Are we there yet?

Okay, so I can't resist having my two-bit say about Pankaj Mishra's Op-Ed piece in the NY Times

For the record, there's a lot that Mishra says that I agree with. My biggest problem with the piece is Mishra's inability to articulate, to others or to himself, just what it is he's opposing. Implicit in Mishra's arguments, there are, I think, at least 4 different claims that have been made about India:

1. The liberalisation and globalisation reforms of the early 90's have been beneficial for India - leading to a spurt in growth and improved standards of living for at least some sections of the population.

2. India is fast emerging as an important global player economically - both as an important market for MNCs as well as a pool for talent and services.

3. India is well on its way to becoming the world's dominant economic superpower

4. India's development has been broad-based and this century will see the majority of Indians enjoying lifestyles comparable to those in the West.

These are, in my mind, four very different claims - the links between which are tenuous at best. I personally happen to believe, for instance, that the first two are true, but that the last two are not.

What amused me the most about Mishra's article is that he starts of by taking exception to the claim that India is a capitalist success story and argues against this by showing that the vast majority of people are still poor. Huh? Since when has capitalism been about prosperity for the masses? Everything that Mishra says in his story actually suggest to me that India is the quintessential capitalist success story - where the elite bourgeois amass large amounts of wealth while the common people continue to live in deplorable conditions.

At any rate. Here are the things that Mishra is saying (or at least, I think he's saying, or trying to say) that I agree with:

1) The belief that large majorities of Indians will someday enjoy standards of living comparable to those enjoyed by people in the West is highly questionable, if not entirely untenable. Just given the sheer size of the population involved, the levels of growth and resources required to make that come true simply don't exist.

2) The benefits of India's growth in the last decade and a half have gone disproportionately to a small minority of Indians. Therefore, claims in the popular media about India's development (e.g. India Shining) are premature and excessively optimistic. Unless serious thought is given to the very real issues facing India - both in terms of infrastructure and in terms of equity - these inequalities will perpetuate, and absent institutional efforts to enhance social welfare, they are unlikely to be 'naturally' overcome.

3) In the absence of equitable growth, income disparities between the rich and the poor will become more glaring and social unrest will increase over time. Worse, given India's democratic context, the lack of equitable distribution of benefits will make it difficult to create strong political support for further reforms. Until the common people see a tangible pay-off from the liberalisation to themselves, they will continue to vote based on issues other than economic performance, and if the masses don't care about it then the government won't either.

4) Given all that, there's good reason to be more cautious about India's potential. India is far from well-set on the path to being an important global superpower. It's too early to be celebrating India's rise to global dominance.

Notice that none of the above implies any of the following:

1) That India would somehow have been better off by sticking to its pre-reform regime. There is no case, in any of this, for turning back reforms. The reforms have led to real growth - that the growth has been uneven is, at best, cause to reflect more closely on the welfare implications of some of the changes made. The fact that some people are getting richer while the majority remains poor doesn't mean that development won't eventually spread - if anything, high incomes and therefore high savings may well be critical to the accumulation of capital needed for rapid growth. We certainly need to think about how the disparities created by that shall be managed, and how the growth achieved will eventually be funneled into real development, but that's no reason to dismiss the growth that has been achieved. That at least some sections of population are enjoying dramatically greater prosperity is an achievement, and cause enough for some celebration, however guarded.

2) That India can only play an important role in the global economy if it achieves broad-based development. Or that India becoming a key global player will necessary mean prosperity for all its people. This would be nice, of course, but it's not, in my view, strictly necessary. I think Mishra is ignoring the sheer size of India, and exaggerating the unsustainability of unequal growth. It's not hard to imagine an India where 5% of the population has extremely prosperous life-style while the remaining 95% remains little better off than they were originally. Yet that 5% alone could make India a key player in the global marketplace.

Understand that I'm not saying that such a scenario is desirable. Only that there's no basis for Mishra's assertion that India's emergence as a key global player is contradicted by its poor performance on human development indicators. India is large enough to be a key global player even without development for all.

3) Echoing point 1 above, there's no reason to believe that creating more broad-based development will require state intervention of the kind associated with the pre-1991 days. That government policy has a key role to play in ensuring the sustainability of India's development is unequivocal, and that government spending is required to make development more equitable is certainly true. But none of that implies a return to a system where the government hijacks the role of the market and sets up inefficient and bureacratic monopolies to 'serve' the people. There is no reason why the government can't intervene through the market to aid in the redistribution of wealth. And there's a vast difference between the kind of clean, deregulated policy we need to let the market operate and the kind of policy that tries to replace and manage the market, which is what we've traditionally had.

Of course, Mishra isn't necessarily saying that we should return to the old days or that the reforms are bad either. But it's a pity that he doesn't really articulate what he thinks the right answer is, leaving the door open for people to assume that a return to the pre-reform days is what he's advocating.

Overall then, Mishra makes, I think, a convincing case for why India isn't a superpower yet and why it's yet to be proven that it ever will be. And in doing so, raises important and relevant questions about the distribution of growth and the challenges of growing inequity. What he doesn't give us is any reason to believe that the changes over the last 15 years are in any way inimical to India's chances of becoming an important global player. Saying we still have a long way to go isn't the same thing as saying we haven't made any progress. Just because something is overhyped doesn't mean there isn't some truth to it.

P.S. Mishra also says some exceedingly silly things about communist parties being voted to power, US nuclear policy towards India being driven by rich Indian-Americans and India not being able to serve as a counterweight to Iran and China because it trades with them. I'm just going to ignore all that, as not being worth comment. Notice though that if India can't be a counterweight against Iran and China because it gets oil from the former and trades with the latter, then one wonders how the US can possibly be opposed to Iran and China to begin with.