Ofsted Rating Grades and The Consequences For Teaching

 Lucy Kellaway in The FT 

Last Monday a primary school headteacher took to Twitter and declared that Ofsted inspectors, who were due the next day, would not be let in. She invited teachers everywhere to join a protest in solidarity with Ruth Perry, the primary head who recently took her own life — her family attribute it to an Ofsted inspection that downgraded her school from outstanding to inadequate. 

Though the mass protest was called off and the inspectors duly admitted, the verdict online was damning and unanimous. End inspections! End Ofsted! — everything teachers are angry about seems to be crystallised in the tragic death. 

That morning I was in the cinema at a local shopping centre with my A-level students for a spot of business studies revision. On the screen was a question. Which was the odd one out: a) salary b) working conditions c) supervision or d) meaningful work? 

Most went for meaningful work, recognising that the others were “hygiene factors”, identified by the American psychologist Frederick Herzberg as basic requirements which, if inadequate, demotivate us and make us want to quit. Meaningful work, by contrast, is a motivator — it makes us try harder. 

So here we were: my colleague and I surrounded by teenagers in leggings and hoodies on a happy, productive day out, living proof of that motivator. Like every teacher I’ve ever met, we enjoy being with our charges (most of them, most of the time). We think helping them learn is as meaningful as a job can be. 

Yet the profession is in a sorry state. According to new figures from the NFER research body, recruitment is at least 20 per cent below target in many subjects, with vacancies running at twice pre-Covid levels. Worse, almost half of existing teachers are planning an exit within five years. 

The hygiene factors are all worsening simultaneously. Cuts in real pay and impossible workloads have brought teachers out on strike. Budget cuts in other services have left vulnerable children all but unsupported, turning us into de facto social workers. This inspection crisis seems like the last straw. 

On joining the profession I was taught to fear Ofsted. In previous schools I filled in endless curriculum spreadsheets in precisely the way the inspectorate is believed to favour — no opposition brooked — and watched supervisors trudge home every weekend to complete “Ofsted-ready” folders. I’ve lived through “mocksteds” — expensive, stressful and even more vicious than the real thing — designed to reassure stressed-out school leaders that they are prepared. 

In my current school, that call came not so long ago: Ofsted inspectors were on their way. At lunchtime one of my sixth-formers asked why her teachers were acting so oddly. Because we feel our jobs are on the line, I wanted to say. Because if we get the same treatment as Ms Perry, it will be a disaster for the school. Because we feel judged, on the back foot and exhausted — but are trying our best. 

I daresay I was acting pretty peculiar as the inspector stationed himself at the back of my class and started taking notes in an unnervingly deadpan fashion. In the end, it was without mishap. The process felt professional, the questions reasonable and the feedback fair. With hindsight, it strikes me the fear and loathing stems less from the inspection itself, than from the nonsense of summarising a complex school in a single grade — with so much at stake. 

Creating intense competition between schools may (or may not) have raised standards for students. But in many schools it has made life grim for teachers, especially senior ones. Schools bust a gut to have the best Ofsted grades and top the league tables, but those that make it can be unbearable places to work: hierarchical, workaholic factories. 

In these feted schools, where students get dazzling exam results, the teachers who quit are often not the worst, but the best. The more they are promoted, the more they are in the line of fire. A brilliant young teacher I trained with said recently that she envied me — not because of my inimitable teaching style, but because of my steadfast position on the bottom rung of the career ladder. I’m too junior to be much affected by Ofsted or bear responsibility for things outside my control. I am not entirely dependent on my teaching salary so can afford to resist the pay rise that comes with promotion. I’m largely immune from the hygiene factors — and left free to enjoy teaching average rate of return to my Year 11s. 

Changing hygiene factors is hard. The government is not fond of finding extra money. Reducing workload isn’t easy either. But sweeping away the Ofsted grades would allow teachers to remind themselves why they joined the profession: for the sake of their wonderful (and maddening) students, not a badge that says “outstanding”.

Doctors and Patients

 

Jaishankar’s problem is stark – no amount of external PR can cover up India’s truth

Freedom House and V-Dem are no gold standards of democracy rating. But Jaishankar must know that just pointing out Western hypocrisy won’t cover India’s reality writes Yogendra Yadav in The Print 



 

S Jaishankar has an unenviable task. He has been handed over the job to give a liberal gloss to a government that cannot spell l-i-b-e-r-a-l. More than manage external relations, he is here to manage external public relations, to ensure that the Narendra Modi government doesn’t get a bad international image. Now, that’s manifold more challenging than managing domestic media, mostly darbari if not outright sarkari, with a handful of carrots and sticks. So, you shouldn’t blame the hon’ble Minister of External Affairs if he occasionally botches it up.

As he did last Saturday at the India Today conclave. He was asked about India’s downgrading by two of the leading democracy rating agencies. The US-based non-government organisation Freedom House released a report that classified India as “partly free”, down from “free” earlier. Sweden-based Varieties of Democracy (V-Dem) Institute has categorised India as an “electoral autocracy”. Jaishankar was aggressive in his response: “It is hypocrisy. We have a set of self-appointed custodians of the world who find it very difficult to stomach that somebody in India is not looking for their approval, is not willing to play the game they want to play. So they invent their rules, their parameters, pass their judgements and make it look as if it is some kind of global exercise.”

Now, Jaishankar is an educated man. He must know some basic logical fallacies that any intelligent argument must avoid. Usually, at the top of that list is ad hominem, Latin for “against the man”. This happens when someone replaces logical argumentation with criticism based on personal characteristics, background or other features irrelevant to the argument at issue. One variety of ad hominem is called “tu quoque”, Latin for “you too”. It distracts from the argument by pointing out hypocrisy in the opponent. This is a logical fallacy and does not prove anything simply because even hypocrites can tell the truth. When an otherwise intelligent and educated person uses this type of argumentation, you know he is really short on logic and facts.

This is not to dispute Jaishankar’s charge of hypocrisy. Of course, Europe or North America is nobody to distribute certificates of democracy. Not just because their certificates are inevitably linked to their foreign policy and economic interests but also because their own democracy is deeply flawed. The list of autocracies that the US has spawned and supported is too long to be enumerated. Besides, Freedom House and V-Dem are no gold standards of democracy rating. Actually, there is no gold standard in this field. Any quantitative measurement or categorisation of democracy is inevitably a subjective exercise open to challenge. All rating agencies invite experts who inevitably bring their own values. There is no way to have a completely objective rating of democracy. But subjective is not arbitrary and values are not necessarily biases. If long literary essays can be evaluated in terms of quantitative marks in an examination, the same holds true for democracy. 

India craves world rankings

S. Jaishankar would know that the Freedom House and V-Dem have not invented democracy ratings or categorisations to damn his government. They have been publishing annual democracy ratings for most countries of the world for a fairly long time. He would also know that besides these two, there are other ratings such as Democracy Index by The Economist. There is also Press Freedom Index. Besides, there are reports by Amnesty International and UN Rapporteur on Human Rights. He would surely know that of late India has consistently fallen in each and every rating of democracy and has been severely indicted in human rights reports. These reports happen to have given a number and a name to what anyone who knows anything about India knows so well.

No doubt, each of these ratings is from a Western liberal understanding of what a democracy is. Yet it would stretch one’s credulity too far to suggest that all of them are into a grand conspiracy against India. It was rich of Jaishankar to claim that India was not looking for approval from the West. Facts suggest otherwise. No prime minister before Narendra Modi has held melas outside India to promote his image. No head of government was as keen to please an American president as Modi was to Donald Trump. No government has made such a song and dance about a routine Ease of Doing Business Index as this one did, a ranking that landed in a manipulation controversy. Never have Indian government officials preferred International Monetary Fund (IMF) data over India’s own statistics as during this government. No one in the world has tried to claim credit for a high score on severity of lockdown index as this government’s enthusiasts did. Ever since gaining Independence from colonial rule, no Indian government has been as craven in its need for Western certificates as this one is.

