Talking of political culture, people in Eastern Europe are still characterized as having less personal autonomy, less responsibility as citizens and members of a global community. In some cases, people also struggle with seriously disturbing national and social identities.

Source: PEW FORUM

As far as economic efficiency is concerned, east European countries have made remarkable progress in the past years, but this progress isn’t enough. The differences in per capita income, productivity and efficiency, output, capitalization, savings, investment, integration into global networks are still huge.

Trading and Colonisation

One historical factor in the development of west European nations is the influx of wealth associated with its sea trade and exploration. Their favourable locations on the Atlantic and Mediterranean gave them advantages in trade and exploration through the sea route with minimal cost. The colonization of lands in America, Africa, Asia and Oceania by several Western European countries brought a huge influx of wealth and resources, which stimulated the economies of these countries. These resources made them global superpowers as early as the 16th century. The effects of colonisation are still being felt in these countries.

Division of Germany

In the aftermath of World War II, defeated Germany was divided into four zones by the allied powers. The Soviet Union occupied the east, while the rest of Germany was divided amongst the United States, Britain and France. With hundreds of thousands of wealthy American soldiers posted in West Germany and spending their American currency, the area flourished. The Deutsche Mark was introduced in 1948 which added to the region’s growth. In the 1950s and 1960s, West Germany experienced industrial growth and low inflation contributing to their prosperity. The security of private property rights and reliance on the price mechanism also contributed to the success of these economies.

Much of the European side of the Second World War happened in Eastern Europe, in today’s Poland, Ukraine, Belarus, the Baltic countries, the Balkans and Russia. These countries were utterly ravaged. Russia and Germany stole many assets. The Soviets literally dismantled many factories and took many industrial machines East. In addition to this, East Germany inherited highly specialised industrial districts, which were cut off from their major suppliers of inputs as well as their market which was in western Germany. This caused a departure of skilled labour and a number of small and medium-sized firms.

Communism

East Germany, under the authoritarian rule of the Soviets, saw much worse conditions than its Western counterpart. When the rest of the world experienced strong economic growth after World War II, the nations of eastern Europe suffered due to socialism which caused shortage of resources, a highly politicised system and a regressive attitude to progress. Soviets neglected the economy and focused on military power causing an economic crisis. Western Europe, not being the vassal state of the USSR for 40 years probably made a difference.

To start with, Eastern European nations weren’t that developed as they have mostly been the borderlands between various empires. Apart from some exceptions like Hungary, they were Russian hinterlands, not real centres of development, industrial or otherwise.

Communism was ultimately very inefficient. There was no incentive for work as individuals knew that the reward will be the same. Accumulating wealth was not really possible. It led to stagnation in economy, technology and culture. It was the mix of the intense poverty, injustice and the presence of absolute anarchy that crippled these economies.

Marshall Plan

America supported western European countries with aid to stop communism from spreading during the years of the cold war. Dollar aid enabled recipient nations to eliminate raw material shortages in exchange for trade liberalisation. The resource funds allowed governments to finance public projects without the need to cut back on welfare spending.

The U.S. provided $13.3 billion in assistance between 1948 and 1951 to 16 Western European countries through the Economic Cooperation Authority. The Marshall Plan helped in reviving the western economies by controlling inflation, reviving trade, restoring production and rebuilding infrastructure. The Soviet Union rejected the aid on behalf of eastern Germany.

When the Marshall Plan ended in 1951, industrial production, trade and exports had increased far above pre-war level. Employment and standard of living were rising. Politically, communist parties lost influence everywhere.

It encouraged the economic integration that led to the creation of the European Coal and Steel Community among six nations in 1950. It took a leap into a more integrated European Economic Community (EEC) after eight years. It finally became what is called the European Union today. This integration helped the nations to revive their economies through trade.

Demographic Dynamic

The population density in the 19th century was much more in Western Europe more than Eastern. In addition to that, across Western Europe, the casualties of war were offset by natural population growth and post-war mass migration. The impacts of the war and the post-war settlement were different for the eastern and western regions. The population growth was scanty in Eastern Europe which deprived it of flexible labour supply that has been recognised as an imperative factor in western reconstruction and development.

In the Eastern Front, millions fled west, running from the advancing Soviet troops. The effect of war casualties combined with the post-war settlement was devastating. The populations of Hungary, Romania, and Yugoslavia stagnated in the 1940s. Czechoslovakia, Poland, and the Soviet Union faced a population decline over the same period. The shortage of skilled labour proved to be detrimental. The province of Prussia was temporarily depopulated resulting in its industrial districts losing their pre-war labour force level.

The war left a distorted demographic structure with a shortage of able-bodied young men. Conventionally, they were the one who constituted the backbone of the industrial workforce. It all brought the region an excess of industrial and commercial enterprises without their original owners, the necessary skills and managerial know-how required to operate them.

The Fall of the Berlin Wall

The Berlin Wall was a concrete barrier that cut across and divided the city of Berlin from 1961 to 1989 and was constructed in the aftermath of World War 2. The fall of the Berlin Wall symbolised the fall of the ‘Iron Curtain’ that divided the Eastern countries from Western Europe during the Cold War.

East Germany was provided with aid of around €1.6 trillion by the government and private German businesses to bring it at par with the West. The dismantling of the wall had a profound impact on the neighbouring economies as well. Hungry and Czechoslovakia opened up their borders and allowed East Germans to take refuge in Austria. The influx of people meant the economies of neighbouring countries took a hit.

