Social Scientist

The Cost of Free Trade: The WTO Regime and the Indian Economy Author(s): Utsa Patnaik Source: Social Scientist, Vol. 27, No. 11/12 (Nov. - Dec., 1999), pp. 3-26 Published by: Social Scientist Stable URL: http://www.jstor.org/stable/3518045 Accessed: 02/02/2010 02:58
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UTSAPATNAIK*

The Cost of Free Trade: The WTO Regimeand the Indian Economy**

It is indeed a privilege to have been asked to deliver the E M S Namboodiripadmemoriallectureand I thank the organisersfor it. Two years ago, after EMS (as he was referredto affectionatelyby seminar everybody) passedawayin March1998, therewas a memorial held in Juneat Perintalamana in Malabar,the town which is within a shortdistanceof EMS's ancestral home.I reada paperon thisoccasion, which was specificallyon EMS'swritings on the agrarianquestion, in particularhow his famous Minute of Dissent to the Commission on MalabarTenancyReforms,was informedby the Marxist theory of ground rent. This has been publishedin a recent issue of Social In that paperthe concernwas with the contradiction Scientist.1 within the agrarian landed between those who economy property monopolise and those who derivea livelihood from the land. In today's lecture I propose to talk about another very importantcontradictionwhich is fast maturing- that initiatedby the liberalised trade and investment regime under the earlier loanconditional structuraladjustmentprogrammes from the late 70's as furtherwith the appliedto the developingnations, and strengthened currentWTO disciplineimposedafterthe signingof GATTin 1994. All of this, I would proceedto argue, is part of a new onslaught by the advanced capitalist countries (following their own economic interests),on the Third Worldcountries'attemptsto follow growth trajectoriesbest servingtheir peoples' developmentand welfare. In I would like firstto discuss talkingof this emergingnew contradiction the historical of trade-liberalized briefly regimes,and refer experience

*Centreof EconomicStudiesand Planning,JawaharlalUniversity, New Delhi. ** The FirstEMS NamboodiripadMemorialLecture2000 at New Delhi Social Scientist, Vol. 27, Nos. 11 - 12, Nov. - Dec. 1999

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to the theoretical underpinnings of analysis relating to these trade liberalizedsystems. Then we will discuss, again briefly,at the costs paid by the other developingcountrieswhich in the last two decades have followed a liberaltradeand investmentregimeand finally look at the specificresultsand futureimplicationsfor the Indianeconomy of the current'free trade'regime. It is often acceptedas an unquestioned truismby economists, including economists from developingex-colonized countries, that the freestpossible international trade,is necessarilya good thing for in trade. For over two centuriesnow the that everyoneparticipating ideology of free trade has been so thoroughlydinned into the heads of students, via the textbooks and in today's world also via the conventionalwisdom filteringthroughthe printandelectronicmedia, that any systematicalternativeviewpoint which stressesthe costs of 'free trade' is hardly ever encountered.The ideology of free trade dates back to Adam Smithand David Ricardo,and it is no accident that both theoristsshould be from Britainand have writtenat a time when that country was in the process of grasping the land and resources of other civilizations, and launchingon the world's first Industrial Revolution after creating a conducive economic environment for it by forbiddingits colonies to manufacture anything and forcingthem to specializein producingthe wage goods and raw materialsits own industryneeded.Neither theoristwas English,for Smithwas a Scotsmanwhile Ricardo's forebears cameoriginallyfrom Yet both were the theorists of the emerging Spain. quintessential in Britain in the last manufacturing bourgeoisie quarterof the 18th century and the first quarterof the 19th century respectively.The freetradethat they advocatedhas been much misunderstood; it was the freeingof Britishtradefromits own monopolytradingcompanies, but very much while retainingcontrol of subjugatedcolonies; hence the freedomto Britainto continue to industrializeat the expense of other nations and peoples, and definitelynot a generalfreedom for any potential rivalto do likewise.Thus AdamSmith,in a passagein The Wealthof Nations which is neverquoted, stronglyopposed the idea of North Americadevelopingits own manufactures ratherthan from Europe: relyingon importingmanufactures colonies towards wholecapitals wealth thatalmost their andgreatness havebeenemployed have those no in agriculture. manufactures, They household andcoarser which... are the work manufactures excepted of the womenand the children The greater in everyprivatefamily.
It has been the principalcause of the rapidprogressof our American

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would retardinsteadof accelerating the furtherincreasein the value of theirannualproduce,and would obstructinsteadof promotingthe progressof theircountrytowardsreal wealth and greatness.2 Here was the first clear articulation by a metropolitan economist, of the now familiar and self-serving argument that the colony's best interests lay in remaining an agricultural exporter, leaving the manufacturing and trade to be done by the metropolis. These words, published in 1776 were famous last words, for after winning independence less than a decade later, from 1783 North America's European settlers went on precisely to do the opposite of Adam Smith's advice, namely they erected protective barriers against the inflow of manufactures from Britain and Europe and built up their own industry in a process of import substitution. Because they did so the USA is today the world's leading capitalist country: had they listened to Adam Smith's version of 'free trade' it would have been at most an Argentina. As the leading capitalist and imperialist country in the world the USA follows today in turn policies to encourage its own growth at the expense of the Third World's freedom to industrialize, a question I propose to discuss later. Of course, the modern theory of international trade is associated above all with David Ricardo and is an elaboration and development of Ricardo's theory of comparative advantage3. The essence of the ideology of international free trade can be said to reside in this theory, for it says that specialization and trade is necessarily of mutual benefit to both parties entering into trade as long as relative cost differences in producing goods exist, even where one country may produce all goods at a lower absolute cost than does the other. The theory has been immensely influential and has been used to explain not only the trade between countries of equal economic strength, e.g. intraEuropean trade, but also the pattern of international trade in which the colonies and subjugated areas came to specialize in agriculture while the European countries specialized in manufactures; and to argue that not only the colonizer but the colonized too benefited from this pattern of specialization and trade. Comparative advantage is the reason given, for example, by Professor K N Chaudhuri in the

part both of the exportation and the coasting trade of America is carried on by.. merchants who reside in Great Britain. Were the Americans, either by combination or by any other sort of violence, to stop the importation of European manufactures, and, by thus giving a monopoly to such of their own countrymen as could manufacture the like goods, divert any considerable part of their capital into this employment, they

