It is now fashionable to speak highly of 'privatization' and'globalization'. We are told in school textbooks how India was on theverge of a financial crisis and the liberalization of the economy putthe country back on track. How we achieved a high rate of growth. Howmulti-national corporations have swarmed India and brought in a glutof wealth. How a significant middle-class had emerged which shops inmalls and consumes more than their parents did. And now there aretalks of us becoming a superpower. All thanks to the liberalization ofthe economy in 1991.
However, while more and more people have been shopping in malls andearning higher salaries in multinationals, between 1997-2005, 1.5 lakhfarmers committed suicide.1 Tribals, Dalits, villagers are beingdisplaced to accommodate dams, SEZs, industries and other such thingsthat the Government calls 'development projects'. Millions of peoplelose their houses, their livelihood and have to relocate – often toslums in cities. Trains from Bihar and Uttar Pradesh are bulging withpeople who have to leave their home in order to look for employment in the bigger cities. 220 million people live in abject poverty.2
So where exactly have privatization and globalization brought us? Isit helpful in creating more jobs, alleviating poverty, increasingwelfare and providing basic necessities? Here's an extract fromArundhati Roy's essay "Power Politics" which succinctly explains theeffects of privatization of essential commodities and services:3
"What happens when you 'privatize' something as essential to humansurvival as water? What happens when you commodify water and say thatonly those who can come up with the cash to pay the 'market price' canhave it? In 1999, the Government of Bolivia privatized the publicwater supply system in the city of Cochabamba and signed a forty-yearlease with Bechtel, a giant US engineering firm. The first thingBechtel did was to triple the price of water. Hundreds of thousands ofpeople simply couldn't afford it anymore. Citizens took to the streetsin protest. A transport strike brought the entire city to astandstill. Hugo Banzer, the former Bolivian dictator(now thePresident), ordered the police to fire at the crowds. Six people werekilled, 175 were injured and two children blinded. The peoplecontinued because people had no option – what's the option to thirst?In April 2000, Banzer declared Martial Law. The protest continued.Eventually Bechtel was forced to flee its offices. Now its trying toextort a $12 million exit payment from the Bolivian Government.
Cochabamba has a population of half a million. Think of what wouldhappen in an Indian city. Even a small one."
The premise for privatization in Cochabamba was that it would makewater supply more efficient and more water would reach more residents.However the only thing Bechtel was efficient in was tripling the priceof water.
In the aftermath of the Mumbai floods, Reliance Power failed torestore electricity in time. The suburbs of Mumbai, from Kurla toViroli in the eastern side and from Bandra to Bhyander in the westernside were not supplied with electric power for nine days. ReliancePower started its job only after they received a notice from the stategovernment on the tenth day. It was a public-sector enterprise, theMaharashtra State Electricity Board that provided human and otherresources which helped Reliance Power to restore power supply.
Power privatization in Delhi has also been a debacle. None of thepromises made while privatizing power were fulfilled by the privatecompanies. Power supply is still as intermittent as it was before. Theaverage tariff increase after three years of privatization is 44%. Inorder to keep the tariff affordable and ensure that the companies makea profit, the exchequer has given a subsidy of Rs. 3452 crores in thefour years after privatization6. The arguments in favour of powerprivatization is that electricity theft will decrease, supply will beuninterrupted, companies will be more efficient and make a profit andso on. All over the country, such measures have failed to bring anyresult. I have not mentioned these instances to show that public sector enterprises are necessarily better than privately-owned ones, but to prove that the private sector isn’t the exemplar of efficiency and responsibility that it is touted to be.
