THE INDUSTRIAL STRATEGY - Developments in West Bengal

Amartya Sen
The Telegraph, 29-30 December

I see that our rajyapal, my friend Gopal Gandhi, told the graduating students of Jadavpur University, at its 52nd convocation on December 24, “Students who pass from this university should have a clarity of mind so that they speak lucidly and logically.” I have never been a student at Jadavpur University, but I have taught there, and I decided that Gopal Gandhi’s firm instruction must apply to me as well: we cannot ask the students to do something that their teachers cannot do. Certainly, there is need for seeking some clarity and reach in speaking about events and developments in West Bengal right now.

The first thing to note is that there are some very important distinctions to be made between the different issues involved in the current debates — distinctions that are sometimes missed. The first, and perhaps the most immediate, distinction is that between a general economic strategy and the general politics of governance (including matters of law and order) associated with that economic strategy. A second distinction relates not to the economics-politics division but arises within the political domain: that between the politics of administration (including maintaining law and order with justice) and the general importance of some political values, particularly that of democracy. The third distinction arises within the economic domain, in particular the difference between the nature of a general economic strategy, on the one hand, and the specific economic proposals, on the other, that are devised to carry out that strategy. I begin with the general industrial strategy that underlies the economic policy programme, but this will have to be supplemented, in the second essay (to be published tomorrow in this two-essay presentation), with considerations of the politics of governance, the importance of democracy, and the translation of the general strategy into concrete economic policies.

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I begin, then, with the policy strategy of rapidly industrializing West Bengal, involving various means but firmly including the use of private investment in industries and in modern services in this state. I would argue that this general strategy is basically correct. What is so good about rapid industrial development? The basic point is simple enough. In removing poverty, incomes would have to be raised (though there are a variety of other things also to be considered, since we do not live by income alone), and it is hard to do effective and secure income-raising without substantial industrial expansion. This works not just through direct income generation but also through its indirect consequences in energizing an economy and generating new skills (critics of industrial expansion often overlook the extent to which different parts of a working economy are interdependent). It is not surprising that no substantial country ever has crossed the barrier of poverty without very substantial industrialization. If the need for an industrial base and the corresponding skills applies to all countries in the world (as I believe it does), it has a particularly strong relevance to Bengal which was one of the more prosperous parts of the world based on strong industries in pre-colonial days, and was especially advanced in textile production. That industrial advantage was lost during colonial rule when the pre-mechanized industries went downhill without new and modern industries coming up, and to this has to be added the reputation that Calcutta developed in the second half of the 20th century as a hotbed of industrial action, scaring industrial investors away.

Strong rejection of this general approach comes from at least two distinct groups. There are, first of all, those who simply do not want capitalists in West Bengal, and do not, in particular, want to invite private capital to help industrialize the state. What is the point, the politically determined typically ask, of having a communist government if it is going to turn all soft on capitalism? The second group of opponents are on a very different track, even though in denouncing the government they can be strong allies. This group of critics would not want to take land away from agricultural use. There are some genuine “physiocrats” among this group, with agriculture-fetishism and a strong belief in the unparalleled — almost mystical — merits of agriculture. Their arguments were adequately rebutted about 200 years ago, and if life has ceased to be quite as “nasty, brutish and short” as Thomas Hobbes found it, the contribution of industrial development to that change would be hard to overlook.

However, the agriculture-favouring opponents have presented some other arguments that are indeed very weighty. Two in particular deserve very serious consideration. Some oppose the diversion of fertile and productive land into industrial use, which applies to some extent to Singur as well, since such land is clearly very useful for agriculture. Another important argument points to the possibility that taking land from agriculture would impoverish the agriculturalists who live on that land, no matter how large an income the new enterprises may actually produce for other people. I have seen various arguments making this point forcefully, including in one case invoking — I believe appropriately — my own concerns about entitlement failures of specific occupation groups and the effects that this might have on starvation of those groups (no matter what happens to the totality of incomes).