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CambridgeEconomic History of India to explain why from being the world'slargestexporterof cotton textiles in the pre-colonialera, India turned into an importerof cotton manufacturesfrom Britain and an exporterof agricultural productslike raw cotton, jute, opium, indigo and so on.4 No argumentcan be more fallaciousthan Ricardo'stheory.Why it shouldhave beennecessary to use militaryforceto inducecountries like Portugal,Chinaor Indiato trade,if it was so beneficialfor them, is not explained.Evenmoreimportant, the theoryis internally logically fallacious. A fallacy in a theory can arise either becausethe premise is incorrect,or becausethe argumentis incorrect.In the case of the comparative advantage theoryappliedto Northerntradewith warmer the itself is incorrect.The premiseis that in the prelands, premise trade situation(assumingthe standardtwo-countrytwo-commodity model) both countriescan produceboth goods. Given this premise, then it can be shown that both the countriesgain by specializingin that good which it can produceat relativelylower cost comparedto the other country, and trading that good for the other good: for situation,for a given level of consumption comparedto the pre-trade of one good a higherlevel of consumptionof the other good results in each country. This mutual benefit arising from comparative advantage,is adducedas both the reasonfor and the actualoutcome of specializationand trade. The realitywas thatthe tropicalor sub-tropical regionswith which Britain,NetherlandsFranceetc. initiatedforcedtradeusing military power, were bio-diverseand could, and did, producea much larger range of goods than the north Europeancountriescould, including tropicalcrops which could neverbe producedunderfield conditions in the temperateregions. In tropical regionscrops can be grown all the year round and multi-cropping of the same physicalunit of land is possible. Not only is the output vector much larger but it is a qualitatively differentoutput vector,for it contains elementswhich are not present in cool temperatelands at all. Moreover since it is agriculturewhich provides not only food for subsistence but raw for manufacture, materials materials fibersforclothingandtraditional for housing, the betterresourcebase and lower costs of subsistence in a bio-diversetropical region led to abundant supply and lower costs of all these elementsvital for the standardof life. While Portugalwhich is a warm temperateland could produce both cloth and grape-based wine on a large scale, Britain could produce only cloth but not grapes under field cultivation, for the

THE WTO REGIME AND THE INDIAN ECONOMY

latterrequireslandwithin a meanJulyisothermof at least 19 degrees Celsius or 66 degreesFahrenheit,which no part of Britain(except while India,Burmaor China perhapsCornwall)possessed.Similarly could produce both cotton cloth as well as raw cotton, sugarcane, indigo, tea, jute, rubber,etc., Britain, Netherlands, Germany and Francecould produceonly cloth and none of the other crops, and so on. The cost of productionof raw cotton, indigo, tea, coffee, jute, rubberetc thus cannot even be defined for cool temperateBritain, or Canada.If absolutecost is not definable,then ipso facto Germany, relative cost is not definable. The premise of the theory does not hold, namelythat both countriescan produceboth goods, hence the conclusiondoes not hold, that specializationand tradeis necessarily mutually beneficial. (Certainlythe country with the poorer output vectorbenefitsby acquiringgoods it cannot produce;but the country with the superior output vector does not necessarily benefit: specialisationand enforced trade can lead to very adverse welfare outcomessuchas fallingmassnutritionlevels,as we will show below). Yet economists have continued to make logically untenable hence nonsensicalstatementslike the following:Britainexportedcloth and importedtea, indigo,cotton fromIndiabecauseit had a comparative advantage in cloth production while India had a comparative advantage in the crops specified. How does one at all talk of production,or cost of productionof tea and indigo in Britain?This as serious theory continues to hold absurd fairy tale masquerading to this in trade theory day, modified only to say - the laboursway abundant country produces labour intensive (primary or simple manufactured) goods while the capital abundantcountry produces intensive (advancedmanufactured) goods. capital of lack satisfaction of the basic and crucial premise The capacitiesacrosscountries- in history,itself homogeneousproductive was the positive real reasonfor this importantsegmentof trade:thus adoptingthe premise,amountsto assumingaway the realreasonfor this trade. The basic motive of forced trade was for the temperate lands to gain access to tropical bio-diversity and to inexpensive which liketextilesof massappealandmassconsumption manufactures of these were basedon usingthe uniqueand cheapresources regions. In the courseof the threecenturiessince 1700 the consumptionbasket of livingof the Northernpopulationshas alteredbeyond and standard recognition.It is based on importinggoods from all over the world, the major part being goods not producibleat all in the temperate lands.

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While Ricardo'sexplanationwas superficiallyextremelyclever, he did a signal disserviceto the cause of objectivityand science, by pretendingin effect that all trade includingforced trade, was freely chosen trade determinedby technologicallydetermined,neutralcost factors.Tradepatternswhich had beenin realitythe outcomeof trade wars, genocide and political subjugation,were discussed in such a way as to ignore this historical reality of 'capitalism'sblustering violence' (to use a memorable phrase first employed by Rosa cost factors Luxemburgs); and by focusing only on value-neutral in a an fallacious manner Ricardo necessarily provided intellectual justification for, and hence an apologetic for forced trade. violence'was neatlysanitizedinto the theory 'Capitalism's blustering of relativecosts. All subsequentmainstreamtrade theory has been similarlytautologicaland apologetic in character,and has talked of mutual gains from trade as the necessary cause and result of all observed patternsof specializationnot simplythat betweencountries of similareconomicstrength.6 'Factor aretalkedof while endowments' completely ignoringthe real differencesin productivecapacities in the same 'factor', land, in differentcountries. Many generationsof ThirdWorldeconomistshavebeenfooledinto believing thatsomehow sectorspecialization, beinginvolvedin a particular patternof primary was unavoidablein terms of purecost-of -productionlogic and was to the ultimatebenefitof their countries. But why blame Ricardo alone ? It is more than that: we in the ThirdWorldremainmentallyand intellectually colonised even when we are politicallyindependent: we do not dare to question the most nonsensical of theories as long as they come from the centres of academichegemonyand power,we do not dareto point out that the Emperoris naked. This is not accidental:as long it is not the search for objective truth which guides us, as long as it is professional publications and professional recognition in metropolitan centres which remain our implicit aim, in short as long as Third World academics continue to suborn themselves, intellectuallydishonest theorizingwill continue to hold sway. What was the historicalcost to the countrieslike ours of being involvedin 'freetrade'as definedand implementedby the colonizing powers?I am here not talkingof the well known costs by way of the genocide and decimation of entire peoples, their numbersrunning into millions,involvedin colonial conquests.I would like to focus on the mechanismsof free trade in more recenttimes. There have been two very importanttypes of cost historically,