One of the arguments advanced in favour of privatization is that sincepublic-sector units are inefficient and incur losses, they should besold off. Suppose you have a splinter in your finger. What do you do?Remove the splinter or cut off the whole finger. The Government'sactions veer towards the latter. Instead of trying to remedy what iswrong with the public sector, instead of trying to minimize losses ormake bureaucrats more responsible, the Government actually gloats overhow they are ill-managed and must be gotten rid of. But why is thepublic sector inefficient? Again I would like to quote from ArundhatiRoy's essay Power Politics:
For many years, India has been more or less self-sufficient in powerequipment. The Indian public sector company, Bharat HeavyElectricals(BHEL), manufactured and even exported world-class powerequipment. All that's changed now. Over the years, our own governmenthas starved it of orders, cut off funds for research and developmentand more or less edged it out of a dignified existence. Today BHEL isno more than a sweatshop. It is being forced into 'joint ventures'(onewith GE and one with Siemens) in which its role is to provide cheaplabour while they provide the equipment and the technology.3
Thus, the responsibility for the “inefficiency” of the public sector lies with a Government keen on privatizing them. This could also be taken as an argument in favour of private corporations, but what it more important for the masses: maximum profit or high employment and welfare albeit at lower efficiency? Although private corporations often make more profit(often by violating labour standards and engaging in malpractices), is this the purpose of all industrialization – making profit? Profit is now considered both, the meansand end.
It would be myopic to say that globalization and liberalization hasnot helped India in any way. Some people are indeed better off. But domore industries and more billionaires equal a better life for allIndians? For the majority of Indians who live in villages? The currenteconomic model has failed to improve the life of the average villager.What we need is a different, more sustainable system which doesn'tenrich only a particular section but the whole country.
Socialism is now considered outdated and inferior to the capitalistmodel. It's believed that all socialist countries, realizing itsdefects have discarded it and are now moving towards the free-market.But the Scandinavian countries – Sweden, Finland, Denmark, Iceland –are Socialist welfare states with high taxes, government subsidies,state interventions and are other things which are now considered animpediment to development. These socialist countries feature in top 20of all the indices of development like the Humans Development Index,Global Competitiveness Index, etc.4 They have an excellent health-caresystem, pensions and benefits.
Cuba is another example. Despite facing economic blockades and prolongedsanctions, Cuba ranks 51 in the Human Development Index. It isclassified under the HDI's "High Human Development" group4. It spends4% of what the US spends(per capita expenditure) on the health sector,but achieves better results in most of the parameters of that sector.It scores higher in HDI than Mexico, Russia, India China and Brazil –all considered emerging economic powers4.
Capitalism has indeed worked for countries like USA, UK, France, etc.But most of these countries have developed at the expense of others –they colonized and exploited resource-rich countries to attain theircurrent level of industrialization. However that era is over. Theresources are limited and markets are saturated. Besides, it isenvironmentally unsustainable. Capital-intensive methods will fail towork in a country with a population as large as India. The capitalistmodel now can only lead to unimaginable wealth for a few and povertyand deprivation for most along with large scale environmental damage. This doesn't mean that all industries should be nationalized. Private enterprise should be allowed, but essential infrastructure like water, electricity, etc. must be controlled by the state. Instead of treating the free market as sacrosanct, the economic system must be such that it takes into consideration the needs of all people.
It has been continuously drilled into us that socialism and stateintervention is bad for 'growth' and 'development'. Everywhere –school textbooks, non-fiction, newspapers, news channels and'bestsellers' like The World is Flat tell us that a globalized freemarket is the only way to progress. Economic growth, growth in GDP/percapita income does not necessarily translate into a better life forall people. If we think that India is developing despite dropping torank 128 in the HDI4 because it rose from rank 8 in 2006 to rank 4 in2008 in the Forbes list of billionaires5, we need to think again.
References:
1)www.indiatogether.org/2007/nov/psa-mids1.htm
2)http://www.economywatch.com/indianeconomy/poverty-in-india.html
3)Roy, Arundhati, Power Politics, The Algebra of Infinite Justice. Penguin Publishers
4)http://hdr.undp.org/statistics
5)http://www.forbes.com
6)http://www.eefi.org/0905/090510.htm
By Saad Ahmed
