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Spectres about market economics
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In their advocacy for an activist state, the authors keep out the complexities of the market growth in the 1990s.. Yet, The Market that Failed has an important place in debates on economic reforms in India, writes ACHIN CHAKRABORTY.
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A PAINSTAKING work of immense importance, The Market that Failed is not a polemic meant exclusively for the faithful. C.P. Chandrasekhar and Jayati Ghosh (CPC and JG, hereafter) have presented us with an excellent survey of the experience of economic reforms in India over the 1990s, and in the end suggest alternative strategies for the future. Their style is extremely lucid and economical. Almost all the important issues have been dealt with in the 14 chapters, which have taken only 174 pages!
The initial chapters give the background to "neoliberal reform". The analysis here is couched in the language of "contradictions". "Contradictions" led to the development impasse of the late 1960s and 1970s. Contradictions were thrown up by the1980s' growth experience; and finally, contradictions generated increasing support within the powerful sections of society for changing the policy regime in the manner desired by the International Monetary Fund (IMF) and the World Bank. We accept, since no amount of empirical evidence is enough to refute these assertions. Contradictions, like beauty, lie in the eye of the beholder.
How did the economy perform in the post-reform decade? Poorly, according to the authors. The fact that India's gross domestic product in the 1990s grew at 5.8 per cent per annum is not something the reformers should take pride in, since such a growth rate was already achieved in the 1980s. The authors argue that growth in the 1980s depended on the fiscal stimulus that government expenditure provided, whereas in the 1990s excessive concern about fiscal deficit led to curtailment of public expenditure. One could then argue that even though in the 1990s public expenditure was cut, growth did not suffer. Does it not indicate soundness (or sustainability, whatever that means) of the growth experience in the 1990s? Not at all, CPC and JG would say. Of course, if you are in the Finance Ministry, which wants to take pride in the "soundness" of the macro economy, you would ignore the fact that much of this growth is to be attributed to the service sector, and there is no consensus on how we should value such growth.
In a book on failures it is natural to refrain from mentioning that the fact that India managed to avoid the sudden crisis that engulfed some of her Asian neighbours in the second half of the 1990s. In the chapter on the external sector, after a brief discussion of RBI policies, CPC and JG conclude, "the larger problem is that such monetary measures are rarely sufficient to stabilise the balance of payments either". Even if we concede that those measures are "rarely sufficient", the fact remains that India managed to avoid the crisis. Ironically, those who have been opposing the simple-minded approach of IMF-World Bank now find India's "success" as vindication of their position. India has succeeded, they would argue, because it has not followed blindly the dictates of the international agencies. CPC and JG have kept all these complexities out of their book. The linearity of arguments is consistently maintained till the final chapter where they spell out their alternative strategy. They write, "domestic capital must be provided with both time and space to achieve the level of competitiveness that is required to face up to international competition". Does it sound like old wine in an old bottle? In their advocacy for an activist state, no space is given to the lessons we have so far learnt from the perverse activism of the state. This is not too disturbing, since many methodologically self-conscious economists now admit that economists are committed from the start to a point of view which they will then support with different types of argument. The question is how to make the arguments persuasive.
Sluggish employment growth and related issues of poverty and food insecurity deserve serious attention. Although chapters 12 and 13 deal with them adequately, my fear is that if the reader has already developed a good deal of scepticism about certain arguments in the earlier chapters, she may start losing interest by the time she approaches these chapters. The issues of unemployment, poverty and food insecurity are too important to be subsumed under the unpersuasive anti-market rhetoric.
But the authors must be commended for accomplishing what they set out to do — presenting cogently a point of view on economic reforms and the post-reform Indian economy. In the debates and deliberations on economic reforms in India, The Market that Failed should have an important place.
The Market that Failed: A Decade of Neoliberal Economic Reforms in India, C.P. Chandrasekhar and Jayati Ghosh, LeftWord Books, Rs. 275.
The writer is with the Centre for Development Studies, Thiruvananthapuram.
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