The imperative as an alternative

Amit Bhaduri
Seminar, February 2008

ARE SEZs necessary to ensure that the Indian economy stays on a high growth path, generating economic development in the process as well? This essay argues that such is not the case at all.

Developing countries are today confronted by a serious dilemma. In the current phase, the emerging rules of globalization are increasingly occupying the policy space of the nation-state. And yet, the global rules of the game are flawed, and biased in favour of the richer countries, especially the United States. The dilemma arises because the developing countries tend to feel that there is no alternative to accepting globalization in its present form, the so-called TINA syndrome of a unipolar world dominated by the United States (US). They do not realize that they can hardly rely on the national interests of this superpower to further their own developmental objectives. A couple of well-known examples illustrate this point.

To start with, consider world trade. Fairer global trade in agricultural commodities, without open or hidden subsidies to farmers in richer countries, is required not merely for a freer trade regime; it also affects the poorest one billion people in the world as most of them are connected directly or indirectly to agricultural activities in the rural areas of developing countries. There is hardly any other trade-related example with greater compatibility between a more efficient international price mechanism operating through freer trade, and greater global equality and economic justice. And yet, international negotiations governed by the corporate interests in the richer nations reduced global rule-making recently to a ‘tit-for-tat’ strategy that led to a breakdown in negotiations, and the tendency to impose policies decided by the richer and more powerful nations.

There are other examples of imposed rather than negotiated policies. Both the Bretton-Woods institutions, namely the International Monetary Fund (IMF) and the World Bank, manipulate economic policy in the developing countries through their standard pro-market loan ‘conditionalities’. In defence of imposing pro-market conditionalities on developing countries, both these institutions place a great deal of emphasis on the principle of accountability to the market. Ironically, however, they themselves remain totally unaccountable for their performance and recommendations, no matter whether an economic collapse occurs in Argentina under their guidance, or an acute financial crisis erupts in East Asia (the only country to escape largely its adverse consequences was Malaysia, which went openly against the IMF prescriptions), or years of stagnation continue despite their recommended large-scale IMF-World Bank sponsored liberalization in sub-Saharan Africa. More blatantly, the presidents of the World Bank are chosen from the US, by the US, for the US, in the name of global development.

The power of imposing rules, which the rich nations have over the poor nations, arises to a large extent from several historically inherited structural asymmetries underlying the present world capitalist system on which is premised the current process of globalization. Without identifying them clearly, it would appear that this process of globalization led by the interests of the rich is a natural phenomenon, somewhat like an earthquake or a drought, consequences that have to be accepted because they cannot be controlled. We would be in a better position to integrate strategically with the global economy to our advantage, instead of meekly submitting to it, if we understand these structural asymmetries.

To begin with, the most fundamental asymmetry in the world economy arises today from the freedom of movement of capital, especially financial capital on one hand, and the restrictions on the movement of labour on the other, especially unskilled labour from developing countries. Despite vast improvements in travel and communications technology, available estimates suggest that labour migration as a proportion of the total world population has been lower in the current phase (approximately 1973 to date) compared to the earlier phase of globalization (approximately 1870-1913).

On a rough reckoning, about one in six persons crossed national borders for employment or livelihood between 1860 and 1900. They went as indentured labour from China and India, as colonial settlers from Europe to North, Central and South America, and to Australia. Over a comparable period of nearly five decades of the current phase of globalization, not more than one in seven persons migrated. Contrast this relatively sluggish movement of labour with the movements of capital, especially financial capital during the current phase of globalization. Rough estimates available from the Bank of International Settlements suggest that the annual volume of private trade in foreign exchange is about 450 trillion dollars, almost nine times the volume of world GDP. Of this, less than two per cent is accounted for by trade in goods and services, and even if one adds all direct foreign investment it would still be well below four per cent. So, purely financial transactions account annually for over eight times the world GDP. (By contrast, in the era of regulated finance in the early 1970s, only about 10% of all international transactions were financial.)

