Sunday, March 29, 2009

What Balanced Growth means to the World Bank

Abusaleh Shariff and Amitabh Kundu
Amidst the global gloom of economic meltdown rivaling only the depression of the 1930’s, the World Bank has delivered its 31st ‘world development report’ (WDR) in its own ritualistic fashion last week in New Delhi. The report is a visual treat as the complexities of world’s business is presented in three dimensions, using geographic depictions that are easy to understand. Although it argues for balanced growth between the rural and urban areas, it makes a strong case for the ‘scale economies’ that can occur through geographic concentration of economic activities, which alarmingly is taking place in and around a few large city concentrations. The case of Tokyo which accounts for closer to one half of Japan’s exports is presented as an illustration with a lot of fervor. The cases of Seoul in South Korea, Dongguan in China, specified region in Egypt have been noted to strengthen the case. The report introduces the concepts of ‘three Ds’ depicting density, distance and division all in geographic parlance and their spatial overlapping without going into the details of their distressing manifestations in many of the countries in less developed regions.
The report makes a case against policies which could hinder the so called natural process of rural to urban migration and process of urbanization. It argues for well informed and people friendly provisioning of services to urban areas so as to facilitate economic growth oriented industrial and service activities. Understandably, the large cities with greater potentials are to be preferred in designing the strategy. A compulsive argument made is that it is just not for the sake of higher wage incomes and better jobs that people migrate to cities and urban agglomerations. They do so due to concentration of economic and social infrastructure; for example, the markets, facilities for education, health, entertainment, leisure and so on. In this context there is emphasis on the fact that it is no more a dichotomy of rural and urban areas but it is a continuum, rural-villages to towns, cities and metropolises that should constitute the premise of the development strategy.

The durability and resilience of an economy during the crises is linked with its own diversity and vastness in terms of the sectors of economy, For example, economies dependent on export of single or few commodities would get affected much more from a sharp fall in global prices of these commodities, compared with economies with a diverse basket of goods and services in its markets. One can extend the argument to geographic diversity and hold that a broad spread of economic activities across all different regions in a country including rural areas and semi-urban corridors would be less vulnerable to such global shocks. Thus the key to long term efficiency and stability in growth lies in economic and geographic spread and not in its concentration. Note that such counter arguments and conflicting policy orientations between economics of specialization, agglomeration and even division of labor are as old as economic thought itself and there cannot be a single prescription for countries that face very different economic situations. There have to be a range of economic prescriptions depending upon the nature, depth and breadth of global integration and level of economic development itself.
The WDR recommendation in favour of concentration of economic activities in the name of size economies would be grossly unsuited for countries like India for several empirical reasons. The country owing to historical and socio-economic reasons has experienced low rate of migration, if you exclude mobility of women occurring largely for marriage and family linked factors. More importantly, the male population has become less mobile over the past several decades. The rhetoric of the regional leaders leading to antagonism between the local population and outsiders is partly responsible for this. The decline in the rate of immigration can be observed not only in case of Maharashtra but also other developed states like Punjab, Haryana, West Bengal, Gujarat and Tamil Nadu. Correspondingly, the rate of outmigration from the less developed states has gone down. Expenditure class wise data from the National Sample Survey suggest that the poor households are worst hit by this trend and their migration rates have declined significantly. Furthermore, the WDR does not draw lessons from the fact that it is the rural-rural migration which has created fascinating geographic economic linkages in India. This linkage is the result of technological transformation of agriculture in specified areas which had relative advantage in water resources and other inputs. In the context of the rural areas the WDR under emphasis two important processes: (a) the role of technology in agriculture, and (b) the role of agriculture in economic growth and livelihood sustenance to the teaming millions in India.
The decline in the growth in urban population during the past two decades indicates that rural urban migration has not gone up despite accentuation of rural-urban disparity. The metropolitan cities have become hostile to the migrants and consequently their poverty levels have come down sharply to about 12 per cent as compared to the figure of 24 per cent for the country as a whole. The household level data show that growing rural-urban disparity provides economic rational for greater migration. Unfortunately, the socio-political reality of the country has come in the way of its materialization. It would be imprudent to plead for a strategy resulting in grater regional imbalance without ensuring that mobility can indeed be increased given the present social environment.
The major concern of the inclusive strategy designed for the Eleventh Five Year Plan is regional imbalance and social justice. A large number of programmes have been designed, targeting the development of backward areas and regions that also have large concentration of socially vulnerable people. The Prime Minister’s flagship programmes including NREGA are trying to reach out to the people who have benefited only marginally from the growth dynamics of the earlier periods. Redressal of the problem of regional balance is taken as a key component of the strategy of inclusive development in the Plan. India is not the only country where regional and social inequalities have gone up in the past few decades, partly associated with adopting measures of globalization. The WDR for the year 2006 entitled Equity and Development had expressed serious concern on this issue and pleaded for providing access to basic factors of production and strengthening the capabilities of the people in vulnerable social groups and regions. The policy perspective emerging from the present report is bound to send erroneous signals to policy makers in developing countries and come in the way of achievement of MDG by 2015. Economic growth foundations if linked securely to the economics of agglomeration will do more harm not only to the farming communities but also to those who live in relatively less endowed geographic spaces; besides creating mega-problems faced by mega-cities. Can anyone imagine India marching ahead on a high growth path even for the next couple of decades by strengthening infrastructural facilities and high quality services in a few urban agglomerations, ignoring the five thousand small towns and six hundred thousand villages, even in the short run? Utopianism can show us the moon, but only a few can reach there. The development practitioners must think about the welfare of the millions living in un-serviced villages and urban slums rather than projecting a dream of creating a few millionaires.

