‘Self-reliance for Poor and State Support for Business is the New Motto’—Jean Dreze

Economist Jean Dreze has played a pioneering role in shaping India’s public and social policy. He is most well-known for his advocacy for the employment-guarantee legislation MGNREGA and the National Food Security Act (NFSA). In this interview with NewsClick, he talks about India’s social and economic policies, including the relationship between Hindutva and the economic model pursued today. He says is difficult to see a coherent strategy in current economic policies, while in the social sphere, ‘Rights are out, duties are in’. Edited excerpts.

Economic nationalism informed the freedom movement, which meant Indians took control of the economic sphere. Also, it meant boosting the public sector. What was the purpose behind it, and have we realised the goals?

Economic nationalism, like nationalism itself, can take many forms. I don’t think that it provides much policy guidance unless we spell out how national interests are defined. When India became independent, the control of the economy shifted from the colonial power to an elected national government, and that was certainly a good thing. It also ended the economic stagnation of the first half of the twentieth century and paved the way to sustained development. But does this mean that ‘Indians took control of the economic sphere’? Some did, some did not. Landless labourers, for instance, remained landless labourers, except in Kashmir, where there were extensive land reforms. By and large, the levers of the economy remained in privileged hands. The transfer of power from the colonial government to a privileged Indian minority was a limited form of economic nationalism, with slim results on its own for large parts of the nation.

One problem for India is to reconcile the conflict between capital and labour. What does the state’s retreat from production and public sector sell-off mean for the majority of working Indians?

Public enterprises can resolve the conflict between capital and labour only for a minority of public sector employees. Contrary to public perception, India’s public sector is one of the smallest in the world in terms of employment—barely 5 per cent of the workforce, compared with 12 per cent in Brazil, 22 per cent in the United Kingdom and 28 per cent in China according to ILO data. There is certainly much scope for expansion, especially in sectors like health and education. The fact remains that the bulk of the workforce will be employed in the private sector in the foreseeable future. The conflict between capital and labour there cannot be reconciled, but the state can help workers to handle it by expanding their rights, for instance, the right to decent work conditions and social security benefits. Workers’ organisations are also important in this regard, especially in the informal sector, where they are still few and far between. 

Taking a longer view, a more radical change in terms of the conflict can be achieved by giving workers more say in the management of private enterprises, if not control of it. In principle, many enterprises could be managed by the workers or by managers accountable to the workers. The bosses, of course, are not going to bow out sweetly, but an organised working class could possibly overcome their resistance step by step.

Hindutva is also a form of nationalism, which is proving very destructive. What is the economic model of today promoting? Like in the social sphere, does it also have hidden motives? 

Hindutva is a political movement, and its toll is more political than economic, whether it is the end of democracy or the breakup of the social fabric. In economic policies, there is more continuity than change. If anything, business-driven policies have intensified because business and Hindutva stand in a relation of mutual support. Hindutva adds some new elements, like the devaluation of rational thinking, the obsession with superpower status, the passion for centralisation, and the suspicion of anything foreign. But the material interests that drive economic policy are much the same as before, at least for now.

In matters of social policy, we did see major changes in the last eight years. Rights are out, duties are in. This change is reflected, for instance, in the central government’s hostility towards social programmes like the rural employment guarantee, maternity benefits, social security pensions and even child nutrition schemes. All of them have been undermined in one way or another. Self-reliance for the poor and state support for business seems to be the real meaning of Atmanirbhar Bharat.

How do you see the control of magnates over the economy and the tax breaks they get? Is it that Indians feel their power is not exploitative because they are not British companies as in the colonial era?

I think a lot of people have a vague awareness of corporate power and the wealth of the super-rich without necessarily realising their enormity. In the latest Mood of the Nation poll, the majority of respondents felt that today’s economic policies benefit big business. On the other hand, when it was pointed out a few days ago that it would take one million years for a hundred workers working at the minimum wage to earn as much as Gautam Adani already has, there was a flutter on social media, suggesting that most people do not realise how rich and powerful the super-rich are. But even if they do, it makes little difference because the public has little influence in these matters. Most people in India would probably support a wealth tax on the super-rich or higher property taxes, but none of that is likely to happen in a hurry. The power of the super-rich includes the power to defend their privileges.