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which have again come to the forefront in the presentera of loanconditional liberalization and WTO discipline : the first is the of an inverserelationbetweenagricultural exportsand re-emergence To domesticfood availability,and the second is de-industrialisation. understandthe first type of cost we have to conceptualisetropical land as akin to a non-renewable resource.Usuallyit is the fossil fuels alone and the mineralswhich are thoughtof as beingnon-renewable. Butwe have to recognisethat land is not homogeneousin productive capacity, and that the earth'sbio-diversityand botanic diversity is concentratedin the tropical lands. It is clear that there is a limited supply of these lands, for unlikein the 19th centurywhen cultivable wastes existed, by now there are no open frontiers, the limits of physical expansion have been reached and only the vast tropical rainforestsremainwhose ongoingdestructioncarriesseriousadverse environmentalimplications. In big countries like India and China total cultivated area is no longer expanding, in fact it is shrinking. Our land now is virtually like a non-renewableresource. It is not sown areacan still be expandedif enough completelynon-renewable: investmentis pumpedin, especiallyinto irrigation.Butthe regimeof neo-liberalism is precisely one of macroeconomic contraction, 'withdrawalof the state' and falling productiveinvestment,and in this context tropicalland must be conceptualizedas non-renewable. But the global asymmetry of demand, established over two centuries ago, continues: the world's rich countries which account for 75 percentof global incomealthoughthey have hardly16 percent cannotproducein theirown countriesanything of world population7, but a small fractionof the highly diversifiedconsumptionbasketon which their populationshavecome to depend,and they want access bio-diverse but limitedlandson the one hand, to our moreproductive, and on the other hand access to our markets for the few primary foodgrains),and for goods they can succeed in producing,(notably arecrucially Theirhighlivingstandards theirmanufactures. dependent on the physical availability of our products. A typical Northern supermarketin western Europe or USA carries on average 12,000 items of food alone in raw and processedform8and at least 60-70 percentof the items have a wholly or partly tropical to subtropical fromthe supermarket importcontent.If thesegoods wereto disappear shelvesthe standardof life of Northernpopulationswould plungeto a near-medievallevel, that prevalentthree hundredyears ago. earlierundercolonialandimperial The solutiondeveloped systems where there was direct political control, was simple: first, protect

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to the inflow of cheaper metropolitanindustrythroughtradebarriers manufactures basedon amplesupplyof raw materials, fromcountries like ours; second, promote in the colonies the export of the wagefor running industries; goods andraw materials metropolitan required third, keep the colonial marketscompletelyopen to the flooding in of manufactures fromthe metropolis, andfourth,monopolizeinvisible incomes (at that time, from shipping and financial services). This remainsthe basic agendaof the advancedimperialist countriestoday although the economic mechanismhas changedto debt-conditional policies and a trade discipline operating through international (whileinvisibleincomeshavechangedto modernforms organizations, of financialandcommunication services,the electronicentertainment and to returns research in piratedbio-resources). Advanced industry, countriescontinueto protecttheirown producers, continueto demand that we export tropical primaryproductsor at most simple labourintensivemanufactures and continue to seek marketaccess for their their manufactures, surplustemperate cropsand for invisibleservices. As regardsthe costs of these policies, in particularthe second nationsthen(andthe developing nationstoday), one, to the subjugated the single most importantin my view, is the fact that nutritionlevels of our people were lowered and in extreme cases mass starvation resulted.An inverserelationnecessarilydevelopedbetweenprimary productexportsand food consumptionof the colonizedpopulations. While demandingan increasingsupply of the products of tropical lands, the foreign rulersdid not put in adequateinvestmentto raise henceincreasingprimaryexports could only take place productivity, by divertingland and resourcesaway from producingthe necessary food consumption of the people. In every single case of export of primary products to advanced countries the per head food consumptionof local producersfell. ConsideringIrelandas a colony of Britain we findthatthe Irishtenants,who were "pauperized beyond belief" (Hobsbawm in Industryand Empire1969), were obliged to export wheat and livestock productsto Britainto pay high rents to theirEnglishlandlords,while theythemselveshad to live on potatoes; in the great 1847 famine one million Irishdied out of the 6 million total populationi.e one sixth of the populationperished,and still the Thisis undoubtedly the greatestrecorded primary exports continued.9 famine in history, more severe in its impact on a given population, than the Bengalfamineof 1770 which had carriedaway one-tenthof the population. Lookingat the data for Java underthe Netherlands we find that per capita foodgrainsoutput fell by about 20 percent

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from 199 kg. annuallyto only 162kg. between1885 and 1940, while sugarcaneand rubberproductionrose 762 percentand 332 percent and on a per capita basis rose by 380 percentand 166 respectively10, The of exports rose 3.7 times in the half century volume percent. after 1890. (SeeTablesla and lb) ColonisedKoreaunderJapanwas forcedto export foograins,viz. rice and by the SecondWarover half of its output was going to Japan, while Koreanswere forced to eat millets and suffered a nearly one-fifth decline in per capita calorie intake over a mere quartercentury."Colonised India had a growth rateof exportablecommercial crops which was over ten times higher than the growth rate of foodgrains, indeed the foodgrains output almost stagnated. The per capita food production fell by nearly 29 percentin the inter-warperiodin BritishIndia,and by as much as India(termed 38 percentin Eastern 'Greater Bengalin the datasource); since therewere little or no net importsthe availabilitydeclinedalso to the same degree. I have argued in a critique of Amartya Sen's resultingfrom lowered theory,that it was the increasedvulnerability nutrition, as a direct result secularlyfalling per capita food output arisingin turn from colonial export policy (a fact totally ignoredby him), which accounts for the extent of the toll in the Bengalfamine of 1943, though the proximatecause of the toll itself was wartime deficit financing.12 Nothing can be more immoral than the fact that the North andlow-inflationgrowthliterally sustainedits own highconsumption at the expense of squeezing the living standards of millions of massfaminein many people,to the extentof precipitating subjugated cases.'3I may add that all this was not possible without the willing collaboration of comprador elements within the Third World populations, those who identifiedtheir interestswith the powerful rulers and in the way they lived their lives, betrayed their own countrymen.That elementtoo remainsunchangedtoday:powerwill always attractthe opportunistsand the servilepersonswho have no scruplesin identifyingthemselveswith what they considerto be the 'winningside' and by theirservilityhope to gain, and do indeedgain very materially.In the chargeof intellectualservilityI would include all those globalized Indian academics today many of whom are intelligent enough to know very well what the real economic mechanismsare, but who find it impoliticto ever mentionit in their writings, because their objective is to be acceptable to and to be lionized by the powerfulNorth-dominatedacademicestablishment. I would argue that the costs of the 'free trade' instituted under

