The Hindu : New agenda needed for development

Online edition of India's National Newspaper
Friday, Jul 05, 2002

Opinion

Opinion - News Analysis

New agenda needed for development

By Murasoli Maran

Since no single magic formula is available for economic development, it may be interesting to start with a brief note about the experience of India — which has 1/6th of humanity but 1/3rd of the world's poor, half of them yet to have access to the written word. Long before concepts such as "basic needs" and "poverty alleviation" emerged and gained currency, Jawaharlal Nehru's adviser in the Planning Commission, Pitamber Pant, made "minimum needs" a basic objective of planning.

He drew up a development plan for 1961-76 with a two-pronged strategy aimed at providing a "minimum level of living" for the entire population: aggregate income growth at 7.5 per cent a year for those 15 years and increased expenditure on health, education and nutrition directed at the poor. This is the `3Es' strategy to combat poverty: Employment, Entitlement and Empowerment. If the same yardstick of poverty line is applied now, around a third of India's population is still poor.

The reason by hindsight is obvious: we were following a State-led model, which was the development consensus at that time among many post-colonial countries. It produced an average annual growth of 3-3.5 per cent, often referred to as the `Hindu growth rate'. While there was an acceleration of growth during the 1980s with liberalisation in bits and pieces, it was fiscally unsustainable and exerted pressure on our budget and balance of payments position. This created a macroeconomic crisis in 1991.

In that year we started the process of economic reform, opening our economy and dismantling the `permit/licence/quota raj'. Ten years of reforms has helped India attain about 6 per cent annual growth. Notwithstanding the measurement issues, overall poverty levels have declined from around 36 per cent in 1993-94 to about 26 per cent at present.

While it is true that "no developing economy can develop within its protected wall'', it is also true that no country has developed simply by opening up to foreign trade and capital flows.

Equally, economic reforms modelled on the so-called "Washington consensus" alone cannot be a cure-all for the problems facing the developing countries. These prescriptions are now subject to question and the questions have not come from the critics alone.

The promise of a better life for millions has not yet been realised. On the other hand, it is causing wrenching social and economic changes which are still uncharted. In this new era of development paradigm, a trinity of Liberalisation, Privatisation and Globalisation (LPG) is perceived as the main development strategy. But this strategy is pursued as an end in itself without any regard to its impact on poverty and inequality.

The problem for the future is not whether to have full or partial globalisation but how to manage globalisation. It is used in the positive sense to describe a process of increasing integration with the global economy. But when used in a normative sense to prescribe a set of strategies in the name of development with "one size fits all'' formula, as if it were preordained by fate, then it causes confusion and worry.

The single greatest phenomenon against the normative view of globalisation is the lack of public support because, among many other things, it gives an impression of encroaching upon the sovereignty of nations and produces losers without any immediate alternative in sight.

Any move that would dismantle or weaken the welfare state concept without providing a sufficient and necessary alternative needs to be approached cautiously after considering the dangerous consequences it is likely to create.

Liberalisation is today adopted by almost all countries. But they should be in a position to confidently carry the message to their citizens that such integration will not cause misery to them and any harmful effects can be dealt with through available policy measures.

When the United States of America dropped the "steel curtain'', its Trade Representative, Robert Zoellick, had stated: "The President believes that free trade benefits American consumers and families and spurs economic growth but he also recognises that some industries, workers and communities cannot respond as quickly as one might wish to the changes of a fast-moving global economy.''

That is what the developing countries are also pleading for — more time for preparation and more resources for adjustment.

The international institutions show little sympathy for such concerns in the developing world. The North is raising the banner of core labour standards and other social issues as if it has the interests of Third World workers at heart. It wants to prevent the South from making use of the only competitive advantage it has: abundant labour. This is nothing but protectionism in the guise of humanitarian concern.

What is important is to enable countries to build up the wherewithal to take decisions based on merit and respective national interests and to be able to implement commitments. Capacity building and technical assistance will become meaningful only if they are backed by sufficient resources for implementation.

Instead of reshaping the world order on the terms set by the North, it is better to have a world order on the basis of social justice and voluntary standards, which are bound to evolve into national and international rules.

What is needed is a new agenda for development based on social justice, recognising the strengths and weaknesses of the state, the market and the people.

The principles of democracy which make governments politically accountable to people must be an integral part of this development paradigm. The global economic order will not work for the North unless it also works for the South.

(The writer is Union Minister of Commerce and Industry. The article is based on his keynote address at the World Bank's annual conference on Development Economics held recently in Oslo, Norway.)

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