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Who is development for?

Most of our politicians have taken ‘development’ as one of their key planks for campaigning. But how many of them have seriously challenged the structurally exclusive pattern of growth we have been seeing in India, asks Aseem Shrivastava in the first of a new column titled ‘Rethinking development’

A most striking fact about the men and women who fought for India’s freedom is that they did not discuss the problems of our people in terms of ‘economic development’. The phrase is conspicuously absent from the many writings of men like Gandhi, Tagore and even Ambedkar, who wrote considerably on issues of public finance. 

The reason has to do with the fact that the term ‘development’ is of imperial coinage. In use in the late colonial era, its modern definitions are given in American policy documents of the 1940s. The World Bank, set up in 1944 after the famous Bretton Woods conference, subsequently became the guardian angel of the concept of development, setting up in due course an international developmental empire – consisting of funding agencies, research establishments, economists, scientists, technicians, consultants, and much else. Importantly, the term barely finds mention (twice) in India’s Constitution, drafted by Dr Ambedkar in 1949.  

So much destruction of nature, human communities, cultures and livelihoods has happened across the world in the name of development over the past six decades that one is impelled to question its very foundation -- economic growth (which is not mentioned even once in the Indian Constitution). Received wisdom among mainstream economists and policymakers today is that economic growth inevitably results in development through the famed ‘trickle-down’ effect. It is not specified what kind of growth will trickle down to the poor. The focus is on mere numbers. This is unfortunately the intellectual basis of most of the policies in operation in India today. 

The shocking truth is that trickle-down has no empirical foundation whatsoever. Research done recently at Britain’s New Economics Foundation (reported in the Scientific American) has unearthed a striking statistic. For every $100 added to the world economy during the 1980s, only around $2.20 made its way into the hands of those families who lived below the World Bank’s absolute poverty line. During the 1990s, that share fell to a mere $0.60. In other words, to achieve a single dollar of poverty reduction in the 1990s took as much as $166 of extra global production and consumption! (One must rightfully ask who received the other $165.) This of course had crushing environmental consequences (such as acceleration of climate change), most of which have had to be borne by those who contributed least to it: the poor. 

Plenty of data from India – on malnutrition, poverty, unemployment, loss of traditional livelihoods and displacement -- can be adduced in support of the view that trickle-down has not only failed India, it has actually meant a further impoverishment and disenfranchisement of the vast majority of our people. 

It appears that the rich have been successful at enriching themselves rapidly under the pretext of reducing poverty. Moreover, thanks to the ‘second economic depression’ underway in the world economy today, investment by the wealthy corporate classes has come to a virtual standstill now. If the logic for greater inequality that so many economists are wont to provide is that it generates jobs by creating strong incentives for investment in the economy when financial resources are concentrated in the hands of entrepreneurs (who can save a greater proportion of their incomes), one has to ask today: where is that investment? Why isn’t it forthcoming despite the boundless wealth that has been transferred to the already affluent classes? What will happen to the estimated 50 million people who, according to the latest estimates of the World Bank, are likely to fall into poverty once again as a result of the layoffs and the fall in global commodity prices? 

The answer to the riddle as to why investment has been choked off may ultimately lie in the appalling deterioration of income distribution both within and across countries since the era of globalisation began, even before the end of the Cold War, when Reagan and Thatcher were in office. This has eroded the welfare State and the wide social base that economic growth once had in the West. In India and in much of the Third World it has not allowed such a welfare State and a wide social base for economic growth to evolve, leading to a classic crisis of demand that market economies are prone to whenever the overall balance between consumption and saving gets upset. It may be one of the main underlying reasons (the financialisation of the economy, generating quick, high returns, leading to short-termism, being the other significant cause) why banks and financial firms have been lending more to each other over the last decade than to firms engaged in the real production of goods. Purely financial transactions – involving a mere transfer of ownership – make up over 90% of international monetary exchanges today, as opposed to 10% in the 1970s. 

Surely there must be far more effective ways than the trickle-down effect resulting from such economic growth to put an end to poverty in the world! Two questions become pertinent. First, what, if not economic development, is the real purpose of growth? Second, if development is merely a shallow rationalisation for growth, what might be the alternative/s to it? Let’s take the first question first. We’ll answer the second question in another column. 

Elites everywhere are gluttons for power – which is often readily seen as an end in itself. (Notice the euphoria among our ruling elites over the fantasy-filled possibility that India may become a superpower one day, just like its present role-model.) In a dynamic capitalist world, built around contracts, growing prosperity – much more than established social status – is the prerequisite for power. Virtually everyone in elite classes around the world today dreams of an empire, but only a tiny few enjoy the dream in real life. They do so at the expense of those excluded from the dream (which might ultimately involve the unborn), while keeping the many aspirants in a state of perpetual seduction and enthralment. The catch is that most of the overall structure of global power is invisible to the majority of people. 