Shortly after the collapse of the Wall, the German Democratic Republic (GDR), the party which was in power in the East also came to an end. Unemployment escalated to extremely high level and the economy was thrown into uncertainty. Those who had government jobs found themselves suddenly out of work. The GDR economy also faced bankruptcy due to the change of currency. Before the reunification of the two regions, 1 Deutsche Mark was the equivalent of 4.5 GDR Marks.

When eastern countries joined the EU, it made it easier for the Western companies to buy up assets in the east. Some also took advantage of the cheap labour market and started companies. Eastern European companies found it challenging to compete with gigantic Western corporations who could afford to undercut prices. In certain industries, prices were set for a certain amount of time so that Eastern European companies could not undercut Western companies which took away their advantage and eventually many Eastern European companies went bankrupt.

Agrarian Economy and Raw Material Exporter

When Western Europe started on the path of capitalist development, the Eastern part of the continent was transformed into an exporter of raw material for the West and an importer of finished goods. The result was a never-ending loop that strengthened Western industries and system that promoted capitalism. Specifically, as the West became more urban, there was a growing demand for agricultural goods, animals and other raw goods. East European people satisfied this need by transforming their domains into farms that exported for the Western market. With the exception of what became the Czech Republic, most of Eastern Europe became more agrarian and therefore poorer than much of Western Europe.

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Academics have been seeing this region as a role model for making policies and providing social security. These countries are unique in the sense that they have adopted a socioeconomic model which combines the features of capitalism like free markets and efficiency with social benefits like free education, healthcare and pension payment for retirees. These social welfare schemes are financed through the taxpayers’ money and are administered by the government keeping in mind the interest of all the citizens. This system essentially minimises the gulf between the rich and poor through redistributive taxes. The model is popularly known in the world as the Scandinavian Model or the Nordic Model.

Social Democracy or Democratic Socialism?

The prevailing sentiment in the world is that the Scandinavian nations achieved what they did by adopting socialism. The truth is far from that.

• The only element of socialism which seems to exist in the Scandinavian model is the rampant presence of welfare schemes provided by the state. Apart from that, the means of production are owned by private individuals and the resource allocation takes place through the forces of demand and supply, not through central planning.
• It is important to point out that the Scandinavian nations developed their current economic system after years of free economy and trade. They were economic successes even before they built their welfare states. It was not the government benefits that created wealth, but it was the wealth of people that allowed the luxury of such generous programs by imposing high tax rates.
• In contrast to the general perception about the Scandinavian economies, there is actually an absence of government interference. None of these Scandinavian countries have minimum wage laws. Instead, wages are decided by collective-bargaining between unions and employers, and not through government-imposed floors. In fact, the Nordic nations have some of the highest unionization rates in the world.
• Sweden has complete school choice as the government provides its citizens with education vouchers. The vouchers provide funding to a student at any school whether public or private. This choice benefits the citizens and the future of the nations. If these nations were to be socialist, they wouldn’t have promoted free choice.

In addition to these facts, the Scandinavian countries rank quite high on the index of economic freedom given by the Fraser Institute. All the countries are in the top quartile in the rankings. In fact, all the three Scandinavian nations are among the top ten countries to start a business according to the Ease of Doing Business Ranking, 2020 given by the World Bank. The best proof of the free-trade background of Scandinavian countries might be Volvo’s buyout by Geely of Hong Kong in 2010 and the bankruptcy of Saab in 2012, in which the Swedish government did not interfere in any way even though they were two of its most iconic companies.

The Nordic countries offer government-paid healthcare, tuition-free education, and generous social safety nets for all. It is allowing businesses to be productive without interfering which in turn produces the high incomes that support the tax collections. The system prevalent in these nations is actually social democracy in which the government aims to promote the public welfare through heavy taxation and spending, within the framework of a capitalist economy. This is what the Scandinavians practice.

Is it Sustainable?

Though it is working wonderfully for the time, it is losing ground due to many reasons. There is two fundamental phenomena which come into play namely the “Wagner’s Law” and the “Baumol’s Law”. Wagner’s Law says that the demand for welfare services tends to increase faster than income. According to Baumol’s Law, productivity in the production of welfare services tends to increase at a lower rate than that in the production of goods and services. If we assume equal wage growth across all sectors, costs must increase faster in the production of welfare services than in the economy as a whole. These two taken together imply that the total spending on welfare services rise faster than GDP over time. As these services are tax-financed, the tax burden must also rise continuously with GDP. Starting from an already high tax burden, further increases in tax wedges will eventually cause serious harm to employment and growth. This is particularly imperative in view of the consequences of globalization and demographic change.

Globalisation is in general beneficial to economic growth as it provides an opportunity to increase the returns to factors of production through the international exchange of goods and services and factor mobility. Nonetheless, increasing international mobility of labour can jeopardise the welfare state and the Scandinavian model. As social welfare schemes belong to all citizens, it becomes increasingly possible for them to benefit from the services without paying the taxes (bearing the cost) due to international factor mobility. For example, citizens who have spent most of their working lives abroad may return to their home country after retirement to collect the benefits of free hospital care and care for the elderly.

