The Developer’s Model Of Development Or The Economist’s?

http://www.countercurrents.org/eco-shrivastava220207.htm

By Aseem shrivastava

22 February, 2007
Countercurrents.org

“An epitome of beauty, serenity and colonial charm…”

- From an advertisement for The Carlton, a luxury hotel created by The Rahejas in Kodaikanal, Tamil Nadu

Two competing notions of development are increasingly at war in the Indian economic landscape. One model is familiar to economists and policy-makers of an earlier era. We shall discuss that model later.

Development according to developers: the new Indian way

With changing times it would be folly to cling to outmoded concepts. One such concept, which wasted the nation’s best resources during the days of the license-permit, Neta-Babu Raj, was the post-war notion of development. It sucked the human, capital and natural resources of the country for over four decades – for which we have little to show.

There is thus urgent need to create and implement an entirely new model of development which answers Indian aspirations in a globalized world with far greater success. Here is what it looks like.

There will be world-class apartments in impressive high-rises touching the sky. Prospective residents will have choices ranging from compact studios to 6-bedroom dupleix flats designed for traditional Indian joint families. The apartments will be equipped with handsome, marble-topped bathrooms, studded with Jacuzzis and golden bidets imported from Europe. Every room will afford a commanding view of the golf course within whose precincts the skyscrapers will be located.

As you step out of the building you will find yourself before the 18th hole of the golf course nearest to you. If not in a golfing mood, you may choose to step out of the rear of your building: your eyes will alight upon an Olympic-sized swimming pool that has been built just for you. Look to your right and you will see Wimbledon-class tennis courts fully appointed with coaches and the latest equipment.

If you prefer independent accommodation we have for you a range of impressive townhouses and bungalows with sprawling lawns and their own private swimming pools. They come with all the facilities available for apartment-dwellers.

You will find your workplace within cycling distance of your residence. (100% safe biking tracks have been laid down on artificial turf to ensure your ease and comfort.) The building that houses your office is equipped with world-class business and communication facilities, including satellite links, global video conferencing facilities and broadband wireless internet connectivity.

Within your office building itself you will find a stress-busting massage parlor (offering a large variety of oriental massages), a mental health clinic (having world-class experienced professionals) and a beauty parlor (with some of the best herbalists in the world). There is also an in-house gym facility, a health club and an all-weather swimming pool.

For those of our customers connected to manufacturing, there are dozens of industrial parks within the city, properly zoned away from residential areas to minimize any of the negative effects of pollution (which itself is expected to be eliminated in the foreseeable future). These parks are fully provisioned with global quality infrastructure such as reliable, internally generated power facilities and ready and easy access to container and cargo terminals, making use of the latest international advances in efficient logistics.

SEZs (Special Economic Zones) are the latest innovation in Indian policy-making. They provide legal relief from archaic constitutional obstacles to rapid industrial growth: investors need no longer worry about paying taxes, minimum wages, health and pension benefits and environmental fines. We have several SEZs with irresistibly attractive terms of investment for both global and Indian players.

When you need to shop, you needn’t drive far. We offer you tens of thousands of global brands not far from your doorstep. There are dozens of dazzling shopping malls excelling global standards, where you can find everything suited to your taste. There are supermarkets, garment, fashion and design stores, footwear stores, jewelry shops, electronics and IT bazaars, music shops, book stores, drug stores, hardware stores, home improvement outlets and even car dealerships. Now you need not lose time on your vacations to shop: even curios from all over the world have been gathered and assembled at our malls for your shopping pleasure.

When you have guests from out of town they can be accommodated at one of the many internationally networked luxury hotels. Our hotels offer all the facilities and amenities available to our residents, with attractive discounts available for our regular customers.

For your entertainment there are half a dozen multiplexes in the city, showing over three dozen films at a time. The film theatres are abutted by gaming parlors where young people can compete with their counterparts the world over.

Adjoining the hotels are amusement parks with childcare facilities on offer. Busy guests traveling with their children need not worry any more: we take full responsibility to entertain them on roller-coasters and waterslides. Our customers will find it assuring that we have won the highest international awards for excellence in providing hospitality to our guests.

We also have some of the most interesting theme parks in the world. There are stimulating interactive facilities to enable visitors to learn Hindu mythology and religion by signing up at the Panchatantra Park. You can even don the armour of a Pandava warrior at our Mahabharata Theme Park.

