Nos. 44-46, April 2008
Nos. 44 - 46
India’s Runaway ‘Growth’: Distortion, Disarticulation, and Exclusion
Productive employment is the key to real development
The question of employment is not limited to the official definition of employment – which is limited to whether the existing labour force is engaged in any activity in the hope of somehow surviving. By the official definition, (i) if a person stops seeking work because she has no hope of getting work, she is not part of the labour force and therefore not unemployed; and (ii) if two workers are working where one worker could get the same output, they are still both considered employed. This official definition merely serves to understate the rate of unemployment, and is otherwise meaningless.
A proper discussion of employment must concern (i) productive employment of the total potential labour force (those of working age), and (ii) how productive their activity is. For the wealth of society is the sum of the productive activities of the entire labour force.
Consequences of separating ‘growth’ from employment
First, much of the growth itself is illusory, in that various activities are proliferated which may add to the GDP but do not add an iota to the betterment of life even in the broadest sense of the word.
Secondly, to the extent growth does deliver material benefits, these benefits and the material wealth of society get cornered by a small section.
Thirdly, the top segments of society develop into a distinct market, which further distorts the pattern of growth: for investment shifts to high-profit sectors catering to these top segments of the market; such investment generates fewer jobs per unit of investment than in industry geared to the lower segments of the market, and a higher share of these fewer jobs are unproductive high-income jobs; this process in turn reinforces the same skewed pattern of income and demand.
Meanwhile, what is called the ‘unorganised’ sector, which predominantly makes items consumed by the poorer sections (agricultural goods and most of small-scale industry output) stagnates for lack of demand, as a result of which incomes in this sector are constricted; this further depresses the demand for the unorganised sector’s products, since such demand originates largely from within the unorganised sector itself – i.e., from the workforce in agriculture and small-scale enterprises. (To the extent that the workforce in the unorganised sector imitates the purchasing pattern of the better-off, for example by buying mobile phones, this diverts some of the marginalised sections’ purchasing power to the organised sector and further depresses the demand for the unorganised sector.)
In the entire process, the dualism of the economy gets reinforced and the existing social divisions and hierarchies get congealed, preventing the development of human potential and demoralising the subjugated social sections. This in turn suppresses overall social development.
The resolution to this problem would involve unlocking the productive possibilities and scope of the entire potential labour force – both creating employment for it and enabling it to develop its capabilities in an all-round way. It would involve employing the bulk of the potential labour force in producing the material needs of the vast majority, despite the relatively low rates of profit in such activities. Employing these vast numbers would simultaneously create a vast, widely dispersed, market for these goods. Such an unlocking of productive potential would require a vast struggle by the subjugated masses themselves for social emancipation. And it would in turn enhance the material conditions for continuing that struggle.
However, this breakthrough is impossible in the given social order. We have described how the constellation of class forces in power, and the specific historical process through which they have emerged, pose an obstacle to such a resolution of the problem.
At the heart of such a resolution is the transformation to be wrought in agriculture. For it is there that the social process must begin which can lay the base for all-round development.
Land still concentrated in a few hands
Six decades after the formal end of British rule, land, the principal means of production in the rural areas, remains concentrated in the hands of a small section. As we noted earlier, the top 5.2 per cent of rural households in India today own 42.8 per cent of the agricultural area, the top 9.5 per cent 56.6 per cent of the area. At the other end, the bottom 60.2 per cent of the rural households own just 5.8 per cent of the area.
By way of fitting comparison, the top 6 per cent of the households in pre-revolutionary China (classified as landlords and rich peasants) owned 46 per cent of the cropland, and the remaining 94 per cent of households owned 54 per cent of the land. In the course of the land revolution in China of 1946-52, the share of the top 6 per cent of households fell to 8 per cent, while that of the erstwhile poor peasants and farm labourers rose from 24 per cent to 47 per cent. In all, some 300 million peasants, nearly two-thirds of the rural population, won 47 million hectares, 44 per cent of all arable land, formerly owned by just 10-12 million persons. Two-thirds of the redistributed land was taken from landlords and one-third from rich peasants (largely the land rented out by them); two-thirds of the redistributed land went to poor and landless peasants, and one-third to middle peasants.1
The staggering scale of this transformation can be set beside the paltry achievement in India: As a result of the implementation of ‘land ceilings’ in India since the 1960s, a total of 3.01 million hectares has been declared surplus (of a current net sown area of about 140 million hectares). About 2.31 million hectares (less than 2 per cent of the cultivated land) has actually been taken over; and 1.76 million hectares (about 1.3 per cent of the cultivated land) has been distributed among 5 million beneficiaries. Much of the area declared ceiling surplus is unfit for cultivation – for example, such is the case with 57 per cent of the declared surplus lands in Uttar Pradesh.2
Some would argue that the small size of holdings in India makes any large-scale programme of land redistribution impractical: According to them, redistribution would break up the ‘viable’ (i.e. large) holdings into ‘unviable’ or ‘uneconomic’ holdings. This argument has been around a long time. Indeed, at the time of the First Five-Year Plan itself the Planning Commission argued that too little land was available for distribution. If ceilings were applied to large farms, the Commission said, production would fall. Since then, subdivision of holdings has further and further shrunk the average size of holdings. In other words, the course chosen in the name of maintaining the economic size of holdings has actually resulted in greater fragmentation.
