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Fueling Economic Growth Through DemocraticParticipation: Three Lessons from Kerala, India
Kerala - beautiful beaches, red sands, coconut trees and people full of love.
by Richard W. Franke: 10 August 2001Professor of Anthropology, Montclair State UniversityFueling economic growth. Three little words with lots of conceptual, empirical,and ethical issues surrounding them. In this talk I propose to note a few of themost important issues, then to describe for you what I believe are threesignificant and thought-provoking experiments in fueling economic growth: 1) aset of quality of life achievements known as the Kerala Model of Development, 2)within that model, a democratic worker-owned industrial cooperative calledKerala Dinesh Beedi; and 3) a statewide campaign for decentralization that isusing democratic participation as a principle fuel for economic growth. We shallbriefly consider how much fuel these two experiments are providing and thenreturn to the conceptual and ethical issues I am about to note. Finally, I hope tosuggest some lessons we might learn from these unusual approaches togrowth lessons already in practice in a few communities in the developed world
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 but with much potential for all of us.First the conceptual issues. The expression "fueling economic growth" isprobably understood intuitively by everyone. Economic refers to the productionand distribution of goods and services. For fuel we can take the basic dictionary
 
definitions of material that causes or assists in the release or utilization of energy.Growth of course refers to an increase in size or amount.Some problems arise with the expression "economic growth." When we try todevelop a ways to measure it, we run into several difficulties, reflecting thecomplex nature of modern economic systems. Are we interested in the growth of the Gross Domestic Product (GDP), for instance, the total value of all theproduction in a country in one year, or the Gross National Product (GNP), theGDP plus rents, interest, profits, and dividends flowing in from abroad minus thepayments out? Unpaid household work is not counted in either measure sincemoney does not change hands: both GDP and GNP ignore much of the fuelwomen supply to the economy. GNP figures tend to distort the measureaccording to ownership. Do more ownership and more inflow of rents and profitsmean more economic growth? And what about depreciation? Are we fuelingeconomic growth when companies replace machinery and office buildings? Oneway economists try to get around this problem is by computing the Net NationalProduct (NNP), the GNP minus capital depreciation. All these figures can bedivided by the number of people in an economy to produce a per capita version(Anderson 1991:19-20). Further problems develop when we consider theenvironmental aspects of economic growth. We can fuel growth literally bychopping and burning forests, or by drilling and burning oil. But neither GDP,GNP, or NNP takes account of the destruction of resources or the state of theresource base. Lester Brown and colleagues at the Worldwatch Institute (Brown1990:8) have been arguing for the past decade that a category of "natural capitaldepletion" needs to be added to economic growth balance sheets. Theenvironmental or "natural capital" aspect of growth measurements is part of alarger conceptual issue now generally referred to as sustainability. Butsustainability can include more than natural resources. We could ask what is thecommunity sustainability of a particular type of economic growth? Does itgenerate long-term, stable or expanding employment or is it part of a growthpattern that skips from place to place making some better off at the cost of others? I shall return to the issue of community sustainability later.Despite the various conceptual problems noted here, most international studieson economic growth and development utilize the per capita GDP. The mainreason for this is that the level of the GDP correlates generally and positively withvirtually all measures of human welfare. Life expectancy, infant mortality, accessto food and to health care, amounts of consumer goods and material comforts,even political liberties and human rights as measured by almost any widely-accepted standards all these to be high when GDP is high and low when it is
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 low. The correlations are consistent, powerful, and statistically significant and theimplication is clear: if you want to produce a higher standard of living and greater health and happiness, but your GDP is low then you have to make your GDPgrow.
 
Let me make an important qualification here. In claiming the positive relationshipbetween GDP and human welfare indicators, I am referring to the full range of societies, from the poor to the rich. Within rich countries, and within the middleand upper classes of all countries, the relationship between income or wealthand various measures of happiness has shown itself to be problematical. In hisattack on the idea of growth, Richard Douthwaite (1999) summarizes andpresents a large number of studies showing that Americans, British, and WesternEuropeans appear no happier now than they were 40 years ago, despitesubstantial economic growth and rising incomes. For us, these findings areimportant, but for people in the poor countries and for poor communities in thericher nations, the data indicate that growth remains a necessity.This brings us back to the problem of the fuel. Particularly since the end of WorldWar 2, economists have been searching for the right materials to inject into thelow-GDP economies to release their energy and jump-start economic growth.They have advocated massive foreign investment, entrepreneurship training,technology transfers, changing the psychological make-up of the people towardsmore future orientation and greater need for achievement, giving people moreeducation, and targeting benefits to the poorest groups to solve the problems of basic needs. These proposals have led to scattered successes, but no approachhas shown itself consistently able to bring about high rates of growth. Todays
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 free trade campaign shows few signs of improving on the situation. In anextended critique, economist Arthur MacEwan (1999:31-65) argues that theeconomics literature of recent years provides consistent refutations of theargument that free trade fuels economic growth. A recent empirical study thatseems to support his argument. Mark Weisbrot, Robert Naiman, and Joyce Kim(2000:9) found that worldwide per capita output grew by 83% during the pre-freetrade period of 1960-80, but declined to 33% in the 1980-2000 period. The 33%growth was accounted for mostly by China, other East Asian economies, andSouth Asia while Arab States and Subsaharan Africa registered economic declinewith the onset of free trade. Latin America and The Caribbean dropped from 75%growth to just above 6% (Weisbrot, Naiman and Kim 2001a:3). Of 116 countriesin the study, 89 experienced growth rate declines in the 1980-2000 period of increased free trade. And in a further paper co-authored with Dean Baker, Egor Kraev, and Judy Chen, Weisbrot[http://www.cepr.net/globalization/scorecard_on_globalization.htm] found that thecorrelation between growth and welfare held up. The declines in the rates of growth have been paralleled by declines in the rates of improvement in lifeexpectancy, infant mortality, and literacy rates in almost all cases except for therich countries where such rates are already the best. In the second poorestgroup, adult female mortality actually worsened (Weisbrot et al 2001:11).If none of the mainstream approaches can identify a fuel for economic growthand improvements in human welfare, where do we look? Revolutionary societiessuch as Cuba, Vietnam, or North Korea offer alternatives, but many people wouldshrink from the heavy state domination they use to bring about growth. The non-
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