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Mainstream, VOL XLIX, No 1, December 25, 2010 (Annual 2010)

Neo-liberal Inclusive Growth: Contradictions, Pitfalls and Potential

Friday 31 December 2010, by Kamal Nayan Kabra


As India completes two decades of its engagement with neo-liberalisation, certain glaring contradictions have come out in the open. Making a marginal departure from its stated objectives derived from the logic of the neo-liberal market and globalisation theories designed to advance the agenda of the powerful global and indigenous dominant forces as adjuncts of globalised capital, the Indian policy establishment has promised a series of welfare steps to reduce the misery, deprivation and rigours of the essentially exclusionary outcomes inherent in the very design of the primary policy thrust. These measures, popularly projected as elements of inclusion and slated for gradual introduction over the next couple of years prior to the next general elections, are market-supplementing, state-led, law-based interventions.

It may be noted that these measures, either in their individual form or taken as a whole do not constitute an entirely new element insofar as even during the days of embedded neo-liberalism the basic thrust of the plans and policies excluded the broad masses. This was related to the popular compulsion and even an economic necessity to give some measure of direct and targeted benefit to a part of the excluded people at large. Three elements were consequently introduced. First, social welfare and services programmes extended much beyond the level inherited by independent India, also in order to meet the needs of the drive to industrialise the country. Thus mainly economic measures were accompanied by land reforms, though hardly any worthwhile gains could be recorded in order to overcome the disadvanta-geous position of a majority of farmers. Secondly, a scheme of multi-pronged reservations was introduced to help overcome the caste-based low and depriving social status of a huge part of the population,. And these economic and social measures were supplemented in the political-administrative sphere by the Panachayati Raj institutions in rural India. However, none of these could make a qualitative break and reduce social exclusion to any significant extent.

As a follow-up of the marginalisation inherited from the era of embedded liberalisation and exacerbated by neo-liberalism’s strides, a new slew of measures are sought to be proposed and in part implemented. The thrust of the three new instalments of the proposed inclusive growth elements seems to be directed towards three programmes. One, the already ongoing MGNREGA that seeks to guarantee to the rural households’ access to a fixed maximum amount of nominal annual income in exchange for manual work on some local development project/work. However, it refuses to cover the similarly placed urban families that arrive in these unfriendly urban centres in order to escape the harsh rural life of deprivation. This exclusion of the urban poor may possibly reflect the overpowering clout of the corporate sector and organised capital in general as the latter may, as a result of an assured alternative source of income to the former at least for a part of the year, have to face a strengthened supply of labour that may perforce push up the wage rate demanded by the workers. Obviously the rural sector employers do not seem to have similar clout with the neo-liberal establishment to be able to stop the MGNREGA, though their hand in distorting the MGNREGA is manifested in many irregularities plaguing the programme.

The second measure of extending inclusion is the law to ensure free and compulsory education to all the children between the age of six to 14 (though in partnership with the private educational businesses). The third one in the series, presently at a sage of planning, is what is projected as the right to food. The right to food has been thought of in a special sense as an entitlement to 35 kgs of cereals at a fixed low price to the identified poor as a priority group and even to the others, placed in the general category, at a somewhat less subsidised price. The proposed law on the right to food has been making rounds of various intra-government committees and so on as the authorities find it difficult to reach a consensus easily on what seems to be a big departure from the existing schemes of helping people to access food in the face of rising prices, supply shortfalls and bottlenecks. The controversy seems to concern the degree of commitment and the extent of coverage. It means that the right to food, as visualised, lacks any objective basis and is a matter of bargaining among different points of view, including those which are more concerned about the fiscal implications than anything else and those that are inclined to protect all those whom they consider vulnerable and want the state to assume the responsibility to make them really be assured of regular and adequate supply of food at a special low price, that is, if they can manage to have the requisite amount of purchasing power.

Clearly the programmes do not seem to be so much a consequence of any moral-ethical-social considerations/commitments or a measure to satisfy some powerful grassroots level mobilisation of the people in the context of the relatively deprived and low level social positioning of various chosen social groups (whose voice is hardly taken note of in the policy formulation process) and the imperatives derived from the Constitution of India as well as the content of development. This intervention seems to be essentially a kind of ‘managerial’ or governance response to socio-political compulsions with critical implications for the economy that a democracy inevitably generates. As noted above, the limited and still uncertain entitlement to those having meagre family income is confined to rural India and is not focused on either an assured minimum income or any scheme of universal social security. Even the persistence of a low-wage economy not respecting a minimum and assured income level to everyone is sufficient to defeat the end of elimination of hunger.

