Davos Debacle

- Dasu Krishnamoorty

In droves, ministers, including Andhra Pradesh CM Chandrababu Naidu, bureaucrats, journalists, captains of industry made their ritual flight to Davos to reconcile the impossible of accepting globalisation on the one hand and rejecting it on the other. They have now returned home with full of hope that what eluded them at Davos will not dodge them at the Qatar round of trade liberalisation talks sponsored by WTO in November. These summits thrive on the illogical faith of the third world leaders that an expose of their achievements is bound to elicit promises of investments and lowering of non-tariff barriers from the leaders of the developed countries. The Davos summit is an invisible appendage of the Brettonwoods twins and the newly born trade gladiator, the WTO and the sooner our leaders realise this the better they will be armed to negotiate with the west.

A decade ago, P.V.Narasimha Rao rolled out the red carpet to globalisation without even a symbolic nod from Parliament arguing that the country needed new economic thinking and behaviour in tune with the changing world. Corporate-owned media hailed as the new economic messiah. The years that followed the exit of Narasimha Rao showed how the country and its people had been pushed deeper into an economic abyss even while media and establishment economists got busy putting a statistical gloss over this slide. They maintained that integrating the country with global finance and trade alone would attract foreign investment and participation in our economy. "Foreign" here simply means western and more specifically American. The non-Congress governments that succeeded the Congress collapse followed the same ill-advised hospitable ways. Has our affiliation to the western bandwagon benefited us?

No, said our Finance Minister, Yashwant Sinha, loud enough to be heard by the plenary session of the World Economic Forum at Davos. In a belated and ambivalent disavowal of a borderless one world, Sinha called for recasting the globalisation process around principles of equal opportunity and just multilateral institutions and urged the industrial nations to play fair in giving greater market access to products from all developing countries. "The south is fighting a grossly unequal battle in adapting to globalisation," he said. If the battle is unequal, it is difficult to understand what prevents our government from insisting on restructuring the globalisation process. The entire liberalisation regime was a knee-jerk reaction to a one-time exchange crisis compromising the country's economic future for a mere $500 million loan from IMF. Sinha's protestations are unconvincing after his government has accepted globalisation as a cure-all for economic ills. It is like embracing Christianity but rejecting the Bible.

Sinha's ire is not new. The UNCTAD parleys, the North-South dialogues, the New International Economic Order were all related to inject some sense of justice and recompense into the western negotiators. These pleas did not work even when the non-aligned movement was at its strident best. The great push that fashionable theories of powerless and minimum state received under a two-pronged attack from the Thacher and Reagan regimes encouraged the economic elite of the third world countries and the media machine they owned to successfully mount a treacherous assault on their own governments to dismantle all state control and regulation. Narasimha Rao became a willing aide of these avaricious globalists. This era witnessed the enrichment of Reagonomics with Manmohanomics, Swaminomics and recently Narayanomics.

Despite the new economic speak, a third of the world's poor live in Bharat. Clare Short, Secretary of State for the UK Department for International Development says "inequality within India, between the richer and poorer states has increased. In 1980, the richest major state in India had a per capita income, which was 2.8 times that of the poorest state. By 1997, this difference had increased to a factor of 4.2 times." Romantic slogans like privatisation are Trojan horses for the abdication of state responsibility for ushering in social change accompanied by cheap or free transfer of public property into corporate domain. Privatisation, which is the most important tenet of globalisation religion, has generated such unmanageable corruption that the corpus of parallel economy today is twice that of the legal economy. The rich-poor gap is now an unbridgeable chasm. The inequitable redistribution of incomes and wealth was not the outcome of any invisible hand but of planned government drive to exacerbate economic disparities.

Sinha attacked the immigration and environment policies of the North, which hampered development in the South and siphoned off the best and the brightest youth from the developing countries. Farmers of the developing countries have suffered for want of fair prices for their produce because of the heavy subsidisation of agriculture in the developed world. Brazilian Agriculture Minister Pratini de Moraes said that Washinton and Tokyo alone were spending one billion dollars a day to subsidise their farm sectors, depressing in the process prices of commodities which still account for a large part of foreign exchange earnings of the developing countries. One of the reasons for the failure of the WTO summit at Seattle last year was Europe's refusal to negotiate on agriculture.

