1. INTRODUCTION
It needs to be clear from the beginning that there are
different ways of organising an economic system and countries should be able to
do this in a way that suits them best - economically and socially. However, in
the last 30 years, we have been told that there is only one way - the
American-style free-market way (Chang : 2003). Alternatives do exist.
Neoliberalism has become the hegemonic form of
governance in the international arena, even though there is increasing
dissatisfaction due to its terrible economic performance, particularly in
developing countries such as India under strong pressure by major institutions
and rich countries that, through aids and loans, set difficult conditions and
make them their puppets. Neoliberal globalisation is basically a system that
ensures the rich get richer and the poor get poorer. They feel a great pressure
to adopt a set of 'good policies' and institutions' to foster their economic
development. ‘Good policies' are the ones prescribed by the ‘Washington
Consensus’ and promoted by major international institutions such as the IMF,
the World Bank and the US Treasury Department. They include liberalisation of
international trade and investment, privatisation, deregulation and restrictive
macroeconomic policy. These policies and institutions are currently being
recommended to developing countries but are not the same as those adopted by
the developed countries when they themselves were developing.
INDUSTRIAL, TRADE AND TECHNOLOGY POLICIES
(ITT)
In Kicking Away The Ladder, Chang uses history to
assess the range of strategies deployed by NDCs when they were in catch-up
position. As Chang (2002a) highlights most countries used industrial, trade and
technology policies (ITT) in order to promote infant industries. Some
countries, such as the US and UK kept on pursuing activist policies even after
they had successfully achieved their desired position. Governments made wide
use of tariff protection, duty drawbacks and subsidies in order to encourage exports,
public investment programmes and industrial subsidies, especially in
infrastructure but also in manufacturing. By giving financial support for
education, training, research and development, governments were willing to
develop domestic technological capabilities in order to gain competitive
advantage (Chang 2002a: 18).
These were the policies used by NDCs. Today, they are
paradoxically and simultaneously the very ones NDCs strongly disapprove, if not
ban through multilateral and bilateral agreements.
What we are experiencing today was already happening
at the time of unequal treaties when powerful Western countries, particularly
Britain, forced poor countries such as India and Japan to accept conditions
which could never have been advantageous to them (Chang 2002a). They were asked
to open up their market and brutally cut back tariff barriers even though they
were not at the same level of development. These requests could only have been
fair and useful to foster progress if applied to countries at the same level of
development. Thus, “levelling the playing field" should be a primary
concern.
An example for the history will help us to
understand the dynamic. When USA accorded over 40% average tariff protection to
its industries in the late 19th Century, its per capita income in
purchasing power parity (PPP) was around three-quarters that of Britain.
Compared with this, India set the trade-weighted average tariff rate at 71%
just before the WTO agreement while its per capita income in PPP terms was only
1/15 that of the USA. However,
following the WTO agreement, India had to cut back its trade-weighted average
tariff to 32% (2002a: 27-28). Thus, depriving the country of its tariff
autonomy has contributed to further impoverishment and was a considerable
handicap (Chang 2002a:52-55) in addition to a reduction in tax collection.
The
currently recommended package of 'good policies' which include free trade
and other laissez faire ITT policies, clashes with the historical experience
since they were not used by the countries that are now recommending them when
they were at the same level of development (Chang 2002a). The US and UK, the
two nations which supposedly climbed the edge of the world economy through
free-market and free-trade policies, are the countries that have mostly used
subsidies and protection (Chang 2002a: 59). England went from being an exporter
of raw wool to Low Countries to being the world leader in that sector and the
hegemony power of the world becoming the promoter of so called "bad
policies" that are claimed to be hindrances for development. Thus, it happened that when NDCs reached the
technological frontier and joined the league, they used a set of policies
in order to leave behind existing and potential competitors. Britain, due to
the length for which it retained the position of ‘frontier economy’ is the most
obvious example however, other countries deployed the very same strategy when
they could. In fact, the same disappointment may be express today, when
American trade negotiations glorify the virtues of free trade to the developing
countries by forgetting history and how they became such a powerful country.
