Poverty Amid Plenty

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Poverty Amid Plenty in the New India by Atul Kohli, Cambridge University Press: New York, 2012, ISBN 052-1-513-871, 264 pp., $99.00 (Hardcover), $28.99 (paper), $16.10 (Kindle).

When I first started studying India in the mid 1970’s, it was the cause of considerable derision. For most Americans at that time India was unknown territory. In the American popular imagination, India was a land of poverty and exoticism. I was repeatedly told that I studying India would get me nowhere.

Much has changed since those halcyon days, but all changes have not been for the better. India is now a common subject in popular American media, but it is no longer considered a land of poverty and exoticism. The new narrative is that India is an emerging economic powerhouse, the land of software, high tech industries, and call centers. The average American account stresses the growth of an emerging middle class that has begun to adopt American consumer habits and will serve as a huge market for American goods and investment. Now, many Americans are being told that the average Indian is a highly educated computer engineer who speaks perfect English and is little different from his American counterpart.

This purported “economic miracle” is part of a larger American narrative, namely an almost mystical devotion to “neo-liberal economics.” We are told that India has been lifted from poverty because it abandoned its former commitment to socialism, saw the light and realized the magic of free trade and open investment. We all know the formula: rein in the labor unions, privatize the public sector, cut taxes, open the country to investment, reduce (or better yet, eliminate) trade barriers. It is a simple formula that has been reduced to a mantra. It has been repeated endlessly and become an article of faith. We are told that this formula represents the best possible economic system, is universally applicable, and will lift any country, anywhere out of poverty. India is held up as a prime example of the success of liberal economics, leading many to conclude that socialism was simply a regrettable detour on India’s way to economic realization.

Atul Kohli, Professor of International Affairs and Politics at Princeton University, is trying to set the record straight and provide us with an antidote to all of this economic mystical thinking. Kohli starts out by defining his ideological orientation, stating that he is a social democrat. Social Democratic political parties are commonplace throughout the industrialized world, where they inhabit the political mainstream. Such parties include the Labour Party of Great Britain and the Social Democratic Party of Germany, and dominate Scandinavia. The United States is the only industrial country without a social democratic party. Although American conservatives are fond of deriding the American Democratic Party as the party of socialism, is does not qualify as a social democratic party. Social democratic parties are firm believers in the democratic process, but are also strong believers in social justice. They view class and income disparities as inherently unjust and see the role of government to act as an agent of egalitarianism.

As a social democrat, Kohli begins by asserting that neo-liberal economics is clearly wrong when it relies on economic growth as the principal measure of economic progress. He correctly confirms that without an equitable distribution of the growing economic pie, massive poverty will continue and even expand. Kohli’s principal assertion is that India’s dramatic change of course from Nehruvian socialism to liberal economics is not what it seems. Introducing a new variable into the debate, Kohli argues that India’s true economic course is one set by big business and that these large business houses collude with the government to gain maximum advantage. As a result, Indian business interests are growing wealthier, and India’s poor are suffering. Kohli points out that the American government has long pursued a “Washington consensus” economic model based on the belief that removing the government from the economy will free up private entrepreneurs to pursue wealth. This will purportedly benefit everyone in society. Kohli contends that while Indian policy makers have told their Washington counterparts they are committed to the consensus, this has never been the case.

Instead, the Indian government engages in “collaborative capitalism,” providing protection, tax benefits, and perhaps most important, access to land, to India’s large business houses. Kohli details how India’s Chambers of Commerce and business associations work closely with politicians, and how it is increasingly difficult for any politician to win election without such support.

This pattern, he argues, has been evident since the beginning of independent India. Although Nehru professed a commitment to socialism, his Congress Party very quickly became reliant on the financial contributions of wealthy industrialists. Nehru created a strong public sector to enable India to construct a base in heavy industry, but at no time did anything to counteract the dominance of Indian big business. Rather, Nehru erected high tariff barriers to provide his supporters with a virtual monopoly of the Indian domestic market.