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loan conditional trade liberalisation in India from 1991 and acceleratedafter the signingof GATT94, are exactly the same as in colonial times. They are the same becausethe agendaof imperialism is the same althoughconditionsare so different.Plus ca change,plus c'est la meme chose as the Frenchsay: the more things change the more they remain the same. For, the dependence of Northern populations on Southernbio-diversityhas increased,not declined, despite sporadic attemptsto find laboratorysubstitutesfor natural hencethe presentWTOregimeinsistson the prising tropicalproducts; of Third World land in order to alter cropping patterns and open increaseexportsof those primary productswhich advancedcountries cannot producethemselves,'4 and priseopen ThirdWorldmarketsto free imports of the wheat and processed dairy products of which they have a glut. The second great historicalcost of 'free trade' to our economies has been de-industrialization.Forcibly open and trade liberalized economieslike ours and other subjugated countriestoo, underwenta destructionof their traditionalmanufacturesand the occupational structure moved towards higher dependence on the primary and tertiarysectors.This resultedfromone-wayfreetrade,viz. a situation where the North protectedits own industryby various means and opened up the subjugatedmarketsof the ThirdWorldcountries.To use a memorablephrase that Keynes had once used, describinga situation where a country insists on exporting to another the good that the second country also produces,therebythe North 'exported That agenda too remains its unemployment'to other countries.15 unchanged : market access is a prime objective of the earlier and ongoing loan conditional liberalization and of the present WTO regimewhich is its continuation.Althoughon paperthe provisions on market access are to be applicableto all countries, in practice steps are taken to ensuredifferentialmarketaccess, viz, opening the advanced country door a very little to Third World exports of manufacturesbut forcing open the Third Worlds' doors wide to unrestrictedinflow of advanced country manufactures.This has already resulted in substantial de-industrializationin many Latin Americanand SSAcountriesin the last two decadesand the process is now underwayin India as well. Let me, to begin with, take up the first greatcost of present-day one-way free trade namely,falling food output per head and falling nutritionlevels in developingcountries,and then go on to discussdeindustrializationbriefly.As we know agriculturewas included for

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the first time in the UruguayRoundof negotiationsleadingup to the intellectualpropertyrights signingof GATT1994. The trade-related and trade-related investment measures also carry important implicationsfor primarysector trade.What was the basic objective of includingagriculture whereasit had neverbeen includedearlier? The reason does not have to do only with intra-Northern trade, over the Union between and the USA despite European wrangles subsidizedoutput, which have been much publicized.All Northern countriesmade sure that they did not have to reducesubsidiesat all (by using a trick brought out by Table 2, which we discuss a little later). I believe that the most important impetus lay in two developments:first, the loss of export marketsfor foodgrainsby the advancedcountriesof North Americaand WestEuropeowing to the economic collapse of Russiaand Ukraineas well as EasternEurope, and hence their desperatedesire to seize new Asian markets;and second, the rapid growth of monopoly in the alreadyconcentrated structureof the big transnationalagri-business corporations.The and Sovietmarketsin the earlynineties first,the loss of EastEuropean was verysubstantial,amountingto around28 m.t of grainexports in the early nineties, and gave an urgency to the targeting of Asian markets- first the SouthEastAsian marketsand now India. For this it was necessary for the advanced countries that all independent systems of domestic food grains procurementand maintenanceof bufferstocks by ThirdWorldgovernmentsshould be dismantledand they should turn into food importersfrom the global market. The Philippinesprovides a case study of the success of this strategy:its and distributionsystemwas wound down in the public procurement under loan-conditionalpressureand it turned into a nineties early substantialnet grain importer. Some 85 percentof the global tradein foodgrainswas accounted for by the advancedcountriesorganisedin the OECD on the eve of GATT 94. Both the specific provisions of loan-conditional in GATT94, liberalisation,and the provisionsrelatingto agriculture have been tailor madeand designedfor this purpose:it attacksinput subsidies,attackssubsidiesfor stock holdingand generalsubsidiesto has beenwrittenin The smallprintof the Agreement the consumer.16 such a way (allowing cash to be paid to farmersunder 'green box' and other provisions)and such priormeasureshave been taken that advancedcountry subsidieshave remainedalmost unchangedwhile ThirdWorldsubsidieshave declined. The second developmentwas the growth of monopoly through

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mergersand take-oversin the alreadyoligopolistic sphereof global agro-business corporations,in the courseof the late seventiesand the decade of the eighties. These are now giant vertically integrated companieseachwith a wide rangeof interestsrangingfrompesticides, fertilisers,geneticallyengineeredseeds, farm machinery,plantation throughcontracts, productionfor export,exportable cropsacquisition The existing andoperationof agro-processing andlivestockindustries. internationalagreementson plant-breeders' rights have been found to be inadequateby these corporations,which have their eye on the immense gene pool which tropical bio-diversityrepresents,which though located in developingcountries,they see as providingthe free raw material for theirlaboratory research leadingto highlyprofitable in not the only of agricultureand pest potential applications sphere control but also medicines, cosmetics, health foods and so on. Companieslike Monsantotook a veryactivepartin mobilisingother TNC executives,formulatingthe TRIPSprovisionsand lobbyingthe US governmentto incorporatethe precise provisions they wanted. The provisions of the TRIPSagreementin relation to bio-resources are tailor made and designed to introduce into new regions and elsewherethe monopolycontrolof these giantTNCs, over strengthen drugs, chemicals, and bio-technology comprising new varieties of plants including genetically modified varieties,andover genetically modified organismsin general.17 The traditionalrights of local plant breedersare not the issue at of the existingpatentlaws aresoughtsolelyto extend modification all; the period of monopolythat a patentconfers, and to restrictthe ease with which others can at present reproducethe patented product. Given that the entireprocessof researchby the TNC's is based upon the piratedgeneticmaterialsfromThirdWorldcountriesover which then a monopoly is instituted,and is to be enforcedby international to no general likethe WTOwhichis answerable policingorganisations These are clear. are authoritarian the of implications body nations, dangerous developments for the Third World countries given the backgroundof the already existing trend of falling per head food output in such a largepartof it owing to an enormousprimaryexport thrust underloan-conditionaltrade liberalisation. Africancountrieshad been The LatinAmericanand Sub-Saharan structural adjustment programmes and trade implementing liberalisationfor a decade and half before India did and the results have been plain to see. Mexico which had pioneeredhigh-yielding wheat varietiesturnedinto a net foodgrainsimporterby the eighties

