Transitional puzzles - Industrial Policy Must Have A Total Perspective

Amlan Datta
The Statesman

Love and war, war and love, constitute the major theme of the ancient epics and, indeed, of human history. But man must live before he loves and fights. So the story of man includes economics, which originally meant “the art of household management”. That art has evolved and grown more complex with time and it has come to be used to designate stages of the evolution of human society. The major features of the present age, including its forms of government, arts and technology, morals and styles of life, are meaningfully yet loosely related to a central drama, a story which takes its character from an intricate combination of wars, local and global, and the transition from an agrarian to a predominantly industrial economy. This transition to an industrial society did not take place at the same time in all parts of the globe. Its design was not the same everywhere. Nor has the process been completed yet. History reveals alternative paths of growth. In what way and how far to carry this process forward is an important question for the future of human society.

Safe future

On the answer to that question will depend vital changes in the physical environment of our planet during the coming decades as also prospects of sustainable development and a safe future for mankind. To argue that man can have no control over the process of this great transition is to offer a counsel of total despair and loss of faith in the power of reason. We have to look at the past, try to understand the nature of the problem and chart out our course for the future. Let us take a quick look at past history, hoping to gain some understanding of roadblocks and guideposts for the future. England was among the first countries to make regular and substantial transfer of land from production of crops to other productive uses. Plots of land scattered in open fields had to be enclosed to facilitate this process. This was done quite early to facilitate sheep farming. The Enclosure Acts of the 18th century came closer to what can be properly called the Industrial Revolution. There are a few special points to bear in mind for an understanding of the English experience. It was common among families of English landlords to send out younger brothers for non-agricultural occupations, such as long-distance commerce, leaving the management of land to the care of the eldest brother. Thus the English family system could be more easily adjusted to the requirements of an industrial transition. Add to this the fact that, thanks to geographical discoveries, a “new world” had already opened up where people could migrate to seek fortunes abroad. Despite these favourable circumstances, the English experience of the transition to industrial society was by no means happy. In fact, this was a particularly unhappy period in the life of the English people. This is a view which is clearly reflected in the literature of that period. It finds eloquent confirmation in the laws enacted at that time to enforce order. The blessings of democracy were enjoyed by a small upper class in society. The poor laws bear unmistakable testimony to the misery of the common people which imperialist plunder in colonies did little to alleviate. There was a great increase in the number of uprooted “vagabonds” thrown up in the turmoil of the industrial transition in England and extremely harsh methods were prescribed to deal with these restless and hapless people. The moral fervour in Marx’s denunciation of capitalism is easy to understand and easier to sympathise with against this social background. There is enough evidence of man’s inhumanity in the social history of England in the 19th century to make any knowledgeable person with a modicum of conscience sit up and think of an alternative path of development. Unfortunately, the Soviet Union failed to show the desired alternative. In some ways the problem of transition to an industrial society in Stalin’s Russia was very different from what it was in England in an earlier century. One basic difference can be very simply stated. England is a comparatively small country with a high density of population. The Soviet Union, by contrast, is a huge land mass with more sparsely populated areas. In the drive towards industrialisation, it is not the acquisition of land for setting up industry which presented the main problem in the USSR. Rather, it was the procurement of surplus food stock from the farmers to feed the towns which appeared as a crucial bottleneck. In the late 1920s, the Stalinist leadership resolved to launch an all-out collectivisation campaign in the agricultural sector. It was argued that collective farms would provide an organisational base for higher productivity. However, there was also a more compelling consideration. It was guessed rightly that collectivisation would strengthen the control of the party over the agricultural sector and so make it easier to achieve higher targets of centralised procurement of grain to meet the needs of the industrial sector. The campaign for rapid collectivisation started in 1929 and some writers have designated the next five years the period of “the Soviet Great Leap Forward”. Statistics relating to progress of collectivisation and changes in agricultural production and procurement over these years are available from Moscow and these tell a grim story. The percentage of crop area collectivised rose from 33.6 in 1930 to 87.4 in 1934; grain harvest in million tons is estimated to have declined from 83.5 in 1930 to 67.6 in 1934; and, despite this decrease in production, state grain procurement in million tons rose from 10.8 in 1928 to 22.1 in 1930 and stood at approximately the same height thereafter (22.6 million tons in 1933). It remains only to add a brief note on the methods by which this extraordinary operation was carried out.

Ruthless force

Stalin’s speech at the 15th Party Congress (December 1927) on the subject of transition from agriculture to industrialisation sounded moderate and reasonable. Referring to the economic situation prevailing in Russia at that juncture, he said: “What is the way out? The way out is to unite the small and dwarf peasant farms gradually but surely, not by pressure but by example and persuasion, into large farms based on ... collective cultivation of the land.” The Soviet “great leap forward” was actually executed not by “persuasion” but by a massive and ruthless use of force. A very large number of people who refused to cooperate were exiled forcibly to Siberia and a very large number perished. Demographic studies put the number of unnatural deaths in these disturbed times at several millions and the horror of it all is unforgettably depicted in Russian literature by great writers such as Solzhenitsyn and Pasternak. Among the leaders of the CPSU in the 1920s, there was no discord on the need for industrialisation. But Bukharin proposed a strategy of economic development that would have been more peaceful. It did not fit in with Stalin’s power game and was rejected. Yet it helped inscribe on the agenda of history the need for a peaceful transition from agriculture to industry.

