A Tale Of Two Forums

Jayati Ghosh

HYDERABAD last week hosted two very different sets of gatherings. One – the World Social Forum Asia – is a congregation of people who are protesting about the current international economic structure and market-oriented policies, and seeking alternatives at both national and international levels.

The World Social Forum has become a unique international gathering of representatives of mass organisations, social movements, trade unions, intellectuals and artists. The main event, hosted annually in Porto Alegre, Brazil, has now spawned regional meetings in Europe and elsewhere. The Hyderabad meeting was the first Asian meeting of the World Social Forum, and so far seems to be very successful in bringing together tens of thousands of people, mainly from different parts of India but also from other parts of Asia and even other developing countries in Africa and Latin America of very different walks of life and even persuasion, but united in opposition to the evils of corporate globalisation.

It was a very lively set of events, full of bustle, noise, debate, music and dance, and enthusiastic participation and interaction. The role of the left parties – especially the CPI(M) – and their mass organisations, in organising, participating and contributing to this gathering, was  very evident.

THE CII MEETING

The other meeting was a much more standard and mainstream meeting - an attempt by the Confederation of Indian Industry to replicate within India the World Economic Forum, which was really the meeting of capitalists themselves. This meeting was being opened by home minister L K Advani, had invited the Director-General of the World Trade Organisation, and was being eagerly sponsored by the current chief minister of Andhra Pradesh, Chandrababu Naidu. Nevertheless, this was clearly the duller and less interesting of the two gatherings, not only because it was more predictable, but because businessmen together rarely generate much fun and excitement.

But even more than whether it was more boring or not, the point may well be that the CII meeting of businessmen and other leaders was turned out to be less productive in general, even from the point of view of the state government of Andhra Pradesh.

MISPLACED APPROACH OF ANDHRA CM

The state government of Andhra Pradesh had gone all out to project itself as the most market-oriented and investor-friendly of all. It had taken on huge external loans which have dramatically increased the external debt of the state, has engaged in very comprehensive privatisation of public assets, and generally projected itself as the sub-regional leader in terms of pushing neo-liberal economic reforms. Nevertheless, as one participant at the World Social Forum pointed out during a session on the effects of mobile finance and economic crisis, there are very few results in terms of actually increased private investment.

Thus in Andhra Pradesh over the past decade, the declared intentions of foreign direct investment have been substantial, amounting to more than Rs 30,000 crore. But the actual FDI into the state has been only one-tenth of that, at less than Rs 3,000 crore. This was the focus of the question this particular participant posed: what explains this huge gap between declarations of intent and actual investment? Why has private investment in Andhra Pradesh not actually picked up despite all the invitations and the incentives being showered upon private entrepreneurs of both foreign and domestic origin?

The discussion at that particular seminar brought out some of the more obvious examples quite clearly. The basic point is really that foreign direct investment, like all private investment, will go wherever and whenever it anticipates profits. And the expectation of profits is not really affected by incentives and blandishments from the government; rather, it is determined by the potential ability to control scarce natural resources or the potential market for the products of such investment.

This means that FDI – especially non-resource-based FDI – goes to places that already have a high rate of growth, because that suggests that the domestic market is growing. And the economies that have high rates of growth are usually those that have high rates of investment. So, in other words, investment goes where there is already a lot of investment, it tends to get “crowded in” by such evidence of dynamism.

ANDHRA PRADESH ECONOMY IN A MESS

That is why the current approach of the Andhra Pradesh chief minister is so misplaced. Through a series of measures, the state government has not only reduced the purchasing power of most of the citizens of the state, but has contributed to the collapse of employment generation which has also marked much of the rest of the country. Other than some infrastructure development in the cities (especially Hyderabad) which have also been based on massive accumulation of public debt, there is precious little to show in terms of development in the state. Certainly it has been the poorest performer of all the southern states in terms of economic growth, since the early 1990s.

This makes it very unlikely that private investment will come rushing in, just because the state government has declared itself to be market-friendly. In such a situation, simply to wait for private investment to come would be a completely futile exercise, as indeed it has proved to be for the past few years. What is really required is for the state itself to increase its own expenditure and investment, to bring about a corresponding and linked increase in private investment.

However, the finances of the government of Andhra Pradesh are now in a most comprehensive mess. And since the states face hard budget constraints, there is little that they can do in terms of expenditure without adding to the already huge mountain of public debt. So it seems that the economic strategy of the current state government has already run its course. And so having parties like the CII conference may not bring much rewards in terms of new investment, either domestic or international.

By contrast, the other party, of the progressive movements at the World Social Forum Asia, holds much more promise for the future. Just bringing various progressive movements together, allowing them to interact and exchange views and experiences and perhaps work out strategies of working together in future, is a very important exercise, and one that becomes even more crucial in the current political climate. So at least one of Hyderabad’s parties is going well.