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and has beenexperiencing fallingperheadoutputof maizeand beans at the same time as it has turnedinto a tropical agriculturalannexe for supplyingbeef productsand fruitsand vegetablesto supermarkets in the USA.The effects of cattle-raisingfor supplyingthe US market has been devastating for the Central American countries like El Salvadorand Honduras. The Sub-Saharan Africancountriesengagedin a primaryexports - the exportshavebeengrowing thrustin the eightiesverysuccessfully at minimumratesof 6 to 14 percentannually-but at what cost? The per head foodgrains output has fallen all through the eighties and continues to stagnate in the nineties. In 1992 I carriedout a fairly painstakingcalculationusingthe UN data for all 46 countriesof SSA for cereals plus tubers and plantainswhich showed that in the six most populous countries, accounting for over three-fifths of the population,cerealsoutputhad fallenby 33 percentin the second half of the 80's and the all-food output had fallen by one-fifth. For the entire regioncerealshas declinedby 16.6 percentand for all food it has declinedby nearly12 percent.Sincethe initialper headcerealall foodgrains output was alreadylow by Indianstandards- only 156 kg.gross annuallyper head - the level after falling, was only 137 kg. by 1990 and the situation has not improvedsince. It is no wonder that large area of SSAare on the verge of famine. It is often argued that the inverse relation does not matter for exchangeearningsfrom primaryexportscan be usedto importfood. But whether this is so, dependson the terms of trade. The absolute unit dollar price of primaryexports declined by nearly half in the 80's alone owing to the fact that dozens of developing countries devalueand deflatetheireconomieswhile were madeto competitively in a competitive export thrust, under loan-conditional engaging After a brief two years of programmesoverseenby the Fund-Bank. improvementthe declinecontinuedin the ninetiesat a slower pace. A subsequentcalculation of availabilityby adding on food aid to maintainnutritionlevels, and importsshows that it was insufficient for calorie intake per head has declined for four out of six most populous countriesand is stagnantfor one, (showing a rise only for Nigeria which is exceptional in being an oil exporter.See Table 4). These four are precisely the countries which had gone in for a Their successful programmes. adjustment exportthrustunderintensive 14 8 to at between percent primary exports have been growing and their between inverse relation exports primary (the annually domestic food production was pointed out in an earlier article of

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Sincethe unitdollarvalueof theirexportshavebeendeclining mine).18 howevertheir foreignexchangeearningshardlyrose at all. It is little wonder that it was some of the Africancountries who, given their long and bitter experienceof liberalization,were at the forefrontof the anger againstthe WTO regimeat the Seattlemeet. On the basis of some knowledge of this alarmingexperienceof the Latin American and SSA countries under liberalisation and adjustmentI had written in December1992, 18 months after India went in for a $4.8 billion loan and started implementingSAP,that with tradeliberalisation andexportthrustwe in Indiatoo couldexpect a decline in per head food output as the powerful magnet of the advancedcountries'demand,start to restructure our own cropping and towards the needs from our patternsaway foodgrains population It gives me no pleasure exports, just as it had done in colonial times.19 to say that my predictionhas been fully borne out. For the first time in 30 years, in the nineties the food grains growth rate in India has fallen to a mere 1.66 percent,well below the populationgrowth rate (even though this itself is slowly declining)whereas it had averaged 2.6 percentin the precedingtwo decades,well above the population this is against the backgroundof a sharp growth rate. Furthermore rise in the rural poverty percentage to 44 percent from around 33 percent between 1990 and 1992; while poverty moderated subsequentlyas moreexpansionarypolicieswere followed, the latest estimatesby an economistin the PlanningCommission,shows a rise againto 45 percentin 1998 admittedlyon the basisof the thin sample data. It is to be noted that the data given on foodgrain availabilityin the Annual EconomicSurvey,which do not seem to show a fall, is subtlydoctored.If we look at the populationfiguresusedto calculate the per capita availabilityand given in the relevantTableevery year, we see that the sameabsolutenumber,16 million (1.6 crores)is being addedto the populationyear afteryear;the base is enlargingbut the assumed addition to population remainsthe same, so that by 1998 the implicitgrowth rate is only 1.66 percent,doctoredto be exactly In fact with Indian equal to the declining foodgrain growth rate.20 population crossing the one billion mark in 1999, the compound growth rate from 1990 to 1999 works out to near 2 percent, well abovethe sharplylower foodgrainsgrowthrateover the sameperiod. The per capita expenditure on cereals in real terms has been declining in India as a numberof analysts of the NSS consumption data have pointedout, at the same time that the per head production

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is declining,and per head availabilityis stagnating.2' It is only those illiteratein economicswho can arguethat this reflectsan Engeleffect in toto, i.e. more diversifiedconsumptionfor everyoneas per head incomeimproves.Thereis indeedsuchan effectfor the top 15 percent of the population,who concentrate anythingbetween70 to 85 percent of national income, dependingon the estimate of black money we adopt. Butthe remainder especiallythe poorestarepayingfor it with a decline in their consumption of basic staples, given the overall stagnationof per head availabilityof cerealsin physicalterms. A little explanation is in order, since there appears to be a widespread misconceptionnot only among students of economics but also among many senior teachers,that with rise in income, the absorptionper head of the staple cereals,falls. Exactlythe opposite is the case: per capita cerealsabsorptionrises, and rises quite a lot, owing to indirectcerealconsumptionin the form of animalproducts. The USA produces over 300 million tonnes of foodgrains, for a population a quarter our size; even after a substantial fraction is deducted on account of exports, the average US citizen consumes or aboutfivetimesthe average annuallynearly1000 kg. of foodgrains, Indian annual absorptionof 200 kg (we are taking throughoutthe gross figuresviz, gross foodgrainoutputretainedwithin the country, divided by population). Even the Soviet Union in the late eighties when its agriculture was supposedto be in crisis, was producingand absorbing760 kg. foodgrainsper head of its population,nearlyfour times India'slevel. Of course,North Americansand Russiansdo not directlyconsumeall grainas grain:they eat about 200 kg. directlyas bread etc, while the remainderis convertedto animal products by being used as feed. The reason that this processleads to such a high absorptionof grainsper capita, is becauseas is well known, at even the most efficient technologies of conversion, animal production especially beef and mutton favoured by Northern populations- is highly grain intensiveand thereforewasteful from a social point of view.The grainwhich could feed directlysix to eight poor familiesin a year,goes in to providingmilk, meat etc for one well-to-do family. The income elasticityof demandfor animalproductsis high and has been estimatedat 1.6 takinga largenumberof developingcountries. does the average As the percapitaincomerises,so therefore absorption of the food grainswhich double as feed grains,rise. In the light of this, it may be judgedhow serious is the situation today in India given that per head foodgrain availability for the decline.We know that the populationas a whole has beenregistering

