Economic Inclusion: Time-Tested Strategy For Political Power

India National FlagIndia became free at the stroke of midnight, on August 14, 1947.  In contrast to the world structure in 1947, India is far less under the sway of others,  and stands firm as a potentially great power.  However, India’s aspiration for political power must include a strategy for economic inclusion.

Human development policies must be advanced from the point of view of their contribution to national power.  As an added incentive, ensuring access to education for underprivileged children, retaining girls in secondary education, and opening opportunities in higher education will work to improve access to finance and to enhance social protection coverage for the more than 90% of the labor force that works in the informal sector (World Bank, 2014).

Pandit Jawaharlal Nehru Independence Day Speech 15 August 1947Jawaharlal Nehru became the first Prime Minster of free India and continued his term till 1964.  Giving voice to the politics, economic ambition and and social sentiments of the nation , Prime Minister, Pandit Jawaharlal Nehru said,

Long years ago we made a tryst with destiny, and now the time comes when we will redeem our pledge, not wholly or in full measure, but very substantially. At the stroke of the midnight hour, when the world sleeps, India will awake to life and freedom.  A moment comes, which comes but rarely in history, when we step out from the old to the new, when an age ends and when the soul of a nation, long suppressed, finds utterance…. We end today a period of ill fortune, and India discovers herself again.

Power, Authority and the United Nations of BRICS

The creation of two new international financial institutions: New Development Bank (NDB), and the Contingent Reserve Arrangement (CRA) in a conference of five governments demonstrates the explosive growth, global reach and speed of contemporary capital movements (short-term as well as long-term).  Indeed, the relative ease with which such flows could occur represent a distinct reversal of the general national policy preferences evident during the years immediately following World War II (Pauly, 2002).

The July 15 meeting in Fortaleza, Brazil demonstrates a profound shift in market-authority, and as such  Brazil, Russia, India, China and South Africa (BRICS) now have room to maneuver independent policy choice in the global financial order.  In practical terms, the growing influence of the BRICS, which account for almost half the world’s population and about one-fifth of global economic output, means power to restructure cross-border financial markets, public authorities and expand activities in the field of sustainable development.

On the domestic front, it is increasingly understood that this economic expansion, facilitated by international financial markets comes with new risks for governments, societies, and individuals (Pauly, 2002).  Markets will continue to “reward or punish according to their judgment of how any government manages its money supply, its fiscal deficit, its foreign debts, or improves the efficiency of its banks and it local credit” (Hall and Biersteker, 2002).  India, for example, will have to continue promoting necessary adjustments in internal policies.

The policy-related observation is that the “silent revolution” of economic liberalization has fueled a boom in emerging markets. Following the exodus of capital from emerging markets and scaling back of U.S. monetary stimulus, it is clear that financial regulatory power is dispersing and no particular national authority is truly dominant.  As Pauly writes, stabilizing the market involves two dimensions: managing systemic risk and ensuring that modicum of symmetry in adjustment burdens required to sustain the logic of interdependence (Pauly, 2002).

Thinking About Thinking About A Bali Deal

U.S. Secretary of State John Kerry (L) shakes hands with Indian Prime Minister Narendra Modi at the Prime Minister's residence in New Delhi August 1, 2014.India has blocked a landmark trade treaty, the first global trade reform since the creation of the World Trade Organization 19 years ago.  This collective action problem demonstrates the constraining character of previously dominant political and economic games.  Policymakers everywhere are seeking to restructure the state so that it can play new roles in the future (Cerny, 1995) of global governance.  India, included.

On the one side, a firmly held conviction that the decisions that ministers reached in Bali (2013) cannot be changed or amended in any way — and that those decisions have to be fully respected.  And on the other side of the debate some believe that those decisions leave unresolved concerns that need to be addressed.

U.S. Secretary of State John Kerry, who was on a visit to India, told Prime Minister Narendra Modi  that India’s refusal to sign the trade deal had undermined the country’s image.

A labourer spreads wheat for drying at a wholesale grain market in the northern Indian city of ChandigarhIndia says it is willing to sign a global trade deal, but just not yet.  The country’s unresolved concern is food security.   India’s new nationalist government has insisted that a permanent agreement on its subsidised food stockpiling must be in place.

My view is that the multilateral trading system is important not just to support economic growth and development, but also to deal with global issues of governance.  However, domestic politics matter, for either side.  The reality is Indian incomes are increasing rapidly, but not as rapidly as one would infer from official labor income data and growth statistics (Piketty, 2014).  Food security is a supreme national interest.

The possibilities for collective action through multilateral regimes have increased, but these operate at least one remove from democratic accountability (Cerny, 1995).  As Putnam (1988) puts it, it is fruitless to debate whether domestic politics really determine international relations, or the reverse.  Think about it.  The answer to that question is clearly, “Both, sometimes.”