(Weekly Organ of the Communist Party of India (Marxist)
December 26, 2010
Growth and Impoverishment
NOT a day
passes without some
official spokesman or the other recounting
perception which has
many adherents is plain wrong. There can be alternative ways of
economic growth, and the social impact of growth depends upon how it is achieved. The growth process
currently underway in the Indian economy, which is rooted in
I am not resorting to hyperbole. The empirical evidence for absolute impoverishment in the recent period of high growth is overwhelming; and the reason for it is also fairly straightforward. Let us look at the evidence first. The official criterion for the identification of poverty (until it was changed recently after the Tendulkar Committee report) has been the intake of 2400 calories or less per person per day in rural India and 2100 calories or less in urban India. By this criterion, poverty has certainly increased: direct measurement of calorie intake suggests that 74.5 per cent of the rural population was “poor” in 1993-4, and 87 per cent in 2004-5; the corresponding figures were 56 per cent and 63 per cent respectively for the urban population. (These figures, based on NSS data, are from Utsa Patnaik, Economic and Political Weekly, Jan 28-Feb 4, 2010, and their veracity cannot be questioned).
figures confirm this conclusion. Per capita foodgrain absorption
net output minus net exports minus net increase in stocks) which, in
figures, was 200 kilograms per annum in
“British India” at the beginning of the twentieth century declined
to less than 150 kilograms by the time of independence. Strenuous
successive governments in independent
Two arguments are typically advanced against the identification of reduced foodgrain intake with increased poverty. The first states that there tends to be a diversification of consumption away from foodgrains as incomes increase, so that reduced foodgrain intake signifies, contrary to my claim, a qualitative improvement in the consumption basket, and hence in living standards.
wrong. With increased incomes, the direct
consumption of foodgrains may go down, but the indirect
consumption of foodgrains, as processed food (such as
cornflakes) or as feedgrains for animal products (such as mutton, pork,
etc) goes up; as a result the total
absorption of foodgrain per capita, direct and indirect taken
increases. In the
The second argument states that the reason for reduced foodgrain intake even among lower income groups is larger expenditure on other things, in particular healthcare; and this is indicative of changing “tastes”, associated with an improved quality of life, and hence economic betterment.
The fallacy of this argument lies in its underlying assumption that anyone, even a poor man, compares at the margin the satisfaction to be derived from consuming more food with that from taking his child to the hospital when the child is ill. This assumption is wrong. In most people’s perception the latter has absolute priority. Since this perception could not have emerged suddenly over the last decade, when per capita foodgrain absorption declined precipitously, the cause for this decline is likely to be a rise in healthcare costs over this period.
Such a rise has certainly been a feature of the neo-liberal era, owing to increasing drug prices and privatisation of healthcare. Hence, the fact that expenditure on healthcare has gone up even at the expense of food intake in the last decade, can only be indicative of impoverishment, rather than of an improved quality of life.
The basic reason for this impoverishment is reduced purchasing power in real terms in the hands of the bulk of the working population, which in turn is due to two phenomena. First, the growth process has been accompanied by what Marx had called a process of “primitive accumulation of capital”, whereby vast numbers of peasants, petty producers like fishermen and craftsmen, marginal groups like the tribal population, suffer either outright dispossession or a squeeze on their real incomes, for the benefit of large capitalists, speculators and the financial interests.
Big retail chains come up to displace petty traders; agribusiness comes in to squeeze the peasantry; land grabbing financiers come in to displace peasants from their land for real estate and spurious infrastructure projects; tribal people are evicted to make room for mining projects; and petty producers of all descriptions everywhere get trapped between rising input prices caused by the withdrawal of State subsidies and declining output prices caused by the withdrawal of State protection from world commodity price trends. When we add to all this the rise in the cost of living, because of the privatisation of education, health and several essential services, which affects the entire working population, we can gauge the virulence of the primitive accumation that is unleashed.
This process of primitive accumulation is at the same time unaccompanied by any significant increase in the employment of wage workers (as distinct from white collar professionals) in the capitalist sector. This is because of the rapid rate of technological and structural change that a changing demand pattern, owing to rising income disparities, generates in a “liberalised” economy. Hence the victims of primitive accumulation cannot get absorbed as wage-workers under capitalism. They either join the reserve army of labour, or linger on in their old occupations, taking a cut in their real incomes in both cases. Besides, this very fact of a swelling labour reserve also keeps the wages of employed workers low, even as labour productivity rises, contributing further to the growing income disparities.
Any acceleration of growth simply reproduces the problem on an even larger scale. The displacement of tribals and peasants occurs on an even larger scale, the expropriation of petty producers occurs to an even greater extent, while the rate of growth of labour productivity in the organised capitalist sector increases with increased growth rate, keeping labour absorption into this sector as constricted as ever. The view that with a higher growth rate poverty will be eradicated remains a chimera; poverty on the contrary only increases with the growth rate.
And the constraint on public expenditure, typical of neo-liberal economies, where tax concessions reduce revenue and “fiscal responsibility” legislation curbs government borrowing, ensures that “social protection” measures remain both anaemic and amenable to sudden, arbitrary and sporadic cuts. Growth under the neo-liberal dispensation therefore, far from being a condition for the amelioration of poverty, becomes an instrument for the impoverishment of large segments of the working population.