As the Gulf economies absorb the oil shock, the ‘Kerala model’ of rights-based development will become unviable. The State needs a change in governance rather than in government.

The only thing new about the >approaching election in Kerala is the speculation that the Bharatiya Janata Party (BJP), which has had no seats in its legislature thus far, may actually open its account this time. However, apart from the frisson that the very thought brings to some political pundits, such an outcome is going to be of little consequence to the people of the State. For neither of the two fronts that have governed Kerala at five-year intervals these past three decades is going to have any truck or barter with the BJP. Given the wafer-thin margin that has historically decided who governs the State, it is possible that electoral success of the BJP may alter the revolving-door pattern according to which the United Democratic Front (UDF) is now set to yield place to the Left Democratic Front (LDF). The far more important question for the electorate though is whether the front that comes to power has the will or the incentive to deal with the issues that confront Kerala.

An economy in tatters



The remarkable thing is that for a State with a reputation for vigorous democracy the line-up of candidates in 2016 is not just stale but also discredited. Oommen Chandy’s civil deportment cannot mask the fact that he has run a government seriously tainted by corruption scandals. Two of his ministers have had to resign in the face of public pressure and members of the Chief Minister’s Office have come under the scanner. Far more damaging to our secular democracy is that his government may have been influenced by religious groups. The opposition LDF has not announced the likely leader in the event of their coming to power, but it would have to be one of either V.S. Achuthanandan or Pinarayi Vijayan. The former’s only credential is that he is not the latter. Mr. Vijayan is seen as maintaining a silence on the politics of violence associated with his party and is himself not fully free of charges of having wilfully brought about loss to the exchequer during his last term in office as Minister of Electricity in the 1990s. While Mr. Achuthanandan is seen as personally incorruptible, it is not just his advanced age that makes Malayalis anxious but the memory of the lacklustre government he fronted during 2006-11.

Kerala’s politicians have long ago lost their grip on the ship of her economy. For over four decades now it has been sucked into the vortex of globalisation in the form of an offshore boom located in the Arabian Gulf. This has meant that labour has exited the State, raising the wage and rendering domestic production uncompetitive. Remittances have also pushed up the price of land, making it an object of speculation. As the returns on holding land have soared, all other forms of investment are rendered less attractive financially. Services which cannot be imported now remain the only viable economic activity, and it is in this segment of the economy that most workers find employment. But unemployment is high, with the present government’s own estimate being that it is approximately three times the national average. The cynical observation that the glories of the ‘Kerala model’ of development may be seen in the construction sites of the Arabian Gulf yet retains a certain relevance.

The dramatic decline in the price of oil and the impact this has had on growth in the Arabian Gulf region recently has the implication that this external stimulus to the Kerala economy may gradually peter out, and the State’s political managers would have to devise an alternative strategy for growth. There is of course nothing inevitable about the dependent development and high unemployment that characterises its economy. It does, however, require a commitment to address the situation. Most crucially, it requires that Kerala be turned into a site attractive enough for production. This would require imagination on the part of the political leadership and the grit to tame the vested interests that stand in the way. These imperatives arise because in an open economy domestic production must confront external competition. Three facts go into the making of competitiveness. These are education, the industrial climate and the availability of producer services. They determine productivity, which in turn determines the competitiveness of an economy’s goods.

Making Kerala competitive



Though Kerala has traditionally had very high levels of literacy, it is not clear that the level of education in the State, particularly of its workers, is high in the lines of production that matter for trade. This may be traced back to the levels of performance of its educational sector. Higher education is in especially poor shape, with dissemination of knowledge being deficient in relation to the best in the country. It may be argued that, actually, for productivity in manufacturing it is vocational training rather than higher education that matters more. This is indeed true for the short run and vocational training in Kerala has never been given the attention that it deserves. Of course, part of the skilling of workers happens on the job and not in industrial training institutes. But for this you need top-class manufacturing facilities to train workers in state-of-the art practices, and it is a moot point whether Kerala has too many of these. So there is a chicken-and-egg syndrome at work here. You cannot be competitive unless you have a trained workforce, but you can’t have a trained workforce unless you have a strong domestic production, which in turn requires that a region’s industry is competitive.

We now come to the industrial climate. Normal productivity growth is reliant on harmonious industrial relations at the workplace. Productivity enhancing investment is reliant on a congenial investment climate. It is not very clear that Kerala has had either. Historically, the communists have encouraged labour militancy while the coalition around the Congress party tilts towards corporate interests, absolving them of the need to come up with creative solutions in management. To attain and maintain the competitiveness necessary for industrialisation, a balance needs to be struck. Neither of the two political fronts that have governed Kerala in turns have been able to display the necessary balance as a result of which industry in Kerala has suffered.

Finally, producer services. Producer services are those that enter into the production process and range from power supply to waste disposal. World over, industrialisation is related to the availability of these services. They involve high initial set-up cost and for this reason tend towards natural monopoly. Some of these are also in the nature of public goods. For these reasons, historically they have been provided by the government or at least by public agencies. In their absence private manufacturers are unable to set themselves up leave alone attain competitiveness.

Immediate priorities



The two political coalitions that have governed Kerala almost equally during the past half century practice so-called “rights-based development”. This has had two consequences. First, the budget is used to distribute welfare payments without raising revenues for fear of alienating the populace. Producer services have now become the lowest priority of the government as its immediate rewards in terms of electoral gain are not obvious. Second, the claim of rights is given precedence over that of the greater common good. This has meant that even apart from the monumental task of reorienting Kerala’s economic model to make it less dependent on remittances, the State is not even able to resolve its most immediate problems.

Two loom large presently. The first is the accumulation of waste — household, industrial and medical. This poses a problem of major proportions with complex dimensions. It requires a leadership that is able to combine the economic and technological elements that would have to go into its solution. The other exigency is the depletion of the State’s once abundant natural capital partly due to conspicuous consumption. Water scarcity is the immediate manifestation of this depletion underlying which is the alienation of agricultural land.

Addressing the accumulation of waste and the depletion of natural capital requires a combination of ethical suasion and political mediation. A rights-based approach is a non-starter here, for it is the very notion that you have an unrestrained right to pollute the environment and to deplete natural resources that caused the problem to begin with. Kerala as a polity needs to seriously engage with the necessary balance between rights and citizenship if it is not to be overwhelmed by its own excesses. Without this, a change in government is unlikely to bring about a change in governance.

Pulapre Balakrishnan teaches at Ashoka University.