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top decile of the population is absorbinggrain per head to a much greaterextent than before owing to the fast growth in their demand for animalproducts,which impliesthat there must be a greaterthan averagedeclinein availabilityof grainfor directconsumptionby the poor. The situation is not entirelyhopeless;many organisationshave become aware of the threat to food securityfaced by Third World countries and that nothing less than an economic recolonizationis being attempted by the advancedcountries through WTO. Within India the many womens' organisations have come together with NGO's to formthe Alliancefor the Protectionof Food Rights.Similar organizationsare active in a numberof Asian countries. At Seattle the Africannationsin particular of the opposition wereat the forefront mountedagainstthe advancedcountriesfor obvious reasons,for they know from their direct experienceof the last 15 years the sinister outcome of the designs of the advancedcountries.What is urgently is unityamongthe developing nationsto work out a common required minimumstrategyto protecttheir interestsagainstthe onslaughton their land and bio-resources. Many of you must be aware that India had put forwarda nineyear phase out plan of giving up the prevailing QR's on imports startingfrom 1997 and ending in 2006, but this was not acceptable to the advancedcountrieswishingto accessour markets,who argued that India'sforeignexchangereservesposition was comfortableand India could no longer invoke article XVIII (b) which specifies that QR'scan be retainedby countriesfacingpossiblebalanceof payments eventhoughfive out of six countriesaccepted problems.Subsequently a reducedperiodof six yearsphase-out,the USA remainedobdurate and took India to the dispute settlementboard which ruled against India. As a result all QR's are to go by fiscal year 2000-01 which is alreadyupon us. Now, in anticipationof convertingQR's to tariffs the advancedcountrieshad announcedveryhigh tariffsrangingfrom over 200 percent for wheat to over 150 percent for other cereals. India'stariff bindings on the other hand are only 150 percent for wheat and amazingly,zero percentfor rice and sorghum.Why and how the rice farmersand sorghumfarmersof this countryare to face the onslaught of competitionwithout any protectionwhatsoever is officialswho gavethis anomalous not clear.Who werethe incompetent a conspiracyagainstthe farmers this of tariff and is structure bindings of this country,arequestionswhich needto be answered. Japanwhich for all crops tariff declared rice subsidized bindings produceshighly

THE WTO REGIME AND THE INDIAN ECONOMY

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except rice and have therebykept its options open while we seem to have closed ours quite inexplicably. Thereis not only mereabsenceof a level playingfield but indeed the field is steeplyinclinedtowardsthe developedcountriesowing to the trickery they have employed. Let me illustrate this from the subsidies data on agriculture.GATT 94 specified that the AMS or was to be reducedby all aggregatemeasureof supportto agriculture in countries to thebase-level compared support 1986-88, but reduction was to be to a greaterproportionateextent by advancedcountries comparedto developingcountries. This looked good, on paper,for developingcountries:but what is the reality? The advanced of futurereduction countriesin anticipation their subsidies to raise without scrambled commitments, exception As may 1986-88. to agriculture to the base phenomenallyup period, be seen from Table1 the USAraisedits ProducerSubsidyEquivalent fromonly 9 percent which is partonly of its total transfers to farmers, of value of agricultural to as in high as 45 percent production 1980, of the valueof agricultural productionby 1986, namelya 500 percent a muchhigherrise in the rise in the relativesharealone, representing absolutesums involved.It is this highlyinflatedtransferwhich then became the base for reduction,so that after reductionthe transfers still remaina multipleof what they were in 1980. The storyis the samefor the otherhigh-income exporters; primary even Japan in which PSEs already amounted to 71 percent of agriculturaloutput value in 1980, raised it furtherto 93 percentby 1986. Ten countries of the EC raised the share from 25 percent in 1980 to 66 percentby 1986. Evenfull compliancewith the reduction commitmentsby advancedcountriesfrom these inflatedbase period levels,would leavethemwith an absolutelydominatingposition;and full compliance has not taken place. (Developingcountries on the other hand, not only did not raise their meagresubsidiesat all but sincerely - and foolishly- tried to comply with WTO reduction commitments,this steeply tilting the field against themselves).It is this kind of manipulationand dishonesty,which makes the demand by advancedcountriesthat developingcountriesshould reducetheir alreadymeagresubsidies,such a hypocriticaldemand. This leads us logically to the question of De-industrialisation Let us briefly take up this other very importantresult of the tradeliberalisationdisciplineof the WTO namelythe de-industrialisation of developing countries. Again the WTO is merely codifying and implementingthe provisions which were already a part of loan -

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conditional liberalisationearlier.We have ample documentationon the way that the free inflow of capital has servedto de-industrialise the Latin Americanand SSA economies from the works of many economists, and not necessarilythose of radicalpersuasionalone.22 In India too it is becomingclearthat even while the entireeconomic policy regimeis gearedto a servilewooing of foreign FDI, the total actual inflow has been not more that 10-12 billion dollars over the entire last decade and a substantialpart of it has gone into mergers and acquisitions. At the same time that they forcibly prise open our marketsfor theirgoods the advanced countriesblatantlymountnon-tariffbarriers as a weaponagainst againstus. The questionof usinglabour-standards the competitionof cheapergoods is not new and is familiar to students of inter-warhistory. From the late 1920's when Japanese textiles invadedIndianmarkets textilestherewas an outcry oustingLancashire from Britain that Japanese labour was super-exploited.All these crocodile tears shed on behalf of Japanese labour had only one objective,to excludeJapanesecompetition and continue the British monopoly of the Indianmarket.Similarlythe same countrieswhich are bombing others and denying medicinesto children in Iraq, are today sheddingcrocodiletearson behalfof Indianchild labour,with the sole objective of erecting to ourcheaperimports. non-trade barriers andthe opposition the of these tactics awareness Unfortunately to it has come rather late, at a time when our markets have been alreadysubstantiallyopened up and penetrated,for the developing countries have been bullied into lowering their averagetariffs to a much greater extent, which is nearly double the meagre extent to which developedcountrieshave lowered tariffs. The time phase of QR removal and tariff reductionhas been shortenedfor developing countries whereas importantbarriersto their exports to advanced which is a systemof quotas, countrieslike the Multi-fibreAgreement have been given a much longer lease of life; and by the time it is will have beenput in placewhich dismantledothernon-tariffbarriers will effectivelyclose their marketsto our textile exports. Perhapsthe saddestand most disturbingaspectof the present neo-liberalregimeis the speedwith which our industrialstructurein the public sector is sought to be dismantledthroughdiscrimination in favour of foreigncompanies.Our governmentsin their eagerness to woo foreigncapital is readyto underwriteprivateforeign profits and get the risk to be borneby the Indianpeople by giving sovereign This is no different to companieslike Enronand Cogentrix. guarantees

