Things, not people

Print edition : October 21, 2011

The emphasis on inclusive growth in the Eleventh Plan has not succeeded in reducing poverty. - K. GOPINATHAN

The basic problem with the Approach Paper, as with its predecessor, is that its theoretical paradigm is wrong.

WHAT used to be said of the Bourbon kings of France applies equally to the Indian Planning Commission: They learn nothing and they forget nothing. The Approach Paper to the Twelfth Five-Year Plan gives one a sense of dj vu. It is hardly any different from the Approach Paper to the previous Plan produced five years ago. There is the same obsession with gross domestic product (GDP) growth, the same platitudes about making it inclusive, the same complacency (we are making progress towards inclusive growth but we need to do more), and the same intellectually untenable attempt to draw a large picture from a collection of factoids of dubious validity. True, the profound economic upheavals occurring at home and abroad do occasionally intrude. Thus the world capitalist crisis and the massive worldwide inflation that has caused street demonstrations in several countries and brought down governments, including in Tunisia and Egypt, are dutifully mentioned. But they are not allowed to shake the planners' complacency and their theoretical paradigm. This is a pity since the basic problem with this Approach Paper, as with its predecessor, is that its theoretical paradigm is wrong.

The question to ask is: why has the Eleventh Plan with its supposed emphasis on inclusive growth not succeeded in reducing poverty? The Planning Commission, of course, disagrees: poverty, it claims, has come down. But the absurdity of the criteria it uses is by now too well-known to need repetition. If we take the most elemental need, nutrition, people are palpably getting less and less of it. Taking the norm of 2,100 calories per person per day for urban areas and 2,200 for rural areas (it was 2,400 for rural areas to start with but was later officially revised downwards to 2,200) as constituting the line below which the people are defined to be poor, which, incidentally, is still the Planning Commission's avowed position, we find that in 2004-05, 64.5 per cent of the urban population and 69.5 per cent of the rural population were in poverty. The corresponding percentages for 2009-10, the latest year for which we have large-sample National Sample Survey (NSS) data, were 68 and 76 respectively.

These figures, based on Utsa Patnaik's work with NSS data, are robust, at least as robust as the NSS which provides the best available official statistics. They are not like the factoids given in the Approach Paper, such as a 16 per cent increase in rural real wages between 2007 and 2010, which is supposed to prove a decline in rural poverty. (Even if such an increase had actually occurred, much of it would have got wiped out by now because of the inflation of the current year; besides, what matters for rural livelihoods is not the wage rate per se but earnings which depend additionally on days of employment.) We can thus state with confidence that in both urban and rural areas, according to NSS data, there was a pronounced increase in absolute poverty precisely during the five-year period when growth was supposed to be getting inclusive.

There was a time when decline in calorie intake was claimed in official circles to indicate a voluntary shift, representing a change in tastes perhaps or simply greater freedom of choice, away from food to other more sophisticated commodities and services; it was claimed therefore as being indicative of reduced, not increased, poverty. This claim was hollow to start with: it flew in the face of worldwide experience that when people become better off they increase (at least until a high level of income is reached, much higher than the Indian average) their food consumption, and hence their calorie intake. But now that the Approach Paper itself talks about the demand for food rising with income, and explains the current inflation by the fact that food supply has not kept pace with such rising demand, that particular red herring has finally got the burial it deserved. In that case, however, we are back to the question why the Eleventh Plan's emphasis on inclusiveness did not produce the desired result but produced instead its very opposite. The Approach Paper should have started with this question, which would have then forced it to rethink its theoretical paradigm. Instead it chose complacently to stick to its ludicrous poverty estimates and hence its theoretical paradigm.

The hallmark of this theoretical paradigm is that it sees poverty removal as being dependent essentially on the achievement of a high magnitude of GDP growth rate. True, it no longer talks of an automatic trickling down of the effects of growth that would lift people above poverty; instead it is forced to modify its position to one where a high growth enables more effective government intervention to reduce poverty, by putting larger fiscal resources in government hands. It is also true that it no longer remains content talking of the overall GDP growth rate alone; the high rate of inflation has forced it to recognise the importance of ensuring that growth occurs in a balanced manner so that there is no excess demand for essential commodities like foodgrains, causing inflation that erodes people's living standards. Nonetheless, this paradigm, with all these caveats, focusses on the size of the bundle of goods and services available: what is the size of the basket of things available? It constitutes a things-based approach, that somehow the more things are produced the less poverty there will be, that the sheer size of the things-basket produced has this mysterious property of spontaneously alleviating people's misery. This is a case of what Marx called commodity fetishism.

The error of this things-based approach arises from the fact that poverty is part of a social relationship. An increase in the size of the things-basket, produced within a given social relationship, does not per se reduce poverty; on the contrary, depending on the social relationship, it may even increase poverty, which is what has been actually happening. The Approach Paper, indeed the entire neoliberal discourse, eschews cognition of any social relationship, which makes its entire analysis wide of the mark.