Facts, not verbiage

The only honest and intelligent way of questioning such ratings would be to counter them with facts. Jaishankar had only one fact to offer: that in India, everyone including the defeated parties accepts election results. But he forgot that the main target of this much-needed punch was Trump who was recommended to the American electorate by Modi himself. Besides, this fact only proves the fairness of counting and, at best, electoral process. It does not disprove widespread anxiety about the worsening state of civil liberties, capture of democratic institutions, erosion in the freedom of media, judiciary and other watchdogs, attack on political opponents and criminalisation of dissent in today’s India. In fact, the whole point of calling India an “electoral autocracy” is this: elections happen more or less fairly, but the country is non-democratic in between two elections. Unwittingly, Jaishankar has conceded this point.

The only other option would be to come up with an alternative way of measuring democracy. A news report says that the Ministry of External Affairs might support an independent Indian think tank to do an alternative global rating of democracies. At any other time, this should have been welcomed as an instance of the kind of intellectual ambition non-Western democracies must show. In today’s context, it is more likely to be another version of Colonel Gaddafi’s Green Book that sought to challenge the hegemony of Western political philosophy through some verbiage.

Mr Jaishankar’s attempt to clothe up the current state of Indian democracy is stark: The Emperor is naked. And no amount of words can dress it up.

The rise of dynamic and personalised pricing

Tim Walker in The Guardian


You wait 24 hours to book that flight, only to find it’s gone up by £100. You wait until Black Friday to buy that leather jacket and, sure enough, it’s been marked down. Today’s consumers are getting comfortable with the idea that prices online can fluctuate, not just at sale time, but several times over the course of a single day. Anyone who has booked a holiday on the internet is familiar with the concept, if not with its name. It’s known as dynamic pricing: when the cost of goods or services ebbs and flows in response to the slightest shifts in supply and demand, be it fresh croissants in the morning, a bargain TV or an Uber during a late-night “surge”.

Sports teams, entertainment venues and theme parks have started to use dynamic pricing methods, too, taking their cues from airlines and hotels to calibrate a range of ticketing deals that ensure they fill as many seats as possible. Last month, Regal, the US cinema chain, announced it would trial a form of dynamic ticket pricing at many of its multiplexes in 2018, in the hope of boosting its box office revenue. Digonex, one of the leading dynamic ticketing firms in the US, has consulted for Derby County and Manchester City football clubs in the UK. “In five years, dynamic pricing will be common practice in the attractions space,” says the company’s CEO, Greg Loewen. “The same goes for many other industries: movies, parking, tour operators.” Amazon, the world’s largest online retailer, tweaks countless prices every day. Savvy shoppers have learned to wait for bargains with the help of other sites such as CamelCamelCamel.com, which analyses Amazon price drops and lists the biggest. On a single day on Amazon.co.uk last week, those included a Samsung Galaxy S7 phone, down 14% from £510.29 to £439, and a pack of six 300g jars of Ovaltine, down 33% from £17.94 to £12.

Physical retailers can’t match the agility of their online rivals, not least because changing prices requires altering labels. But “smart shelves” – already common in European supermarkets – are coming to the UK, with digital price displays that allow retailers to offer deals at different times of day, along with information about the products. Sainsbury’s, Morrisons and Tesco have all trialled electronic pricing systems in select stores. Marks & Spencer conducted an electronic pricing experiment last year, selling sandwiches more cheaply during the morning rush hour to encourage commuters to buy their lunch early.

Toby Pickard, senior innovations and trends analyst at the grocery research firm IGD, says this new technology will benefit retailers by enabling them “to gain more data about the products they sell; for example, they can closely gauge how prices fluctuating throughout the day may alter shoppers’ purchasing habits, or if on-shelf digital product reviews increase sales.” IGD’s research suggests there is an appetite for this sort of tech from consumers, too. For example, says Pickard: “Four in 10 shoppers say they are interested in being alerted to offers on their phone while in-store.”

FacebookTwitterPinterest M&S experimented with pricing to encourage commuters to buy their lunch early. Photograph: Luke Johnson/Commissioned for The Guardian

Earlier this year, the Luxembourg-based computer firm SES took a majority stake in the Irish software firm MarketHub. Together, they are bringing data analysis and smart-shelf-style systems to some 14,000 stores in 54 countries including the UK. MarketHub says two Spar stores in London have succeeded in raising revenue and decreasing waste since introducing its technology. For the firm’s CEO Roy Horgan, though, there’s a big difference between what MarketHub offers and dynamic pricing per se. “I don’t see dynamic pricing happening in major retailers,” he says. “Supermarkets have huge, complicated logistics systems. They can’t react in real time to what’s going in their stores the way Amazon can. [Physical retailers] want to discount, to have more relevant deals, fewer promotions, better value and more customer loyalty. That’s not about changing the price of individual products, it’s more about changing deals.”

As examples, Horgan suggests offering cheap lunch deals in the morning (à la M&S), so that workers don’t have to queue up at lunchtime, or guiding shoppers with limited budgets to discounted ingredients for an evening meal. “That’s not dynamic pricing,” he says. “It’s just agile retail.”

A recent survey of US consumers by Retail Systems Research (RSR) found that 71% didn’t care for the idea of dynamic pricing, though millennials were more amenable to the concept, with 14% of younger shoppers saying they “loved” it. Perhaps that ought not to be surprising, given the younger generation’s greater familiarity with browsing for bargains online.

“Consumers always love it when they can get a great deal, and dynamic pricing isn’t just about raising prices – it often leads to lowering them,” says Loewen. “In general, we have found that when prices are transparent to consumers and they understand the ‘rules of the game’, they adapt to dynamic pricing fairly seamlessly and even embrace it.”

Simon Read, a money and personal finance writer, says: “If you’re desperate for an item and it’s the last available, you are likely to pay a premium when dynamic pricing comes into play.” But dynamic pricing can also play to the consumer’s benefit, he explains.

“The truth is that retailers want to flog their wares at whatever price they can get. If you want to take advantage of dynamic pricing, you’ll need to find out when retailers are desperate to sell. In bricks-and-mortar stores that means shopping at quiet times – in the morning – or waiting until closing time when grocers need to clear their shelves.” If you’re shopping online, Read says, research the normal price of an item before buying it, so as not to be caught out. “It’s also a good idea to leave things in your shopping basket at most online retailers rather than buying immediately. After a day or two, you will often get an email offering a decent reduction.”

Those consumers who are suspicious of dynamic pricing may also be confusing it with (the far more controversial) personalised pricing, whereby specific customers are asked to pay different amounts for the same product, tailored to what the retailer thinks they can and will spend – using personal data points that might one day include, for instance, our credit rating. In 2014, the US Department of Transportation approved a system allowing airlines and travel companies to collect passengers’ data to present them with “personalised offerings” based on their address, their marital status, their birthday and their travel history. It’s not hard to imagine that the fares you are offered might be higher than for others if, say, you live in an affluent postcode and your husband’s birthday is coming up.

