Time to Remember the Poor

 - Dasu Krishnamoorty

Washington played host to three important annual rituals last week without making much difference to how billions of common people all over the world lived or died. The World Development Indicators for 2001 show that of the world's 6,000 crore people, 1,200 crore continue to live on less than a US dollar a day; about one crore children die under the age of five; more than 13 crore children do not go to school and every year around five lakh women die during pregnancy or childbirth. At the meetings of the finance ministers of the developed and developing countries brokered by the Brettonwoods twins, the IMF and the World Bank, poverty was an omnibus term that was used as a synonym for the tragedies of the developing world. They wished away the problems of the wretched of the earth, window-dressing them in exotic terminology fashioned by Bank-Fund economists.

Several groups -- the Group of 7, the Group of 10 and the Group of 24 -- met, supplying the agenda for conclaves of the IMF financial committee and the World Bank's development committee. Our Finance Minister Mr. Yeshwant Sinha spoke at several of these meetings, now complaining and now cajoling the twins not to extend the range of the conditionality regime. The conditionalities are a sequel to what is called structural adjustment programme (SAP) that borrowing countries have to implement, sometimes even before the aid money begins to flow in as a token of earnestness. However, the poorest of the poor or any voter in India has never heard of these instruments of economic denial and deprivation in the campaign speeches of any party leader.

The impoverished farmers all over the developing world are slowly becoming familiar with the link between their poverty and the WTO agreements. But, the rest of the electorate hardly knows how their Finance Ministers regularly traded their sovereignty with the Bank-Fund twins in exchange for nothing but eternal economic bondage. Our Finance Ministers make these trips to Davos or Washington or other locales to scout for fresh loans which never redeem the earlier ones. Mr. Sinha told the IMF meeting that the reforms exercise (another name for structural adjustment) had succeeded in achieving significant reductions in poverty levels. In the budget speech, he told Parliament that "poverty has fallen from 36% in 1993-94 to 26% or less now."

Sinha obviously is oblivious to the controversy raging in the country about methods employed to arrive at poverty levels. Achin Vanaik (The Hindu, 19 March 2001) says, "The less said about the statistical-methodological mess-up of the 55th National Sample Survey Round which gives the absurd (non-comparable) figure of a 26% poverty rate, the better. The most honest and serious of economic journalists and commentators have already explained that this figure cannot be taken seriously, specially when even neo-liberal economists claim that the key determinants of poverty decline are agricultural growth rates (which have declined in the second half of the 1990s relative to the past) and food prices, which in real terms have not behaved so as to support those claiming a poverty decline."

Regardless of poverty levels, the communiqué issued at the end of the meetings of the IMF financial committee and the World Bank development committee referred to the need to strengthen the partnership of the Bank and the IMF in fighting poverty and strengthening growth in the world's poorest countries. The communiqué also pointed out that the broader fight against poverty required a two-pillar strategy. First, poor countries must take charge of their own future and create opportunities for equitable and sustainable growth and poverty with respect to their macro-economic management. It is obvious that all the developing countries are a party to this communiqué consecrating the grotesquely unequal relationship between the former colonies and the Brettonwoods twins speaking for the Group of 7.

Representatives of the Group of 24 know very well that poverty is a direct result of implementing the Bank-Fund structural reforms, which are a corollary to borrowing from these institutions. One of the conditions for lending is that the borrower-country must heavily reduce social spending and food and other subsidies meant to make the pain of poverty more bearable for the people. This and several other conditions took charge of the Indian economy when the Bank gained a foothold as the country faced a foreign exchange crisis in 1966. A Bank mission headed by Bernard Bell visited India and instantly recommended currency devaluation as a precondition for aid. Finance Minister T.T. Krishnamachari opposed this, though on becoming the Prime Minister, Indira Gandhi, new to office and the politics of global economy, agreed to a 37.5% devaluation of the Rupee.