The city boasts of a number of helipads from where chartered flights can take you to the nearest international airports enabling smooth connections. Arrangements can also be made for chartering jets of all sizes from the nearest airports. Our travel agents will look after all your travel needs, both for business and pleasure, offering you some astounding discounts on vacations at virtually every beach or mountain resort anywhere in the world.

For your children we have some of the best schools in the world, offering the International Baccalaureate diploma in three different languages. Our teachers are trained in London and Geneva and are required to know at least three globally recognized languages well. They are also required to have spent at least half their working lives abroad.

Given the scrupulously clean and hygienic environment we maintain within the city sicknesses and poor health are rare. But should you ever feel the need there are world-class hospital facilities managed by the world’s leading healthcare providers. You will be in the care of internationally reputed doctors and nurses.

Last, not least, every building and facility within the development is guarded by world-class surveillance equipment and security forces trained especially for you. You need never worry again for your safety once you entrust your security to us. Residents and visitors will especially appreciate the finesse with which our security personnel do their daily job without making themselves even remotely obtrusive or even visible.

Is it all only a fantasy?

The above is hardly a fantastic caricature of the promises made by India’s leading builders and developers today. Indeed, one may observe that in some cases the promises are close to being met – at the appropriate price.

Consider just a few promotional advertisements from some of India’s leading builders and developers. Rahejas have already been quoted above. Unitech, whose profits this year are 3000% higher than last year, offers us “Shoppertainment for Indians.” “Dreams are for achieving”, they say, not merely to be savoured as fantasies. Ansals, with an international endorsement (Norsk Akkredit Ering EMS 006), offer a “futuristic SEZ in Greater Noida” which will become the “greentech IT hub” and “will usher in the new age of an IT-led economy”. Parsvnath Parivar (with an ISO 9001/14001 certification) wish to invite us to join their family in order to enable them to create an “ever-enlarging footprint” across the length and breadth of the country. Any perceived irony is not intended.

It is evidently the case that India is “poised” to become a “developed” superpower at the cutting edge of the global economy. Those of us who are skeptical of the promises and the developments are either naysayers, doomsdayers, wet blankets or simply ignoramuses.

Unanswered questions

But some thorny issues remain. What about the people laboring to create and maintain these lavish establishments? What is their share of the promised prosperity? And what of those who the “developments” have displaced without rehabilitation? And what sorts of inputs of energy, water and resources are involved in the implementation of this world-class model of development? Where are the air and water-borne effluents from the establishments going to be discharged? Finally, hardly inconsequentially, what are the implications of these developments for that neglected and forgotten sector of the Indian economy, agriculture, on which two-thirds of our people – anywhere from 700 to 750 million – are directly dependent? Will the gathering crisis in agriculture endanger food security and supply in times to come, reducing to naught the gains made in the direction of self-sufficiency in food, canceling one of India’s great achievements since gaining independence from the British in 1947, and possibly reintroducing the era of famines in India?

Is there any reckoning of these questions in the meetings and discussions carried out in the boardrooms of our policy-making elites? One wonders.

Trickle-down or vacuum up?

The questions raised above can be answered optimistically only with some heroism. The only assumption under which the model of development outlined above can be of any tangible benefit to the teeming millions of impoverished Indians is that the growth induced by large investments in the real estate sector of the economy will bring benefits to the lower classes in the form of new opportunities of employment – both directly and secondarily, through spin-offs. This is the familiar refrain of pious promises of eventual trickle-down, which have yet to materialize anywhere in the world.

The narrow base of economic growth in India – focussed thus far in the IT-BPO sectors of the service economy – has meant that trickle-down theories of the spread of prosperity have remained confined to the sphere of illusions. The persistence of widespread hunger, malnutrition, poverty and unemployment reminds one of the economist-diplomat John Kenneth Galbraith’s acerbic observation that faith in trickle-down is a bit like feeding race horses superior oats so that starving sparrows can forage in their dung.

In fact, far from the benefits of growth trickling down to the downtrodden, the policies adopted since the mid-1980s and early 1990s have led to big losses of rural economies and livelihoods that are not reckoned on the negative side of the ledger (where they belong) in the growth calculations of government statisticians. Besides, the poor throughout the country are being rapidly dispossessed of the only real asset in a primarily agrarian economy: land.

What happened to the old idea of development?

One thing is clear. The paradigm of development that is in place bears a far closer resemblance to the developer’s model of development, as outlined above, than to the developmental visions of the first generation of planners and economists under Nehru. It ignores the repeated recommendations of seasoned thinkers like Amartya Sen (who has warned that even a 100 Cyberabads and IT Parks will make no dent in long-standing challenges of reducing malnutrition, starvation and poverty). Needless to add, the de facto “developmental” vision of our policy-makers does arrogant violence to Gandhi’s vision of village republics.

