By Iqbal Masud
Three recent news items: I, Under the heading “India going electronic’ International Herald Tribune gives an enthusiastic account of India’s new electronic National Stock Exchange which became operational on November 10. It will have everything going for it, “speed transparency and lower cost for investors”, compared to the Bombay Stock Exchange. Another glittering addition to the store of Manmohanomic miracles.
- In the latest issue of Foreign Affairs, Mr Paul Krugman of Stanford University questions not. Only whether the Asians have developed, a superior economic, system but whether there has been an economic miracle at all. The reference is to the “Tigers”, the countries of the Pacific Rim (S Korea Taiwan, etc.), which Serve as a model for Dr. Manmohan Singh Asian growth”. Says Mr Krugman, “like that of the Soviet Union in its high grow her a seems to be driven by extraordinary growth in inputs like labour and capital than by gains inefficiency
- “Politics can end up being a zero-sum game if the economy is not growing fast enough.” Dr Manmohan Singh.
If one reflects on this collage of images, and statements, the following propositions emerge India’s economy and techno culture have a computer dazzle. But how deep does it go? How efficient is it? Can it pull the Sensex outfits present morass? Can it by itself restore foreign investors’ confidence hit hard by communal/ caste riots, plague and malaria? How efficient is our liberalized or liberalizing economy? In the course of celebration of liberalization by its acolytes, this question is rarely asked, When our products are “failed” by objective tests abroad, we often shout “First World imperialism’’, But the inefficiency is a fact. Will liberalization get rid of it by waving the magic wand of multinational entry? Last and most important, is politics a function of economics? If the economic cake increases by virtue of liberalization, will our caste and communal strife disappear, or is there a more complex relationship between economics and politics? Let me digress on a personal note, during the mid-sixties I was a UN Economic Adviser to the Government of North Yemen The present aide to Dr.Singh, Mr Montek Singh Ahluwalia, had visited Yemen at that time with a team of World Bank experts. He evinced keen interest in a report of mine which had traced Yemen’s economic and political problems to its tribal system. I don’t know what happened to the World Bank report but the open-door economic policy in Yemen during the seventies and the eighties doesn’t seem to have done it much good considering the recent vicious war between North and South Yemens. The point of my digression is this. Unless we understand at a deep level the link between politics, economics and the social structure, the so called economic reforms can spell disaster. Let me take three instances Iran Egypt and Algeria. In the seventies the Shah of Iran had opened the gates of Iran to foreign capital no doubt tightly controlled by him. The result the rise of a predatory class resulting in the rise of fundamentalism and its victory. Egypt adopted an “Open Door’ economic policy during the eighties under President Sadat. The result was twofold. A crazy race for “development”, a neglect of environment, and the rise of Sunni fundamentalism (similar in technique to Iran s Shia fundamentalism). The recent disaster in Egypt of oil tankers being set ablaze and the loss of 500 lives can be directly attributed to Egypt’s liberalization and its reckless disregard of environment. The inhumanity of this process has revived religious radicalism which is seen to view individuals as human beings and not as economic units. A similar process was noticed in Algeria, Freed from France in 1962 by “socialist military” groups, the country slid into economic misery because of the corruption of its “secular” ruling classes. The latter “Opened up” the country to multinationals for oil exploration/exploitation. The benefits from this “connection” were not passed on. To the poor, the result: the poor flocked to the religious radical groups. Of course, India is not Iran, Egypt or Algeria. It has a democratic constitution and a still reliable judiciary but the administration and politicians are suspect in vital areas. There is the same neglect of environment, an all-pervading mood of despair and cynicism is driving people to religious radials. Politics is not a*zero sum game”, it is a negative game which will reduce Manmohanomic to zero.
Let us look at some vital areas where polity/society impinges on the economy. Communalism: Hindu Muslim relations are at their lowest ebb in this century. I write as one who has studied the history of the relationship and watched it in action since the early forties. Does it affect the economy since Muslims are only 12 per cent of the population? But this group is scattered all over the country and its total alienation is creating problems, and will continue to do so. Dr Singh admitted its impact when he pointed to the disastrous impact on the exports of Seurat’s communal riots in December, 1992. So what is the government of which Dr Singh is apart, doing about it? The Supreme Court’s Ayodhya ruling has bought it time to “do nothing” (to quote a lawyer), But apart from “affirmative action” gestures (minority reservation, etc.), what is the government or what are the political parties doing to bring the communities together emotionally? By putting all eggs in the Ayodhya basket both groups have lost. Now is the time to sit down and talk — and not only about Ayodhya. Caste uprisings: These affect the economy in two ways; (a) the professional upper castes may become NR’s. (b) The growing interacts violence will discourage investment. Here, again is a situation where one has to look beyond electoral gains and start on a national healing process.
Corruption: The cause of moral probity has received a severe set~ back by the failure to bring the guilty men to book in the ATR on the JPC’s findings. Dr Singh should realize that the first requirement of a free market economy is transparency in decision-making and its concomitant accountability. If that is not there, the Finance Minister can send back’ liberalization to Harvard or wherever it came from.
“Open-door economics” is a dangerous game. See what happened in Russia and Eastern Europe. If Dr Singh wants to play that game. He has to play it according to its. Intangible but inflexible rules.
Article extracted from this publication >> December 23, 1994
