[Reader-list] Reg: Series of Articles on India & Its Development - 1

[Rakesh Iyer]

Link:  http://www.frontlineonnet.com/fl2821/stories/20111021282101400.htm

Article:

*Things, not people*

PRABHAT PATNAIK

*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 déjà
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.