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Which India Matters?

Subir Halder/India Today Group/Getty Images
Amartya Sen and Jean Drèze, 2009

“India today,” the historian Ramachandra Guha writes, “is an environmental basket-case; marked by polluted skies, dead rivers, falling water-tables, ever-increasing amounts of untreated wastes, disappearing forests.”22 Meanwhile, as Sen and Drèze write, the largely corporate-owned media, deeply indifferent to poverty and inequality, and reflexively intolerant of any remedial action by the government, produce “an unreal picture of the lives of Indians in general” by celebrating the fame and wealth of billionaires and cricket and Bollywood stars.

Indeed, perennially aggrieved columnists and TV anchors have a crucial part in “the deeper drama in India,” according to the political scientist Atul Kohli in Poverty Amid Plenty in the New India (2012). That drama is one of an elite that expands and is entrenching itself. Increasingly impatient with the rules and ethics of democracy, India’s ruling class today consists, as C. Rammanohar Reddy, editor of The Economic and Political Weekly, defines it, “of large Indian businesses, the new entrepreneurs in real estate, finance, and IT, the upper segment of the urban middle classes, the upper echelons among the bureaucracy, and even large sections of the media.”

What’s immediately striking about this class of the relatively affluent is the degree to which it shares the same interests and beliefs, and its reflexive hostility to government spending on welfare—although political parties feel particularly obliged to indulge in such spending before elections.23 But the conservative rhetoric about buoyantly self-reliant entrepreneurs hides the fact that, as Kohli writes, the Indian state since the 1980s has been “pro-business” rather than pro-market, responsible both for the dynamic forces at the apex of India’s economy and “the failure to include India’s numerous excluded groups in the polity and the economy.”

This “collaborative capitalism,” of which Narendra Modi, the Hindu nationalist chief minister of Gujarat, is the most egregious exponent, consists of the state extending tax benefits to India’s largest businesses and facilitating their cheap access to national resources of oil, gas, forests, and minerals.24 In turn, “the disproportionate control over economic resources,” Kohli writes, “enables businessmen to ‘buy’ politicians,” shape decision-making through the media, and even enter politics themselves.25

A major voice in the echo chamber of India’s elite belongs to rich and powerful Indians abroad, especially in the United States, many of whom were naturally enthusiastic about, and now wish to direct, the progress of the poor country they had to leave in the 1960s and 1970s. Their reestablished links with the old country have underpinned the new strategic and economic relationship between India and the United States.26 This diaspora has “promoted a friendly image of India,” Bhagwati and Panagariya write in their new book, and “with their analysis and advocacy…kept pressure in favor of continued reforms.” Indeed, one of the most distinguished figures of this impressively credentialed Indian-American elite—which includes the venture capitalist Vinod Khosla, Vikram Pandit, the former CEO of Citibank, and (until his conviction on insider trading) the investment banker Rajat Gupta—is Jagdish Bhagwati himself.

Educated at Oxford and Cambridge, together with Manmohan Singh, Bhagwati worked with Amartya Sen at the Delhi School of Economics before moving to the United States in the 1970s. In the changing ideological climate of Anglo-America in the 1980s and 1990s, he emerged as a major advocate of free trade and globalization. “We were economic theorists,” he recalls in his new book, “and later turned to policy analysis that would help transform India and the world.” His pioneering work on trade policy became central in shaping the Anglo-American assumption, also known as the “Washington Consensus,” that was the dominant ideological orthodoxy before the economic crisis of 2008: that no nation can advance without reining in labor unions, eliminating trade barriers, ending subsidies, and, most importantly, minimizing the role of the government. From his perch at Columbia and the Council on Foreign Relations, Bhagwati has provided intellectual authority and sustenance to those who think that India, by prioritizing wealth-creation over health and education, can become a “role model” for “other developing nations.”27

Adversity in this endeavor—manifested by India’s falling growth rate as well as rising inequality and violence—seems to have made Bhagwati particularly cross with his fellow Oxbridge-educated Indian economists who are still riding the “bus” that he and Manmohan Singh, he claims, have “gotten off.” “They fancied themselves,” he writes in one of the book’s many polemical asides, “as Rosa Parks; in truth they were just intellectually lazy and unwilling to learn from the ruin they had visited on India and its poor.”

