Neoliberalism has failed to deliver what it boasted of, writes Kashif Mansoor
We are almost completing 30th anniversary of the neoliberal regime. It was in July 1991 when India adopted a full-fledged neoliberal outlook, marking a turning point for the economy. It was a watershed year in Indian economic policymaking, when the government replaced a 25-year old interventionist regime with a market-oriented approach.
Subscribing to the “Washington Consensus”, the adoption of New Economic Policy (Liberalisation, Privatisation & Globalisation) changed the character of the state. The state has transitioned from being a regulator and monitor of the market to one being the felicitator of the functioning of the market mechanism. This transition is an ideological one. From “market fails” to “market performs efficiently”, the state has receded from the “social”, and advocated the “private”.
The transformation goes from “recognizing the inherent weaknesses of the market system and thereby correcting it with the state support, so that growth is justice-oriented” to “accepting the dictates of the market mechanism in the guise of efficiency without considering equity”. Hence, the growth was pursued as the sole objective at the cost of fairness, justice, and equity.
Our economy is still characterised by poverty, deprivation, inequality, informality and petty production. The policy of neoliberalism is sure to dent the lives of millions of people. Post-Independence, the mixed economy approach was followed, keeping in mind that reliance on market signals was neither able to optimally allocate the country’s resources, nor able to fight extreme poverty and deprivation that had devastating multi-dimensional effects on people then. Hence, the regulation and controlling of industries, preventing them from making private profits at the expense of social benefits, and several welfare programmes to redistribute income were launched with much prudence.
The interventionist policy was required to protect cottage and small scale industries against big industrialists, informal workers against capital-led growth, preserve the bargaining position of workers, and to check regional imbalances. The interventionist policy (taken in broad sense of state support, and not narrowly in terms of state monopolies) was well-thought. Let’s turn to some statistics based evidence to understand what has transpired over the years of neoliberalism.
The first obvious indicator for us is the poverty rate; what percentage of people is falling below the poverty line (measured in terms of calories-intake of 2200 in rural areas and 2100 in urban areas). Data reveals that the proportions of the rural population falling below the poverty line in 1993-94 and 2011-12 were 58 and 68 per cent respectively; the corresponding figures for urban India were 57 and 65 per cent respectively. Thus seen that, proportions of people being trapped in vicious cycle of poverty has risen significantly over the years of neoliberalism. Between 2011-12 and 2017-18, the rural population has seen a decline in per capita real consumption expenditure of 9 per cent. This fall in consumption and rise in poverty has occurred alongside an impressive growth rate averaging 8 per cent per annum.
Thus, despite neoliberal obsession with GDP figures, which so grossly ignore environmental concerns, social infrastructure and other people-centric welfare concerns, the economic growth has not ‘trickled down’ to vast majority of the masses. Instead, there is a rising pauperisation and severe distress.
Similarly, the devastating impact of neoliberalism is seen in rising income inequality. Had the neoliberalism succeeded in ameliorating people’s hardships, inequality would have gone down. However, the share of the national income, as Thomas Piketyy and Lucas Chancel show in their book Capital in the 21st Century, going to the top 1 per cent of the population has risen, and is at a level higher than any time since 1922. Prof. Himanshu from JNU has informed us that this growing inequality has been largely driven by urban inequality. He further says that top 1 per cent holds more than one-fourth of total wealth.
Next, we can look at employment-unemployment rate. An economic growth without commensurate growth in employment for an economy is undesirable, because it is through part-taking in employment opportunities that people can avail of the virtues of growth, and especially so in an underdeveloped country which lacks in any unemployment benefits. The employment generating capacity of the Indian economy as a result of its output growth, called employment elasticity, has been slowing down since 2004-05, and came close to zero in 2011-12 and now was reported negative in the recent employment survey of 2017-18. The declining measure implies that the growth in output (GDP) was creating less employment. In other words, the growth was not employment-augmenting but employment-contracting, aptly called “job-less growth” regime.
In the more recent years from 2011-12 to 2017-18, the growth has actually been “job-loss”, that is those who were employed had lost their employment, and joined the ranks of either the unemployed or the ‘out of labour force’ (the segment of the population either in employment or actively looking for one). Between 2012 and 2018, the magnitude of job-loss was about 15.5 million. This is not merely a double-digit ‘number’, but reflects growing vulnerabilities, deprivation and dispossession for millions of Indians.
Despite a doubling of GDP growth rate from 3.5 to 7-8 per cent over the years of neoliberalism, the economy has faced an ignominious fiasco in absorbing even the natural growth of workforce, let alone providing a decent work for all. To add, it should be noted that employment rate alone is not a good criterion to assess the labour market performance in India, because the employment rate as always reported in various media reports hides the grim reality of under-employment, part-time and intermittent work. This blows up the employment figure. The other side of the story is the unemployment rate. Though historically, India had a very low unemployment rate, except the recent upsurge in the rate of nearly 9 per cent in 2018-19.
The low unemployment rate in India is not a sign of good performance of the neoliberal regime but a sign of acute deprivation and lack of wherewithal to hinge on for a vast multitude of people who are ready to do any sort of jobs in hazardous and informal conditions at wages even below than the minimum wages for mere subsistence. Much of people’s work is for subsistence rather than a means to accumulation.
Neoliberalism, it was argued, would unleash the potential of India’s industrial sector and the sector would drive the economic growth. Despite brief periods of buoyancy, the manufacturing sector in India has not spurred the economic growth and even failed to absorb the increasing working-age population. In 2010, its share to GDP contribution stood at 27 per cent, much lower than the similarly placed economies such as 47 per cent in China, 47 per cent in Indonesia, 39 per cent in South Korea, 44 per cent in Malaysia, and 45 per cent in Thailand.
Despite much touted NDA-BJP project of “Make In India”, the manufacturing sector has been laggard and performed at 20-year lows in 2019, shrinking its share from 30 per cent in 2014 to 27.5 per cent in 2019. On contribution to employment generation, the manufacturing sector is one of the worst performing sectors reporting ‘net job-loss’ between 2011-12 and 2017-18.
Neoliberalism has failed to deliver what it boasted of. This article does not intent to advocate a pro-state stance nor does it aim at hurling diatribe on pro-market approach. The question is not one of either market mania or market phobia. A market mania approach, as has been rigorously pursued in the last three decades, has not worked to the advantage of the people and has instead enhanced their vulnerabilities and sharpened the faultlines.
[The writer is the former editor of The Companion, and writes on economic issues.]