A few days of hostile private trade in the foreign exchange market can wipe out the entire foreign reserve of all the central banks in the world. The defining characteristic of the current phase of globalization has become this overwhelming dominance of private trade in finance. The world has not seen anything like this before.

The rise to ascendancy of international finance started with successive waves of liberalization of the major capital markets of the advanced capitalist countries starting around mid-1970s, and assumed irresistible momentum by early 1980s. The entire process was further stimulated by the internet boom of the 1990s and by rapid advances in telecommunications technology. Although little explicit note is taken of its implications in public discussions and government pronouncements, its imprint has been deep on the pace and pattern of world development in general, and Indian development in particular.

Economic policies are increasingly formulated by the Indian government with a view to appease the sentiments of financial markets. The English language media, especially the electronic media that shape Indian middle-class opinion, tend to behave as if the daily fluctuations of the stock market provide a barometer of the health of the real economy. However, the Indian stock market is minuscule in relation to the vast size of global private trade in foreign exchange mentioned earlier. The rupee and Indian stocks can easily be set into an uncontrollable downward spiral by a few large international players speculating against some Indian stocks or the rupee.

This is not at all fanciful. Recall how Dalal Street nosedived immediately after the 2004 general election results, because a few large, mostly foreign institutional investors, began to withdraw from the Indian capital market fearing that a coalition government supported by the left will be unfriendly towards private businesses. However, as soon as the UPA government named its top economic team, a trio of the prime minister, the finance minister and the deputy chairman of the planning commission, all known for their extreme pro-market and corporate-friendly outlook, the stock markets began to stabilize in no time.

Nothing had changed about ground realities of the Indian economy in those few weeks, except that international finance capital needed political assurances. In the process, the future course of economic policies of the country was set, and the left sufficiently tamed as its subsequent economic policies are showing.

This story would remain incomplete for India, as for other developing countries, if we miss the critical role of the IMF and the World Bank. Since those two institutions are in a pivotal position to influence the perception of private foreign investors like multinational corporations, banks and other financial institutions about a country’s investment climate, they exert a significant influence on financial markets. If the economic policies of a government are favourable to the corporations, it generally gets a good chit from the IMF and the World Bank, encouraging capital to flow in to stimulate the stock market. With an unfavourable signal from those institutions, the government runs the risk of capital flying out in a destabilizing manner.

This, not merely free trade, is the name of the financial game under globalization. The IMF, the World Bank and all those suffering from the TINA syndrome would like us to believe this is indeed the only game in town! Under pressure from the Bretton-Woods institutions, India passed a Fiscal Responsibility and Budget Management Act (FRBM) in 2003 which prevents the government from spending more in areas like elementary education, expanding rural employment guarantee or making it effective by strengthening decentralization of the panchayat system through adequate fiscal autonomy. Tribals and peasants are evicted from lands with little compensation and their livelihoods destroyed to improve the ‘investment climate’.

It is becoming increasingly apparent that in the name of development policies of developmental terrorism on the poor are being pursued. It might deliver high growth in the short term, but it is growth without a democratic content. It does not reach the poor citizens of India who need to benefit most from the process of growth. This is why each and every government that has been following this sort of policy gets showered with the approval of the corporate sector, the IMF and the World Bank, and even the upper middle class, but loses the general election.

The Congress government under the then Prime Minister Narasimha Rao with Manmohan Singh as its finance minister spearheading economic reforms lost the general election. Manmohan Singh personally failed to win a seat. The BJP-led coalition crashed in the 2004 general election with its ‘Shining India’ slogan; it did especially badly in Andhra which was shining under the glow of IT industries. There is no reason to believe that things would be any different next time. However, this would require going against the hidden script of globalization by upsetting the alliance between large domestic industrial houses, multinational corporations and banks including the IMF and the WB, and a pliable domestic government irrespective of its political label.

The second important asymmetry in the current phase of globalization arises from the increasingly freer flow of trade in goods and services on the one hand, and the growing restriction on the transfer of knowledge and technology embodied in the production of those goods and services on the other. In the emerging regime of Trade Related Intellectual Property Rights (TRIPS), all developing countries, including India, find it increasingly difficult to learn and adopt the production technology involved in the goods and services they import. The asymmetry of the emerging trade regime has been characterized by freer trade in goods and services coupled with greater restrictions on the flow of productive knowledge.

