Infatuation with Economic Growth
Infatuation with Economic Growth
Ever since the turn of the 1990s, there has been great stress on raising the rate of economic growth. In fact, it has become the be all and end all for the governments coming to power at the centre. It has been underlined time and again that the only way to accomplish this task is by following the ten points that constitute the Washington consensus, which boil down to liberalisation, privatization and globalisation. For quite some time the votaries of this thinking and their trumpeters in the academic world as well as the media have been announcing from the housetops that the salvation of India lies in this. They blame Nehru for shackling the Indian economy and the forces of economic growth by bringing in his "disastrous socialistic ideas" and "models"! The result was, what pro-Western media and academics called "the Hindu rate of economic growth" that hovered around average 3 to 3.5 per cent per annum. Now, it is claimed that, by following the prescription of Washington consensus, India has been able to raise the annual rate of economic growth to 7-8 per cent and, very soon, it will reach 10 per cent and the day is not far when it will be ahead of China. It will then join the club of world superpowers. But here an inconvenient question arises: will it take care of India's problems of unemployment in all its forms and manifestations, illiteracy, poverty, sickness, regional economic imbalances and so on? Before we attempt to tackle this very pertinent question, let us be clear about the connotation of economic growth.
In common parlance, seldom any distinction is made between growth and development. They are generally taken to be synonyms. In development economics, however, they do not have the same connotations. Economic growth means only a sustained increase in the volume of goods and services produced annually by a nation, generally expressed in terms of GDP (Gross Domestic Product). The total volume of goods and services may increase by employing greater amounts of labour without any change in its productivity or by raising its productivity without any change or with even a decline in the quantum of labour or by increasing both the quantum of labour and its productivity. Obviously, there is a clear-cut possibility of "jobless growth", i.e., GDP may increase without generating new employment opportunities or throwing workers out of jobs.
Economic development, on the other hand, is a much wider concept. It includes not only growth (i.e., a sustained increase in GDP) but also technical and institutional changes. There can be no development without growth, while if a nation is having growth, it does not mean, at least in the short run, that it will have economic development too. In other words, economic development implies economic growth along with changes in the distribution of GDP and in the economic structure. These changes, in turn, imply an improvement in the material well-being of the poorer segment of the population; a decline in the relative share of the primary sector in GDP and a corresponding increase in the share of secondary and tertiary sectors besides improvement in the level and quality of education and skills of the working population, with the result that the country concerned is able to pioneer most of the technological advances. Dudley Seers was very candid in demarcating development from growth: "What has been happening to poverty? What has been happening to unemployment? What has been happening to inequality? If all three of these have become less severe, then beyond doubt this has been a period of development for the country concerned. If one or two of these central problems have been growing worse, especially if all three have, it would be strange to call the result 'development', even if the per capita income has soared." ("The Meaning of Development", International Development Review, December 1969) Development, ultimately, leads to a change in the values, outlook and attitudes of the people and in the society and the polity. Far-reaching changes occur in the organisation of business, production and finance. Social relations based on hierarchy, customs and traditions give way to those based on contract and in the course of time become more and more impersonal.
During the 1960s and 1970s, a number of countries had high rates of economic growth without any appreciable development. A country like Saudi Arabia had a very high rate of economic growth, thanks to increase in the production as well as the price of oil, but most of the increased GDP was cornered by a handful of people and there was no change in social outlook, values and attitudes, besides, the polity and jurisprudence continued to remain medieval. Obviously, there was no economic development. H. W. Arndt stressed: "At the very least, development policies must aim at growth with equity. Better still â€¦ priority should be accorded to the satisfaction of basic needs." (Economic Development. The History of an Idea, 1987, p.4) Dudley Seers came down very heavily on infatuation with economic growth: "the need is not, as is generally imagined, to accelerate economic growth-which could even be dangerous-but to change the nature of the development process." It was wrong to postpone the redistribution of income and wealth: "Those with high incomesâ€¦will inevitably try to find ways of maintaining privilege, resortingâ€¦ to political violence rather than give it up."
Obviously, those who want to sidetrack the issue of redistribution, regard it to be a fortuitous by-product of growth. They are, in fact, the votaries of the 'trickledown strategy'. It implies that economic gains to the well-off segments will in the course of time percolate to the less well off. To give an example, as the wealthy have more and more cars, they will need drivers, cleaners and mechanics and it will mean that a part of their income will percolate downwards.
John Kenneth Galbraith has been a consistent critic of this approach. As early as 1958, he had fondly hoped: "In the advanced countryâ€¦ increased production is an alternative to redistribution. And â€¦ it has been the great solvent of the tensions associated with inequalityâ€¦. How much better to concentrate on increasing output, a programme on which both rich and poor can agree, since it benefits both â€¦. In this case the facts are inescapable." He was, however, utterly disappointed. After a decade or so, he drastically revised his opinion, especially in view of what had been happening in developing countries: "In the less developed lands the simple goal of an expanding production, the assortment reflecting the demand given by the income pyramid is not a satisfactory guide. There is, first, a very large population, which is very near or sometimes below the margin of subsistence. Those who are hungry have a special claim on resources. So do the measures, which remedy this privation. For the same reason there is a special case against the luxury consumption of the well-to-do." He was very harsh when in the 1990s; he attacked the trickle-down theory of redistribution. To quote, "Trickle-down theory -the less than elegant metaphor that if one feeds the horse enough oats, some will pass through to the road for sparrows." It is needless to add that the advocacy of the trickle-down strategy is nothing but insulting the people at large. The present deputy chairman of India's Planning Commission has been a great votary of this strategy and has written a number of so called research papers in learned journals in its support.
Ever since the infatuation with economic growth has come to the fore, unemployment has been on the rise, regional disparity has been widening and income inequalities have been increasing. A virtual "luxury fever" has gripped the rich and upper middle class and their conspicuous consumption has spurred bribery and corruption, social tensions and crimes of various sorts. No amount of police patrolling and the deployment of paramilitary forces can eradicate them unless the infatuation with economic growth is given up.