The people Bhagwati considers intellectually lazy or dishonest are a diverse lot. In his new book, he accuses Joseph Stiglitz and George Soros of practicing “Jurassic Park Economics” and derides the works of Dani Rodrik, the well-known economist at the Institute for Advanced Study, as “hollow.”28 He has denounced Oxfam as well as Muhammad Yunus, the Bangladeshi economist who won the Nobel Peace Prize for promoting micro-credit ventures among the poor. But no one has impersonated Rosa Parks more vexingly in Bhagwati’s mind than his former colleague Amartya Sen.29

Why Growth Matters provides further variations on Bhagwati’s insistent complaint that Sen has used his prestigious Nobel Prize as a “weapon of mass destruction” against India’s potential for economic growth. Much of the book consists of an attempt to mock and repudiate Sen and Drèze’s ideas, even where the two are not named; it then deplores what Bhagwati and Panagariya see as the sentimental liberalism embodied by such institutions as the World Bank and the World Health Organization.

Were health and education neglected during India’s early decades? Not at all, the authors assert. Slow growth and limited revenues were to blame. Does India today resemble America’s Gilded Age in the privileges of its upper classes? “The allegation is not persuasive.” What about inequality? When mobility is high, as they claim it is in India, “the poor may react by celebrating the conspicuous inequality.” Is India doing worse than Bangladesh in human development despite its much higher growth? “These inferences are plain wrong.” What about corruption? The reforms Bhagwati advocated “bid good-bye to many forms of corruption.” Does the decline in Indian calorie consumption, as shown by WHO statistics, reflect increased hunger and poverty? The decline could be due to “a shift from coarse grains” to “rice and fruits.” In any case, Bhagwati and Panagariya add, without saying how it can be done, “malnourished families should be shifting their diet to more milk and fruits.”30

There is much about this shadow-boxing that makes one wonder if Bhagwati, moving like many intellectual elites between the bubble of universities and think tanks and the private hothouse of professional rivalry, has lost touch with how the other half—or the 99 percent—lives.

Bhagwati and Panagariya don’t examine in any depth the nature or likely sustainability of India’s economic growth, which, based primarily on extraction—of natural resources and cheap labor and foreign capital inflows—rather than high productivity and innovation, seems to have run up against its built-in limits.31 They urge India to develop more Chinese-style low-skilled, labor-intensive industries. They are right to blame mindless regulation for India’s lost lead over a smaller and poorer country, Bangladesh, of clothing export. But then, investors keep shifting factories to low-wage countries because of the mobility of capital and the fierce trade competitiveness that Bhagwati recommends as a sure formula for prosperity.32 His fervent advocacy on behalf of India’s potential clashes with the fact that globalization can shrink a nation’s comparative advantage pretty quickly, and, even when usefully deployed, can entrap late-industrializing national economies in low income.

Why Growth Matters does offer some practicable improvements to India’s poor social infrastructure, for example, training programs for nurses and collectively insuring residents of rural regions against major illnesses. But too many of its recommendations seem indistinguishable from the talking points of Paul Ryan: the authors advocate vouchers for schools and hospitals, and targeted rather than universal health coverage. As for extensive environmental destruction, “the correct way to diagnose this issue is to say that we have a ‘missing market’ regarding pollution.” How such a market could come into effect and reduce pollution they do not make clear.

Predictably, Bhagwati and Panagariya propose direct cash transfers for performance of specific jobs rather than guaranteed wage employment in public works. Exemplifying another right-wing article of faith, they admire the weakness of labor unions in not only Taiwan, South Korea, and China, but also Bangladesh, which allows “firms to hire and fire workers under reasonable conditions and maintain a balance between the rights of both workers and employers”—words that would have sounded bizarre even before the collapse in April this year of a garment factory in Dhaka that killed more than a thousand workers, exposing yet again the slave-labor conditions of many unprotected toilers in the globalized economy.33

Looking back at the conversation between Nakayama and Reischauer, and its echoes in Bhagwati’s disagreements with Sen, it seems clear that for postwar Japanese economists and policymakers, eliminating poverty and reducing inequality were profoundly political—and ethical—challenges. Writing in the early 1970s, Reischauer seemed to concede the argument to his Japanese interlocutor by admitting a “broad causal relationship between imbalanced growth and eventual instability.”34

Nakayama’s implicit argument—that high economic growth can empower an insular, selfish, and antidemocratic elite in an unequal society—seems particularly applicable now to a cruelly stratified country like India, where, as judges of the Indian Supreme Court recently put it, “predatory forms of capitalism, supported and promoted by the State” are pushing the poor “to the wall.” This is exemplified vividly by the tribals protesting their dispossession by mining companies and local governments in central India—people often led by armed Maoists.35

