Three major issues which hinder self-reliance and sustainability of the Indian economy

by Dipankar Dey

Frontier | 12 August, 2016

This paper argues that the Indian citizens in general and policy makers in particular should immediately address three major issues which limit India’s self-reliance and economic sustainability. These are
(i) Indian core industries are suffering from the infamous ‘Dutch Disease Syndrome’ due to large scale ‘virtual brain drain’, from the country to serve the foreign companies. It needs to be highlighted that unlike Chinese companies Alibaba, Baidu and Taobao, those compete with global giants like Wal-Mart, Google and eBay respectively, no such platform exists in India.
(ii) there is a disconnect between the traditional knowledge system which had evolved over years and the post Renaissance European  knowledge which has given birth to the capitalistic production process. Academics tend to look on “esoteric” beliefs with contempt, but are usually ignorant about the religious and philosophical traditions to which these terms refer, or their relevance to intellectual history (iii) Capitalism is passing through a serious crisis. An alternative to the existing free market mechanism has to be explored. The idea of Third Sector is getting prominence in the economic discourse.

Indian citizens in general and policy makers in particular should immediately address three major issues which limit India’s self-reliance and economic sustainability. The present piece tries to identify those issues.

1. Since the last decade, more specifically during the third wave of information technology (IT) revolution, we have witnessed tremendous changes in business models, value chain, organization structure, organizational culture, etc. Probably this is going to unleash unprecedented productivity growth in near future. Not only that, competitive advantage of some of the biggest companies is going to be withered away.[1] These changes will be backed up by technology. But question may be raised about the outcome of these changes. Are these changes leading to a better world to live with? Steep rise in labor productivity, in almost all the countries, is not matched with the rise in real wages leading to chronic supply demand gap. International Labor Organization’s (ILO) “Global Wage Report. 2014”, shows that increased worker productivity–particularly in developed economies, where inequality saw its widest increase—has had little effect on boosting wages.[2]

Paul Baran, in his path breaking thesis, ‘The Political Economy of Growth’ (1957), challenged the views of the mainstream ‘development economists’ and argued that  imperialism had penetrated underdeveloped countries, destroyed their earlier social formation, destroyed subsequent development and created  a ‘lasting condition of dependency’, for those countries, on the Western developed nations. Baran’s theory of ‘lasting dependence’ had influenced many other social researchers to explain the widening gap between the Center and Periphery which is believed to be a product of the dynamics of the imperialist world system[3].

Economist Samir Amin, who massively contributed to dependency and the world system analysis, mentioned (1997) about five monopolies those helped the imperialist global capital to retain their hegemony on the countries of the periphery. These are (i) technological monopoly, (ii) monopolistic control over worldwide financial markets; (iii) monopolistic access to the planet`s natural resources; (iv) monopolies on media and communication; (v) monopoly on the weapon of mass destruction. In addition to these, the advanced industrial countries exercise their power through the intermediary triad of the World Bank, IMF, and WTO. Thus, by creating increased dependence of the under developed peripheral countries on the world market and global finance dominated by the western developed nations, the global capital has further eroded the possibility of an independent nation state. Data on rich-poor country divide strengthens the above observations. In 1820, the richest and the poorest countries were separated by a per capita GDP difference of 3:1. By 1992, the ratio has risen to 72:1[4].

The situation has worsened further in recent times. The  latest Oxfam report shows that the 62 richest billionaires own as much wealth as the poorer half of the world’s population. The report calls for urgent action to deal with a trend showing that 1% of people own more wealth than the other 99% combined.[5] Globalization of capital has made the situation even worse for countries like India. One Mumbai based newspaper has even claimed that ‘Globalization has turned India into a coolie economy’.[6]

If development of indigenous technology is considered as one of the important steps towards de-colonization and self-reliance, India has not done much progress towards that compared to other two Asian countries, namely China and South Korea, those achieved independence almost at the same time. The numbers of patent applications by residents of the respective countries (Table 1) is a case in point.

Table 1: Patent Applications, by Residents

Country

1996-2000

2011-2015

China

4,15,829

8,01,136

India

8,841

12,040

Korea (Rep)

1,38,034

1,64,074

Japan

2,87,580

2,65,989

UK

15,343

15,198

USA

2,47,750

2,85,098

Source: The World Bank, http://data.worldbank.org/indicator/IP.PAT.RESD

It is argued that Indian capitalism did not emerge as a result of the contradictions within Indian society but as a result of the impact of the developed capitalism of a foreign country, on a dependent pre-capitalist society. It is also said that the Indian bourgeoisie was divided into two societies – National and Comprador – a division made on the basis of the nature of the relationship with the foreign imperialist capital.[7]

Now the question remains where does the Indian IT industry, which draws the best technical talents of the country, fits into these broad categories of comprador and national bourgeoisie. Are Indian core industries suffering from the infamous ‘Dutch Disease Syndrome’[8] due to large scale ‘virtual brain drain’, from the country to serve the foreign companies? It needs to be highlighted that unlike Chinese companies Alibaba, Baidu and Taobao those compete with global giants like Wal-Mart, Google and eBay respectively, no such platform[9] exists in India.

