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POLI 322 (3)

"South Asia and the World Economy- Transition and the Imperatives of Reform" (Vernon Hewitt) pp.206-20; 230-48

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Political Science
POLI 322
Narendra Subramanian

economic plans of nationbuilding contribute to crisis of domestic politics and pol order challenge of transforming preindependence rural agrarian societies into urban industrial ones Nepalrecently compelled to liberate its eco in line with events in Indianeoliberal trading policy Bangladeshend of civil war urgent task of developing ecofeeding rapidly growing popenvironmentally vulnerable areatrying to attract foreign investmenthanding over to the private sector previously stateowned assets Indiaemerging industrial giantagriculture employs 60 of labour forcehuge in Pakistan and Nepal as wellThe Politics of Planninggovt attempts to commercialize and transform agri sectors mobilize internal capital and savings augment eco through home market plans to mobilize domestic resources and target priority areas through bureaucratic controls to ensure investment in key areasrequired input of foreign aidIndiaplanned a large state sector to control and contain FI foreign investmentactive cooperation with private Indian capitalinclude programs to increase welfare of the poor and underprivileged in socsubstantial subsidies to the beneficiaries avoiding pol costs of increasing soc differentials caused by rapid growth without redistributionattitudes towards equity criticized as premature compromising subsequent growth rates by diluting capital across preexisting soc divisionsPakistanplanned towards the interests of private and foreign capitalno widespread nationalization until early 70s with Bhuttos Islamic socialismcommitted to virulent neoclassical view of development stressing importance of growth during Ayub Khan periodlittle direct reference to distributionapproach to development warned against the possible consequences of premature redistribution of resources to those areas of soc that save and invest little Sri Lankabetween the two extremes of India and Pakistanplanning depends on which pol party is in powerSLFP had large state sectorUNP favours privatisation and foreign investmentBangladeshbegan at Indian end of spectrumstate ownership widespread talk of redistributionafter 1975 moved towards Pakistan enddominated by foreign aid and loans and debt repaymentslate 1993 govt package aimed at increasing foreign investment and privatization The Regional Trend Towards Liberalization convergence of eco policies across SAsia since mid80s Indiasince 1991 sustained rolling back of state ownershipexport promotions deregulation of private sector collaboration with foreign companies FI intl bodies using structural adjustment programs and conditionaid programsurbanbased middle class at the heart of the complex matrix of pol patronagestateled industrialization provided a nexus of interests that supported private industrial development and sheltered it from competition with subsidies price support policies and tariffs policies of liberalization bedevilled by pol and sectional pressures policies feared by smallscale producers and small businesses that need protectionBUT growing number of large private firmsjoint stock companies who would benefit from world economy global technologies and production processes of multinationals could provide basis for first Indian transnational corporations 1986 onwards Gandhi govt faces allegations over financial kick backs involving arms deals with foreign companiesallows govt personnel to extract rents from manufacturers anxious to gain market entrycontributions to Congress electoral funds in exchange for facilitated license applications to access protected markets such corruption can also be found in Pakistan and Sri LankaPlanning vs Liberalizationissues of efficiency of resource allocation and aggregate growthrise of neoclassical orthodoxy in late 70s tied to sacred cows of comparative advantage and tradeobscure the rationale and the gains made by state planning comparison between states of SAsia and Pacific Rim eco has questioned the logic behind export pessimism and inwardoriented growth strategiesSAsia planning has been largely successful in fundamentally reorienting and restructuring colonial economiesBUT by early 80s growing evidence that bureaucratic and regulatory functions of state management outlived their usefulness Western assistance made it possible for Indian government to adopt economically unsuccessful policies and to pass antiWestern eco policies a regulated planned eco with builtin export pessimism would affect growth and suffer low levels of investment and returns The Internal Constraints National Elites and State PowerIndian economic planningefficiency jobcreation to increase the overall purchasing power of the internal market ensure pol stability existence of state sector is evidence of real commitment to socialism poor and the abolition of povertypost 1985 Congress quietly moving away from socialism under Narashima Rao want eco reforms but govt sensitive to issues of IMG involvement and vulnerable to argument of being antipoor1995 Finance Minister Singhs autumn budget with policies to eliminate povertyincreased education and rural development schemes BJP opposition had drawn attention to poverty and inequality since 1992 with antiWestern antifree trade rhetoric attempt to square populism with conditionality is problematic Reserve Bank of India cautioned govt against throw away policies World Bank ag fiscal laxityplanning and socialism also found in Pakistan and Sri Lankamuch of S Asia remains ambivalent towards intl capital because of colonial heritage images of Western dominanceBangladeshradical lefts opposition to capitalism effectively neutralizedBUT present govt of Begum Zia has several pol groups who oppose external interference and World Bank role in ecoemphasis on Islamobjections to conditionalityPakistan possible anticapitalist anticommerical tendencies of Islamic pol system could cause problems for Western investment since 1989 antiUS attitudes of govtSri Lankacriticised by intl financial agencies because failure to cut back on nondevelopmental expenditureAKA welfare policies and food subsidies labour unrest after welfare cuts and retrenchment on public sector pay planning for a free market is as complex and as necessary for planning within the state sectorabsence of planning is impossible to sustainIMF conditionsstate seeing financial help and restructuring submit eco plans for considerationencourage them to formulate longterm strategies to promote exports encourage investment developing entrepreneurial cultureThe International Imperatives World Trade and Global Productionmain motivating force towards liberalization came from within the states crisis of public financecollapse of state planning in USSR and Eastern EuropeIndia 19851990 deregulationUSIndian joint venturesreluctance to reform various antimonopolies legislation to facilitate private corporate expansion post1991 reforms more sustained because domestic and intl circumstances were so acute 1994 praise from World Bank for deepening commitment to eco reform Bank thought that necessary to eliminate povertyin the short term liberalization and restructuring required continual access to concessional and soft loanssudden emergence of weak states from USSR meant SAsias share in concessional loans declinedtransitional economies of Eastern and Central Europe more attractivenot sure that India and Pakistan can provide the necessary credits to sustain eco restructuring victims of their success US raised objections to India IMF assistancesay it no longer required concessional loans because it was now a substantial economy US reluctance to make exceptions for Indian policies on trade and development too1989 US Trade Department invoked super 301 clause of omnibus Trade Act ag India for unfair trade practicesfailure to reciprocate trade liberalizations treat India as a developed state Indian response was remarkably constrained accusations of protectionism often aimed at informal practices and distribution outlets and the use of nontariff barriers US pissed at Indias limited protection of intellectual property for US multinationals criticisms abut Indian business management procedures low levels of productivity and problems of quality control Sri Lanka has benefited from the relocation of textile and manufacturing industries from SKorea and Taiwan no guarantee that India would have access to foreign markets for nonprimary valueadded goods even if they could modernize industrialmanufacturing basesensitivity of industrialized world to allowing technological cooperation to undermine their own industrial production and tech advancement Protectionism and Tariff Barriers nontariff barriers NTBs proliferated mid70s indirect protectionism because GATT outlawed tariff structures GATT Uruguay Round extended a liberal trading regime into areas previously excluded from GATTagriculture IP rights entertainment complaint that GATT gave OECD countries unfair advantageanxieties over regionalismfear of regional trading blocs like EU NAFTA Pacific Ri
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