SAP and Globalisation: Prof. Vibhuti Patel

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SAP & Globalisation:

8/31/2011 1 SAP & Globalisation Dr. Vibhuti Patel, Director, PGSR Prof. & HOD, University Department of Economics, SNDT Women’s University, Smt. Nathibai Thakersey Road, Churchgate, Mumbai-400020 Phone-26770227®, Mobile-9321040048 E mail: vibhuti.np@gmail.com

Washington Consensus:

8/31/2011 2 Washington Consensus This policy has intensified the processes pursued in the last decade and a half (mainly in the post-emergency period), as a result of a new international division of labour between the advanced capitalist economies and the post-colonial economies of Asia, Africa and Latin America. In the late 1970s, national and multinational corporations in the USA and Europe realized that the best way to reduce the wage-bill and to enhance profit rates, was to move industrial plants to poorer countries like India, Sri Lanka, Bangladesh, etc. The cheap labour of 'docile', 'nimble fingered' and 'flexible' Asian women was found to be most attractive step to enhance profit margins. This policy was given the appealing title of 'Integration of Women in Development .'

Structural Adjustment Programme:

8/31/2011 3 Structural Adjustment Programme In response to a mounting burden of debt leading to a balance of payment crisis, the Government of India (GOI) adopted a structural adjustment programme (SAP) in 1991. It included reductions in public investment, devaluation, cutting food and fertilizers subsidies, the reduction of budgetary provision for developmental planning, capital intensive and 'high-tech' productive activities, economies in government expenditure, an increase in the bank rate, insurance charges and rail tariffs. Simply put, the policy aimed at capital, energy and import-intensive growth with the help of 4 "Ds" - devaluation, deregulation, deflation and denationalisation .

Market fundamentalism:

8/31/2011 4 Market fundamentalism Marked feature of neo liberal policy is enlightened self- interest activated through market forces. The post- colonial development theories have explained the concept of dualism in terms of dichotomy of traditional and modern .

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8/31/2011 5 Landscape of Informal sector in dozens of South Asian (India, Pakistan, Bangladesh, Srilanka, Nepal), South East Asia (Thailand, Indonesia, Philippines, Malaysia) countries, Indochina (Laos, Kampuchea and Vietnam) and China is flooded with Sweatshops, ghetto labour markets and stigmatised migrant workers. ASEAN countries have recently discussed establishment of Special Economic Zones that would ensure flexibalisation of the labour force to attract Foreign Direct Investment (FDI).

Dual Labour Markets- Primary Sector & Secondary Sector :

8/31/2011 6 Dual Labour Markets- Primary Sector & Secondary Sector Primary Sector is characterised by steady and preferred jobs, high wage, opportunity for advancement, good working condition, stability of employment and a role in the organisational structure. Secondary Sector is characterised by temporary, self-terminating and unattractive jobs and irregular work-habits.

Slide 7:

8/31/2011 7 STIGMATISED GROUPS are crowded into this sector with low pay, no chances for upward career prospects, low security of employment and bad working conditions. They have flatter wage earning profile. The lack of registration, organisation and protection does not have its origin in the free play of social forces, but it is the product of economic interests that benefit from the state of informality in which a wide range of activities in all branches of the economy are kept, systematically and on a large scale, through evasion of labour laws and taxation. Informal sector functions not separate from but subordinated to the dominant circuit .

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8/31/2011 8 Sizeable section of the informal sector goods and services are produced, frequently by means of contracting and subcontracting, which are paid for on piecework rather than a time-rate basis. Much of the economic activity in the informal sector is founded on capital from the formal sector and given the low cost of labour and taxed minimally or not at all, return to where it came from with tidy profit.

Primitive accumulation in its classical form included plunder, slavery and colonialism, while primitive accumulation in the contemporary period includes sweat- shops, labour concentration camps and criminalisation of the working class. In 1998, the world economy had 1.2 billion poor i.e. population with an income of less than 1 dollar per capita per day. :

8/31/2011 9 Primitive accumulation in its classical form included plunder, slavery and colonialism, while primitive accumulation in the contemporary period includes sweat- shops, labour concentration camps and criminalisation of the working class. In 1998, the world economy had 1.2 billion poor i.e. population with an income of less than 1 dollar per capita per day .

Slide 10:

8/31/2011 10 As a result of Structural Adjustment Programme, sacked/ retrenched formal sector workers and employees are forced to work in the informal sector. Victims of Voluntary Retirement Scheme have downward economic mobility. Rationalisation, mechanisation and automation have had labour reducing implications .

