Terry Eagleton is a British Academician of repute with a leftist orientation in his economic thinking. His book on ‘’ Why Marx was right” is thought provoking in the context of the current economic turmoil. The neo-liberal principles of de regulation, free market and capital de control are the fundamentals of the new economic order being practised in many nations. This economic order along with the impact of modern information technology created what is now called as globalization, breaking down barriers between geographically dispersed markets. Globalization resulted in internationalization of trade, production, investment and capital movements. The purpose of this article is not to have a discourse on globalization (as I am neither a critic nor a votary of it ) but to focus on the turbulences that we are experiencing from the world markets and its consequent impact on the Indian economy .
In the twentieth century we saw the great divide between the Socialists who believed that through the dictatorship of the Proletariat, wealth can be redistributed, while the Capitalist believed the same can be achieved through free markets and enterprise . Social and Political developments in the later part of the twentieth century resulted in the triumph of the capitalist leading to the establishment of the so called new economic world order. Markets, production, demand and consumption shifted to Asia resulting in the emergence of India and China as consumption and production centres respectively. By the twenty first century technology started transforming economic life and ensured free flow of capitals across market breaking geographical time lags. India became the service corridor of the world market especially in the area of IT enabled services and China a manufacturing backyard and both economies started growing significantly . Buoyant by their huge foreign exchange surpluses and government stimulus and domestic demand, India and China were able to keep up its growth momentum and survive the financial meltdown which had engulfed world economies in 2009.
The conventional economic model of the free capital had its own irrationality when we saw the Asian Crisis of 1998 , the Mexican Pizza crisis called Tequila crisis in 1994 which were all the consequences arising from flight of capital. The recession of 2009 had its origin in the sub prime crisis in the US when the capitalist financiers used debts and mortgage tools to invest their capital and failed attempts for refinancing the debts. In all these cases respective governments had to pump in tax payers’ money to re-establish the order.
You may ask what all of this has to do with India. Though still an import driven economy with a minuscule share in the world mercantile trade , foreign Institutional investors hold above 30 % of our Stock market which resulted in wealth creation for large stock holders albeit at the risk of wealth erosion. However how many of the 125 crore people in this country hold stocks and trade in them and make money. Only a few, but the country’s population depending on Jobs will have an impact as flight of capital will affect the Indian Industries’ capability for capital investment and creation of jobs. Moreover government may have to resort to providing stimulus to entice industries to invest which has an indirect consequence on tax outgo. The point made here is that the global capitalist order nicely christened as the new world order is indeed creating growth and wealth but in a country like India the million dollars question is that whether the growth is egalitarian in nature. To quote Eagleton ‘’ It is a crazed notion that a single global system known as the free market can impose itself on the most diverse cultures and economies and cure all their ills’’. The great economist of the twentieth century John Maynard Keynes in the aftermath of the great depression of the 1930 had also warned that global capitalism can result in spurt of unemployment affecting demand in the economic system creating a recessionary trend. We saw this in 2009 when jobs were lost and demand suppressed resulting in the UPA government resorting to delivery of stimulus packages .
Of late the turbulences in the Chinese economy, and the de valuation of their currency did have a rippling effect on India’ s stock market and currency value and it is not wrong in stating that India is still in the roller coaster ride , even though domestic demand is driving our growth story.
The larger objective of this essay is not for a doom saying but for understanding India and its need for an egalitarian growth model, rather than the conventional new world order model which governments have been following since last many years. The India growth story is bound to create more disparity and gap between the rich and the poor. If you read the recent world health report prepared by Capgemini and RBC wealth management, it speaks of the rise in Indian millionaires to 1.95 Lakh individuals making India the 11th largest in terms of number of millionaires. This category has risen from 1.56 Lakh in 2013 - a near 25 % increase in two years. In contract to this picture, what is the percentage of reduction in poverty in the same period? It is your guess because you can’t trust the government numbers which are politically motivated….. A recent testimony is the data on applications made by youngsters in the Indian State of UP alone for the post of ‘’peons’’ (low grade government servants) in the Government service. A staggering 1.5 lakh people applies for 350 odd positions of peons which will fetch them a meagre salary of $ 250 per month. It was reported that there were a significant number of PhDs also among the applicants . The number of educated unemployed in UP along is estimated to be more than 15 lakhs. This is just the story of one state in India. The central government recruitments by Union Public service commission for nearly 1200 seats in the class ‘A’ government service is attracting 4.5 lakh educated youths in India. Where does the unsuccessful go? The McKinsey report on India’s economic geography has predicted a major deficiency in skill and employability of India’s youth in the coming times. The employability and skill deprivation among India’s youth has also resulted in youths resorting to violent collective bargaining for reservations on government jobs as like in the recent uprising of the Patel community in Gujarat. A case in point is also the recent trade Union strike and the one rank one pension(OROP) agitation among the defence personal where interest groups largely bargain for government largesse in an economic geography of rich becoming richer and the poor poorer. This trend is bound to continue and the gap skewing widely as our growth only creates millionaires and an indulgent middle class who now governs our economy and polity. The other trend lies in side-lining agro reforms by undermining our burgeoning need for food in a climate changing world .Traditional agricultural labourers are finding no scope in agricultural engagement and is instead migrating to urban areas for work. This is in addition to the no of disguised unemployed in the agricultural economy. These uneducated youths from the agriculture sector clubbed with the educated unemployed faces the greatest economic challenge for India.
In a paper abstract that I read Converging Crises: reality, Fear and Hope by Prof Susan George of the Transnational Institute in Amsterdam I read this concept of re-localization or de- globalization where she talks about regulation and re distribution of wealth by a welfare state. The terminology of re localization echoes the swadeshi jargon from one of our political spectrum. Do we need more millionaires at the cost of the starving lot, what is the mechanism which will ensure that the wealth created is percolated down . Eventually how do we address issues of collective and egalitarian growth rather than being proud of our burgeoning millionaires and middle classes? Will we be able to make the MARKET the MAKER of our Destiny or the MASTER of our destiny?
Addressing these issues are more important than being myopic hearing the myriad growth stories from self-indulgent interest groups.