Thus, the more ‘liberalized’ trade regime of the World Trade Organization (WTO) puts India under increasing pressure to import goods and services rather than produce them at home. It is conveniently forgotten that international trade has been the vehicle for learning the technology embodied in the traded goods and new products throughout history. This learning process involved through international trade may well be the most important dynamic gains from freer trade, far outweighing the static gains of existing comparative advantage.

By treating knowledge more and more as simply a privately tradable commodity, the current trade regime shows its bias towards corporations as the generator of knowledge who should be handsomely rewarded, but forgets the importance of other sources of knowledge like traditional community-based knowledge to the detriment of many indigenous communities. This, however, does not stop globally powerful drug giants from engaging in biopiracy by relying precisely on the knowledge of herbs held by tribal communities of this country!

It is in this context of freer trade in goods and services that the economic consequence of globalization in terms of the increased relative importance of the external vis-à-vis the internal or domestic market needs to be examined. It has influenced thinking on macroeconomic policy in a way which is seldom highlighted. It emphasizes the importance of reducing the costs of production through more efficient supply-side policies for increasing the international competitiveness of the national economy, but ignores the problem of creating adequate purchasing power and aggregate demand through relative neglect of the domestic market.

This shift of emphasis from domestic demand to international cost competitiveness raises concerns about labour market ‘flexibility’ and various forms of wage restraint. Lower wages tend to depress the unit cost of production, but also the consumption demand from wage income. Consequently, unless either higher luxury consumption, investment or increased export surplus makes up for that reduction in consumption demand in a regime of investment or export-led growth, insufficient aggregate demand at home would become the binding constraint on development.

Similarly, the emphasis on increasing output (value added) per worker or labour productivity (to reduce labour cost of business) and using this as a tool for enhancing international competitiveness has its downside. Attention focused only on labour productivity separates it from the level of employment in the economy. Thus total output would decrease despite an increase in productivity, if the percentage decrease in the level of employment exceeds the increase in labour productivity. Consequently, the corporate strategy of ‘downsizing’ the labour force to create a ‘lean and efficient corporation’ for increasing market share might turn out to be good for a particular corporation, but macro-economically counterproductive if many corporations do it simultaneously with shrinking of total supply, and of the size of the domestic market.

Such policies of reducing unit cost in search of greater efficiency are effective on the microeconomic scale of a single corporation, but counterproductive on the macroeconomic scale due to their effect of depressing aggregate demand. The blurring of this distinction between micro-level and macro-level efficiency, typical of the corporate ideology, gives rise to many ‘fallacies of composition’ in macroeconomic policy by assuming that the individual microeconomic ‘parts’ have the same properties as the ‘whole’ macroeconomic system. In actual fact, the whole is different from the sum of the parts.

The third asymmetry arises in the current phase of globalization from the role assigned to the state in monitoring and regulating economic activities. The market-oriented neo-liberal philosophy intends to curb the role of the state as an economic actor, but gives rise to an almost schizophrenic view of the capabilities of the state. It is usually claimed that the state cannot be trusted with expansionary monetary and fiscal policies (e.g. FRBM Act of 2003 mentioned earlier) because it has an inbuilt tendency to be financially irresponsible. At the same time, however, the same state is relied upon to undertake far more complex financial tasks like extending the scope of the market though privatization without corruption, regulating the stock exchange, etc. This schizophrenic view about its capabilities is rooted in denying the state its developmental and distributive role, but using it to promote the reach of the multinational corporations through measures like privatization.

This also poses the most serious challenge to our democratic form of government. It leads in the case of India to the most fundamental asymmetry in the relation between our political democracy and the market mechanism. In neo-liberal philosophy, the free market and democracy are considered mutually reinforcing, as both extend the scope of individual choice. And yet, the types of freedom granted by the market economy and political democracy are often in conflict in developing countries. The democratic principle of ‘one-adult-one-vote’ coexists rather uneasily with the free market philosophy that the rich, with greater purchasing power, would have more ‘votes’ than the poor in the marketplace.