Economic Recovery

Economic Recovery is in the Brain!

As the global economy saw a sustained and uninterrupted growth of just about a decade since the east- Asian crisis of 1998-9, the USA became first to strike back with a vengeance as if she was waiting to destabilize the world economy with a purpose. The blame game began – it is the sub-prime lending, crash of the housing market and so on; but the real culprit was the inefficient and unregulated banking sector in the US and selected European countries. Remember even the erstwhile east-Asian crisis was triggered by the failure of the banking sector who could not sustain FII and FDI flows and the panic subsequently robbed the capital markets across the region through contagion. This time it is not the financial constraints per se, rather glut of easy and cheap money channeled into the American financial system from across the world, mainly through federal bonds and speculative investments in real estate. USA has been the favorite destination for keeping ‘global sovereign funds’ as a store of value through the purchase of federal bonds and investments in private markets. For example, most of surplus petro-dollars from the Middle Eastern countries, the national savings from China and Japan are dominantly parked in the American bond and stock markets and by the end of 2008 US had the largest negative trade balance in the world of $821billions.

Another fact important is that financial crisis that hit the real estate in the US came unannounced; the undercurrent of this ‘financial tsunami’ was not at all visible. Murmurs of overheating of economies were heard during 2008 but they were taken as positive indications for promoting high levels of production and marketing activities thus benefitting corporate sector. But subsequent to the crisis inter-banking activity came to standstill and developmental fund channel for industrial production, trade and services was desiccated. Many expansion plans and future investments were put on hold. A grand psychological deficit took shape which further drained the financial markets, that not only damaged institutions and business but also individuals and households. In spite of the fear of loss of value of cash savings, individuals preferred to withhold cash or should we say stash cash under the pillow thus damaging the business and marketing activists. Such a forced and unwarranted savings create disaster especially during the slowdown as this behavior reduces domestic demand and brings down the overall economic activity leading to massive unemployment, although there could be initially a decline in rate of inflation. Such a behavior normally snowballs into deep crisis. The efforts to stop such disaster have lead to what is now known as economic bail out plans but amidst serious criticisms.

