TCA Srinivasa-Raghavan: Globalisation: It works, folks

OKONOMOS

The ability to mislink cause and effect is an old human pastime. Economists and astrologers both thrive on it.

The Hon. Galahad Threepwood, a character in P G Wodehouse's novels once endorses the virtues of alcohol by talking about a friend who had given up. "Dead within a week," he says. "Run over by a hansom cab."

The ability to mislink cause and effect is an old human pastime. Economists and astrologers do it all the time. Both thrive.

In recent times, nowhere has this sort of mis-linking been more in evidence than in debates over globalisation. Supporters think it is the cure for all evils. Critics think it is evil itself. There is no meeting ground.

Baldev Raj Nayar*, professor emeritus at McGill University, has tried to provide that meeting ground in this short monograph. He summarises the critics' case very nicely.

"Rather than higher economic growth, the critics see economic stagnation. Rather than economic advance and industrialisation, they see deindustrialisation. Rather than local entrepreneurship, they see denationalisation. Rather than economic stability, they see economic destabilisation. And rather than the enhancement of human welfare, they see impoverishment and growing inequality."

He tests these assertions with reference to India and quietly concludes that they are wrong. "Even limited integration has had enormous consequences for India... instead of economic stagnation, India has seen acceleration in its average annual rate of economic growth, from 3.4 percent in the pre-globalisation period to about 6 percent. That figure may soon reach 7 percent."

Likewise, far from being de-industrialised, the opposite has happened. "The average annual rate of industrial growth has jumped from 5.2 percent during the period of autarky to 7.0 percent after 1991. At the last rate, the value of manufacturing doubles about every ten years "" not exactly deindustrialisation."

There has also been an increase in competitiveness, imports and multinationals have not swamped Indian business and, most remarkably, there have been no crisis since 1991. Personally, I regard this last as the most important benefit of globalisation because it has resulted in eliminating the siege mentality of the country's economic managers.

Poverty has been declining, whichever way you choose to look at it and if at all there is a cause for concern, it is not growing inequality but growing regional disparities. Here, perhaps, the author is on somewhat weaker ground and may want to re-visit the analysis in the light of deprivation generally.

So, he says, "The policy conclusion is that India should be more open to globalisation", which it is, by and large. As a tract on India's positive experiences with globalisation, this monograph should become a standard reference.

That said, it is perhaps also necessary to point out that globalisation as the term was understood in the last two decades of the 20th century is a thing of the past now. To the extent that it signified a multilateral integration of factor markets, the movement stopped long ago, perhaps as far as back as 1982 when the US first broached the idea of NAFTA. Since then the world has seen a massive proliferation of preferential trading arrangements and bilateral treaties for "comprehensive" economic cooperation.

In that sense the meaning of the term globalisation has changed. The central flaw in this book is the failure to recognise this change. But it is easily remedied and I hope the author will do so. Basically, if and when he writes the second edition, he needs to examine the effects regional integration as distinct from global integration, especially from the political perspective.

To put it crudely, would India's communists and other elements of the inchoate Left be as opposed to integration with the Chinese economy as they are with the US economy? If not, is there an economic argument against integration? Is India's trade deficit with China a lesser concern than its deficit with the US?

The Communists have never answered these questions and they never will. Nevertheless, the question does need asking. *India's Globalisation: Evaluating the Economic Consequences http://www.eastwestcenter.org/res-rp-publicationdetails.asp?pub_ID=1984