This asymmetry becomes even more acute when with greater inequality in the distribution of income a larger proportion of the poor have political voting rights, but are economically without a ‘voice’ in the market. In these circumstances, the democratic form of government comes under increasing strain if too much freedom is granted to the market. Yet, the process of globalization relentlessly generates a situation in which national governments (having already succumbed) end up having little control over the free play of global market forces as they impinge on their own country.

As a matter of fact the history of the relation between economic development and democracy has been far more complex than the currently fashionable ‘political correctness’ would have us believe. Historically, the per capita income of the western countries had to reach a minimum of 2000 dollar per capita per year before anything close to universal suffrage was granted. This was a high level compared to India’s 200-250 dollars around the time of our first general election in 1952 (measured in 1999 at Purchasing Power Parity or PPP calculation).

It is an unparalleled achievement in recorded history that political democracy in India has been sustained at that level of poverty despite the tremendous diversity of the country. This also poses the most serious challenge to our democratic form of government. It must control the excesses of globalization and domination by corporations of our economy. Our democracy has to ensure that the process of growth is not corporate-driven, but is decentralized and led by rural employment, in order to allow for the widest participation of our citizens. Only then will the wealth created by growth be fairly shared, and growth itself will have a democratic content. It will be growth of wealth created by the people, for the people. This compulsion of our time can neither be met by globalization, nor by corporate-led growth supported by the government. Unfortunately neither the right nor the left seem to have woken up to this challenge for a pattern of development that gives dignity to all citizens.

If multiparty parliamentary democracy means giving people a wide range of political choices, we have it in plenty in India. However, if we have to also choose the content in critical areas of economic policy there is hardly any choice left. A marked convergence among political parties is taking place, less apparent in their rhetoric, but unmistakably clear in their actions. One could have believed that this is the result of the compromises of coalition politics at the centre. But when the same thing happens at the level of states, and political parties of different labels follow with equal vengeance the same economic course, no room is left even for illusions.

Grand terms like ‘growth’, ‘industrialization’, and ‘development’ are used by politicians with abandon these days to hide the poverty of their economics and politics. But the central question remains unanswered. If a high rate of growth of a particular sort necessarily entails a certain type of industrialization, is this industrialization synonymous with development?

The type of industrialization India is experiencing with recent high growth has three characteristics that are unmistakably neo-liberal. First, it is led by corporations. Second, they are mostly private corporations. Third, the role that the government plays at the central and at the state level is that of a promoter, an agent of private corporations, not one of a regulator. All parliamentary political parties seem to agree. We are repeatedly told that sacrifice is needed for this industrialization, but it is conveniently left untold that the sacrifice must be borne by those who are least capable of bearing it, the poor and the most marginalized sections of society. The rich corporations need not sacrifice. Instead, they are subsidized by the governments. The estimated subsidy for the Tatas in Singur, West Bengal is over Rs 850 crore for an investment of Rs 1000 crore. Similar deals are said to have been cut by the other big industrialists for SEZs and other projects.

The traditional political differences have been homogenized into a neo-liberal consensus. Insofar as the traditional left is concerned, first Singur and then Nandigram drove home the point that many of the left politicians are not that different from the ‘dream team’ of economic policy-makers at the Centre who favour the World Bank, the IMF and the Asian Development Bank. The cultural nationalists of the Hindutva variety violently uphold their culture when it comes to Ram Mandir and ‘Vande Mataram’, but surrender willingly to foreign multinationals. The political doubletalk everywhere is amazing.

