The Errors Of Arundhati

ARUNDHATI Roy, India's most famous novelist, has become, thanks to Outlook, its leading polemicist. Her first target was the Bomb, her second the Dam and now she has taken on globalisation. In doing so she has fashioned her outrage into a philosophy. As she writes of a protest in which she took part against the Maheshwar dam: "We were fighting for a philosophy. For a worldview." And here she has gone disastrously wrong.

Grant Ms Roy her gripes. Perhaps it is true that dams are ruining millions of lives to no purpose and that some private power projects are rip-offs. If so, she has every right to her indignation. But Ms Roy assembles such examples into an indictment of a system, "a malevolent, incorporeal, transnational multi- gnome", who she thinks is calling the tune in India as elsewhere. With this she has joined the battles of Seattle and Prague against global capitalism. If she had her way, the door India has only just begun to open to the world would slam shut once again.

To explain why this should not happen is not easy in India, where socialism and swadeshi are the reigning economic passions. Liberalisation looks like an assault either on the poor or on India's dignity (for Ms Roy it's both); at best, it is seen as grim necessity. The notion that free trade and foreign investment should be cheered, by the poor no less than by the prosperous, has few takers. Ms Roy would be among them if she looked at the evidence.

There are no perfect experiments in economics. But one can see how different sets of policies have affected otherwise similar countries. The division of Europe between capitalist and communist spheres ended in a vindication of capitalism. There's also an impressive body of evidence that open economies grow faster than those that are closed and a smaller, but still suggestive, set of data showing that such countries reduce poverty faster. Think of China, which had a lower per capita income than India's as recently as 1980. In 1998, China attracted more than 10 times the foreign direct investment India did, which helped it export five-and-a-half times the merchandise. By 1999, China's per capita income was 75 per cent higher than India's. About half of Chinese live on less than $2 a day, compared with more than 80 per cent of Indians.

A recent study (admittedly by two economists from the hated World Bank) suggests that globalisation has something to do with poverty reduction. Looking at 80 countries over 40 years, it found that, on average, incomes of the poor rose with overall incomes. It also found that openness to trade spurred economic growth that benefited the poor as much as others. Of course, education and healthcare promote growth and reduce poverty. But, as I shall suggest, globalisation and privatisation can help with them, too.

Yet experience has taught Ms Roy something different. Her clashes with dam builders, her knowledge of corrupt deals in the power sector have apparently convinced her that private enterprise is a kind of larceny, which gets grander as the enterprise gets bigger and more global. Privatisation, she writes at one point, is a "mutually profitable business contract between the private (preferably foreign) company...and the ruling elite of the Third World".

Since Marx, if not before, witnesses to the sins of capitalists have concluded that capitalism itself is incorrigible. But capitalists are moral chameleons, not serpents. Companies that used slave labour in Nazi Germany today offer their employees working hours that are among the world's shortest and wages among the highest.Enterprises may lack a social conscience but are socially indispensable. In a competitive market, or a non-competitive one that is intelligently regulated, the quest for profit yields efficiency, innovation, employment and reasonable prices. mncs have capital and expertise poor nations lack, which makes them threatening, but necessary.

Ms Roy scoffs at one of the more useful things private investors can do: assist India's power reforms. After all, she writes, 70 per cent of industrialists in Madhya Pradesh steal electricity, so entrepreneurs are part of the problem. Yet if electricity distributors were privatised, their new owners might chase the thieves, allowing state subsidies to fall. Governments would then have more to spend on primary education and health. Yet Ms Roy will not entertain the possibility that private players bring a useful sort of accountability governments find hard to mimic.

She scorns Jack Welch, boss of GE, perhaps America's most successful company, for wanting to sell power equipment to India. She does not mention that GE employs hundreds of Indians to do back-office work for the rest of the company, jobs that might otherwise go to Americans. But that would not mollify her. She finds "call centres", which provide such services, demeaning, because on duty their employees adopt American monikers and use American slang, showing "how easily an ancient civilisation can be made to abase itself completely". Ms Roy's napalming of globalisation does not invite critical thinking about what it can and cannot do and how it can serve India's interests. It consigns globalisers to a sort of untouchability.

To disagree with her is not to let enterprise off the hook. Capitalism can't be accountable only to itself. Nor can one pretend globalisation is the best friend of the environment, cultures, people displaced by economic change. Enterprise should be answerable to democratic government, vigorous media, efficient courts, none of which in India is as vigilant as it should be. No system works on the premise that big corporations (or any other sorts of institution) are angels.

But to Ms Roy they are Rumpelstiltskin, the foul homunculus who spins straw into gold. She does not so much want to bury him as to strangle him at birth. It would be a case of mistaken identity.

(The writer is the South Asia bureau chief of The Economist. The opinions expressed here are his own.)