 Airlines use dynamic pricing on flight tickets. Photograph: Easyjet

In 2012, the travel site Orbitz was found to be adjusting its prices for users of Apple Mac computers, after finding that they were prepared to spend up to 30% more on hotel rooms than other customers. That same year, the Wall Street Journal revealed that the Staples website offered products at different pricesdepending on the user’s proximity to rival stores. In 2014, a study conducted by Northeastern University in Boston found that several major e-commerce sites such as Home Depot and Walmart were manipulating prices based on the browsing history of individual customers. “Most people assume the internet is a neutral environment like the high street, where the price you see is the same as the one everyone else sees,” says Ariel Ezrachi, director of the University of Oxford Centre for Competition Law and Policy. “But on the high street you’re anonymous; online, the seller has information about you, and about your other buying options.”

Dynamic pricing, says Ezrachi, is simply a way for businesses to respond nimbly to market trends, and thus is within the bounds of what consumers already accept as market dynamics. “Personalised pricing is much more problematic. It’s based on asymmetricity of information; it’s only possible because the shopper doesn’t know what information the seller has about them, and because the seller is able to create an environment where the shopper believes they are seeing the market price.”

The ethics of pricing based on an individual’s personal data are vexed: some consumers will find it manipulative and insist on its regulation; others may feel it’s fair – socially beneficial, even – to charge wealthy customers more for a product or service. “You will find people arguing in different directions,” Ezrachi says. Loyalty cards have long enabled supermarkets and other major retailers to offer personalised offers based on the spending habits of repeat customers. B&Q has tested electronic price tags that display different prices to different customers using information gleaned from their phones (the company made clear that their intention was to “reward regular customers with discounts”, not to raise the price for more profligate shoppers). In the US, Coca-Cola and Albertsons supermarkets have experimented with targeting shoppers in-store by sending personalised offers to their phones when they approach the soft drinks aisle in an Albertsons store.

Horgan resists the idea that supermarkets will embrace personalised pricing. “In the airline industry, we have more freedom, information and choice on airlines than we’ve ever had before, and that is all dynamic-pricing led. But nobody’s loyal to Ryanair; they’re loyal to the deal. Retail is different,” he says. “If I have five pounds in my pocket and a family of four to feed, I want to know I can generate a recipe that is nutritious for them, and I want an app that can navigate me around the store to find a deal on [the necessary ingredients]. To me, that is personalised retail. But any [bricks and mortar] retailer who charges different prices to different people for the same product is an idiot. They’re only going to lose loyalty.”

Loewen agrees that personalised pricing carries as many dangers as opportunities for retailers. “Consumers are more empowered and informed than ever before, and any pricing strategy that seeks to fool or mislead them is unlikely to be successful for long,” he says. Nevertheless, in the dawning era of dynamic pricing, personalised pricing and agile retailing, the days of fixed prices seem to be coming to an end. And although the technology may be more advanced, in some ways dynamic pricing is simply a return to the days long before supermarkets, when traders would judge how high or low a price to haggle from a customer based on factors as simple as the sound of their accent, or the cut of their cloak.

World’s largest hedge fund to replace managers with artificial intelligence

Olivia Solon in The Guardian


The world’s largest hedge fund is building a piece of software to automate the day-to-day management of the firm, including hiring, firing and other strategic decision-making.

Bridgewater Associates has a team of software engineers working on the project at the request of billionaire founder Ray Dalio, who wants to ensure the company can run according to his vision even when he’s not there, the Wall Street Journal reported.

“The role of many remaining humans at the firm wouldn’t be to make individual choices but to design the criteria by which the system makes decisions, intervening when something isn’t working,” wrote the Journal, which spoke to five former and current employees.

 

Ray Dalio, president and founder of Bridgewater Associates. Photograph: Bloomberg/Bloomberg via Getty Images

The firm, which manages $160bn, created the team of programmers specializing in analytics and artificial intelligence, dubbed the Systematized Intelligence Lab, in early 2015. The unit is headed up by David Ferrucci, who previously led IBM’s development of Watson, the supercomputer that beat humans at Jeopardy! in 2011.

The company is already highly data-driven, with meetings recorded and staff asked to grade each other throughout the day using a ratings system called “dots”. The Systematized Intelligence Lab has built a tool that incorporates these ratings into “Baseball Cards” that show employees’ strengths and weaknesses. Another app, dubbed The Contract, gets staff to set goals they want to achieve and then tracks how effectively they follow through.

These tools are early applications of PriOS, the over-arching management software that Dalio wants to make three-quarters of all management decisions within five years. The kinds of decisions PriOS could make include finding the right staff for particular job openings and ranking opposing perspectives from multiple team members when there’s a disagreement about how to proceed.

The machine will make the decisions, according to a set of principles laid out by Dalio about the company vision.

“It’s ambitious, but it’s not unreasonable,” said Devin Fidler, research director at the Institute For The Future, who has built a prototype management system called iCEO. “A lot of management is basically information work, the sort of thing that software can get very good at.”

Automated decision-making is appealing to businesses as it can save time and eliminate human emotional volatility.

“People have a bad day and it then colors their perception of the world and they make different decisions. In a hedge fund that’s a big deal,” he added.

Will people happily accept orders from a robotic manager? Fidler isn’t so sure. “People tend not to accept a message delivered by a machine,” he said, pointing to the need for a human interface.

“In companies that are really good at data analytics very often the decision is made by a statistical algorithm but the decision is conveyed by somebody who can put it in an emotional context,” he explained.

Futurist Zoltan Istvan, founder of the Transhumanist party, disagrees. “People will follow the will and statistical might of machines,” he said, pointing out that people already outsource way-finding to GPS or the flying of planes to autopilot.

However, the period in which people will need to interact with a robot manager will be brief.

“Soon there just won’t be any reason to keep us around,” Istvan said. “Sure, humans can fix problems, but machines in a few years time will be able to fix those problems even better.

“Bankers will become dinosaurs.”

It’s not just the banking sector that will be affected. According to a report by Accenture, artificial intelligence will free people from the drudgery of administrative tasks in many industries. The company surveyed 1,770 managers across 14 countries to find out how artificial intelligence would impact their jobs.

'This is awful': robot can keep children occupied for hours without supervision



“AI will ultimately prove to be cheaper, more efficient, and potentially more impartial in its actions than human beings,” said the authors writing up the results of the survey in Harvard Business Review.

However, they didn’t think there was too much cause for concern. “It just means that their jobs will change to focus on things only humans can do.”

The authors say that machines would be better at administrative tasks like writing earnings reports and tracking schedules and resources while humans would be better at developing messages to inspire the workforce and drafting strategy.

Fidler disagrees. “There’s no reason to believe that a lot of what we think of as strategic work or even creative work can’t be substantially overtaken by software.”

However, he said, that software will need some direction. “It needs human decision making to set objectives.”
Bridgewater Associates did not respond to a request for comment.

Abolishing Annual Performance Appraisal

Lillian Cunningham in The Independent

As of September, one of the largest companies in the world will do all of its employees and managers an enormous favor: It will get rid of the annual performance review.

Accenture CEO Pierre Nanterme told The Washington Post that the professional services firm, which employs hundreds of thousands of workers in cities around the globe, has been quietly preparing for this “massive revolution” in its internal operations.

“Imagine, for a company of 330,000 people, changing the performance management process—it’s huge,” Nanterme said. “We’re going to get rid of probably 90 percent of what we did in the past.”

The firm will disband rankings and the once-a-year evaluation process starting in fiscal year 2016, which for Accenture begins this September. It will implement a more fluid system, in which employees receive timely feedback from their managers on an ongoing basis following assignments.

Accenture is joining a small but prominent list of major corporations that have had enough with the forced rankings, the time-consuming paperwork and the frustration engendered among managers and employees alike. Six percent of Fortune 500 companies have gotten rid of rankings, according to management research firm CEB.

