A Dutch DIsease for Kerala

 

As the Pinrayi Vijayan government took office for the second time in Kerala, they made an interesting announcement. The government announced a programme to launched from August 15, to remove extreme poverty from the state. This apparently could have been an innocuous statement but given the reputation of Kerala and the public relations associated with the same, it did set off some debate and perhaps more memes among the social media circles. There were people who were wondering what would that mean and perhaps it meant exporting Kerala labour to more regions both within and outside India.

 

Kerala has boasted itself of being the most literate state in the country. It is supposed to be the role model for development across the world. Amartya Sen has often highlighted how Kerala shows the path in terms of human development. To economists like Sen, it is the Human Development Index that would indicate the level of economic and social progress rather than the Gross Domestic Product or other indicators advocated by pro-market economists. Yet, for all that matters, Kerala’s progress in economic terms has been scanty. In fact, less developed states on the social front have gone miles on the economic platform. For instance Gujarat has delivered on economic parameters. This has led to two arguments contrasting with each other on the causes of prosperity. Economists like Sen have argued social infrastructure and progress like education would lead to economic prosperity. Economists like Jagadish Bhagwati have often argued that rather social growth causing economic growth, it is the other way round. As economy experiences the growth, there is a need to invest in more resources to climb higher and thus have an incentive to invest in goods like education or healthcare. The investment in education would per se not lead to growth though it might lead to migration elsewhere.

 

As one looks at Kerala, there is no doubt large scale migration that has happened across places. Kerala by and large thrives as remittance economy apart from the taxes gained from alcohol. In this context, very little economic growth is observed within the state. The people want to move to greener shores the moment they get an opportunity. In fact in recent times, there is a metaphor that Kerala needs a high speed train to Bangalore implying people’s desire to relocate to Bangalore in search of greener pastures. Furthermore, as one observes the migrant workers from Kerala to the Arabian Gulf, they are generally employed in low wage industries. In fact, even in healthcare, Kerala produces more nurses than doctors. Implied is the talent is generally occupied in low skill industries relatively speaking as opposed to high technology industries. The stories of migrants caught in the civil war or political upheaval in many countries are one too many and most relate to Kerala. If Kerala was indeed the messiah of social progress, one would beg to wonder the reasons for many migration on low skilled low wage jobs and living in poor conditions. This conceivably is a strongest signal that Kerala growth model is more an outcome of some nice PR rather than something positive on the ground.

 

There is without doubt the worker activism, the trade union movement disrupting the industrial progress that is at the heart of the Kerala problem. One should observe this as a problem rather than as a model being described by the friendly media all over. The problem is both in industrial and agrarian sectors. Kerala has not been able to build itself a competency in any agrarian products. For all the claims of farmer welfare, they do not have yet an APMC something which has emerged in many other states. There is little propensity for production owing to several factors. The state is hardly friendly in terms of industry partly aggravated by the activist unions. To the activists, every opportunity is something to be utilized to ensure the industrial growth does not take off. The propensity of inability or unwillingness to work might not hold good per se since many do succeed outside the state. There is of course a current context that people are comfortable receiving remittances and thus little propensity to work. Kerala’s core competency seems to be in massage given the resorts that have emerged around. If the massage economy has to sustain, it hardly is going to add great economic value add. Tourism while has gained certain traction is hardly going to pull the entire state upwards. Tourism can create spillovers but these have hardly been leveraged.

 

Kerala might pride itself as God’s Own Country but the reality is very different. It is essentially an economy thriving on remittances and alcohol. This would be hardly a testament for the state that prides itself on being the most literate. The fault-lines are not farfetched. It is perhaps the complacency of the people or maybe their lack of desire to create an economic base within the state. As long as they have the passport to the other states and the Gulf countries, they feel the state can flourish thanks in part to the media coverage. It apparently is evident that industrialization or growth in income through domestic production is absent from the narrative. The narrative has been skewed towards so called social progress rather than a focus on economic development. For a state to be industrialized, there needs to be an emphasis on economic development and such a narrative is absent. There is hardly an electoral disadvantage for not emphasizing on economic narratives. There perhaps does exist a Dutch disease thanks to the remittances. The problem is more acute because this is a Dutch disease for low end welfare rather than high tech jobs. People seem to be oblivious to the impact on social and family life in terms of separation from families etc.

 

Thus one can observe at least prima facie, there is something lacking in the willingness to go in for economic development as viewed by pro-market economists. Economic growth is a must for social infrastructure growth but the willingness to pursue the same is missing. Until this comes on the table, Kerala will continue to languish and export its cheap labour all over the Gulf and other Indian states.