The Hindu Business Line : Keep `foreign hand' at arm's length from Plan panel

The induction of representatives of foreign agencies into the Planning Commission is surprising and seems ill-advised. And justifying the move on the grounds that these members would only be called upon to guide and advise, and that the Government would have the final say, is rather simplistic, given their record of wanting to thrust policy prescriptions down the throats of countries with only a superficial understanding of the conditions peculiar to the latter.

NOT FOR nothing have all political parties, barring the constituents of the United Progressive Alliance (UPA) governing at the Centre, taken serious exception to the formal induction of representatives of the International Monetary Fund (IMF), the World Bank, the Asian Development Bank (ADB) and McKinsey and Company into the Planning Commission. The move is as ill-advised as it is objectionable.

The Planning Commission Deputy Chairman, Dr Montek Singh Ahluwalia, has justified it on the argument that they have been brought in only to assist in the mid-term review of the Tenth Plan, and not to oversee the functioning of the Commission as a whole.

He feels that being outsiders, they would be able to bring to bear their critical professional judgment on the appraisal, drawing on their exposure to situations in other countries, whereas one set of officials within the Government, undertaking a similar exercise, and going over the work of another set of officials, might be inhibited in exposing gaps and deficiencies in performance in an equally frank and forthright manner.

Also, the role of the foreign agencies was meant to be strictly advisory, and not binding on the government whose power and authority to take final decisions would continue to remain without its independence being in no way allowed to be compromised or diluted.

The Prime Minister, Dr Manmohan Singh , who is also the Chairman of the Commission has been quick to endorse his Deputy's stand.

Naïve assumption

The matter is not as simple as made out and begs a whole host of questions:

Will the representatives of foreign agencies be invited to attend meetings of only the expert groups connected with the mid-term review or of all bodies set up under the aegis of the Commission?

Will they, under the guise of reviewing the Tenth Plan, have the freedom to comment on issues directly or indirectly relatable to the whole range of economic policies?

Will their access to official data be restricted only to open, unclassified documents or be extended to cover whatever is relevant to the material under discussion in meetings?

Are the various sections of the Commission under an obligation or instruction to accede to their requests for information over and above what is furnished to them?

Can they on their own call on officials and hold private consultations?

Will the summary records of the proceedings explicitly record their views and suggestions?

Does their participation in the meetings and discussions entail payment of any fees?

What about familiarity bred by such contacts leading to easily imaginable unsavoury consequences?

Dr Ahluwalia is being rather simplistic in assuming that the role of foreign agencies being advisory in nature somehow gives the Government the right to overrule them and take independent decisions on issues according to its best lights and in the best interests of the country.

It is astonishing, and, at the same time, disappointing, that both Dr Ahluwalia and Dr Manmohan Singh, having dealt for so many years with the kind of foreign agencies now given entrée into India's corridors of power, should have failed to take note of some factors that compulsively and even routinely determine their behaviour in their relations to other countries.

Knee-jerk reflexes, quick fixes

The first set of factors has to do with their organisational culture and style of functioning. Being largely peopled by self-centred and presumptuous know-alls lacking in humility and unfamiliar with the complexities and diversities of countries like India, they act on knee-jerk reflexes and impose their quick fixes based on the premise "One size fits all".

They have a few simplistic prescriptions that they seek to thrust down the throats of countries without taking account of conditions peculiar to them. These are: Privatise government undertakings, devalue the currency, extract user fees, eliminate subsidies, remove tariffs, let prices find their levels however high, open the doors to foreign investors, throw away the keys!