THE WTO REGIME AND THE INDIAN ECONOMY

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from the way that the colonial governments gave guaranteedreturns to privateforeigncompaniesto build railwaysin the last century- a as privateprofitsat public haddescribed processwhichDanielThorner risk. It has been estimatedthat not only will the power suppliedby theseprojectshavesubstantially highercost perunitowing to inflation of the capital costs, than power suppliedby the plants set up using domestically produced power equipment, a staggering additional burden will be put on the government exchequers by way of returns.Forexamplea decisionin March 1993 was taken guaranteed Government of Karnatakathat the KSEBshould buy all power by fromCogentrix. This decisioninvolvedguaranteed paymentstotalling over Rs. 2000 crores a year for a period of 30 years, namely a guaranteedpurchaseorderof Rs. 75,000 croresto a companywhose total equity was only Rs. 45 lakhs! Economic unreasonappearsto hold sway. Despitea severelycriticalreportfrom a team of experts,a was signedin 1995 with a powercompany powerpurchase agreement whose sole promoterwas Cogentrix.Publicoutcryand a writ petition led to a ruling by the KarnatakaHigh Court for a CBI enquiry.23 Againrecentlydespitethe successof this public interestpetition and High Court ruling which led to Cogentrix announcinga welcome pull-out,the SupremeCourtwas inducedto overturnthe High Court verdict, and the Centralgovernmenthas come forward with fresh It is a difficultsituationindeedwhen compradorthinking guarantees. and comprador elements pervade the intelligentsia and the administration, when many bureaucrats and academics alike in positions of power,are preparedto sell their birthrightfor a mess of pottage. The solution to the attemptedrecolonisationis to fight back. This fighting back has to be at many differentlevels: through mass organisations of workers like trade unions, through the womens' movement,throughthe indispensablepolitical parties,and through theoreticalanalysisand exposureof the agendaof neo-imperialism. becomemoreof a Never has the disciplineof economicsin particular battlefieldthan it is today - as the other disciplineslike history and politicshavealwaysbeen.This is not a time for continuingintellectual servility to the self-servingideas generatedin the mainstreamof theorising in the Northern universities.The real issues must be understood and young people in particularmust come forward to provide the badly-needed theoretical competence and moral commitmentfor a renewedresistanceto economic recolonisation.

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TABLE1A Productionper head of population,of Paddyin Java, 1890 to 1940 Year 1885 1895 1900 1905 1920 1930 1940 Population (million) 19.912 23.672 26.150 27.386 34.984 40.891 48.416 Paddy Output 000 t. 3972 4207 4474 4406 6108 6501 7836 Output per head in kg. 199 178 171 161 175 159 162 Index of Output per head 100 89.4 85.9 80.9 87.9 79.9 81.4

TABLE1B and ProductionIndicesof Rubber,Sugarcane PrimaryExportVolumeIndex,Java Period Rubber (1910-19 = 100) Sugarcane (1890-99 = 100) Period Volumeof Exports (1903=100) 100.0 122.5 154.1 183.2 239.0 348.2 369.6

1890-99 ..... 100 1900-09 ..... 263 1910-19 100 382 251 1921-25 491 1926-30 504 668 1931-35 600 402 1936-40 762 332 Source:Agricutural in Indonesia. Development

1903 1908 1913 1918 1923 1928 1938

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TABLE 2 Percentage of Producer Subsidy Equivalents to Total Agricultural Production by Selected Countries Year Australia Canada EC (10) 25 30 42 26 24 44 66 USA Japan

1980 1981 1982 1983 1984 1985 1985

5 8 15 8 9 13 19

15 16 20 19 25 39 54

9 12 14 34 21 26 45

71 65 77 79 81 86 93

Source:Ingersen,KA, Rayner,AJ and Hine, RC (Eds) 1994 quotedin Dhar B and S Chaturvedi1999, p.80 TABLE 3 Change in Nutrition level in six most Populous Countries in Sub-Saharan Africa Country Cerea Imports (000 T) Food Aid (Cereals) (000 T) Change in Imports net of food aid (000 T) 4. 19891990 5. 19801990 Per Cent Change in Calories per head

1. 1980

2. 1990

3. 19791980

6. 1979-81 to 1989-91 -2.17 -9.92 -6.00 15.45 -9.86

Tanzania Ethiopia Uganda Nigeria Kenya Zaire

399 397 52 1828 387

73 687 7 502 188

89 111 17 86

22 538 35 62

-259 -137 - 63 -1326 -175

1.54 -232 107 77 538 336 Source:For first four columns,variousissues of WorldDevelopmentReport;fifth column derivedfromearlierones. For last column, FAO'SFood BalanceSheets 1992-94 Average,Rome 1996. Calculatedand presentedin PatnaikP 1999, Table 1 on p.174. Note: Column5= (2-4) - (1-3). Importfiguresreferto calendaryearswhile food aid so that theircomparisongives an approximate figuresreferto crop years (July-June)
picture only. Since aid data are from foreign donors, July-june is compared with the

followingJanuary-Decemberto take care of lags in aid arrival.