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How strong is the anti-capitalist high theory against private investment, with an implicit vision of a hugely prosperous State ownership economy? In particular, should not communists shun private investment? It is sad for high theory, but in most cases that would be a mistake, if the communists want rapid economic development for the removal of poverty (as they clearly do). It is not an accident that every communist country reliant on pervasive state ownership in the world has either moved to welcoming private investment quite substantially (as China has done), or has declined and been replaced by straightforward capitalist systems (as has happened in Russia and other countries in the former Soviet Union). The exception is Cuba, but its economic success is extremely limited. It remains a poor economy.

But is there, then, nothing to learn from Cuba? There is, in fact, a hugely positive lesson in the Cuban experience about how much can be achieved, despite economic poverty, through excellent public healthcare and school education. Despite its low income, Cuba has nearly the same life expectancy as the much richer population of the United States of America, primarily because of its medical system which is good and which does not leave a huge proportion of the population uninsured, as the US one does. There is, however, also a precise lesson here about how one need not become a capitalist camp follower simply because of accepting the pragmatic case for using private investment in industries. The role of the State in many fields, including in universal medical care and in universal schooling, remains extremely strong, and it is a lesson that has often been missed, even by countries that are formally communist.

Take China. Pre-reform China, before the privatization that began in 1979, had already achieved a high life expectancy (68 years at birth) and very high literacy rates through universal public healthcare and public education. To be sure, China also had a terribly inefficient communal agriculture, and this, combined with a general lack of democracy and a free media, was mainly responsible for the famines of 1958-61 which killed between 23 and 30 million people (the existence of this catastrophe is now denied only in the Indian subcontinent, not in China or anywhere else, and then again only by some whom I would call hard-core theorists — it is hard to call them Marxists since Marx had such strong respect for empirical information). But the general system of public healthcare with universal coverage and universal schooling had dramatic achievements in pre-reform China, and in 1979, China was 14 years ahead of India in life expectancy at birth.

The Chinese economy was, however, in a mess, and the reforms of 1979 put agriculture on a much surer footing through private farming under the new “responsibility system”. In industries too, the reforms achieved a great deal, when China went on to use private investment drawn from all over the world. But the reforms did not stop there. Such was the new belief in the magic of the market (China leaped from a comprehensive anti-market position to a comprehensive pro-market philosophy) that the Chinese also abolished overnight the entitlement to free healthcare for all. Everyone now had to rely on private purchase of health insurance, except in the relatively few cases where the employing organization did that for the employee. The bulk of the population got suddenly excluded from entitlement to public health service, and it is now thought that no more than 20 per cent of the population has assured healthcare. Since then, China’s progress in health and longevity has slowed down dramatically. Even India has been catching up with China, despite the messy state of India’s own healthcare: India’s shortfall from China in life expectancy at birth has been halved since 1979, from 14 years to 7 years. And a state like Kerala with universal medical coverage by the State (even though private medicine also thrives in Kerala on the secure foundation of public medical entitlement for all) is very substantially ahead of China in life expectancy. To take another measure, in 1979, China and Kerala both had an infant mortality rate of 37 per thousand, and this has now fallen only to 28 in China, whereas the rate is less than half that in Kerala (around 10 to 14, depending on which survey you use).

There is, thus, a lesson from Cuba that China missed (about the merits of universal public healthcare) and a lesson from China that Cuba missed (about the positive role of private investment in industries). And there are huge lessons from the experiences of the rest of the world. India in general, and West Bengal in particular, can learn from all. Neither a comprehensive anti-privatization philosophy, nor a comprehensive pro-privatization position, would offer what is needed.