These companies say their own research, as well as outside studies, ultimately convinced them that all the time, money and effort spent didn't ultimately accomplish their main goal — to drive better performance among employees.

In March, the consulting and accounting giant Deloitte announced that it was piloting a new program in which, like at Accenture, rankings would disappear and the evaluation process would unfold incrementally throughout the year. Deloitte is also experimenting with using only four simple questions in its reviews, two of which simply require yes or no answers.

Microsoft did away with its rankings nearly two years ago, attracting particular attention since it had long evangelized about the merits of its system that judged employees against each other. Adobe, Gap and Medtronic have also transformed their performance-review process.

“All this terminology of rankings—forcing rankings along some distribution curve or whatever—we’re done with that,” Nanterme said of Accenture's decision. “We’re going to evaluate you in your role, not vis à vis someone else who might work in Washington, who might work in Bangalore. It’s irrelevant. It should be about you.”

Though many major companies still haven’t taken the leap, most are aware that their current systems are flawed. CEB found that 95 percent of managers are dissatisfied with the way their companies conduct performance reviews, and nearly 90 percent of HR leaders say the process doesn’t even yield accurate information.

“Employees that do best in performance management systems tend to be the employees that are the most narcissistic and self-promoting,” said Brian Kropp, the HR practice leader for CEB. “Those aren’t necessarily the employees you need to be the best organization going forward.”

Brain research has shown that even employees who get positive reviews experience negative effects from the process. It often triggers disengagement, and constricts our openness to creativity and growth.

CEB also found that the average manager spends more than 200 hours a year on activities related to performance reviews—things like sitting in training sessions, filling out forms and delivering evaluations to employees. When you add up those hours, plus the cost of the performance-management technology itself, CEB estimates that a company of about 10,000 employees spends roughly $35 million a year to conduct reviews.

“The process is too heavy, too costly for the outcome,” Nanterme said. “And the outcome is not great.”

Interestingly, though, the decision to roll out an updated approach usually has little to do with reining in those numbers. Kropp said companies aren’t likely to save much time or money by transitioning away from their old ratings systems to a new evaluation process. Where they stand to benefit is, instead, the return on those investments. “The smartest companies are asking, how do we get the best value out of the time and money we are spending?” Kropp said.

That’s the question Accenture posed to itself. And its answer was that performance management had to change from trying to measure the value of employees’ contribution after the fact. It needed instead to regularly support and position workers to perform better in the future.

“The art of leadership is not to spend your time measuring, evaluating,” Nanterme said. “It’s all about selecting the person. And if you believe you selected the right person, then you give that person the freedom, the authority, the delegation to innovate and to lead with some very simple measure.”

Fitch downgrades Argentina and predicts default

Credit rating agency Fitch has downgraded Argentina, which is locked in a court battle in New York over its debt, and said the country would probably default.

Also read Ratings Agencies - The Power of Modern Day Astrologers

Also read How could Greece and Argentina – the new 'debt colonies' – be set free?

Fitch also said that Argentina's economy has slowed sharply this year Photo: AFP

11:55PM GMT 27 Nov 2012

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Fitch cut its long-term rating for Argentina to "CC" from "B," a downgrade of five notches, and cut its short-term rating to "C" from "B". A rating of "C" is one step above default, AP reported.

US judge Thomas Griesa of Manhattan federal court last week ordered Argentina to set aside $1.3bn for certain investors in its bonds by December 15, even as Argentina pursues appeals.

Those investors don't want to go along with a debt restructuring that followed an Argentine default in 2002. If Argentina is forced to pay in full, other holders of debt totaling more than $11bn are expected to demand immediate payment as well.

Argentine politicians, even those opposed to President Cristina Fernandez, have nearly unanimously criticized the judge's ruling as threatening the success of the debt relief that enabled Argentina to grow again.

Ratings by agencies like Fitch are used by investors to evaluate the safety of a country's debt. Lower ratings can make it more expensive for countries to borrow money on the bond market, exacerbating their financial problems. 

Argentina is in a deepening recession and is grappling with social unrest. Besides the court case, Fitch cited a "tense and polarized political climate" and public dissatisfaction with high inflation, weak infrastructure and currency.

Fitch also said that Argentina's economy has slowed sharply this year.

Of the two other major rating agencies, Standard & Poor's has a rating of "B-" for Argentina, five steps above default, and Moody's rates it "B3 negative", also five steps above default.

To secure credit, Europe finds global financial markets no longer attuned to Western interests

Joergen Oerstroem Moeller 

The eurozone crisis has not only raised questions about the viability of the common currency, but could also jeopardize an economic model that has so far reigned supreme. The course taken to resolve the crisis in Europe will have long-term impact on the most vibrant parts of the world – from Asia to Latin America.

In developed countries of the West, debtors have run up a high debt ratio to gross domestic product, even while economic growth was high – overspending when they should have saved. They borrowed to spend more, demonstrating a disastrous failure to grasp basic economic principles as well as flaws in moral behaviour and ethical judgment. Among these borrowers are established heavyweights – the United States, most European nations and Japan. The United States, one of the wealthiest countries, became an importer of capital instead of exporting capital, registering its last balance vis-à-vis the rest of the world in 1991.

After accumulating savings over several decades through prudent and cautious policies, the creditors sit on a large pile of reserves with low domestic debt and government deficits. These reserves are largely held by emerging countries with China at the forefront. As a paradox, the emerging economies have taken it upon themselves to lend to the richer countries – exporting capital almost as vendor’s credit. Indeed, this reversal of roles is one explanation for the global financial crisis. The global monetary system is not geared to function under such circumstances.

This development was framed by the so-called Washington Consensus of the 1980s – a neoliberal formula that spurred globalisation by promoting liberalization of trade, interest rates and foreign direct investment; privatisation and deregulation; as well as competitive exchange rates and fiscal discipline. Fundamental flaws were exposed, raising the question about which economic model might replace it.

There are two possibilities in this competition: One strategy is from the United States and a group of Democrats who suggest that more short-term borrowing and spending could lead to growth, tax revenues and exit from recession – even if the debt grows and deficits become permanent. A breakthrough by the US Congressional super-committee to make substantial cuts over the next 10 years won’t fundamentally change this stance, merely reducing rather than eliminating the deficit. The Europeans have taken the opposite view: They advocate starting the recovery by reducing deficits and debt even if that seems counterproductive for economic growth in the short run. The Europeans are also raising taxes across the board, regarded as indispensable for restoring balance in government budgets.

The results of either plan won’t be known for a few years. Chances are, however, that the European policy will carry the day for the simple reason that creditors call the tune. It’s highly unlikely that creditors favour continued reliance on deficits as the inevitable consequence will be inflation, eroding the purchasing power of their reserves. Indeed, the Chinese rating agency Dagong has announced that it may cut the US sovereign rating for the second time since August if the US conducts a third round of quantitative easing.

Early in the crisis, as Europe set up a stabilizing bailout fund, there were rumours in the market that China, Russia and Japan might rescue of the euro, either by buying European bonds or going through the International Monetary Fund. It’s unclear how China wants to proceed with such an undertaking, but Russia and Japan have allegedly acted to do that through the International Monetary Fund or by buying European bonds.

Countries with surpluses do not dream of rescuing the euro; they act in their own interest. Economically they prefer the European fiscal discipline, reasoning that American prodigality will shift much burden of adjustment onto them. They may dread being left with the US dollar as the only major international currency, forcing them to endure, at times, whimsical policy decisions by the Federal Reserve System, the US Treasury Department or US Congress. The euro and the European Union are seen, and indeed needed, as a counterweight. The EU may look weak, but it’s a respectable global partner, offering the euro as an alternative to the dollar and serving as a major player in trade negotiations and the debate about global warming, just to mention a few examples.