Yet only a third of the promised aid materialised and it was the popular belief at that time that the 1967 electoral setback to the Congress was a result of caving in to the Bank diktat. Indira Gandhi angrily reacted to this development by moving closer to the Soviet Union and making self-reliance the essence of the country's economic policy. An appeal for a 5,000 crore SDR loan from the IMF in 1980 brought back the Brettonwoods twins to Delhi with greater clout. The country's external debt tripled in the eighties decade and the forex reserves sank to a new low in 1991. What happened afterwards is a familiar story, endless like the fables in the great Indian epics. When Yashwant Sinha talks of reasonable conditionalities he is being unreasonable because under the structural adjustment programmes, which epitomise the Bank-Fund conditionalities, there is no room for such reasonableness.

Harry Magdoff, editor of well-known American journal Monthly Review says, "The extension of loans does more than bring immediate profits to the lenders. It serves also as a door-opener and support for other forms of economic penetration: markets, investment opportunities, acquisition of natural resources. There is also the symbiotic relation between the bankers and their state: loans are extended as instruments of diplomacy to widen the lending nation's sphere of influence; and the state acts, when needed, directly or through an international agency to assure collection of the debt."

Under SAP, the Bank not only supervises individual sectors of the Indian economy such as agriculture, social sector and energy sector, but also monitors the entire macro-economy such as balance of payments, fiscal deficit, foreign investment etc. Public expenditure reviews are part of the Bank's conditionalities. It is useful to assess the benefits that accrued to the country as a result of IMF-Bank duo take-over of the Indian economy. Yashwant Sinha's claims notwithstanding, it is evident that the trip to Washington is in discharge of accountability to Brettonwoods administration.

Apart from the compulsions of accountability, there is also the need to seek fresh loans either for 'development' or simply to pay back the old loans. Though there has been a marginal decline in the rate of growth of external debt, it is close to US$1,00,000 crores. The per capita outstanding debt of the country is Rs.11,539 as in March 2000 of which Rs 4,332 is external debt. But, look at the cost of our debt. In 1999-2000, we paid Rs 12,677 crores towards debt servicing, Rs. 8,096 crores going towards principal and Rs. 4,581 crores towards interest. The same year we received aid flows of Rs.10,312 crores. It means what came in was less than what went out of the country by Rs. 2,365 crores. This difference for 2000-2001 was Rs. 3, 647 crores.

This phenomenon of lower inflows and higher outflows repeats every year. Our economists are delighted that some western rating agency has termed us a 'moderately indebted country.' Whether economists endorse this view or not, if India shows signs of wriggling out of the debt trap, the controllers of the IMF-Bank operations will engineer a border conflict that will neutralise the process of debt recovery. The US administration constantly pressurises the Brettonwoods institutions to design the conditionalities in such a way as to help export of its multinational capital, services, and goods. The US has a voting weightage of 17% in the IMF and no reform is possible without its consent because such resolutions need an endorsement backed by an 85% vote.

Just as the poor succumb to a fatal conviction that there is no alternative to poverty, our economists are convinced that there is no alternative to the economic models manufactured in the west. Such faith is strengthened by the exodus of our top bureaucrats like Montek Singh Ahluwalia to the IMF, a tradition pioneered by celebrities like Manmohan Singh. As long ago as 1940, Minoo Masani wrote a memorable book entitled 'Our India' which is India's first blueprint for self-reliance. Such self-respecting remedies are not acceptable to a group of vultures constituting just one percent of the country's population which siphons of all benefits of external loans and domestic growth and which claims the exclusive attention of our finance minister on a weekly basis. This group has links with elite coterie in the Group of 7 countries, both sharing an overpowering drive to appropriate the wealth of their country to the exclusion of the underclass. There is a school of economists in the country which believes that it is possible to get aid on our own terms, possible to renegotiate the loans, possible to get an audit done of receipts and payments to show how the loans had already been cleared. What the country can offer to foreign investors and creditors is what makes it possible.

Disclaimer