Globalization and Growing Disparities

By—Girish Mishra

The present phase of the Washington Consensus-based globalization is now almost two decade-old. Hence it is not premature to judge what its protagonists promised and what results have accrued. To begin with, globalization was to generate a high economic tide that was supposed to lift all boats, no matter whether they were in developing or developed countries. As Richard Hornik, an American researcher says, “Any transitional pains that the resulting huge commercial shifts would inevitably cause would be fleeting. Everything from the expansion of the World Trade Organization and the European Union, to the “reform” of government pension systems to force workers to work longer than originally promised were sold with the same political snake oil: “Take a bit of pain now,” politicians and pundits assured the public from Warsaw to Washington,” and we’ll all cross that shiny bridge to a new prosperity in the 21st century.”

After more than one and a half decades, what is the situation? There is uncertainty everywhere. So far as working class is concerned, no job is safe. The corporate sector has got unrestrained power to hire and fire. Wherever the government has not yielded on the demand for flexible labour laws, there is an intense pressure to bend it. The threat of taking business and investment elsewhere hangs like Damocles’ sword. All workers whether blue collar or white collar, have to continuously worry about tomorrow. They may be retrenched for no fault of their own because the company wants to reduce labour costs or wind up the business and go somewhere else. Workers are all the time unsure about health benefits and pensions and the fate of their children’s education. With the state’s social welfare role all the time under attack and the financial constraints becoming more and more acute, it should not be surprising if working people become desperate.

Over the years, socio-economic and regional disparities have increased. The distribution of the benefits of rising rate of economic growth has been skewed. To quote the UNDP’s Annual Report for 2006: “Ours is a world of extremes. The poorest 40 per cent of the world population – the 2.5 billion people who live on less than $2 a day – account for five per cent of global income, while the richest 10 per cent account for 54 per cent. Never before has the goal of abolishing poverty been within our reach: there are no longer any insurmountable technical, resource or logistical obstacles to achieving it. Yet more than 800 million people suffer from hunger and malnutrition, 1.1 billion people do not have access to clean drinking water and, every hour, 1,200 children die from preventable diseases. Despite a growing world economy and significant advances in medicine and technology, many people in developing countries are not reaping the potential benefits of globalization.”

A report in The New York Times (June 28) by its correspondent, Celia W. Dugger, has this to say: “It is no secret that mosquitoes carry the parasite that causes malaria. More mystifying is why 800,000 young African children still die of malaria per year – more than from any other disease—when there are medicines that cure for 55 cents a dose, mosquito nets that shield a child for $1 year and indoor insecticide spraying that costs about $10 annually for a household.”

The report goes on to add: “In Uganda, population 28 million, not one of the 1.8 million nets approved more than two years ago by the Global Fund to Fight AIDS, Tuberculosis and Malaria has yet arrived.

“The World Bank, after pledging to halve malaria deaths six years ago, had let its staff working on the disease dwindle to zero.”

A recently published report by the World Bank, entitled Economic Growth in South Asia, has highlighted the fact that in spite of the overall rate of economic growth rising and the average incidence of poverty falling disparities have increased. Obviously, all sections of the society and all the regions have not shared the gains from economic growth equitably across South Asia.

Bangladesh, Bhutan, India, Maldives and Pakistan have grown on an average at over 5 per cent per annum while Sri Lanka and Nepal have grown at 4.7 per cent and 2.5 per cent per annum respectively. The incidence of poverty on an average has fallen by 9 per cent in Bangladesh, 10 per cent in India, 11 per cent in Nepal and 6 per cent in Sri Lanka. All these impressive gains pale into insignificance when one takes into account the fact that as many as 400 million people out of a population of 1.37 billion in the region are below poverty line. In other words, over 30 per cent people do not get sufficient income to keep their body and soul together. The report underlines that “Poverty is not just endemic, but increasingly concentrated in particular, lagging regions. Not only are the regions poor, but their growth are substantially slower than the better-off regions.”

So far as India, the largest country in the region, is concerned; the increasing economic inequalities in the society and the widening regional disparities are becoming more and more acute with every passing year. This poses grave dangers to India’s political and social stability as well as national integrity. Political turmoil, criminal activities and separatist tendencies are bound to gain in strength. In turn, they are bound to affect future economic growth and development adversely. Already, the increasing Maoist insurgency, rising graph of all kinds of crimes and the tensions generated by the growing demand for reservation in jobs and educational institutions by the downtrodden and backward castes are indicating the more troublesome days ahead if necessary corrective steps are not urgently taken.

One can ignore the following observations by the report at one’s peril: “The phrase “two Indias” exemplifies this difference in regional development outcomes. In 2002-03, all-India per capita GDP was $480, the poorest seven states (accounting for 55 per cent of the population) had a per capita GDP that was two thirds the national average, while in the richest seven states (33 per cent of the population) per capita GDP was nearly the double that of the poorest seven states. In the two largest states (Bihar and Uttar Pradesh, 25 per cent of total population) per capita GDP was less than half the national average and only a third of the richest 7 states. The four southern states, Andhra Pradesh, Karnataka, Kerala and Tamilnadu (21 per cent of the total population), at an average, enjoyed more than twice the GDP per capita of the quarter of the population concentrated in the two poorest northern states.

“Furthermore, with average GDP growth rates of 5 per cent, the southern states are galloping ahead of the poorest but populous northern states with growth rates of only 2 per cent. This threatens to further increase the poverty gap in the two regions, currently, head count poverty in the poorest northern states and the better off southern states is 35 per cent and 18 per cent respectively.”

This report by Shantayanan Devarajan and Ijaz Nabi has unambiguously warned about the dangers looming large on the horizon: “rising inequality in the wake of market-oriented pro-growth policies could elicit a backlash against these policies, sometimes leading to distortionary policies that slow growth… if inequality between regions rise above a certain threshold, it can trigger a violent conflict which, in turn, can lead to decades of reduced growth.”

It was not without much thinking that founding fathers of modern India time and again emphasized the importance of removing social and economic inequalities and reducing regional disparities. All the plan documents underlined them and economic policies and programmes were judged from this angle. It is only after the beginning of the economic reforms inspired by the Washington consensus that these two important objectives have been almost discarded and a drumbeater of the Washington consensus like Gurcharan Das in his article “The India Model” (Foreign Affairs, July-August 2006) has the audacity to accuse Jawaharlal Nehru and Indira Gandhi of “shackling the energies of the Indian people under a mixed economy that combined the worst features of capitalism and socialism.” Das seems to be so heavily doped by his ideological masters that he forgets what has happened to Pakistan that unquestionably followed the American dictates. It got split into two and could never have even a modicum of democracy. India, in spite of all the diversity, has been able to preserve its territorial integrity and democratic institutions. Mr. Das, please look at the backyard of the USA, i.e., Latin America, where democracy and independent economic development have begun prospering only after discarding the Washington consensus. Lies and distortions must be given up if one genuinely wants to debate and convince.

Girish Mishra,