American Advice for Indian Growth

by VIJAY PRASHAD

Where does one even begin?

On May 21, the US Ambassador to India, Nancy Powell, addressed the Bengal Chamber of Commerce and Industry in Kolkata. She told the eager crowd of businessmen that “if India is to grow again, support for policies that are necessary for that growth need to be cultivated.” It is an amusing thing to be lectured at by an emissary of the US state on growth rates.

US first quarter growth of this year has now clocked in at a modest 2.5 per cent. India’s growth rate is about 5 per cent, easily double that of the US, and the United Nations’ Economic and Social Survey of Asia and the Pacific 2013 predicts that the rate will grow to 6.4 per cent during the rest of the year. No such predication exists for the US growth rate. The US figures surpass the anaemic 0.4 per cent growth rate in the final quarter of 2012, but these new figures will be dampened as the sequestration cuts take hold of the economy. US consumer spending is currently driving the growth, with sales of durable goods (cars and household appliances) leading the pack at 8.1 per cent. This section of consumer spending is buoyed by credit card debt, now at historic highs. The credit card debt bubble ($800 billion) along with the student debt bubble (over $1 trillion) could burst at any time, bringing down with them the meagre gains in the US economy.

None of this was in Ambassador Powell’s presentation. She spoke as if the US economy had returned to the 1950s, as if its factories were churning out cars and its workers were spending their wages on new houses built along the new freeways. Ambassador Powell didn’t bother to mention the convulsions in the IMF over US policy, with its Atlantic-friendly chief Christine Lagarde warning that US policies were not only threatening its recovery but also the global economy. But India’s growth rate was only the first pretext for Ambassador Powell’s dogma.

The second pretext followed soon after, that “GDP growth is not an end in its own right, since ultimately growth is to raise standards of living and eradicate poverty.” Poverty, she said gallantly, cannot be defeated without growth. Now this is not an uncontroversial idea. Growth is not a neutral process. A certain kind of growth trajectory might not reduce poverty, but indeed increase it. When IMF officials are honest about the facts, they cannot understand why this is so. On May 20, the day before Ambassador Powell’s Kolkata speech, IMF representative to Nigeria W. Scott Rogers looked at what he called a “conundrum,” the high GDP growth rate (7.2 per cent) in Nigeria and the high poverty rates (above 62
15125371per cent of the population). “Income per capita has gone up,” he noted in Abuja, “yet poverty isn’t improving and we’re having a difficult time understanding why that is or how that could be.” In the insular world of the IMF the elementary critiques of neo-liberal pathways of GDP growth are not digested. If they read these critiques, they would recognize that the kind of policies that propelled Nigerian growth are precisely what generate high rates of inequality, and so despite higher per capita income poverty rates remain stable or rise. A similar policy framework has been set in place in India, which is why, on May 18, the leading Marxist economist Prabhat Patnaik noted, “There has been a period of positive growth as far as the GDP is concerned. But during this period, there has been an increase in the magnitude of absolute poverty.” No conundrum here. The kind of GDP growth that India has embarked upon, and which Ambassador Powell wants to see intensify, is precisely what produces poverty and does not eradicate it.

Having lain out that India must grow again and that growth is an antidote to poverty, Ambassador Powell argued that the way to grow is to “open the economy and bring in more foreign investment…. It is past time to put to rest those out-dated notions that India suffers from economic openness and that India suffers from foreign investment.” Foreign Direct Investment (FDI) is, like GDP growth, not neutral. There are many different kinds of FDIs and, as studies by UNCTAD and other agencies show, most of them are not the best motors for financing development. In a paper for the G-24, Prabhat Patnaik argues that FDI “either goes into economies which are not short of real resources, especially foreign exchange reserves built out of cumulated export surpluses, which is precisely what enhances their appeal as investment destinations; or has the effect of rendering existing real resources in the host economies idle.” In other words, FDI rather than enhance development possibilities often stifles them. FDI mostly goes into the financial sector or service sector, two areas that do little for the vast bulk of the Indian working people whose lives have been vanquished by the neo-liberal pathway of growth. Ambassador Powell was reading from the talking points developed by the US Treasury, which is carrying water for US banks – the interest of the Indian people are camouflaged behind anodyne words about poverty alleviation. It is precisely Ambassador Powell (and the US Treasury) that are trying to flog “out-dated notions” of the utility of FDI for development – a proposition invalidated by the careful studies from UNCTAD over the course of the past decade, starting with the 2002 Expert Meeting in Geneva on the theme, “The Development Dimension of FDI: Policy and Rule-Making Perspectives.”

