In defence of globalisation

Print edition : March 25, 2005

Development and Nationhood: Essays in the Political Economy of South Asia by Meghnad Desai; Oxford University Press, New Delhi, 2005; pages 410, Rs.650.

MEGHNAD DESAI is one of the leading economists of Indian origin living in the United Kingdom. He taught at the London School of Economics for close to four decades. A member of the House of Lords, he is known among economists as a staunch critic of India's development policies of the planning era and an enthusiastic supporter of the1991 economic reforms. But Desai is more than an economist. He has been a commentator of the political scene in India and beyond, approaching development from a politico-economic perspective, and is a prolific writer. He has authored over 250 academic articles and 16 books. The book under review is a collection of 30 essays, most of them first published in the 1990s and over the past few years. Initially they had appeared in newspapers, professional journals and edited volumes. Some are texts of invited special lectures already published elsewhere. The pieces vary not only in length - some under three pages, some over 30 - but also in quality. There is repetition, more than what may be expected in a collection of this kind and acknowledged by the author. As one reads on one gets the feeling of going through iterative drafts of papers yet to emerge in the final form.

The focus of the book is clearly on India, with only three essays under the section titled South Asia to justify the subtitle. This review will thus focus on Desai's views of India's development set in a larger-than-usual perspective. (The last three papers, which are of a technical nature and will not be of much interest to the general reader, are not covered in this review.) "I cannot think about India in terms of economics alone," says the author in the Preface, "not even of political economy as it is conventionally thought of. History and ideology and anthropology are all part of the understanding. Economic reform and globalisation are as important as communalism and the quality of Indian democracy." It is on this fairly large canvas that Desai depicts India with unusual colour combinations and some brilliant strokes.

Ideology is the connecting thread in Desai's narratives and analyses. This is visibly demonstrated in Chapter 15, which states that the 20th century - particularly the period between 1914 and 1989 which Eric Hobsbawm has described as "the short twentieth century" - can be seen as a battle ground between capitalism and socialism. Although during this period there were prognostications and predictions about the collapse of capitalism with the course of events at times suggesting that it was about to happen, by the last decade of the century capitalism emerged triumphant. I can almost hear Meghnad Desai shouting "Halleluiah"! This is a theme he has communicated more fully and forcefully in Marx's Revenge: Capitalism and the Death of Stalinist Socialism (Verso, London, 2002). A summary of his views on capitalism is given on page 151 of the present volume: "... a dynamic successful capitalism does not generate harmony, nor does it rule out periodic crisis or poverty and unemployment. Capitalism succeeds by innovations - acts of creative destruction - whose aim is to restore profitability. Capitalism will continue as long as it displays this ability to generate innovations and to reproduce itself by generating profitability." However, capitalism cannot be confined to a country or a region. It is intrinsically global and so spreads to different parts of the globe in different periods. This process is wrongly depicted as imperialism. It is just shifts in the centre of gravity of capitalism. This capitalism is not any external system. "It is us," proclaims the Lord, especially in its global sweep. "Globalisation or what is sometimes called the Market is all of us acting in our own interest and responding to opportunities and adjusting to constraints. Globalisation is us. It is not some mysterious Other" (page 184).

It is this view of capitalism - majestic, triumphant, and internal to human beings and thus intimate - that informs Desai's critique of the historical transformation of India's economy, society and polity.

India (rather Indica as Desai designates the geographical territory that was India prior to l947 and now consists of Bangladesh, Pakistan and residual India that is Bharat) had started experiencing capitalism almost as early as it began emerging in Europe, thanks to what is popularly, perhaps not quite accurately, referred to as colonialism. As always, capitalism's impact was destructive to some extent, but the net effect was creative and positive. (Did not Marx also say something to this effect?) For instance, when colonialism formally ended in 1947 India was the 10th largest industrialised country in the world (a position it has lost during the period of development). However, India had not experienced a capitalist transformation.

