Nobel Laureate Joseph Stiglitz spoke in New Delhi this week about his new book, “Making Globalisation Work.” Indian reformers like me will agree with much, though not all, of what he says. The problem lies in what he does not say.
Stiglitz says that you must reform hyprocritical, self-serving rich countries and international institutions to make globalisation work better, and thus help billions of the world’s poor. I agree. But he fails to emphasize a far greater reason why the poor gain nothing from globalisation: stupid and predatory policies of Third World governments, and supposedly pro-poor policies that keep poor people poor.
Stiglitz is too good an economist not to know this. But he has written this book for a white audience, and so flagellates whites. This is a good strategy to sell more copies, but not good economics.
Stiglitz is no socialist. He appreciates the power of markets, trade and globalisation. He is a forthright supporter of WTO and multilateral free trade. He simply wants to improve globalisation.
And so he lashes out at rich countries that talk free trade and then give massive agricultural subsidies (these have doubled in the US in the last decade). The US also gives huge industrial subsidies via the Department of Defence. Stiglitz castigates the US penchant for bilateral free trade pacts, which erode the much better WTO system of multilateral free trade. He finds many flaws in the UN, World Bank and IMF, and wants a greater say for developing countries in such institutions. He castigates free-market fundamentalism (like capital market liberalization). He dislikes pharmaceutical patents that make medicines expensive for the poor. He says there is no single blueprint for success, and every country must experiment and create its own version of globalisation. He wants more safety nets for the losers from globalisation, and more attention to uplift the poor billions bypassed by economic reform.
The main problem with this approach is that it views most Third World ills as a White Man’s Burden. This is infuriatingly condescending and plain wrong. If dalits and tribals in India suffer from high poverty and pathetic education and health, it is not the fault of the IMF or multinational corporations. It is the fault of decades of socialism and continuing government failure.
For many decades, politicians monopolized all economic power in the holy name of socialism, and used this to line teir pockets and create patronage networks. They shackled every nook and corner of the economy, stopping Indians from using their great energies. Those energies were released when the shackles were lifted in the 1990s.
But while industry and trade have been reformed, rural India has not. Hence the vast majority of villagers polled say they are unaware of any change in economic policy whatsoever. The government has spent huge sums on rural development without getting functioning schools, health clinics, pucca roads, telecom and electricity to every village. Dalits and tribals have been given job quotas, the odd Ministership and a plethora of subsidies. But they have not been empowered through access to education, telecom electricity andc pucca roads. Most subsidies go to the non-poor, and those earmarked for the poor are mostly creamed off by politicians and petty bureaucrats.
Anti-globalisers say that globalisation has bypassed the poor, especially in rural India. Yes, but who is to blame ? Globalisation is about connectivity, about connecting every villager to the globe. But thousands of Indian villages do not have connectivity even to the next village by pucca road. They cannot use the internet because monopoly government providers have failed, after 50 years, to get electricity or telecom to them.
Ironically, a multinational company—ITC– was the first to give Indian villages global connectivity through e-choupals (where farmers now look up Chicago prices). ITC found that government-supplied electricity was too intermittent to run an electronic kiosk, and BSNL telecom was useless for data (though it worked for voice). So ITC resorted to solar electricity and satellite-based telecom to bypass the government’s delivery systems altogether! The government was the hurdle, not the solution to poverty.
India still has hundreds of millions of poor people. But the poverty ratio has declined from 56% in 1973 to 28% today. During the heights of Nehruvian and Indira Gandhi socialism , the poverty ratio did not fall at all. Indira Gandhi’s “Garibi Hatao” policies abolished amiri (or at least white-money amiri) but did not reduce garibi at all. Poverty started falling from the 1980s onwards when the green revolution raised rural incomes and the first economic reforms accelerated GDP growth.
Poverty is still too high, and the poor lack connectivity. But why blame the white man? Our own government has failed miserably to provide pucca roads, telecom and electricity. Its schools and health clinics suffer from massive absenteeism, and it is too afraid of trade unions to penalize or sack the guilty.
International institutions and white donors have poured billions into rural programmes globally. If despite that people remain poor and unconnected, the fault lies in Third World countries that have squandered the money. India is a minor offender compared with Africa and Latin America.
Whatever the flaws in the Western world —and they are many—correcting them is neither necessary nor sufficient to save the Third World. First the four East Asian tigers, then the ASEAN countries, and now China and India have shown that miraculous rates of GDP growth and poverty reduction are possible even with the existing aberrations of the white man. If Africa and Latin America have fared so much worse than Asia in identical global conditions, the fault lies in those regions, not global conditions.
Even Africa has miracle economies like Botswana and Mauritius (and Latin America has Chile), all of which have averaged more than 6% growth for decades. They faced the same global conditions and western advice as the failures, but had better governance and domestic policies.
I do not think Stiglitz will disagree with what I am saying. The difference is that he is writing for a white audience, and I am not. That seriously affects his relevance for India.