It is clear that these moves, if implemented sincerely, can go some distance in the direction of guaranteeing three essential human rights derived from the constitutional provisions regarding the right to life and development. In spite of many obvious shortcomings and a marked degree of hesitancy to go the whole hog, the proposed steps are in some senses a distinct improvement over various pro-poor flower-pot schemes based on executive level administrative decisions seen so far. However, doubts remain over the implications of legal guarantee vis-à-vis an executive decision-based programme as to what difference would come about in terms of enforceability of these three rights on the initiative of the deprived persons/ groups and areas. In any case, with the growing involvement of the people at large and active intervention of various social groups, there are grounds for cautious optimism. More so because in the wake of the faulty and depraved implementation of the MGNREGA, the experience and socio-administrative practices are developing, albeit gradually and with a lot of arduous efforts, the prospects of gradual improvement. However, the basic fact that these social programmes hold out a better promise should not be allowed to blind us to the contradictions and limitations they are steeped in.

THE proposed triple guarantee surely has the potential of going beyond the avowed purpose, instruments and rationale of the neo-liberal shift in our development policies if their inner dynamics can be carried further by political and social action to shake and weaken their neo-liberal foundations while exposing and diffusing the apologetic character of neo-liberal inclusive growth or, in brief, NLIG. While attempting to restore the conditions for the success of big-capital-led accelerated growth of the economy, it may well be a move to make some compro-mises for softening the rough edges of the inevitable outcomes that worsen the overly and, in effect, self-defeating (by threatening sustain-ability and inviting cyclical fluctuations) skewed distribution of economic and social resources and growing concentration by the joint operation of the market processes and cronyism of the worst variety that has become the defining character of the Indian brand of neo-liberalism. Consequently, there are so frequent and increasingly stinking exposures of these scams and washing of the dirty linen in public (because cronyism inevitably involves bitter fights between the top business groups and the political entrepreneurs (the self-appointed leaders who—either as family descendents and successors or as lumpenised persons—worm their way up as storm-tropers or as the wheeler-dealers working for various major partners). The fact is that the political space still available in India enables them to beat each other with tarred brushes and attempted image-bursting in such a no-holds-barred manner that even an ordinary citizen is convinced about the foul-play-ridden character of the joint operation of the economy and government.

The combination of business and political power, their growing symbiosis, surely increases some limited outcomes and accelerates marginali-sation and the political compulsion to go in for programmes to reduce exclusion in a certain measure. These may well be projected as proto-socialism in the sense that to the extent these programmes help build grassroots level capabilities and create space for multi-pronged social action they help strengthen the forces that are inclined to move from a series of social changes towards social transformation and in the process apply some brakes on the counter-acting narrow power and resource-base of the top echelons. Of course, nothing of the projected potential trajectory can be taken to be moving uninterruptedly and unidirectionally; but surely better space and possibilities do open up for carrying forward the processes and blunting the opposite edges. However, as explained in the following, the real test is the capability of such programmes to increase the real space for reducing exclusion and build up the capabilities of the common citizen to exercise her/his political rights.

In this context it seems that these pro-people steps would involve a modicum of direct state action that transgresses the self-imposed limits on public action inherent in the market-led, open border economy model. This is likely to happen insofar as these state-determined social programmes of assistance to the excluded sections cannot be carried out without denting the built-in market-friendly and private profit-guided resource allocation and various liberal bounties for strengthening the incentives for private corporate capital accumulation and the process of extending the frontiers of all-round commo-ditisation. It is these implications, in a hugely expanded scale, on which the interventions are needed. And the explosion of popular wrath in various forms seems to suggest that this time the hyperbole over inclusive growth cannot easily be reduced to the fate of the earlier empty slogans of the socialistic pattern of society, garibi hatao and growth with justice variety.