It appears that somewhere during the past decade the meaning of the term “development” has undergone a decisive mutation in the heads of our policy-making elite.

Is economic growth the same as development?

Every student of Development Economics learns on the first few pages of her textbook that economic growth does not translate directly into economic development. The two notions are in fact quite distinct. Though, typically, the two are seen to go together, up to a not insignificant degree development is possible without growth as growth is possible without development. Sri Lanka, for instance, while scarcely growing at all, raised its average life expectancy – a crucial indicator of well-being – by a dozen years during the first 7 years of its independence from Britain. Saudi Arabia, despite growing rapidly after the OPEC-led oil boom of the 1970s has failed to bring about a transformation in the lives of the bulk of its citizens. To see whether growth will lead to development, one has to scrutinize closely the content and pattern of growth. On this, more will be said presently.

The point is that aggregate figures like per capita income can be seen to rise rapidly with economic growth, but the inequalities of wealth and income might be such as to mask entirely the poor material condition of most people’s lives.

Economic growth in India in the last decade or so has been the experience of a minority, reflecting huge and growing corporate remuneration and the bloated salaries of skilled and English-speaking urban professionals belonging to upper and middle classes. Growth in the organized sector (including both private and public) has been largely jobless. In many cases, like at the manufacturing plants of Tata and Bajaj in the Mumbai-Pune belt, production has shot up dramatically during the last decade while, in fact, cutting back significantly on the employment of workers. Jobless growth, thanks to the path of labor-saving technology from the West, is the norm.

Development, as conceived by economists, planners, policy-makers and political leaders after decolonization in the middle of the last century, was about the socio-economic and political transformation of the lives of hundreds of millions of ordinary people. It was much more than just raising the real per capita income of the developing country. Importantly, it had nothing to with the fairy-tale dreams of builders and developers. For that matter, the Indian constitution does not even make a commitment to economic growth!

In addition to real per capita income (which in any case glosses over glaring and widening inequalities), by 1990 the pre-eminent international institution concerned with development issues, the World Bank, had learnt to include at least two other features in what began to be called “human development”: average life expectancy as an indicator of health and the literacy rate as an indicator of education. When one observes trends in India’s ranking among countries with respect to HDI, one sees that it has yet to fall below the 120s (China hovers between 70th and 75th). A per capita income of $2 a day at market exchange rates (China is $6-7 and the US is $100) is unbecoming of any country, let alone a purported or aspiring superpower.

Development with dignity?

How much dignity remains for those who are thrown off their farmlands in order to make way for the growth and progress of the nation in the form of a real-estate boom, the ultimate aim of property developments? And how much for those, sometimes the same people, who live “on the other side of the wall”, so to speak, from the developments, and have to make do with open sewers, lack of drinking water, poor hutments, lack of hospitals and schools?

As far back as in 1972, soon after Indira Gandhi launched her idea of Garibi Hatao, the economist C.T.Kurien had written thus in an article entitled “Strategy for Development”: “The development process in India has not yet become a mass movement. The development process cannot become effective until it becomes a movement” (Seminar, January 1972). It went on to say: “If development is for the people it has to be by the people also. Herein lies the connection between development and mass movement.” The main policy recommendation of that piece was a public works programme by a district-level Land Army of those who were looking for work in the countryside, a proposal not dissimilar to the NREGS launched belatedly last year, so far with dubious success.

Amit Bhaduri’s recent book Development with Dignity has argued forcefully the case for full employment in India. Here are his main observations:

1) “Our unforgivable failure has been the persistence of mass poverty and destitution. It is a matter of utter shame that nearly six decades after Independence, we have anywhere between one-third and one-fourth of our people desperately poor and denied the minimum conditions for human existence - the largest number of illiterates, millions of children crippled or blinded due to malnourishment.”

2) India’s continuing reliance on English has sustained a linguistic divide and inequality of opportunities between those who speak and those who do not speak English.

3) Agriculture is so overcrowded and devoid of earning opportunities, thanks to destructive trade and other agricultural policies of the governments after 1991, that in poor states like Bihar and MP, even selling peanuts on the streets brings more income. Disguised unemployment is extremely high.

4) “India’s immense diversity creates a bewildering variety of identities, and politicians try to manipulate them to their advantage in the game for gathering votes at any cost.”

