Development is both complex and nuanced. Over the years, the definitions have changed, and there has been no single deterministic path to its understanding. Development and the “politics of development” are two inseparable components. What it entails and what it does not, cannot simply be put in binaries, and the normative discourses around such issues keep evolving over time. However, such normative assessments about the politics of development often find a back seat in the Indian political context, owing primarily to high voltage partisan discourses.
At a time when the news media has more often come to cater to majoritarian consumer preferences, the discourse has become largely limited to issues of nationalism, religion, and the likes. In these vulnerable times, issues about health and education, social support systems etc., have become largely invisible. Partisan politics and majoritarian appeal has not only aided electoral success, but also has manufactured consensus among the growing upper middle and top income groups against interventionist welfare measures.
While there is no doubt that fiscal responsibility is an important concern, the government as well as the upper income groups have constantly rallied against welfare spending, often derogatorily calling it “Revdi” or Freebies. But there is much more to this debate than just political euphemisms, both on the right and the left. Buchanan was of the view that higher fiscal deficits are not necessarily a bad thing if such fiscal spending can sustain growth. There exists a fine line between redistributive policies and free market structures which needs to be respected and understood. Anything that breaks this balance can set off a chain of economic and political disasters.
Disillusionment With The Fee Market:
The idea that the free market aids better growth through physical infrastructure growth quite possibly a misnomer. And the neo liberal order thrives on this distorted idea. This over-glorfication of laissez faire economics has come at a cost, a cost that has systematically made the rich richer and the poor poorer, aiding an order that legitimizes neo colonialism (Ritzer, 1993). John Perkins in his book, “Confessions of an Economic Hitman” talks about how the neo liberal economic agents often work as “hitmen” to smaller, developing countries, sanctioning huge infrastructural loans when they are clearly less risk averse. Infrastructure spending, IMF loans are all part of the trickle down package of the Washington Consensus that have created debt-laden regimes all around the world (Rodrik, 2013).
Such exorbitant lending, put at the disposal of private independent agents and firms, are used up in sectors such as construction, dams, railways among other infrastructure sectors, where the risks of corruption are higher. And the incentives attached to corruption are often the reasons why poorer developing countries are attracted to such large infrastructural loans. The underlying idea is, when corruption and secrecy compliment each other, it entails huge social costs. The demands of such secrecy shift investments away from critical areas such as education and health, to areas such as defense and infrastructure, which are not really the priority sectors in a poor country. (Shleifer and Vishny 1993)
The Need For Redistribution:
Beyond its consequential politicization, economists have long supported the need for substantial welfare and redistributive measures. One of the best known scholars on redistributive economics is undoubtedly Joseph Stiglitz, who sees the transition from a less developed to a developed economy through the lens of robust government intervention. He states three stages. The first stage deals with a poorer economy, one that requires the most significant public expenditure: the need for a sizable public sector is imminent. The theory of the “first best”, that envisions market based pareto efficiency, has its own loopholes in the form of externalities which inadvertently lead to inefficiencies. Here comes the need of “the second best”, which calls for government interventions to correct these inefficiencies.
In the Indian context, while extensive populist Nehru-bashing has become the status quo, such allegations often root out of narrow political gimmicks that undermine historical contexts. As for Nehru, systematic investment planning coupled with a larger focus on heavy industries, set the stage for a sustained growth process in India. A newly independent nation that has faced extensive deindustrialization during the colonial era, needed a self sustaining growth engine. The Nehru Mahalanobis model was successful in achieving exactly that (P Balakrishnan, 2007)
The other reason why public welfare becomes so important can be perceived through Thomas Piketty’s arguments, which have revolutionized economic thinking in the 21sf century.. Piketty suggested that economies today function on the underlying idea that the rate of interest (r) is greater than the rate of growth (g), which according to him is primarily the reason for greater inequality in contemporary times (Piketty, 2014). Imagine a person A with an annual income of one thousand dollars per annum, with no generational or underlying wealth. Imagine another person, B, with the same income, who also has a stock of generational wealth of, say, two thousand dollars.
While the Gini Coefficient for consumption inequality is always lower than that for income inequality (the gap is much higher in the case of India), both A and B will spend a similar amount in terms of daily pending needs (Krueger and Perri, 2006). Now for B, it is understood that they can earn an interest on the two thousand dollars of generational wealth, year after year. But there is no growing capital accumulation for person A. This is where the cycle of capital accumulation worsens for A, as consumption takes away a huge share of their income every year. It is clear how the “g” here, the growth rate of income, is less than the “r”, the rate of interest. It is in similar terms that the growth rates of economies have been on the decline while interest rates are on the rise. Especially in contemporary times, when inflation has peaked in major economies, the problem of rising interest rates have made many suffer, especially the ones at the bottom of the income hierarchy.
There is a clear pattern of higher inequality arising out of such considerations, especially in countries where sizable reductions in capital income are seen. Inequality rises when tax on capital income (corporate tax et al) decreases. The US saw similar patterns of increased inequality post the Reaganite policies (which focused on lower capital income tax, deregulations etc) of the 1980s and it has been on an upward trend ever since. The graph below shows lower levels of inequality between the 1930s and the 1980s, a time when top tax rates were high on high income individuals, along with relatively higher corporate tax rates. Similar patterns emerge in India, especially post the 1990s when the economic reforms exaggerated inequality in record levels (Kar and Sakthivel, 2007)
Spending Cuts, Austerity Et Al:
When it comes to undermining welfare and strengthening austerity, be it through spending cuts, interest rate hikes, corporate tax cuts, and in general, the decimation of unions, welfare cuts et al, austerity has become a potent fiscal weapon of the state to preserve the capital order (Mattei, 2022). Austerity as a fiscal measure was a product of the crisis of capitalism after World War 1, which eventually led to the Great Depression of 1929. Keynes in 1919 stated that the collapse of the economy was a major concern not just for the workers but also for the bourgeoisie, and the capital order in general.
This was when austerity was born, to prevent the collapse of the capitalist order and to maintain the status quo of economic power relations. This new regime, masquerading as a democratic framework, expels the worker and their power as the real driver of the economy, crushes union power, justifies corporate taxes and the role of the capitalist, the entrepreneur as the real driver of the economy. Empirically, austerity has never really achieved its goals of reducing debt burden, and achieving fiscal constraints.
Political Participation, Demands For Larger Social Support:
In times such as these, when the free market has clearly not trickled down income and capital to the bottom, there is an utmost need to realign discourse on public spending. Thinkers ranging from Marx, Sen, Piketty, Abhijeet Banerjee et al have all shown how extremely political economic decision making is. Policy making cannot function in isolation, away from political intuitions and institutions alike. In terms of higher human development achievements, Sen exemplifies states such as Kerala, Himachal Pradesh and Tamil Nadu, and broadly emphasizes on three reasons: a) larger social support base b) expansion of human capabilities and c) participatory development.
While the three of these are equally disruptive, the concept of participatory development is probably the most radical. It focuses on the need for political participation, democratic and revolutionary social movements, and constitutional demands that have institutionalized growth and development in better performing states. There is a need to rally behind social movements that ask for economic accountability, the right to access basic public goods, and the right to economic security. As long as such demands are not pressed hard enough, welfare will see its end and development will be skewed towards the rich.