Globalisation has angered the poor not only in the developing countries, but also the underclass in the developed world. The Seattle protests and street battles at the time of the WTO conference last year showed that globalisation overlooked the poorer sections everywhere. Ditto for protests and demonstrations in Davos, Zurich and Berne. The attack on a McDonald's outlet was demonstrative of the wrath against multinationals for whose benefit governments of the developed countries do not hesitate to tune their policies. Policies even in the North went against labour and the poor and pushed up corporate profits even as living standards and employment rates were falling. Such programmes shifted the distribution of income in favour of the already rich.

As Prem Shankar Jha reminisced about the anti-WTO sentiment at Seattle "Globalisation is tearing the society apart even in America in a manner that the world has not witnessed since the early years of the industrial revolution two centuries ago." He quoted MIT economist Dr. Paul Krugman as saying "between 1947 and 1973 a graph of the rise in American real family incomes for different segments of society looked like a picket fence. Between 1974 and 1994 -- the period in which markets became globalised -- it looked like a staircase. In the latter period, the real income of the poorest 40% of the families actually fell in absolute terms and the income of the top 20% rose fastest." According to Achin Vanaik, a senior economist, while the average CEO earned 40 times the average income of a factory worker in 1960, he earned 149 times more in 1993.

Part of India's anxiety to embrace globalisation can be attributed to the hope of attracting FDI, which overlooks the reality of restless multinational capital in search of markets. When Claude Smadja, Managing Director of the World Economic Forum, visited Delhi last time, he said "the Indian government's target of achieving FDI of $10 billion by the end of the current fiscal year (1996-97) would remain a myth" if it did not cut import tariffs further. We did cut import tariffs, but never achieved the target of $10 billion. In the first five years of post-liberalisation, we received only $4.33 billion of foreign investment compared to $20.5 billion approved. The gap between the actual inflows and approvals is widening. This was the response despite our dismantling MRTP, abolishing industrial licensing and FERA and bloating the OGL list. Smadja also said that the image of India had gone down in the eyes of foreign investors due to the various scandals that have broken out involving even a former Prime Minister.

Everyone knows that the Tanaka scandal in Japan or the scams involving a former Prime Minister of Italy, the Bhuttos in Pakistan, or elsewhere in Africa or Latin America have never dampened the enthusiasm of foreign investors. Their reluctance to invest in India is a ploy to wrench the most favourable terms from our government. Indeed, foreign investors themselves are players in some of these scandals. Some of them investing in the power sector in our country have been reported to have secured the projects through pay-offs. So much for FDI. To quote Vanaik again, "Aggregate FDIs as a measure of the globalisation of production is deeply misleading. The major part of the FDI flows goes into non-manufacturing assets, speculative ventures and financial services -- golf courses, real estate, hotels, banking and insurance etc. In the name of globalisation, there is not a greater diffusion from the North to the South but a greater marginalisation of most of the countries of the South." There are more intra-North flows than North-South flows.

This bleak one-sided script does not dampen the enthusiasm of Chandrababu Naidu to mobilise, not multilateral but, private investment for power projects, road building, construction of bridges, bypasses, ports and airports. Where the Union Government was not able to lure FDI, Chandrababu claims that he had wrested promises of a total investment of $22.8 billion at the partnership summit held recently at Hyderabad. When these promises translate into reality, we can certainly agree that Chandrababu has a charm that Vajpayee and Sinha lack. All these measures to attract investment at any cost, in fact, mean that our economy is for sale to the highest bidder.

As David Korten, president of People-Centred Development Forum in Washington, says "under capitalism, democracy is for sale to the highest bidder; the market is centrally planned by global mega corporations larger than most countries. The world is now ruled by a global financial casino." It is evident that Prime Ministers, economists, and industrial groups of the poor countries journey to Davos or any other summit resort, not to speak for the poor of their countries but to seek favours for the rich and to improve their image at home. The Human Development Report 1997, published by UNDP says "the greatest benefits of globalisation have been garnered by a fortunate few." Wisdom lies not in chasing prospective investors at exotic locales, but in discovering our own strong points and sticking to them.

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