As a fall out of the meltdown a number of less developed countries are affected. The Economic Intelligence Unit predicts that 95 countries around the world are facing a threat of social unrest which can disrupt economies and topple governments. Volatility and uncertainty in food and fuel prices, and associated pricing and trade policies needs to be at the top of the economic agenda of low income and transition economies so as to keep a watch on the welfare of millions of the downtrodden spread across both the rural and urban areas. Many businesses are resorting to wage cuts or reduction in working hours, depleting inventories and so on. The durability and resilience of an economy during the crises is linked with its own diversity and vastness in terms of the sectors of economy, for example, single or fewer commodity export economics would get affected much more from a sharp fall in global prices of such commodities; compared with economies with a diverse basket of goods and services in its markets. An extension of this phenomenon is geographic diversity and a broad spread of multiple economic activities across all parts of a country including rural areas and semi-urban corridors. Thus the key is in economic and geographic spread and not in its concentration, notwithstanding the most recent prescription of the World Bank vehemently promoting economic concentration in the guise of economics of agglomeration (World Development Report, 2009). Note that such counter arguments and conflicting policy orientations between economics of specialization, agglomeration and even division of labor are as old as economic thought itself and it is easy to recommend a balanced view on it; but what is relevant today is that there cannot be a single prescription and that countries face very different economic situations. Thus, there have to be a range of economic prescriptions depending upon the nature, depth and breadth of global integration and level of economic development itself.

The rich economics are putting financial bailout packages to banks and industrial houses under sever criticisms that such efforts are akin to nationalization and getting closer to socialistic virtues which are not respected in liberal market economics. The economic bailout plans mostly in US but also in the UK and to a limited extent in other European countries are intended to bring back vibrancy of economic activity through promoting businesses. But this is better said than done, as businesses can be promoted only when psychologically they are again ready to take risks and initiatives for furthering production, distribution and trading activities. A saving grace during this state of madness has been not so high increases in basic food items although there are indicators of food price increase during this year and the year after. Food prices have either declined or remained same, but there are pressures that they may increase which will mean that the poor will be affected.

It was common knowledge that India and China were engines thrusting economic momentum of the globe during previous decade and expected to do so during next half a century or more. But the meltdown has affected both - China much more than India. This is because of China’s high degree of global integration in spite of not being a member of WTO for a long time. China has recorded industrial unemployment never heard of and economic growth rate is expected to be half of decadal average. India on the other hand not fully integrated globally both in terms of exports and financial inflows are affected somewhat less. It has not yet seen massive unemployment although a recent ‘labour bureau’ estimate puts is at about 500,000 job losses but it is nowhere near to 2.5-3 millions reported from China. Indian has continued to receive FDIs almost at the same rate and reached the peak last month. Thus what appeared a problem for India that its economy was growing due to domestic demand has become a blessing in
disguise, and supporting reasonable growth during the downturn. Even the IMF (18th March 2009 news papers) has accorded accolade for India for its responsible economic policies and sustaining growth in the vicinity of 6 % during the current year.

A natural response to protect an economy from the global forces of meltdown could be to insulate itself through protectionist policies. A few countries have precisely done the same especially in areas of financial flows and food exports. But what appears a curse in transferring and augmenting the impact of the meltdown, is precisely what will work to ward off such an evil. Multilateralism and open borders still are the solutions to reduce the impact jointly and ultimately get a set of countries out of recessionary situations. At the national level it is prudent to sustain expenditures on programs such as for mass employment generation (NREGA) which enables the rural poor to sustain income and consumption. Fiscal deficits will be under stress but that is what the national governments are expected to do, manage fiscal and financial flows prudently.