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NOTES "E MS and the Agrarian Question: Ground Rent and its Implications" Social Scientist Vol.29 No.9-10 Sep- Oct 1999 2 Adam Smith The Wealth of Nations Books I-III (First published 1776, quoted passage on p.466 of Penguin Books 1986, Ed. Andrew Skinner) 3 David Ricardo Principles of Political Economy and Taxation (Vol.1 of The Works and Correspondence of David Ricardo edited by Pierro Sraffa with the collaboration of M H Dobb, Cambridge: CUP 1951) Ch.VII 'On Foreign Trade' 4 K N Chaudhuri 'Foreign Trade and the Balance of Payments' in The Cambridge Economic History of India Vol.II edited by Dharma Kumar and Meghnad Desai (Orient Longman 1985) 5 Rosa Luxemburg The Accumulation of Capital (London:1963) 6 Joan Robinson is an exception. In her "Reflections on the Theory of International Trade" (Collected Economic Papers Vol. V Oxford: 1975) She points out that "In Ricardo's example Portugal was to gain as much from exporting wine as England from exporting cloth, but in real life Portugal was dependent on British naval support, and it was for thid reason that she was obliged to accept conditions of trade which wiped out her production of textiles and inhibited industrial development, so as to make her more dependent than ever". 7 These figures relate to the USA, Canada, EEC and Japan taken together. 8 Harriet Friedman, 'The Origin of Third-World Food Dependence' in Bernstein, Crow et.al. Eds The Food Question 9 For the importance of imports of livestock products from Ireland in meeting 12 to to 18 percent of the actual consumption in England-Wales during the Industrial Revolution, see E L Jones in R Floud and D Mc.Closkey (Eds) in The Economic History of Britain since 1700 Vol 1 1700-1860 (Cambridge, CUP 1981) I The index of rubber output in fact rose over 7 times in a shorter period, from 1914 to 1938. n For Korea see R Grabowsky 'Towards a Reassessment of Japan's Early Industrialisation' in Development and Change 1985, and E B Schumpeter The Industrialisation of Japan and Manchukuo (London:1940). 12 For India see estimates by George Blyn Agricultural Trends in India 18971947 (Philadelphia: 1966). For a critique of Amartya Sen see my 'Food Availability and Famine: a Longer View' in Journal of Peasant Studies 1991, also reprinted in U Patnaik The Long Transition - Essays on Political Economy (New Delhi: Tulika 1999) 13 For a theoretical discussion of the way that coupling their economies to the subjugated economies enabled non-inflationary expansion in advanced countries see P. Patnaik Accumulation and Stability under Capitalism (Oxford: Clarendon Press 1997) 14 This includes those fruits and vegetables which can grow in cold temperate lands only in summer, but whose supply is maintained all the year in the supermarkets through imports in winter from distant subtropical to tropical countries. 5 This is not altered by the fact that some industrial re-location of production of textiles and other consumer goods destined for Northern markets has

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been done by NorthernTNCs seekingto profit fromthe muchlower wages in ThirdWorldcountries;these too face tariff and non-tradebarriers. 16 The on Agriculture mentionsfood securityas a non-tradeconcern Agreement at the behestof the developingcountriesand most magnanimously 'permits' stock holdingactivitiesfor food securityreasons.Butthe conditionsattached haveseriousimplications: countries are'allowed'to makepublicstockholding " the of foodgrains difference betweenacquisition priceand external provided referenceprice (i.e the ruling internationalprice) is accounted for in the AggregateMeasure of Support " where the AMS is subject to reduction commitments.Now while this did not matterfor years where the domestic procurement price in Indiawas below world price, but now that the world grain price has fallen in the course of the last two years, and is below the current per tonne production cost in India , the pressure to give up at a fair price to our farmersis bound to mount. Indeedwith procurement the currentreductionof importduty to a flat across the board 35% in the 2000 budget,Indianfarmersarealreadysubjectto unfaircompetition,since the world grainpriceitselfis not relatedto productioncost abroadbut is the resultof massivesubsidyused for capturingmarkets. 17 to the Licensing A papertitled "GATT Intellectual Code"presented Property ExecutiveSocietyUSA/Canada AnnualMeetingin October1989, by James R Enyart,.Director, International Affairs,MonsantoAgricultural Company, the successful describes effortsof the Companyalongwith likeinterestgroups in pushingthe IPRprovisionstheywanted:"Acountrycannotexcludedrugs, ; a reasonableterm chemicals,biotechnologyand the like frompatentability must be providedwith 20 years from filing suggested.Compulsorylicenses for its fulminations areto be tightlylimited."The paperis interesting against developingcountries,which are accusedof seeking"magicways to shortcut the developmentprocess",and against the UN system "wherehigh flown rhetoricand crackpot ideas are taken seriously"even by many developed country academics who "took this New World Economic Order stuff seriously". and Food Securityin Developing Countries 1X "ExportOrientedAgriculture in my book The and in India"EPW SpecialNo. August1996 also reprinted Essayson PoliticalEconomy(1999) Long Transition: 19 Utsa PatnaikThe Likely Impactof EconomicLiberalisation and Structural
Adjustment on Food Security in India (Workshop organised by ILO and
20

National Commissionfor Women, New Delhi January1993) See the 1998-99 EconomicSurvey.By mid-1999 it was clearthat the 199899 foodgrainoutput had again reachedits earlierpeak at 203 m.t, so the in February 1999-2000 EconomicSurveyreleased 2000, has suddenlyadded to obtain the an annual incrementof 22 million personsquite arbitrarily, 1998 populationfigure,and then has revertedto adding 16 million to that to obtainthe 1999 provisional population,whichremainsat only 986 million whereaswe have been informedwith owing to the earlierwindow-dressing, great fanfarethat India'spopulation had crossed the one billion mark by thereis no reason October 1999! Accordingto independent demographers, to believethatthe annualpopulationgrowthrateis less than 1.9 to 2 percent. By the time authenticestimatesof the ninetiespopulationgrowth from the 2001 Censusare available,people will have forgottenthe doctoredfigures of the EconomicSurvey.

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21

22

23

Availability perhead,jisdefinedas productionplus net importsminuschange in stocks , all three taken per head of population. Evenwhen production per head declines, as has been the case in the nineties, availabilitycan be maintained through net imports and buffer stock changes. Availability of the poor can be minimizedby the strategyis of cuttingtheir requirements purchasingpower and reducetheireffectivedemandfor foodgrains;I argue this has been and continuesto be the strategyunderthe demand-deflation for developingcountries.See my 'Export policies guided by the Fund-Bank and in India' orientedAgriculture in DevelopingCountries and Food Security Economicand Political Weekly SpecialNumberAugust1996 also contained in my The Long Transition-Essays on Political Economy (Delhi: Tulika 1999) ArdeshirSeperi1994 'Backto the Future? A Criticalreviewof (the World BankReport)"Adjustment in Africa:Reform,Resultsand the Road Ahead" 'in Reviewof AfricanPoliticalEconomy No.62 1994; quoting SanjayLal, 1992 'StructuralProblemsof AfricanIndustry'in F Stewart,S Lall and S Wangwe Eds. Alternative DevelopmentStrategiesin Sub-SaharanAfrica (London: MacMillan 1992) and H Stein 1992, 'De-industrialisation, Adjustment,the World Bank and the IMF in Africa' WorldDevelopment Vol.21 No.1. See AbhayMehta Power Play pp.130-133 (Delhi:OrientLongman1999); P Patnaik'The Humbugof Finance'FrontlineFebruary 4, 2000.