‫كل السلطة للشعب‬

‫ الندوة الدولية حول‬:

‫إشكالية السلطة بين التسلط والتحرر‬
‫كل السلطة للشعب‬

Colloque International sur le

probleme du pouvir
Entre la Domination et la Liberation
Tout le Pouvoir est au Peuple

International symposium on the

problem of authority
Between Domination and Liberation
To whole Authority for whole
people
 Globalisation, Nation States, and the Emerging
Regionally Anchored Economic Actors: Experiences from India
Dr T. N. Sreedhara
Professor of Business Administration

Globalisation, Nation States, and the Emerging Regionally

Anchored Economic Actors: Experiences from India

Dr T. N. Sreedhara
Professor of Business Administration

Introduction

Contemporary debate on globalisation reveals us the central reality that it has, over and

above its overpowering character, multiple representations and implications in different societies

differently. India, as a society of colonial inheritance, has been a recipient of globalisation

ideology from its wrong end. In fact, the story of globalisation influx in India is a culmination of

the earlier story of colonial domination. Like other societies in Asia and Africa, India, first

under colonialism and now under globalisation, has been a victim of borrowed models of

development resulting in disastrous consequences. Given this, the paper attempts to examine the
major debates on globalisation primarily to draw implications on the agenda of development in

India and its consequences on the nature of domination and political authority.

The process of integration that was initiated at the global level with the collapse of the

Berlin Wall is popularly termed as globalization, though this process has been there from the

dawn of the human civilization in one form or the other. The use of the term globalization to the

contemporary integration process is significant due to the following reasons. First, the rapidity

with which the current global integration is taking place is unheard of in the history of human

civilization. Secondly, the new technology is exponentially destroying/displacing the hitherto

believed institutions and values that are anchored in the spirit of nationalism in such a way that

now we are compelled to think beyond the traditional nationalistic framework. Thirdly, this

process is distinct from the earlier ones in that that the problems of exclusion and the consequent

problems that we are facing today, and that we are going to face tomorrow, is unparalleled in the

history of human civilization. Finally, the impact of this inevitable process is universal

irrespective of nationality, stage of development and the nature of political ideology of the

country. Therefore, it is vital that we understand the main discourses of globalization before we

attempt to understand the emerging trends in India. The contemporary globalization discourses

could effectively be understood in terms of hyperglobalist, skeptic and transformationalist

perspectives.
Hyperglobalist view of globalisation

The hyperglobalists believe that globalization is a real phenomenon and

is brining about not only quantitative, but also qualitative changes in

international and transnational relations and interactions, and as such it

heralds a new epoch of human history. This thesis is anchored in neo-liberal

economic logic and predicated on the emergence of a single global market

and global competition as the engine of human progress. Economic

globalization, according to hyperglobalists, will lead to denationalization of

economies by creating transnational networks of production, trade and

finance and the creation of the borderless world. Ohmae and others argue

that the traditional nation-states have become unnatural, even impossible

business units in a global economy.1 As a result, they argue, the national

governments would just act as transmission belts for global capital. Strange

goes a step further and asserts, “the impersonal forces of world markets . . .

are now more powerful than the states to whom ultimate political authority

over society and economy is supposed to belong . . . the declining authority

of states is reflected in a growing diffusion of authority to other institutions

1
Ohmae, Kenichi. The End of the Nation State, New York: Free Press, 1995; Wriston, Walter, B. The
Twilight of Sovereignty: How the Information Revolution is Transforming Our World, Scriber: New York,
1992; Guéhenno, Jean M. The End of the Nation-State, Minneapolis: University of Minnesota Press,
1995; and Friedman, Thomas, The World is Flat: A Brief History of The Globalised World in the 21st
Century, Allen Lane: London, 2005.
and associations, and to local and regional bodies.”2 Hyperglobalists

discourse, however, represents considerable divergent normative viewpoints

between neo-liberal and neo-Marxist camps. But notwithstanding the

divergent ideological positions, both the camps share the view that

globalization is primarily an economic phenomenon increasingly integrating

the global economy and that the global capital demands neo-liberal

economic discipline guided by ‘the principle of sound economic

management’.

