Author: Studying the transition

By Zubeida Mustafa

THOSE who attended the sixth conference of the India-Pakistan Forum for Peace and Democracy in Karachi in December were treated to rich intellectual fare. It came in the form of the keynote address by a retired professor of economics from the Indian Institute of Management Kolkata. Nirmal Kumar Chandra elaborated on imperialism and globalization in his talk which was dedicated to the memory of Dr Feroz Ahmed and Prof Hamza Alavi.

Prof Chandra, whose work has involved more research than teaching, continues to study the areas which have interested him most, namely, the impact of imperialism on the Third World. At present his research focuses on the transition economies of Russia, China and Cuba. Having been a member of the Association of Third World Economists founded in 1976 at Algiers, Nirmal Chandra’s profound interest in these regions is understandable. Here are some excerpts from the interview he gave to Books & Authors:

B&A: What are your findings generally about the Russian economy today, and while researching the Soviet Union forty years ago did you anticipate anything of what has happened now?

Prof NKC: No, nobody anticipated the downfall of the Soviet Union even in 1991 after the cold war ended. Actually it collapsed a few months later. Secondly, in my view, and I have done a little research on this, the fundamental reasons for the collapse of the Soviet Union started sometime in the late sixties, if not before.

My hypothesis simplified drastically is that in some crucial areas like housing, public transport and food, the prices were frozen for nearly 30 years before the Soviet Union collapsed. In fact, in housing, rents had been virtually frozen since 1928. As for public transport, when the Moscow underground was opened in the early thirties, the fare used to be a standard five kopek per journey. It was exactly the same when the Soviet Union fell.

So the point is that in all these areas, the cost of providing these services or agricultural goods went on escalating for a variety of reasons. Thus, wages went up sharply as did other costs and therefore the subsidy burden became increasingly intolerable. And more so, from the late sixties onwards, wages in real terms began to rise quite sharply. At one point or another the subsidy burden itself would be enough for a collision or collapse unless there were some counteracting measures. Of course, apart from this, the military burden became increasingly intolerable because the economy had ceased to grow. And the Soviets were at par with the Americans right up to the time of their collapse. There were other contributing factors too, like the Soviet planning system.

B&A: Do you think this could have been avoided?

Prof NKC: Of course. The Chinese avoided an economic collapse. They dismantled their planning system gradually. It is still very much there but it does not operate in the old fashioned way. In other words, it leaves a whole range of sectors completely outside the central planning. What the Chinese plan is concentrated in some critical sectors. They operate more through price controls with the prices for most goods based on the market. The state just ensures that they remain within some socially acceptable range.

B&A: How do you assess the period of transition?

Prof NKC: In Russia there is a total collapse of the system and it intensified after the fall of communism. In fact, it is now twelve years since they have been living with the new system and the national income is still 40 per cent below the earlier peak. Today the talk about a boom in Russia is very artificial and based on the high price of oil compared to what it was before. Poverty is widespread. Unemployment is widespread. And most important, the ceiling of economic policy imposed by the IMF means that the Russian economy will remain shackled indefinitely until it finds a reason to overthrow these shackles.

B&A: Do you think those will have any political consequences?

Prof NKC: From Yeltsin to Putin everybody is playing the American game, basically, with some minor variations here and there. They don’t want to confront the West. They think they should have very close links with the West. This unholy alliance will continue to cripple the Russian economy.

B&A: Coming to South Asia, how do you see the position here?

Prof NKC: Here we are replicating the most regressive features of post-Reagan post-Thatcher Anglo-American tactics. The huge tax cuts and highly permissible tax laws allow all kinds of expenses of a personal nature to be written off with these expenses. That has meant that the tax collection from both the corporate sector and the rich individuals has fallen and that has aggravated the inequities, although we don’t have the statistics on the income distribution to give accurate figures. Whatever is given is totally meaningless as it is based on the consumer expenditure survey in the Saarc nations.

B&A: What will be its economic and political consequences?

Prof NKC: The economic consequences are that the policy makers are trying to develop a small layer of a middle class which should have adequate opportunities to buy some of these consumer durables and also the non-durable consumer goods like perfumes, designer clothing, etc. That would certainly keep up the so-called statistical progress of the national income, which is very high now. On the other hand, we find that the strength of workers in the organized sector has not grown at all for the last ten years, which is most surprising. The organized sector of the whole region — which covers both the public and the private sectors as well as the government — has stagnated.