What the arguments against redistribution miss is that, first, in India’s existing political economy, large land holdings are by and large not a superior form to small holdings, but merely a larger one. Secondly, without land redistribution and the associated democratisation of agrarian society, no genuine cooperation or collectivisation is possible; and so the absence of agrarian reform is ultimately an obstacle to the emergence of superior large units.
As part of China’s land revolution, the peasants also won draught animals, tools, grain, and control over water resources. Further, all debts incurred in the countryside prior to the reform of the agrarian system stood cancelled. By contrast, in India, as we have seen, usury has flourished under various garbs, and is stronger than ever, with total interest payments draining at least one-tenth of agricultural GDP.
Staunching the bleeding of agriculture
Following China’s land revolution, about half of this surplus remained in the hands of the peasants, and half went in taxes to the State. Moreover, unutilised land was brought under cultivation and the unemployed gained work, increasing the surplus further. As a result, by 1953 itself investment had soared to 20 per cent of GDP. Moreover, in the following years rural employment, both farm and non-farm, grew rapidly, as did grain production, consumption and well-being.
We have mentioned the barest outlines of China’s land revolution here not to suggest that India can copy its development pattern blindly, but merely to indicate how an upturning of India’s land relations is a precondition to re-directing the surplus from agriculture into productive avenues.
The change in land relations plays a critical role in expanding the market. When the rural masses, who are barely subsisting, and indeed are not able to obtain minimum calorie requirements, are able to improve their consumption, they would constitute a vast source of demand, stimulating the entire productive economy. First, of course, demand for food would be generated within the countryside itself; while some of this would be satisfied from household production, some would be purchased, improving agricultural incomes. (Indeed the Planning Commission itself has recently noted that the decline in demand for food has depressed agricultural incomes.)
Vast, widely dispersed growth in demand for industrial goods
The Government makes strenuous efforts to gain foreign markets for Indian goods; for that it assists exporters with various open and hidden subsidies, and helps them suppress wage levels here. Indeed, the SEZ policy promotes exports as the engine of economic growth, for which it provides the SEZs vast hidden and open subsidies. Even critics of the present policies stress the need to grab the opportunities for, say, textile exports with the phasing-out of the Multi-Fibre Agreement (whereby developed countries earlier placed restrictions on their textile imports). Revealingly, there is a complete absence of discussion regarding the vast potential domestic market for textiles and other industrial products contingent on growth in domestic demand. There is, of course, a class rationale for this. First, serious and sustained growth in domestic demand would require changes in the agrarian class structure, which the present social order cannot tolerate. Secondly, such demand would be widely dispersed, and would be for goods of relatively cheap quality; given the dispersal of this demand, and the low profit margins involved in catering to it, it would be attractive only to small local producers, not to the corporate sector.
It is important to note that all of these humble goods require very low technology, and most can be manufactured in the small scale sector (indeed, large firms’ reigning practice of outsourcing many products to small units amply confirms this). Such industries can be widely spread over the rural areas and small towns. Thus as demand is created for these goods, scope is created for generation of vast employment – on the condition that the direction of investment and choice of technology are determined by social priorities.
Employment potential of industry
Starving the small scale sector of capital has damaging effects on not only employment but output as well. Again, illustrations from the present do not adequately convey the potential of a different social order. Nevertheless it is useful to note the following calculation: If small scale and traditional industries had received in 2006 the same percentage of net bank credit they received during the period 1994-95 to 1999-2000, credit to the sector would have been more than double its actual level, and accordingly employment and output in the sector too would have doubled.5 Most of this output would have been consumed by the working people; and the additional employment in the sector would have generated a portion of the demand for the output.