Skeptic view of globalisation

As opposed to the views of hyperglobalists, the skeptics hold that

globalization is a myth. They argue that the post 1990s developments could

be viewed at best as the quantitative increase than qualitative alternations

as hyperglobalists claim. To skeptics, globalisation necessarily implies a

perfectly integrated worldwide economy, the ‘law of one price,’ and

heightened levels of internationalization. Hirst and Thopson, for example,

assert that the contemporary ‘globalization’ is wholly exaggerated and that it

only demonstrates that world economy is undergoing a significant

‘regionalization’.3 The skeptics consider the hyperglobalist thesis as

2
Reich, Robert. B. The Work of Nations. Knopf: New York, 1991.
3
Hirst, Paul and Thompson Graham. Globalization in Question. The International Economy and the
Possibility of Governance, Cambridge: Polity Press, 1996.
basically defective and politically naive as it undermines the lasting power of

national governments to regulate international economic activity. Again,

skeptics point out that the global widening and deepening process is not new

and historically the human civilization may have witnessed even higher

degree of interdependence. The nature of interdependence what we are

experiencing today is not at all global as this process is highly selective and

asymmetrical and a reinforcing factor of existing inequalities and exclusions.

The skeptics argue that this process, contrary to hyperglobalist view, could

trigger socio-economic and political reactions encouraging fragmentation,

rationalization and the erection of new borders. Therefore, they reject the

thesis that the power of national governments or state sovereignty is being

undermined by economic internationalization.4

Transformationalist view of globalisation

Unlike hyperglobalists and skeptics, transformationalists acknowledge that we are

currently witnessing new kinds of processes on a global scale that have the capacity to induce

desirable transformations in the international system thus presenting both challenges and

possibilities. They also, like other views, do not believe that the path these processes will take is

inescapably predestined and independent of the choices real actors will be making. To a certain

4
Held, David; McGrew, Anthony; Goldblatt, David; and Jonathan Perraton. Global Transformations.
Politics, Economics and Culture, Cambridge: Polity Press, 1999.
extent, transformationalists’ accounts emphasize globalization as a long-term historical process

which is extolled with inconsistencies and which is significantly shaped by conjectural factors.

Nierop argues in this context, ‘Virtually all countries in the world, if not all parts of their

territory and all segments of their society, are now functionally part of that larger [global] system

in one or more respects.’5 Transformationalists are convinced that, at the dawn of a new

millennium, globalization is a central driving force behind the rapid social, political and

economic changes that are reshaping modern societies and world order.6 Therefore, they

conceive globalization as a powerful transformative force, which is responsible for a ‘massive

shake-out’ of societies, economies, institutions of governance and world order.7 Consequently,

they argue, these processes are historically unparalleled such that governments and societies

across the globe are being compelled to adjust to a world in which there is no longer a clear

division between international and domestic, external and internal affairs.8 Nevertheless,

according to them, the existence of a single global system does not signify global convergence or

of the arrival of single world society. Conversely, they argue, it is associated with new patterns

of global stratification in which some states, societies and communities are becoming all the time

more trapped in the global order while others are becoming ever more marginalized. A new
5
Nierop, T. Systems and Regions in Global Politics: An Empirical Study of Diplomacy, International
Organisation and trade 1950 -1991, John Wiley: Colchester, 1994.

6
Scholte, Jan Aart. International Relations of Social Change, Open University Press: Buckingham, 1993;
and Castells Manuel. The Rise of the Network Society, Blackwell: Oxford, 1996.
7
Gidden, Anthony. Durkheim on Politics and the State, Polity Press: Cambridge, 1996.