Massive Urban unemployment and rural underemployment and disguised unemployment have resulted into social tensions in terms of ethnic and religious chauvinism in several Asian countries. Incidents of economic crimes have risen drastically. :

8/31/2011 11 Massive Urban unemployment and rural underemployment and disguised unemployment have resulted into social tensions in terms of ethnic and religious chauvinism in several Asian countries. Incidents of economic crimes have risen drastically .

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8/31/2011 12 Co-existence of high wage islands in the sea of pauperised working class has enhanced human misery and social conflict in the context of massive reduction in the welfare budgets of the nation states in South Asia and South East Asia. With rising ethnic and communal tension jeopardising economic activities, visible and invisible activities of underground extra-legal economy is displaying a tendency to expand.

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8/31/2011 13 INDIVIDUALS WITH SIMILAR LEVELS OF EDUCATION & SKILLS get differential wages due to casualisation of the workforce. Introduction of contract system in public sector has institutionalised neo-liberal dual economy model.

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8/31/2011 14 Immigrants face job discrimination in pre-entry phase & wage discrimination in post entry phase. They remain the first to be fired and the last to be hired. Dualistic Models in the Asian region, promotes differentiation based on language, caste, religion, ethnic background and exclusion from informal network for upward economic mobility .

External Sector:

8/31/2011 15 Majority of the toiling poor rot in the external sector in which real wages change at disparate rates. Institutions like extended family, caste and village nexus play an important role in providing safety nets to migrant workers. External Sector

Segmentation in the Labour Market (SLM) :

8/31/2011 16 Segmentation in the Labour Market (SLM) Definition: A historical process whereby political and economic forces encourage division of labour market into separate sub-markets processing different characteristics and behavioural rules. SLM allows Division of Labour markets into two segments. Recent economic policies in Asia have consolidated SLM with detrimental effects on the toilers and empowerment of the owners of establishments.

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8/31/2011 17 . 1. Primary or Internal segment , which is composed of the owners of physical and human capital. . 2. Secondary or External Segment that is composed of the proletariat LIMITED MOBILITY FROM ONE TO THE OTHER is a rule of the game in the labour, factor and product market segmentation.

Slide 18:

8/31/2011 18 In the occupational labour market, interplant, intra-plant and occupational wage differentials are supported in the name of labour reforms. Asian countries are flooded with manorial markets that are reminders of feudal relations.

Internal Labour Market (ILM) :

8/31/2011 19 Internal Labour Market (ILM ) is an administrative unit within which pricing and allocation of labour is governed by a set of administrative rules and procedures. ILM is influenced by stability of employment, rigidity and irreversibility of administrative rules .

External Labour Market (ELM) :

8/31/2011 20 External Labour Market (ELM) ELM is unstructured and characterised by an absence of union, fleeting relationship between employer and worker, low skill, piece wage & low capital intensity. ELM serves as a reserve army to hold the union power in check.

Burgeoning GHETTO LABOUR MARKETS are perpetuating the law of jungle in the industrial scenario. As a result a situation arises where legal apartheid faced by micro-entrepreneurs at the foot of the economy. Workers in casual sector are predominantly young and single men and women, while workers in regular sector are older and married. :

8/31/2011 21 Burgeoning GHETTO LABOUR MARKETS are perpetuating the law of jungle in the industrial scenario. As a result a situation arises where legal apartheid faced by micro-entrepreneurs at the foot of the economy. Workers in casual sector are predominantly young and single men and women, while workers in regular sector are older and married.

Segmentation begins in the rural areas where the asset-less poor in the margin of economy migrate to the cities. Dual economy thrives on discrimination based on gender relations, caste, religion, mother tongue, parent’s education, family occupation, migration status and age. 1. Income differs widely between these segments. 2. Mobility between them is limited. :

8/31/2011 22 Segmentation begins in the rural areas where the asset-less poor in the margin of economy migrate to the cities. Dual economy thrives on discrimination based on gender relations, caste, religion, mother tongue, parent’s education, family occupation, migration status and age. 1. Income differs widely between these segments. 2. Mobility between them is limited.

In this situation, is development possible without supranational or even intra-national redistribution of the sources of wealth and prosperity? :

8/31/2011 23 In this situation, is development possible without supranational or even intra-national redistribution of the sources of wealth and prosperity?

Thank You Thank You:

8/31/2011 24 T h a n k Y o u Thank You

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