Take the example of inflation, the most burning question of the day. The Approach Paper's explanation of it is simple: it is caused by an excess demand for essential commodities like foodgrains, in the sense that the demand for them exceeds their potential supply. (To say that inflation is because the demand for them exceeds actual supply is a tautology that does not constitute an explanation since it begs the question: why cannot supplies be augmented?) This explanation, however, is palpably wrong. At this very moment the government has much larger foodgrain stocks than are normal for this time of the year, which it could release to the people at controlled prices to protect them from inflation. What is more, it has also been resorting to foodgrain exports in recent months, whose avoidance would have augmented domestic supplies. And as the Approach Paper itself notes (at a different point) the foodgrain output in 2010-11 has been a record 241 million tonnes, which should have removed excess demand pressures. Why then should there be any excess demand for foodgrain to cause near-double-digit inflation in its prices?

The obvious answer to this question is that the government is unwilling to augment foodgrain supplies for some reason. And the obvious reason is that doing so, by taking steps to make foodgrains directly available to the people at controlled prices, would enlarge the fiscal deficit, to the displeasure of globalised finance capital. This is why it does not dishoard its own stocks, and it does not prevent exports because that will merely add to its own stocks. Since inflation in foodgrain prices is a worldwide phenomenon, Indian prices, not being insulated from movements of world prices, keep increasing in tandem with world prices. It is, therefore, not any shortage of foodgrains that underlies the inflation in foodgrain prices. It is the class bias of government policy, the fact that it is loath to offend globalised finance in an effort to protect the domestic working people against inflation. The explanation for inflation, which at first sight appears to consist in a paucity of things, turns out on closer inspection to be part of a social phenomenon, having to do with the social weight of finance capital vis-a-vis the working people.

The Approach Paper's problem is that social phenomena do not enter its precincts, which is why it cannot comprehend increasing poverty and hence fails even to cognise it. The social mechanism generating poverty in India today has two basic components. One is a massive assault on petty production, including on peasant agriculture, by corporate and financial interests. The capacity of petty production to survive against corporate capital (without lowering the subsistence of the producers, that is, without getting into accentuated distress) had been bolstered in the post-Independence period by the support of the state. The state had supported peasant agriculture through tariffs and quantitative restrictions on imports, subsidised inputs including credit, assured prices, provision of irrigation and electricity, research into seed varieties and farm practices, and extension services. It had supported other petty producers too in a variety of ways, including the reservation of spheres for their activities. With neoliberalism, the state progressively withdraws support from petty production and acts exclusively to appease corporate and financial interests to bolster their state of confidence. The growing distress and dispossession of petty producers, which Marx called the primitive accumulation of capital, and of which there is massive evidence in the recent period, including the mass suicide of peasants, is an inevitable fallout of this.

The second component is the fact that the rapid growth of the capitalist segment of the economy, spearheaded by corporate and financial interests, has little capacity to generate jobs. On the one hand, therefore, there is an increase in the distress and dispossession of petty producers and of the working people, including agricultural labourers, dependent upon them, while on the other hand they do not get absorbed into the ranks of workers in the capitalist sector. It is this combination that causes growing absolute poverty among petty producers and the working people dependent upon them. But their impoverishment also has the effect of sapping the bargaining strength of even those who have got absorbed into the ranks of workers in the capitalist sector. Their wages remain tied to a subsistence level, which, if anything, declines slowly over time even as there is significant labour productivity growth in the capitalist segment (which is what prevents the growth of employment in this segment). What such labour productivity growth generates in the face of stagnant or declining wages is a rise in the share of surplus and hence a massive increase in income inequalities.

Primitive accumulation

An acceleration in the rate of growth of GDP has the effect, in a variety of ways, of accentuating the process of primitive accumulation of capital: it means more dispossession of peasants from land, and more luxury housing, malls and shopping complexes (which have the added effect of dispossessing petty artisans, sellers, peddlers and traders); and its capacity to generate jobs does not go up to any corresponding extent. Hence an acceleration in the growth rate of GDP tends to accompany an increase in absolute poverty. GDP growth, far from being a panacea for poverty, tends to accentuate it.

What follows from this is not that growth is bad or that stagnation is preferable, but that all such issues must be examined in the context of social relationships. Planning, if it seriously intends to improve the lot of the poor, must consciously and consistently focus on social relationships, on how to change them, and on how to usher in the requisite increase in the volume of the means of consumption within such changed social relationships, in a manner that is consistent with them.

It may be thought that going into this terrain of social relationships is not the job of the Planning Commission, that, though possibly important, it has little to do with planning. But this is wrong. Planning discussions in India had always been informed by a sense of the underlying social relationships, whether or not one agreed with the official position. Neoliberalism has knocked this out of Plan discussions. The exclusive focus on the growth of things in a world where social relations are changing to the detriment of the poor and the working people does not just ignore the latter; it has the effect of accentuating their misery.

Of course, the present Planning Commission is not just guilty of ignoring social relationships. It has consciously thrown its weight behind those who wish to change the social relationships to the detriment of the poor and working people. It has consistently advocated, for instance, the opening up of retail trade to multinational corporations (MNCs); and its insistence on public-private partnership even after fiascos like the Hyderabad metro project is indicative of an ideological position that endorses such adverse social change (not to mention the drain it causes to the exchequer, in the name of alleviating the burden on the exchequer).

The piece de resistance of the Approach Paper of course is the advocacy of privatisation of higher education, for which it is even suggested that curbs on its being a sphere of profit-making should be done away with. This would leave the Indian working people without even any organic intellectuals to speak on their behalf, which is the ultimate dream of the ruling classes.

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