The most serious challenge to the Nordic model is caused by the changing demographics given the extensive role of the public sector in providing age-dependent social services and benefits. The age composition of the population in most European countries have changed dramatically in recent years. The shift is driven by two factors: a “baby boom effect” as the generation has reached retirement age, and a continued increase in life expectancy. As a consequence, dependency ratios have been increasing since 2010 in all the Scandinavian nations and now stands at 57% in Denmark, 53% in Norway and 61% in Sweden. The balance between those contributing to and those benefiting from the welfare state is shifting to such an extent that the financial sustainability of the system is in danger.

How it evolved?

Till the 1950s, Nordic countries were the top free-market, competition-based nations in the world. In the ‘70s, however, intense social government and regulatory systems were put in place with high tax rates. All of the economic growth came to an end in the early ‘90s with the burst of the housing bubble and the advent of a recession. Sweden’s economic growth fell to 1% lower than the rest of Europe and 2% lower than in the United States of America.

By the ‘90s, government spending was up to 70% of GDP, and the debt to GDP ratio was 72%. Even the unemployment rate rose by 5%. The Scandinavian states were strained and were forced to increase taxes drastically to keep their model alive. As soon as policymakers saw the socialist approach failing, things changed. In 1991, parts of health care were privatized, schooling vouchers were first introduced, and some welfare programs were cut back. In 1993, the collapse of the housing bubble forced the Swedish State to scale down their generous welfare system in a context of lower growth, growing unemployment, and to manage public accounts. Between 1995 and 2000, the debt-to-GDP ratio was dropped down to 50%, and citizens earned more income owing to the new 28% tax rate. As of today, Sweden’s public spending has decreased to 49.3% of their GDP, and their corporate tax rate is 22%, below the OECD’s average of 23.9%. Denmark and Norway allow private firms to run public hospitals and Sweden has privatized part of its retirement system.

Conclusion

Are the Scandinavian countries a model for the rest of developed countries? We may answer in affirmation by looking at the top rankings achieved by them for most of the elements that make a country successful: education outcomes, health and life expectancy, happiness index and economic development. But a large part of the Scandinavian system is unique and reflects the Scandinavians’ long tradition of governance which emphasizes on consensus, compromise and trust. Also, the Scandinavian nations raised the taxation rate only after their economy grew and the citizens had high incomes. A government should never begin with enormously high rates and expect its citizens to keep pace. The population of the region is merely 21 million which is fundamentally homogeneous and thus any big and multi-ethnic state might not be able to adopt the Nordic model. Instead of adopting the model, nations should view it as an inspiration and customise their policies according to their needs and demographics.

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In a city where house rents can reach even up to Rs.1.2 lakhs per month, Dharavi provides an affordable option. Rents here can be as low as Rs.250 per month. The issue of unaffordable rental housing began with the introduction of the Maharashtra Rent Control Act of 1999. The rent control markedly reduced the incentives for landlords to maintain rental properties as they would receive nominal returns for doing so. Rent control and restrictive land policies also discouraged private investment in housing. Price control has also led to a shortage of flats in Mumbai by decreasing the prospect of profits for developers, thus pushing more people into slums like Dharavi.

What Is The Redevelopment Project?

Dharavi is located at the intersection of two main train lines and just a few kilometers away from the Bandra-Kurla Complex. The Chhatrapati Shivaji International Airport lies less than 5 miles away and famous landmarks namely the Gateway to India and Colaba are also nearby. As a result, the value of the properties has soared and developers and the government have begun looking at ways to redevelop the area to capture the value of the land.  The current plan, which was put forth by Mukesh Mehta, was accepted by the government in 2004 and proposed the idea of increasing the floor-space index of Dharavi from 1.33 to 4, thus concentrating current residents into multi-story buildings.

Under the scheme, which was tweaked many times (the latest amendment was in October 2018), private developers can purchase slum land from the government at a low price and redevelop the land. After purchasing the land and obtaining the consent of 70 percent of the residents of the slum, the developer can clear the land and provide the eligible slum residents with free of cost housing. Those residents who can prove that they have been living in the slum prior to January 1, 2000, will get free tenement, and those who are residing in hutments built before January 1, 2011, will have to pay the construction cost of the tenement. The families will get a redeveloped unit measuring a minimum of 350 square feet. Those above 300 square feet will get 400 square feet, and those over 500 will get an additional area of 35 percent. In return, the developer can construct commercial and residential buildings on the rest of the land and sell them on the market. Through this model, some of Mumbai’s most prominent development projects have been built on former slum land. For instance, Imperial Towers were built on former slum land where the current model of slum redevelopment was first used.

Shortcomings Of The Model

While Mehta’s proposal was accepted in 2004, there has not been much development in the project. The primary obstacle being massive opposition from current residents who feel that the proposed amount of space is not enough.  There is no space allocated for the operation of informal businesses, raising fears that their sources of income would be shut down. Government negligence is also a big impediment responsible for the delay of the project.

The informal nature of Dharavi’s economy has limited the government’s ability to understand its capacity and the positive externality it creates by independently handling municipal waste and encouraging sustainability in Mumbai through recycling. The government has made no offer to compensate residents for the loss of their businesses. The government’s proposals have focused entirely on the strategies for rehousing of slum-dwellers, with little thought of how they will seek meaningful livelihoods once their small businesses are closed down.

