[nukkad] 'The Indian government spends much too little'

["A.Shrivastava" <>]

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hi...found this article which had appeared in
tehelka.com thought provoking.....


'The Indian government 
spends much too little'

Roberto Mangabeira Unger, professor of law at Harvard
University and a leading proponent of alternative
economic systems, tells Paranjoy Guha Thakurta of that
India, China, Russia, Brazil and Indonesia should come
together to challenge the economic dogmas propagated
by the wealthy north Atlantic nations led by the US

New Delhi, August 11

An adviser to leading political figures in Mexico and
Brazil, Professor Unger articulates his vision of a
"democratised market economy" located outside the
bounds of the conventional left support of
state-directed planning, as well as the orthodox right
support of the market system favoured by the so-called
Washington consensus. He is extremely critical of the
Indian government's policies of economic
liberalisation. These policies, he says, have no
future. 

Do you agree with the view that there is considerable
political consensus in India about the policies of
economic liberalisation that have been followed by
successive governments? What are your own views about
the direction economic policies have taken in this
country?
The present project in India has no future. The
starting point is the impossibility of a return to the
old project, of a dependency on licensing and on
policies of isolationism, and populist inflationary
public finance. The new project, on the other hand,
implies an outright surrender of any strategy of
national development. It implies a passive
acquiescence in the distribution of advantage in the
world economy. I wish to make four points in this
context. 


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"The fiscal problem is inseparable from the basic
problems of the economy, the problem of empowering the
majority of the population"

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First, no country in modern history has succeeded in
becoming rich and powerful without an active shaping
of economic policies by the government, a shaping of
concentrated advantage in particular sectors of the
economy. It is not that the government can and should
pick specific sectors for development. What the
government does is to break bottlenecks and actively
create conditions for convergence towards certain
sectors where the national economy can concentrate its
scale and skills. 

The second flaw in the project is that it abandons the
majority of the population to disempowerment. The
educational needs of this section remain relegated to
the informal economy. The third defect in the project
is that in the absence of economic empowerment of the
majority, the majority would sooner or later strike
back. Unless there is a productivist alternative,
there will be a populist alternative and politics will
continue to be played out as a pendulum swing between
orthodoxy and populism. 

The fourth aspect is that the new project imposes
contradictory demands on the national government and
makes it impossible for it to solve the problems of
public finance. Orthodoxy demands that the government
restrain public spending. The truth is that in a
country like India, the government spends much too
little. It also receives far too little by way of
taxes. It cannot increase tax collections by
increasing taxes on the minority that pays taxes. It
can do so by extending the tax base. This can only be
achieved by bringing those in the informal sector into
the market economy. 

So, contrary to what is often claimed, the fiscal
problem is not a technical preliminary or a problem of
accounting or a consequence of lack of self-restraint
on the part of the government. The fiscal problem is
inseparable from the basic problems of the economy,
the problem of empowering the majority of the
population and providing them the instruments of
effective economic and political action. 

If this is the problem, wherein lies the solution?
What are the alternative policy prescriptions that are
available to the government?
The alternative I propose is along the following
lines. We first need a national government willing to
defy the whims of international finance because it can
rely on a high tax yield and the transformation of
savings into productive investments rather than its
dissipation into a financial casino. Then we need a
social policy that gives absolute priority to
education, which defines minimum standards of
investment per child and performance per school. The
social policy has to back these standards by bringing
about a trans-federal system of supervision and
intervention involving the national, state and
municipal governments. 


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