8
Sassen, Saskia. Losing Control? Sovereignty in an Age of Globalisation, Columbia University: New
York, 1996.
pattern of global power relations is held to be crystallizing giving way to a new international

division of labour such that the ‘familiar pyramid of the core–periphery hierarchy is no longer a

geographic but a social division of the world economy.’9

In any case, globalisation today has occupied the center-stage in all kinds of

intellectual debates. In the context of the impact of globalisation Joseph Stiglitz, in his seminal

work on globalisation, observes that,

“Globalisation today is not working for many of the world’s poor. It is not working for much of
the environment. It is not working for the stability of the global economy. Caring about the
environment, making sure the poor have a say in decision that affect them, promoting democracy
and fair trade are necessary if potential benefits of globalisation are to be achieved,” 10

Similarly, Jacques Deforny and others, while talking about the increased power of capital and the

consequent displacement and marginalisation of the majority of the people world over make the

following observation:

“Today, globalisation is accompanied by the creation of economic blocs covering large areas.
Global elimination of controls on capital was the basis for the financial globalisation that led to
the creation of these blocs. Globalisation is sustained through deregulation and trade
liberalization, and amplified by the new communication technologies. Business now focuses
much more on export markets than on their home market and this extroversion is growing. The
leading national and international concerns in this new social and economic landscape are the
cries of employment and social cohesion, as exemplified by the growing rift between skilled and
unskilled workers of the North and intense competition among nations of the South. As a result,

9
Hoogvelt, Ankie. Globalisation and the Post-colonial World, London: The Macmillan Press Ltd., 1997.
10
Stiglitz, Joseph E. Globalization And Its Discontents, Penguin Books, New Delhi, 2002.
large sectors of the population have been pushed into the informal economy, the last buffer
against social upheaval.”11

Valerian Rodrigues provides an apt description of the complex and multi-faceted dynamics of

globalisation thus,

“The last three decades have witnessed certain profound changes in this (world) configuration
resulting in new and larger networks of exchange; great movement of peoples, goods and
information; trans-national, social and economic interaction and increasing flows of trade,
investment and culture. Such changes are not merely quantitative. New economic, political and
cultural institutions have arisen. These changes have circumscribed the place and role of the
nation-state in a profound way. Increasingly, our lives today are intimately shaped by
developments beyond the confines of the nation-state. Changes in technology and information
have radically altered the hither to familiar notions of space and time. The relationship between
culture, economy and politics is being redefined through rapid exchange of information, ideas
and knowledge. These changes, both quantitative and qualitative, are attempted to be captured by
the term globalisation.’’12

II

Development, globalisation, and India

India’s long and complex historical encounter with colonialism, her eventual attainment of

freedom, and her adoption of the path of modernization got inter-linked to determine decisively

11
Deforny, Jacques et. al. Social Economy: North and South, Centre d’ Economie Sociale, Universite De
Liege, 2000.
12
Rodrigues, Valerian. “Globalisation – An Introduction,” Paper presented in the national seminar on
globalisation held during may 7-10, 2001 at Udupi, Karnataka, India.
her destiny in the post-independent period. Consequently, the newly emerged independent India

was destined to be ‘modern India.’ India’s first Prime Minister Jawaharlal Nehru, who happened

to sphere-head the project of modernizing India, unequivocally believed that modern India had to

be an ‘Industrial India’ poised for rapid and unprecedented scientific and technological

advancement, and economic development through centralized planning. Being socialistically

oriented, Nehru envisaged a Welfare State under the guidance of which Indian economy was to

prosper and the society to advance. He, being a victim of the logic of neo-classical economics,

believed that economic development would necessarily and automatically guide to social

advancement through the intervention of welfare oriented, enlightened State and a clear strategy

of planning.13 Thus, Nehru’s agenda of modernization as the official philosophy of Indian State

meant industrialization, application of science and technology in every sphere of life, and

introduction of English education.