This is because they have raised the salaries in the government jobs far beyond what, I think, the government can afford. It means it becomes more expensive for the government to hire additional people. So the government’s current philosophy in employing workers is to keep their number as small as possible. In the organized private sector there is so much emphasis on profits and loosening of legal constraints and the retrenchment of workers that it is very common for companies to keep the number of workers low by using more machines and better work methods rather than create jobs. So whatever expansion has taken place has been in the informal sector where the wages are low and where the living standards have fallen.

First the consequences will be economically in terms of declining standards. In politics, specially in our countries, this situation may persist over a long time without there being an immediate governmental crisis. But the prospects for durable growth are, I think, quite limited.

Right now there have been many writings in our newspapers saying that India is doing very well and it will surpass China in growth rates in the near future. But this is a misconception. China is aware of its problems. Unemployment there and underemployment is massive. In the rural areas there are 100 to 200 million labourers who at any point in time are looking for jobs — near their villages or in far away factories.

No one knows their exact number but they are on a very significant scale and no Chinese publication has cited them as less than a hundred million. And also in China, in the last few years, the actual income of millions of households has stagnated. These problems notwithstanding, the average income of the employees in both the public and the growing private sector has increased. As a result the growth in China is far more broadbased than in India or in most other countries. But inequalities are also increasing at a frightening rate in China along with corruption and nepotism. In fact, in terms of corruption, I am not sure if China is a better place than India. I think corruption is more in China than in India.

B&A: You pointed out in your talk that the younger people are leaving home to work in America. What would be the impact of this trend in the long run?

Prof NKC: The impact will be not only on the young people, but also for their home country. I know in India you hardly ever visit any middleclass home which does not have a son or a daughter or a brothers or sister living abroad. I think it is the same here in Pakistan among the educated class. Now what it implies is that those people are directly part of the American economy. Many of us, who are not directly in that network, would not like our countries to take measures which would antagonize America because then their own people living there will be in jeopardy. So this is, I think, a major factor in cementing or rather tying us with foreign countries in the American network.

B&A: But then it also allows the Americans greater control over our countries.

Prof NKC: Because of these constraints many governments, unless they are strongly radical, do not support strong measures. But if lower wages continue, we’ll be deeper and deeper in the quagmire.

B&A: What solution would you suggest?

Prof NKC: I don’t have a solution. (Laughs) My reaction is negative: if this situation continues, we’ll be deeper and deeper into trouble. So we have to get out of it. How to get out of it? I am not a politician and therefore I have no obligation to give a solution. As an economist what we are trying to do — and many of us think alike — is to present Cuba as a special case to show that it is possible. If we take into account the resources that we have, it is possible to do away with foreign aid. We can withdraw from all these foreign debts and that will not affect us badly.

Cuba has made a very big jump. You see Cuba’s case is very peculiar. To put it very briefly, right up to 1990 when the Soviet Union collapsed, something like 20 to 25 per cent of its GDP was in the form of aid from the Soviet Union, which is absolutely unheard of elsewhere. But Cuba had always been a highly trained dependant economy. It managed to take hold of a whole lot of consumer goods, a whole lot of machines for their factories, oil, very cheap oil to mechanize their whole sugar industry and cultivation. Its national income declined by 40 per cent but then it managed to change its policy drastically. It promoted tourism on a big scale and encouraged remittances by Cubans abroad to their families, it legalized the holding of dollars as a result of which Cuba now has two currencies that are perfectly legal tender. Now the Cuban national income has practically recovered to its 1989/1990 level.

B&A: A final question about India-Pakistan relations. How do you feel the economies of the two countries would be affected were they to normalize their relations?

Prof NKC: The amount of trade we can have with Pakistan will not be large enough to have a very big beneficial effect upon India. But, for Pakistan the cost of import would come down very sharply in some areas. I have only one piece of advise. Since Pakistan has already rejected a single currency idea, it should try and negotiate within the framework of Saarc to enable each member state to maintain its trade flows in a mutually beneficial manner, which it cannot under the WTO. It should insist on balanced trade.

Nirmal Kumar Chandra: profile

Nirmal Kumar Chandra retired as professor of Economics from the Indian Institute of Management , Kolkata. He also taught as visiting professor at the universities of Delhi, Mexico and Paris. As a consultant he worked for UNCTAD, FAO, ESCAP, and CTC. He was member of several committees of the governments of India and West Bengal.

Professor Chandra was closely associated with two political weeklies from Calcutta during the editorship of late Samar Sen,, namely, Now and Frontier, and the Bengali cultural magazine, Ekshan. He also writes extensively in the Economic and Political Weekly, Mumbai.

Professor Chandra was a member of the Association of Third World Economists founded in 1976 at Algiers. All through he has been preoccupied with the question of imperialism. Of late he has focused on the transition economies of Russia, China and Cuba and their interaction with imperialism.

Source: Dawn