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Road less travelled

Print edition : Jul 13, 2007 T+T-
Chief Minister V.S. Achuthanandan.-R.V. MOORTHY

Chief Minister V.S. Achuthanandan.-R.V. MOORTHY

The LDF's one year in power in Kerala is a resounding demonstration of the fact that governments have options other than neoliberalism.

There is a chorus these days: "development is above politics". This means that no matter what government comes, whether it is a United Democratic Front (UDF) government or a Left Democratic Front (LDF) government, the same development policies must be pursued, which, needless to say, are the neoliberal policies. So complete has this process of "destruction of politics" been, that most State governments, irrespective of their political outlook, are pursuing the same set of economic policies, focused essentially on the creation of an "appropriate climate" for private investment. Indeed they vie with one another in providing social bribes to private capital in order to entice it to locate its investment in their particular States. To be sure, when the national government is pursuing neoliberal policies, the scope for State governments to do something different is limited. Even so, State governments do have options; and it is by no means inevitable that the rejection of neoliberal policies that the people have expressed systematically in every election should always remain infructuous.

The one year's rule of the LDF government is a resounding demonstration, above all, of this fact. The LDF government has during the year taken a path completely different from what the UDF had taken, and also different from the path that most State governments tread commonly today. And it has done so with "success", in the only theoretically valid sense of the term, namely, it has earned for itself the overwhelming support of the people: the LDF government today perhaps enjoys larger mass support than it did even at the time of its resounding election victory a year ago.

There are at least three areas where its approach has been completely different from the conventional one that enjoys the blessings of neoliberalism. One relates to the agrarian crisis. The conventional approach to this question has been to announce some relief to peasants in the matter of interest payments on institutional loans, and to focus on raising agricultural productivity. To this latter end, corporate farming, contract farming, a reversal of tenancy reforms to make these possible, and the induction of multinational corporations (MNCs) and corporate interests into agricultural marketing, are all suggested as means of improving the conditions of the agriculture-dependent population. Measures that will lead to the eviction and displacement of peasants with no employment opportunities coming up outside of agriculture, are passed off as their means of salvation. By contrast, the LDF government's approach has been to defend, protect and nurture peasant production.

Two measures in particular have been important in this respect. One is the setting up of the Agriculturists' Debt Relief Commission, which, apart from negotiating with institutional credit agencies for debt relief to peasants, will also arbitrate on a case-by-case basis on the debt owed to private moneylenders, and will, in the case of destitute peasants, recommend the takeover of debt by the State government. The setting up of this Commission is an unprecedented step in post-Independence India. Something akin to it had occurred only before Independence when the provincial governments of Punjab under Chhotu Ram and of Bengal under Fazlul Haq had set up some such arrangements to provide relief to distressed peasantry.

The second measure of protection for the peasantry is the offer of an assured price of Rs.8.50 a kg of paddy. This has had so positive an impact that the secular decline in area under paddy cultivation in the State has been reversed for the first time, and the expected increase in rice output in the current year is 30 per cent over the previous year. Of course the government can do little in the matter of cash crops where tariff and trade policy enter strongly into price determination, but at least its support to paddy cultivation has provided some relief to peasants.

The second area where it has adopted a bold and unconventional approach relates to the autonomy of the State government vis-a-vis the private sector. Instead of gratefully accepting whatever conditions are laid down by capitalists for setting up projects in the State, the LDF government has asserted its autonomy by fixing a suitably high "reservation price" below which it would not go in all such negotiations. The Smart City deal is a case in point. The UDF government had already negotiated an agreement with the Dubai-based TECOM (Technology Electronic Commerce and Media Free Zone Authority) group to set up the Smart City, but the LDF renegotiated the deal on terms far more favourable to the State, including 26 per cent equity in the company developing the Smart City. The TECOM group at various points broke off negotiations and threatened to call off the deal if its terms were not accepted, but the State government's implacable stand paid off. This deal may set a healthy precedent whereby the State government insists on 26 per cent equity, which gives it veto power, in all future deals of this sort.

The demolition of unauthorised structures in Munnar, which had been built on government land encroached upon for the purpose, is another example of this autonomy. Since these structures belonged to major capitalist interests among others, the "natural" reaction of a State government, influenced by neoliberalism into an obsession with sending the "right signals" to capitalists, would have been to take a soft approach towards such encroachments. The LDF's toughness, which has brought it great popularity among the people, represents a sharp contrast to this. This toughness does not per se signify any hostility to private investment. It only means that capitalists have to operate within a certain discipline, and on terms that do not violate what the State government considers a minimum acceptable set.