Rising social unrest is making an insecure Indian elite gravitate to such hard-line leaders as Narendra Modi, whose well-advertised toughness with labor unions and PR-enhanced business-friendliness make him the preferred choice of many corporate leaders, economists, and commentators as India’s next prime minister.36 Bhagwati, for instance, has described Modi as a “positive role model” with “an unblemished record of personal integrity.” As chief minister of Gujarat, Modi was allegedly complicit in the killing of over a thousand Muslims there in 2002 and was barred from traveling to the United States as a result. But he still embodies managerial efficiency and iron discipline to those disturbed by the political assertiveness of the poor and the disaffected.37

In fact, the political energies of the hundreds of millions of the poor and disaffected are still underdeployed. Could they lead to a more accountable and responsive state and, in the long run, to a more egalitarian and democratic India? Sen and Drèze seem convinced that the poor themselves rather than technocratic elites can help remove poverty and inequality by keenly participating in the public sphere.

This “bottom-up” democratization may seem like a remnant of modernization theory. And Sen and Drèze offer no clear vision of the economic—as distinct from political—process that would help their cause of equity, and also check environmental destruction. But the poor in India still have a great “capacity to aspire,” as the social anthropologist Arjun Appadurai claims in his new book.38 And their collective efforts can make the state more accountable and efficient—a possibility that Bhagwati and Panagariya ignore while lamenting the state’s incapacity and corruption. In the state of Tamil Nadu, for instance, mobilized lower-caste groups not only achieved political power. They also, as Sen and Drèze have written, established a social infrastructure—schools, health centers, roads, public transport—that is now envied across India.39 Sen and Drèze also reveal how democracy in its simplest manifestation, the scramble for votes, can drive successful implementation of welfare programs such as the Public Distribution System.40 They see more hopeful signs in the recent mass agitations against corruption and violence against women.

Many observers of India are generally impressed by the procedures of Indian democracy, with its routine elections. India, Bhagwati and Panagariya assert, “has all elements of a liberal democracy with the poor and the underprivileged having access to effective politics at the ballot box.” But as Sen and Drèze point out, “the success of a democracy depends ultimately on the vigor of its practice.” Certainly, creeping authoritarianism of the kind witnessed in India can make political reform from below seem more urgent than economic engineering from the top. “Educate, agitate, and organize,” the disenchanted low-caste author of India’s constitution B.R. Ambedkar exhorted. Many more Indians will have to exercise these democratic rights if they wish to transform the profoundly damaging elitist character of Indian society and politics.

  1. 22

    The recent floods in Himalayan valleys, which claimed thousands of lives, focused international attention on illegal deforestation, construction, and mining, and feckless dam-building. The World Bank estimates that environmental damage reduces India’s GDP by 5.7 percent. The figure would be greater if it took into account the loss of livelihoods of millions of Indians who depend on forests, farms, rivers, coasts, and grasslands. For an eye-opening account of environmental depredation in India, see Aseem Shrivastava and Ashis Kothari, Churning the Earth: The Making of Global India (Delhi: Penguin, 2012). 

  2. 23

    Though, according to a new report by the Asian Development Bank, India spends less than Nepal and Timor-Leste—only 1.7 percent of its GDP —on health, income, employment, and other forms of social protection. As Sen and Drèze point out, affluent Indians protesting against the right-to-food bill that would annually cost Rs. 27,000 do not object to the tax exemption on diamond and gold imports that annually costs the Indian treasury more than Rs. 57,000 crores a year, or the even more wasteful subsidies on diesel fuel that benefit the rich. The advocacy by Sen and Drèze of social services, and their opposition to Narendra Modi, have provoked many angry attacks on them in the corporate-owned media, including the baseless charge of charlatanry. See R. Jagannathan, “Food Bill: Amartya Sen’s Charlatan Economics Debunked,” Firstpost, July 10, 2013. 

  3. 24

    Such incentives make it harder for the government to raise the revenues needed for public spending. Also, the possibility that they may not be enhanced, or even withdrawn, provokes Indian businessmen to look elsewhere for greater profits. Indian beneficiaries of both the old protectionist and new crony capitalist regime such as Birla and Ambani are now putting the bulk of their investments abroad. 

