Tuesday, May 1, 2007

BALANCING NEEDS - India needs a vision with common sense


BALANCING NEEDS - India needs a vision with common sense

Tapas Majumdar

Prime Minister Manmohan Singh was addressing the “CII Steel Summit: Vision 2020” when, with his characteristic gentleness, he managed to make several telling points, beginning with: “I want the Mittals and the Tatas, and all others who are eyeing global opportunities, to also invest more at home. India is a land of opportunity.”
The prime minister possibly had in mind two recent feats — the acquisition of Arcelor Steel by Mittal and of Corus by Tata Steel — when he added, “While I commend our business leaders for their global vision and reach, I urge them to pay equal attention to market opportunities at home.” He went on, presumably thinking of what had happened (and was still happening) in Nandigram and Singur: “There has been some controversy in the recent past on industrial policy, but I am sure the people of India want to see industrial progress. In a country where the average size of landholding is so small, there are limitations to what you can do to improve agricultural productivity … The long-term solution to the problem of agrarian distress has to be to take people away from agriculture, to manufacturing, to services and other non-agricultural pursuits.”
Finally, the prime minister entered a caveat to the vision. This was so contrary to the rest that it made me wonder whether what preceded was Manmohan Singh’s own vision. But I will come to this remarkable parting shot, appropriately, only at the end.
I am not writing this just to express my admiration for the way the economist Manmohan Singh chose to present this clear and seemingly sensible vision of economic development. My main purpose is to argue rather to the contrary. I would suggest here that the clarity of the prime minister’s mind actually allows us to see more clearly how the vision of development, plausible in the outline, is basically fractured. It throws up serious social choice anomalies when one tries to spell it out.
Is there anything special about a development vision? I think there is, as a social choice specialist will tell you, if pressed. To put it briefly, your development vision, almost definitionally, cannot be a monolith if you live in a democracy: typically, one vision would offer quite different vistas of social opportunities and economic futures to different individuals and different categories of people.
An important task before the nation’s policy-makers is therefore to look for the unequal consequences of a given development process and for possible ways of reducing the iniquities that such consequences may imply. Equally important is the state’s duty to caution people honestly about the small print that always goes with the bold outline. Governments, whether Central or state, cannot but presume in a democracy that the people, more than governments and political parties, have the inherent right of making the basic decisions to the extent feasible, and governments and parties have to abide by these decisions in good grace.
The options in the choice set contain, apart from the alternatives we are familiar with in everyday economics, what Nobel Laureate Kenneth Arrow — Amartya Sen’s precursor — named “alternative social states”. The choice of a social state (say, “secular democracy with a socialistic pattern”) often implies the exercise of value judgments more basic (to use Sen’s terminology) than the ones used for everyday decisions. These graver judgments can be about structures of governance, methods of voting, exercise of other crucial social options. These are not options that come up everyday. But when they come, people will expect the institution of democracy to accommodate them.
Let me go back to the prime minister’s speech. First take this sentence : “In a country where the average size of landholding is so small, there are limitations to what you can do to improve agricultural productivity”. Even in summary it is too harsh on our cherished dream of battle tanks of yesterday becoming tractors and harvesters of tomorrow. It is harsh on dreamers of another kind too — Tolstoy, Gandhi, Tagore! Finally this: “The long-term solution to the problem of agrarian distress has to be to take people away from agriculture, to manufacturing, to services and other non-agricultural pursuits”. This should make you count how many people you can save this way. And how do you propose to take away even a small number? To make you understand I must tell you a story first. I cannot help it; as time ebbs out, memories crowd in.
That fantastically clear-minded economist, Joan Robinson, was visiting Jawaharlal Nehru University in the winter of 1972-73, when I got myself introduced to her by one of my old students, Amit Bhaduri, I think. We were discussing in a group Introduction to Modern Economics, that brilliant little book she and John Eatwell had just finished writing. At one point, someone asked why there didn’t seem to be any place for the theory of individual or collective choice in their book? She promptly said something like (I forget the exact words) “Because nobody has a choice in a poor agrarian economy”. We all laughed, but she had said this not in her usual crisp manner of a General’s daughter that she actually was, but gently, almost with a touch of sadness! I did see the point then as I see it now, but even after all these years , I cannot quite accept it except as a quip. But it is true that when people frustrated in agriculture move to other vocations, we still cannot believe they do so by choice. As if they will never venture into another enterprise (like trade, transport or construction) independently.
So our development policy presumed that taking away people from agriculture was the job of the biggest industrial entrepreneurs from the cities and beyond. They had to be tempted with special incentives (relaxations in taxes and duties, some freedom from the regulatory bodies, some relief from trade union pressures). Special economic zones had to be carved out of village land for them. International giants like Mittal and Tata already know that both land and labour are enormously cheap in India. The scent of incentives makes the fare more appetizing. Big industry would now happily provide employment for the rural poor! India indeed was a land of opportunity.
Who can deny that the policies proposed by the Centre (also eagerly grabbed by the state governments) can quicken the birth of modern urban life in the carefully chosen patches of rural India. For some hitherto poor villagers, life in the SEZs may be better in every way — easier access to health and education, higher incomes, a more humane civic existence. For some, constituting a minuscule fraction of all. Remember we made promises to all? What about the rest? Would you fix their compensation claims by the low prices their infertile land fetches, as is being suggested, and not by counting a bit of the value of the various opportunities and rights you had promised for all, but will now deliver only to some? Did you expect people left out to till their infertile little acres for the rest of their lives to leave you in peace, not raise hell?
Even with favourable outcomes, I am not sure our policy-makers would not be pilloried by history for espousing causes that prospered only by letting a few lucky ones jump the queue and live happily ever after. If the outcomes are not favourable, we may not even have to wait for history to tell us that.
Good and rounded economist that Manmohan Singh is, he understandably had his small print ready for the “CII Steel Summit: Vision 2020” too. As I hinted at the beginning, it may yet provide the alibi: “The steel industry has a huge requirement for land … These needs must be balanced against larger social concerns with respect to equitable development and inclusive growth”. This perhaps saves the economist. But the prime minister?