Thursday, March 5, 2009

Marginalized and Indian Democracy: A case of Muslims

There are a number of ways marginalized groups of people can be defined in India; often referred to as the excluded as well. These generic expressions, inherently suggest a systemic but mechanical manner in which groups of specified identities are driven away towards peripheries of democratic decision making institutions. They miss out from the benefits of protective and promotive public policy approaches, mostly due to lack of motivation amongst functionaries assigned with implementative duties. They often lack informational and institutional support structures that through community networks could claim their own space in governance and civil society. Put differently exclusion can occur due to the acts of omission and commission by the political and governance structures. The dimensions namely, political process, bureaucratic reach and drive for organized civil society initiatives are all essential to enable citizens seek fair access and achieve reasonable levels of outcomes in modern day developmental initiatives.

Given the complex maize of socio-cultural and religious pluralism and diversity in India, often population groups identified as dalits, tribals (notwithstanding constitutional guarantees), minorities (mostly religious), land less manual workers, migrants from rural and less developed regions and those living in inhospitable hinterlands are identified as marginalized or excluded groups. They generally do not carry political patronage, nor do they attract attention of developmental functionaries under routine setup, and are unable to organize themselves in the mould of civil society. In short they are easy to pry, mislead and even soft targets of exploitation.

In India we invoke general (national) elections every five years to choose 552 members to loka sabha (house of the people) in parliament. They along with members of rajya sabha (council of states) and state level legislatures select a Prime Minister as chief of executive, representing largest faction of elected representatives, and he in turn selects his team of ministers. Thus one finds a multi-level process and at each level the marginalized may experience the brunt of exclusion and suppression. Since the Indian democracy recognize and respect those who have support of the majority, which can be just over one half and often much less due to multiple contestants. In many circumstances those at the helm of governance do not in fact represent majority at all. In such a mechanism, those identified as marginalize and excluded cannot make inroads into functional democratic formations. Thus, executive and legislature in India seems to work for the majority not because institutional formations were based on majority but rather to an illusionary majority which is important to sustain power in future as well. Besides, one finds a declining share as voters, amongst the marginalized especially in case of religious minorities, which can further cause marginalization and exclusion.

It is absolutely necessary, therefore, that other institutional structures are available to protect the interest of marginalized and excluded. The judiciary is one such institution, which is part of the trilogy (along with legislature and executive) accounting for good governance. But judiciary acts only when approached and marginalized normally are incapable to reach out seeking redresses. Normally, judiciary addresses individual cases and only rarely accommodative to ponder over systemic and mechanical exclusion; and on its own it does not initiate corrective measures.

In India, there are other quasi-public institutions such as the human rights commission, the SCs and STs Commission, minority commission and so on; whose mandate is not well defined, and a look at their functioning suggests little attention towards three types of exclusions enunciated above. Such quasi-public institutional arrangements are involved in seeking redresses through the enactment of law; lacking are intuitional arrangements to ensure implementation of laws and program that promote inclusion.

The hope for democracy in India lies in the grassroots identified as the panchayati raj institutions. Even at this level same principle of ‘highest count wins the cup’ is utilized, which in fact pushes the identified communities further towards deepening marginalization, exclusion and distress. The concept of proportional representation was rejected at the time of formation of the Indian republic in 1947 on the belief that democratic selection through ‘highest vote gather’ method was good enough to address concerns of minority groups that were not capable of winning a place through votes. But as we experience now such expectations are not to be found. It appears, therefore, time is ripe to introduce some form of proportionate representation at the level of local self governments. For example, legislation in Andhra Pradesh in 2006 ensures nomination of two minority members to the panchayat sabhas across the state. Other states will do better by emulating this format and learn from experiences.

Although Indian has made a name for itself in the world as an emerging economy, production and consumption hub, and part of the global energy revolution; it is going through one of the lowest spiral so far as inter-community relationships are concerned. It has poor record in social policy of building safe and secure place of living for people who profess varied religions and social customs. Inter-community relationships must be addressed as the priority of this government and the government which will be formulated after impending general elections. It is a matter of ‘trust’, but the minority communities especially the Muslims and Christians are looked down upon by certain political thinking, which is corrupting the young minds. While other minorities namely Buddhists, Sikhs and Janis do not sufferer from such mistrust of the polity and establishment.