Superior economic efficiency
In many cases industries would be able to draw on locally available raw materials, thus stimulating agricultural production. Moreover, not only would the consumers of these units’ goods be less demanding of quality (as we know from the actual consumption patterns of the poor today), but the units too would be willing to accept poorer raw materials in both construction and production. Indeed, these difficulties would spur the units, in particular, their workers, to innovate in order to overcome these problems within the given constraints, often by substituting locally available products for the normally used ones. New technological solutions would be devised to reduce costs, and new uses would be devised for materials which are otherwise treated as waste. Further, since such units could make do with poorer materials than the organised sector, their activities would create demand for other small units whose output was similarly not of the top quality. The scope of such units is not restricted to agro-based industries such as food processing, textiles, and leather, but would extend to chemicals (including fertiliser, soaps, pharmaceuticals), metal products, small machines, and so on. Many of these patterns are visible in an embryonic form in the efforts of a wide range of small scale industries in the country today to survive in the face of great odds.
Given the large unemployed/underemployed labour force in agriculture, these units need not divert labour force already engaged in more productive activities; rather they would mobilise labour that is unable to find productive employment. (Indeed, if these units ran up against labour shortages, that would testify to their success in absorbing unemployed labour.) Crucially, such industries would be able to mobilise the labour of women much more than is possible at present. The location and character of work would make these units much more accessible to rural women for their employment.
Links between small scale and medium/large industry
As long as there are unemployed/underemployed workers, the activities of the small units need not divert resources from the development of productive and socially useful medium and large industry. Rather, they could supplement the production of medium and large industry greatly, and indeed generate further demand for the latter’s products. (However, resources could indeed be diverted from large industry to small industry, or, what is not necessarily the same thing, from capital goods to consumer goods, as a conscious choice of slower and more equitable growth, keeping in mind other social priorities. For example, a society may decide on a somewhat slower rate of growth than what is possible in order to improve, side by side, the very low levels of consumption.)
If the choice of technology is determined by social priorities, and the markets of small industries are protected, the small units would be able to develop intricate backward linkages for inputs and equipment. This growing web of interconnections, some with large industry but also with other small units and with agriculture, would further boost employment.
For example, imagine the setting up of a small unit processing some fruit and vegetables grown locally (we could have chosen any number of other examples – say, a small unit manufacturing soaps out of locally available oils). Much of the production of fruits and vegetables in India tends to get wasted for lack of storage and because of the long distances to markets or processing points. A unit near the point of production could eliminate much of such waste, improving peasant incomes and allowing them to improve agricultural production. Let us say the unit employs machinery of a relatively low technological level, and adopts only selective mechanisation, using more labour instead. It would also require bottles, lids, labels, and other packaging materials, which would generate demand for other local units making these items. Further, workers of the unit might find a use for what used to be treated as waste – say, peels, rinds, husks, residues – and set up another unit linked to the first, improving the surplus from the whole operation and employing more workers. The fruit/vegetable processing unit would not have the financial muscle to market its goods at distant places, with fancy packaging, large retailing margins and advertising; it would have to rely on keeping prices down to sell its goods in nearby markets. Given the low profitability, the number of supervisory, management, and marketing staff would have to be kept to the minimum, and their salaries would have to be kept close to those of workers; they would not develop into a separate elite market. Such a unit could only flourish if (i) a large number of local consumers had enough purchasing power to buy such products, and (ii) the local market were not invaded by large units with large advertising and marketing budgets. That is, it would depend on completely different macro-economic priorities and environment than those which prevail today. As this web of units and agriculture begins to run into labour shortages, they would invest in machinery to reduce their labour requirement. In such conditions improvement of labour productivity would not result in the gross social inefficiency of rendering workers unemployed, but would permit the release of workers for expanding activity. This example shows how the questions of employment, output growth, the connections between sectors, and markets are inter-related. When development takes place through an internal dynamic of accumulation, rather than an as externally imposed process, organic links develop within the economy, enabling expanded reproduction.