These buildings will most definitely resolve the issue of hygiene and sanitation to a great extent but it still encountered resistance from the residents. They feel that a tower structure will destroy the community sentiment that has allowed the proliferation of Dharavi’s micro-industries. The huge population of Dharavi and its proximity to the business district can also pose implementation challenges.

The current model does not provide specific standards on the quality of rehabilitation buildings. The discretion is left to developers. Some of the rehabilitation buildings are designed in a way that compromises the living standards of residents. There is the danger that these buildings will become “vertical slums”.

Due to the eligibility criteria for the provision of free housing, the ineligible population is left with no option but to stay in an unauthorized manner in slums. Many of them will have to settle in a new slum after their previous slum is demolished by the government.

As the current model provides free housing to the slum dwellers, developers have to cover the cost of rehabilitation housing by increasing the prices of the commercial and residential buildings built on the rest of the land which ultimately leads to the increase of housing prices on the formal market.

Past Policy Failures

Policy failure has been a recurring theme in the story of the redevelopment of Dharavi. In 1971, the Maharashtra Government created the Slum Improvement Programme (SIP) which was intended to provide some basic facilities to the area like water, electricity, toilets, and sewage disposal but could not do so due to no comprehensive census of slums of Mumbai.

In 1976, the government attempts to give the slum dwellers with legitimate status. For this purpose, they created photo identities. However, the scheme ended due to a lack of records of residents. Also, part of the slum was not owned by the government and was under de facto control of the slum lords who did not want to give it up by allowing redevelopment.

In 1985, Slum Upgradation Programme (SUP) which was funded by the World Bank came into effect. Slum land was leased out to cooperative groups of slum dwellers at affordable prices and loans were granted for environmental and housing improvements. However, it was unable to overcome a key hurdle which was that a large portion of the slum was on private holdings.

In 1995, the government put in place the Slum Rehabilitation Authority (SRA) to address the issue of slums in the state through a Slum Rehabilitation Scheme (SRS). The scheme took into account many of the shortcomings not addressed by the previous schemes. Though the plan was not successful as it required consent of 75 per cent of the slum population but was unable to do so. Several residents who did receive the redevelopments under the scheme rented them out for an additional source of income and continued to stay in their shanties. Out of 100,000 units, only 3486 units consented for the programme by the year 2000.

Some Amendments

Dharavi has grown into its own ecosystem over the years. Residents rely on the micro-enterprises, some of which make use of the outdoor spaces to operate their businesses. It is imperative to residents that their livelihoods are supported during this change. In order for the upgrade to work for the residents, it’s crucial that the redevelopment also considers the economic and social activities that flourish in slums. The businesses need to be provided with some liberty. By creating an area for industrial and commercial purposes, Dharavi can grow beyond imagination.

The housing stock which is created in the formal market is mostly in the luxury or semi-luxury segment which does not cater to the demand for affordable houses by low and middle-income groups of the population. The government should consciously create housing stock for low and middle-income groups. Under the current laws, 19 percent of the total houses in Maharashtra are lying vacant. The government must create an environment to bolster the rental market.

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Modern Genocide

Since the summer of 2017, we have been hearing frequently from the world media and human rights organisations, appalling reports of ginormous internment of people. Most of them who have been arbitrarily detained are Uyghur (a primarily Turkic-speaking Muslim minority ethnic group), Kazakhs, Kyrgyz, and members of other Muslim minority groups in the Xinjiang Uyghur Autonomous Region (Xinjiang). According to the latest Chinese census, the population of Uyghurs is about 12 million. However, sources indicate that their population is undercounted by the Chinese authorities.

Since 2017, eight hundred thousand to two million Uyghurs and members of other Muslim minorities have vanished into an extensive network of “re-education camps”. Forcing the detainees to repudiate Islam and espouse the Chinese Communist Party (CCP) seems to be the ultimate goal for the government. Former detainees reported mandatory classes where they were required to recite Communist slogans and praise the CCP. Some reported the rampant presence of cameras and microphones without any blind spots monitoring their every move. Women have shared stories of sexual abuse, forced abortions and having contraceptive devices implanted against their will.

Initially, China denied the existence of such camps. But once evidence started to mount with pictures, videos and testimonies, they changed their narrative and asserted that these internment camps were “vocational education centers” designed to help young, unemployed people in Xinjiang to learn job skills and the Chinese language, concealing the fact that the middle-aged population is almost wiped out in southern Xinjiang. Till date, China doesn’t accept that any human rights violation is taking place. It holds that the purpose of the camps is to get rid of the environment that breeds terrorism and religious extremism.

Outside of the camps, Uyghurs have continued to suffer from a long clampdown by Chinese authorities. Surveillance is intrusive and ubiquitous making it one of the most heavily surveilled police state in the world. Muslims are being forced to accept Communist Party officials in their homes, effectively extending state surveillance everywhere. 1.1 million local government officials have been stationed to spend about a week every two months living in the home of a Uyghur host family. It is referred to as the “Pair Up and Become Family” campaign. Additionally, each square has a police station that closely monitors the locals through regularly scanning their ID cards and searching their mobile phones.

Fleeing out of China is not enough to escape the rule of CCP. In 2017, Uyghurs worldwide reported being contacted by Chinese police and were ordered to return home. Those who obeyed often disappeared and those who did not, received calls from family members begging them to repatriate for the fear of detention. It also coerced many countries into returning Uyghurs and members of other Muslim minority groups to China. In 2015, Thailand returned nearly 100 Uyghurs. In July 2017, Egyptian authorities deported two dozen Uyghurs, who instantaneously disappeared on arrival in China. In some cases, like Malaysia, foreign governments resisted Chinese pressure, often through the support of the United States and refused to return Uyghur individuals.