Here are a few samples from the writings of Western critics on their mindset:

"It defies logic to believe that a small group of 1,000 economists on 19th Street in Washington should dictate the economic conditions of life to 75 developing countries with around 1.4 billion people." (Dr Jeffrey Sachs)

"The IMF Secretariat with 2,300 staffers works in secret, drawing up policies for the 80 countries under its control, largely without their participation and without the knowledge of the world. The IMF's monopoly of power over policies (with no prior open professional or public debate over their theoretical or practical basis) and its almost total lack of `transparency' in decisions and decision-making process is in ironic contrast to its shrill preaching to its client states to fully open up to competition and transparency" (Asian Wall Street Journal)

"The role of the IMF and World Bank is of concern. The conditions placed on their loans often force countries into rapid liberalisation, with scant regard to the impact on the poor." (Mr Stephen Byers, former Trade and Industry Secretary, Britain)

"Interested only in nominal targets, the IMF is heartless in the consequences of its policy prescriptions. For with its process of exclusive decision-making by its staff, its susceptibility to influence by its major shareholders (the rich countries), the secrecy of its operations and, most frighteningly, the wrong policies making the situation worse, the IMF is bad news for any country needing its rescue." (Third World Network)

Dr Joseph Stiglitz, former chief economist at the World Bank, has also been outspoken in pointing to the arrogance and secrecy of the IMF and sister institutions in dealing with the developing countries they are supposed to help, and their being bereft of any sense of democratic accountability. According to him, their economic remedies' often make things worse, turning slowdowns into recessions and recessions into depressions.

Nowhere have the Bretton Woods duo been at their worst than in Russia which they subjected, with the active support of Dr Jeffrey Sachs who later on repented his blunder, to the so-called "shock therapy" involving quick privatisation of state-owned assets and abrupt liberalisation of trade, prices, and capital flows.

It brought the country to near ruin with incomes plunging and poverty soaring and social indicators, such as life expectancy mirroring the dismal GDP numbers. Only a trifle less devastating have been their cures for the economies involved in the South Asian meltdown.

If India had heeded their insistent advice right until the debacle to go in for total current account convertibility, it would have also been caught up in the traumatic maelstrom that swept over the South Asian countries.

As regards McKinsey and Co., it may not be able to live down the fact that the firm had been a consultant to Enron which was paying it as much as $10 million in annual fees.

The former Enron CEO, Jeffrey K. Skilling, was once a McKinsey & Co. partner and loyal alumnus. The BusinessWeek (July 8, 2002) says Enron was just one of an unusual number of embarrassing client failures for the elite consulting firm. Besides Enron, Swiss-air, Kmart, and Global Crossing were some of the big McKinsey clients that filed for bankruptcy in relatively short order.

Keeping realpolitik at bay

The problem with foreign agencies with their noses in the air is that they do not take it well if the advice they give is rejected for good reasons. They hold it against the client and the government concerned, sometimes going to the extent of influencing the opinion of investors, financing institutions, collaborators and other governments against it.

In any case, India is not some hapenny-tuppenny country needing the help of foreign agencies to perform such a simple task as making a mid-term review of its own Plan.

The acumen and capacity for economic leadership of persons of the likes of Dr Manmohan Singh, Dr Montek Singh Ahluwalia, Mr P. Chidambaram, Dr Rakesh Mohan, Dr Y. V. Reddy and Dr C. Rangarajan, and the calibre and competence of India's experts and professionals are in no way inferior to any of the dispensers of advice in foreign agencies.

Since realpolitik plays an invisible and significant part in the functioning of these agencies, one cannot also be sure whether their advice is truly objective or subserves some other extraneous interests. Again, as has happened in some other countries, the initial foothold may end up as a repetition of the story of the Arab and the camel.

Dr Ahluwalia has even brandished the quote of Mahatma Gandhi ("I want a house with all its windows and doors open where the cultural breezes of all lands and nations blow through my house. But I refuse to be blown off my feet by any.") in defence of his action. Allowing cultural breezes play is quite different from wittingly getting embroiled with possible cat's paws of powers pulling wires from behind the scenes.

The best course, taking account of all these unwanted contingencies, is to keep clear of foreign influences and not let them operate within the portals of the government.

At least, that would make it easy when things go wrong to scratch the "foreign hand" from the list of suspects.