India: Triumph of Neoliberalism
August 11, 2007
Thomas Friedman has long held India to be a model for the successes of Globalisation, which in his view has flattened the earth. I am sure the following stats will come as a vindication:
Seventy-seven percent of Indians — about 836 million people — live on less than half a dollar a day in one of the world’s hottest economies, a government report said.
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50% more than Pakistan manages though.
Despite rough parity at partition.
And what’s that supposed to prove, Partition? That 50 years spent as a highly militarised U.S. client state hurts the poor more than even the flawed and highly bureaucratic socialism of Nehru?
I think we are all missing the point here. According to most modern Economic Historian India was before being subjugated by the British Empire one of the most dynamic economies in the world. The incipient industry was dismantled by the Brits so India could fully become a surrogate belly of the trade and industry needs of London. Furthermore, according to Jeffrey D. Sachs in his book The End of Poverty (who no one can accuse of being leftwing source) says that during the 40 last years of British colonial rule the Indian subcontinent grew “cero per cent”. I believe that Colonial history still account –and will still account for a long time- for a lot of the existing poverty in India. The neoliberal modernisation of India is helping to expand and diversify the economy, although I agree that much more is needed in terms of wealth redistribution. But to suggest that the problems of exclusion in India are a result of the economic policies implemented in the past few years is simplistic.
Von Hayek:
Though your argument is correct as far it goes , the point of neo-liberalism is that the very infrastructure that has to be geared to make India ( and the others that have followed the “Chicago” route) free to use its resources and vital utilities are being privatised and sold at dirt cheap prices to parties that do not have the interests of all Indias population at heart.
Selling water;gas;electricity to global corporations that are “honor bound” to make profits means we have an elite superclass and the Poor.Usually at the ratio of 2% to 98%.
The other casulties are Schools;hospitals and welfare infrastructures.Many exist only on paper.
As the BJP found out at the last election the idea of “foreign corporate investment” liberilising the economy is as false as the idea of a long term foreign military occupation nourishing democracy.
The BJP policies were plainly stupid, I agree. However there seems to be to much orthodoxy in the criticism against neo-liberalism. Privatisation is not necessarily a bad thing, if it reallocates resources within society. I don’t agree for example in privatizing health, education or public services such as water. But what about the need to foster national capital?
In certain areas is necessary to incorporate private national capital so it can produce profits to reinvest. The Chileans for example, restructured their pension system and put it into private banks, however the same law says that these the national savings can only be invested in Chile itself.
On the other hand, in some cases it has been proven that NGOs and non-State institution do a much better job in managing certain sectors. For example, schools managed by the private sector offer free of charge, the school is not set to make profits and the children get a high quality education for far less money than the highlight bureaucratic State schools (i.e. see what the Catholic Church is doing in Latin America with the project Fe& Alegria). I think that we tend to treat privatisation as a demon per se, when in reality we have misunderstood what it means. I agree that if you take public services from the State and turned to corporative interests that are seeking for profit; the end result is always a tragedy for the people. But you and I can agree that there are areas in which the state should not be involved at all.
Why should the state have airlines? We in Europe pay a hugh subsidy to keep airlines such as Iberia and Alitalia aflot. Instead, we should leave the market decide who survives and make sure that it regulates the industry properly. Instead, we should concentrate in imroving instead the railways and renationalise it completely. I think the same is true of India, although I also am aware of the specific circumstances in term of the need to protect and foster national industries.
Best
Von Hayek
Excellent reply.
I think we understand each other.Between old state bureaucracy and best practise macro management there is much merit in ISOisation of efficient transparent running of vital utilities.
But , alas the devil in the neo-liberal agenda is the “opening” of markets and any state that tries to regulate the balance in favour of national self determination of resources will be underminded to say the least.
For example if Chile was to “overstep” the mark then an external pressure for a change of government will not be long as we have seen in the 2002 “incidents” in venezuela and other theatres.
Dear rumple_stiltskin24:
Yes, we agree on most things. That the devil in the neo-liberal agenda is the “opening” of markets I have no doubts. But even this cannot be treated with too much orthodoxy. Good point you make about Chile, in fact in 1999 Chile allowed its Pension Funds to start making investments outside Chile itself. As a result of that there is less money now available for Chilean industries to borrow. However, pension funds are now more healthy and stable, allowing retired people in Chile to have a better life. Equally important is the case of Venezuela. For all that it has been said to the pre-Chavez period, the truth is that until 1989 Venezuela’s economy was very protective and closed. As a result people in that country had to buy from very inefficient and expensive industries. Not that the IMF/World Bank shock-therapy of 1989 made things better, but by no means this was the economic paradise that some nostalgic claim it to be. In the case of India, economic growth is absolutely necessary and to do so India will have to play in the international field.
For me it was very significant that the recent speech on India’s independence day of Manmohan Singh focused on the estimated 800 million Indians – mostly living in the countryside – who have been left behind by the last four years of blistering economic growth. Mr Singh paid particular attention to the issue of malnutrition (that affects 47 per cent of Indian children between one and three, a higher rate than in much of sub-Saharan Africa). Then he went to pledged three billion pounds of investment to agriculture, which supports three quarters of India’s population of 1.1 billion. This money would not have been available 15 years ago, before the economic reforms and opening to international markets began.
Best
VonHayek
Your right in a big sense:
Neo-liberalism is efficient as far as the theory goes , and MOST importantly if the parameters and thresholds are dictated by the recipient nations.And there is a choice as to how savings are invested and where.