The Organ Scandal

China announced that it had performed the first double transplant on a 59-year-old after her lungs failed due to coronavirus. The fact that the patient had to wait for merely five days for a donor to provide a perfectly matching set of lungs while the world’s waiting time for a single lung could be months and even years, raises doubts about the legitimacy of the organ harvesting program. These suspicions are being raised because China has a voluntary donor rate of only 0.6 per one million citizens. Of the 1.5 million Chinese citizens who are in need of an organ transplant donor each year, only 10,000 receive a successful match, according to the Journal of Biomedical Research.

The Final Judgement of Independent Tribunal Into Forced Organ Harvesting from Prisoners of Conscience in China given on 1^st March 2020 declares, “Forced organ harvesting has happened in multiple places in the People’s Republic of China (PRC) and on multiple occasions for a period of at least 20 years and continues to this day,”. The judgment further states that, “Falun Gong practitioners in detention were systematically subjected to blood tests and organ examinations. Dr Trey, an (expert) witness raises the question ‘Why would detained Falun Gong practitioners receive specific physical examinations (including X-Ray, ultrasound and blood tests) while at the same time being subjected to brainwashing, labour work, torture or torture death?’ He postulates that the only rational explanation is to build up a systematic medical databank of potential living organ donors.” On the basis of all the evidence on the subject, the Tribunal concluded that the medical testing of Falun Gongs and Uyghurs was related in some way to the group concerned because other prisoners were not tested. No explanation has been given by the PRC for these testings yet.

Both the Red Cross Society of China and Doctors Against Forced Organ Harvesting also cast doubts in this regard as there had been a sudden increase of more than 25,000 organ donors on a single day in December 2015 and 88,300 registered organ donors within a six-day period in December 2016, a number that can only be explained by a large-scale, forced organ harvesting programme. Ethan Gutmann, a human rights investigator, testified to the China Tribunal that “over the last 18 months, literally every Uyghur man, woman, and child – about 15 million people – have been blood and DNA tested, and that blood testing is compatible with tissue matching”.

The Proponents and Opponents

China’s critics are mainly in the western world and also include major democracies like Australia and Japan. All 27 are considered either full or flawed democracies according to the Democratic Index 2019 given by The Economist Intelligence Unit. China is backed by a conglomeration of authoritarian and hybrid countries, including many of the world’s most brutal dictatorships namely North Korea, Saudi Arabia and Syria.

Unexpectedly, most of the signatories of the letter defending China’s new policy happened to be Muslim-majority nations like Saudi Arabia, Pakistan, Qatar, UAE and Syria. In the past, as the members of the Organization of Islamic Co-operation (OIC), they were not muted when Myanmar persecuted Rohingya Muslims and expelled 700,000 of them to Bangladesh. They were unequivocally releasing statements in condemnation when the Trump administration moved the U.S. embassy in Israel from Tel Aviv to Jerusalem. But they are almost hushed on China’s attempt to suppress Islam in Xinjiang.

Albeit, some other OIC members such as Afghanistan, Albania, Bangladesh, Indonesia, Malaysia, Morocco, and Turkey refrained from signing the statement in support of Beijing. Regardless, all Muslim majority countries have ignored the call by the UNHRC to examine the situation in Xinjiang. There are quite a few factors which may have led these countries to keep distance from criticizing China.

Some OIC members are part of the Belt and Road Initiative (BRI) and thus have their economic future linked up with China. The political cost of impeding the Uyghur issue would be too high for any of these countries to endure. The success of the BRI depends on the Xinjiang region as it is the main route to the Arabian Sea via Pakistan. Any instability here can jeopardize Beijing’s plans for trade connectivity, risk its investments and disturb all stakeholders.

Beijing remains the Arab world’s long-term consumer base for the next few decades as fluctuating oil prices and the rise of western demand for alternate energy sources endanger its economic stability.

China is also expending loans and grants to these nations. $20 billion in loans to Arab countries, $6.7 billion to Pakistan, $27 billion in projects in Kazakhstan and many other central Asian nations. China’s massive investments are bearing fruit. Beijing has effectively taken advantage of the UNHRC to endorse the very activities it was created to oppose.

Conclusion

China is not only inflicting a cultural genocide of Uyghurs, but it is also repressing other cultural and religious minorities like Christians and Hui Muslims. It continues to abuse lawyers, human rights defenders, and activists. Any activity carried out in China to advocate for social change runs the risk of harassment by Chinese authorities. Basically, anything that the government considers as a threat to itself is a crime in its perspective. The worst violation of human rights is happening right in front of us. China is actively shifting the world narrative in its favour. Regardless of power, there are consequences for challenging China. Australia found itself in a trade dispute with its largest trading partner after pushing for international scrutiny into the origins of the novel-coronavirus. Two Canadian citizens are still being held in China after Canada arrested Huawei’s CFO on behalf of the United States. Nevertheless, China has been backlashed by the global community which grows its support for defending the human rights.