The day before this lecture Ambassador Powell spent over an hour with West Bengal’s beleaguered Chief Minister Mamata Banerjee. The CM asked the Ambassador to facilitate more FDI into West Bengal; much like the kind of FDI that helped set up the PepsiCo Frito Lay factory in Uluberia which Ambassador Powell had just visited. An earlier visitor to Writers’ Building, the West Bengal government offices, was Hillary Clinton in 2012 – then to coax Banerjee to let go of her populist opposition to FDI in retail. Now Ambassador Powell hopes to build on Clinton’s flattery and urge Banerjee to become one of the spear points for the “out-dated notions” peddled by the US Treasury. Banerjee, whose own government is shaky after the collapse of a ponzi scheme that seems to have been engineered by her party who then benefited from it, is eager to appear to be serious about development. The calculations of those around Banerjee indicate that she would like to be one of those regional leaders who the public associates with development rather than communal riots (Gujarat’s Narendra Modi) or who have been able to transform the image of their state from basket case to bread basket (Bihar and Nitish Kumar). It is because of venal domestic political designs, combined with the salivating business elites that Ambassador Powell can be taken seriously.

Vijay Prashad’s new book, The Poorer Nations: A Possible History of the Global South, is out this month from Verso Books.

 

 

Vijay Prashad’s new book, No Free Left: the Futures of Indian Communism, is just out in paperback from LeftWord Books. He will be speaking in Dublin, Ireland, on June 30 at Comhlámh, 12 Parliament Street at 630pm.

Like What You’ve Read? Support CounterPunch
July 29, 2015
Mike Whitney
The Politics of Betrayal: Obama Backstabs Kurds to Appease Turkey
Joshua Frank
The Wheels Fell Off the Bernie Sanders Bandwagon
Conn Hallinan
Ukraine: Close to the Edge
Stephen Lendman
What Happened to Ralkina Jones? Another Jail Cell Death
Rob Wallace
Neoliberal Ebola: the Agroeconomic Origins of the Ebola Outbreak
Dmitry Rodionov
The ‘Ichkerization’ Crime Wave in Ukraine
Joyce Nelson
Scott Walker & Stephen Harper: a New Bromance
Bill Blunden
The Red Herring of Digital Backdoors and Key Escrow Encryption
Thomas Mountain
The Sheepdog Politics of Barack Obama
Farzana Versey
A President and a Yogi: Abdul Kalam’s Symbolism
Norman Pollack
America’s Decline: Internal Structural-Cultural Subversion
Foday Darboe
How Obama Failed Africa
Cesar Chelala
Russia’s Insidious Epidemic
Tom H. Hastings
Defending Democracy
David Macaray
Why Union Contracts are Good for the Country
Virginia Arthur
The High and Dry Sierras
Jon Langford
Mekons Tour Diary, the Season Finale, Mekonception in Redhook
July 28, 2015
Mark Schuller
Humanitarian Occupation of Haiti: 100 Years and Counting
Lawrence Ware
Why the “Black Church” Doesn’t Exist–and Never Has
Peter Makhlouf
Israel and Gaza: the BDS Movement One Year After “Protective Edge”
Carl Finamore
Landlords Behaving Badly: San Francisco Too Valuable for Poor People*
Michael P. Bradley
Educating About Islam: Problems of Selectivity and Imbalance
Binoy Kampmark
Ransacking Malaysia: the Najib Corruption Dossier
Michael Avender - Medea Benjamin
El Salvador’s Draconian Abortion Laws: a Miscarriage of Justice
Jesse Jackson
Sandra Bland’s Only Crime Was Driving While Black
Cesar Chelala
Effect of Greece’s Economic Crisis on Public Health
Mel Gurtov
Netanyahu: An Enemy of Peace
Joseph G. Ramsey
The Limits of Optimism: E.L. Doctorow and the American Left
George Wuerthner
Bark Beetles and Forest Fires: Another Myth Goes Up in Smoke
Paul Craig Roberts - Dave Kranzler
Supply and Demand in the Gold and Silver Futures Markets
Eric Draitser
China’s NGO Law: Countering Western Soft Power and Subversion
Harvey Wasserman
Will Ohio Gov. Kasich’s Anti-Green Resume Kill His Presidential Hopes?
Jon Langford
Mekons Tour Diary, Episode 4, a Bowery Ballroom Blitz
July 27, 2015
Susan Babbitt
Thawing Relations: Cuba’s Deeper (More Challenging) Significance
Howard Lisnoff
Bernie Sanders: Savior or Seducer of the Anti-War Left?
Martha Rosenberg
Big Pharma’s Profiteers: You Want Us to Pay What for These Meds?
Joshua Sperber
What is a President? The CEO of Capitalism
John Halle
On Berniebots and Hillary Hacks, Dean Screams, Swiftboating and Smears
Stephen Lendman
Cleveland Police Attack Black Activists
Zoe Konstantopoulou
The Politics of Coercion in Greece
Patrick Cockburn
Only Iraq’s Clerics Can Defeat ISIS
Ralph Nader
Sending a ‘Citizens Summons’ to Members of Congress
Clancy Sigal
Scratch That Itch: Hillary and The Donald
Colin Todhunter
Working Class War Fodder
Gareth Porter
Obama’s Version of Iran Nuke Deal: a Second False Narrative