Since I am now what is called a “senior citizen” —an euphemism for being old and feeble — when people are supposed to turn autobiographical, indulging incessantly in reminiscences, I shall follow that hallowed practice myself, beginning with my college days in the early Fifties. Like many students in Calcutta at that time, I was quite firmly on the left of the political spectrum, without joining any political party. If there was anything in particular that worried me greatly, it was the scepticism with which democracy — usually called “bourgeois democracy” — was viewed by those with whose radical commitment to economic equity and social justice I was, otherwise, much in sympathy. Krushchev’s denunciation of Stalin at the Twentieth Congress of the Communist Party of the Soviet Union in 1956 was yet to come, but we knew something already about the demise of other political parties in the Soviet Union, the arbitrary arrests and trials and purges, the “voluntary confessions” of former comrades, the famine in the Ukraine, the devastation of independent workers’ unions, and so on. And yet it was hard to join the political opponents of the Left, who very often deserved their reactionary reputation and seemed indifferent to removing terrible economic deprivations and social inequity with adequate speed and urgency.

So the chosen position of many of us was to remain broadly in support of the Left, with the hope that problems such as inadequate appreciation of the value of democracy and liberty would get rectified over time. A big cluster of people I knew well, including such diverse personalities as Sukhamoy Chakravarty, Satyajit Ray, P.C. Mahalanobis (to name just a few, with very different involvements and of varying ages) had somewhat similar attitudes about the Left, and over the years, this yielded a sizeable Left-oriented civil society in Calcutta. The broad support of the Left civil society might not have swung any elections, but it did make some difference to what was written in the newspapers and books, and what came out in films and theatres.

Establishment Left politics did, in fact, come to terms gradually with democracy and a multi-party liberal society. A deep-rooted conservatism might have prevented the CPI(M) from “de-Stalinizing” formally (I remember telling my 11-year-old daughter in answer to her question about who the moustached person was in the posters at the Howrah station, “Look at him carefully, Indrani, since you will not see his picture anywhere else in the world any more: his name was Joe Stalin”). But the operational beliefs of the party did change over time, and the dismissal of “bourgeois democracy” gave way to multi-party politics, defence of minority rights, championing of habeas corpus, celebration of media freedom — indeed most of the basic ingredients of democratic practice.

However, central to democracy is also the idea of “government by discussion” (I think John Stuart Mill, a socialist himself, floated the term, but it probably pre-dated him substantially). The question I am about to ask is whether some of the turmoil of the past year relates to a less vigorous practice of discussion than should ideally go with decisions and their execution. This may apply both to governmental policies at the top and to the strong-armed behaviour of party activists down the line. I do, of course, see the difficulty in having “government by discussion” when the principal opposition party seems much more keen on shutting down the town than in chatting about problems and their solutions, but the government does have a huge responsibility, especially given its large majority in the assembly, in initiating and trying hard to make a success of the dialogic route.

In yesterday’s essay, I defended the general strategy of industrialization chosen by the West Bengal government, including the participation of private investment. And yet, even though that policy is, I think, right, I would not say that there is nothing much to discuss there. A discussion allows differentiations and variations in a way that the announcement of an already cemented policy does not. I think, for example, the merits of the economic plans for Singur and Nandigram are hugely different. This is not only because the Nandigram plan called for ten times the amount of land (10,000 acres) than Singur needed (1,000 acres). It is also because Singur residents are, in general, much less dependent on agricultural income than Nandigram residents (the percentage of labouring families dependent on agriculture is 32 per cent in Singur and 52 per cent in Nandigram), and have much less risk of minority vulnerability (the Muslim population is 9 per cent of the total population in Singur, as opposed to 32 per cent in Nandigram). No less importantly, the Singur project is from an industrial group, the Tatas, with the best record in India of good relations with workers and sensitivity to public concerns, whereas the Nandigram proposal came from a group not known here in India and very often not thought to be terribly admirable by those who know something about it abroad.

The Nandigram proposal is now evidently abandoned (after abusive exchanges, rowdy demonstrations, street fights, violent evictions of residents on both sides of the divide in sequence, and most alarmingly, police shooting and killing), but the abandonment could have emerged on the basis of discussions before the parties involved declared full-scale war. There are things to discuss about the specifics of the Singur project as well, including global and local issues about the environment. There are also more immediate issues of land acquisition and pricing, which take me back to the arguments mentioned in the first essay on the possible case against transferring land from agricultural use to industrial utilization.