5) “India has given its citizens political rights, but not economic rights to a decent livelihood, with or without economic liberalisation.”

6) “Narrow minded policies focussing on ‘cost’ reduction fail to see that cost is a concept defined in a particular social context of contending economic interests.”“The worker might think of profit as the ‘cost’ he has to bear for being employed, just as the employer thinks of wage as the ‘cost’ of employing the worker!”

Thus, Bhaduri proposes that “the developmental process that we must strive for is not simply a higher growth rate; nor should it mean simply an elaborate bureaucratic mechanism for income transfer to improve the distribution of income in favour of the poor. It has to be viewed from a different perspective altogether in which growth and distribution are integrated into the very same process, while breaking systematically the social barriers of discrimination and prejudices based on gender, caste, language, religion or ethnicity. This is what Development with Dignity must mean for us in India” (emphasis added). The author, one of India’s well-known economists, adds with authority: “This is not a utopia. It is the only reasonable economics that this country can pursue with the support of the majority of its citizens who are poor to varying degrees.”

So, importantly, Bhaduri proposes that redistribution of income and wealth and reduction of poverty and inequality happen through the growth process itself, not something that happens once growth has been achieved (by which time it is usually too late, since each growth strategy has a distributional strategy implicitly built into it).

For illustration, Bhaduri argues: “Nowadays in big cities, and even in small towns, bottled drinking water is available at a price, which at most only the top 10 per cent of the income earners can afford. And yet, while the market naturally has no compulsion to make a basic good like safe drinking water available to the poor, it might produce more of bottled water and this could step up our statistic of the rate of growth!”

In an primarily market-driven economy the only reliable way of bringing most people to an acceptable standard of living is by creating employment opportunities which will put purchasing power into the hands of the hitherto poor, thereby altering in their favour (as also of aggregate growth data), the direction of market signals which determine what will be produced and in what quantities.

For instance, by putting the rural landless to work on infrastructure projects like road-building or environmental projects like watershed management, a demand for basic food, clothing and shelter will be created. The market mechanism will take over after that and supply the goods in the required amounts. This will tackle several challenges – of the creation of infrastructure, the conservation/regeneration of the environment, the alleviation of poverty, the creation of employment, and the growth of the overall economy – at one stroke. The same strategy could be applied equally well to infrastructure and environmental projects like watershed management or soil conservation to generate mass employment and income.

For a public spending of less than 4% of our GDP the families of some 40 million people (totalling about 200 million) could be lifted out of poverty. Taxation, public borrowing, or even printing the required currency are all viable options for financing such schemes if the economic activity undertaken is productive and generates income and demand in the economy.

Bhaduri is not unmindful of the staggering diversity of this country. So he wants such schemes to be administered not centrally – by the state or central government – but by local Panchayati Raj institutions.

Thus, like Kurien and many others, Bhaduri advocates a two-pronged economic strategy for a country like India. The rich and middle classes can hope to gain from the booms generated by a globalized market economy. However, what’s good for the goose is sometimes poison to the gander: countless millions can only expect disruption of their livelihoods and ways of life on account of the powerful interests operating in the country (and its countryside). For such people – running into several hundred millions – an altogether different strategy of development is called for. Bhaduri advocates an employment strategy much along the lines advocated by Kurien and already enacted in the NREGS regulation, though, as already mentioned, the attempt has been feeble and half-hearted.

In sum, recognizing the false promises of trickle-down Economics, Bhaduri advocates a strategy of “employment first, with growth as outcome” and not “growth first, and full employment later.”

Needless to say the expenditures on health and education, long advocated by economists like Amartya Sen, are equally urgent if underprivileged India is to be lifted out of underdevelopment.
None of this is pie-in-the-sky daydreaming. On the contrary, to change the content and pattern of economic growth in the country is an imperative to sustain its level. When one considers, to take just one among many similar instances (the potential contribution made to effective aggregate demand by the poor being another), the shortage of skills being reported from all corners of Indian industry today, it becomes clear that in the future there will be no growth without development in the true sense of the word.

Development according to developers must be restrained, while the old idea of development must be awakened from its slumber in the minds of the policy-making elite. A failure to achieve this is likely to prove economically costly, quite apart from generating a political derailment of the growth process, with worse outcomes to follow in the shape of rising social tensions, political violence and crime.

Aseem Shrivastava is a trained economist and an independent writer. He can be reached at aseem62@yahoo.com.