What happened to India’s economic miracle?

The elephant untethered.

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An Uncertain Glory: India and Its Contradictions
Jean Drèze and Amartya Sen
Penguin, 448pp, £20

 

Patience, wrote Ambrose Bierce in The Devil’s Dictionary, is a “minor form of despair, disguised as a virtue”. The economists Amartya Sen and Jean Drèze quote Bierce in their new book on the Indian economy, An Uncertain Glory:

India has seen a lot of this alleged virtue. There has been an extraordinary tolerance of inequalities, stratification and caste divisions . . . There has been the silent resignation of Indian women. There has been patient endurance of the lack of accountability and the proliferation of corruption. And – of course – there has been adaptive submission by the underdogs of society to continuing misery, exploitation and indignity.

An Uncertain Glory is a major work by two of the world’s most perceptive and intelligent India-watchers writing today. In it, they examine the uncertain future of the country’s economy at a moment when initial optimism about the spectacular rise of “New India” is giving way to more a nuanced understanding of the difficulties that still lie ahead.

Sen is among the greatest minds of our time. A winner of the Nobel Prize in Economics, a former master of Trinity College, Cambridge, and now the Thomas W Lamont University Professor at Harvard, he is regarded with such reverence in academia that he has probably been awarded more honorary degrees than any other person alive: there were about 100 on his CV at the last count.

His co-writer, Drèze, though lesser known in this country, is also a celebrated development economist. Of Belgian origin, he became an Indian after decades of living in the country and has taught at both the London and Delhi Schools of Economics. He is regarded as one of the most knowledgeable writers on famine, child health and poverty, on which subjects he advised the Indian prime minister, Manmohan Singh, before resigning in despair when he saw that all his suggestions were being ignored. This is the third book Sen and Drèze have co-written and is by far the most important and chilling.

Their thesis is simple: India’s failure to equal the success of China’s hyper-development is due in large part to the failure of the state to provide “essential public services – a failing that depresses living standards and is a persistent drag on growth”:

Inequality is high in both countries, but China has done far more than India to raise life expectancy, expand general education and secure health care for its people. India has elite schools of varying degrees of excellence for the privileged, but among all Indians seven or older, nearly one in every five males and one in every three females are illiterate . . . India’s health-care system is an unregulated mess. The poor have to rely on low-quality – and sometimes exploitative – private medical care, because there isn’t enough decent public care. While China devotes 2.7 per cent of its gross domestic product to government spending on health care, India allots 1.2 per cent.

An Uncertain Glory comes at a time when observers worldwide have begun to recalibrate their expectations of India’s future. The economic boom, which began in 1991 and took off in the late 1990s, provoked a miniboom of New India books, some far better than others. First off the blocks was Gurcharan Das, a former CEO of Procter & Gamble, whose India Unbound in 2001 became an international bestseller and made a convincing case that the future was India’s: all that was needed was further deregulation and a stripping away of the economic coils – the “licence Raj” – that were tethering the Indian elephant to the ground and the country’s future as an economic superpower was assured.

The statistics were impressive: India was reportedly training a million engineering graduates a year, against 100,000 each in the US and Europe, and the country was said to stand third in technical and scientific capacity – behind the US and Japan but well ahead of China. Between 1991 and 2001, as the Indian economy trebled in size, the country’s IT sector alone earned almost $50bn a year, mostly in export revenues. Part of those profits were spent buying prestigious foreign businesses – for example, the muchtrumpeted acquisition of Jaguar and Land Rover by Tata Motors.

Some of this continues today. Average incomes were projected to continue doubling every ten years. The number of mobile phone users has jumped from three million in 2000 to 100 million in 2005 and 929 million in 2012. The number of television channels rose from one in 1991 to 150 in 2007 and more than 500 today. In 2006, 23 Indians appeared on the Forbes list of the world’s billionaires; this year, the figure had more than doubled to 55.

In the wake of this amazing growth, there followed two more books on the subject from Das and a series of notable New India memoirs and studies from authors such as Patrick French, Anand Giridharadas and Akash Kapur. One of the best was a remarkable look at India’s economic prospects entitled In Spite of the Gods by Edward Luce, the articulate and wonderfully literate former New Delhi correspondent of the Financial Times. “Economic futurologists at the CIA, in the investment banks, at western universities and in the business press all agree that China and India will at some stage in the 21st century come to dominate the global economy,” he wrote, almost a decade ago. “In Washington’s various intelligence estimates, China will overtake the United States between 2030 and 2040 and India will overtake the US by roughly 2050, as measured in dollar terms.” According to Luce, opinion was only really divided “on the speed with which the future will materialise”: “Add or subtract a couple of points from India’s annual growth rates and it could overtake the United States as soon as 2040 or as late as 2090.”