Security Concerns- In organized societies especially in a pluralistic context there can be physical threat to life if a dominant group intends to eliminate or reduce the civic power of the other group. But the legal structure and state security machinery such as the police, the army and other agencies are put in place to ensure security to all citizens. It is in this context and frame of governance that one needs to understand the physical security of the Muslim community in India.

In spite of democratic governance in place in India there is physical threat to life of many minorities – mostly Muslims and Christians; and castes such as dalits and adivasis.
Muslims especially face threat to life if they do not align their political ideology with the dominant community of a given area such as a constituency, a district or a state. Often organized threat to life of Muslims emerges from the State especially when those with deviant ideology assume power – For example in Gujarat. But such organize crime causing loss of life can be caused even in the so called secular regimes – thus such mass killings such as during the communal riots are mostly engineered and well planned in connivance with the security agencies of the state. The police force in the Indian context seems somewhat less concerned with the problems of the poor and excluded.

When there is a fear phobia amongst a community it affects practically all facets of human lives. While it generates a feeling of perennial insecurity in the minds of people, which in turn pushes them in to living in exclusive spaces and ghettos? Children, especially girls would not participate in normal and regular schools for fear of life as most often such facilities are found in living spaces where the Muslims do not reside. Muslim women will not come out to secure employment in common places such as the markets. Even the well educated and qualified Muslim men may not be employed in the private sectors, as they will be considered not trust worthy. Especially since the whole of the Muslim community across India is under the suspicion, it is not uncommon to find that the security agencies pick up Muslim youth at random and subject them to merciless killing just to create a terror phobia amongst the Muslims.

This is a national disgrace and needs to be set right. In this connection there is a need to establish the ‘equal opportunities commission (EOI)’ as recommended by the Sachar Committee, and appropriate legal mechanism through an enactment of law must be put in place to deal with religious discrimination. The EOI also helps strengthen grassroots level participation by reducing willful exploitation and exclusion of communities, socio-cultural or economic groups such as the wage laborers, temporary migrants, women, and minorities and so on. Maintaining diversity in public spaces was also recommended to be absolutely essential through extending a set of carefully crafted incentives and disincentives. Sachar report essentially is a review and record of success or failure of the democratic institutions intended to achieve social-equity, participation and inclusiveness. It is two years since the report was handed over to the parliament, but so far there has not been any discussion and debate on it. In a democracy, keeping issues under wraps, away from the public debates can defeat the very purpose and objectives of developmental governance. Although there are some gains with respect to enhanced sensitivity amongst the policy makers and bureaucrats with respect to excluded communities in this case the Muslims; no noteworthy policy shift has been noticed. Mechanisms to improve diversity in government employment, admissions in colleges and universities, and in institutions of local self governance have to be addressed on an urgent basis. Importance of information sharing and transparency in public debates effected though establishing an independent data bank and assessment and monitoring authority will go a long way in ensuring the fact that Indian democracy is moving towards maturity and that it meets the standards set by modern day democracies around the world.

The following initiatives will yield better results both at the level of State and National government frameworks:

Markets, Credit and Employment:

City/ town specific modernization, marketing and export schemes for products produced by artisans. Access to bank and cooperative credit to facilitate production, gradation, packaging and exports. Easy access to bank and micro-credit programs for promotion of self-employment.

Promote food-processing industries for export of meat, chicken and fish with participation of Muslims in backward and forward markets. Retailing, where many Muslims are engaged is now being hijacked by the organized sector.

Promote environment friendly leather industry with involvement of Muslims and SCs and STs in the backward and forward markets.

Strengthen the backward and forward linkages in both credit and product markets in hand loom and power loom sectors to promote production of cotton textiles and Silk.