This had been anticipated by those who fought for this country’s freedom from Western domination. In Glimpses of World History, which Jawaharlal Nehru wrote in prison, he said that “the modern type of empire is the invisible economic empire”. His foresight merits a full hearing: 

“Most of us think of empires... like the British in India, and we imagine that if the British were not in actual political control of India, India would be free. But this type of empire is already passing away, and giving way to a more advanced and perfected type. This latest kind of empire does not annex even the land; it only annexes the wealth or the wealth- producing elements in the country. By doing so it can exploit the country fully to its own advantage and can largely control it, and at the same time has to shoulder no responsibility for governing and repressing that country. In effect both the land and the people living there are dominated and largely controlled with the least amount of trouble.” 

One might add that the task is considerably simplified if a national elite can be ‘sponsored’ by engaging it as a junior partner in the overall project of domination. That way the spoils of the war that development has become are shared to a degree which is enough to maintain indirect control in the sphere of influence. Its own ambitions will make the national elite generally subservient to the interests of the superpower. Nehru went on: 

“It is quite possible that Britain’s visible hold over India might go before long, and yet the economic control might remain as an invisible empire. If that happens, it means that the exploitation of India…continues…

Economic imperialism is the least troublesome form of domination for the dominating power. It does not give rise to so much resentment as political domination because many people do not notice it.” 

After two decades of (An)globalisation in a unipolar world, we can now see how well-founded Nehru’s fear was. Market-mediated empires are indeed less visible. This has been true since the days of the medieval trading empires created by European powers after Columbus and Vasco da Gama. Imperial ambitions today come carefully masked by the rhetoric of economic growth which is meant to deliver ‘development’ – through the ‘automatic route’. In actual fact, since the ‘stealth reforms’ after 1991, the country has been converted into a well-disguised project of global finance capital.  

Under the guise of mobilising capital for development, growth in the real economy is pushed in order to keep India attractive for global investor classes. The latter can then extract surplus from the country via financial returns which are unheard of in the Western world. Data published last year by The Times of India showed that before the recession began, the Mumbai Stock Exchange gave, on average, annual returns of 43% to global investors, while Beijing gave 33% and New York a mere 15%. 

To keep the stock market in such a delirious state, a system of real illusions is needed. The hype has to be founded on something real underneath. This was provided between 2003 and 2008 by high growth (8-9%) of GDP in the economy.  

However, to ensure this growth many things are required. For instance, you need resources, markets, cheap (nowadays usually skilled) labour, suitable government policies and incentives (like tax breaks, relaxation of labour and environmental standards) and so on. We have seen, and will continue to see unless we change course radically, historically unprecedented land and resource-grab, coercive creation and imposition of markets, demands for ‘flexible’ labour standards and of course an economic policy framework treacherously obsequious to the pressures of global and national capital. 

The prerequisites of rapid growth led by global private capital are not inevitably obtained in a world of ostensibly sovereign nation-states which claim to be decolonised and free of Western imperialism. The justification of ‘development’ is thus necessary to secure policies in poor countries which favour global elite interests. The role of the so-called multilateral institutions, the IMF, the World Bank and the WTO is critical here. The regional development banks – such as the Asia Development Bank – toe the line of the Washington Consensus.  

The intellectual armoury to push such policies is provided by the army of economists, consultants and development professionals who are trained at universities in the West, and typically go back and forth between jobs with multilateral institutions and national governments. Governments in Third World countries have ‘bought’ the party line given by the high priests at the IMF and World Bank. Elites in these countries have been taken on board as junior partners and rivals in the race for global corporate dominance. All that remains to be accomplished in order to get traction for the ambitions of the transnational corporations (90% of which are US/EU/Japan-based) is to ‘buy’ public opinion in these countries. This is obtained today by turning newspapers into tabloids and through 24/7 commercial propaganda and aggressive advertising over television. Numbing large audiences into thoughtlessness is necessary to turn them into willing slaves and greedy consumers for the existing economic machinery to prey on them. 

The net result of this many-sided assault of predatory growth is that no political party in an ostensibly democratic nation like India has found the integrity and courage to seriously challenge the notion of ‘development’ in the present election campaign. On the contrary, most leaders – ‘dealers’ deeply ensnared in the twin lures of power and wealth – have taken development as one of their key planks for campaigning. This is so even when evidence is mounting rapidly that India is today caught in a growth process which is structurally exclusive, leaving most people (possibly more than 80%) without a chance to share in the gains of globalised development. It is almost a qualification for running a successful electoral campaign today that you are at least a crorepati. In a country where the per capita income is a little over Rs100 a day, and more than 80% of the population still earns below the per capita income, millionaires and wannabe billionaires decide the destiny of the people. To be anyone less rich is to be disqualified before you can get a start. 

If one or another of the parties and coalitions still ends up forming the government, it is only because a truer, more authentic politics is kept at bay by the forces of power and wealth. By default, one or another group of corrupt ‘leaders’ is elected to office. Nobody has ever ‘won’ a national election in a very long time: someone has always lost it. 

InfoChange News & Features, April 2009