GIVEN the inherent but by no means inevitable contradictory potential of these legally guaranteed partial and limited measures for increasing social inclusion, it does not seem unreasonable to postulate that these steps may well be treated as some hesitant moves towards proto-socialism. However, a number of caveats must be seriously pondered over. For example, the simultaneously operating neo-liberal processes of asymmetric globalisation and the corporate capital-led capital accumulation trying to satisfy the maha-consumerist urges of the super-rich and the aspiring middle-income, educated strata. Instead of resting on the laurels on account of the formal beginning of the triple guarantee and their potential towards contributing to proto-socialism, the fight in the form of articulation and mobilisation can be and have to be made the sites for exposing their limitations, contradic-tions and diversionary potential. It is pretty obvious that such concrete state steps based on ground level people’s action have to be quite different from the ritualistic acts of symbolic protest and verbal jehad relying by and large on the party cadres but with little direct and growing participation by the main victims of the neo-liberalisation processes themselves.

True, nothing of what one visualises here is automatic and inevitable but increasingly the space for political struggles would have to move in the direction of highlighting the hypocrisy of continued pampering of a tiny minority while putting into the public domain schemes of the kind that are presently on the table. It is clear that what has been promised to date by UPA-II is no serious and sincere scheme of universal social assistance on an adequate scale. It is inclusive development as far as it is compatible with the neo-liberalisation processes and agenda. The reason is obvious. No such scheme and policy can proceed without departures from market-determined and cronyism-mediated distribution of income and wealth. Riding on two horses with their faces in opposite directions is a task that cannot simply take off. Because a few dozen global league super-rich of Indian origin have amassed wealth equivalent to about a quarter of India’s GDP, the logic of its impact on the economy and polity, simple arithmetic and elementary analysis of the operation of the market mechanism would show that the rest, especially the structurally and operationally excluded sections, are condemned to suffer further displacement and deprivation from their already sub-human levels of living. The so-called inclusive growth packages, NLIG, in their present form, design, scale and intentions are too feeble to undo the neo-liberal distortions of the kind we see growing all around in this country in the first decades of the 21st century.

It is true the market fundamentalists insist that the normal fiscal processes even with self- imposed limits on the size of public spending can enable the government to discharge the obligations towards the poor masses so long as the economy moves on a sustained high growth path. How ridiculous these claims are can be seen from some simple home truths. The government, buoyed fiscally by the high level of GDP, condescends to devote barely one-tenth or so of the amount of tax write-offs for the corporate and organised sector big guns, and then suddenly remembers the Chicago School chants for fiscal prudence. The amount of public exchequer loot by fraud, force and unlimited greed one has witnessed with unbelievably dirty processes in the G2 spectrum scam would make one think a thousand times about the sincerity of the stated purposes and interests of the neo-liberal ideologues, policy-makers and the ruling dynasties who have outsourced their responsibilities. But the results obtained from these twin processes of full blast neo-liberalisation and token and discretionary flower-pot programmes of partial, limited and discretionary social inclusion for creating the smokescreen for winning wider empathy with the common citizen, that is, hunting with the hound and running with the hare, tend to become a typical case of attempts to placate all those who stand in need of such support but never up to the level to which expectations have been aroused or can weaken, let alone reverse, the anti-social exclusion processes, not to speak of dealing effective blows to age-old chronic maladies and the processes, agents and forces that spawn all these. The creation of the conditions that enable the people to assert their democratic rights on the basis of self-assertion and without needing external crutches presuppose a certain level of capabilities contingent upon a secure social existence for oneself and one’s family. None of the neo-liberal inclusive growth (NLIG) measures currently in vogue and/or in the offing are a step of this kind. Their bureaucratic-political patronage-dispensing discretionary nature (reflected in part in the nomenclature given to them after some members of the dynasty presiding over the Indian National Congress) is a minor but telling illustration, supplemented by grossly inadequate budgetary allocations and their unsteady amounts being a far more serious limitation.