Nehru strongly held that given these processes at work under the initiation and monitoring

of the State, the objectives of development, equality, empowerment, and justice would be

realized in the due course of time by the intrinsic capabilities of the forces of modernization. In

other words, Nehru held that the process of economic development would percolate down to all

spheres of social life due to effective State intervention and planning. One of the reasons that
13
Ghosh, Shankar. Political Ideas and Movements in Modern India, Allied Publishers, Bombay, 1972. See
some of the works related with these aspects: Dutt, Palme. India Today, Manisha Granthalaya Private Ltd.,
Calcutta, 1989; Misra, B. B. The Indian Middle classes: Their Growth in Modern Times, Oxford University
Press, Oxford, 1983; Bagchi, Amiya Kumar. The Political Economy of Underdevelopment, Cambridge:
Cambridge University Press, 1982.
forced Nehru to ascribe pivotal importance to the State was that the State in India is democratic

and representative in character, and that it is the sole effective political instrument to achieve

social equity and justice.14

However, this does not mean that there was no alternative thinking on

development available in India during that time. There were quite a few who strongly held that

the Gandhian idea of development based on economic and political decentralization is best suited

for India.15 There were also powerful votaries like Sardar Patel (the first Home Minister of free

India) and C. Rajagopalachari (the founder of Swathantra Party) who championed the cause of a

classical model of free enterprise and market economy.16 Besides, the neo-Gandhian socialists

like Rammanohar Lohia and Achutha Pathavardhan forcefully advocated the idea of intermediate

technology and small unit machines to achieve historically appropriate model of development in

India.17 Yet, Nehru’s viewpoint on free India’ development prevailed as he headed the Indian

State.

14
Gopal, S. “Jawaharlal Nehru – A Biography,” Oxford University Press, New Delhi, 1989.
15
Alavi, Hamza. “India and Colonial Mode of Production,” Economic and Political Weekly, (special
number) Vol.X, No.33, 34, and 35, November, 1975, Pp. 1235-1262.
16
Chandra, Bipin. The Rise and Growth of Economic Nationalism in India, Peoples Publishing House,
New Delhi, 1982.
17
Lohiya, Rammanohar. Marx, Gandhi, and Socialism, Rammanohar Lohia Samatha Vidyalaya Nyas,
Hyderabad, 1962.
Failure of the development agenda in India

The development model that India adopted after independence until early 1990s did not

produce the expected results. It was not only unable to eliminate some of India’s most crucial

problems but also added a few more to them. Obviously, trickle down effect did not take place.

The process of industrialization due to the uneven social structures in India was lopsided and

benefited only the dominant groups in the society. As a result, the gap between the rich and the

poor, the urban and the rural, men and women, upper strata and the lower strata in the society

began to increase. The supposed effective State intervention and planning did not materialize to

the extent it was expected. In a sense, what really happened in India during those years was, as

A. G. frank puts it, ‘development of underdevelopment.’18

After independence, India, as a Welfare state, laid down the welfare and development

obligations in the Directive Principles of the State policy. While making Welfare policies, as

already pointed out, it followed the footsteps of dominant western theories with a received vision

of development as experienced by the West. This effectively sidelined the possibilities of

deploying indigenous and context-specific modes of structuring or restructuring of Indian

18
See Bardhan, Pranab. Political Economy of Development in India, Oxford University Press, New Delhi,
1984; Bannerji, Nirmala. "Whatever Happened to the Dreams of Modernity? - The Nehruvian Era and
Women's Position," Economic and Political Weekly, 33.17 (1998) WS 3-4; Sen, Anupam. Industrialization
and Class Formation in India: A neo-Marxist Perspective on Colonialism, Underdevelopment and
Development, Routledge, London, 1982. See also Frank, A. G. On Capitalist Underdevelopment,
Bombay: Oxford University Press, 1975; and Dependent Accumulation and Underdevelopment, The
MacMillan Press Ltd, London, 1978.
society, and of managing its development.19 20 This negligence of and insensitivity to the unique

problems and historically specific conditions of India by the State is one of the main reasons why

the development policies and welfare measures failed. Even though many of these policies and

measures were targeted to improve the conditions of the poor and marginalized, they did not

reach them.

