[OPE-L] In defence of globalisation by C.T. KURIEN

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Sun Mar 13 2005 - 18:46:15 EST

Vol:22 Iss:06 URL: http://www.flonnet.com/fl2206/stories/20050325000307200.htm

In defence of globalisation


Development and Nationhood: Essays in the Political Economy of South
Asia by Meghnad Desai; Oxford University Press, New Delhi, 2005;
pages 410, Rs.650.

MEGHNAD DESAI is one of the leading economists of Indian origin
living in the United Kingdom. He taught at the London School of
Economics for close to four decades. A member of the House of Lords,
he is known among economists as a staunch critic of India's
development policies of the planning era and an enthusiastic
supporter of the1991 economic reforms. But Desai is more than an
economist. He has been a commentator of the political scene in India
and beyond, approaching development from a politico-economic
perspective, and is a prolific writer. He has authored over 250
academic articles and 16 books. The book under review is a collection
of 30 essays, most of them first published in the 1990s and over the
past few years. Initially they had appeared in newspapers,
professional journals and edited volumes. Some are texts of invited
special lectures already published elsewhere. The pieces vary not
only in length - some under three pages, some over 30 - but also in
quality. There is repetition, more than what may be expected in a
collection of this kind and acknowledged by the author. As one reads
on one gets the feeling of going through iterative drafts of papers
yet to emerge in the final form.

The focus of the book is clearly on India, with only three essays
under the section titled South Asia to justify the subtitle. This
review will thus focus on Desai's views of India's development set in
a larger-than-usual perspective. (The last three papers, which are of
a technical nature and will not be of much interest to the general
reader, are not covered in this review.) "I cannot think about India
in terms of economics alone," says the author in the Preface, "not
even of political economy as it is conventionally thought of. History
and ideology and anthropology are all part of the understanding.
Economic reform and globalisation are as important as communalism and
the quality of Indian democracy." It is on this fairly large canvas
that Desai depicts India with unusual colour combinations and some
brilliant strokes.

Ideology is the connecting thread in Desai's narratives and analyses.
This is visibly demonstrated in Chapter 15, which states that the
20th century - particularly the period between 1914 and 1989 which
Eric Hobsbawm has described as "the short twentieth century" - can be
seen as a battle ground between capitalism and socialism. Although
during this period there were prognostications and predictions about
the collapse of capitalism with the course of events at times
suggesting that it was about to happen, by the last decade of the
century capitalism emerged triumphant. I can almost hear Meghnad
Desai shouting "Halleluiah"! This is a theme he has communicated more
fully and forcefully in Marx's Revenge: Capitalism and the Death of
Stalinist Socialism (Verso, London, 2002). A summary of his views on
capitalism is given on page 151 of the present volume: "... a dynamic
successful capitalism does not generate harmony, nor does it rule out
periodic crisis or poverty and unemployment. Capitalism succeeds by
innovations - acts of creative destruction - whose aim is to restore
profitability. Capitalism will continue as long as it displays this
ability to generate innovations and to reproduce itself by generating
profitability." However, capitalism cannot be confined to a country
or a region. It is intrinsically global and so spreads to different
parts of the globe in different periods. This process is wrongly
depicted as imperialism. It is just shifts in the centre of gravity
of capitalism. This capitalism is not any external system. "It is
us," proclaims the Lord, especially in its global sweep.
"Globalisation or what is sometimes called the Market is all of us
acting in our own interest and responding to opportunities and
adjusting to constraints. Globalisation is us. It is not some
mysterious Other" (page 184).

It is this view of capitalism - majestic, triumphant, and internal to
human beings and thus intimate - that informs Desai's critique of the
historical transformation of India's economy, society and polity.

India (rather Indica as Desai designates the geographical territory
that was India prior to l947 and now consists of Bangladesh, Pakistan
and residual India that is Bharat) had started experiencing
capitalism almost as early as it began emerging in Europe, thanks to
what is popularly, perhaps not quite accurately, referred to as
colonialism. As always, capitalism's impact was destructive to some
extent, but the net effect was creative and positive. (Did not Marx
also say something to this effect?) For instance, when colonialism
formally ended in 1947 India was the 10th largest industrialised
country in the world (a position it has lost during the period of
development). However, India had not experienced a capitalist