As the economic climate has become chillier in the past five years, however, there has been a major revision of expectations and the books emerging more recently have begun to reflect that. In 2009, Dipankar Gupta published The Caged Phoenix: Can India Fly? The book was the first to look closely at the structural limits to the Indian growth story. Gupta wrote that despite the promises of independence and liberalisation, India continued to remain caged in backwardness. Why was the growth story not translating into development? Why was the much-vaunted human resource capital not taking India rapidly towards excellence? How could deprivation and prosperity live so easily side by side?

As the economy has continued to slow since 2010, the mood has grown steadily more pessimistic. India’s growth rate has now sunk from 9.3 per cent in the first quarter of 2010 to about 5 per cent a year, slipping from the world’s second-fastest-growing economy to tenth place in this index. Other economic indicators are equally alarming: public borrowing has quadrupled in the past five years, the national deficit is growing, inflation is high and the value of the rupee has plummeted by 20 per cent in the course of the summer. In a few years, India has gone from what seemed to be imminent world economic domination – the maharaja of the Brics – to what the emerging market analyst Ruchir Sharma, the author of last year’s bestseller Breakout Nations, has called merely a “50-50 bet”.

The slowing of India’s economy, argued Sharma, was partly due to a wider global malaise that was outside its control: almost all of the main emerging markets were growing at around 7 per cent between 2003 and 2008; only three contracted. India did well to have an average growth rate of 8.9 per cent during these boom years but it was hardly a surprise. Thanks to the global recession, growth rates are down across the board. This year, China is expected to grow 7.7 per cent and Brazil less than 2.8 per cent. India still has a good chance of success, wrote Sharma, but no better a chance than that of many other emerging economies.

Into this contested field, Sen and Drèze walk with the steady tread of umpires emerging on to a pitch after a shout of “LBW!” Their book is not journalistic like Giridharadas’s India Calling, nor anecdotal like French’s India, nor a literary memoir like Kapur’s sophisticated look at a changing South India in India Becoming. It does not offer a bold, new way of looking at poverty like Abhijit V Banerjee’s and Esther Duflo’s remarkable Poor Economics. What it does, with a rare clarity, is provide a fabulously comprehensible deployment of complex data and lay out the factual basis of where India stands now and what it needs to do if it is to reach its full potential. It shows how far India has moved on from the time of the Raj, when average life expectancy in India, in 1931, was only 27. Today, it’s 66. The female literacy rate in India has likewise gone up from 9 per cent in 1951 to 65 per cent today.

On the other hand, Sen and Drèze show that “a quarter of the Indian population . . . remain effectively illiterate”. Physical infrastructure is badly neglected: “The general state of public services in India remains absolutely dismal, and the country’s health and education systems in particular have been severely messed up.” Even today, a third of Indians do not have electricity, compared to 1 per cent in China. “Half of Indian homes remain without toilets, forcing half of all Indians to practise open defecation.” Wages in manufacturing in China have grown by 12 per cent since 2000, compared with 2.5 per cent in India, and 90 per cent of Indians still work in what is referred to as “the informal sector”. While India has climbed rapidly up the ladder of economic growth rates, it has fallen behind Nepal and Bangladesh in the scale of social indicators. Brazil, with much slower economic growth, has a far better record of poverty reduction. India remains an oddity among the Bric countries: “India’s per capita GDP is less than half of China’s, one third of Brazil’s and one fourth of Russia’s.”

This is the most shocking part of the book. Every year, more children die in India than anywhere else in the world: 1.7 million children under the age of five, largely from easily preventable illnesses such as diarrhoea. Of those who do survive until the age of five, 48 per cent are stunted as a result of a lack of nutrients: child malnutrition in India is higher than in Eritrea.

In this respect, write Sen and Drèze, “South Asia fares distinctly worse than sub-Saharan Africa. More than 40 per cent of South Asian children (and a slightly higher proportion of Indian children) are underweight in terms of WHO norms, compared with 25 per cent in sub-Saharan Africa.”

Likewise, the most basic health measure that any government can provide for its people is to immunise very young children but, in India, only 43.5 per cent of children are completely immunised, compared to 73.1 per cent in Bangladesh: “India is falling behind every other South Asian country, with the exception of Pakistan, in terms of social indicators.” For instance, life expectancy was the same in India and in Bangladesh in 1990 but today it is “four years higher in Bangladesh than India, 69 and 65 respectively. Similarly, child mortality, a tragic indicator, was estimated to be about 20 per cent higher in Bangladesh than India in 1990, but has fallen rapidly in Bangladesh to now being 25 per cent lower than in India by 2011.”

