While India continues to see economic reforms through the lens of politics, debate continues whether economic reforms like allowing FDI are at all bad for the poor of this country. OneIndia News spoke to Dr Christopher Lingle, an independent economist who had predicted the East Asian economic crisis in the late 1990s.
Dr Lingle is a Visiting Professor of Economics at Universidad Francisco Marroquín in Guatemala, Adjunct Scholar at the Centre for Independent Studies (Sydney), Research Scholar at the Centre for Civil Society (New Delhi) and Member of the Academic Advisory Council of the Globalisation Institute (Brussels). His research interests are in the areas of Political Economy and International Economics with a focus on emerging market economies and public policy reform in Europe, East Asia, Latin America and Southern Africa. He is the author of the book The Rise and Decline of the Asian Century. He is based in Guatemala City.
Here is what he told OneIndia.
OneIndia: What is your take on the current political chaos in India over the government's crucial decisions of opening the economy and efforts towards deregulating fuel prices? It seems the political class in India is unable to understand that a closed and subsidised economy can not sustain in the long run. Is too much politicisation holding the country back?
Dr Lingle: Political chaos in modern India is the inevitable outcome of a long, misguided history of extensive state intervention into economic affairs. In turn, this lead to ever-increasing politicisation of daily life.
As it is, India's politicians and intellectuals suffer from a mental trap that induces them to enthusiastically embrace government control over markets. This hostility to the market economy comes from a historical tradition that, wrongly, equates colonialism with capitalism.
This misguided equation meant that opposition to colonialism necessitated opposition to capitalism. This mental trap impedes reform and reduces the possibility for the truly poor to gain access to economic opportunities that would arise from higher economic growth.
OneIndia: India, unlike China or many other African countries, has strong institutions like a competent judiciary, a viable political democracy, a strong bureaucracy inherited from the British rulers and these factors place India at an advantageous position to realise the good effects of economic liberalisation. What's your take on this?
Dr Lingle: India's institutional advantages over rivals like China tend to make me optimistic about India's economic prospects, especially when I am not there. Upon returning to India and reading the local papers, I am being reminded of the incompetence and rampant corruption which make me pessimistic. (By contrast, my pessimism about China's long-term prospects when I am outside of China is replaced by optimism when I see physical improvements upon visiting there!)
And so it seems that inept or lazy politicians and the bureaucrats are squandering these precious institutional advantages.
OneIndia: Will FDI in retail really harm the poor and the humble sections in the country? Political parties are extremely vocal over this point and one of them even pulled out of the government, leaving it as a working minority. They feel the entry of super-chains will eventually see the local shops being closed down. India has already seen liberalisation being carried out in 1991 but did that affect the poor sections? Instead, the general feeling is that lots of people have found themselves employed in some capacity or the other, which would not have been possible in a closed economy.
Dr Lingle: There is no evidence that the "poor" as a class will be harmed by FDI in retail sales. It turns out that slum clearances and the "war" against people trying to earn livelihoods in the informal sector do much more harm to the interests of the poor.
As for small traders, they have much more to fear from arbitrary closures by public officials than from competition from global retail chains.
In fact, lower prices available in hyper-markets will allow more small traders to access cheaper goods that can be sold at lower prices to everyone. While some small traders may be disadvantaged, most will continue to have a comparative advantage in being close to many consumers, especially in the Metros.
OneIndia: Even when the political parties are speaking about the poor being deprived, wasn't it the failure of the Indian state itself that it failed to address their issues all these years? How much progress has the poor sections witness during the days of 'socialist days' in India? If we do not provide them basic opportunities in education, health and other development at the primary level, then there is no point in shouting that these people will be deprived in a liberalised economy. If Indian engineers can compete with the world today, then why not farmers and labourers, provided they have the training? By speaking in favour of protecting the poor against globalisation, is the Indian state actually exposing its failure in protecting their cause? Your views on this.
Dr Lingle: Pretending to act in the name of the poor is the last refuge of scoundrels! Rajiv Gandhi pointed out that for every rupee allocated in government budgets on behalf of the poor, only about 10% reaches them.
Perhaps the most egregious public-sector waste is in the name of educating the poor. It turns out that private providers of education serve the poor much better. As such, the government should turn to a voucher system to allow private education compete with public schools.
In all events, formal education is neither a necessary nor sufficient condition for economic success. People are not poor because they are uneducated. They are poor because they do not have jobs. There are not enough jobs being created because there is not enough new investment in capital that would allow incomes to rise. And the fault lies with successive governments that have been unwilling to undertake economic reform that would encourage more investment.