Stable prices, jobs for all, and high growth—basically the good life if you will—are often the stuff of policy dreams. Governments and ruling parties alike try to achieve them. But against the bedrock of real-world constraints, some meaningful, if harsh, choices have to be made.
In this respect, the Congress party is no exception. In its draft economic resolution at its 83rd plenary, the party’s bosses outlined their vision of a good life. Some of their concerns are indeed laudable. To give one example, the party asked the government to curb inflation with “candour and courage”.
The resolution, while hailing the expected 8.5-9% growth in the economy, said the government should avoid “jobless growth” and “keep its focus on creation of jobs as an important pillar of economic policy…”. It also asked the government to protect the interests of all stakeholders while formulating a comprehensive land policy and giving the poor and the downtrodden a share of profits of the industries and businesses that use land and other resources.
In theory, there can be no arguments about these proposals. The greatest welfare of the largest number is a Benthamite ideal that bears repetition. The problem is in the mechanics of achieving these dreams.
Take the issue of inflation first. In an economy where gigantic sums of money are being pumped into a 100-day guaranteed work scheme where the quality of assets under the programme is doubtful, inflationary pressures are likely, if not certain. This is because if the assets created don’t create goods (consumable or fixed) or don’t yield monetary returns, then the money in the hands of those employed will only chase a fixed amount of goods elsewhere in the economy. This will only fuel inflation. What is to be done about it? There is nothing but silence there.
Then there is the matter of profit sharing. At the moment, private firms don’t mind this. When calculating its expected profits, companies factor in political risks. In India today, the danger from Naxalism and a socialist climate, something that can lead to an expropriation and destruction of assets such as plant, equipment and land, is very real and firms don’t mind giving up a part of their profit.
That is a temporary matter, however. When the law and order situation improves and when competition, local and global, between firms leads to demands to be “freed” from these shackles, companies will no longer wish to do this. The question is, once addicted to such profit sharing, what will these communities do once companies move away? The government must first find answers to these questions before moving on a hazardous course.
The Congress’ economic vision: Real or utopian? Tell us at email@example.com