Pranab Bardhan, Economics Professor
at the University of California, Berkeley, has held teaching positions
at MIT, Indian Statistical Institute and the Delhi School of Economics,
and has been a visiting professor at Oxford, Cambridge and the London
School of Economics. The author of 11 books, he is now writing a book
on India and China, examining their problems and prospects. He spoke to
Dev Chatterjee at his Berkeley office overlooking the Golden Gate
bridge, about how economic reforms can get larger support and whether
India’s Left really serves the interests of the poor. Excerpts:
Economic growth and globalisation has
helped reduce poverty dramatically.
Official estimates don’t take into account non-income indicators like
health, education or environment but there can be no doubt that
delicensing and deregulation, trade and financial and tax reforms have
helped unleash entrepreneurial energies in the corporate sector which
boosted competition and growth. But agricultural growth has slackened
in the last decade and even in the non-agricultural sector, more than
80 per cent of labour works in the informal sector — I’d like to know
how exactly reforms have helped these people.
There is a belief that services sectors like telecom, financial
services and software have led our economic growth but almost
two-thirds of the service-sector value-added is from the unorganised
sector.
If governance in on the decline, as
many believe, why is growth increasing?
You can’t say the entire governance structure in India is declining.
The Election Commission, the Supreme Court and some regulatory bodies
(regulating telecom, insurance, stock exchanges and so on) are quite
active, independent and doing a reasonably good job in governance. In
some state offices, thanks to info-tech, land and other records have
improved. Having said that, governance is still in decline in many
areas, particularly in the management of infrastructure and the
delivery of social services. It is, I believe, our general inattention
to governance reforms that makes economic reforms so unpopular in India.
So what can be done?
I think India has to gradually move towards politically managing some
package deals where on the one hand, public services have to be
cost-priced so that there is more inducement to public and private
investment in infrastructure, and on the other hand, some credible
assurances as to the quality of supply of services can be effectively
arranged.
The other important issue is that of guaranteeing some kind of safety
net for the poor. There is a lot of agitation against land acquisition
for industrial and infrastructure projects in different parts of India.
This is not just a matter of providing a fair compensation to
landowners (so that they can get a share in the rising value of land);
what about the many landless workers and other service providers in the
area who will be displaced? We need to have some minimum social
insurance schemes and job training programmes in place for these
uprooted people in a credible form so that they are not just the
victims of contractors and the land mafia.
If the public service delivery is in
bad shape, why not give the poor vouchers?
While I welcome the idea, I have doubts about its implementation,
particularly in rural areas. The poor can go to a good school in an
urban area with the help of a voucher but what about the poor in the
rural areas? Vouchers work when there are enough competing service
providers. In many cases, ghost schools would come up just to take away
that voucher from the poor in exchange of some paltry compensation and
the education of their children will continue to decay. In higher
education there is likely to be more viable competition, and I am all
for it. Fees should be increased substantially to improve educational
institutions and the government should give more scholarships to the
poor so that they are on a level-playing field.
In food distribution, I am more in favour of food stamps and other
forms of enriching the purchasing power of the poor, rather than
maintaining our costly and ineffective public distribution system.
Does India’s Left serve the cause of
the poor?
The Left parties often are most vocal about a narrow segment of the
labour force, particularly the unionised public sector employees. They
often reflexively oppose labour reform. Job security is a major
legitimate concern, but they should work with economic reformers on a
package deal that combines more flexibility in the labour market with a
better unemployment insurance and job training programme. There are
parts of our labour laws which keep the organisation of labour
fragmented and only weaken the labour movement (for example, any seven
people can start a trade union in India).
They also unthinkingly agitate against any fundamental restructuring of
our public salary structure (which needs to make the upper-end salaries
somewhat more competitive with the private sector in order to preserve
administrative talent, and slow the rise in the salaries of the
lower-end where they are out of proportion to the worker’s reservation
wage outside). Other examples of unthinking positions are when they
oppose privatisation without doing something about the constant
political interference in public enterprise management, when they
agitate for irresponsible subsidies for rich farmers, against raising
tuition fees in higher education or LPG gas prices (which help mostly
the rich), and so on. At the same time, no one should deny the vitally
important role Left parties have historically played in pushing the
cause of land reform, in improving the voice of poor workers in a
country where the interests of the
rich ride roughshod over them, and, as in Kerala, in substantially
improving public services in health and education.
Are programmes like the National Rural
Employment Guarantee a good idea?
First of all, there are interesting ways in which information
technology has been used in Mexico and Brazil to identify the
beneficiaries and monitor the implementation of massive welfare
programmes that can reduce the extent of corruption. Secondly, we
should not forget that Indians live in a welfare state for the rich.
According to the estimates for a Ministry of Finance White Paper in
1997, the central and state governments together gave out (in the
mid-90s) about 10 per cent of GDP in the form of explicit or implicit
budgetary subsidies for “non-merit” goods and services (largely
accruing to those who are relatively rich). The NREG is expected to
cost even less than 1 per cent of GDP. How does the corruption in this
programme compare with that in our various military purchase contracts?
What lessons should India learn from
China?
The current capitalist triumphs are partly based on some socialist
legacy, in the large improvements in basic education and health, large
participation of women in the urban labour force, egalitarian land
redistribution which provided a minimum safety net that rendered the
dislocations of capitalism somewhat more socially tolerable. They have
also given more autonomy to public-sector managers to pursue long-term
economic goals. They have concentrated on building the public
infrastructure that a modern economy needs and have not hesitated in
charging cost-based user fees. We should also learn from their
mistakes. The colossal damage of the environment (air and water
pollution), for example, should not be repeated by us in our drive for
industrialisation.
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