In some ways Japan provided a model of transition which contrasted sharply with the Russian experiment. Nobody can miss the striking difference between the natural endowments of these two countries. Japan has to manage with much less land relatively to the size of her population. She is also deficient in essential mineral resources for industrial development. This gave rise to the need for supplementing her internal resources with supplies from outside to carry through any big programme of industrialisation. By the very logic of these restrictive conditions, Japan could not be as self-sufficient as Russia or the USA in her pattern of economic development. This partly explains, although it does not excuse, Japan’s imperialistic aggression in the early stage of her industrialisation. This remains a blot on the history of her economic development in the early part of the 20th century. For the rest, the path of development which she chose was marked by some commendable features.

Priority for education

For instance, Japan wisely gave high priority to education for the people. It is worth noting that she came to have a largely literate rural population already before the Russian revolution. This made it possible to raise agricultural productivity substantially without any drastic change in the size of land holdings. Side by side with large-scale and monopolistic enterprises, a good deal of attention was given to small-scale and light industry which blended with agriculture and provided employment to rural people. Also methods of business management were devised which aimed at and drew strength from a reconciliation of tradition with modernity. In the economic transition of Japan, agriculture and industry played admirably complementary roles. At the same time, there was a strongly authoritarian element in Japanese society which cannot be safely recommended today. Does this brief report have any message for us? India is in transition. This has to be accepted as a historical necessity. But history also teaches that there are alternative paths of development. We have to choose our path cautiously if we want to avoid grave problems for the future. We cannot avoid industrialisation. But a simple affirmation of the need for industrialisation does not take us far in the actual formulation of a correct policy. Some recent incidents at Singur and elsewhere have started a public debate on this subject. It is to be hoped that this debate will be so conducted that it produces not just a lot of heat but also some light. We are apt to be deceived by some ideas which look simple and convincing at first sight. Take this for an example. Industry marks a higher level of productivity and higher earnings; therefore, transfer of labour from farm to factory should be recommended. The trouble with this line of reasoning is that it oversimplifies a complex situation and it can be dangerous if pushed hard. We should bear in mind that in a number of countries, India included, “jobless growth”, as a UN report notes, has become a matter of grave concern threatening social stability in recent years. The Tatas have offered to invest money at Singur to produce small cars on a vast tract of land taken over from farmers. It should be noted that it is not simply the owners of land who will be displaced by this operation, but a much larger number of marginal cultivators who work on that land without owning it. It has been vaguely suggested that these people will get employed in the new industrial establishment and they will be better off in consequence of this change. This surely is grossly misleading. Our poor cultivators, six decades after independence, are still mostly illiterate and the only productive skill they possess is tilling land. Industrial employment calls for a very different set of skills and habits. Transition from agriculture to industry carried out in this fashion may only lead to a net increase in unemployment. It will create a large number of uprooted “vagabonds” joining the ranks of beggars and criminals. The projected enterprises will throw out agricultural labour and at the same time create employment and some special positions available mostly to people from a different stratum of society. The leadership of this country is recruited in large part from the upper strata. Our policy decisions are coloured by the class composition of this leadership. It is not displaced tillers of land but children of middle and upper class families who will get preferential treatment in the special economic zones which are in the process of coming up. This does not mean that we have to totally abandon this policy. But we have to move with circumspection. We cannot do any permanent good even to our cities without paying attention to our countryside in a constructive way. A sick countryside makes cities sick and vice versa. Our industrial policy should be concerned with this total perspective. Our preferred pattern of industrialisation should reflect that concern. Adam Smith made a perceptive distinction between two kinds of industry. There are those that are the offspring of long-distance commerce, which get increasingly bound with the world market. But there is also a different kind of industry which can be called the offspring of agriculture. These come to life by a process of organic growth from within agriculture itself. A healthy rural economy does not live by agriculture alone. It needs the support of other complementary activities including rural industry. In the absence of this support in adequate measure, the rural economy falls sick. The remedy for that sickness does not lie in the setting up of industry typified by production of small cars. Beyond rural industry, our national economy will surely find room for other kinds of manufacturing and service-related activities. In the choice of location of such activities, the state should be guided by wider considerations than what private enterprise left alone would take into account. For instance, the government should be interested in the development of backward regions. It has a special responsibility to provide infrastructural facilities and offer suitable incentives to attract private enterprise and reduce regional disparities. Simultaneously, there should be a broadbased two-way campaign of education to teach the people as well as learn from them and so make them willing partners in programmes of development. This is a condition precedent for a smooth transition from agriculture to industry in a democratic society.

Wrong precedentsThere are ample examples of forced transitions in other countries and other epochs. For India these are wrong precedents. Our society and polity are so constituted that an assault on the democratic tradition will have costly material consequences apart from its being morally wrong. Recent incidents in West Bengal illustrate that the ruling party has a strong temptation to enforce its will by relying on force.The organised violence of the state has provoked counter-violence by the people. If this process is carried far, the country moves inexorably towards a condition of civil war. In contemporary conditions, there is a risk of this getting mixed up with an already prevailing trend towards terrorism and counter-terrorism. It provides a fertile ground for separatist forces and fundamentalist reaction to grow in strength. How a totalitarian state would handle such a situation is a different question. India’s path of development has to be consistent with democratic norms. Non-violence may suggest to some people too high an ideal. But we in India have to strive and maintain certain standards of mutual tolerance and peace within our civil society and with our neighbouring countries if we want to achieve a moderately crisis-free transition to a tolerable future. The past is an imperfect guide. However frequent wars might have been in the past, the battle really worth fighting for today is the battle for peace.

Author is a noted economist and former Vice-Chancellor of Viswa Bharati