When Independence came India (from now onwards India as the post-1947 entity) had to choose between following a capitalist path already initiated or of attempting a (rival) socialist transformation as was going on in the Soviet Union and said to have been started in Eastern Europe. "A socialist revolution in India would be an event of fundamental significance to the development of world history," wrote Desai in 1975. India indeed was a great potential storm centre within world capitalism. But it also had several factors controlling the impulse to popular revolt. "These range from religious antagonisms which have murderously divided the masses to political machines which yoke them together with their class enemies; from archaic survivals of feudal social relations to the most modern strategies of imperialist penetration"(page 20). But India under Jawaharlal Nehru managed to give the image of a soft socialist regime. Therein lay the seeds of India's retardation. For, the pretence of socialism accompanied by the directions and regulations of the economy chocked the nascent capitalism which, otherwise, would have progressed and delivered the goods.

What the author calls the Nehru-Mahalanobis strategy comes in for particular criticism. It is conceded that "there was every reason for the adoption of the Nehru-Mahalonobis strategy. The period 1955-65 was one of high growth of income and of industrial output" (page 153). But the closed-economy assumption and the import-substitution industrial policy prevented India from taking advantage of the possibilities presented by the world economy from the early 1970s, especially after the Bretton Woods system of fixed exchange rates collapsed in 197l. The opportunity missed by India was used by other Asian countries - Singapore, Hong Kong, Taiwan, South Korea - who in another two decades became the Asian `tigers' while India continued as a limping bear.

The Nehru-Mahalanobis strategy had other problems too. For one, it created the illusion that India was a planned economy. But in reality "India was not a planned economy; it was an economy for which a plan had been made" (page 134). Along with planning it brought in false analogies of commanding heights, dominance of the public sector and so on. Similarly, the Nehru-Mahalanobis strategy left it to agriculture and to "stagnant small-scale and traditional industries to generate employment and supply wage goods. Not only that this did not happen, but the protection given to the handloom sector prevented the modernisation and growth of India's leading industry, textiles, which otherwise would have developed into a major global player".

Desai carries his criticism of the strategy so far as to say that Nehru may have decided on it for extra-economic considerations. "Nehru chose the Mahalanobis strategy because it gave the promise of an early build-up of national production capacity for defence equipment" (page 79).

One of the gravest errors of the period of planning was the imitational socialist effort to ensure that the economic surplus was distributed correctly instead of attempting to augment it. "Thus, rather than adopt policies which would enhance the surplus, for example, by speeding up accumulation and transforming production on modern lines, Indian planners concentrated on changing relations of tenure and ownership of landing a series of land reforms" (page 8).

No wonder the Indian economy started confronting crisis after crisis. The misdirection of the economy came to be perceived in the 1980s and hesitant attempts were made to dismantle the shackles of planning and to open up the economy. But not all of them were in the right direction. When India started looking outwards, for instance, it was to borrow, not to let foreign equity capital to come in.

Then came the mega crisis of 1991 and the radical restructuring of economic policies. Writing in 1993, Desai, now unreservedly the supporter of dynamic capitalism, welcomed the move, not as the only choice as many globalisers maintain and continue to insist on, but as the right choice. For, Desai concedes the option of pursuing the socialist ideal. But we must examine "whether there is any one with the political courage to set about restructuring industry and agriculture so that it produces surplus for the betterment of the poor rather than gobble up subsidies; whether there is any one to launch a social revolution in literacy and better health" (page 157). If the answer to these queries is in the negative, then surely the right policy is a rapid integration of the Indian economy into global capitalism. It only means a shift from a "hobbled and underdeveloped state capitalism" to the disciplines of global capitalism, although they may appear to be stern. On pages 183-184 he indicates what that means. He lists 10 features of contemporary global capitalism of which the main ones are: deregulated capital markets with the possibility of speedy transfer of capital; active forex markets with supporting financial markets that allow speculators to take positions in any currency around the world; greater geographical spread and increased mobility of direct investments; spread of communication and Information Technology; and "increased but as yet imperfect and legally impeded mobility of labour". It is interesting to note that the list includes the fashioning of global culture, music and films and even "greater awareness, though as yet not very effective redress of human rights violations, ecological disasters, famine" and so on, but there is absolutely no reference to trade in commodities as such. Desai is honest in sticking to the position that globalisation is basically freer and faster movement of capital in search of profits, including, perhaps mainly, speculative profits.