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The Protectionism Hypocrisy

At the World Economic Forum meeting in 2018 in Davos, PM Narendra Modi, indirectly pointing towards Trump who have been propelling an “America First” Policy said that some nations were looking inwards and being protectionist. He appealed for more accessibility and free trade. Fast forward to 2019, India opted out of the Regional Comprehensive Economic Partnership (RCEP). The reasons are believed to be the fear of being swamped by imports especially from China, putting the domestic industries at risk. Given that India already suffers from a trade deficit from the members of RCEP of $105 billion and out of that $53.56 billion is from China alone, this decision seems very rational. But is it really?

Piyush Goyal (Commerce and Industry Minister) claimed that this decision will boost “Make in India” and that free trade agreements (FTAs) with countries like Japan, South Korea and ASEAN provided them with duty-free access to Indian markets but domestic goods faced barriers in their territories. But this is not the entire picture. To test whether the FTAs were beneficial or not, the Economic Survey 2019-20 conducted research. For this, it took into account 14 trade agreements signed by India. Only the trade agreements with Korea, Japan and Sri Lanka had a negative impact which means that the percentage rise in imports was greater than the percentage rise in exports. Other trade agreements had either no impact or a positive impact.

Talking about the overall effect with the trading partners, the Indian economy actually gained. The impact on exports was 13.4% for manufactured products and 10.9% for the total merchandise. Whereas the impact on imports were found to be lower at 12.7% for manufactured products and 8.6% for total merchandise. Therefore, from the perspective of the trade balance, India has obviously gained in terms of 0.7% increase in trade surplus per year for manufactured products and a 2.3% increase in trade surplus per year for total merchandise. Although, all the views regarding the fallout of the decision to step back from the RCEP agreement are just speculations at this point and we will get to know about the actual effects in the years to come.

Back in January, when Jeff Bezos visited India, he got no reception from PM Narendra Modi. Piyush Goyal advocated that Bezos was only covering up losses from predatory pricing by investing $1 billion in India and also condemned his pledge to create a million jobs by 2025 arguing that it hardly made up for the millions of Indians put out of work by the e-commerce site. It is a popular opinion that the Chinese were able to build tech giants like Alibaba only because they shut out US-based firms like Google and Facebook. Therefore, it is believed that India should also block them and create its own local champions. But to aid its overall development, the Indian economy needs all the economic vigour it can assemble and that involves attracting foreign investors. With its frequent policy changes, India has already got an image as a troublesome and unpredictable place to invest. The government further signalled the investors about their protectionist intentions through this act and risked a dampening effect on investors globally.

Protectiveness Vitiates the Budget as Well

In the budget 2020, the government not only hiked custom duties on a wide range of goods like grocery items, shoes, dolls and toys, ceiling fans, wooden furniture, kitchenware appliances, hairdryers, shelled walnut but also intends to make changes in the Customs Act 1962 through the Finance Bill. It will be amended to give the government the power to impose safeguard duties and tariff-rate quotas on imports on the pretence of injury to the domestic industry. Since the 1991 liberalisation era, this power was restricted to trade of gold and silver. The procedure for claiming preferential tariff rates under trade pacts has also been made complicated with importers having to give declarations along with the certificate of origin.

These changes will surely increase the scope of corruption by bureaucrats as they get more power. Also, these arbitrary tax spikes will lead to economic distortions and worsen the rent-seeking activities by domestic industries as they will lobby for their preferred tariffs which would have been dampened in a world with uniform taxes. Thus, instead, it needs to adopt the strategy of simplified, uniform and predictable tariffs which will eliminate tariff inversion (in which intermediate goods are taxed more heavily than the final goods) and distortion costs could be kept very low.

The current policy choice reflects a highly mistaken mindset that one can cut back on imports while boosting exports, not realising that a reduction in imports, induced by an increase in tariffs, is expected to lead to a decrease in exports of a corresponding value. This is known as the Lerner’s Symmetry Theorem, a result used in international trade theory stating that an ad valorem import tariff will have the same effects as an export tax and is based on the observation that the effect on relative prices is the same regardless of the policy.

A Call to Escalate Exports

According to the World Trade Statistical Review, 2019 by World Trade Organisation (WTO), India’s average annual growth rate in merchandise exports was 5.3% between 2008 and 2018 which is well below Vietnam, Bangladesh and China. The growth rate of India in commercial services export was 8.6% per year on average from 2008 to 2018. This is below many of the developing countries namely China, Philippines, Vietnam, Singapore, Thailand, Qatar and Myanmar. There has been a substantial increase in exports of transport equipment, chemicals and food products which contributed to moving up India to the 19th position in world rankings of top exporting countries.

Although India has achieved many milestones in the last decade, it can do much better given its potential and unexplored territories. In fact, the government should try to increase its exports than constantly trying to decrease the imports if it wants to be a $5 trillion economy. Some scholars argue that the huge trade deficit of India is not because of increasing imports but of decreasing exports. “Unless India’s exports grow at 15%, we won’t get 8% growth. For that, we should reverse some of the protectionist measures taken. If we turn protectionist, I don’t know how can we be an exporting power. Self-sufficient exporting powerhouse is an oxymoron” – Arvind Subramanian said while speaking at a webcast organized by EY India.

