[Reader-list] Growth vs Redistribution

[A. Mani]

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People's Democracy
Vol. XXXVII
No. 33
August 18 , 2013

Growth versus Redistribution


Prabhat Patnaik


A CURIOUS debate has arisen in the country of late which has gained
importance in the context of the proposed food security legislation,
though this legislation itself is not being explicitly debated. Two
Columbia University economists, Jagdish Bhagwati and Arvind
Panagariya, have argued that attempts at redistribution must come only
after a period of sustained high growth, for otherwise there will be
too little to distribute; hence all efforts must be concentrated now
on achieving growth. Though their case has been spoilt somewhat by one
of them making personal broadsides against Amartya Sen, who is alleged
to hold a contrary view (on this more later), this argument itself
merits discussion.


LITTLE SENSE

The first question that arises is the following: the argument that
redistribution should wait and growth must take priority, for then the
cake to be distributed will be even larger, can be made at every point
of time. It can be made ten years from now, or twenty years from now,
just as it is being made now. Hence this argument, without the
specification of some objective criteria on the basis of which it can
be said that the day of redistribution has finally arrived, makes
little sense. And the Columbia professors specify no such criteria.

They must either argue therefore that as the economy grows, a time
comes when the demand on the State exchequer (whose size too would be
growing in a growing economy) by expenditure items that are essential
for sustaining growth (or tax concessions that may be deemed necessary
for doing so), automatically taper off , so that more funds become
automatically available for redistribution without in any way
disturbing the growth momentum; or else they would be open to the
accusation that they are opposed to any deliberate attempt at
redistribution ever.

Since they do not advance the first argument, for which in any case
there is little basis in reality, they cannot escape the charge that
while they talk as if growth should be a prelude to redistribution,
what they are really concerned with is growth per se which they
believe can spontaneously cause an improvement in people’s lives. In
other words what we have here is the thoroughly discredited “trickle
down” theory being brought back into respectability.

Let us however, for argument’s sake, ignore this first question. Let
us assume that they actually have some time-frame, such that we pursue
growth until then and attempt redistribution thereafter. But that
brings us to the second question. To believe that the State can pursue
growth-promoting policies till a certain date and then suddenly switch
to redistributive policies after that date, is to believe in the
absolute autonomy of the State in a capitalist society, which is naïve
in the extreme. The very pursuit of growth-promoting policies in such
a society entails the strengthening of certain social groups, an
increase in their wealth, incomes, and economic, social and political
influence, including influence over the State. Hence the State that
pursues growth-promoting policies under capitalism cannot be expected
to switch suddenly to re-distribution one fine morning.

Such a switch of course may happen if the earlier State is overthrown
and replaced by a different kind of State (even if this is not yet a
socialist State); but such replacement requires massive militant
action on the part of the people. To exacerbate the people’s misery
through a strict adherence to growth promotion, to the exclusion of
any policy of redistribution, in order to provoke them into such
militant action cannot possibly be anybody’s recommendation; and such
militant popular action surely is far from what the Columbia
professors have in mind.

This naïve belief in the absolute autonomy of the State becomes even
more incredible when we are talking of a country tied to the vortex of
global capital flows. The capacity of the nation-State to pursue
policies of its choice, even assuming that its intended policies are
informed by the best interests of the people, gets undermined when the
economy over which it presides is open to global financial flows.
India, no doubt, does not have a convertible currency, and has some
restrictions on cross border financial flows (which may be construed
as giving its State a certain degree of autonomy); but it is still
sufficiently open to capital flows to impose restrictions on the
capacity of the State to pursue policies relating to redistribution.


CONSTRAINTS OF AN ECONOMYCAUGHT IN THE VORTEX OF GLOBALISATION

This is so obvious a point, and so heavily underscored by what is
happening at this very moment in the Indian economy, where a desperate
effort is on to make India attractive to globally-mobile capital in
order to halt the slide in the rupee, that claiming, even if
implicitly, that the State has the absolute autonomy to pursue one
kind of policy now and another kind later, and that too when the
latter kind of policy is specifically disliked by globalised finance
capital, cannot but be an act of dissembling.

