January 22, 2002

SOCIAL welfare is outside the threshold of the market, which is about profit. But it is indispensable to the market, as the economy cannot reproduce itself without reproducing the labour power, trained in the manner required by the capital. This labour power includes both the employed labour force and the “industrial labour army” i.e. the mass of unemployed who are qualified and available for employment. The maintenance of this reserve army is thus as much a need of the capital as is the maintenance of the machinery and other means of production.

However, while the latter are maintained by the individual capitalist directly, the task of maintaining the reserve army is that of the capitalist class as a whole, a task performed on its behalf by the state.

This gives rise to contradictions between the private capitalists and the state during the periods when rates of profit are falling. The private capital, standing in immediate need of all financial resources in order to renew the machinery etc., sees the expenditure on social welfare as a waste. The state, looking after the interests of the capitalist class as a whole, takes a longer-term view and wants to maintain the industrial reserve army as an asset upon which the capital can draw later as the production picks up.

When approached by a backward country for help with its balance of payments problem, the IMF/WB ensures first of all that the repayments, not the debts, owed to the Western banks are not interrupted. Then they apply the textbook remedy of reducing the purchasing power of the middle and lower classes, so as to release products for export. This goes to repay foreign banks and to reduce the balance of payments deficit.

Where the country soliciting the help of these agencies is in a weak position, the effects of these neo-classical policies can be devastating. The real wages in some countries seeking the help of IMF/WB fell sharply between 1980 and 1984 e.g., by 40 per cent in Tanzania, 33 per cent in Zambia and Mexico, and 24 per cent in Peru.

These international agencies were not, up to a few years back, interested in welfare activities like health, education etc, available to the population of these countries. But with the ascent of globalization, they are beginning to be concerned with them. This is understandable. If the whole globe is to be an open field for the reproduction of the western capital, the reproduction of the reserve army on the global scale cannot be ignored. However, the responsibility for its maintenance continues to be that of the Third World states concerned. The book under review studies the impact of the economic reforms undertaken by India in 1991, upon the programmes of the social sector development in two states, Maharashtra and Tamil Nadu. The Indian government had decided that these reforms would be “with a human face”, so that the social policy would be a part of redistributive ethics. However, while this was the policy of the central government, the social sector was itself under the states and so subject to their constraints.

The Indian social structure was not conducive to redistribution of benefits of growth. The percolative process awaited by the planners was nowhere to be seen and the elitist social expenditure had brought lop-sided literacy achievements. Inequality appeared to be a natural result of the capitalist development. Even the infrastructure provided by the government could not be utilized by the population because of low incomes. For example, in spite of nearly free education provided by the state, the dropout rates were high in both the states. And in both places, reliance on private education and health services was considerable.

The study shows that, while India recovered from the crisis in two years, the expenditure on the social sector declined proportionately as a result of reforms, even in these two states, which spent above the national average. What is more, what Dr Prabhu calls delivery, i.e. the actual benefit accruing to the population from state schools and dispensaries, lost some of its content.

The Indian reforms were undertaken when the economy was unable to function in the old way. Such a crisis manifests itself in the falling rates of profit and the unsustainability of the balance-of-payments gap. They call these reforms structural adjustment. But all the learned schemes of the experts and the technical language of their papers boil down to just one thing — the lowering of the real wages. The public expenditure on education, health and other social welfare measures, if any, is part of the real wages. Their contents thus must also go down proportionately if not actually.

The book has been written in technical language and will be of interest mainly to persons doing economic work or managing social welfare actvities.

 

Economic reform and social sector development: a study of two Indian states

By K. Seeta Prabhu

Sage Publications, M 32 Market, Greater Kailash 1, New Delhi-110 048

Email: marketing@indiasage.com

ISBN 0-7619-9541-2 370pp. Indian Rs550

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