignoring them al-

together, the state acquires with single-

minded devotion land, water and resources

or the private corporations or mining,

industrialisation or SEZs in the name o

public interest.

With some tribal land that can be ac-

quired according to the PESA (1996) Act

only through the consent o the commu-

nity (gram sabha), consent is requently

manuactured at gun point by the law and

order machinery o the state, i the money

power o the corporations to bribe and

intimidate proves to be insucient. The

vocal supporters o industrialisation

never stop to ask, why the very poor who

are least able, should bear the burden o

economic progress o the rich.

It amounts to a process o internal colo-nisation o the poor, mostly dalits and adi-

vasis and o other marginalised groups,


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commentary


through orcible dispossession and subju-

gation. It has set in motion a social process

not altogether unknown between the im-

perialist master race and the colonised

natives. As the privileged thin layer o

the society distance themselves rom the

poor, the speed at which the secession

takes place comes to be celebrated as ameasure o the rapid growth o the country.

Thus, India is said to be poised to become a

global power in the 21st century, with the

largest number o homeless, under-

nourished, illiterate children coexisting with

billionaires created by this rapid growth.

An unbridled market whose rules are

xed by the corporations aided by state

power shapes this process. The ideology o

progress through dispossession o the

poor, preached relentlessly by the united

power o the rich, the middle class and the

corporations colonise directly the poor,

and indirectly it has begun to colonise

our minds. The result is a sort o

uniorm industrialisation o the mind, a

standardisation o thoughts which sees no

other alternative. And yet, there is a atal

faw. No matter how powerul this united

campaign by the rich corporations, the

media and the politicians is, even their

combined power remains deenceless

against the actual lie experiences o thepoor. I this process o growth continues

or long, it would produce its own demons.

No society, not even our malunctioning

democratic system, can withstand beyond

a point the increasing inequality that

nurtures this high growth. The rising

dissent o the poor must either be sup-

pressed with increasing state violence

fouting every norm o democracy, and

violence will be met with counter-violence

to engul the whole society. Or, an alter-

native path to development that depends

on deepening our democracy with popular

participation has to be ound. Neither the

rulers nor the ruled can escape or long

this challenge thrown up by the recent

high growth o India.

Note

1 Data collected by Aseem Srivastava, Why ThisGrowth Can Never Trickle Down, Aseem can bereached at [email protected].

References

Alternative Economic Survey, India (2006-07): byAlternative Survey Group, New Delhi, DannishBooks.

Dev, S Mahendra (2008): Inclusive Growth in India,Oxord University Press, New Delhi.

Fisher, S (2003): Globalisation and Its Challenges,American Economic Review, Papers and Procee-dings, Vol 93, No 2.

Government o India, Economic Survey (2006-07):Ministry o Finance, New Delhi.

Green Le t Weekly (2007): Issue No 710, May.

Rakshit, Mihir (2007): Service-led Growth, Moneyand Finance, February.

Radhakrishna, R (2008): India Development Report,(ed), Oxord University Press.

Rangarajan, C et al (2007): Revisiting Employ-ment and Growth, Money and Finance,September.

Jain, Anil, Kumar and Parul Gupta (2008): Global-isation: The Indian Experience, Mainstream,Delhi, February 8-14.

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