Kohli makes two other substantive contributions in this book. He documents the pervasiveness of poverty in India using quantitative analysis and demonstrates how the country could benefit from a social democratic economic model rather than the “Washington consensus” or any other neo-liberal model. Kohli shows that despite the neo-liberal belief in the benefits of a “trickle-down” economy, not enough has trickled down to make serious inroads into poverty. Examining current poverty measures, Kohli concludes that while absolute poverty has declined, “some one third to one half of India’s population continues to live under conditions that must be judged unacceptable, irrespective of the definition of poverty one embraces.” He states that using the most liberal definition of poverty (preferred by the World Bank and the Indian government), there are still 315 million people living in poverty in the country. Other poverty definitions would expand this number to as high as 456 million. The decline in the poverty rate attributed to India’s shift to liberal economics has not reduced the absolute number of people living in poverty. While the percentage of those living in poverty declines, India’s high population growth rate ensures that the absolute number remains the same.

Kohli then goes on to outline the long-term detrimental effects of neo-liberal economics on India’s future development. Big business dominance of the economy has resulted in a skewed political system dominated by big money. Indian business interests receive the lion’s share of government largesse, while half of the population, living in absolute poverty, have no political access and are largely ignored by the government. The unique aspect of India, however, is its functional democratic system. Kohli points out that authoritarian capitalist countries of East Asia, do not have to contend with elections, can pick and choose the most efficient industries to nurture, can erect selective trade and investment barriers to ensure economic success, and crush trade unions. While Indian business and economic elites would love to adopt similar policies, they must contend with periodic elections. India’s universal suffrage allows even the poorest of the poor to cast their vote. It is during elections that the poor begin to ask why their lot does not improve, while the wealthy continue to expand their power.

In response, Indian political parties have increasingly relied on distraction. Most notable, is the right wing Bharatiya Janata Party (BJP), India’s leading opposition party, which uses a politics of religious exclusion and bigotry to capture Hindu voters. Other parties stress regional and language politics or rely on periodic giveaways. Detractors of India’s Nehruvian socialism often declare that by giving the government undue power over the economy, Nehru opened the door to increasing corruption. Kohli points out that Nehru’s “socialism” was half-hearted, inefficiently pursued, and unevenly applied, and made few inroads into the all-pervasive poverty present at independence. However, Kohli documents that there is no evidence to indicate that corruption was worse during the socialist years than at present. Kohli points out that India has been rocked by a series of high-level corruption scandals since liberalization, culminating in the infamous G-2 scandal of 2010, which deprived the government of an estimated $40 billion in revenue. India’s most ignored and deprived group are the tribals. Indian government patronization of big business has deprived Indian tribals of their land and ruined their traditional livelihoods, stoking the Naxalite insurgency spreading through the Indian heartland. Kohli points out that the Indian government has adopted a draconian military approach to this problem, leading to ever growing conflict and violence.

Kohli backs up his argument that a social democratic approach is more applicable to India by constructing a typology of Indian governance. Three types of governments currently rule India’s states. The neo-patrimonial, found in India’s poor Hindi heartland, is the politics of charismatic leaders backed by violent criminal elements that rely on caste politics to remain in power and are inherently corrupt. The developmental state, epitomized by Gujarat, pursues economic growth at any expense, while patronizing selected business interests. This model uses authoritarian methods to ensure law and order and does little for those at the bottom of the economic ladder. The social democratic model is found in the states of Kerala and Bengal. These states give a voice to the poor in economic and political processes and try to equally distribute benefits such as land, education, and access to health care. Kohli uses quantitative data to document that the poor have benefitted the most from the social democratic policies pursued by these states. While “communist” parties rule these states, Kohli confirms that they are actually Social Democratic parties that have embraced the democratic process, eschewed totalitarianism, and are working to attract investment.

Kohli’s book is long overdue. The debate regarding India’s economic model has been too one-sided. It is refreshing to hear an alternative point of view. Kohli restricts his analysis to Indian policy and only touches briefly on American economic imperatives. However, this book is relevant to Americans, as it will cause them to question the oft-repeated American maxim that its economic model is universally applicable. Kohli contends that for Indians, perhaps it is better to look at a redistributive, egalitarian model such as that found in Scandinavia rather than the American model, which is causing growing class disparities and increasing poverty in the United States.

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