It must be emphasised that Desai's tracing of the history of India's economic policies since Independence is in tandem with the history of political processes. In Chapter 9 which he considers to be "a sort of grand summary of many of my writings on economics and politics at least as of the end of 2002" (page 10), he makes an attempt to weave the two together. In the first three decades India's economic policy was driven by the Nehru-Mahalanobis strategy of national self-sufficiency and import-substitution industrialisation. Political developments in the mid- and late-1950s led to the restoration of the role of agriculture, which was hitherto neglected. The Green Revolution, which occurred by accident in the 1960s, gave the rural areas a new clout, which began to be reflected in subsequent general elections. But despite the rapid growth in foodgrain production, the overall growth rate remained well below the planned targeted growth rate.

Unlike in most other newly emerged nations of the period, these three decades demonstrated the political stability of India under a democratic regime. The threat of instability was dealt with by a brief period of Emergency, but it was ended democratically, accompanied by a smooth transition of power to a new coalition, ending the one-party domination that had prevailed so far. By the end of a short period that party was again back in power.

The economic policies of that party after restoration marked the beginning of a process of opening up and liberalisation. The opening up of the 1980s was limited, confined to borrowings from the International Monetary Fund (IMF) and from private foreign lenders. But the growth rate of the economy increased from the preceding three-decade average of 3.5 per cent per annum to 5.5 per cent.

Desai expresses his admiration for the revolutionary decision of India to adopt universal adult franchise with a Western-style parliamentary system. But he expresses some reservations about the choice of "an individualist atomistic model of democracy for India, rather than one grounded in caste, religion, and language identities" (page 97). He argues that these ignored identities were the basis of some problems of the polity that emerged in subsequent years. On page 67 he suggests three changes necessary and sufficient to remedy India's political problems: making all States the entities that constitute the Union of India; amending the Constitution only by the consent of the majority of the States and the Centre; and giving proportionate representation for elections to the Lok Sabha.

It is not surprising that Desai is an ardent supporter and advocate of the economic reforms, which started in 1991. But he expresses his disappointment and disenchantment with the slowing down of the reforms process within a few years. Pointing to the soft-pedalling of the reforms after the Congress lost the elections in 1994, Desai wonders "whether India can politically sustain radical economic policy, or whether politics will mould economics in its own conservative shape" (page 168). The three "blocks" India suffered from are social conservatism, economic radicalism (obviously other than the radical reforms of the post-1991 period) and political electoralism, and Desai had hoped that the humiliation of near-bankruptcy in 1991 would have "the effect of a triple bypass for a patient who had become grotesquely unhealthy but was in denial about his life-style" (page 89). But, alas, after obeying the instructions of the doctor for a while, the patient had slid back to his old ways of eating, drinking and smoking (page 177).

The most engaging part of the book is the treatment of nationalism dealt with primarily in Chapters 20 to 23. Desai draws a useful distinction between a nation and a nation-state. The nation-state is essentially a legal construct depicting an entity that exercises power over a territory. It has a life cycle of birth, growth and death. The nation, on the other hand, is an imagined community the members of which believe they are united by a common history and traditions, religion, language, or any other binding factor, usually a combination of some of them. The distinction between nations and nation-states is crucial, but may not be easy to perceive and respect in actual historical instances.

USING the history of Germany as a parallel, Desai draws out this distinction in the subcontinent, that is, the pre-1947 Indica and the post-1947 Bangladesh, Pakistan and (residual) India. The subcontinent as a geographical entity has always existed, but what caused it to become a delineated, separately identifiable territory? From the early vague notions, an Indian nationalism gradually evolved, becoming more clearly expressed after the British established rule over the territory. And yet, Indian nationalism also had its separate regional specificities and a host of quasi-independent native States that largely stood apart from the mainstream nationalist sentiment. It was the freedom movement - the opposition to the British - that demonstrated Indian nationalism in its most coherent form. Even then there were undercurrents of division, essentially on religious grounds, which finally, in the decades immediately preceding Independence, manifested themselves as the two-nation theory.

