Economy in Crisis

In a seminar on “Economy in Crisis”, organized by Centre for Policy Analysis in New Delhi, its chairman S P Shukla spoke on agriculture and unemployment as the two major qualitative indicators of crisis in Indian economy. He said that poor and marginalized farmers “produce losses”, go into debt, and commit suicide to get out of it. Farmer suicides is a crisis in India, he said. Citing recent figures, he stated that 20 million women have involuntarily withdrawn from agriculture. The employment sector too shows signs of crisis in India.

Transcript:

The whole concept of political economy as you know was from Adam Smith's time and and there it was really a rise of a new class in the polity, in the society which took the economic analysis as a tool in order to demolish the obstructions that they were visualising, coming in the whole economic process from a class which had no longer any productive potential or value and in order in their fight against that, they used the tool of economic analysis and economy as a political tool. It was really in that historical context that the political economy term came and later on it became the just economy and Samuelson's textbook, Just Economy. The political aspect just went away because it was already a rise of the political class which controlled the thinking and use the economic analysis and then it made a science in itself. |Economics – what some of us would like to call bourgeois economics, that became divested from the political economy thinking because it was corresponding to a particular need at a particular time. Smith, Ricardo... My point is that, in the morning the way the political economy was described, sought to be explained was dichotomous and to my mind, doing a little injustice to the term of political economy. How does the political economy differ from the bourgeois economy as I may call it. Basically, it is, the political economy looks at it as a historical process. The science of economics as it developed later, that looks upon it more as a science which is true for all places and all times, like geometry. Political economy takes crisis as the beginning of analysis. Crisis is all around us and not only now; whereas the economic science starts with the concept of equilibrium, balance – how the whole thing will converge into a kind of an order of a balance and harmony. And lastly, the political economy thinks in terms of going beyond the surface and trying to understand the forces of which the superficial phenomenon is the effect. And there you go into the question of who, whom – how Lenin described it. Which is the caste which is using this economic tool in order to further its interests. What kind of class contradiction emerges; what kind of class conflict it can give rise to etc. So from that angle, political economy becomes an integrated approach to a problem which is economic, which is political and which is also social. In that sense, separating the two, to my mind, is not very scientific. If you separate it, then we fall into the trap of creating a straw man and destroying him. Then there is politics and the politics is represented by what is called political class. Till today I have been not able to understand what is this political class? I can understand a capitalist class, I can understand a labour class but what is this political class? They come, they arise out of us, they again - if they get defeated, they get back into our own system. But then this demon is created - political class. And then, everything is wrong with the political class and economy is fine. There is no crisis. So, you try to find solutions to the crisis in terms of this abstract frame of the failings of the political class and political class, of course, is the class represented in parliaments, in legislatures, political executive etc and then we say we find a solution saying that: have institutional solution to that, have regulatory committees, have regulators, expert regulators and let them decide and the parliament may lay down the law and the experts will define the law. Courts, on one hand are doing that, now the experts will do it in more concrete way in terms of things which will effect the interests of the people, the very living of the people. Now this, to my mind, is not the idea of political economy or the crisis of the political economy. The various indicators which Prof. Nayar recounted right in the beginning and he said this is how the mainstream debate explains the crisis and tries to understand the crisis. In a way, they are all quantitative indicators - so much of fiscal deficit, so much of CAD, so much of inflationary pressures etc. and then we say that this is the crisis, this quantitative majors have been exceeded and therefore, there is a problem, the balance is disturbed and how to bring back the balance and how to rein in the run away, say exchange rate or fiscal deficit. Now, to my mind, this is very superficial way of looking at the crisis. Crisis is in the political economy, we have to find out why it has come and in terms of the interests of the classes, in terms of the conflict of the class interests. And if you look at that, then, one can make some meaning of the term of crisis. Now, all this quantitative indicators totally forget the qualitative aspect of the crisis and the qualitative aspect of the crisis is really-- what has happened, to my mind, is what has happened particularly after 1991, where the corporate capital in India is getting into greater, more close collaboration with the global finance capital. This is the essence of economic reforms. And this is the root of whatever problems we are now saying and trying to quantify. Now, this qualitative aspect gets neglected in the mainstream debate for obvious reasons. One is that this qualitative interest aspect does not really suit them to talk about it. Whereas the other quantitative indices and their analysis, that is of concern to them because it effects them directly - their profits, their wealth, their influence including the political influence. So the debate gets concentrated more on the quantitative aspect. Secondly, it also helps them in a … for e.g. when we talk of the quantitative aspects then you can have alternation of arguments suiting your their interests. It becomes very opportunistic self-serving logic. Example is, the debate on the integration versus decoupling. Only a few years ago I remember in the debates those who were the protagonist of integration were taking credit for decoupling of their imagination and saying that because of this we have been able to protect our economy from the turbulent winds of the world economy. Now, integration is used in order to justify the failures of the policies. If the rate has decelerated, it is because of the world-wind which is coming, the slowdown of the world economy. So it becomes an alternation of the arguments. More or less self-serving kind of a thing. So we have to get out of that and then we have to see what is the kind of real political economy crisis which we are facing and indicators of that are available. It is not as if the academic debates have not really addressed those issues. Now, in the morning there was a reference to agriculture; NK said about structural kind of problems that we are facing and he mentioned about agriculture. Employment also came in for discussion. Now if you really have to see the nature of the crisis, I think these are the two indicators - one is the agrarian crisis and the other is what is happening to the