But you must remeber that 3 Billion pounds (UK sterling) amounts to £4 per person per annum , around 1 p per day ( give or take inflation).
It amounts to trickle down to its barest bones.
The agriculture sector wants a better supply of water ; infrastructure and general debt free self development.So too would the Indian Goverment , But The IMF/World Bank are alas a one sided filter that , low and behold, favour the richer nations and corporations “need” to enter markets and , alas , not a local economies need for local development as such.
The problem is not the theory , but the thresholds (quotas) of the trade agreements that interfere with the progressive development of emerging ecomonies in a way that gunboat diplomacy would have in the past/ or outright Military Invasion does in the middle east today , namely keep them dependent on the one hand , and allow cheap goods/cheap skilled labour attainable for the richer countries on the other.
Though i dont know much about chile as a case study , i wonder if the decision to invest Chiles pension funds was motivated from Santiago or strategists in New York who happen to also know the hotline number of the school of the Americas.
hi nice post, i enjoyed it
Dear rumple stiltskin:
First of all, thank you for very stimulating discussion, which I hope we can continue.
Decision-making in public policy will always be always determined by both national and international centres of power. In the case of Chile, I suspect you are right and the decision to easy the restriction on pension funds investment was taken in both Chile and New York. However, let me emphasise, the decisions are taken in “both places”.
In the case of India, I absolutely agree, this amount to be spent in addressing poverty in the rural areas is insignificant. But how can we blame this in neo-liberalism? Isn’t India spending US$ 13.5 billion per year in defence? China, with very similar poverty problems spends officially US$ 145 billion per year (the real number might be higher). Let’s not even consider the case of the US where the defence budget this year was a staggering US$ 750 billion, even is unable to offer health care to many of its citizens and struggle to deliver basic service to the survivors of Katrina.
Let me give you another example that is often dismissed by critical observers. The country in Latin America with the best performance in terms of human indicators (health, education, life expectancy, etc.) is not Cuba but Costa Rica. Yes, Costa Rica, the epitome of neo-liberalism in Central America and the Caribbean. The difference, Costa Rica has no armed forces, leaving it with more money to spend in health and education. Cuba has instead to dedicate a lot of its own resources in facing the US embargo and military threat.
I guess that what I am saying is that colonialism historical legacy and current neo-imperialism are far more responsible for the problems in the developing world than the imposition of neo-liberal policies. The question, I would say, is it to what extent neo-liberalism can be equated to colonialism. I believe that they are intrinsically linked, but not the same. The industrial-military complex and the Zionist experiment in the middle east are not the end result of neo-liberalism, but distinctive manifestations of historical situations.
Best
VanHayek
Thankyou for your excellent remarks.
The case of Costa rica could be held to be a sporting case study of the success of neo-liberalism and the superficial figures are good.
But , and this is the real But , the case of Costa rica is also the proof of the pudding that neo-liberalism and colonisation are completely interlinked.
If anything Costa rica is a Imperialist Monroe plan dream come true.
It could be said to be a unique case to the continent in such a way that Israel is to the Middle east.
The numbers as far as the indices of education;health and life expectancy hold up and can only be challenged by Cuba.
But look at the price to be paid as far as self-determination and soveriegn rights goes.
Firstly Costa Rica has not had an army since 1949 becuase it was “understood” that its strategic location at the bottom tip of central america made it a vital piece of the Monroe policy to act as a buffer between the support for dictators in South America and the forerunner of neo-liberalism to the north of Costa Rica (the US could not afford to have a large standing army too near to Texas).
The other saving grace for Costa rica is the very liberal access to markets terms and thresholds to the US that Costa rica enjoys , and this ties in with access to markets being a main lever that makes neo-liberalism the modern equivalent to gun boat diplomacy or outright military invasion.If you side with the US (foreign policy warts an all) you get market access , if you dont you get a trade block wall and sanctions.
Costa Rica has a no duty access to the Mexican market and also favoured access to the US.
Costas development is due to this favourable threshold.
The price to pay is some of the ludicrous positions Costa Rica is obliged to take in the field of foreign policy.
It was one of only 4 countries that decided to locate its embassy in Israel in Jerusalem instead of tel-Aviv.
It is aslo a clutch of about 4-6 nations that regularly support US/Israeli positions in the international colonialist arena.
It also , bizarrely , has only diplomatic links with Taiwan and noy mainline China until only 2 months back ( when the neo-liberal/colonialist climate allowed it to do so).
It is also worth remarking that the very first sentence of corporate business journals is “market open to foreign investment”).
I think to hold up Costa Rica as a model that works is as out of place as too hold up Israel as to the way forward for other countries in the middle east region.
I cn only agree with you in a board sense.
However, let me clarify that the statistical sources often cited to show Cuba’s social progressare the same that show Costa Rica’s own achivements.
With regards to Costa Rica’s subservant position, I agree too. However, I must say that most of the other countries in the continent have a very similar position. Furthermore, one could also say that Cuba’s was equally subservant to the former USSR. Thousend of Cuba’s men and women died in places such as angola and afghanistan to serve the Soviet imperialist foreign policy.
I frankly do not believe that army’s in developing countries have any function at all other than serve as pretorian guard of the ruling class. I know that this might sound extreme, but think about this: national boarders are a colonial legacy, therefore why defend them in the first place. Second, the revolution in military affairs that conventional armies are usless if a invasion from a country such as the US happens. Why then have a costly military expenditure?
Best
VonHayek