Creating two nation-states was thought to be the way out. However, Pakistan was soon to learn that religion alone was not strong enough to sustain the sense of a unified nationalism. The nation-state of Pakistan split into two in 1971 - Bangladesh and (residual) Pakistan - on linguistic and economic grounds. Thus pre-1947 India now is the home of three nation-states.

What about (residual) India that is Bharat? It had, rightly, decided that as a territory with a pronounced diversity of religions it would not, could not, make religion the basis of its nationhood. Its history had become truncated. And so, it had to make a conscious and overt effort to evolve a new sense of nationhood. It is ironic, says Desai, that Nehru, who in his Discovery of India had claimed India to be a nation, was faced, after Independence, with the challenging task of establishing India's nationhood.

The task that Nehru attempted using All India Radio, the Films Division, letters to the Chief Ministers of States and his passionate exhortations to the people at large to rise above all parochial loyalties was not easy and still remains difficult. It was the Chinese attack of 1962 that united Indian sentiments as never before. How ironic that territoriality, a physical attribute, turned out to be the factor to achieve a sense of nationhood!

Desai also tries to show that in the social and political spheres, lack of clarity of nationhood still remains the basis of tensions and conflicts. India, according to him, is "a classic multi-national polity determined to assert a single nationality" (page 222). Three competing approaches to nationhood have emerged over time. The first is the Nehruvian view of single nationality which is therefore inclusive, but ignores other loyalties that are real to people and find expression from time to time. The leading alternative is the notion of India as a Hindu nation, which, however, recognises and up to a point respects the reality of religious pluralism but clearly privileges the majority community. The third is the position taken by backward castes, Dalits and others, usually finding expression as regional parties but striving for pan Indian unity fully respecting regional, linguistic, religious and social diversities. The meaning of secularism will have to be re-examined in this context.

Development and Nationhood has received pre-publication commendations from some leading personalities in the country and surely it deals with some important issues. Like the curate's egg, it is good in parts. The author's treatment of nationhood is stimulating and his suggestions on how people of South Asia can recapture something of the spirit of one people without any common political authority (Chapter 27) are refreshing. But his discussions on development are disappointing. The merits and demerits of the Nehru-Mahalanobis strategy have been publicly discussed in India and elsewhere for almost half a century. On it I do not see any contributions by Lord Desai other than a few felicitous phrases. On the post-1991 reforms and globalisation, his views, at least as can be gathered from the pieces from this volume, are not that of a scholar but that of a partisan. While he repeats over and over again that the post-reform growth rates are higher, he does not even seem to have noticed that the average growth rate of that period does not show any substantial increase over the average of the 1980s. Similarly, while celebrating the decline in the percentage of the population below the poverty line after the reforms, he does not seem to be aware of the fact that the rate of decline of poverty in the 1990s was not different from that of the 1980s and the 1970s.

On the opening up of the economy, his rhetorical question is: "But if there is no foreign inflow, how will India pay for all the imports to which its middle classes are addicted?" (page 157). He admits that globalisation, like any restructuring, will have losers and gainers, but listen to what follows: "In India's case the losers are those who have benefited enormously from old structures and who have contributed to the low performance of the economy. They enjoy subsidies of various sorts - tariff for big business, water/electricity/fertilizer subsidies for farmers, guaranteed jobs for indexed and rising salaries for government employees, comforts of non-competitive behaviour for bankers, and the corrupt gains from the business-politics tie-up for the politicians. These forces resist change." (page 187). Is there any evidence, my Lord, that these have been the losers by India's globalisation?

Desai at one place assures the poor that they do not have anything to lose because of the market for they have always lived in the market economy (page 157). But a little later, as already noted, he makes it clear that globalisation is for capital, finance, and currencies, and not the markets the poor live by. A major drawback that Desai finds in the parliamentary system is that if a political party has a comfortable majority in Parliament, the Cabinet, a small sub-set of Parliament, will come to have almost dictatorial powers. And yet he laments that economic reforms in India have been slow and halting because in the 1990s and beyond no political party or even a coalition of parties had that kind of power.

Somewhere along the line, Meghnad Desai talks about those conservatives who sound radical while being quite comfortable with the existing system. Need we look elsewhere to find a good example?

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