Is it fair to acquire land at prices which, though substantially higher than current market values of the land, when confined to agricultural use, are undoubtedly quite a bit lower than the prices that these bits of land would have commanded if they were sold in the market after being released from confinement to agriculture? Going further, is it really essential for the government to acquire the land that is needed, rather than allowing the industrial firm involved to buy it? Had the land been voluntarily sold to the Tatas, there would be no ground for complaint about non-consent, and no sense of being hard done by through governmental fiat. Such private purchase might, of course, be difficult to achieve when the plots are divided into quite tiny holdings, but the general policy, now in widespread use, of thinking of acquisition first, rather than of purchase, seems rather breathless.

It is not hard to see that the industrialists might favour, for reasons of relative costs and the ability to attract good management, locations that happen to involve fertile land (Singur’s proximity to Calcutta clearly moved the Tatas), and it is also true that the new industries can generate large incomes — much larger than the agriculture it replaces, even when based on multiple-cropping. But we also have to see where the new incomes go. The worry about the subsistence and living standard of the owners and cultivators of acquired lands is not, thus, misplaced, though the problem would be far less had the land transfer followed sales rather than compulsory acquisition. There is surely much to discuss here.

There is also the consideration that a larger aggregate income can be a huge source of public revenue, which can be used for any public purpose. It is often said that the country is not getting anything substantial, because of the inequality of the generated income, from India’s high rate of growth of gross domestic product. One reason why this critique may be mistaken is that public revenue is going up much faster than even the GDP growth that is generating this revenue expansion. In 2003-4, for India as a whole, the economic growth of 6.5 per cent was exceeded by the revenue growth of 9.5 per cent, and in 2004-5 to 2006-7, the growth rates of 7.5 per cent, 9.0 per cent, and 9.4 per cent have been respectively bettered by the expansion rates of government revenue of 12.5 per cent, 9.7 per cent, and 11.2 per cent (all figures in “real terms”, that is corrected for price change). This creates a wonderful opportunity to make much larger investments in public education, healthcare, public transport, environmental protection, and other public goods. There is, however, a catch here, since the SEZs that are being set up across the country do not do this — they are exempt from most taxes. Singur is not, of course, an SEZ (though it did get some tax concessions), but the proper SEZs, which are springing up all over the country, are huge forgone opportunities for raising public revenue.

There was — and is — strong ground for much more discussion on the case for and against SEZs in India as a whole, and in West Bengal in particular. It seems reasonable enough to propose particular tax concessions, as the West Bengal government did with the Tatas and may do with other industrial groups to break the isolation of West Bengal in the world of modern industries and enterprises, but the wholesale forgoing of public revenue in SEZs as a general policy certainly demands much closer examination and more critical scrutiny.

I began by talking about the Left civil society in Calcutta and West Bengal. As someone who, broadly speaking, belongs to that group, I do not think I have seen it as sceptical and alienated from Left politics ever before. And the shift goes, I think, well beyond the intellectuals of Left civil society and applies to people who are less vocal but whose disquiet about their previous favourites is not at all hard to detect. There is, I think, quite widespread frustration about not having much discussion on what seem eminently discussable questions. Joe Stalin, who smiled down from the walls of the Howrah station 20 years ago, would not approve, but the establishment Left does have to remember the long tradition of fighting for democracy and voice and dialogue in Left movements.

My support for the general economic strategy of industrialization of the government of West Bengal cannot but be combined with questions about the importance of democratic values. I believe I am right in claiming that more practice of “government by discussion” would have not only enriched and improved the process of economic decision-making, it would have actually led to better economic plans and better translation of the general strategy of industrializing — or re-industrializing — West Bengal. If this applies to the past, it is no less relevant for the future.