The third area where the State government has departed strongly from the UDF approach relates to fiscal policy. Kerala has been having a fiscal crisis for a long time, ever since the beginning of this century. But it has responded to this fiscal crisis not by raising additional tax revenue, which, considering the fact that the State has been having a growth rate as high as 8 per cent of late, it easily could have done; instead it has responded to it by curtailing government expenditure. And since certain elements of government expenditure are inflexible downwards, such as interest payments, salaries and pensions, the axe has inevitably fallen on public investment and welfare expenditure. The much-vaunted "Kerala model" is consequently in a shambles, with the public health and education systems suffering great degradation in quality, and people having to access private facilities at considerably greater costs.

The UDF's approach to the fiscal crisis in fact has been quintessentially neoliberal, far more so than anyone ever demanded of it, which suggests that it was the assimilation of neoliberal ideas within important echelons of government, rather than any external constraint that made the government act the way it did. Far from raising the tax-GSDP (gross State domestic product) ratio, the UDF kept it virtually constant for five years, during which the tax-GSDP ratio of every other south Indian State was increasing impressively. While in 2002-03 Kerala had the highest tax-GSDP ratio among all the south Indian States, by 2006-07 it had the lowest. While additional resource mobilisation was not resorted to, the UDF government on its own passed a Fiscal Responsibility Act, which limited the size of the fiscal deficit by the target date to a mere 2 per cent. This was even more drastic than the Central legislation limiting it to 3 per cent. Why the UDF government did this remains a mystery. It had assimilated neoliberal orthodoxy no doubt, but even the high priests of that orthodoxy, located at the Centre, did not go as far as the UDF government did.

The LDF government has broken from this approach. It has gone in for substantial additional resource mobilisation in the 2007-08 Budget, and for significantly stepped-up public expenditure. The Eleventh Five Year Plan for the State has launched a set of flagship programmes, which include the provision of free health care to the bottom 30 per cent of the population (and affordable health care to the rest); an ambitious scheme of scholarships/fellowships at the secondary, higher secondary, college and research levels; the recruitment of an additional 100 faculty members at the university/college level where the various departments are woefully understaffed owing to past expenditure cuts; the provision of free mid-day meals to all schoolchildren (including those in Plus 2 classes) opting for it; free housing (including renovation of existing dwellings) for the entire below poverty line population; and the spread of awareness against gender discrimination, which is a major concern in Kerala. The important thing here is the change in the problematique: instead of the UDF policy of making expenditure adjust to resources which are deliberately kept meagre in deference to the neoliberal paradigm, we now have the alternative policy of stepping up expenditure in response to requirements and making resource availability adjust to it through additional taxation and borrowing.

These three areas where the LDF has launched an alternative to the conventional approach are themselves interlinked. For instance, since a peasant's economy is a total one, where there is no separation between the spheres of production and consumption, the decline of the public health care and education facilities has been a major factor contributing to the agrarian crisis. Hence the stepping up of public expenditure in these spheres is simultaneously a way of protecting peasant agriculture.

Likewise, as the State government garners larger fiscal resources for itself, its autonomy vis-a-vis private capital and its ability to enforce a "reservation price" also get strengthened. In short, the LDF is launched on an alternative trajectory, not just a set of empirical adjustments in specific policies. There are several other components of this trajectory, such as a serious effort at implementing the National Rural Employment Guarantee Scheme (NREGS), which started late in the State but has picked up impressively (at least in Wayanad, the poorest district), and a revamping of the public distribution system, which, like everywhere else in the country, had got severely eroded.

One important component of this alternative trajectory, the Education Bill, which is the first attempt anywhere in the country at a social regulation of private educational institutions, has become a victim of the legal system, but the drive started by the Bill will certainly continue.

To say all this is not to underestimate the enormity of the task that remains to be done or even to express complacency over what has been achieved. What has been done can always be undone. The plethora of powerful forces hostile to an alternative trajectory has not disappeared. They are biding their time to trip up the State government, to impose their "development agenda" upon it, to coerce it and entice it in a myriad ways to drop its own pro-people agenda and go in for "prestige projects" that would make headline news. The government has to be extremely vigilant not to fall into these traps. But it can look back with some satisfaction at what has been achieved during the past one year, which shows that an alternative, however modest its departure from the conventional may initially be, is possible, provided politics, in the sense of class politics, is consistently put in command.