Developing the capabilities and the authority of the people
Indeed, in our society today there is a deeply irrational, fetishistic attitude to technology: rather serving as a tool of social aims it dictates them, with the ‘latest’, ‘highest’ technology blindly adopted in all spheres, and no attempt to even adapt it. There is a need for engendering a rational, questioning attitude to technology: Why should we adopt this method, rather than another? Is it suited to our particular needs? Can it be improved? What are the implications of being dependent for this technology on a particular source? Can we develop it ourselves? What are the losses and gains of doing so? And so on. Such an attitude should not be inculcated merely among technical experts (who are indeed most prone to technology fetishism); it must start at the level of the mass of working people. And the pattern of industrial development we have described would provide a vast school for inculcating such an attitude.
Another such benefit which cannot be measured quantitatively is the change in the status of women, who are nearly half the working people. The better mobilisation of women’s labour, by integrating them in a planned way in the productive stream, would be indispensable to the industrialisation process; and in turn would have an impact on women’s social position. It would increase women’s economic strength, allow them greater social interaction, and create greater scope for them to organise. Of course this would not spontaneously guarantee women a better position in society; that, as always, would require conscious struggle. But this would create circumstances much more favourable to that struggle.
Further, such a process would enable, over a length of time, the all-important shift of workforce from agriculture to industry. Not only would this relieve the overcrowding of the land, but the greater weight of the industrial working class in society would open up a range of new social possibilities.
Existing land relations and social order obstruct agricultural development
Today, attempts to improve the condition of agriculture run up against the existing land relations. For example, there are large lands which have been degraded for diverse reasons. The productivity of much of this degraded land can be restored through a variety of means. However, most of this land is privately held or, in the case of forest plots, privately cultivated. Whose land is to be restored? Who will pay the bill? Who will reap the benefits? For example, the corporate sector has been projecting that vast sums are required, which are assumed to be beyond the scope of the Government; therefore, it argues, degraded lands, particularly forest lands, should be handed over to it to restore and use for commercial crops. This is resisted by the poor peasants, particularly tribals, for whom even these low-productivity lands are crucial to their subsistence, providing fodder for their livestock, fuel, and even crops which require few inputs. They would surely welcome the restoration of the productivity of these lands if ownership would rest with them. But only if the gains of improving land go to ruling class interests will restoration of degraded land proceed at more than a snail’s pace. A similar problem exists in extending land under cultivation through measures such as terracing of hill land.
One of the most pressing questions in Indian agriculture today is that of groundwater. During the last two or three decades, irrigation has been added almost entirely through tubewells, which are depleting the underground aquifers faster than they can be replenished. Those with greater financial clout, that is, the landlords and rich peasants, can bore deeper and extract water; as they do so, the water table falls and poor peasants’ water sources dry up. It is glaringly evident that there must be social control of groundwater resources, not only on grounds of equity but in order to prevent irreversible damage to the environment, threatening life itself. The question is, how is social control to be enforced? No authority exists that would compel the rural propertied to obey such a law, were it to exist. And so society will continue to watch groundwater resources get depleted, much in the same way as the world helplessly watches the advance of global warming. But the social control of India’s groundwater ought to be much more within our grasp than the world environment.
The question of peasant indebtedness, of which the largest portion is the debt to usurers, is another most pressing problem of Indian agriculture. No less than the Union Agriculture Minister expressed the helplessness (or lack of will) of the Government to do anything about this question when he said that peasants should themselves repudiate their debts to usurers. Such a repudiation, were it effective, would strike at the heart of the rural social order; but it would be possible only in the course of a sweeping social transformation, including the redistribution of land and other rural assets. Further, peasants would tend to slide back into debt unless guaranteed favourable terms of trade; and ensuring that in turn requires a planned economy.
Indeed, let alone the control of land and other rural assets, the rural propertied classes’ grip on political power ensures that even the crumbs of the social surplus fail to reach the poor and landless peasants. Every Government scheme purportedly for the interests of the poor becomes an instrument of further enrichment of the propertied. While there are large diversions by the rural propertied from the public distribution system (PDS) and virtually all rural schemes, the poor are by and large unorganised, cowed, and in no position to enforce their rights to rations, work, health care, or education. (Ironically, these diversions are being used by the international financial institutions and the Indian ruling classes to argue for the winding up of the PDS – that is, the violation of a right is being made the ground for doing away with the right itself.)
In short, without a change in production relations, and the emergence of a new social order, it is impossible to either bring about a fundamental improvement in agriculture or fundamental betterment in the lives of those in the rural areas.