It can be expected that other nations will step forward to support the euro. But at what price? What conditions, if any, will be put on the table and will the Europeans consent? A case can be made that, as creditors undertake investments to help the euro, they actually help themselves, and there are no reasons why the eurozone should pay any price. We can expect a game of hardball, in which nerves matters, and who gives what to whom may not be clear at all.

Another question has arisen about who decides and who is in charge. The G20 meeting in Cannes revealed a growing consensus to stop the financial houses amassing and subsequently abusing power. If the global financial system is big enough to force Italy into a default-like situation, many countries are surely asking whether they’ll be next. The big financial houses are viewed by many as irresponsible stakeholders, if stakeholders at all. Consider, the US government is suing 18 banks for selling US$ 200 billion in toxic mortgage-backed securities to government-sponsored firms, the Federal National Mortgage Association and the Federal Home Mortgage Corporation, known as Fannie Mae and Freddie Mac. In April 2011 the European Commission initiated investigations into activities of 16 banks suspected of collusion or abuse of possible collective dominance in a segment of the market for financial derivatives.

The market has muscled its way in as judge about whether a country’s political system or economic policy are good enough. But the market is neither a single institution nor a broad, balanced mix of diverse players. It’s become a small group of large financial institutions, the power of which overwhelm what even big countries can muster: 147 institutions directly or indirectly control 40 percent of global revenue among private corporations. A sore point is that they pursue profits without concern over implications for countries and societies. Rather than let measures work, these financiers force the issue here and now, even as they speculate against efforts, many admittedly delayed and inadequate, to resolve debt crises. Financial institutions holding sovereign bonds that could default insure themselves by buying a credit default swaps. What seems like prudent corporate governance becomes a shell game as these obligations are traded among financial institutions, some of which don’t hold sovereign bonds in their portfolios – all of which heightens interest in forcing default.

The temptation to roll back economic globalisation inter alia by breaking up the eurozone or restricting capital movements has been resisted. Economic globalisation is holding firm.

Creditor countries can set the course on future economic policies – likely highlighting fiscal discipline. While the West had vested interest in the big financial houses, the incoming paymasters do not, and they can be expected to increase their control over investment patterns. This can be done either by setting up own financial houses or buying into Western financial institutions as was the case in the slipstream of the 2008 global debt crisis.

The global financial market is changing course, away from looking after Western interests and acting in accordance with corporate governance as defined by the West toward a more global outlook guided by the interests of new group of creditors.

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Joergen Oerstroem Moeller is a visiting senior research fellow, Institute of Southeast Asian Studies, Singapore, and adjunct professor, Singapore Management University and Copenhagen Business School.

Putting Growth In Its Place

It has to be but a means to development, not an end in itself

Jean Dreze ,  Amartya Sen

Is India doing marvellously well, or is it failing terribly? Depending on whom you speak to, you could pick up either of those answers with some frequency. One story, very popular among a minority but a large enough group—of Indians who are doing very well (and among the media that cater largely to them)—runs something like this. “After decades of mediocrity and stagnation under ‘Nehruvian socialism’, the Indian economy achieved a spectacular take-off during the last two decades. This take-off, which led to unprecedented improvements in income per head, was driven largely by market initiatives. It involves a significant increase in inequality, but this is a common phenomenon in periods of rapid growth. With enough time, the benefits of fast economic growth will surely reach even the poorest people, and we are firmly on the way to that.” Despite the conceptual confusion involved in bestowing the term ‘socialism’ to a collectivity of grossly statist policies of ‘Licence raj’ and neglect of the state’s responsibilities for school education and healthcare, the story just told has much plausibility, within its confined domain.

But looking at contemporary India from another angle, one could equally tell the following—more critical and more censorious—story: “The progress of living standards for common people, as opposed to a favoured minority, has been dreadfully slow—so slow that India’s social indicators are still abysmal.” For instance, according to World Bank data, only five countries outside Africa (Afghanistan, Bhutan, Pakistan, Papua New Guinea and Yemen) have a lower “youth female literacy rate” than India (World Development Indicators 2011, online). To take some other examples, only four countries (Afghanistan, Cambodia, Haiti, Myanmar and Pakistan) do worse than India in child mortality rate; only three have lower levels of “access to improved sanitation” (Bolivia, Cambodia and Haiti); and none (anywhere—not even in Africa) have a higher proportion of underweight children. Almost any composite index of these and related indicators of health, education and nutrition would place India very close to the bottom in a ranking of all countries outside Africa.

Growth and Development

So which of the two stories—unprecedented success or extraordinary failure—is correct? The answer is both, for they are both valid, and they are entirely compatible with each other. This may initially seem like a bit of a mystery, but that initial thought would only reflect a failure to understand the demands of development that go well beyond economic growth. Indeed, economic growth is not constitutively the same thing as development, in the sense of a general improvement in living standards and enhancement of people’s well-being and freedom. Growth, of course, can be very helpful in achieving development, but this requires active public policies to ensure that the fruits of economic growth are widely shared, and also requires—and this is very important—making good use of the public revenue generated by fast economic growth for social services, especially for public healthcare and public education.

The minority of the better-off forgets that even after 20 years of growth, India’s among the world’s poorest nations.

We referred to this process as “growth-mediated” development in our 1989 book, Hunger and Public Action. This can indeed be an effective route to a very important part of development; but we must be clear about what can be achieved by fast economic growth on its own, and what it cannot do without appropriate social supplementation. Sustainable economic growth can be a huge force not only for raising incomes but also for enhancing people’s living standards and the quality of life, and it can also work very effectively for many other objectives, such as reducing public deficits and the burden of public debt. These growth connections do deserve emphasis, not only in Asia, Africa and Latin America, but also very much in Europe today, where there has been a remarkable lack of understanding of the role of growth in solving problems of debt and deficit. There is a tendency to concentrate only on draconian restrictive policies to cut down public expenditure, no matter how essential and no matter how these policies kill the goose that lays the golden egg of economic growth. There is a neglect of the role of economic growth in economic and financial stability in the European debate, with its focus only on cutting public expenditure to satisfy the market and to obey the orders of credit rating agencies.
Yet it is also important to recognise that the impact of economic growth on living standards is crucially dependent on the nature of the growth process (for instance, its sectoral composition and employment intensity) as well as of the public policies—particularly relating to basic education and healthcare—that are used to enable common people to share in the process of growth. There is also, in India, an urgent need for greater attention to the destructive aspects of growth, including environmental plunder (e.g. through razing of forests, indiscriminate mining, depletion of groundwater, drying of rivers and massacre of fauna) and involuntary displacement of communities—particularly adivasi communities—that have strong roots in a particular ecosystem.

The European debate focuses only on curbing public spend, ignoring the role of economic growth in financial stability.

India’s growth achievements are indeed quite remarkable. According to official data, per capita income has grown at a compound rate of close to five per cent per year in real terms between 1990-91 and 2009-10. The more recent rates of expansion are faster still: according to Planning Commission estimates, the growth rate of GDP was 7.8 per cent in the Tenth Plan period (2002-03 to 2006-07) and is likely to be around 8 per cent in the Eleventh Plan period (2007-08 to 2011-12). The “advance estimate” for 2010-11 is 8.6 per cent. These are, no doubt, exceptional growth rates—the second-highest in the world, next to China. These dazzling figures are, understandably, causing some excitement, and were even described as “magic numbers” by no less than Lord Meghnad Desai, who argued, not without irony, that whatever else happens, “the government can still sit back and say 8.6 per cent”. 