In sub-Saharan Africa, only eight out of 25 countries have immunisation figures as bad as India’s. India’s adult literacy is not quite the lowest in the world but, at 65 per cent, it is the same as in Malawi and Sudan. Adult literacy in China, by comparison, is 91 per cent. So bad is the situation that Sen and Drèze go as far as stating that Indian democracy is “seriously compromised by the extent and form of social inequality”.

Improving education lies at the heart of solving the problem. India’s underperformance, they write, can be traced to a failure to learn from the examples of so-called Asian economic development, in which rapid expansion of human capability is both a goal in itself and an integral element in achieving rapid growth. Japan pioneered that approach, starting after the Meiji restoration in 1868, when it resolved to achieve a fully literate society within a few decades. As Kido Takayoshi, one of the leaders of that reform, explained: “Our people are no different from the Americans or Europeans of today; it is all a matter of education or lack of education.”

Indians hugely value this, too, but effective public education remains out of the reach of millions. The private sector is often excellent but state schools – all that is available for most ordinary Indians – remain abysmal.

In a recent article, Aravind Adiga wrote that “the greatest danger to India’s future” was not Pakistan “but overconfidence”. He is right. As Sen and Drèze point out at the end of their magnificent study, democratic politics does offer opportunities for the most deprived Indians to demand “a rapid and definitive removal of their extraordinary deprivation”. However, as well as political organisation, what is also vital is “a clear-headed understanding of the extensive reach and peculiar nature of deprivation and inequality in India. This is surely one of the principal challenges facing India today.”

By providing the raw data on that poverty and by presenting it in such a palatable format, Sen and Drèze have made a major contribution to finding a way towards solving the desperate situation faced by India’s many millions of underdogs.

William Dalrymple’s “Return of a King: the Battle for Afghanistan” is published by Bloomsbury (£25)

 

A bustling street in the northern city of Srinagar. Photograph: Michele Borzoni / Terra Project / Picturetank

This article first appeared in the 08 July 2013 issue of the New Statesman, The world takes sides

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Roy Hattersley: Labour is far closer to extinction now than in the 1980s

 If the takeover of the party by the far-left succeeds there will be no opportunity to rescue it from the wilder shores of socialism, says the former deputy leader.

The comparison with the Eighties is irresistible but misconceived. Labour is far closer to extinction as a major party than it was 35 years ago. That is not because Jeremy Corbyn is incapable of leading the party to victory — although he is. Nor is it because his supporters threaten the political assassination of anyone who says so — although they do. It is because, for the first time in its history, Labour is in real danger of a permanent domination by the unrepresentative and unelectable left.

All the other regular crises in the party’s history — German rearmament, nuclear disarmament, the defection of the Gang of Four to found the SPD — were resolved by mistakes being rectified, resolutions reversed and Labour resuming its place in the mainstream of British politics. Nor was there any genuine risk that the infiltrators from the far left would play a decisive part in national policy making. The Militant Tendency controlled municipal politics in Liverpool and attempted, with mixed success, to unseat vulnerable mainstream MP’s. But there was no possibility of them subverting the whole party. Now the far left operating through Momentum  aspires to make a decisive, and irreversible shift in Labour’s core ideology by initiating a purge of mainstream Labour MPs and a cull of headquarters office staff, reducing the part that the parliamentary party plays in choosing the leader and making the election manifesto the preserve of the annual conference. If the putsch — described by its instigators as an extension of party democracy — succeeds, there will be no opportunity for a latter day Neil Kinnock to rescue Labour from the wilder shores of socialism and the odds on its survival lengthen.

The crisis could have been averted. The parliamentary party  with the exception of a handful of residual Blairites  is ready for some sort of compromise. That is why, three weeks ago, it gave its overwhelming support to the proposal that the shadow cabinet should be elected by Labour MPs rather than chosen by the leader. The change was intended to allow an honourable return to the front bench for the shadow ministers who resigned in the spring. As a move towards unity, it is no more than papering over the cracks but better that than gaping fractures. Although Corbyn had neither the sense nor the grace immediately to accept the gesture of conciliation, the choice between an uneasy peace and continued guerrilla warfare still lies with him. If — as his victory speech suggests — he regards last Saturday’s victory as a mandate to impose his sectarian will on the party, the battle is likely end with mutual self-destruction.

