Foreign Economic Models and DCs
By Dr Baldeo Sahai
 

The economists of the western world have tried various models to ameliorate the condition of the weaker sections of society in the developing countries (DCs) but nothing seems to have worked satisfactorily. The IMF-World Bank have poured billions of dollars to pull up their sagging economy but very little has been achieved. Rather, some DCs have been caught in debt traps and in a few cases in South- East Asia there was grave financial crisis. It may be said in defence of these models that the situation might have been worse if these were not introduced and IMF- WB loans were not advanced. At the same time it cannot be completely ruled out that there has been something wrong with the foreign economic models and the DCs have to evolve their own strategies which will suit their social and cultural structure. This view seems to acquire strength when we examine the examples of countries like China and Malaysia which have attained enviable recovery on their own without towing the western line. 

Right now the model that is being vigorously propagated and pursued is that of globalization free market and privatization. Not unoften it is put forward as a precondition for obtaining foreign financial help, or attract foreign investment. Those who manage public sector enterprises (PSEs), it is being vehemently projected are inefficient, incompetent and ill-trained and have no personal stake in business. The IMF - WB even brought out a book. 

Bureaucrats in Business - to publicise their theory. As far as India is concerned, then, conveniently forget that it is the public sector which laid the foundation of infrastructural industries like steel, power, oil, light and heavy engineering, chemical industry and others so much so that mainly due to the contribution made by the public sector, the country emerged as the tenth most industrialized nation in the World. The performance of public sector giants like Indian Oil - mentioned in Fortune 500 -NTPC, BHEL and several others is second to none in the world. In the peculiar problems faced by the country, public sector has to lend support to certain sectors and offer employment to more people than required with all the amenities like housing, education and medical facilities etc. With all the efforts, being made, by the IMF- WB and other philanthropic' organizations, according to ILO estimates, there were as many as 160 million unemployed people at the end of 2000. Of these, about two-thirds are in the DCs and only 50 million in the industrialized countries (ICs). In addition says the ILO's World Employment report 2001, more then 500 million workers, almost entirely in the DCs, are unable to earn above the US $ 1 a day poverty line. 

Over one-sixth of the total population of this 'blighted' planet is living on less $ 1 per day. The total number of these unfortunate human beings in 1998 was 1,199 million, the largest number living in South Asia at 522 million; sub-Saharan Africa coming second (291 m) with East Asia and the Pacific being the third with 278 m in people (P6). The percentage of such people fall from 44 to 40 in the first eight years of the 1990s, but the number of extremely poor in 1998, .at 522 m was almost 30 m more than in 1990 (P9). 

Recent estimates for India based on the National Sample Survey offer little hope for poverty alleviation. It says "While these results must be interpreted with caution, they do suggest that higher economic growth in the recent past is not translating itself into any significant improvement in the poverty situation." In fact real wages of unskilled agricultural workers has declined by 2.1 percent in 1998-99 after showing a healthy increase of over 6 percent in the previous two years. According to the Planning Commission sources, in spite of economic reforms introduced in 1991, employment generation has fell in the past six years to 0.98 percent from its growth of 2 percent during the 1980s. 

Earlier, the incidence of poverty declined from 55 percent in 1973-74 to 36 percent in 1993-94 with the absolute number of poor remaining more or less stable at around 320 million which has slightly come down according to the latest census. In fact Indian planners have to sit up and think development for what and for whom? 

In Pakistan, the employment and poverty situation has worsened in the 1990s ‘due to prolonged economic recession’ and slowdown in overseas migration and remittances. The level of unemployment at around 6 percent in 1999 was high compared to historical trends and disproportionately larger for women (15 percent) as compared to men (5.2 percent). The proportion of population below the poverty line had increased from 17.8 percent in 1987-88 to 32.6 percent in 1998-99. The number of those living below the poverty line has spiraled from 17.8 million to 43.9 million recording an increase of 26.1 m in the past 11 years. In the second half of 2000 the economy showed slight recovery specially through growth in agriculture and manufactured exports. In Bangladesh, economic growth was higher in the 1990s as compared to the previous two decades, but it has not been sufficient to absorb the increase  in labour force. In I 990s, a net 8 million people joined the labour market, "but employment increased barely by 5 million. More than 80 percent of the population line in rural regions, half of them below the poverty line. 