India does need rapid economic growth, if only because average incomes are so low that they cannot sustain anything like reasonable living standards, even with extensive income redistribution. Indeed, even today, after 20 years of rapid growth, India is still one of the poorest countries in the world, something that is often lost sight of, especially by those who enjoy world-class living standards thanks to the inequalities in the income distribution. According to World Development Indicators 2011, only 16 countries outside Africa had a lower “gross national income per capita” than India in 2010: Afghanistan, Bangladesh, Cambodia, Haiti, Iraq, Kyrgyzstan, Lao, Moldova, Nepal, Nicaragua, Pakistan, Papua New Guinea, Tajikistan, Uzbekistan, Vietnam and Yemen. This is not exactly a club of economic superpowers.

Bangladesh and Nepal do not have India’s per capita income but have vastly improved indices.

Having said this, it would be a mistake to “sit back” and rely on economic growth per se to transform the living conditions of the unprivileged. Along with our discussion of “growth-mediated” development, in an earlier book, we also drew attention to the pitfalls of “unaimed opulence”—the indiscriminate pursuit of economic expansion, without paying much attention to how it is shared or how it affects people’s lives. A good example, at that time (in the late 1980s), was Brazil, where rapid growth went hand in hand with the persistence of massive deprivation. Contrasting this with a more equitable growth pattern in South Korea, we wrote “India stands in some danger of going Brazil’s way, rather than South Korea’s”. Recent experience vindicates this apprehension. Interestingly, in the meantime, Brazil has substantially changed course, and adopted far more active social policies, including a constitutional guarantee of free and universal healthcare as well as bold programmes of social security and economic redistribution (such as Bolsa Familia). This is one reason why Brazil is now doing quite well, with, for instance, an infant mortality rate of only 9 per 1,000 (compared with 48 in India), 99 per cent literacy among women aged 15-24 years (74 per cent in India), and only 2.2 per cent of children below five being underweight (compared with a staggering 44 per cent in India). While India has much to learn from earlier experiences of growth-mediated development elsewhere in the world, it must avoid unaimed opulence—an undependable, wasteful way of improving the living standards of the poor.

India’s Decline in South Asia

One indication that something is not quite right with India’s development strategy is the fact that India has started falling behind every other South Asian country (with the partial exception of Pakistan) in terms of social indicators, even as it is doing so well in terms of per capita income (see table below).

Seeing its neighbours, India’s poor could well wonder what economic growth has got them.

The comparison between Bangladesh and India is a good place to start. During the last 20 years or so, India has grown much richer than Bangladesh: per capita income was estimated to be 60 per cent higher in India than in Bangladesh in 1990, and 98 per cent higher (about double) in 2010. But during the same period, Bangladesh has overtaken India in terms of a wide range of basic social indicators: life expectancy, child survival, fertility rates, immunisation rates, and even some (not all) schooling indicators such as estimated “mean years of schooling”. For instance, life expectancy was estimated to be four years longer in India than in Bangladesh in 1990, but it had become three years shorter by 2008. Similarly, the child mortality rate was estimated to be about 24 per cent higher in Bangladesh than in India in 1990, but it was 24 per cent lower in Bangladesh in 2009. Most social indicators now look better in Bangladesh than in India, despite Bangladesh having barely half of India’s per capita income.

No less intriguing is that Nepal also seems to be catching up rapidly with India, and even overtaking India in some respects. Around 1990, Nepal was way behind India in terms of almost every development indicator. Today, social indicators for both countries are much the same (sometimes a little better in India still, sometimes the reverse), in spite of per capita income in India being about three times as high as in Nepal.

To look at the same issue from another angle, Table 2 displays India’s “rank” among South Asia’s six major countries (excluding tiny Maldives), around 1990 as well as today (more precisely, in the latest year for which comparable international data are available). As expected, in terms of per capita income, India’s rank has improved—from fourth (after Bhutan, Pakistan and Sri Lanka) to third (after Bhutan and Sri Lanka). But in most other respects, India’s rank has worsened, in fact, quite sharply in many cases. Overall, India had the best social indicators in South Asia in 1990, next to Sri Lanka, but now looks second-worst, ahead of only Pakistan. Looking at their South Asian neighbours, the Indian poor are entitled to wonder what they have gained—at least so far—from the acceleration of economic growth.

India and China

One of the requirements of successful growth-mediated development is the skilful use of the opportunities provided by increasing public revenue. There are interesting and important contrasts in the policies followed by different countries in this respect. Since China is often cited by advocates of a single-minded focus on economic growth, it is interesting to compare what China does with what India has been doing. China makes much better use of the opportunities offered by high economic growth to expand public resources for development purposes. For example, government expenditure on healthcare in China is nearly four times that in India (after adjusting for “purchasing power parity”—the gap is even larger otherwise). China does, of course, have a larger population and a higher per capita income than India, but even as a ratio of GDP, public expenditure on health is much higher in China (about 2.3 per cent) than in India (around 1.4 per cent).

The RTI Act may not apply to information with private corporations but it can help contain the state-corporate nexus.

As Table 1 illustrates, China has much higher values of most social indicators of living standards, such as life expectancy (73 years in China and 64 years in India), infant mortality rate (16 per thousand in China and 48 in India), mean years of schooling (estimated to be 7.6 years in China, compared with only 4.4 years in India), or the coverage of immunisation (very close to universal in China but only around two-thirds in India, for DPT and measles). While India has nearly caught up with China in terms of the rate of economic growth, it seems quite far behind China in terms of the use of public resources for social support, and correspondingly, it has not done nearly as well in translating growth into rapid progress of social indicators. While there are also, undoubtedly, other factors behind the China-India contrast, the differing use of the fruits of growth for social support would seem to be an important influence in this contrasting picture.

It is not at all our purpose to argue that India should learn from China in every respect. India has reasons to value its democratic institutions. Even with all their limitations, these institutions allow for a wide variety of voices to be heard, and facilitate significant opportunities for various forms of public participation in governance. There are, of course, many failings of Indian democracy (which we have discussed in our writings), but there are big democratic achievements as well, and also the hindrances can be addressed through democratic battles to remove them. If China officially executes more people in a week than India has done since Independence (and this is true of a shockingly large number of weeks every year in China), this comparison, like many others involving legal and human rights of citizens, is not to India’s disadvantage. If there is something to learn from China, especially about how to ensure that the fruits of economic growth are more widely shared, then that is a case for learning from what there is to learn, not a case for blind imitation.

Not even one of the 315 editors and senior leaders of the print and electronic media in a survey were SC or ST.

The China-India contrast does, however, raise another interesting question: could it be that India’s democratic system is a barrier to using the fruits of economic growth for the purpose of enhancing health, education and other aspects of “social development”? In addressing this question, there is some possibility of a sense of nostalgia. When India had a very low rate of economic growth, a common argument coming from the critics of democracy was that democracy was hostile to fast economic growth. It was hard, at that time, to convince the anti-democratic advocates that fast economic growth depends on the friendliness of the economic climate, rather than on the fierceness of political systems. That debate on the alleged contradiction between democracy and economic growth has now ended (not least because of the high economic growth rates of democratic India), but a similar scepticism about democracy seems to be now emerging, suggesting an alleged inability of democratic systems to pursue public health, public education and other socially supportive arrangements.

