Open Forum
New Delhi, 21 January 2015
Economic Reforms
TIME FOR WELFARE
CAPITALISM
By Dr S Saraswathi
(Former Director,
ICSSR, New Delhi)
To meet the fiscal deficit target for this year, it is
reported that the Central government is working on drastically cutting down
allocations in the social sector and avoiding cut in infrastructure
allocations. The latter is viewed as growth-oriented and necessary for
promoting the nation’s economy. Even the target for public health expenditure
seems likely to be reduced from 4-5% of the GDP as required to reach the
Millennium Development Goal to an achievable 2.5% of the GDP.
Reducing poverty and boosting economic growth are the twin
objectives of the Government today. These have to be reached through economic
reforms dictated by globalization of economy. It demands what once former
Finance Minister Yashwant Sinha said that economic reforms should be “guided by
compassion and justice”. Indeed, a big challenge to the Government.
The Indian Constitution has guaranteed certain fundamental
rights and also declared certain directive principles of State policy. These
principles, once considered non-justiciable were elevated in status by a
judgement of the Supreme Court in 1970. It stated: “The mandate of the
Constitution is to build a welfare society in which justice, social, economic,
and political, shall inform all institutions of our national life. The hopes
and aspirations aroused by our Constitution will be belied if the minimum needs
of the lowest of our citizens are not met”.
This mandate is well entrenched today and underlies broader
interpretations of several of our rights. Right to life and liberty includes
right to life with dignity. What follows is right to food and right to
education. A massive national employment guarantee programme also stems from
the right to food. All these have not clashed with the dictates of
globalization.
The idea of “rights-based development” is getting
established through a number of court pronouncements in India. There is
tacit acceptance by policy makers that those unable to realize their rights
cannot realize their full capacities as human beings and cannot contribute to
development. They are marginalized untouched by the fruits of liberalization or
development.
Inclusive growth – the theme of the 11th Five Year Plan
(2007-12) – is another concept accepted
as equivalent to all-pervasive improvement in the quality of life touching all
weaker sections of society. There is a general idea that liberalization and
globalization which give precedence to market have caused exclusion of many
sections of the people from participation in production and from the group of
beneficiaries of that economic process.
However, many economists agree that liberalization has on the whole led
to reduction in poverty and improvement in the economic conditions of people
across the world.
In this context, the question who all benefit under the new
economic policy arises again and again without a standard answer.
The welfare State concept, endorsed by pragmatic liberal
theorists, requires the Government to play a major role in promotion of
economic and social well-being of the people directly as well as indirectly.
Providing for minimum needs must be accompanied with availability of equal
opportunities, equitable distribution of wealth and goods, and special care of
those unable to fend for themselves and take their share.
There are a number of models of welfare State. In all these,
public support for social welfare policies and programmes through the
Government forms an important part.
Modern welfare States emerged first in societies that
underwent rapid economic growth with industrialization. State-sponsored social
welfare became necessary and was possible because of surplus production and
affluence that could be diverted to education, healthcare, housing etc.
Developed countries have become welfare States capable of developing individual
welfare as well as collective progress.
It is therefore, wrong to imagine that only developing and
underdeveloped countries need to promote welfare State model. All advanced
developed countries in Europe, America,
and elsewhere are capitalist welfare States which are also facing difficulties
in coping with the dictates of globalization.
The problem in India and many other developing
countries is the thrust of globalization before realizing the full potential of
a welfare State. With problems of illiteracy, malnutrition, slum living and
awfully inadequate basic amenities for a healthy life, India has to
take on the challenge of global economy. A new model welfare State has to take
shape which has to provide for growth and equity through capitalism which some
prefer to call welfare capitalism.
However, the freedom of the nations to determine their
social policies are somewhat restricted by compulsions of global trade and cut
in social spending on welfare ideals.
Markets overtake producers, consumers and clients. Employment cuts in
various ways including compulsory acquisition of land for development projects
works antithetical to welfare concepts. There is struggle to continue subsidies
while prices keep rising without corresponding increase in purchasing power of the people. Under these
circumstances, the size and scope of welfare measures of non-productive nature
are bound to fail.
While a few fortunate people like Government servants are
rewarded with pay rise and allowances for price rise and those at the bottom
are taken care of with doles and bare minimum pensions, bulk of the population
in the middle are oppressed under the new economy without relief from welfare
ideals. It seems that developing countries have to pay a heavy price for lagging
behind in industrialization in various forms not just economic. The middle
class needs welfare schemes.
It is time to amend old order welfare ideals like doles and
subsidies which still continue under popular pressure and humanitarian outlook
and openly as political bait to capture voters.
New welfare approaches need to be evolved though the goal remains the
same. Growth and equity are to be simultaneously fostered.
The answer is improvising an advanced welfare model which
will replace doles and subsidies with opportunities for learning and employment
with healthy living. Such a model will encourage the poor to accept economic
reforms voluntarily. Just as the old model was a device of public pressure and
preferences, the new model must become the choice of the people.
It is the job of political parties and pressure groups to
influence people to adopt new welfare concept. Unfortunately, they are
indulging in competitive populist politics unmindful of its economic outcome.
It is time to prevent politics from becoming an enemy of economic progress; and
more specifically to control distributive politics from playing spoil-sport for
productive development.
India needs a strong and financially
sound social sector planning which should include continuation of subsidies.
But, the tendency to make subsidies the main feature of welfare State is
neither possible nor desirable. Our immediate task is to prepare people from
all strata to accept reforms as the road to reach the welfare ideal.
Necessary adjustments in politics or economics to bring
about an appropriate model of capitalist welfare society have to be made.
Growth must come through employment and production. Distribution must not be
indiscriminate. Any conflict of interests between welfare State and economic
reforms must be bridged. --- INFA
(Copyright,
India News and Feature Alliance)
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