By Prabhat Patnaik
The Nehru-Mahalanobis strategy which broadly underlay the entire dirigiste period is now being intensely vilified, not just by the Modi crowd, but even by neoliberal elements within the Congress and outside. As neoliberalism gets deeper into crisis and as disillusionment with it becomes more pervasive, its votaries become even more vociferous in lauding the change it effected in contrast to the dirigiste regime. Running down the dirigiste regime inevitably follows, which has the “added advantage” of catering to the present government’s predilections.
In fact long before the neoliberal criticism of it had surfaced, the Left had been critical of the Nehruvian strategy, but on altogether different grounds. It is very important to distinguish between the Left criticism and the neoliberal criticism of the dirigiste strategy. The Left approved of the Nehruvian strategy’s attempt to break with the colonial pattern of international division of labour, to develop the domestic capacity to build producer goods (Marx’s Department I), to build up technological self-reliance, to use the public sector as a key instrument of growth, to nationalise all mineral resources, to nationalise major banks and insurance companies, and to remove foreign capital from the vantage position it had occupied in the colonial era. Every one of these measures which was opposed by the neoliberal world-view had been supported by the Left.
The thrust of the Left’s criticism of the Nehruvian strategy lay elsewhere. The strategy envisaged home market based growth. Since the growth of the home market in an economy like India depends essentially on the growth of agriculture, the strategy’s success depended on ushering in a higher rate of agricultural growth, for which land reforms were absolutely necessary; the Left criticism of the Nehruvian strategy was that it was attempting a home market based development not just without breaking the concentration of land ownership, but without even providing security of tenure to the actual cultivators. Growth under the dirigiste strategy in such a situation, the Left argued, would be too constrained to absorb the massive labour reserves, and hence overcome the associated poverty, that existed in the country as a legacy of colonialism.
This is exactly what happened, because of which the class opposition to neoliberalism was not strong enough to prevent its introduction. How much of a difference even a recognition of the rights of actual cultivators can make was shown in West Bengal where, following “operation barga”, the agricultural growth-rate in the decade of the nineties became the highest among all the states of the country. Nehruvian dirigisme failed on this score.
The neoliberal criticism of the Nehruvian strategy however was altogether different, and was based on an intellectual sleight-of-hand. It contrasted an “inward-looking” with an “outward-looking” development strategy, and argued on the basis of the experience of East Asian countries that the latter produced much higher growth rates. India therefore would have been much better off, it argued, if, instead of the Nehruvian “inward-looking” strategy, it had pursued an “outward-looking” strategy of the sort that the East Asian countries had followed. This “outward-looking” strategy allegedly meant opening the economy to inflows of goods, services and capital including finance, and for that reason enforcing “fiscal responsibility” on the government (minuscule fiscal deficits), and making the economy “investor-friendly” by keeping down wages and the incidence of workers’ strikes.
This was a fraudulent argument both theoretically and also in its interpretation of the East Asian experience. Later research showed that East Asia was not a case of neoliberal development with free flow of goods, services and capital including finance, and with the government having a hands-off attitude. On the theoretical side, the argument for “outward-looking” development was presented on the assumption that each country was like a “small country” that could export as much as it liked. In other words the fact that there is only a given size of world demand in any period, so that one country exporting more would necessarily be at the expense of another, so that every country could not be as successful as the East Asian countries, even if they followed the East Asian strategy, was completely glossed over.
Neoliberalism has in effect pitted countries of the Global South against one another, each country trying to reduce its wages and increasing the workers’ intensity of work, compared to others in a race to the bottom. And State support for peasant agriculture and petty production has been progressively withdrawn bringing the petty producers and the peasants into acute distress. All these features have been accentuated by the crisis of neoliberal capitalism that has meant a sharp reduction in the size of the overall world demand.
The defenders of neoliberalism underscore the acceleration of growth in GDP compared to the dirigiste era to make their point. This acceleration itself is a matter of serious doubt, with even a former Chief Economic Adviser to the Government of India suggesting that the official GDP growth rate is a huge over-estimate. Besides, one cannot buy food with GDP accruing to someone else; so we have to look at the actual conditions of the working people to form a judgement about the relative performances of the dirigiste and the neoliberal periods.
The fact that the working people have become relatively worse off compared to the well-to-do in the neoliberal era is scarcely open to doubt. The most comprehensive study in this regard is by the World Inequality Database that is operated by Thomas Piketty and others. According to this, the share of the top 1 per cent of the population in national income which was around 12 per cent at the time of independence, had actually gone down to 6 per cent by 1982; since then it has started rising during the neoliberal period and reached around 23 per cent in 2023, its highest level over the last century for which estimates are available. So the neoliberal era has seen a tremendous widening of income inequality to a level that is unprecedented even in colonial times.
Even more telling is the evidence on absolute worsening in the conditions of life of the working population in the neoliberal period. There is of course evidence for this in the massive wave of peasant suicides that has occurred in the country during this period. But let us take a very specific indicator, namely the average daily calorie intake of the population in rural India. The erstwhile Planning Commission in the country had taken 2200 calories per person per day in rural India as the benchmark for defining poverty. In 1973-74 when poverty was first estimated on the basis of the National Sample Survey data on consumer expenditure, the proportion of the rural population below this benchmark was 56.4 per cent. In 1993-94 just two years after neoliberalism was introduced in the country, this proportion was 58.5 per cent. By 2011-12 however it had increased substantially to 67 per cent, and by 2017-18 is estimated to have peaked to 80 per cent, at which point the Modi government decided to alter the method of collecting NSS data, so that no comparability with earlier figures could be established.
Under the Nehruvian strategy in other words there was no increase in the rural poverty ratio. Compared to the abysmal state of affairs at the time of independence, there must have been some reduction in poverty on this criterion though we do not have any figures to show this; between 1973-74 and 1993-94 the rural poverty ratio remained roughly unchanged which underscores the validity of the Left critique of the Nehruvian strategy. But the neoliberal period has witnessed a sharp increase in the rural poverty ratio. The Nehruvian strategy, though obviously inadequate for overcoming poverty owing to its inability to carry out land reforms, was distinctly superior to the neoliberal strategy as far as the working people were concerned.
The neoliberal strategy entails a throwback to the economic policy regime of the colonial period, which had also been marked by the free flow of goods and services into the country (modified only by the limited “discriminating protection” of the inter-war years), and the free flow of capital including finance (though not much capital actually flowed into the country). It entails the opening up of the Indian land mass which is limited in size and non-augmentable in the absence of significant yield-raising public investment, which neoliberalism prevents, to the demands of the metropolis, at the expense of the local population. The nutritional deprivation of the local population therefore is an inevitable outcome of the neoliberal strategy which represents an imperialist strategy that has the backing of the Bretton Woods institutions and advanced country governments.
In the days to come we shall hear more talk of poverty disappearing in the country, so that government intervention in the form of procurement and public distribution of foodgrains is no longer deemed necessary. The residual restrictions on throwing open the Indian landmass to metropolitan demands, it would be argued, should therefore be abandoned. The current attack on the Nehruvian strategy is a prelude to this. (IPA Service)
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