employment and it is a very real kind of a phenomenon which effects the lives of the people, which effects the very survival of the people. When I heard that there was no agrarian crisis in this country, I was a little stunned. If you look at the, well, agrarian question is old. It has been with us right from the colonial days. But after 1991, for various reasons one can go into that, it has assumed crisis proportions. Fragmentation of holding for which a reference was made; it becomes totally uneconomic. In fact, if the latest figure is 53% of the workforce is dependent on agriculture, only four years ago it was 57%. And a little ahead before that, it was 63% or something. Now, if such a large proportion of workforce of an economy is dependent on the agriculture, agrarian economy and agrarian economy is what, the average size of the holding if you take. It just cannot work in an economic and productive way. You find that the empirical surveys also show, that for the whole year the small and marginal farmer will work and he will work very hard and he will produce loss. The only production that he does is loss in terms of the economy. Then he gets into debt. Then he has to supplement his income by going out and doing whatever comes his way and try to reduce the loss that he has produced. The most notorious phenomenon of farmers suicides - more than 2 lakhs and there is a lot of debate on that and we have talked about it and the government said we have packages and all that.. whatever; but the fact of the matter is, if 92% of the peasantry is small and marginal farmers, uneconomic farming, producing loss, year after year after year. Then ultimately for various reasons, the opening up etc., if you get into a problem where it becomes impossible for him to survive and goes for suicide. That's the worst indication of the crisis that we have. That is the crisis, not so much the other quantitative indicators. On the employment side also, similar situation is there. On the employment side also, if you see, a lot discussion also took place in the morning you know, and then I have seen some economic analysis recently where reference is made to a sharp decline in the agricultural employment of the order of about 15 million. If you compare 2004–2005 figures NSO basis to 2009-2010, then you find there is a sharp decline in the agricultural employment and then it is cited as a kind of an evidence that this crisis which characterise the agrarian economy for decades and decades perhaps that is now thawing and movement is taking place. The labour is moving from farm employment to off farm employment. This is what we want to, and perhaps the things are changing. If you look at the data of employment, you will find that this fifteen million, the decline in agricultural employment is even larger. It is something of the order of - female workforce in agriculture have withdrawn, about 20 million as large as that. 5 million is the male workforce addition. So ultimately it comes to about -15, that is a decline of 15 million workforce in agriculture which is cited as an evidence of thawing the crisis in agrarian economy. If you really look at it, where has it gone. If you broadly look at the picture, you will find, one sector which really has shown a surge in the employment and that is the construction sector. In the construction sector, it is of the order of about 17.8 million. Now, construction sector, both organised and unorganised, if you take together, the informal employment in these organised sectors also is about 50% or so. What is happening is, though the agriculture is ejecting the work force, it is going; but it is the withdrawal of the women work force that is the reason for the decline, not so much the shift to other sectors. Shift to other sectors has also taken place. If you see other sectors also, then you will find that roughly the surge in employment in the construction sector is more or less consistent with a kind of increase in the work force that took place in different sectors and moved away. But this construction sector, it is true that not having any employment is better to have at least some employment of informal type or even exploitative type so that they can meet both ends meet. In fact, the small and marginal farmers have been always doing it, all along. Now, this construction sector employment which has come, one has to look beyond it and see what kind of employment and is it generating assets which will provide a continuous source of income for the people who are being engaged in that. Most of it is coming in terms of the construction of so-called infrastructure, the airports and the highways and then the real estate - the big bungalows, small houses, housing colonies and the whole lot of it. None of this is really creating assets, I mean, I am generalising but largely it is true..none of it is creating assets which are of value to those who are creating this asset. In the sense, you create an asset and on that basis you have continuous source of income - that is not happening. So this will be a phenomenon which will again raise the problems. What will they do after this happens, because the assets are not of value to them. Now, then only the kind of trickle down aspects and whatever it can absorb that will be the only ultimate result. But in the short term there is a surge, there is a shift, there is a decline. But decline, as I said, twenty million women have withdrawn from participating in the agrarian employment. The reasons are not very clear yet. Some reasons have been cited and one of reasons that sounds reasonable is that agricultural female work force was employed in allied activities - rearing goat, rearing cattle, fisheries, the whole lot of this activity which supported the agrarian incomes. Now, I read in one of the articles that one of the reasons is that big business is entering into many of these activities - whether it is poultry, whether it is dairy, whether it is fisheries - with the result that the absolute population of goats and cattle has come down, with the result that fisheries are getting controlled by large scale business and poultry etc. The withdrawal is not voluntary withdrawal. Withdrawal of the female workforce is involuntary. Because they have nothing. They cannot sustain that kind of activity now. Therefore, they withdraw. So the withdrawal is also not a sign of a great positive indicator, that is the women are going to study or they are doing some other work. Simple thing is such work is not available. The availability of such allied incomes is being denied to them. So, the kind of statistics on employment, particularly the agriculture sector which still constitutes the mainstay of the work force of India. That is not conclusive in terms of any great improvement towards the thawing of the stasis that one sometimes talks about. Second and that was talked about in the morning also, about the low that is, about the elasticity of the employment going down. So if you really look at the employment picture also, the crisis signs are very much there and the agrarian crisis, the employment crisis this is really the political economy crisis and that comes because of a systematic effort to tilt the balance of class power against the basic classes and that is the essence of the policies of the reforms also. So, this is to my mind, the crisis not so much the quantitative indicators but the qualitative indicator in terms of the class interest and in terms of the class conflict. Where do we go from here is the big question.