When Independence came India (from now onwards India as the post-1947
entity) had to choose between following a capitalist path already
initiated or of attempting a (rival) socialist transformation as was
going on in the Soviet Union and said to have been started in Eastern
Europe. "A socialist revolution in India would be an event of
fundamental significance to the development of world history," wrote
Desai in 1975. India indeed was a great potential storm centre within
world capitalism. But it also had several factors controlling the
impulse to popular revolt. "These range from religious antagonisms
which have murderously divided the masses to political machines which
yoke them together with their class enemies; from archaic survivals
of feudal social relations to the most modern strategies of
imperialist penetration"(page 20). But India under Jawaharlal Nehru
managed to give the image of a soft socialist regime. Therein lay the
seeds of India's retardation. For, the pretence of socialism
accompanied by the directions and regulations of the economy chocked
the nascent capitalism which, otherwise, would have progressed and
delivered the goods.

What the author calls the Nehru-Mahalanobis strategy comes in for
particular criticism. It is conceded that "there was every reason for
the adoption of the Nehru-Mahalonobis strategy. The period 1955-65
was one of high growth of income and of industrial output" (page
153). But the closed-economy assumption and the import-substitution
industrial policy prevented India from taking advantage of the
possibilities presented by the world economy from the early 1970s,
especially after the Bretton Woods system of fixed exchange rates
collapsed in 197l. The opportunity missed by India was used by other
Asian countries - Singapore, Hong Kong, Taiwan, South Korea - who in
another two decades became the Asian `tigers' while India continued
as a limping bear.

The Nehru-Mahalanobis strategy had other problems too. For one, it
created the illusion that India was a planned economy. But in reality
"India was not a planned economy; it was an economy for which a plan
had been made" (page 134). Along with planning it brought in false
analogies of commanding heights, dominance of the public sector and
so on. Similarly, the Nehru-Mahalanobis strategy left it to
agriculture and to "stagnant small-scale and traditional industries
to generate employment and supply wage goods. Not only that this did
not happen, but the protection given to the handloom sector prevented
the modernisation and growth of India's leading industry, textiles,
which otherwise would have developed into a major global player".

Desai carries his criticism of the strategy so far as to say that
Nehru may have decided on it for extra-economic considerations.
"Nehru chose the Mahalanobis strategy because it gave the promise of
an early build-up of national production capacity for defence
equipment" (page 79).

One of the gravest errors of the period of planning was the
imitational socialist effort to ensure that the economic surplus was
distributed correctly instead of attempting to augment it. "Thus,
rather than adopt policies which would enhance the surplus, for
example, by speeding up accumulation and transforming production on
modern lines, Indian planners concentrated on changing relations of
tenure and ownership of landing a series of land reforms" (page 8).

No wonder the Indian economy started confronting crisis after crisis.
The misdirection of the economy came to be perceived in the 1980s and
hesitant attempts were made to dismantle the shackles of planning and
to open up the economy. But not all of them were in the right
direction. When India started looking outwards, for instance, it was
to borrow, not to let foreign equity capital to come in.

Then came the mega crisis of 1991 and the radical restructuring of
economic policies. Writing in 1993, Desai, now unreservedly the
supporter of dynamic capitalism, welcomed the move, not as the only
choice as many globalisers maintain and continue to insist on, but as
the right choice. For, Desai concedes the option of pursuing the
socialist ideal. But we must examine "whether there is any one with
the political courage to set about restructuring industry and
agriculture so that it produces surplus for the betterment of the
poor rather than gobble up subsidies; whether there is any one to
launch a social revolution in literacy and better health" (page 157).
If the answer to these queries is in the negative, then surely the
right policy is a rapid integration of the Indian economy into global
capitalism. It only means a shift from a "hobbled and underdeveloped
state capitalism" to the disciplines of global capitalism, although
they may appear to be stern. On pages 183-184 he indicates what that
means. He lists 10 features of contemporary global capitalism of
which the main ones are: deregulated capital markets with the
possibility of speedy transfer of capital; active forex markets with
supporting financial markets that allow speculators to take positions
in any currency around the world; greater geographical spread and
increased mobility of direct investments; spread of communication and
Information Technology; and "increased but as yet imperfect and
legally impeded mobility of labour". It is interesting to note that
the list includes the fashioning of global culture, music and films
and even "greater awareness, though as yet not very effective redress
of human rights violations, ecological disasters, famine" and so on,
but there is absolutely no reference to trade in commodities as such.
Desai is honest in sticking to the position that globalisation is
basically freer and faster movement of capital in search of profits,
including, perhaps mainly, speculative profits.