Globalised finance capital will be happy when the so-called
growth-promoting policies are pursued, but when the time for a switch
from growth-promotion to redistribution comes, if it does come at all,
ie, if all prior efforts of finance capital to scuttle such a switch
have been defeated, it will quit the country en masse precipitating a
financial crisis, until either a stop is put to such attempted
redistribution or the country imposes capital controls and de-links
itself from the process of “globalisation”.

This is where one must also join issue with those who are advocating
redistribution now. Our sympathies obviously lie with them, but they
show, neither implicitly nor explicitly, any awareness of the
constraints, upon the policies of the nation-State, of the economy’s
being caught in the vortex of global financial flows. Many of them in
fact, Amartya Sen included, have been votaries of “globalisation”
(whose essence in today’s context is getting caught in the process of
globalisation of finance).

To be sure, one can have a different theoretical understanding where
one believes that the constraints, imposed upon the policies of the
State by the fact of the economy’s being open to globalised finance,
are not serious enough, that the Left exaggerates these constraints.
But the fact that there is some constraint surely cannot be denied,
especially if the attempt at redistribution on the part of the State
amounts to more than a trifle. And yet there is no explicit awareness
of this fact among the advocates of redistribution, and no suggestion
of what the State should do, if the globalisation favoured by them
stands in the way of the redistribution which they also advocate.

The present debate in short, pushes us into a conceptual universe
where categories like capital, finance capital, international finance
capital do not exist. The Left cannot become a part of this conceptual
universe, notwithstanding its preference for one side in this debate
over the other, and even while adding its weight to the demand for
redistribution as a transitional demand.

There is a second, and even more basic reason, for the Left’s
remaining outside the terrain of discourse where this debate is being
carried out. That is an epistemological reason, and it arises because
all participants in the debate, again Amartya Sen included, are agreed
that at low levels of per capita income, growth must have priority.
True, those advocating redistribution argue that education, nutrition
and health for the people is essential, but essential for achieving
growth. While we may agree with them that a sustainable strategy for
growth must be one that should be inclusive in this sense, it still
amounts to arguing for education, health and nutrition for the people
in instrumental terms, only because it is conducive to growth, not
because it must be mandatory in a democracy per se. And if it is
mandatory in a democracy, then it must be provided to all, no matter
what the level of per capita income, no matter how “poor” the country
may be.


PEOPLE ARE SUBJECTS, NOT OBJECTS

In a democracy the people are supposed to be “subjects” and not
“objects”. As “subjects” they have an absolute and inalienable right
in normal circumstances to certain minimum levels of health, nutrition
and education, which are essential for them to play their “subject”
role. Even above this bare minimum, for which there are certain
objective norms (which certainly can be fulfilled in India today),
what actual level of redistribution should be effected must be decided
by them.

For making this decision they need inputs that economists must
provide, but it is not for the economists, or the media or the State
to decide what is good for them, to decide whether to have growth or
redistribution. Even if, for argument’s sake, we assume that the
provision of the minimum levels of nutrition, health and education to
the entire population of the country, would create a situation where
the growth rate of the GDP would drop to zero, then that cannot be an
argument against the provision of this minimum. Such a situation, of
growth rate dropping to zero if redistribution is undertaken, would
not of course arise, and this fact must be emphasised, but this cannot
be the argument for the provision of such a minimum. The argument for
providing this minimum in short transcends all such considerations.

The epistemological objection from the Left to the present debate
consists in the fact that both sides in it privilege “growth” without
taking cognizance of the sovereignty of the people. The debate smacks
too much of “we”, the economists, deciding what is good for “them”,
the people, and telling the State accordingly; it should instead have
been “we” the economists aiding the “subject” role of the people.

Put differently, the first question that should have been posed to the
Columbia professors when they argued that growth should take
precedence over redistribution, is: “who are you to say so?”, and not
“yes we agree with you over growth, but redistribution will also help
growth.”


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Best

A. Mani



A. Mani
CU, ASL, AMS, CLC, CMS
http://www.logicamani.in