Asia and the Pacific Region 
For Asia and the Pacific region, 1999 and 2000 were years of recovery from the crisis of 1997-98. Growth rates in China, India, the Republic of Korea and Malaysia were particularly high. As output increased, unemployment rates tended to fall and real wages rose in most countries although in the case of India, as pointed out earlier, their impact on reducing poverty is not yet discernable. Recent developments in the Pacific have not been encouraging. The use of force to overthrow elected governments in Fiji and Solomon Islands has had a major negative impact on output and employment. The unemployment rate in the region has been the lowest at 1.3 in Hong Kong, China with Singapore coming the close second at 1.7. It was the highest in Sri Lanka at 14.4 and in the Philippines second highest at 8.1 

In East and South-East Asian countries seriously affected by the financial crisis of 1997 recovery occurred more quickly than expected. The main reasons for this turnaround were strong real output growth, under-pinned by accommodative monetary policies, gradual fiscal consolidation and improved competitiveness. The electronics industry has recovered more quickly than others. But the pace of revival varies and only the Republic of Korea, Malaysia, and the Philippines exceeded pre-crisis levels of , quarterly output by the end of 2000. In the Philippines however, political uncertainty in the second half of 2000 slowed down the economy. During 1999 unemployment rates were still raising in Indonesia (6.4 percent) and Malaysia (3.4 percent) and were  only slightly below record year earlier levels in Republic of Korea (6.3 percent), the Philippines (9.7 Percent) and Thailand (4.2 percent). In the Philippines, and Thailand real wages in the first quarter of 2000 were 9 percent below the levels of the second quarter of 1997, while the full scale of the disaster in Indonesia's labour market in 1997 and 1998 was there all to see. In the Republic of Korea, real wages continued to rise in 2000. 

Latin America and the Caribbean 
In the Latin American countries recovery from the crisis lagged behind East Asia by at least a year. In ] 999 several economies like those of Argentina, Chile, Colombia, Ecuador, Uruguay and Venezuela suffered fall in GDP. In the first three quarters of 2000, the rate of unemployment was close of 9 percent registered in the same period of ] 999. Youth unemployment (]8.9 percent) was almost I double the average rate of 8.9 percent and slightly higher among l women than men. Industrial wage increased by 1.2 percent and minimum wages by 0.5 percent, sustained by growing productivity of 1.3 percent and lower inflation.

In general, during the recovery phase, t employment responded at a lower pace than output. In Chile, GDP had recovered to pre-crisis level after a year while the unemployment rate was almost 50 percent higher. Brazil has still not fully recovered from recession and the rate of unemployment is still above the pre-crisis levels. Mexico is an exception with declining unemployment coupled with growing real wages. In the Caribbean countries, high double digit open unemployment has characterised their labour markets. In Bahamas, Barbados, Surinam and Trinidad and Tobago, unemployment declined in the 1990s due to improved economic growth. It is in Belize that, unemployment increased significantly in 1998 despite strong economic growth in the earlier years.

Industrialised Countries 
Among the industrialised countries for the fourth consecutive year, growth rate has exceeded 4 percent and the un-employment rate also around 4 percent, has been less than half that recorded in OECD countries. Gordon has calculated that hourly labour productivity in 1995-99 grew at 2.7 percent per year, compared with just over 1 percent in the previous 13 years.

A major problem facing many countries today is the sharp and sudden drop in employment levels due to armed conflicts or natural disasters. Presently, about a third of the ILO's member states are in conflict, just emerging out of conflict, re-entering into conflict or affected by a conflict in a neighbouring country. These conflicts, point out the report, jeopardize the efforts of ILO relating to employment promotion, poverty alleviation, elimination of social, economic and gender iniquities, protection of workers' rights and observance of international labour standards. Employment-friendly reconstruction and the promotion of decent work in unstable situation have become integral parts of the work of ILO. 

The problem of employment is closely related with the economic policies of various countries. These have somehow made the rich richer and the poor at best have remained where they were.  A comparison of statistics for 36 countries in the 1980s and the 1990s from the UNDP Human Development Report for 1994 and 2000 reveals that income distribution has become worse only in one out of 181Cs but in most of the DCs, further deterioration has occurred. The DCs and LDCs, therefore have to formulate their own independent economic models keeping in view their social, cultural and developmental needs.

(By Arrangement with Kaleidoscope)