When Extremes Meet

It is very rare, though not theoretically impossible, that the two extremes meet. One such rarity has been recently witnessed in India. The writer Ms Arundhati Roy and the economist Prof. Raghuram G. Rajan have been poles apart so far as their social and economic views are concerned. Roy, for years has been actively campaigning for a radical change in India’s socio-economic system and has fearlessly stood by the depressed, deprived and oppressed sections of the Indian society, without caring even for her physical safety. These days she is being talked about for her advocacy of the cause of the Maoists. On the other hand is Rajan, an internationally renowned economist, belonging to the Chicago School of Economics, which has been a strong pillar of neo-liberalism. Milton Friedman was among its founding fathers. Rajan has served the International Monetary Fund as its chief economist. At present, he is an honorary economic adviser to the Prime Minister of India. Without mincing words, Rajan has stood for the minimum possible role the state in the economy and the removal of all restrictions on the movement of capital and commodities.

In spite of these basic differences, both Roy and Rajan are one as far as their assessment of Indian democracy is concerned. Some time back, The Wall Street Journal (April 15, 2010) came out with a poser: “On Maoists, Do Roy and Singh Adviser Agree?”

It referred to Roy’s television interview on CNN-IBN’s programme ‘Face the Nation’, where when she was asked whether she stood by an earlier comment that India was a “fake democracy”, she boldly stated: “Certainly, I feel that India is an oligarchy where it does work as a democracy for the middle classes and the upper classes. Therefore because it does not work for the masses of people, it is a fake democracy.”

Commenting on this The Wall Street Journal wrote: “… this time the writer-activist may be on firmer ground that many of her critics would like to concede, since what she said had the backing of one of India’s most eminent economists.” Then it went on to refer to a speech by Rajan at the Bombay Chamber of Commerce on its Founders Day Celebration, held on September 10, 2008. The title of his 11-page long address was: “Is There a Threat of Oligarchy in India?” It is very interesting and instructive to read the views of a person who has been privy to many important decisions and discussions relating to Indian economic problems since his IMF days. Not long ago, he headed a committee of the Reserve Bank of India that recommended capital account convertibility of the rupee.

Rajan, at the very outset stated: “… in the spirit of inquiry and discourse that we follow at the University of Chicago, let me lay out some thoughts that could be the basis of a debate.” And then went on to stress that “we are entering one of the most critical periods in India’s history. The next ten years will determine whether we will take our place amongst the group of nations like South Korea and Taiwan that have made their way from poverty to moderate prosperity in a couple of generations, or whether the last few years have flattered only to deceive—whether the tremendous growth of the last five years, following on the growth acceleration starting in the 1980s, is simply a growth spurt whose underpinnings are unsustainable.”

When the Licence-Permit Raj of the Nehru era was terminated, paving the way for neo-liberal path of economic development, its fruits went largely to the coastal states and others lagged behind as far as the growth of employment opportunities, income generation and public services was concerned. Consequently, unemployment, poverty and deprivation increased. As against the Nehru-Indira era when investments were directed by the Union government in order to inherited-regional imbalances, under the new dispensation, market forces became the allocator and director. Consequently, states like Madhya Pradesh including Chhattisgarh), U. P. (including Uttarakhand), Bihar (including Jharkhand), etc. became more backward and the incidence of poverty increased. The same became the plight of tribal areas of Orissa, West Bengal and Andhra Pradesh. In all these administration, education and health services deteriorated. Let us hear it in the words of Rajan, “Our entire bureaucratic system of provision of public goods is biased against access by the poor. Ration shops do not supply what is due, even if one has a ration card, teachers do not show up at schools to teach, the police do not register crimes, or encroachments, especially by the rich and powerful, public hospitals are not staffed, public sector banks do not want to lend… I can go on, but you get the picture. This is where the local politician fits in. While the poor do not have the money to purchase services … or to bribe the public servant, they have a vote that the politician wants. The politician does a little bit to make life a little more tolerable for his poor constituents – a government job here, an FIR registered there, a land right honored somewhere else. For this he gets the gratitude of his voters. But he then also has little reason to improve their lot – because the local politician in India today owes his reelection to the totally corrupt and compromised system of delivery of public goods, and the paucity of reliable jobs, especially for the very poor.

“And the system is self-sustaining. An idealist can promise to change the system, but the voters know there is little one person can do. Moreover, who will provide the patronage while the idealist is fighting the system? Why not stay with the system? …. Of course, for those who are truly disillusioned with the system, violence offers an alternative path. The growth of Naxalites … is only more evidence of total breakdown of the delivery of public goods to the poor.”

How and from where do the politicians get the requisite financial resources to sustain his patronage to the poor and run their election machinery? In the past the Licence Raj provided them in the form of, what economists call, rent. This rent, after liberalization, has moved elsewhere.

The number of billionaires per trillion dollars of GDP has increased very rapidly. “It is Russia [which tops], with 7 billionaires for the 1.3 trillion dollars of GDP it generates. …these are the oligarchs who stole the country’s mineral resources, who participated in the Loan for Votes scheme, etc. But guess which country comes second? It is India with 55 billionaires for the $1.1 trillion it generates.

“Some comparisons… to convey…how extraordinary this number is. Remember, our per capita GDP is tiny, even compared to Russia’s.” It shows greater income inequality in India.

One must remember that these billionaires of India do not have acquired their present positions owing to their enterprise, innovative zeal and their forward looking approach and ideas. The proportion of software billionaires in the list is tiny. To quote Rajan, “three factors – land, natural resources, and government contracts or licenses – are the predominant sources of the wealth of our billionaires. And all of these factors come from the government.

“So the circle is complete. The poor need the savvy politician to help them navigate through rotten public services. The politician needs the corrupt businessman to provide the funds that allow him to supply patronage to the poor and fight elections. The corrupt businessman needs politician to get national resources cheaply. And the politician needs the votes of the poor, who are numerous enough to assure him reelection, no matter how much an idealist middle class may rail. Every constituency is tied to the other in a cycle of dependence, which ensures the status quo prevails.

“Clearly, reality is more complex than what I have sketched. And there are many fine upstanding politicians and businessmen, greatly outnumbering the corrupt…. But oligarchies do not require many participants to flourish. They only require silence and complacency among all of us.”

Obviously, it is the truth that compels both Arundhati Roy and Raghuram Govind Rajan standing on the two extremes to come and share the same viewpoint as regards the real character of the present day Indian polity is concerned. The trouble is that neither of them has any concrete strategy to break the existing impasse. What is urgently needed is a serious, thorough and frank debate so that a feasible strategy is worked out to mobilize the masses.


Leave a comment