Are ordinary farmers aware of how the terms of trade go against them?

I doubt that most farmers have a clear view of the terms of trade. They are obscure enough for economists. And they may or may not matter much to individual farmers. Roughly speaking, the terms of trade capture what the agricultural sector can buy from the rest of the economy per unit of produce sold in the market. This would be a useful statistic for a surplus farmer. On the other hand, consider farmers in Jharkhand, where I live. Most of them are deficit farmers who grow some of their food and buy the rest, along with other items, from their earnings as wage labourers in the non-agricultural sector. An improvement in the terms of trade may or may not help them. They have many other things to worry about, starting with the drought that is sweeping large parts of the state right now.

What most farmers do understand, I think, is that farming is not a very rewarding occupation, especially in dry-land areas. Their job is full of arduous work, hardships and uncertainty, but at the end of it, they can barely make ends meet. And it doesn’t get much better over time because productivity growth barely compensates for the shrinking of per-capita landholdings. Meanwhile, the rest of the economy is growing relatively fast, so farmers tend to be left behind. It is this relative loss, I think, that creates frustration among farmers and makes them look for alternatives.

How do you view the talk about ‘handouts’ and ‘doles’?

We should not use propaganda terms like doles and freebies used by the corporate-sponsored media to attack whatever subsidies they dislike. We should assess subsidies on their own merit. Subsidies may be justified on various grounds, such as social equity, public health or the protection of the environment. If they have no justification, you could call them wasteful subsidies. The bulk of wasteful subsidies in India benefits privileged groups and the corporate sector, for instance, in the form of over-subsidised power, tax concessions, unrecovered loans and privatisation of natural resources. These are the big handouts if you insist on using that sort of term. Some wasteful subsidies may benefit poor people as well, but they are quite small in comparison.

Redistribution is an essential role of the state, and there is nothing wrong with assisting the poor by providing certain facilities or commodities to them for free. Politicians often make exaggerated promises for their own purpose, which is not always a healthy thing. But it is only by extracting these sorts of promises that the poor get anything in India’s lopsided democracy. Most of the big steps of social policy in the recent past, like the employment guarantee act and the National Food Security Act, were made possible by democratic politics. The idea of restraining this process, as the Supreme Court reportedly suggested, is quite dangerous.

Is India facing a crisis of what should be its next development strategy? And what is the way out?

It is indeed difficult to see a coherent strategy in current economic policies beyond the general love of business. The NDA government came to power with a clarion call for the return of black money stashed abroad, but this turned out to be a wild goose chase. A surgical strike on black money at home was the next move, but this backfired badly when demonetisation sent the economy off the rail. The trail of confused policies continued with Make in India, Smart Cities, Atmanirbhar Bharat, “one district-one product”, and quixotic goals like doubling farm incomes by 2022 (that’s today) or making India a $5 trillion economy by 2024.

The common denominator of these policies is that they leave a lot to the imagination, so the specifics are easily turned into business sops. Atmanirbhar Bharat, for instance, quickly metamorphosed into the so-called “production linked incentive scheme”, a Rs 2 lakh crore shower of subsidies for big business, including foreign companies like Ola and Apple. As Raghuram Rajan pointed out, we are in danger of a return to some sort of Licence Raj.

The way out is to strive for public policies that focus on improving people’s lives instead of being swayed by privileged interests. The expansion of human capabilities is not just a welfare issue, it is also a springboard for development. A modest increase in the tax-GDP ratio, cuts in wasteful subsidies and a big investment in health, nutrition, education and social security would be a good start. It would serve the triple goal of economic development, helping the poor and curbing India’s huge inequalities