It is important in this context to understand how democratic decisions emerge and how policies get adopted. What a democratic system achieves depends greatly on the issues that are politicised, which contributes to their advancement. Some issues are extremely easy to politicise, such as the calamity of a famine—and as a result famines tend to stop abruptly with the establishment of a democratic political system. But other issues—less spectacular and less immediate—present a much harder challenge. Using democratic means for remedying inadequate coverage of public healthcare, non-extreme undernourishment, or inadequate opportunities for school education demands more from democratic practice—more vigour and much more range.

India-China comparison tends to focus on the horse race of relative rates of overall growth.

Authoritarian systems can change their policies very quickly, when the leaders want that, and it is to the credit of the Chinese political leaders that they have focused so much on social interventions in education, healthcare and other supportive mechanisms to advance the quality of life of the Chinese people. But authoritarianism does not, of course, provide any kind of guarantee that the social commitments will emerge (they clearly have not in North Korea or Burma), or that they would invariably be stable and non-fragile (there have been sharp variations in the past even in China, including its having the largest famine in world history during the failure of the Great Leap Forward initiative). Even China’s commitment to broad-based public healthcare has had ups and downs, and came close to being undone: the coverage of the rural cooperative medical system crashed from 90 per cent to 10 per cent between 1976 and 1983 (when market-oriented reforms were initiated), and stayed around 10 per cent for a full 20 years. During this period of abdication of state responsibility for healthcare in China, the progress of health-related indicators (such as life expectancy and child survival) slowed down sharply. This led eventually to another U-turn, around 2004-5, when the rural cooperative medical system was rebuilt, with the coverage rising again to 90 per cent or so within three years (Shaoguang Wang, ‘Double Movement in China’, Economic and Political Weekly, Dec 27, 2008).

You call this education? A government school in Lucknow. (Photograph by Nirala Tripathi)

There is, in fact, no real barrier in India in combining multi-party democratic governance with active social intervention. But what would be needed is much greater public engagement with the central demands of justice and development through more vigorous democratic practice. The development of the welfare state in Europe has many lessons to offer here. As it happens, public debate is quite powerful in India, but the range of engagement has often been quite limited. The India-China comparisons tend to concentrate mostly on the horse race of relative rates of overall economic growth rather than the variations in mediation for development. Underlying this dialogic narrowness, there is a social picture. A big part of the Indian population—a fairly small minority but still quite large in absolute numbers—has been doing very well indeed, through the process of high growth alone; they do not depend on social mediation. In contrast, more vigorous mediation would be very important for other Indians—many more, in fact—whose lives are affected by ill health, undernourishment, lack of healthcare and other deprivations.

Power Imbalances, Old and New

The neglect of elementary education, healthcare, social security and related matters in Indian planning fits into a general pattern of pervasive imbalance of political and economic power that leads to a massive neglect of the interests of the unprivileged. Other glaring manifestations of this pattern include disregard for agriculture and rural development, environmental plunder for private gain with huge social losses, large-scale displacement of rural communities without adequate compensation, and the odd tolerance of human rights violations when the victims come from the underdogs of society.

But China makes much better use of growth to extend public resources for development.

None of this is entirely new, and much of it reflects good old inequalities of class, caste and gender that have been around for a long time. For instance, the fact that not even one of the 315 editors and other leading members of the printed and electronic media in Delhi surveyed recently by the Centre for the Study of Developing Societies belonged to a scheduled caste or scheduled tribe, and that at the other end, 90 per cent belonged to a small coterie of upper castes that make up only 16 per cent of the population, obviously does not help to ensure that the concerns of Dalits and adivasis are adequately represented in public debates. Nor is India’s male-dominated Lok Sabha (where the proportion of women has never crossed 10 per cent so far) well placed to address the concerns of women—not only gender issues, but also other social issues in which women may have a strong stake. A similar point applies to rural-urban disparities: a recent study found that rural issues get only two per cent of the total news coverage in national dailies.
Some of these inequalities are diminishing, making it easier for disadvantaged groups to gain a voice in the system (even the proportion of women in the Lok Sabha, abysmally low as it is, is about three times as high today as it was 50 years ago). However, new or rising inequalities are also reinforcing the vicious circle of disempowerment and deprivation. For instance, the last 20 years have seen a massive growth of corporate power in India, a force that is largely driven—with some honourable exceptions—by unrestrained search for profits. The growing influence of corporate interests on public policy and democratic institutions does not particularly facilitate the reorientation of policy priorities towards the needs of the unprivileged.

The growing influence of corporate interests on public policy is not reorienting policy priorities towards the unprivileged.

It is important to recognise the influence of elements of the corporate sector on the balance of public policies, but it would be wrong to take that to be something like an irresistible natural force. India’s democratic system offers ways and means of resisting the new biases that may emanate from the pressure of business firms. One instructive example both of a naked attempt to denude an established public service and of the possibility of defeating such an attempt is the long saga of attempted takeover of India’s school meal programme by biscuit-making firms. The “midday meal” programme, which provides hot cooked meals prepared by local women to some 120 million children, with a substantial impact on both nutrition and school attendance, had been eyed for many years by food manufacturers, especially the biscuits industry.

A few years ago, a “Biscuit Manufacturers’ Association” (BMA) launched a massive campaign for the replacement of cooked school meals with branded biscuit packets. The BMA wrote to all members of Parliament, asking them to plead the case for biscuits with the minister concerned and assisting them in this task with a neat pseudo-scientific precis of the wonders of manufactured biscuits. Dozens of MPs, across most of the political parties, promptly obliged by writing to the minister and rehashing the BMA’s bogus claims. According to one senior official, the ministry was “flooded” with such letters, 29 of which were obtained later under the Right to Information Act. Fortunately, the proposal was firmly shot down by the ministry after being referred to state governments and nutrition experts, and public vigilance exposed what was going on. The minister, in fact, wrote to a chief minister who sympathised with the biscuit lobby: “We are, indeed, dismayed at the growing requests for introduction of pre-cooked foods, emanating largely from suppliers/marketers of packaged foods, and aimed essentially at penetrating and deepening the market for such foods” (Hindustan Times, Apr 14, 2008).

The bigger battle is still on. The BMA itself did not give up after being rebuked by the Union minister for human resource development. It proceeded to write to the Union minister for women and child development, with a similar proposal for supplying biscuits to children below the age of six years under the Integrated Child Development Services (ICDS). Other food manufacturers are also on the job, and despite much vigilance and resistance from activist quarters (and the Supreme Court), they seem to have made significant inroads into child feeding programmes in several states.

Similar concerns apply in other fields of social policy. For instance, the prospects of building a public healthcare system in India are unlikely to be helped by the growing influence of commercial insurance companies, very active in the field of health. India’s health system is already one of the most privatised in the world, with predictable consequences—high expenditure, low achievements and massive inequalities. Yet, there is much pressure to embrace this “American model” of healthcare provision, despite the international recognition in the health community of its comparatively low achievement and significantly high cost.

Rosy picture Himachal leads the way in social indices. (Photograph by Tribhuvan Tiwari)

However, recent events have also shown the possibility of fighting back, not just in terms of winning isolated battles against inappropriate corporate influence, as happened with the biscuits lobby, but also in terms of building institutional safeguards against abuses of corporate power. The Right to Information Act, for instance, though not directly applicable to information held by private corporations, is a powerful means of watching and containing the state-corporate nexus, as the biscuits story illustrates. Regulations and legislations pertaining to corporate funding of political parties, corporate social responsibility, financial transparency, environmental standards, and workers’ rights also have an important role to play in disciplining the corporate sector.

