Growth and Attrition

Just a couple of days ago, I was watching a news report about a young couple in Delhi, who work as rag pickers. Their abstemious habits are a reflection of the abject poverty they live in. A recent legislation passed by the Sheila Dikshit Government has been the cause of the furrows that appear on the foreheads of this couple. This new rule is almost certain to deprive them of their meagre livelihood. The new rule proposes to privatize garbage collection and other ancillary businesses. The timing of this law apropos of the present situation is pertinent.

We are at a juncture where any debate against Privatization and Globalization is marked with such acerbity that there is hardly any hope for the marginalized sections of Indian society. There is an urgent need to abridge the growing gap between the two poles of the Indian economy and establish a mechanism for equitable creation and distribution of wealth. The main challenge is to acclimate ourselves with Globalization and Indianisation. Our greatest adversary and strength is in our numbers. Right in our backyard, Chinese Majors like Lenovo, Huawei, TCL, Haier, Cathay Pacific, Bank of China and many more have managed to eke out a name of their own relying entirely on domestic markets. It is a matter of great delight that our Global footprint is increasing day after day. But we need to explore extensively locally before flying globally.

Getting back to the evils of LPG – Liberalization, Privatization and Globalization. I’ll try to explore the effect that liberalization has had on the poor. I have attempted to separate normative practices from ground reality. Gross inconsistencies in formulation of Govt. public policies can be vividly illustrated through examples of small time business. Perhaps there are reforms that may create better conditions for earning a decent and honest livelihood without being weighed down by the fear of extortion and harassment. I strongly advocate that the poor reap the benefits of controlled Liberalization and Globalization and that the current license-quota system be done away with. I believe that muscle and money have meant that existing Govt. Policies are always favorable to the affluent, as they almost definitely find a way around restrictions, while the Man with limited means is left to suffer under the boundaries that, perhaps inadvertently, have been placed by the govt. Immunity to certain restrictions, that have been adduced unnecessary, would be greatly appreciated by the poor entrepreneur, who otherwise finds himself embroiled in legal roadblocks. Most importantly, this post is not a rehash of previously known facts as it seeks to ascribe the condition of the poor to the govt., contrary to popular opinion that it is a result of exploitation by the rich.

Very often, urbanization has been connected with development. This however, I believe, is debatable considering the fact that the magnitude of investment that has gone into rural development is negligibly small compared to that in urban India. This is clearly noticeable in the agrarian crisis plaguing the country today, even though we have the largest workforce in terms of the sheer humanity and extensive areas of arable land. Ironically, this sector employs close to 60% of the workforce, and is lying in shambles. Various instances can be cited that demonstrate how excessive bureaucratic control is not only creating dead-ends for those who wish to enter the market but is also exposing existing entrepreneurs to constant harassment. The terms “Dead capital and diverted capital” crop up, which again is a reference to the existing license-quota Raj that has made it extremely difficult to harness hidden value.

A number of attempts have been made in the past to alleviate the problems faced by poor businessmen. I strongly argue that the failure of these methods can be attributed to the fact that none of them is market based. A market based solution would address the problems of poor entrepreneurs without compromising on standard of living of the richer sections.

Apart from this, attacking the core of the problem would mean a restructuring of the think-tank that formulates these policies. Certainly, a single net cannot catch all kinds of fish. Government policies prepared are same across the board for all situations. De-centralization of the government at various stages is a suggested solution. What seems to be the major hurdle is the information collection. Clearly, there is a yawning gap between the ground reality and assumed reality. Decentralized policy formulation would certainly benefit from better information inflow and most importantly address problems unique to a particular area. I guess that although most Govt. Policies are prepared with the name of helping the poor, they are constructed to favor the babudom, whatever benefit the poor receives from the policy is purely incidental. Here, Milton Friedman’s sentiment is echoed -“One of the great mistakes is to judge policies and programs by their intention rather than their results.”

Policy framers seem to have a confirmed view that Liberalization and Globalization is the one-point solution to this problem. It is not clear to me why the existing rules cannot be changed which will better serve the interests of the poor, and how LPG could be the single substitute of all the problems the poor are facing. I hold the view that inopportune liberalization could adversely affect small time business prospects in a developing country like India. Is it not a fact that Global Giants like Walmart have eroded the livelihood of thousands of petty traders and businessmen? Globalization is not the final answer as it protects the big players and creates pressure on smaller stakeholders. Predatory trade practices by deep-pocket organizations in the name of competition will wipe out poor businessmen from the market. I am not against LPG per se, but strongly hold the view that fledging businesses, subsistence level work and entry level professions must be shielded from LPG until our Government develops better social security and economic safety nets.

As a parting comment, I believe that the Principles of Life, Liberty and Livelihood can only be realized if the Govt. also plays its role vis-à-vis the roles of the market and civil society.

Peace be with you...

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