In a substantial article, Kasrils (2013), a South
African politician, blames himself and the South African government for having
opened up the doors to further deprivation when Neoliberal policies were
"embraced" in South Africa. As he states:
[...] Extremely tight budgetary obligations were
instituted that would tie the hands of any future governments; obligations to
implement a free-trade policy and abolish all forms of tariff protection in
keeping with Neoliberal free trade fundamentals were accepted [...].
He recognized the huge mistake South Africa and, more
broadly Africa, made. However, who pays the price, as he said, are the poor
people, those already deprived and India perfectly fits in this scenario.
Industrial upgrading is necessary for economic development and it will
not happen purely through market forces but require government interventions. Indeed,
Indian Government should provide direct and indirect subsidies to small
entrepreneurs as well as to essential assets.
A striking examples has been provided by
Japan. In fact, it protected its infant car industry (Toyota) with high tariffs
for nearly four decades, providing lot of direct and indirect subsidies, and
virtually ban foreign investment in the industry before it could competitive in the world market (Chang:113). Nevertheless, tariff protection was not, and is not, the only
policy tool available for a state in order to develop new industries or upgrade
old ones. This is the case with Germany and Japan. Indeed, policy mix is
fundamental according to the objectives that a country wants to pursue and the
conditions it is facing. There is no ‘one-size-fits all’ model for industrial
development - only examples from which to learn. Surely, every country should
be allowed to have its tariff autonomy and decide upon their policy (Chang
2002a: 64-66).
Concluding
this section, As Chang pointed out ( 2002a : 126-127) the restrictions imposed
by the WTO on the ability of developing country to pursue their own activist
ITT policies is a “modern and multilayered version of the unequal treaties”
that Britain and NDCs deployed towards semi-independent countries at that time.
Today we are still denying those countries the ability to pursue the policies
they want and we have gone a step further. As Monbiot points out (2008)
Britain, like many other countries discovered the enthusiasm for free trade
only after it had achieved economic dominance.
DEVELOPMENT AS FREEDOM
The level
playing field Chang advocates cannot happen unless people are allowed the
freedom to ‘do and be’ says Amartya Sen. Acknowledging great disparities
between and within countries and the lack of freedom people suffer, Sen
proposes the main reason for economic development should be to help people
break the chains that hold them back from living the life they value.
Sen’s major
contribution lies in the “capabilities approach", the freedom to achieve
various lifestyles. He feels economic development needs to be perceived as a
process of expanding substantive freedoms and believes a successful society
relies on freedoms from which its members can benefit (Sen 1999:75).
Developmental
Economics is largely seen in terms of income maximisation. Thus, the main variables
are GNP, unemployment rates, and income distribution, whereas Sen strongly
criticizes the “utilitarian view” as it fails to recognize free agency - the
ability to act on what one values
Reasons for
feeling a lack of freedom to live life as one would choose are poverty, social deprivation,
lack of public facilities, poor economic opportunities and the denial of
political and civil liberties. These issues need to be eliminated through
social economic development.
Socially
based investments such as education and health care do not need to be postponed
until a country
has achieved relative richness. A poor economy may have less money to spend on
health care and education but it needs less money to
provide the same services which would cost much more in richer countries. This is a recipe for achieving a
higher quality of life. Human development is not a luxury that only rich countries can afford to
undertake. Education and health care greatly influence and foster economic growth since workers can work
better and be more productive by using
the skills they have acquired if they are healthy.
For those reasons, India’s needs
of hygiene and education should be seriously taken into consideration. Indeed, the country currently has the largest population of
illiterate adults in the world with 287 million (The Indu, 2016) and despite
those poor performance the Government has been reducing the expenditure on
education from the entire budget for the past three year by reaching the
debatable point of 3.65% of the entire GDP. Even more questionable is the
political choice imposed by the 14th Financial Commission to the Government of
shrinking even further the funding for secondary
and higher education. The scenario is quite dramatic as in higher education the
enrolment ratio is below 24% for the 18-23 age group.