The Case for a Comprehensive Approach

The need for growth-mediated development has not been completely ignored in Indian policy debates. The official goal of “inclusive growth” could even claim to have much the same connotation. However, the rhetoric of inclusive growth has gone hand in hand with elitist policies that often end up promoting a two-track society whereby superior (“world-class”) facilities are being created for the privileged, while the unprivileged receive second-rate treatment, or are left to their own devices, or even become the target of active repression—as happens, for instance, in cases of forcible displacement without compensation, with a little help from the police. Social policies, for their part, remain quite restrictive (despite some significant, hard-won initiatives such as the National Rural Employment Guarantee Act), and are increasingly steered towards quick fixes such as conditional cash transfers. Their coverage, in many cases, is also sought to be confined to “below poverty line” (BPL) families, a narrowly defined category that tends to shrink over time as per capita incomes increase, which may even look like a convenient way of ensuring that social welfare programmes are “self-liquidating”.

In Delhi, Rs 30 a person a day can get a kg of rice and a one-way bus ticket three stops down.

Cash transfers are increasingly seen as a potential cornerstone of social policy in India, often based on a distorted reading of the Latin American experience in this respect. There are, of course, strong arguments for cash transfers (conditional or unconditional) in some circumstances, just as there are good arguments for transfers in kind (such as midday meals for school children). What is remarkably dangerous, however, is the illusion that cash transfers (more precisely, “conditional cash transfers”) can replace public services by inducing recipients to buy health and education services from private providers. This is not only hard to substantiate on the basis of realistic empirical reading; it is, in fact, entirely contrary to the historical experience of Europe, America, Japan and East Asia in their respective transformation of living standards. Also, it is not how conditional cash transfers work in Brazil or Mexico or other successful cases today.

In Latin America, conditional cash transfers usually act as a complement, not a substitute, for public provision of health, education and other basic services. The incentives work for their supplementing purpose because the basic public services are there in the first place. In Brazil, for instance, basic health services such as immunisation, antenatal care and skilled attendance at birth are virtually universal. The state has done its homework—almost half of all health expenditure in Brazil is public expenditure, compared with barely one quarter (of a much lower total of health expenditure) in India. In this situation, providing incentives to complete the universalisation of healthcare may be quite sensible. In India, however, these basic services are still largely missing, and conditional cash transfers cannot fill the gap.

Poor initiatives Jairam and Montek discussing the poverty line at a press conference. (Photograph by Jitender Gupta)

The pitfalls of “BPL targeting” have become increasingly clear in recent years. First, there is no reliable way of identifying poor households, and the exclusion errors are enormous: at least three national surveys indicate that, around 2004-05, about half of all poor households in rural India did not have a “BPL card”. Second, India’s poverty line is abysmally low, so that even if all the BPL cards were correctly and infallibly allocated to poor households, large numbers of people who are in dire need of social support would remain excluded from the system. In 2009-10, for instance, the official poverty line in Delhi was around Rs 30 per person per day. This is just about enough to buy one kilogram of rice and a one-way bus ticket that would take you three stops down the road. Third, BPL targeting is extremely divisive, and undermines the unity and strength of public demand for functional social services, making a collaborative right into a divisive privilege.

The power of comprehensiveness in social policy is evident not only from international and historical experience, but also from contemporary experience in India itself. In at least three Indian states, universal provision of essential services has become an accepted norm. Kerala has a long history of comprehensive social policies, particularly in the field of elementary education—the principle of universal education at public expense was an explicit objective of state policy in Travancore as early as 1817. Early universalisation of elementary education is the cornerstone of Kerala’s wide-ranging social achievements.

Less well known, but no less significant, is the gradual emergence and consolidation of universalistic social policies in Tamil Nadu (see ‘Understanding Public Services in Tamil Nadu’ by Vivek S., PhD thesis, 2010, Syracuse University, and the literature cited there). Tamil Nadu was the first state to introduce free and universal midday meals in primary schools. This initiative, much derided at that time as a “populist” programme, later became a model for India’s national midday meal programme, widely regarded today as one of the best “centrally sponsored schemes”. The state’s pioneering efforts in the field of early child care, under the ICDS, has made great strides towards the provision of functional anganwadis (child care centres), accessible to all, in every habitation. Tamil Nadu, unlike most other states, also has an extensive network of lively and effective healthcare centres, where people from all social backgrounds can get reasonably good healthcare, free of cost. NREGA, another example of universalistic social programme, is also doing well in Tamil Nadu: employment levels are high (with about 80 per cent of the work going to women), wages are usually paid on time and leakages are relatively small. Last but not the least, Tamil Nadu has a universal public distribution system (PDS), in both rural and urban areas. Tamil Nadu’s pds supplies not only foodgrains but also oil, pulses and other food commodities, with astonishing regularity and minimal leakages.

Protests against Vedanta in Orissa

Himachal Pradesh began this journey much later than Kerala and Tamil Nadu, but is catching up very quickly. This is most evident in the field of elementary education: starting from literacy levels similar to the dismal figures for Bihar or Uttar Pradesh around the time of India’s Independence, Himachal Pradesh caught up with the highest-performing Kerala within a few decades. This “schooling revolution” was based almost entirely on a policy of universal provision of government schools, and even today, elementary education in Himachal Pradesh is overwhelmingly in the public sector. Like Tamil Nadu, Himachal Pradesh has a well-functioning pds, providing not only foodgrain but also pulses and oil and covering both “BPL” (Below Poverty Line) and “APL” (Above Poverty Line) families. Himachal Pradesh has also followed comprehensive principles not only in the provision of essential social services (including schooling facilities, healthcare and child care) but also in the provision of basic amenities such as roads, electricity, drinking water and public transport. For instance, in spite of adverse topography and scattered settlements, 98 per cent of Himachali households had electricity in 2005-6.

It is perhaps not an accident that Kerala, Tamil Nadu and Himachal Pradesh also tend to have the best social indicators among all major Indian states. For instance, a simple index of children’s health, education and nutrition achievements clearly places these three states at the top (Dreze, R. Khera, S. Narayanan, 2007, ‘Early Childhood in India: Facing the Facts’, Indian Journal of Human Development, 1(2), Jul-Dec 2007). Despite wide historical, cultural and political differences, they have converged towards a similar approach to social policy, and the results are much the same too. There is a crucial lesson here for other Indian states, and indeed for the country as a whole.

A Concluding Remark

We hope that the puzzle with which we began is a little clearer now. India’s recent development experience includes both spectacular success as well as massive failure. The growth record is very impressive, and provides an important basis for all-round development, not least by generating more public revenue (about four times as much today, in real terms, as in 1990). But there has also been a failure to ensure that rapid growth translates into better living conditions for the Indian people. It is not that they have not improved at all, but the pace of improvement has been very slow—even slower than in Bangladesh or Nepal. There is probably no other example in the history of world development of an economy growing so fast for so long with such limited results in terms of broad-based social progress.

There is no mystery in this contrast, or in the limited reach of India’s development efforts. Both reflect the nature of policy priorities in this period. But as we have argued, these priorities can change through democratic engagement—as has already happened to some extent in specific states. However, this requires a radical broadening of public discussion in India to development-related matters—rather than keeping it confined to simple comparisons of the growth of the gnp, and naive admiration (implicit or explicit) of the high living standards of a relatively small part of the population. An exaggerated concentration on the lives of the minority of the better-off, fed strongly by media interest, gives an unreal picture of the rosiness of what is happening to Indians in general, and stifles public dialogue of other issues. Imaginative democratic practice, we have argued, is essential for broadening and enhancing India’s development achievements.

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Jean Dreze is Visiting Professor, Department of Economics, Allahabad University. Nobel laureate Amartya Sen is Lamont University professor and Professor of Economics and Philosophy at Harvard University.