Provide clearly identified urban space for undertaking vending operations for vegetables, fruits, flowers and other food products with proportionate share for Muslims.

Provide mainstream space to show case crafts produced and manufactured by Muslim artisans. The artisans are feeling the heat of technological inventions, and their livelihood is endangered.

Recognize self-help groups from amongst the Muslim communities. Enable registration of Muslim oriented civil society organizations.

Social Services:

Ensure ICDS centres in Muslim dominated area to be managed by Muslim Women and attach libraries and provide reading material.

Ensure presence of Muslim men and women in adequate proportion in local panchayats. Nominate Muslim women and men in panchayats where they cannot get elected due either to local political factors or due to smaller numbers.

Recruit Muslim men and women in regular schools as teachers, assistants and administrative staff in all types of public schools, not necessarily in schools for Muslim boys and girls.

Appoint Muslims in Police and other institutions meant for protection of public property such as the railways, border security force and so on.

Recruit Muslim men and women in regular rural health programmes such as doctors and surgeons, ANMs, health assistants, extension workers.

Draft Muslim men and women in public employment programmes. Promote inter-faith committees in all locations with Muslim concentrations. Promote membership of Muslims in the urban housing societies.

Muslim Community itself must take Initiatives of the following type:

In today’s time ‘knowledge’ is becoming central to all paths of progress and that is where Muslims have to strive hard. Chart out strategies and accumulate resources to promote educating amongst the poorer sections of Muslim community. Promote compulsory 7 years of education amongst both boys and girls.

Promote appropriate technical education (computer linked) such as the Indian Technical Institutes for those who are failed at the matriculation and pre-university levels.

Establish transparency in managing Islamic institutions such as the Wakf and Mosque committees. The resources including from Zakat and other donations along with Wakfs should be targeted to the poorest amongst the Muslim community. Welfare activity must not end at construction of mosques, but also to ensure measurable transfer of welfare gains to the society.

Establish small and medium enterprise program to promote manufacturing of goods such as, soups, shampoos, pulses, dairy, spices, edible oil, wheat flour, homemade pickles, homemade drinks, home made sugar, cosmetics, hatchery, skin processing, poultry, cattle feed, rearing of cattle, sheep & goat, garment manufacturing, lime kilns, gaur gum units, hydrated lime, plastic goods dyes, colour and chemicals, textile processing units, toothpaste, toothbrush, shaving creams, hair dyes, jewellery etc. and things which are being used in everyday life by common man. There is a need to eliminate the middlemen though the establishment of SHGs. All these products would be “halal” products and the whole community would be galvanized to buy these Sharia compliant products without much marketing efforts.

I Initiate an anti-dowry movement amongst the Muslim communities so as to become a model for the whole of population in India. Imbibe nationalism amongst boys and girls in young ages by promoting respect to national flag and national anthem. There can be a Muslim way to saluting the national flag and ‘sare jahan se achha hindustan hamara’ must be used as the national anthem along with ‘jana gana mana’.

There is widespread absence of civil society groups with a focus on Muslim advancement, who could play a vital role in the implementation and monitoring processes of various Muslim oriented programs. This challenge could be addressed by encouraging Muslims to set up civil society groups, and even offering some Masjid Committees to take over this role until a full fledged civil society group emerges in the locality as a meaningful alternative. But the latter decision need to be carefully made so that such initiatives should not result empowering Muslim clergy class who are often known for regressive interpretation of Islam denying gender equality to Muslim women. The secular development intervention needs to have enough space for Muslim girl’s education and advancement, without which addressing Muslim backwardness could be entirely impossible.

The intellectual and political leadership addressing the issue of Muslim backwardness is led by largely non-Muslims indicating consolidation of secular content of India’s public debate. The Muslim community must continue to engage one and all strategically so as get integrated into the mainstream democratic value system enshrined in the Indian constitution. Promote importance of protecting public property, community infrastructure and place of worship of all religions and castes.