BAD ECONOMICS MR GANDHI
Rahul Gandhi’s introductory address at a public lecture to celebrate the 20th anniversary of the Rajiv Gandhi Institute of Contemporary Studies on October 18 provided a rare insight into the Congress heir apparent’s worldview. It also laid bare the Congress party’s continued, and damaging, ambivalence on economic policy. Making perhaps his most definitive statement on economic policy to date, Rahul said, “Globalisation excludes as much as it includes. There are millions left out of the process, millions who do not benefit from globalisation.” The clear emphasis was on those left out, a kosher left-of-centre stance. That worldview would have fit in well with Indira Gandhi’s pro-poor Congress party. It may, however, be out of sync with history as it is unfolding in 2011. Now is the time for India to embrace globalisation more strongly than ever before.
Thirty years after this wave of globalisation was unleashed by the Reagan-thatcher revolution in the early 1980s, the advanced economies—the US, Europe and Japan—are in serious, if not terminal decline. The global balance of economic power is shifting towards the emerging economies—india, China, Brazil, Russia and South Africa. Investors earning meager returns in the West are looking to move elsewhere. China and India, as the two largest and fastest growing emerging economies, are the obvious beneficiaries. Rahul Gandhi is absolutely right when he warns that India’s success is not inevitable. However, the most serious obstacle to India’s success is not globalisation, but an old-fashioned, confused and uncertain Congress party ruling at the Centre.
Modern parties of the centre-left, which have reinvented themselves over two decades across the world, view free markets and globalisation as a largely positive force. The way to address exclusion is not to block globalisation but to use calibrated intervention to ensure greater inclusion. The Congress party’s basic instincts are to block the forces of globalisation as is evident in the UPA Government’s refusal to allow greater FDI in retail, insurance, aviation among other sectors even without the chains of the Left that shackled it in UPA 1. In a different sphere, the Government, in collaboration with the RBI, has done nothing to liberalise India’s financial system which means that the average Indian consumer or business pays significantly more interest on a loan than his counterpart elsewhere. The exclusion of millions of Indians from access to cheap finance is a failure of Government, not free markets.
The logic of globalisation should benefit even the less skilled in India. Global manufacturing is constantly looking for cheap labour. Unfortunately India’s restrictive labour laws send global manufacturers to China depriving millions of poor Indians of a factory job. That is a failure of Government. That there are not enough Indians with the education to get high skilled jobs created by globalisation is also a failure of the Government—its failure to evolve better delivery systems for public goods like education and health. It is convenient for politicians like Rahul Gandhi to blame the faceless forces of the free market and globalisation for the poverty of India’s millions. It would be more fruitful if the young Mr Gandhi was to reinvent his party’s archaic thinking on economics.
THE MOST SERIOUS OBSTACLE TO INDIA’S SUCCESS IS NOT GLOBALISATION, BUT AN OLDFASHIONED, CONFUSED AND UNCERTAIN CONGRESS PARTY RULING AT THE CENTRE.