19 May 2011

Growing Consumption a Bane for India: Chandran Nair

Excerpt from The Economic Times, 16 May 2011

'Author and think-tank founder Chandran Nair is a second-generation Indian-origin Malaysian based out of Hong Kong. He made news in India a few years ago at a conference in New Delhi, where he took on American political scientist Francis Fukayama over what he calls the latter's "odd view of the world based on an inherent belief in American exceptionalism". 

Nair advocates a new model of capitalism for Asian economies—constrained capitalism-—that particularly wants governments to regulate the use of natural resources, and therefore the nature of consumption, through a range of policy tools. In his new book, Consumptionomics, he argues that the consumption-led Western economic model, which is based on under-pricing resources and externalising the true cost of goods and services, won't work in resources-constrained Asia...

What are the failures of the Western model of development and why do you think it won't work in emerging economies such as India and China? 

It is now a model of an entrenched political and economic ideology and at the same time has historical underpinnings based on colonialism and therefore global privilege with access to unlimited resources (example: colonies such as India, African nations or frontier land such as Australia). As such it does not belong in the 21st century where all the scientific evidence points to limits being surpassed on numerous fronts as the global population is set to exceed 9 billion in 2050 (it was only over 1 billion in 1900). It does not believe there are limits and this is simply a lie or, kindly put, "being in denial". It will not work in India and China because the pursuit of "more" at any cost will bring about catastrophic failure simply because there are far too many Chinese and Indians (India's population was slightly over 300 million at Independence 62 years ago and has increased almost four fold since then). For those who are not in denial, that is already all too obvious. But I must stress here as I do in the book that it does not mean they must remain poor. In fact, the book argues that the current trajectory is likely to shatter the dreams of hundreds of millions of the poor for a better life. 

You have warned the world of what you see as the worst-case scenario: Indians and the Chinese trying to consume like the Americans. As an antidote, you bring in a concept called constrained capitalism. Could you please expand on it?

I am not suggesting that we get rid of capitalism which some have lazily assumed. Nor is the book saying that the West has a free pass and Asians must now be poor. The book is very clear on this and it argues that capitalism has many elements that can be further refined for a crowded 21st century. But modern capitalism has morphed into something that seeks to benefit and thrive at every turn by under-pricing everything. You could look at the origins of capitalism in the US and argue that it even under-priced basic labour by using slaves. To various degrees that continues today in different parts of the word given how migrant labour is exploited in Asia. The focus of the book is on resource use. I am proposing that Asian governments start to reshape capitalism by making resource management the centre of all policymaking and to do this by putting in place the necessary frameworks and policies to price things properly. In a constrained world this is a fundamental shift that is needed and requires rejection of the Western consumption-led growth model where everything can be traded and has a price, but is actually under-priced to suit the needs of vested interests, industry and its lobbyists. 

What are the reforms required for the new model?

Making access to resources and the maintenance of their vitality the centre of all polices is the first step. I believe this is only possible if we have strong governments which are willing to stand up to vested interests and also the mainly Western-led international bodies which are wedded to the notion of the "globalisation of everything and anything" through free markets, free trade, the power of technology and the leveraging of finance...

To some extent, economic prosperity for the affluent classes may trickle down, but our priority should not be to make the wealthy wealthier and wait and hope for incomes to magically trickle down. We should instead focus on making resources available to more of the dis-enfranchised and thereby hopefully create more equitable (not equal) societies...

Won't 'benign authoritarianism' that you talk about rob people of their freedom? 

I use the term casually but to get my audience to understand that unless we have strong governments and we support them, we can give up any hope of solving the most pressing problems of human development because extreme capitalism will not deliver on that front. I am not advocating dictatorship. But the point is that authority is not a bad word, and that in societies there has to be some respect for the rules that allow for equal access and control overuse and regulate the way resources are used. It is in this context that I used the term and I would argue that we should have a more honest conversation about notions of freedom as currently narrowly defined with perhaps too much of a focus on democratic and political freedoms. The most basic and important freedoms and rights are those of access to food (secure and safe), water and sanitation, basic housing, education and health care. I doubt that one can honestly make a strong case for the current model of economic growth furthering these freedoms for the majority.'

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