Economic reforms do not necessarily liberate

The literature of economics has witnessed an unprecedented growth of buzzwords like ‘economic governance’, ‘liberalisation’ and ‘structural reforms’ over the last 30 years or so.

Published: 06th January 2013 12:00 AM  |   Last Updated: 04th January 2013 10:59 AM   |  A+A-


The literature of economics has witnessed an unprecedented growth of buzzwords like ‘economic governance’, ‘liberalisation’ and ‘structural reforms’ over the last 30 years or so. The trouble with these buzzwords is that everyone interprets them in his or her own way. It is, therefore, pertinent to the political managers of the UPA what exactly they mean by phrases like ‘big ticket reforms’ that the Manmohan Singh government claims to have ushered at the last session of Parliament when it faced a range of challenges.

During the past two decades when ‘opening up’ became a golden phrase of political discourse, Indian middle class, seemed to have woken up to a dream of accomplishments  and accompanying consumerist expectations.

Somewhere in the din of the politicians clamouring for the welfare of the have-nots in the incredible and shining India, the vast majority of the marginalised Indians were left out. In the lexicon of Indian politics the word ‘reform’ became a synonym of their ‘liberation’ from poverty. We forgot that the first generation of reforms merely involved industrial de-licensing, tariff liberalisation, and increasing private sector competition in the economy. The issue of how best to manage the country’s natural resources was not addressed. As a result, India merely transitioned from a policy framework governed by the “License Raj” to one dominated by the “Resource Raj.” In other words, the potential for corruption did not disappear; it merely shifted from one set of activities to another. Growth of crony capitalism and the hitherto undercover nexus between the politicians, bureaucrats and capitalists came up above the surface. The 2-G scam and the Coalgate scam that rocked the present UPA regime were the logical sequel, and not an aberration.

The political class has found a convenient way out of its failure to give a humane face to the process of economic reforms—competitive populism. Populist schemes such as Mahatma Gandhi National Rural Employment Guarantee Scheme, subsidies and food security legislations are being introduced by the central and state governments without any meaningful cost benefit analysis. The result is that the ultimate loser is the aam aadmi  who pays for this profligacy without getting any tangible benefits in real terms.  

The irony is that the second generation reforms that would rationalise the government control over natural resources are now being blocked by some of the winners emerging from the first generation reforms. These elements have vested interest in blocking subsequent reforms. The corny capitalists and their political allies have been able to exploit the arbitrary, opaque, and regulatory-intensive governance of natural resources to make huge sums of money.

The effect of this subjective and motivated implementation of liberalisation, globalisation and privatisation in the name of reforms is being felt by the masses in their daily life as the number of people coming below the poverty-line is swelling up. Unemployment has ballooned, and the economic and social inequalities are threatening to rip apart the social fabric of India.

It is high time the policy makers—politicians and bureaucrats as well as industrialists,  entrepreneurs and the media—realised that economic reforms per se do not necessary lead to liberation of the people suffering under an inequitable system. The paradox of lakhs of people going hungry while vast quantities of foodgrain rots in godowns and farmers continue committing suicides can be resolved through sturdier measures. There is no magic key of unlimited investments to solve problems of this magnitude.

To be meaningful, globalisation and economic reforms must be instrumental in reducing poverty and generating more employment. Till the political class understands this, it will resort to the gimmicks of populist schemes to feed the masses, while it fattens itself and the winners of skewed reforms adopted by India and other developing countries—a process that has enriched the politicians, the bureaucrats and the corny capitalists, and alienated the masses. This will ultimately lead to anarchy and nihilism, signs of which are already there in India’s rural landscape in the form of Maoism and Mafia raj in the urban space.

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