2.In this simplistic analysis, a large section of producers, namely, weavers, artisans et al, who for centuries have lived in villages and produced goods with their mere local capital and traditional technology[10] to meet the basic needs of the millions of people, have been kept outside the purview of the mainstream deliberations on national and comprador capital. Incidentally, most of these small producers belong to indigenous tribes, religious minorities and low caste Hindus who, for centuries, live in the margins/periphery. It is argued that the continuation of the British model of administration and education has helped to push the traditional artisans further to the periphery. Ideally, their knowledge could have been utilized for the real decolonization of independent India. Instead, the European knowledge, propagated by the educated urban elites, has marginalized them.  One example would clarify the issue.

Wilhite (2007),[11] referring to his study on the traditional houses of Kerala (India), mentioned that for centuries the houses and public buildings in Kerala were built mainly by caste based craftsmen (Viswakarma caste, who did all types of carpentry work across the country). Their building principle took account of local climate. In Kerala, artisans used woods, mud, un-burnt bricks, bamboos, straw and leaves as building materials. These are all porous materials that allow natural ventilation. So there was no need for artificial cooling. But in the mid-20th century, new building regulations called for written proposals with drawings for new buildings. This disfavored the artisans who lagged the skill of writing proposals for construction projects with site plan and blue prints as per the newly framed municipality norms. In their place, ‘technically educated’ building contractors and consultants began to take-up construction jobs. The emphasis shifted to cost management, use of unskilled labor and cheap fabricated materials. Along with this new building industry, electrical appliances industry of air conditioners, refrigerators etc. also flourished.

It seems there exists a disconnect between the traditional knowledge system which had evolved over years and the post Renaissance European  knowledge which has given birth to the capitalistic production process. Academics tend to look on “esoteric” beliefs with contempt, but are usually ignorant about the religious and philosophical traditions to which these terms refer, or their relevance to intellectual history[12]

It is high time that we encouraged all kinds of creativity and innovations with more open mind and try to bridge the existing gap between the traditional and modern knowledge system for a sustainable future.

3. Capitalism is passing through a serious crisis.[13]. Markel (2014)[14], in his paper ‘Is Capitalism compatible with democracy?’ has rightly said, ‘capitalism is not democratic and democracy not capitalist’. Many countries are exploring a new philosophy of doing business.[15] The idea of Third Sector[16] is getting prominence in the economic discourse. It is claimed that the Third Sector- comprising of community groups, voluntary organizations, charities, social enterprises, co-operatives and individual volunteers, makes a direct impact on the growth of economy, the wellbeing of its citizens and the improvement of its public services[17]. It is also claimed that it can play an important role in helping the Government achieve its purpose of creating a more successful independent nations with opportunities for all to flourish, through achieving sustainable economic growth. In India, the concept of the ‘Third Sector’ is not new. However, it was not very seriously taken by the policy makers and the implementing agencies. The experiment with the ‘mixed economic model’ has miserably failed. It is high time we explore alternative business models seriously.

[Dipankar Dey, PhD, Dean (Research) IBS Business School, Kolkata, India. ]

Notes:

1. Kodak is a glaring example.

3. Foster J B 2007, The Imperialist World System- Paul Baran’s Political Economy of Growth After Fifty Years, The Monthly Review, Vol. 59, No1

4. ibid

7. Ghosh Suniti 2000, Indian Big Bourgeoisie, New Horizon Book Trust, Kolkata

8. wweconomicshelp.org/blog/11977/oil/dutch-disease/

9. A platform is a business model that creates value by facilitating exchanges between two or more interdependent groups, usually consumers and producers. Successful platforms facilitate exchanges by reducing transaction costs and/or by enabling externalized innovation. As a byproduct, platforms also create ecosystems and leverage their inherent network effects.

10. Traditional technologies are not dependent on electricity.

11. Wilhite H 2007, Will Efficient Technologies Save the World, ECEEE, 2007, Summer Study.

12. Hanegraaff Wouter J. 2012, Esotericism and the Academy: Rejected Knowledge in Western Culture, Cambridge University Press

14. Markel W, 2014 Is Capitalism compatible with democracy? , Comparative Governance and Politics, Vol. 8, no 2. Springer

15. H M Treasury, Cabinet Office, 2007, The future role of the third sector in social and economic regeneration: final report, UK

17. http://www.gov.scot/Topics/People/15300/ResearchForum

SOURCE: http://www.frontierweekly.com/views/aug-16/12-8-16-Three%20major%20issues.html

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