Congress has a remarkably short memory about the Sikh massacre of 1984. The left parties rightly breathe fire about the Gujarat massacre of 2002, while BJP covers it up with false propaganda and manipulation of the state machinery. When Nandigram massacres happened in 2007 and Advani compared it with Jallianwala Bagh, conveniently forgetting Gujarat, CPM leaders and some of the supportive intellectuals called it an unfortunate incident that happened accidentally. The unwarranted shooting of 13 tribals in Kalinganagar in 2006 by the police bears an uncanny parallel. The tribals were refusing to hand over their land to the same Tatas in Kalinganagar, just as in Singur and Nandigram the peasants have been resisting. Should we be erecting a defence of empty words to say how different Navin Patnaik is from Buddhadeb Bhattacharya only because they go by different political labels? It is evident from a chronological survey of field reports from Kalinganagar and Nandigram that these were premeditated actions by the state authorities to test the waters and see how far they can go in the service of large corporations.

In this world of neo-liberal harmony, parties of different shades insist that corporate-style industrialization with the state as its agent is our only option. At the same time, the Indian polity with an increasingly inequitable economy thrives in the name of high growth, industrialization and ‘development’, working ruthlessly against the poor majority. A spectre of despair and popular anger haunts all corners of the country now. Farmers are committing suicide in thousands, especially in Maharashtra, Andhra Pradesh and Punjab because the government wants to usher in a new type of commercial, industrialized agriculture under WTO, with expensive inputs supplied by multinationals, but without any subsidy or an appropriate price for their produce.

In Chhattisgarh, in the name of fighting extremism, tribals are being forcibly evacuated in thousands from their villages under Salwa Judum, to be huddled in Vietnam-style concentration camps while the corporations eye greedily their land, rich in mineral resources. The poorest, though richest in natural resources, are kept down by denying them what belongs to them by birth.

Since land is a state subject according to the Constitution of India, the question of land acquisition, and the degree of coercion used thereby, is largely the prerogative of the state government. This is where the political hypocrisy is particularly evident, and the rhetoric about centre-state division of power cannot hide it. Land is being acquired by various state governments in a competitive race-to-the-bottom in order to win the favour of the big corporations. The argument goes, ‘If we in West Bengal do not do it, Uttarakhand will do it’ or, ‘We can be more ferocious than Orissa in pleasing the Tatas or the Jindals or whoever else.’ This has legal and moral encouragement from the central government, but the state government has full constitutional power not to oblige.

Land is being acquired in different guises for mining, industry, power projects, large estates and IT parks and, most recently for special economic zones (SEZ) under the ‘eminent domain’ clause of the Land Acquisition Act (1894), which allows the state to override private property right in land in the ‘public interest’. Land, the primary source of livelihood in the agrarian economy, includes as per the act, ‘everything’ attached to land – water, minerals. Therefore, it becomes the most obvious case of coercive transfer of resources from common people (for whom land and the resource base is not mere property but livelihood) to private corporations. Using the same old act since the British days, amended in 1984, land acquisition is carried out to serve corporate interest, destroy livelihoods, and displace people.

It is often said there are invariably gainers and losers in such economic processes, which the economist Jospeh Schumpeter had long ago captured with the phrase ‘creative destruction’. However, in the present context this is a misleading half-truth. If such creative destruction was just a part of the normal process of capitalistic development, it would have been unnecessary for the state to intervene in the guise of ‘public interest’ on behalf of private corporations. It involves a transaction between two private parties, namely the corporation and the landowning peasants, without a level-playing field. The function of the state should be to at least ensure that this transaction is voluntary, particularly because one party in the transaction is economically far weaker. This would mean that the corporations would acquire land at a price at which the peasants are willing to part voluntarily with their land, either individually or through collective decisions, the latter being especially relevant in the case of tribal land.

Instead, what has been happening is that the state is using force and violence under a cloak of secrecy despite the Right to Information Act. Although the SEZ scheme has the most pronounced pro-corporate bias, the difference between acquiring SEZ land in Nandigram, and the land for the Tata-Fiat joint venture in Singur is one of legal nicety, not of relevance insofar as those who derive livelihood from that land are concerned. And, even after Nandigram, what most parties, including the CPM have to recommend is not the scrapping of SEZ altogether, but restricting its maximum size and other minor changes!