Even if Jeremy Corbin succeeds in his attempts to create a permanent far-left hegemony, the Labour Party is unlikely to split as it did 30 years ago . The fate of the SDP — absorption into a Liberal Party which kept the Tory-led coalition in office or defiant independence that ended in the ignominy of polling fewer by-election votes than the Monster Raving Loony Party — has dampened enthusiasm for a breakaway movement. Nor are there charismatic potential leaders who stand ready to lead their followers into battle in the way that Roy Jenkins and David Owen (the Fidel Castro and Che Guevara of social democracy) marched a dozen Labour MPs into the valley of political death. But a futile attempt to form a new party would at least imply the hope of some sort ofresurrection. The more likely outcome would be the product of pure despair — the parliamentary Labour party would not divide and instead would begin slowly to disintegrate.

If the worst happens some Labour MPs will suddenly discover previously undetected virtues in Corbyn and Corbynism and line up behind him. Others will grow weary of being abused by local extremists and fade away. Contrary to public opinion, most MPs could earn more from less demanding jobs outside parliament. The politically dedicated, determined to be candidates in the next election, will accept the challenge of reselection. More will succeed than fail, but the harm to the party’s reputation will be immense.

One feature of the 1980 desertion will certainly be replicated. When the Gang of Four defected, the damage done by the loss of glamorous leadership was more than matched by the loss of hard working membership. If Labour MPs begin to believe that the battle for reason and recovery is no longer worth fighting the disenchantment will become infectious. Jeremy Corbyn’s devotees would still turn out for the rallies. But the enthusiasm with which they would tramp the streets on rainy nights, or spend boring weekends telephoning target voters, is in doubt. Reliance on the notion that the election can be won online is the refuge of politicians who either have not identified or do not understand the floating voters.

The haemorrhage has already begun — increased by the behaviour of recently recruited Corbynites who do not seem to have heard that their hero has an olive tree outside his office door. All over the country they are bullying and filibustering their way into the control of local parties — excoriating mainstream members, manipulating the rules of debate and postponing votes until late in the evening. Of course, the men and women who oppose them could play the same game. But they are, by their nature, reasonable people and they want to lead reasonable lives. That is why they represent the sort of Labour Party with which voters can identify. 

Unfortunately, many of the Labour MPs who should have led the campaign to recreate an electable party have spent the last year either sulking or complaining. They have been anti Corbyn but pro very little. Owen Smith’s leadership campaign ended in disaster not because of the size of the incumbent’s votes but because of the challenger’s failure to set out an alternative vision of the society that socialists hope to create. Angela Eagle would have won fewer votes, but she would come closer to reassuring party members that "moderates" (a deadening description which should be abandoned) have principles and policies. A campaign that relied on nothing except the obvious truth that Jeremy Corbyn would lead Labour to defeat was doomed from the start. A majority of the party members who joined before 2015 voted for Smith. Think of how many more would have done the same had he offered them more to vote for than disapproval of his opponent.

Corbyn, and many of the Corbynites, are unmoved by the evidence that they are heading straight to defeat. That is, in part, because Corbyn himself is in what psychiatrists call “total denial.” There were times last year when he seemed to be implementing a carefully coordinated plan to alienate all the middle-of-road voters on whose support a Labour victory depends. He has proposed the unilateral abandonment of the British nuclear deterrent, refused to back Britain’s continued membership of the European Single Market and defended his historic association with apologists for terrorism — all items on the curriculum vitae of a Labour leader who might have been invented by Conservative Central Office. No political leader in British history has been so careless about his party’s prospects at the ballot box. But that is only one of the reasons why the threat of defeat will do little to halt the party's leftward gallop.

There is, within the ranks of Corbyn supporters, a substantial number of activists who — since they do not believe that parliamentary democracy can create the socialist Utopia of their dreams — regard the election of a Labour Government as an irrelevance. Indeed they believe that a prolonged period of Tory misrule will bring forward the day when a spontaneous uprising will herald the new dawn. It is near to inconceivable that Corbyn believes in such millenarian nonsense. But he appear to subscribe to the equally fatuous view that the first task is to make Labour a genuinely socialist party and that winning elections can wait until it is accomplished.

That is clearly the view of those correspondents to the New Statesman who complain about Corbyn’s critics obsession with what they call “electablity”. It is easy for their cynics to sneer about putting power before principle, but winning is a matter of principle too. Labour exists to make those changes in society which can only be achieved in power. In 2016 the fight — to quote the former Labour leader Hugh Gaitskell in 1962 — is less about saving “the party we love” than about rescuing the nation from long years of  Tory bigotry. To behave in a way which diminishes — indeed for a time extinguishes — Labour’s chance of fulfilling its historic purpose is worse than self indulgent. It is betrayal.