At least four inter-twined reasons could be identified for this failure. In the first place, the

development policies and welfare measures of the Indian State was based on the liberal political

philosophy and its economic counterpart of neo-classical development ideology. Secondly, such

a received political philosophy could neither accommodate indigenous modes of development

pursuits nor would strive for radical restructuring of society and economy. Thirdly, since the

capitalist classes, the urban middle classes, and the rural land owning classes predominantly

constituted the Indian State, it could not but be subservient to the interests of the affluent sections

of the Indian society. Finally, the State informed by liberalism could only treat the society as a

passive receiver of programmes and their benefits than as an active participant in the decision-

making process of development and welfare. Thus, the State that operated on the principles of

derived ideas of development; for the interests of the affluent sections of the society; and through

the top-down approach to planning and development, was probably historically destined to fail to

deliver aspired results. The chronicle of India’s stride in the path of ‘development’ or

19
Arrora, Dolly. “Addressing Welfare in Third World Contexts - Indian case,” Economic and Political
Weekly, April 29, 1995, p. 955.
20
Riley, M John. Stakeholders in Rural Development, Sage Publications, New Delhi, 2002, p. 35.
‘underdevelopment’ is not drastically different during the era of globalisation. Instead, her

problems became acute and compounded with the new conditions emerging out of globalisation.

Globalization and its impact

As has been discussed in the first part, globalisation is a huge and unprecedented

phenomenon that has shaken the world as a whole. Supporters of globalisation hail it as a great

leap forward in human advancement and a grand accomplishment in human civilization.

However, the critics of globalisation hold divergent views about its nature and impact. Some of

them argue that globalisation is a horrendous development causing misery, displacement, and

marginalisation to the vast majority of people. In other words, it perpetuated ‘eternal smile on

one side of the visage of the world and frozen tears on the other side.’ A few other critics tended

to believe that the process of globalisation is irreversible and that we have to live with it. Yet

another group of critics think of possible human intervention in the process of globalisation to

create another world. Further, those critics who try to go into the historical antecedents of

globalisation hold at least two identifiably different views regarding its origin and historical

development. One section among them argues that the history of globalisation is the culminating

phase of the history of late capitalism. Another section strongly contends this argument by

emphasising that globalisation has no history, no past, and no antecedents. It is ‘a bolt from the

blue.’
 In India too globalisation has aroused mixed reactions. It has been hailed as a panacea to

all kinds of problems that India confronts today. A few hold that globalisation in India, as is

elsewhere, is an entirely new phenomenon that cannot be explained away in terms of out

fashioned theories of modernization. However, some others argue that in India it is merely an

accelerated and aggressive form of modernization. As an aggressive form of modernization,

globalisation has led to the opening-up of the economy enabling the entry of a large number of

new and more formidable economic actors. It has also significantly reduced the span of State

activity in India, at times even resulting in the shrinking of national sovereignty. As a

consequence of this, the modernization agenda of the post independent India began to slowly

lose its welfare focus. This, in turn, has not only aggravated the already existing dichotomies,

contradictions, and structural inequalities, but also added a few more to them.

III
 In this general historical setting of India’s journey through modernization, development

and globalisation, the researcher intends to take up and explore the issues with regard to the

changing patterns of state’s involvement in the processes of economic globalisation. What is

intended to be highlighted is how these new patterns of state’s involvement has resulted, on the

one hand, in a redefinition of national sovereignty and, on the other, the increasing departure of

the state from the aspirations of the people. This huge development, the paper wants to illustrate

by taking up three major instances of state participation in the process of economic globalisation

in India. They are: (a) Emergence of coalition politics and the resultant pro-active role that the

federal states play in India; (b) The emergence of new competition among federal states in India

with regard to capital inflow and Foreign Direct Investment; and (c) The dawn of Special

Economic Zones and the interest of Federal States in it. The net result of all these is the

increasing estrangement of the state from popular interests and aspirations.

The entry of globalisation in India has vastly redrawn the map of Indian politics.