It must be emphasised that Desai's tracing of the history of India's
economic policies since Independence is in tandem with the history of
political processes. In Chapter 9 which he considers to be "a sort of
grand summary of many of my writings on economics and politics at
least as of the end of 2002" (page 10), he makes an attempt to weave
the two together. In the first three decades India's economic policy
was driven by the Nehru-Mahalanobis strategy of national
self-sufficiency and import-substitution industrialisation. Political
developments in the mid- and late-1950s led to the restoration of the
role of agriculture, which was hitherto neglected. The Green
Revolution, which occurred by accident in the 1960s, gave the rural
areas a new clout, which began to be reflected in subsequent general
elections. But despite the rapid growth in foodgrain production, the
overall growth rate remained well below the planned targeted growth

Unlike in most other newly emerged nations of the period, these three
decades demonstrated the political stability of India under a
democratic regime. The threat of instability was dealt with by a
brief period of Emergency, but it was ended democratically,
accompanied by a smooth transition of power to a new coalition,
ending the one-party domination that had prevailed so far. By the end
of a short period that party was again back in power.

The economic policies of that party after restoration marked the
beginning of a process of opening up and liberalisation. The opening
up of the 1980s was limited, confined to borrowings from the
International Monetary Fund (IMF) and from private foreign lenders.
But the growth rate of the economy increased from the preceding
three-decade average of 3.5 per cent per annum to 5.5 per cent.

Desai expresses his admiration for the revolutionary decision of
India to adopt universal adult franchise with a Western-style
parliamentary system. But he expresses some reservations about the
choice of "an individualist atomistic model of democracy for India,
rather than one grounded in caste, religion, and language identities"
(page 97). He argues that these ignored identities were the basis of
some problems of the polity that emerged in subsequent years. On page
67 he suggests three changes necessary and sufficient to remedy
India's political problems: making all States the entities that
constitute the Union of India; amending the Constitution only by the
consent of the majority of the States and the Centre; and giving
proportionate representation for elections to the Lok Sabha.

It is not surprising that Desai is an ardent supporter and advocate
of the economic reforms, which started in 1991. But he expresses his
disappointment and disenchantment with the slowing down of the
reforms process within a few years. Pointing to the soft-pedalling of
the reforms after the Congress lost the elections in 1994, Desai
wonders "whether India can politically sustain radical economic
policy, or whether politics will mould economics in its own
conservative shape" (page 168). The three "blocks" India suffered
from are social conservatism, economic radicalism (obviously other
than the radical reforms of the post-1991 period) and political
electoralism, and Desai had hoped that the humiliation of
near-bankruptcy in 1991 would have "the effect of a triple bypass for
a patient who had become grotesquely unhealthy but was in denial
about his life-style" (page 89). But, alas, after obeying the
instructions of the doctor for a while, the patient had slid back to
his old ways of eating, drinking and smoking (page 177).

The most engaging part of the book is the treatment of nationalism
dealt with primarily in Chapters 20 to 23. Desai draws a useful
distinction between a nation and a nation-state. The nation-state is
essentially a legal construct depicting an entity that exercises
power over a territory. It has a life cycle of birth, growth and
death. The nation, on the other hand, is an imagined community the
members of which believe they are united by a common history and
traditions, religion, language, or any other binding factor, usually
a combination of some of them. The distinction between nations and
nation-states is crucial, but may not be easy to perceive and respect
in actual historical instances.

USING the history of Germany as a parallel, Desai draws out this
distinction in the subcontinent, that is, the pre-1947 Indica and the
post-1947 Bangladesh, Pakistan and (residual) India. The subcontinent
as a geographical entity has always existed, but what caused it to
become a delineated, separately identifiable territory? From the
early vague notions, an Indian nationalism gradually evolved,
becoming more clearly expressed after the British established rule
over the territory. And yet, Indian nationalism also had its separate
regional specificities and a host of quasi-independent native States
that largely stood apart from the mainstream nationalist sentiment.
It was the freedom movement - the opposition to the British - that
demonstrated Indian nationalism in its most coherent form. Even then
there were undercurrents of division, essentially on religious
grounds, which finally, in the decades immediately preceding
Independence, manifested themselves as the two-nation theory.

