A state of consumption

That the so-called market-oriented reform, deregulation and globalisation have all conspired to make the rich poor and the poor poorer. Exactly the same charge as the free-marketeers made against socialism. Global capitalism is now in retreat. Look, even the Nobel committee has chosen a povertarian this year after years of feting the derivatives hot shots. Why, evenJeffery Sachs has written a special article in The Economist on what is wrong with global capitalism. So why are we Indians arguing even now? Obviously our way of graduated change, or hastening slowly, has been the best. The world is acknowledging it. Our own Amartya Sen has been suggesting exactly this.

This is where the real danger lies. Smugness is a natural Indian trait and it is now strengthening over the suicidal notion that so smart has been our economic management that just when South-East Asia is collapsing we still maintain a growth rate of six per cent or thereabouts. It follows that South-East Asia is paying for opening up too early, that we must protect our industry through barriers of tariffs and general cussedness as quot;all sensible countries in the world have donequot; and that we should at least now listen to the Amartya Sens of the world and forget the Jagdish Bhagwatis for the moment.

Meanwhile, nobody actually reads what Sen has been suggesting because, if you did, the smugness woulddisappear faster than the Indian corporates8217; appetite for competition at the first sight of the MNCs. Sen is not saying, go back to a controlled economy. He is only pointing out the direct linkage between a society8217;s investment in the quality of its population and its economic and industrial development. He is telling you India8217;s economy is constrained a great deal by the human factor which most of our corporates, barring honourable exceptions like the Tatas, tend to treat with such contempt.

If South Korea, Hong Kong and even China look to be in such good shape now, it is because they made massive investments in the quality of their population in the 8217;60s. In 1960, for example, the Korean literacy rate had already crossed 71 while we were at a mere 28. By 1980, the gap had increased further 93 against 36. By this time even China had moved far ahead with a literacy rate of 69 per cent. Today China stands at 80 against our 50 and even that tells only half the story as among younger Chinese the literacy isnow nearly universal.

Sen8217;s basic theory is that it is the quality of population that determines a country8217;s growth and its sustainability. This is why South-East Asia will recover from the current crisis and, when it does, growth will again acquire a rapid clip because the human and physical infrastructure is already in place. We will still be patting ourselves on the back, struggling to sustain our six per cent. But can we really hope for better if so many of our human development indices continue to be poorer than those of sub-Saharan Africa? Our national literacy rate is at least four points lower than that of the darkest region in the dark continent. We still have sizeable sections of population with infant mortality higher Orissa, 124 per thousand than sub-Saharan Africa 104.

What Sen is telling us is not that we should bring back controls on the economy or that the state should intervene to rescue a recession-hit industry but that it should invest in the quality of its population now. And whatis our corporate sector telling the Prime Minister instead? Buy our steel. Buy our cement. Buy our trucks. And shore up our shares.

When was the last time you heard Indian industry and its powerful associations and chambers of commerce use their clout to force the government to spend more on health, literacy and technical education instead? Surely, better educated and healthier people have a better quality of life and therefore consume more, which is just what the industry needs. But such farsightedness is not to be expected of an industry fattened in an economy that functioned like a protection racket as if the consumer was entirely peripheral to it.

For four decades we lived with the absurdity of cars and scooters selling on premium. Today, when the consumer has other options, what does Indian industry and its apologists do? They invoke Malthus and Mahathir, Sachs and Sen, and ask the government to bail them out not merely by slowing down deregulation but also by throwing the taxpayer8217;s money into themarket as part of the quot;kickstartingquot; process. Market may be a wayward monarch at the best of times. But it cannot have much time for businessmen who look upon the government not only as their lord and master but also as the only consumer of consequence.

Postscript: Here the story I promised to tell you in the beginning of this column: I once had three dogs 8212; Lhasa terriers 8212; thoroughly pampered and spoilt. The only time they were leashed was when they were taken out for a walk, the most exciting part of any dog8217;s day. So they loved the leash. Sometimes, I played a game. I would open the door, put the leashes aside, and gesture to the dogs to come along for the walk. All three would sit, confused and unwilling to move out without the protection of the leash.