Growth vs development

Jagdish Natwarlal Bhagwati, professor of economics at Columbia University in New York, isn’t known for modesty or patience towards his critics. In 2004, he got a chair in Indian political economy created at Columbia, named after himself. Even more unusually, the chair’s occupant is Arvind Panagaria, Bhagwati’s co-author!

In 2010, Bhagwati had a fellowship named after himself set up at the Columbia Law School to coincide with the creation of a chair named after its illustrious alumnus and India’s main constitution-drafter, BR Ambedkar. Unlike the first chair funded by private donors, the Bhagwati fellowship is financed by the Indian taxpayer!

Bhagwati and Panagaria are dyed-in-the-wool neoliberals and apologists for the now-discredited ’Washington Consensus‘ package of liberalisation, privatisation and globalisation. Bhagwati has famously championed free (as opposed to fair) trade as the key to development. Panagaria has been chief economist at the Asian Development Bank, and a World Bank and International Monetary Fund adviser. Both root for ’second-generation reforms‘ and oppose food security, employment guarantee and other welfare measures.

Bhagwati relishes ridiculing those who disagree with him, in particular Nobel Laureate Amartya Sen. Bhagwati’s books, including the latest ’Why Growth Matters‘, co-authored with Panagaria, are replete with vicious comments on Sen. For years Bhagwati would throw a party each time Sen missed the Nobel Prize. He called for a new ’Swadeshi‘ movement – making a bonfire of India’s regulations – without the faintest recognition of the irony of advocating this while living abroad! Yet, not many thought Bhagwati would stoop to launching abusive personal attacks while commenting on Jean Dreze and Sen’s new book ’An Uncertain Glory: India and Its Contradictions‘. Sen responded with reasoned arguments, largely without mentioning Bhagwati.

Besides the book, what seems to have ’provoked‘ Bhagwati is Sen’s defence of food security, endorsement of Bihar’s social welfare measures and criticism of the Gujarat ’development model‘, and his statement that he wouldn’t vote for Narendra Modi as prime minister. Many people have described this exchange as a shouting match or slugfest. But the aggression comes from one side, with Bhagwati unfairly accusing Sen of being anti-growth.

While unseemly, the exchange nevertheless highlights the polar opposition between the GDPists, or worshippers of GDP growth as an end in itself, and those who believe that what matters is social progress and people’s welfare, which requires more than growth. The GDPists’ critics are on strong ground while citing India’s experience over the last two decades, the fastest-growth period in recent history, if not ever. This has seen very little improvement in the standard of living of the majority, or in the reduction of poverty, deprivation, income inequalities and regional disparities – the real measures of progress.

Progress requires balanced growth with equitable distribution. India’s growth is remarkably unbalanced, with the services sector growing rapidly, industry growing too sluggishly to absorb labour, and agriculture – on which 60 percent of people depend –growing at barely two percent.

Recent growth has wrought enormous environmental destruction in India. In a recently released report commissioned by the Indian government, the World Bank estimates that environmental degradation annually costs India a horrific 5.7 percent of GDP. This shaves off almost all of the annual six percent per capita GDP growth recorded between 2000-01 and 2010-11. Outdoor pollution alone kills 1.16 lakh people every year. Almost a quarter of India’s child deaths can be attributed to inadequate availability of clean water and sanitation, itself related to environmental degradation.

Income disparities in India are growing obscenely. According to the latest National Sample Survey, per capita spending of the richest five percent of urban Indians in 2011-12 was 15 times higher than that of the poorest five percent. Twelve years ago, the ratio was 12. In rural India, the top-bottom disparity grew from seven to nine multiples.

Even assuming that the latest Planning Commission estimates of poverty – which very few people find credible – are correct, the annual pace of poverty reduction is just 2.2 percent, a fraction of the 7.6 percent GDP growth. There’s no ’trickle down‘ to the poor.

Rather, growth enriches the already affluent. The Bhagwatis of the world have no answer as to how this growth process, into which structural imbalances and disparities are built, can reduce them on its own. The Bhagwati-Panagaria book contains no serious analysis. It merely regurgitates shop-worn GDPist clichés.

Bhagwati-Panagaria abuse Sen as a misguided ’Mother Teresa of economics‘: “…she did a lot of good at the micro level”, whereas Sen’s prescriptions have done ’huge damage‘. They rail against food subsidies for the poor, amounting to less than Rs1 lakh crores, terming them a ’fiscal threat‘ and a waste of money, but are silent on India’s much larger fuel subsidy bill or the giveaways of over Rs5 lakh crores to the rich in budget after budget.

Dreze and Sen lay out a persuasive case for state intervention in their sober (and sobering) discussion of India’s dismal human development performance – in healthcare, literacy, education, poverty reduction and social assistance etc. They aim at ’integrating growth with development‘ within a democratic and participatory framework.

They highlight India’s many persistent social pathologies. Thus, 43 percent of India’s under-five children remain undernourished, and 48 percent stunted. Almost half of Indian women of childbearing age are anaemic. These ratios have remained unchanged over two decades. As has the proportion of Indians who defecate in the open – still over 50 percent.

Even more telling, India, despite its high growth rate, remains a social development laggard in South Asia barring Pakistan. The contrast with Bangladesh is revealing. Bangladesh’s per capita income is half that of India’s. But it has overtaken India in life expectancy (four years higher), infant-mortality decrease (25 percent lower), and child immunisation (82 vs 44 percent). India performs disgracefully even in comparison to the world’s poorest 16 countries outside sub-Saharan Africa. It ranks as low as 11 (literacy), 13 (improved sanitation) and 15 (underweight children). India, quite simply, is a disaster zone – little islands of California amidst a sea of social deprivation, economic bondage and human misery.

In Asia’s lower-middle income countries, to which India belongs, spending on social insurance, social assistance, and labour market programmes averages 3.4 percent of GDP. India’s spending is one-half of this – and just one-fifth that of Asia’s high-income countries. Even that low level is reached largely because of the National Rural Employment Guarantee Act.

Dreze and Sen powerfully argue for a series of corrective measures to empower the poor and enhance their capabilities. They address not just economic matters, but issues such as accountability, corruption, ethics, public reasoning about equality and justice, and the opportunities for change made available by India’s relatively robust democracy despite all its faults. One wishes Dreze and Sen had delved deeper into the root-causes of India’s social development failures – such as class, caste and gender biases, themselves rooted in India’s severely unequal society, its policymakers’ elitist inclinations, the misanthropic nature of its ruling class, recent distortions in public discourse, and increasing demonisation and repression of popular protests.

Their passionate concern with these questions is expressed in the book’s final chapter, ’The Need for Impatience‘. This sums up what we, South Asians, must do – become intolerant of our policymakers’ criminal indifference to justice and equality, and mobilise major social energies on these vital issues.

The writer, a former newspaper editor, is a researcher and rights activist based in Delhi. Email: prafulbidwai1@yahoo.co.in