Creating two nation-states was thought to be the way out. However,
Pakistan was soon to learn that religion alone was not strong enough
to sustain the sense of a unified nationalism. The nation-state of
Pakistan split into two in 1971 - Bangladesh and (residual) Pakistan
- on linguistic and economic grounds. Thus pre-1947 India now is the
home of three nation-states.

What about (residual) India that is Bharat? It had, rightly, decided
that as a territory with a pronounced diversity of religions it would
not, could not, make religion the basis of its nationhood. Its
history had become truncated. And so, it had to make a conscious and
overt effort to evolve a new sense of nationhood. It is ironic, says
Desai, that Nehru, who in his Discovery of India had claimed India to
be a nation, was faced, after Independence, with the challenging task
of establishing India's nationhood.

The task that Nehru attempted using All India Radio, the Films
Division, letters to the Chief Ministers of States and his passionate
exhortations to the people at large to rise above all parochial
loyalties was not easy and still remains difficult. It was the
Chinese attack of 1962 that united Indian sentiments as never before.
How ironic that territoriality, a physical attribute, turned out to
be the factor to achieve a sense of nationhood!

Desai also tries to show that in the social and political spheres,
lack of clarity of nationhood still remains the basis of tensions and
conflicts. India, according to him, is "a classic multi-national
polity determined to assert a single nationality" (page 222). Three
competing approaches to nationhood have emerged over time. The first
is the Nehruvian view of single nationality which is therefore
inclusive, but ignores other loyalties that are real to people and
find expression from time to time. The leading alternative is the
notion of India as a Hindu nation, which, however, recognises and up
to a point respects the reality of religious pluralism but clearly
privileges the majority community. The third is the position taken by
backward castes, Dalits and others, usually finding expression as
regional parties but striving for pan Indian unity fully respecting
regional, linguistic, religious and social diversities. The meaning
of secularism will have to be re-examined in this context.

Development and Nationhood has received pre-publication commendations
from some leading personalities in the country and surely it deals
with some important issues. Like the curate's egg, it is good in
parts. The author's treatment of nationhood is stimulating and his
suggestions on how people of South Asia can recapture something of
the spirit of one people without any common political authority
(Chapter 27) are refreshing. But his discussions on development are
disappointing. The merits and demerits of the Nehru-Mahalanobis
strategy have been publicly discussed in India and elsewhere for
almost half a century. On it I do not see any contributions by Lord
Desai other than a few felicitous phrases. On the post-1991 reforms
and globalisation, his views, at least as can be gathered from the
pieces from this volume, are not that of a scholar but that of a
partisan. While he repeats over and over again that the post-reform
growth rates are higher, he does not even seem to have noticed that
the average growth rate of that period does not show any substantial
increase over the average of the 1980s. Similarly, while celebrating
the decline in the percentage of the population below the poverty
line after the reforms, he does not seem to be aware of the fact that
the rate of decline of poverty in the 1990s was not different from
that of the 1980s and the 1970s.

On the opening up of the economy, his rhetorical question is: "But if
there is no foreign inflow, how will India pay for all the imports to
which its middle classes are addicted?" (page 157). He admits that
globalisation, like any restructuring, will have losers and gainers,
but listen to what follows: "In India's case the losers are those who
have benefited enormously from old structures and who have
contributed to the low performance of the economy. They enjoy
subsidies of various sorts - tariff for big business,
water/electricity/fertilizer subsidies for farmers, guaranteed jobs
for indexed and rising salaries for government employees, comforts of
non-competitive behaviour for bankers, and the corrupt gains from the
business-politics tie-up for the politicians. These forces resist
change." (page 187). Is there any evidence, my Lord, that these have
been the losers by India's globalisation?

Desai at one place assures the poor that they do not have anything to
lose because of the market for they have always lived in the market
economy (page 157). But a little later, as already noted, he makes it
clear that globalisation is for capital, finance, and currencies, and
not the markets the poor live by. A major drawback that Desai finds
in the parliamentary system is that if a political party has a
comfortable majority in Parliament, the Cabinet, a small sub-set of
Parliament, will come to have almost dictatorial powers. And yet he
laments that economic reforms in India have been slow and halting
because in the 1990s and beyond no political party or even a
coalition of parties had that kind of power.

Somewhere along the line, Meghnad Desai talks about those
conservatives who sound radical while being quite comfortable with
the existing system. Need we look elsewhere to find a good example?

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