“The autonomy of the poor and the support of the State for companies are the new motto” – Jean Dreze
Economist Jean Dreze played a pioneering role in shaping India’s public and social policy. He is best known for his advocacy for the MGNREGA Employment Guarantee Legislation and the National Food Safety Act (NFSA). In this interview with NewsClick, he talks about India’s social and economic policies, including the relationship between Hindutva and the economic model pursued today. He says it is difficult to see a coherent strategy in current economic policies, when in the social sphere “rights are out, duties are in”. Edited excerpts.
Economic nationalism informed the freedom movement, which meant that Indians took control of the economic sphere. It was also about revitalizing the public sector. What was the purpose behind it, and did we achieve the objectives?
Economic nationalism, like nationalism itself, can take many forms. I don’t think it provides much political guidance unless we clarify how national interests are defined. When India became independent, control of the economy shifted from colonial rule to an elected national government, and that was certainly a good thing. It also ended the economic stagnation of the first half of the 20th century and paved the way for sustainable development. But does this mean that “the Indians have taken control of the economic sphere”? Some did, some didn’t. Landless workers, for example, remained landless workers, except in Kashmir, where there were many agrarian reforms. Overall, the levers of the economy remained in privileged hands. The transfer of power from the colonial government to a privileged Indian minority was a limited form of economic nationalism, with small results in itself for large parts of the nation.
A problem for India is to reconcile the conflict between capital and labour. What does the withdrawal of the state from production and the sale of the public sector mean for the majority of Indian workers?
Public enterprises can only resolve the conflict between capital and labor for a minority of public sector employees. Contrary to public perception, India’s public sector is one of the smallest in the world in terms of employment – just 5% of the workforce, compared to 12% in Brazil, 22% in the UK and 28% in China. according to ILO data. There are certainly many possibility of expansion, particularly in sectors such as health and education. However, most of the workforce will be employed in the private sector for the foreseeable future. The conflict between capital and labor is irreconcilable there, but the state can help workers manage it by extending their rights, for example the right to decent working conditions and social security benefits. Workers’ organizations are also important in this respect, particularly in the informal sector, where they are still few and far between.
In the longer term, a more radical change in terms of conflict can be achieved by giving workers more voice in the management of private companies, if not in their control. In principle, many companies could be managed by the workers or by managers responsible to the workers. The bosses, of course, are not going to bow out smoothly, but an organized working class might eventually overcome their resistance bit by bit.
Hindutva is also a form of nationalism which proves to be very destructive. What is today’s economic model to promote? As in the social field, does he also have hidden motives?
Hindutva is a political movement, and its record is more political than economic, whether it is the end of democracy or the breakdown of the social fabric. In economic policies, there is more continuity than change. On the contrary, business-oriented policies have intensified because business and Hindutva have a mutually supportive relationship. The Hindutva adds some new elements, such as the devaluation of rational thought, obsession with superpower status, passion for centralization, and suspicion of anything foreign. But the material interests that guide economic policy are much the same as before, at least for now.
In social policy, we have seen major changes over the past eight years. Rights are out, duties are in place. This change is reflected, for example, in the central government’s hostility towards social programs such as the rural employment guarantee, maternity benefits, social security pensions and even child nutrition programmes. All of them have been mined in one way or another. Empowerment of the poor and state support for business seems to be the real meaning of Atmanirbhar Bharat.
How do you see the tycoons’ control over the economy and the tax breaks they get? Do Indians feel that their power is not exploitative because they are not British corporations like in colonial times?
I think a lot of people have a vague awareness of the power of corporations and the wealth of the super-rich without necessarily realizing their enormity. In the last Nation’s mood poll, the majority of respondents believed that today’s economic policies benefit big business. On the other hand, when it was pointed out a few days ago that it would be necessary a million years for a hundred minimum-wage workers to earn as much as Gautam Adani, there has been a flurry on social media suggesting most people don’t realize how rich and powerful the super-rich are. But even if they do, it makes little difference because the public has little influence on these matters. Most people in India would probably support a wealth tax on the super-rich or higher property taxes, but none of that is likely to happen in a hurry. The power of the super-rich includes the power to defend their privileges.
Are ordinary farmers aware of how the terms of trade work against them?
I doubt most farmers have a clear view of the terms of trade. They are quite obscure to economists. And they may or may not be of great importance to individual farmers. Broadly speaking, the terms of trade reflect what the agricultural sector can buy from the rest of the economy per unit of product sold in the market. That would be a useful statistic for a surplus farmer. On the other hand, consider the farmers in Jharkhand, where I live. Most of them are loss-making farmers who grow some of their food and buy the rest, and other items, with their earnings as non-farm wage earners. Improved terms of trade may or may not help them. They have plenty more to worry about, starting with the drought that is currently sweeping through much of the state.
What most farmers understand, I think, is that farming is not a very rewarding occupation, especially in arid areas. Their job is full of hard work, hardship and uncertainty, but in the end, they can barely make ends meet. And it doesn’t get much better over time because productivity growth barely offsets the decline in land holdings per capita. Meanwhile, the rest of the economy is growing relatively quickly, so farmers tend to be left behind. It’s this relative loss, I think, that frustrates farmers and drives them to look for alternatives.
How do you see the discourse on “alms” and “benefits”?
We shouldn’t use propaganda terms like grants and giveaways used by corporate-sponsored media to attack grants they don’t like. We should evaluate grants on their own merit. Subsidies can be justified on various grounds, such as social equity, public health or environmental protection. If they have no justification, you could call them useless subsidies. The bulk of unnecessary subsidies in India benefit privileged groups and the corporate sector, for example, in the form of over-subsidized electricity, tax breaks, uncollected loans and privatization of natural resources. These are the big documents if you insist on using that kind of term. Some unnecessary subsidies may also benefit the poor, but they are quite small in comparison.
Redistribution is a essential role state, and there is nothing wrong with helping the poor by providing them with certain equipment or products for free. Politicians often overpromise for their own ends, which is not always a healthy thing. But it is only by getting these kinds of promises that the poor get anything in India’s lopsided democracy. Most of the major social policy milestones in the recent past, such as the Job Guarantee Act and the National Food Security Act, were made possible by democratic politics. The idea of restricting this process, as the Supreme Court would have suggested, is quite dangerous.
Is India facing a crisis of what its next development strategy should be? And what is the output?
It is indeed difficult to see a coherent strategy in current economic policies beyond the general love of business. The NDA government came to power with a clear call for the return of black money stashed abroad, but it turned out to be a wild goose chase. A surgical strike against black money at home was the next step, but it backfired when demonetization derailed the economy. The trail of muddled policies continued with Make in India, Smart Cities, Atmanirbhar Bharat, “one district, one product”, and fanciful goals like doubling farm incomes by 2022 (that’s today) or make India a $5 trillion economy by 2024.
The common denominator of these policies is that they leave a lot to the imagination, so the details are easily turned into trade concessions. Atmanirbhar Bharat, for example, quickly morphed into the so-called ‘production-linked incentive scheme’, a shower of Rs 2 lakh crore subsidies for big companies, including foreign companies like Ola and Apple. . As Raghuram Rajan pointed out, we risk reverting to a kind of License Raj.
The solution is to fight for public policies that focus on improving people’s lives instead of being influenced by vested interests. The expansion of human capacities is not only a question of well-being, it is also a springboard for development. A modest increase in the tax-to-GDP ratio, cuts in unnecessary subsidies and a big investment in health, nutrition, education and social security would be a good start. This would serve the triple purpose of economic development, helping the poor and reducing India’s huge inequalities.