Although land is the most visible symbol of transfer of resources to the corporations, the problem goes deeper. The bias against the poor in policy-making is both direct and indirect. The direct bias is visible in plan allocation. Despite 60% or more of our working population depending on agriculture, all the recent five year plans under different governments have allocated less than five per cent of planned investment to agriculture. The indirect bias operates pervasively through a pattern of consumption and production promoted by the state. Mammoth projects create the impression of urban gloss, with fancy express-ways, underground metros, flyovers etc. at public cost.

We take it for granted that many of these public utilities are essential for efficiency, saving time in travelling, improving the quality of life, even for attracting investment. These arguments are not false, but one-sided. We need, even more desperately, higher efficiency and better quality of life in rural India where the majority lives. In the metropolitan area, we need infrastructure to ensure basic amenities to the most needy. Manhattan-like world-class cities are set as our goals, when 25% to 60% of the urban population lives a subhuman existence in slums. So why this bias, and whom does it benefit? It certainly benefits the urban elite population, and leads to uncontrolled urbanization and mega cities with growing hunger for energy, water and other resources. Slums are cleared without providing resettlement options, poverty banished only from sight. Millions suffer.

This large-scale destruction of livelihoods of both urban and rural communities is only the surface phenomenon. The modes of transport we are creating with more flyovers for cars (including Tatas’ people’s car), the type of shopping or housing complexes we are promoting are not merely iniquitous. They are far more polluting and resource and energy-intensive, and the majority of our ordinary citizens who do not consume them also have to pay directly or indirectly for this pattern of consumption. This is why farmers get less water, are starved of electricity in critical periods and clean drinking water or proper sanitation is a luxury in villages.

The idea that industry is more efficient than agriculture is largely because of this pronounced bias against agriculture and the poor. With almost two-thirds of our work force in agriculture producing under one-fourth of national output, output per worker in agriculture is about 40 per cent of national average. In contrast, industry and services have a labour productivity double the national average. This is also an old game of attributing ‘values’ to selected products and services, so that higher growth is achieved by transferring more and more resources to the high productivity sector, and by favouring large corporations which organize this pattern of production for privileged India. The other (much larger) India watches in despair and anger, while many have no choice but to commit suicide. Must we not strive for an economic alternative on the basis of a new politics?

An economic alternative stimulating another kind of development is feasible. Elements of it exist even in the present political-economic system. Very briefly, it has to be based on three basic premises. First, we must learn to rely far more on the internal rather than the external market. The biggest driving force of the internal market is the purchasing power of the ordinary people derived from employment growth. India’s record on this score has been dismal in recent years. An eight per cent growth in output has been accompanied by barely one per cent growth in regular employment, and increase in irregular or ancillary employment is marked by flexible contracts loaded against the worker, with insecurity and overcrowding of infrastructure.

It is foolish to expect that corporate-led growth can do better on the employment front, because corporations are in the game of making profit by cutting costs, including labour costs. And the more we accept globalization unconditionally, the stronger would be the relative importance of the external over the internal market. This means cutting labour costs in order to increase exports will become even more pressing. Primacy to exports also means priorities in production going against the needs of the population here. Growth of the internal market through rapid employment growth, therefore, requires a far more selective approach to globalization.

Second, economic growth must be the outcome of employment growth, not the other way round and the former should never be at the cost of the latter. Employment growth in the 1980s was twice of what it is now, even though the growth rate of GDP was a little more than half of what it is today. Our benchmark should be a time-bound programme for full employment. How much the growth in employment contributes to growth in output depends naturally on how productively labour can be employed. India has performed poorly in this respect. The main reason is a bureaucratized system of central control which kills local initiative. We have to start at the opposite end of socialist orthodoxy, not by accepting neo-liberalism, but by forging a new combination altogether.

On the one hand, we have to get out of the grip of corporate-led industrialization by making agriculture and the rural economy the centre of economic dynamism; on the other, we have to break the grip of current centralized bureaucratic decision-making. This can be done by extending the present national employment guarantee scheme to an ambitious time-bound full employment programme. It will involve delegating much of the decision-making power to the panchayats and local bodies to identify, formulate and execute local employment-generating productive projects.