In the Economic Survey, while discussing India’s performance on Ease of Doing Business (EoDB), a series of case studies shows the inefficiency in the Indian system of Trading Across Borders. As Italy topped the EoDB ranking in Trading Across Borders, they compared India’s performance with that of Italy. India takes 60-68 hours in border compliance for exports while Italy took only one hour. Moreover, the cost of compliance is zero in Italy compared to $260-281 in India for export. Almost 70% of the delays occur due to procedural complexities, multiple documentations and involvement of multiple agencies for approvals and clearances. These inefficiencies, in turn, lead to time delay and end up pushing the cost to trade. Increasing digitalization and integrating multiple agencies into a single digital platform can reduce these inefficiencies and improve user experience substantially.

Also, a study found that an apparels consignment going from Delhi to Maine (USA) takes roughly 41 days, but 19 of these are spent within India due to delays in transportation, customs clearance and loading at sea-ports. A study of carpets exports from Uttar Pradesh to the United States also showed similar results. Apparently, the process flow for imports is more efficient than that for exports. In contrast, however, the imports and exports of electronics through Bengaluru airport were found to be top-notch. It thus recommended that the processes of Indian airports should be replicated in sea-ports as well.

It also suggested adopting policies aimed at strengthening its involvement in the export market for Network Products (NP) in order to get linked with the Global Value Chain (GVC). Through observations, it has been found that countries who substantially increased their exports and managed to maintain it did it through linking up with the GVCs. Given our vast labour force with relatively low skill-set, India’s strength lies in the assembly of NP. While the short-term objective is the expansion of assembly activities on a large scale by making use of imported parts & components, giving a boost to domestic production of parts & components should be the long-term objective. Assembly is a highly labour-intensive area that can provide jobs for the huge population of our country, while domestic production of parts & components can create high skill jobs. But for a country to become an attractive location for assembly activities, it is crucial that import tariff rates for intermediate inputs are zero or negligible. Thus, India needs to control itself on the tariffs and restrictions. India needs accessibility, it needs foreign investment, it needs the competition to be a world-leader.

Conclusion

There are different kinds of restrictions when it comes to protectionism. We can certainly have the set of duties which seeks to create a level playing field for the MSMEs but it becomes harmful when we instead try to protect the industries which are already in a good position in terms of opportunities in the hope to flourish them. There is just a slight difference between these two kinds and policymakers need to incorporate this idea when drafting policies. For instance, India refused to allow permanent tariff liberalisation on health and farm products at the WTO Council Meeting as an answer to trade disruptions caused by COVID-19 is not harmful protectionism. Every country will bear the brunt of COVID-19, the difference being the level of disruptions faced by each one of them. But we should also keep in mind that the least developed and developing countries need to be guarded given the lack of resources available to defend themselves from the crisis.

India acknowledges the disruptions caused in the flow of medical supplies, food and other goods and services across borders and has been playing a proactive role in combating it but doing so at the cost of its own industries is something India (or for that matter none of the countries) would like to do given the economic crisis they are going to face. At the same time blindly putting up restrictions will only lead to increased prices for competitively produced imports and the customers will end up footing the bill. India committed the same mistake back in the 1970s. In order to be self-sufficient, a country needs to make its industries capable through the competition so that the users do not pay the price by buying some cheap quality or inefficiently produced product. Protectionism is not the way forward if we want to grow. We should have an equally or even more efficiently produced substitute ready if we want to raise the tariffs. Thus, India should instead focus on the production inside the country and work on infrastructure, logistics, productivity and lifting the standards of products if it wants to reduce the trade deficit.

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Ensuring inclusive and equitable quality education and promoting lifelong learning opportunities for all like the fourth Sustainable Development Goal (SDG 4) perfectly encapsulates the motto- “Leave no one behind”. However, India’s progress in attaining this goal is a mixed success story. With innumerable schemes like Samagra Shiksha Abhiyan, Mid-day Meal, Integrated Child Development Services (ICDS), Pradhan Mantri Kaushal Vikas Yojana (PMKVY), Beti Bachao, Beti Padao and the Right to Education (RTE) Act, we all expected modification in the sector with everyone getting free access to quality education and thus able to improve their living standards. But that is not the story here. Although India has made progress in getting children enrolled in educational institutions, it is still not enough. In fact, according to the Progress Report 2020, the Net Enrolment Ratio (NER) for primary education has decreased from 87.1% in 2015-16 to 82.5% in 2017-18. Similarly, for the upper primary, it has decreased from 74% to 72.6%. But still, India has come a long way since 1947 in terms of quantity of education and it’s doing better in that regard. What it really lacks in is the quality of education.

Despite implementing the Right to Education Act 2009, India’s performance is worse than the developing South-East Asian countries like Indonesia, Malaysia, Thailand, and Vietnam with the mean years of schooling at 6.5 years according to the Human Development Report 2019. The learning outcomes are even worse. According to ASER Report 2018, only 44.2% of Standard V students and 69% of Standard VIII students in rural government schools can read a Standard II level text and this proportion has only decreased in the last 10 years. Between 2008 and 2018, the proportion of ‘division solvers’ in Standard V in rural government schools went down from 34% to 22.7% and that for the students in Standard VIII went down from 65.2% to 40%. These figures are just outrageous. There is a huge variation in the literacy and numeracy levels among these students which is the most critical constraint in the structure of the Indian Education system. The learning outcomes for rural private schools are no better than rural public schools. PISA is an international assessment that provides cross-national learning benchmarks and helps nations improving their learning levels. The last time India participated in PISA in 2009-10, it stood at the second last place. Imagine the learning deficits that have accumulated from years of low-quality education. When the time comes to look for employment, what are these young people trained in this mangy manner going to find?