Social emancipation and change in economic institutions two aspects of a single phenomenon
As we have seen over the course of history, when the peasantry itself carries out the redistribution of land and other rural assets, it undergoes a profound transformation; indeed society itself is transformed. The grip of the parasitic classes on the consciousness of the peasants is released, and the enormous social energies of the poor and landless peasants are liberated. They begin to believe that they can change their destiny, and seek out ways to do so. Moreover, they can only win the battle against the parasitic classes through their collective efforts. And in the course of this collective battle elements from among the poor and landless peasantry (who are also generally of the socially oppressed castes) come to the fore.
By breaking the stultifying grip of feudal consciousness and shaking off the social inertia of centuries; by overcoming the isolation of the peasantry and bringing them into collective action; and by bringing forward a new leadership from among the most oppressed sections, this process lays the first real basis for democracy among the agrarian classes. Not only is the social domination of the landlord over his tenants and labourers laid low; the hierarchy of caste too is dealt a decisive, though far from final, blow. (Note that in our society, the trigger for caste atrocities in villages is frequently that an individual Dalit family has gained some economic independence, either on the basis of a plot of land or employment outside agriculture. If even an individual case is taken as a threat to upper caste domination, imagine the strength of the blow when the entire oppressed social section wins economic independence from the socially dominant sections.)
Democratisation in turn clears the way for steps toward cooperative farming, for it is only among free and equal persons that there can be genuine cooperation. Paul Baran wrote that if agrarian reform
Once peasants begin to cooperate, a new world of possibilities opens up. They are able to undertake various types of projects which require a large number of workers at a time, without worrying that their own farms will suffer for lack of labour. These projects would boost agricultural output, through works such as irrigation, land improvement, afforestation and grain storage; they would house rural industries; and they would house schools, health posts, creches, and other necessary community services. These assets would be created relatively cheaply, with the labour of the peasants who would otherwise be unemployed: it is, after all, labour that creates capital. The number of labour days in the countryside would double in this process. The peasants would be interested to contribute this labour because it is they who would be the immediate beneficiaries.
At the same time, as opportunities develop for the productive employment of labour outside agriculture, mechanisation of agricultural activities becomes a socially efficient choice. (By contrast, under the present conditions, even though mechanisation may be profitable for a landlord, it is socially inefficient, as it renders labour power idle with no alternative employment.)
We shall not proceed further in describing this world of possibilities, which deserves much more than these few sentences. Our aim here is only to suggest how the first step – the democratisation of the agrarian scene – is a precondition to the rational development of India’s agriculture, and of its society.
Finally, the process of the socially oppressed and exploited sections themselves carrying out anti-feudal reforms in the face of fierce resistance by the propertied classes would propel new social forces to dominance in Indian society. It is these social forces that would be able to put a stop to the maldevelopment of our country, and carry out genuine development. Such a momentous agenda would require that the drain of surplus from the economy, as well as its dissipation in luxury consumption, which we have described in previous chapters, be halted. It would require that, instead, the surplus created by the labour of hundreds of millions be garnered and husbanded for redeployment in the interest of Indian society.This process would require a genuinely socialist planned economy (not the travesty of planning that India has witnessed) and the reversal of the process of ‘globalisation’. Essential detachment from the world economy would be a necessary prelude to establishing relations with the world economy on a new, independent, footing. At the same time, the changes described above would create the social, economic and political basis for India’s economy to chart an independent path. That subject, of course, requires elaboration which we cannot undertake here.
1. Mark Selden, ed., The People’s Republic of China: A Documentary History of Revolutionary Change, 1979. Selden cites Peter Schran, The Development of Chinese Agriculture 1950-59, 1969. (back)
2. Report of the Working Group on Land Relations for the Formulation of the 11th Five Year Plan. (back)
3. Victor Lippitt, Land Reform and Economic Development in China, 1974. (back)
4. NSS Report no. 508. (back)
5. National Commission on Enterprises in the Unorganised Sector, Financing of Enterprises in Unorganised Sector, Report of the Task Force on Access to Finance, Raw Materials and Marketing, April 2007. (back)
6. Incidentally, it is worth noting that the reduction in transport costs and in advertising would reduce GDP to that extent; this underlines how misleading it is to take GDP as a measure of material betterment. (back)
7. Only an economy planned according to social priorities can resuscitate and protect our wounded and ailing environment. This topic requires serious discussion, which we cannot attempt in this piece. (back)
8 .Baran, Political Economy of Growth, p. 202. (back)
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