  4. 25

    The pecuniary logic of the free market is redefining India’s journalism as well as politics. In 2010, India’s leading television personalities were caught on tape offering their services to business lobbyists. The managing editor of the Times of India, India’s biggest English-language newspaper, which pioneered the phenomenon of “paid news,” recently told The New Yorker that “we are not in the newspaper business, we are in the advertising business.” The Press Council of India, a monitoring body, commissioned and then tried to suppress a report on “paid news.” It can be read at www.outlookindia.com/article.aspx?266542. Investigative reports on corporate-political skullduggery or police brutality are confined to small-circulation magazines such as such as Tehelka and Caravan. In one of India’s most recent scandals, the government raised gas prices in order to benefit one of the India’s largest corporations, Reliance, and its global partner, British Petroleum. The corporate-owned media as well as the main opposition parties stayed conspicuously silent. See Anuradha Raman and Prarthna Gahilote, “Lips and Purse-Strings,” Outlook India, July 15, 2013. 

  5. 26

    Briefly, in the 2000s, India seemed to have replaced Japan in the American strategic imagination as an exemplary Asian democracy with pro-American elites—one that can be usefully counterposed to authoritarian China. 

  6. 27

    The intellectual synergy that creates the elite consensus about reforms in India is now subsidized by conservative American think tanks such as the American Enterprise Institute, the Cato Institute, and the Peterson Institute, which employ economists and journalists of Indian origin and ancestry. 

  7. 28

    Full disclosure: in a speech to the Indian parliament, Bhagwati described my October 2010 New York Times Op-Ed on rising inequality, farmer suicides, and Maoist insurgency in India as “fiction masquerading as non-fiction.” 

  8. 29

    More recently, Bhagwati has compared Sen, unfavorably, to Mother Teresa. 

  9. 30

    Arvind Panagariya has attempted to prove that malnutrition rates in India are based on faulty WHO methodology and that Indian children are genetically programmed to be short. See “Does India Really Suffer from Worse Child Malnutrition Than Sub-Saharan Africa?,” The Economic and Political Weekly, May 4, 2013. Also see a rebuttal of Panagariya’s argument by several economists in The Economic and Political Weekly, August 24, 2013. 

  10. 31

    For a sobering analysis, which claims that India’s economic boom, part of a worldwide expansion before the crisis of 2008, and led by debt and exceptional flows of foreign capital, was unsustainable, see R. Nagaraj, “India’s Dream Run, 2003–2008: Understanding the Boom and its Aftermath,” The Economic and Political Weekly, May 18, 2013. 

  11. 32

    As Thomas Friedman put it in his inimitable fashion, “if you are a little too slow or too costly…you will be left as roadkill before you know what hit you.” 

  12. 33

    Even Walmart now calls Bangladesh’s working conditions “unacceptable.” See Jim Yardley, “Bangladesh Pollution Told in Colors and Smells,” The New York Times, July 14, 2013. On India’s own unsafe work sites, see the series of articles by Maitreyee Handique for Mint, including “Damage Done, But Damages Stay Unpaid,” October 8, 2009. 

  13. 34

    “What Went Wrong?” in Dilemmas of Growth in Prewar Japan, edited by James William Morley (Princeton University Press, 1971). 

  14. 35

    An estimated 10,000 to 20,000 armed Maoists are active in one third of India’s districts. The government’s response is borrowed from its counter-insurgency measures in Kashmir and the northeastern states. But the show of brute force in affected parts of central India by paramilitaries and private militias makes the situation even worse. 

  15. 36

    For a revealing profile of Modi by Vinod K. Jose, one of India’s best journalists, see “The Emperor Uncrowned: The Rise of Narendra Modi,” The Caravan, March 2012. Also see Christophe Jaffrelot, “Gujarat Elections: The Sub-Text of Modi’s ‘Hattrick’—High Tech Populism and the ‘Neo-middle Class,’” Studies in Indian Politics, Vol. 1, No. 1, (June 2013). 

  16. 37

    As in pre-war Japan, and many other countries, the elite’s quest for power expresses itself as a preference for a hardline state. 

  17. 38

    The Future as Cultural Fact: Essays on the Global Condition (Verso, 2013). 

  18. 39

    For more links between political enlightenment, democratic mobilization from below, and egalitarianism, see Kohli’s Poverty Amid Plenty in the New India, with its comparative studies of West Bengal, Uttar Pradesh, Kerala, and Gujarat. 

  19. 40

    According to the Planning Commission, poverty rates in rural areas, especially those in states with low growth rates, have declined faster than in urban India due to increased government spending on welfare programs. 

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