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Reaping the benefits of past investments

Big bank theory: In the early part of the 20th century, Dakshina Kannada district saw the founding of banks [such as SyndicateBank pictured above in Manipal] that were to play a major national role by the second half of the century.

Big bank theory: In the early part of the 20th century, Dakshina Kannada district saw the founding of banks [such as SyndicateBank pictured above in Manipal] that were to play a major national role by the second half of the century.  

One of the benefits of taking a half-century view of an economy is that it helps us move beyond the tyranny of annual, or even quarterly, growth rates. Instead, it helps us focus on the causes and consequences of growth, particularly the distinction between periods, when society invests for the future and those when it consumes past investment. If Karnataka in the half-century before 1970 was marked by visionary economics, involving substantial investments in the future, the next half-century in the State, leading up to 2020, has been a period of consuming the benefits of past investments, with much less thought to the future. The early and middle decades of the 20th century saw several transformational changes in Karnataka’s economy.

Princely Mysore had been a pioneer in the development of electricity and irrigation. The Krishnarajasagar dam had fundamentally transformed dry-land districts, particularly Mandya and Mysuru, into successful agricultural regions. Princely Mysore also invested in public sector industries, including those that would help process agricultural products. These early decades of the 20th century also saw substantial investment in technical institutions, including the Indian Institute of Science. Subsequent decades saw the growing social consciousness foster movements that would transform the nature of rural society, such as the Kagodu Satyagraha in Shivamogga district.

In other parts of Karnataka too, there were changes taking place that would have a long-term impact on the State’s economy. In the early decades of the 20th century, then Dakshina Kannada district of the Madras Presidency saw the founding of banks that were to play a major national role by the second half of that century. The districts of Karnataka, which were in the then Bombay Presidency, were witness to the coming of the cooperative movement, with its long-term impact on the political economy of the region and the State.

Agrarian reforms

The transition from a long-term vision to more transactional perspectives was, arguably, first seen in the 1970s version of agrarian reforms. Karnataka, particularly after the reorganisation of States in 1956, had pieced together very different agrarian systems. In the coastal region, and parts of the Malnad, there was a predominance of tenancy. In contrast, much of Old Mysore was characterised by small peasant agriculture with very little tenancy.

North Karnataka had its own variations, including large dominant tenants. The uniform land-to-the-tenant agrarian reforms, predictably, had very different consequences in the varied systems.

In coastal Karnataka, it led to the fruition of land reform politics, with land being transferred from large landlords to their tenants. Some of these new owners became successful farmers and were able to grow their land. Others were less successful and were forced to leave cultivation. This generated a movement out of agriculture, at different levels. The tendency to move out of traditional agriculture extended beyond agriculture as well. To cite a popular example, several people trained in mass feeding in religious institutions, commercialised these skills, leading to the development of Udupi restaurants. Much of the benefit of this movement out of agriculture did not, however, come to the Karnataka economy. Many of those seeking alternative employment did so in West Asia, and those seeking to invest, including the setting up of Udupi restaurants, quite often preferred to do so in Mumbai.

In much of the State, though, tenancy was not the dominant agrarian system. In the small farm-dominated agriculture in the rest of southern Karnataka, tenancy was as much a matter of convenience as it was of agrarian domination.

There were both small and large tenants, just as there were both small landowners and relatively larger ones. The rigid implementation of land-to-the-tenant, thus, only took land from one faction and gave it to the other. This created an environment that emphasised the power of the State. This environment came with an expectation that the State would provide the benefits of growth. As a result the farming community did not develop an entrepreneurial culture of its own. In other States, districts that had benefited from the Green Revolution, such as Coimbatore in Tamil Nadu, had seen farming families moving successfully into industry. The successful Green Revolution districts in Karnataka remained deeply dependent on the government. This dependence led to demands, such as loan waivers, which had a long-term negative impact on the economy as a whole.

Public sector, education

The last 50 years have also seen the extensive tapping of two of the long-term investments made by the State in the previous half-century: the public sector, and education. Investment in the public sector had several benefits that the beneficiaries no longer find it necessary to acknowledge. Some of them were fortuitous.

As the public sector began to come under financial stress by the 1970s, it was decided to rely more on components provided by ancillary units. As these units used unorganised labour, their wage bills were substantially smaller. They also benefited from the State creating large industrial estates, such as the one in Peenya.

This move was, however, not enough to completely reverse the fortunes of the public sector. The large small-scale industry infrastructure and the unorganised labour force were then under pressure. They were saved by a series of seemingly unconnected changes taking place on the other side of the globe.

The student movements in Europe and the United States in the late 60s and the early 70s had their impact on fashion as well. These movements celebrated the clothes of the working class, particularly blue denims. These new symbols of fashion could be mass produced without a very high level of skills. Global brands then began to look for places to manufacture these mass-produced middle-fashion garments at a low cost. Among the sites they found in the developing world were the industrial estates in Bengaluru, with their sources of cheap labour. Bengaluru thus became one of the hubs of global garment manufacture. The emphasis on education by the early visionaries also began to pay off. For a while, especially in the 1960s, the emergence of technical manpower was seen as a problem. It had led to the emergence of a large number of unemployed engineers. The coming of the communication revolution in the 1980s transformed this situation. The new technologies made it possible for this technical manpower to be tapped in Bengaluru by companies that formed a part of the global IT revolution. Since this transformation took place at a time when people had gained the confidence to move from savings in government controlled institutions to equity investments, it also provided an opportunity for Indian companies to tap the capital market. The availability of technical manpower as well as capital markets, enabled traditional industries, like Wipro, to move into the IT space, just as it allowed complete newcomers, like Infosys, to become global companies.

The tapping of the opportunities, created by visionaries of the first half of the 20th century, has not been accompanied by the emergence of new visionaries. Instead, the celebration of economic success has overwhelmed even an acknowledgement of the role of previous far-sighted strategies. In the early decades of the 20th century, Bengaluru celebrated science, with Nobel prize winners working in its institutions. The coming of Independence saw the emphasis shift to the celebration of science administrators. And the turn of the century saw a further shift to the celebration of those who had economically tapped technological change.

The shift from long-term visions to immediate economic gain has had its impact on the very institutions that created the current economic success. The most striking effect is on the education systems that created the technical manpower.

Even as investment in higher education has increased manifold, the emphasis within these institutions has shown a marked shift from learning to earning. As students at different levels seek institutions whose brand is expected to improve their earning capacity, they typically do not care very much about what they actually learn in the process. The institutions, in turn, begin to pay greater attention to their own earnings, further widening the gap between what industry expects and actual knowledge of the students. This gap may not be immediately noticed, but industries get wiser to it sooner rather than later. This has already led to the emergence of technical manpower that industry finds unemployable.

Present over future

The emphasis on the present over the future has also taken more extreme, and clearly unsustainable, forms elsewhere. Excessive mining, which is sometimes not even legal, has drained natural resources and created an environmental crisis in Ballari district.

The pressure on natural resources and the environment may be less severe in other districts, but it is nevertheless quite substantial. The economic success that Karnataka likes to celebrate has been largely the result of visionary strategies in the first half of the 20th century.

Far from being acknowledged, the preoccupation with the celebration of the present has been accompanied by ignorance of what got us here. We may choose to kick away the ladder that got us to these heights, but our children have genuine reason to worry about what we have left them.

(Narendar Pani is Professor and Dean, School of Social Sciences, National Institute of Advanced Studies.)

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Printable version | Aug 11, 2020 8:55:13 AM | https://www.thehindu.com/news/cities/bangalore/reaping-the-benefits-of-past-investments/article31881108.ece

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