THE above conclusions are based on a number of factors. No economy with as gigantic a size of the poor and excluded population covering at the very least over half the population, as we have in India, has grown, or indeed can grow at a such a fast and uninterrupted pace as to be able to finance and implement the universal right to livelihood, nutritious food and education for every child. Some recent analyses of the right to education have shown that so astronomical is the size of the bill that its actual implemen-tation would involve a total and unimaginable rewriting of the pattern and size of public expenditure in India in its totality. The continually rising public foregoing of tax revenue for fattening the corporate big guns (over Rs 5 lakh crores currently) is simply not consistent with a really effective allocation even for the right to education, what to speak of the right to food. If anything of the sort is to be attempted by the government, apart from using so many weapons at their disposal, as a silent but effective protest, the public exchequer-pampered corporate leaders of the accumulation processes would go on undeclared investment strike and threaten growth that is considered the hallmark of successful policies by the neo-liberal state which has become the victim of cronyism and no longer runs the economy based on the rule of law. In any case the cutting-edge level corruption and leakages that defeat the purpose of these projects are nothing but forms of war against the ‘others’ waged by the privileged few feeling threatened by any genuine process of inclusion of the excluded.

One must make it clear that all the claims by the entire neo-liberal establishment and its intellectual patrons/lackeys showing poverty reduction as a by-product of economic growth are based on a totally self-serving determination of the magnitude and depth of poverty. For instance, in India an inhuman poverty line, that has nothing to do with livelihood security ensuring assured full stomachs and at least a minimum share in the public goods and services (let alone a fair and even a proportionate share), has been consciously kept constant in real terms (ignoring authoritative advice to the contrary by the same experts who designed the original poverty line and can find support even in the writings of Adam Smith—the much misused theorist of the market processes) without any upward revision as the economy grew and the extent and depth of poverty increased.

Look at some facts: while the index number of per capita real income has increased from 137.9 in 1973-74 to 425.6, that is, more than three times, in 2007-08 (with 1999-00 as the base) the poverty line was kept constant at the 35-year-old level as though in terms of even a notional definition of poverty no share of the growing national cake was meant for the masses. Surely neo-liberalism and morality do not sit together.

Not making any upward revision in the level of poverty line by a government that has set no time-frame for making the above poverty line level living for everyone or even for a majority of people a part of its perspective plan seems to be the operational choice for a simple reason. Without any meaningful poverty line even the minimum claim for these disequalising growth policies (a major feeder of cronyism), in terms of either any success in reducing poverty or at least not increasing poverty while the aggregate GDP increased, would slip away from the basket of means used for managing the pretence of legitimacy. However, even on the basis of widely acknowledged unfair and special purpose definition and corruption-ridden, arbitrary ground-level identification of the poor, the absolute number of people below the poverty line and even as per cent of the population has increased during the high rate of growth era of the past two decades.

The actual experience suggests that the programmes supposed to contribute to inclusive growth have never been made universal, solidarity-fostering and efficient to give people a real, purposeful life ensuring adequate social assistance to all who stand in need of it. In the name of targeting, based on no consideration other than the unwillingness to allocate even a fraction of the resources handed over to big organised capital by way of tax expenditure and without ever examining the outcomes obtained by these measures and so on and ignoring the leakages in the hands of the bureaucrats and their political mentors, the attempt has been to marry the state-sponsored, vote-catching pseudo-state-‘philanthropic’ programmes financed by people themselves with the poverty-increasing corporate hyper-growth policies. One basic point ignored in advancing such claims of NLIG is that the moment anyone is born, one becomes a part of the society, polity, economy and culture. Thus formal inclusion is always there; the billion rupee question is: how and by what agency and means can the inborn, formal, largely ineffective or empty inclusion become meaningful, empowering and equalising, giving real content to procedural democracy? These basic considerations do not even form a part of the mental horizons and social commitments of the neo-liberal pundits and maharajas.

Clearly the pro-people, pro-poor stances taken by UPA-II are a rather pale, jejune and counter-productive idea of inclusive growth. No real inclusion is possible unless social exclusion is steadily reduced. Thus the contradiction we are referring to is the attempt to carry out the hitherto unseen measures for ensuring food, income and educational rights without moving an inch away from growth orthodoxy, market fundamentalism, galloping cronyism, and, for the sake of freedom of enterprise, accepting and encouraging the exponential growth of gross inequalities. What flower-pot measures of social inclusion can deliver is at best a temporary pretence of social legitimacy.

The author is a Professor, Malcolm S. Adiseshiah Chair, Economic Development and Decentralised Planning, Institute of Social Sciences, New Delhi.

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