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Thursday, Feb 24, 2005

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Grassroots guarantee for employment

By L.C. Jain

Production for the domestic market offers the most guaranteed form of employment over the long term.

IN THE article "Guaranteeing Employment" ( The Hindu Dec. 27, 2004) Amit Bhaduri has opened our third eye to a radical alternative to our globalisation-fixated economic strategy. He has shown that a great deal of economic fortune is in fact in our own backyard. Ironically, the rest of the world sees the vast potential of our domestic market and, via MNCs, is vying to cash in on it while we are busy acquiring the capacity to step into the global market. By all means let us go to the world but we ought not to mistake the chaff for the grain. The grassroots market is enormous, easier to access, and relatively more stable, apart from lightening the burden of poverty and unemployment.

The selling of our goods in this admittedly under-supplied market is only one aspect. The real reward in domestic production for the domestic market is in putting purchasing power in the hands of millions of the unemployed and underemployed. A discreet support to labour-intensive techniques of production to meet domestic demand can enhance the employment content of the production process. Production for the domestic market to meet unsatisfied demand thus offers the most guaranteed form of employment over the long term.

We need to summon to our aid the salutary lessons from the European experience of single-minded pursuit of growth and international competitiveness via standard solutions — higher investment, more mergers, expanded trade and full throttled deregulations. It was nearly 10 years ago that a 167-page White Paper of the European Commission titled Growth Competitiveness and Employment admitted that in spite of an impressive record of growth and competitiveness, unemployment in Europe had reached "serious proportions." More instructive for us was its confession: "we know how to produce but our manufacture often destroys jobs."

According to economist Chris Freeman (Science Policy Research Unit of the Sussex University), the unemployment scene in Europe is in fact grimmer and comparable to that experienced during the Great Depression. A similar concern was written in the annual review of the OECD (1993) titled Employment Outlook, which argued that Europe's statistics for the 1990s understate unemployment as they do not capture all of the labour slack that exists in OECD countries.

The white paper underscores that this level of unemployment has been reached despite the fact that investment went up by one-third between 1985 and 1990, there were three times more company mergers and acquisitions, trade doubled in sectors previously regarded as sheltered from competition, while massive de-regulation eliminated 70 million customs documents. Yet the European Community failed to match the increase in generated wealth with parallel improvements in job opportunities. In a general manner, it shows that "growth is not in itself the solution to unemployment, that vigorous action is needed to create jobs."

No doubt, technical progress is presenting opportunities for growth but, the white paper argues, we can avail ourselves of it on the condition that we alter our development model, meet the needs stemming from the upheavals in social life and urban civilisation, preserve our rural areas, and improve the environment and the quality of our national assets. Further, while the dynamism of the market can help boost growth, experience has also shown that the market is not without its failings. It tends to underestimate what is at stake in the long term. The speed of the changes it creates affects the different social categories unequally and it spontaneously promotes concentration, thereby creating inequality between the regions and towns. Indeed, in most European countries, the proceeds of economic growth have mainly been absorbed by those who remained in employment, and there is a large pool of unemployed that has been excluded. The paper concludes on a chilling note: if only proof were needed that our economies have not yet reached maturity, it would be the existence in Europe of some 50 million people below the poverty line.

In the 1980s, the growth of our product rose to 5.3 per cent from 3.5 per cent, but it was accompanied by a disastrous decline in the growth rate of employment from 2.8 per cent to 1.5 per cent. This trend worsened in the 1990s — the celebrated decade of economic reforms, notwithstanding the assurance to Parliament by the then Finance Minister that "reforms were aimed at encouraging a pattern of industrial production which is labour intensive."

A May 2002 report of the Planning Commission says the employment generating capacity of the economy, especially the organised sector, vis-à-vis the GDP growth is "declining fast over time (1983 to 2000)", though during the same period GDP growth accelerated from 5.2 to 6.7 per cent per annum. The report says in the late 1990s the organised sector reached a state of "almost a near jobless growth." The Planning Commission report does not elucidate why the organised sector is not delivering jobs though it has been liberated from all major shackles — licensing and controls over imports and foreign investment — since the 1990s. Was jobless growth an intended objective of strengthening the organised sector?

While investment flooded the organised sector a la economic reforms, during the same period not only millions of our men and women but also our vast production resources — the semi-arid and rain fed areas (i.e. two thirds of our cultivable area) — were kept on starvation diet investment-wise. Apart from investment, a precondition for raising productivity and hence employment intensity of these starved areas is an appropriate institutional framework. The finger points to a functioning panchayat in each village. Recently a seminar in Chennai organised by the National Commission on Farmers and The Hindu Media Resource Centre for Sustainable Development identified multiple institutional deficiencies, including non-empowerment of elected panchayats, as major constraints in eliminating deprivation of marginal farmers and landless agricultural workers.

Unquestionably, it is the village panchayat alone which can focus on raising productivity of soil and water and on not raising unemployment and underemployment.

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