There are major figures in the current drama of the Labour Party whose attitude towards the prospect of government is both inexcusable and incomprehensible. Chief among them is Len McCluskey, the general secretary of Unite and a man whose every bombastic television appearance is worth thousands of votes to the Tories. The members he represents have the strongest possible vested interest in a Labour victory at the next election. Yet many of his policies and pronouncements — particularly his risibly unsuccessful attempts to bully MPs into supporting Jeremy Corbyn’s leadership — contribute to the Conservatives’ opinion poll lead and increases the danger of massive defeat at the next election turning into total destruction.

Anyone who doubts that Labour could be reduced to the status of the Liberal Democrats or the Greens — struggling for influence without even hoping for power — should be sent to canvas for the party in Scotland. But the near oblivion north of the border is not yet inevitable in the south. Recovery will take time and before Labour can begin effectively to deal with the challenges from outside the party it must struggle back into the mainstream of politics — a process which has to begin with an acceptance that Jeremy Corbyn’s first election was more than a combination of the Peasants’ Revolt and the Children’s Crusade. For many of the men and women who voted for the first time in 2015 his victory represented the end of a decade of disillusion. At first they had felt no more than disappointment at opportunities that successive Blair Governments missed — their delight in the landslide victory of 1997 fading away until it was finally extinguished on the battlefields of Iraq.

The Peak District village in which I live is home to more Labour party members than the tourists may imagine. Two of them  —  a retired bank manager and an emeritus professor of cardiac surgery — voted for Corbyn in 2015. In part they were motivated by a desire to “give socialism a chance for once.” But they also thought that they were drawing a line under the years of “the third way” and triangulation. New Labour, in which they had once devoutly believed, had come to mean private enterprise edging its way into the health service, the surreptitious extension of secondary selection and light regulation of the City of London. Jeremy Corbyn, like the Scottish National Party, has much to thank Tony Blair for.

For some people Jeremy Corbyn was, like Donald Trump and Marine LePen, a welcome alternative to the politics of the establishment. To many more he was, by the very nature of his unelectability, the antidote to the opportunism which they (wrongly) believe characterises life in Westminster. Now, a mainstream candidate for the Labour leadership will have to make clear that they are guided not by opinion polls but by a vision of a new and better society. The next leader must concentrate every nerve and sinew on winning, but they must have faith in their ability to carry the country for reasonable revolution.

Unfortunately the members of the Labour mainstream are notoriously reticent about  discussing first principles. They find talk of “the vision thing” embarrassing and believe that the task which faces them is too obvious to need justification by any “fancy theories.” Yet there is a great body of work — by the likes of TH Green, RH Tawney. Anthony Crosland and John Rawls — which set out the theory of democratic socialism and descriptions of why it is especially relevant today – Joseph E Stiglitz’s The Price of Inequality and The Spirit Level by Richard Wilkinson and Kate Pickett — abound. The recovery of reason has to begin with Chukka Umuuna explaining the virtues of equality, Yvette Cooper describing Britain’s obligations to the developing world and Dan Jarvis defining the role of the state in protecting the weak against the strong. Or any of them talking about what they stand for instead of assuming that their convictions are taken for granted. The Daily Mail might not report their speeches, but moderate party members will treat the related Fabian Society pamphlets like water in the desert.

If, as they must, the reasonable majority of Labour MPs choose to stay and fight, they have to organise — inside the parliamentary party and, more importantly in the constituencies. I have spent much recent time insisting, to sceptical friends that the occupants of the opposition back benches are as competent and committed as were members of any of the governments, or shadow governments, in which I served. But I do not even try to argue that they are as active as my contemporaries once were in reclaiming the party. Success and survival depends on the constant demonstration that reasonable radicals still have a home in the Labour Party.  

One refugee from Corbyn’s original shadow cabinet assured me that like-minded Labour MPs do occasionally meet. When I asked what they discussed, I was told that they “wait for something to turn up.” But, something will only turn up if it is prepared and promoted by the men and women who have the courage and commitment to lead Labour out of the wilderness. The journey will be long and hard and there can be no guarantee of arrival at the desired destination. But those of us who believe that Labour can still provide the best prospect of a more equal society have to begin the trek toward the promised land — and we need to set out straight away.

Roy Hattersley was deputy leader of the Labour Party from 1983 to 1992.