Indian politics under globalisation witnessed a paradigmatic shift from single party dominance to

coalition politics.21 Such a major shift in Indian politics invariably brought about new equations

and new equilibriums of power. It is not a coincidence that the coalition politics emerged around

the same time of the entry of globalisation in India. The new economic order that globalisation

caused has its effects on the nation state and its internal politics. India cannot be an exception to
21
The nature of party system in India has always been a matter of debate among political scientists, as India
never represented any of the classical models of party system. In order to capture the complexities and
contradictions of the party arrangements in India Rajani Kothari had invented a conceptual category called
‘single party dominance.’ See Kothari, Rajani. Politics in Modern India (revised ed), Orient Longman, New
Delhi, 2002.
this. One major outcome of coalition politics is a visible decline in the power of the central

government and a conspicuous upsurge of federal states. These newly empowered federal states

not only enjoyed greater autonomy in their respective regions but also are major stakeholders in

the central power alignments. Consequently, India under globalisation saw, on the one hand,

drastic weakening of national government and, on the other, the active presence of national and

trans-national economic powers and regional or federal governments transforming themselves as

economic actors. These developments have three fold impact: a) the concept of a developmental

nation state is consistently undermined; b) national as well as trans-national capital have begun

to occupy vital spaces and bestowed upon themselves the responsibilities of development; and c)

regional or federal governments have become transmission belts to accommodate and woo these

national and trans-national economic interests.

Another major instance of the changing patterns in state participation in the

process of economic globalisation in India is the emergence of new competition among federal

states with regard to inflow of internal capital and foreign direct investment. We can see this in

the intense competition among some of the leading federal states in India. It is interesting to note

that globalisation facilitated new competition among federal states in India to have the best of

internal capital inflow and foreign direct investment in their respective regions. However, this

competition among federal states is by no means ‘an ideal type’ as classical economics envisages

it. Instead, it is a highly lopsided inflow in terms sectoral emphasis, and skewed in terms its
distribution among federal states. The lopsidedness is seen in the inflow of internal capital and

FDI into sectors like finance, insurance, IT, etc. Its skewed distribution is determined by the

federal state’s capacity and preparedness to woo and receive. This is clearly revealed in only

few federal states receiving the bulk of internal capital and FDI in those specified sectors. The

preparedness of federal states to invite both national and trans-national capital is dependent upon

incentives offered, infrastructure created, facilities provided, etc. This obviously calls for the

federal states reprioritizing development agenda of the region and allocation of budget

accordingly. This phenomenon unravels two aspects that have far reaching implications. First,

the nation state and its sovereignty is seriously damaged as federal states are independently

pursuing their supposed regional interests by aligning them with global economy with utter

disregard of national sovereignty. Instances of the heads of federal states independently visiting

abroad and lobbying for foreign capital corroborate this. Secondly, federal states have also

progressively alienated themselves from local popular interests and aspirations.

The third major instance is the dawn of Special Economic Zones and the interest

of Federal States in it. The new phenomenon of Special Economic Zone (SEZ) overwhelming

India today has enabled the federal states in India to become competing economic actors both in

the realms of foreign direct investment and national capital. The striking feature of this

development is that the federal states in their bit to have SEZs go out of the way to entice

national and trans-national capital at the cost of local conditions, necessities, and aspirations.
This process obviously has lead to disastrous consequences of federal states completely ignoring

their responsibility of sustainable regional development by sacrificing agriculture and other

sustainable livelihood possibilities. Consequent result of all this is that the issues of sustainability

and balance, crucial for both regional and national development, have disappeared from the

sphere of popular authority and are replaced by the dominant global economic interests.

IV

Conclusion

The thrust of the foregoing discussion is to suggest that the processes of globalisation and

the subsumed agenda of development built into it have serious implications on certain

substantive aspects of our civic and political life. The paper tried to draw attention to three such

major implications on Indian society, economy, and polity. First, the processes of globalisation

have radically divorced the agenda of development from issues of social welfare, economic

justice, and sustainable people oriented development and turned it into an effective vehicle of

global capital. Secondly, these processes have substantially altered the conception of the nation

state and national sovereignty to facilitate uninterrupted flow of capital to usher in the era of

domination. Finally, it has transformed the federal states in India into major economic actors

competing for a cozy place in the global economic order.