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The need for cautious optimists

Prabhudev Konana


India needs leaders and policy makers who can see different parts of the elephant at the same time; who are thoughtful about their actions in a complex socio-economic pluralism; and who can address the concerns of doubters and temper the irrational exuberance of optimists.


Depending upon the lens through which one analyses India’s current economic development, he or she will arrive at a different conclusion. This is similar to the parable of four blindfolded men who touch different parts of an elephant and conclude that it is a rope (tail), snake (trunk), pillar (legs), and wall (body). We miss the big picture if we fail to recognise the different lenses and conclusions.

At one extreme are the ‘optimists’ who embrace free trade, free markets, liberalisation, and privatisation. They anchor to the impressive growth rates of GDP, total trade, foreign direct and institutional investments, and foreign reserves to reflect optimism. They are excited at the burgeoning middle and upper-middle class population. They are energised by the new billionaires and millionaires, the spectacular performance of the stock market, and the impressive starting salaries of professionals. Often they are the direct or indirect beneficiaries of growth.

At the other extreme are the ‘pessimists’ who detest multinationals and globalisation, and believe free trade favours developed nations and will lead to Western cultural and economic invasion, slowly tearing apart the cultural fabric and national identity. They argue current policies are about corporate imperialism and welfare at the expense of the poor and farmers, creating a huge gap between the haves and have-nots. Their perceptions are often rationalised with powerful anecdotes such as subsidised land for wealthy companies, 5-star hotels surrounded by poverty, and disproportionate resources to certain sectors. Pessimists focus largely on ideologies that are opposite to that of optimists and future unknowns. They ignore the benefits of the current economic growth.

Between the two extremes are the ‘doubters.’ The doubters express deep scepticism without tying themselves to the ideologies of the pessimists or optimists. They anchor to important known unknowns and find no meaningful attempts to address the endemic issues of society. They question whether the growth has led to a proportional decrease in poverty levels or the wealth-gap. The doubters can refer to visible poverty, farmer suicides, abysmal infrastructure, and low spending on healthcare and education to discount progress. Corruption continues to obstruct every aspect of life. Rural India remains impoverished and urban India finds itself polluted, chaotic, and deteriorating. They are concerned with the increasing wealth-gap between the rich and the poor and increasing friction from land acquisition for development. This is analogous to ‘What You See Is What You Get’ (WYSIWYG) popularised with Graphical User Interface. The benefits of economic growth are unknown or unobservable. They perceive that development is not inclusive but exclusionary since only a small fraction of the urban educated population benefits from this growth. Doubters have reasons to disbelieve meaningful progress.

Socio-economic pluralism

India needs leaders and policy makers who can see different parts of the elephant at the same time without deeply entangling with ideologies. They need to be thoughtful about their actions in a complex socio-economic pluralism and alleviate the fears of pessimists. They need to address the concerns of doubters and temper the irrational exuberance of optimists. They have to be ‘cautious optimists.’ Some would say this approach might satisfy no one. But extremism has made things worse. Extreme optimism has led to an intense backlash (for example, Nandigram incidence), which can put economic development on hold. Extreme pessimistic view has maintained the status quo of poverty and desperation.

Cautious optimists recognise that inclusive economic development, managed liberalisation, and global trade are necessary steps to have sustainable progress. Foreign capital and technology are necessary to create jobs, become efficient, and compete effectively. Cautious optimists recognise that meaningful development cannot be achieved without broad-based investments in infrastructure, education, and healthcare. They understand the knowns and the unknowns of economic development and deliberate actions that are equitable and sustainable.

Cautious optimists would think ahead and plan now rather than when things start to crumble all around. They evaluate the consequences of their actions in greater depth. For example, cautious optimists would study the impact of new industrial parks in major cities like Bangalore on pollution, traffic, and health and on the future demand for water and electricity. In contrast, optimists continue to announce more and more development when existing infrastructure has already crumbled. The unknowns of development are greater than the known benefits. A cautious optimist would seek a moratorium on new industrial parks in major cities.