A precondition for this is local control over local resources related to land, and maximum fiscal autonomy for the panchayats. Even the Constitution, through Article 243, provided for a Finance Commission to support and ensure that village/ward-level local bodies become financially viable. It was to be appointed in 1993. No government, central or state, followed this up seriously. The record of Kerala has been the best while that of West Bengal government has been among the worst.

Acknowledging that the Left Front played a role in getting NREGA enacted, it is shocking that only 14 per cent of the money allotted in the poorest Bengal district of Purulia for employment guarantee was spent until December 2006, more than half the money of employment guarantee provided by the Centre remaining unspent in the state. Not more than 16 days of employment was provided, while the legal and financial provision allows for 100 days. (Reports from other states too show a similar situation with an exception in certain areas). If the governments had shown the same zeal in making a success of employment guarantee as they have shown in acquiring land from the unwilling peasants, we would have taken at least the first step towards a genuine process of development. The irony is that such an approach would be a political success at the polls. Yet, the path is not being followed!

Finally, there is the question of finance. Where would the money come from for such an ambitious employment programme, and how to make sure it is spent effectively? The Fiscal Responsibility and Budget Management Act (2003) which ties the hands of the government in spending money for most pressing needs like employment guarantee must be scrapped. With this act the Centre pushes privatization to raise money, denies basic health and educational expenditure, and restricts the role of public policy in the name of financial discipline. This suits well the IMF, the World Bank, and the corporations who want the state to promote, not regulate them.

This is where the left should have its biggest battle, and insist that money that is needed for employment, basic education, health and social security of the unorganized workers must be found within our means, if necessary by revising this law. Its own policy imagination failing, it went along instead with the neo-liberal economic ideology with only a whimper of initial protest, ultimately succumbing to corporate-led industrialization. A recent statement by a veteran left leader regarding the inevitability of capitalism is a case in point.

To ensure fiscal autonomy for local bodies, their budget can be kept in a separate account in nationalized banks with a credit line extended to panchayats. This would avoid duplication of institutions, while a system of mutual check and balance between the panchayats and the local branch of nationalized banks can be devised based on their performance as borrowers and lenders. Banks would lend the next round only if the previous project succeeds, and panchayats can borrow the next round only if the money is well-spent. It is this mutuality of interest which has to be strengthened over time in creating the new form of sustained financing for development.

Regardless of whether the growth is 8 or 10 per cent, these measures would initiate a process that empowers the poor, imparting a genuine democratic and participatory content to India’s development. If our political parties, policy-makers and bureaucrats can reach a consensus and display the same collective commitment to the participatory approach outlined in this essay that they have hitherto shown in order to achieve corporate-led high ‘growth at any cost’, at least five desirable goals of development in the country can be attained.

First, easy as it might sound, unemployment and poverty can be eliminated within the foreseeable future. Second, by putting purchasing power in the hands of the hitherto destitute, the domestic market for industrial products and basic needs can be developed, creating a fresh source of healthy growth for industry and the macroeconomy. Third, through the public works programmes that the rural poor will execute, infrastructure (like roads, irrigation, etc.) can be strengthened and expanded. Fourth, priority environmental projects (such as watershed development, afforestation, groundwater recharge and soil conservation) can be undertaken to stem and reverse the worsening ecological crisis the country will face in the approaching future. Finally, by generating employment in the countryside the policy will reverse the flow of distress migrants to the cities (saddled as they already are with burdened infrastructure).

SEZs are not needed to find such a growth-and-development path. In fact, it is difficult to conceive of a single policy which can meet so many desirable goals at one stroke. There are times in history when what is desirable is also necessary and imperative. The alternative to destructive, socially and environmentally destabilizing growth stares us in the face. Unless the reforms inaugurated in 1991 are radically reformed and humanized by a fresh approach, we may be entering a period of great political and social turmoil, courting environmental disasters in the process. The question is: can we as a citizenry commit ourselves to the urgent task at hand?