Furthermore, the Prime Minister Narendra Modi in 2014 launched the campaign to end open
defecation by 2019 though subsidising toilet building. However, three main
concerns can be addressed. Firstly, the poor quality of the toilet which is
strictly connected with the small amounts of money allocated to promote better
hygiene and trigger a behavioural change. Thirdly, the campaign has become only
a matter of number and particularly reaching the target of 17 millions of
toilets per year for five years. Thus,
the budget set, which accounts for £1.6m, brought ineffective and unsatisfactory
results. Indeed, the implementation phase is pivotal in order to make a real
difference at stopping the open defecation phenomenon . Especially, the
Government should be willing to invest more so to make the campaign a political
will. In fact, according to the World Bank estimates, the lack of sanitation
facilities costs India over 6% of the GDP.
4. DANI RODRIK: CAUTION GLOBALIZATION
DESERVES
As Dani Rodrik points out (1997), globalization can succeed and be
sustained only if appropriate domestic policy measures are undertaken to soften
the impact on groups that are affected and to equip all sectors of society to
take advantage of the benefits of globalization
rather than be undermined by it. Globalization’s advantages and disadvantages
for important groups within the society as well as for the country as a whole
need to be made clear. Basically, we have to consider globalization’s
stakeholders before making any decision.
The
most important challenge for the world economy is making globalization
compatible with domestic, social and political stability by making sure that
international integration does not contribute to domestic social disintegration.
In fact, globalization increases the demand on the state to provide social
insurance while reducing the ability of the state to perform that role
effectively (Rodrik 1997:53).
Globalization
that comes at the price of social disintegration will be a very hollow victory.
If, global economic integration is not handled properly, the result will be bad
economics and bad governance. Globalization has loosened the civic glue that
holds societies together and has delivered a strong blow to social cohesion since
fundamental beliefs regarding social organization come under attack. Moreover,
social fragmentation is detrimental to economic performance (Rodrick 1997:
69-72).
Rodrik
believes that the big challenge is to enable countries that are willing to
enlarge in greater harmonization of domestic policies to do so, while allowing
them to delink from international obligations in case those obligations come
into conflict with domestic norms or institutions.
5.
CONCLUSION
Neoliberal
developmental policies have been poisoning the world with the establishment of
its hegemony in most areas of our lives.
Such policies which were supposed to bring about development and
growth, led to a miserable impoverishment of people's lives. It mostly happened
because of its commitment and alignment with the interests of big businesses,
transnational corporations and finance at the expense of people's real needs.
Solidarity
has become an expensive luxury; the main concern seems to be to extract as much
as you can and win over as many people as possible. We pessimistically have to
admit that the freedom we perceive is the greatest untruth of the our day and
age. We’ve "Never been so free, never been so powerless" as Bauman
dramatically says (Verhaeghe 2014). The most harmful impact of Neoliberalism is
not the economic crisis but the political crisis. Since the realm of the state
is reduced, our ability to change the course of action through political participation
is shrinking as well. Neoliberal theory assumes that people can exercise their
choice through spending; however some have more of the cake than other. Sen and
Chang want to prove that new directions are possible and highly recommended if
we want a shift to a better world, where development is meant as a process that
goes beyond empty indexes with no trace of human beings but instead a fair and
even course which in the last instance reallytells how happy we are and how
well we live.
Instead,
Rodrik show us the deep interrelation between globalization and neoliberal economy. Indeed, He is not saying that globalization should be
avoided but simply wisely managed
so that the bottom of the society, the larger part of a country, is safeguarded
and doesn’t end up paying the price and swallowing the “bitter pill” as well in
order for countries to maintain their autonomy.- Stefano
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