Dealing with extreme views

If all the struggles of pessimists are about uplifting masses, particularly farmers, then there is no practical alternative other than creating economic opportunities within the realms of health, safety, culture, and environment. However, it is impractical to assume new job creation to come from agriculture. India has 60 per cent of the workforce in the agricultural sector contributing to approximately 25 per cent of the total GDP. Even if agricultural productivity and GDP share increase using modern technologies, it is unsustainable to support such a large agricultural workforce trying to seek a share that is highly dependent on uncontrollable factors like monsoons, limited resources like subsidies, and an inefficient system that has marginally improved in decades. China has been successful in moving hundreds of millions of rural surplus labour into other sectors — thereby moving 400 million out of poverty.

Too many people are impacted during a drought or depressed prices owing to bountiful crops. These are economic realities. India cannot remain an agrarian society to support 60-70 per cent of the population. This by no means diminishes the role of agriculture but it is a necessary step in moving forward. Pessimists may create greater social benefits by actively encouraging industries and services that consume agricultural output like textiles, the branded food and beverage industry, canned meat and dairy products, fast food and restaurant chains, tourism, and so on and move agricultural labour into these sectors.

This has implications for agricultural productivity as land is prevented from further division as some family members move out of agriculture (my own family is an example). As forward linkages to agricultural goods become stronger, there is a greater stability and growth in the demand through greater consumption and exports. With a smaller fraction of population engaged in agriculture, the rewards and disposable income are higher, which will jump start other parts of the economy. Unfortunately, pessimists give greater importance to the negatives that prevent any development than focussing on how to minimise the negative consequences or extract larger benefits to farmers.

Pessimists disagree with privatisation or multinational corporations. However, economic realities are different. Capital and advanced technologies are needed for growth, job creation, productivity, and competitiveness. I worked in a public sector unit in India making photographic film that was riddled with inefficiencies, quality problems, and wasted resources. The fact is the days of this public sector are numbered as digital technology continues to substitute film-based photographic, motion picture, and medical industries. This public sector unit has neither the competence in digital technology nor the capital to transform itself into a hi-tech firm. Existing assets have little use for digital technology. Any struggle to keep this public sector unit running is a futile exercise.

Pessimists have serious issues with land acquisition for economic development. Special economic zones (SEZ), highway projects, expanding townships, self-contained neighbourhoods, metro rail and so on will need large spaces. Any struggle should be to seek just compensation and a sustainable environment for those displaced to succeed. Some of the protests are justified while some are simply a creation of distrust and ideology.

Net result: status quo

Sadly, the actions of optimists strengthen the beliefs of pessimists. Optimists complain against the socialistic mindset as an impediment to a free market. However, hypocritical free market proponents want the government to take away land from the powerless and transfer that to highly resourceful publicly traded companies at a fraction of the market price. The fact is that the land value is transferred to the shareholders of those companies and this value grows exponentially. When fairness is discussed, the market value needs to be based on the expected value the firm generates rather than the current market price, which can be very low. Optimists need to treat displaced people as equal shareholders. Unfortunately, there is a huge gap between free-market thoughts and free-market actions. Likewise, even if optimists attempt to treat displaced owners as shareholders, ideologies of pessimists come in the way of making progress. The net result is simply a status quo. The process in which policy makers and optimists make this happen is more important than the idea itself.

Pessimists often derail energy initiatives when energy has a serious impact on job growth, productivity, and competitiveness in all sectors. Further, pessimists are upset at sectors that focus on exports and employ an educated workforce. The fact is that companies that generate valuable foreign exchange allow India to import advanced technologies and energy resources that have implications for all sectors. Of course, we need to be critical of subsidies, regulatory ‘favouritism’ and excessive attention to certain sectors at the expense of broad-based development.

Doubters and pessimists often complain about the wealth-gap. However, it is not known if there is an economic development that will shrink the gap between the rich and the poor in the short run. Maybe, it is an uncontrollable outcome. However, we need to focus on whether the people at the bottom of the economic pyramid have improved their lives and have opportunities to succeed. If the rich using ethical and legal means become richer, so be it. However, the rich needs to be sensitive to the surrounding and to be compassionate. They have a greater opportunity to make a difference to society than any government.

Sadly, the actions of pessimists to protect the underprivileged may prolong poverty and desperation, while those of optimists may exacerbate these actions. We must engage different viewpoints and temper extreme views for a meaningful development. We need cautious optimists to move India ahead.

(The author is a Distinguished Teaching Professor at the University of Texas at Austin and can be contacted at pkonana@mail.utexas.edu.)

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