With the reduction in profitability from agricultural activities, parents in rural areas have let their children study well beyond the age when they have themselves joined the workforce in hope that it will be a way out of their insecure farm life. However, when these children graduate, they will find that there are hardly any good jobs. It’s a disaster that is waiting to happen. Even if we look at the whole population instead of just these poorly educated rural children, the story remains the same. The Annual Employability Survey 2019 report by Aspiring Minds revealed that only 20% of the Indian engineers were found employable in the knowledge economy and a meagre 2.5% of them possess new-age skills in Artificial Intelligence (AI) that the industry actually requires. These figures can be justified if we look at the proportion of those above 5 years of age who are able to use the internet which is just 20.1%. Estimates suggest that only 2.3% of India’s workforce has undergone formal skill training compared to Germany’s 75% and South Korea’s 96%. The enrolment rate for tertiary education is merely 28.3% which points towards failed policies. This all has led to a large fraction of the workforce having insufficient work skills. If the employability remains so low, we cannot ensure a sustainable pool of students enrolled in schools as their trust in the system erodes.

According to a report tabled in the parliament by the Ministry of Human Resource Development (MHRD), we have over 100,000 schools with solitary teachers. At the national level, over 75 per cent of schools have a multi-grade situation with one teacher being coerced into teaching students of several grades in the same classroom. The high rate of teacher absenteeism, limited time spent on teaching when the teacher is in the class and generally poor quality of education are among important reasons for an abysmally low number of enrolments as reported by the NITI Aayog. In February 2015, Maharashtra held an evaluation test for teachers of government-run schools. Only a little over 1% primary teachers and 4.9% upper primary teachers who took the test passed. This is a furious figure and perfectly explains where the problem lies in our education system.

Talking about inclusion for everybody, India’s position is abominable in that too. Literacy rate of male population above 15 years of age is 82% while that of the female population is just 65% which is a stark difference. The reasons for females for not attending school being the classic ones – engaged in domestic activities, financial constraints, marriage or not interested in getting education. The enrolment rate of children with disabilities is mortifying with merely 1.18% in primary education, 0.56% in secondary education and 0.25% in higher secondary education. There is an urgent need to develop infrastructure to accommodate these children as hardly 22% of the schools have disabled-friendly toilets and only 33% have disabled-friendly ramps. Not only this but only 55 in 100 schools have basic handwashing facilities.

The Draft National Education Policy 2019 (DNEP) bought really good suggestions regarding the separation of regulators from operators and policymakers thus avoiding the conflict of interest, significant autonomy to the university system and Early Child Care and Education (ECCE) but it fails to address the real crisis which is teacher quality or rather teacher’s unaccountability. The underlying notion for all the reforms suggested is that there is a lack of resources which can be in connection with infrastructure, quantity of teachers or even quantity of trained teachers and this is a fundamentally mistaken idea. The real culprit is not the lack of inputs but the absence of accountability of schools, teachers and the system as a whole.

The new education policy also asked to double the public expenditure on education from 10.6% (2018-19) to 20%. It is not a sensible thing to do in the current circumstances of wastage of government resources. Public Schools with fewer than 50 students and an average of 29 students per school stood at 3.7 lakh schools in 2014-15. They represented 36% of all public schools. This is a catastrophic situation. This is too small a size for it to be pedagogically or even economically viable as the per-pupil salary expenditure becomes really high. At the point where the learning outcomes of these government schools are pitiably low, almost 80% of the public expenditure on education in 2018-19 is spent on teacher’s salaries. In a state like Uttar Pradesh, there is an increase of 15% in salaries each year where inflation is just 3-3.5%. All the capacity of the state to increase expenditure on education is being tapped by salaries alone. There is such an inefficient use of the government resources that any effort towards increasing education spending is like putting your money in a blackhole. What we need to do is put in place some new governance mechanisms to increase efficiency instead of increasing the budget itself.

The policy talks about the issue of small schools being economically suboptimal and suggests for consolidation of these schools by creating large school complexes. But this again won’t be beneficial for students if it is not done keeping in mind that these small schools cater to the needs of those living in isolated and remote areas. An independent study by Accountability Initiate (AI) maintained that Rajasthan saw a 6% decline in enrolment of backward social groups including Scheduled Castes (SCs), Scheduled Tribes (STs) and Other Backward Castes (OBCs) when small schools were merged. The study highlighted that the stakeholders in the process namely teachers, principals and parents were never consulted. If providing the required number of teachers for every school has become physically and economically unviable, we must seriously review the earlier approach of providing a school in every habitation within one or three kilometres or providing a school where 20 or more school-going children live. If they want to consolidate schools, they should provide the children with facilities to go to school.

CONCLUSION

India has a long way to go to provide quality education to all. It especially needs to focus on rural and backward regions’ education which is in poor health and needs an overhaul. India’s history is strewed with ambitious education policies that have not been fully implemented. The latest National Education Policy has a possibility of being similar to the previous policies in terms of poor implementation unless the government addresses the reasons behind the past policy implementation failures and makes conscious efforts to amend the mistakes. These points are important because in India what we tend to do is write policies and plans that say the right things but are unable to drive the intended changes.

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