India, which suffered from the 2008 financial crisis, though not half as badly as it might have, needs to build safeguards against destabilising gusts from alien shores. Chances of stumbling are many; it must be cautious
Joseph Stiglitz says in Globalization and its Discontents, “I have written this book because when I was at the World Bank, I saw firsthand the devastating effect that globalisation can have on the developing countries, and especially the poor within these countries. I believe that globalisation — the removal of barriers to free trade and the closer integration of national economies — can be a force for good and that it has the potential to enrich everyone in the world. But I also believe that if this is to be the case, the way globalisation has been managed, including the international trade agreements that have played such a large role in removing those barriers and the policies that have been imposed on developing countries in the process of globalisation, need to be radically rethought.”
I remembered these words as I started reading Aseema Sinha’s Globalizing India: How Global Rules and Markets are Shaping India’s Rise to Power. Sinha places India’s engagement with globalisation in the context of the country’s evolving economic policies from the dirigisme of the 1960s and 1970s, to the reformism of the 1990s to the position in 2016 when India has, in the words of the author, become a trading state pursuing tradecraft in its engagement with globalisation. She attributes this transformation both to the pressure of international forces generated by globalisation and India’s own autonomous resolve. Pressure from the World Trade Organisation, for example, where India lost the cases related to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and quantitative restrictions in 1998, led to close consultation and partnership between industry and Government and greater mobilisation of experts in the framing of policy and negotiations with global forces. As Sinha puts it, “New institutions, new coalitions, and new collaborations were forged to evolve India’s trade policy. Research entered into the policy process more frontally than before, as did new political and business leaders and legal experts.”
Along with pressures from outside, India witnessed the emergence of political leaderships more favourably inclined than their predecessors toward attenuated state control and a market economy at home, and ideologically disposed toward greater openness to international economic forces. Manmohan Singh who, as Finance Minister, inaugurated India’s progress toward a market economy in 1991, became Prime Minister in 2004 and remained in office until 2014. Domestic opposition notwithstanding, his regime saw major strides being taken toward engagement with the forces of globalisation and also removal of Government controls within. Earlier, Prime Minister Atal Bihari Vajpayee’s Government had also moved in the same direction albeit at a slower rate and more circumspectly. And now Prime Minister Narendra Modi is actively pursuing greater global engagement for a greater inflow of investments from abroad into the establishment of manufacturing units here.
It has not been an easy transformation. There was resistance from elements in walks ranging from commerce and industry to politics and civil society who had much to lose from a more liberalised flow of goods, services and funds from abroad or were ideologically opposed to the process. Sinha shows that not only has India achieved this transformation but has pushed successfully in various world fora to combine the discharge of its global commitments under the international economic order established following the Uruguay Round of negotiations (1995) with the maximum possible autonomy of action for itself. She has illustrated the point by her detailed study of India’s negotiations at various international fora to gain the maximum advantage from globalisation its textile and pharmaceutical sectors.
Sinha’s work, marked by exhaustive research, meticulous presentation and logical coherence, needs to read by all who are interested in India’s economic progress and ability to engage with the world. While the picture of skillful negotiations by India that she projects reflects well on the country’s capacity to cope with the world, questions remain about the process of globalisation itself in terms of removing poverty within the country. There is very little indication that it has done so. If anything, it has reinforced domestic developments leading to growing inequality, with the super-rich revelling in conspicuous consumption at one end and debt-ridden farmers driven to suicide at the other. Apart from the question of social morality this presents, the tensions and anger the process feeds is pushing people to various religious and political extremist movements calling for the total replacement of the existing order by the utopian dispensations they advocate.
The matter requires serious thought. The super-rich, rich and the expanding affluent and consuming middle class, support globalisation, the last because it now finds within its reach much coveted branded goods from abroad that it had been lusting after for a long time. But the vast, invisible majority that now see these goods but cannot even dream of accessing them, and who struggle to survive at the subsistence level, constitute a fertile recruiting ground for all varieties of extremist outfits.
As important, involvement with a globalising economic order also means being a part of an interconnected and interdependent network and, consequently, vulnerability to crises affecting it. Such crises are bound to recur. Stiglitz points out in Globalisation and its Discontents that to its proponents, globalisation “typically is associated with accepting triumphant capitalism, American style.” He further states in Free Fall: Free Markets and the Sinking of the global Economy, “The current crisis (the one that began in 2008) has uncovered fundamental flaws in the capitalist system, or at least the peculiar form of capitalism that emerged in the latter part of the twentieth century in the United States (sometimes called American-style capitalism.) It is not just a matter of flawed individuals or specific mistakes, nor is it a matter of fixing a few minor problems or tweaking a few policies.”
These flaws have to be discussed in another column. What can be said here with some certitude is that they will not be removed easily. And, as long as these remain, crises born of them will spread, just as the one that began in 2008 started in the US and then travelled to Europe and a major part of the world. India, which has also suffered though not half as badly as it might have, needs to build safeguards against destabilising gusts from alien shores. Even otherwise, it will be wise to remember Stiglitz’s statement in Globalization and its Discontents, “the West has driven the globalisation agenda, ensuring that it garners a disproportionate share of the benefits, at the expense of the developing world.” He cites a number of examples in support of his position. India needs to be careful.
