By Kaushik Basu Professor of Economics, Cornell University

Villagers in the Indian state of Gujarat provide food for thought on one of the biggest economic issues of the century, as economist Kaushik Basu finds.

After driving from Gujarat's commercial capital, Ahmedabad, for four hours, the highway meanders into a narrower, bumpier road and the landscape is flat and parched.

This is the edge of the salt deserts of Kutch in Gujarat.

The vegetation consists of the ubiquitous babul, a shrub-like plant that spreads all the way to the horizon.

The babul, I am told, is not natural to this region.

It was planted by some government officials to stop the spread of the desert, and has been fighting a losing battle ever since.

Desolate village

For the inhabitants of the region, survival depends on a life of perennial foraging for water and firewood.

But there is another activity for those who have the skill.

That is embroidery, especially mirror work, stitched into fabric.

To take a one sided view on globalisation seems wrong Is globalisation a force for good? Your views

I am going to Jakotra, where I will stay at the house of one such craftsperson, Dohiben.

Jakotra is a poor, desolate village, in the middle of nowhere. By the time we arrive there it is night.

At dawn a winter mist hangs low over the dusty village roads and cows and goats stir languorously.

The womenfolk are out in their ornate, embroidered clothes, bare feet, and sets of three progressively smaller pots on their heads, in search of water.

Over the next two days, in Jakotra and Manipur, outside Ahmedabad, I talk to a number of village artisans about their precarious lives.

They are producing enormously labour-intensive handicrafts and barely making ends meet.

My thoughts turn inevitably to globalisation and its effect on such poor people.

It is a subject that one week later would be roundly castigated at the World Social Forum in Bombay (Mumbai).

To take a one-sided view on globalisation seems wrong.

The reason why artisans like Dohiben are better off today than 10 years ago (and they readily admit this) is because of the merits of globalisation.

If they had to sell their products only in the neighbouring villages, the demand would be tiny and prices abysmally low.

This is true at a more macro level as well.

The handicrafts sector has been a major beneficiary of India's globalisation.

Villagers' fears

Research by Tirthankar Roy and Maureen Liebl shows that the export of handicrafts has surged since the reforms of 1991, with its share in India's manufacturing exports rising from two percent to 5% during the last decade.

The rural poor need to be protected against unemployment.

The number of people employed in the handicrafts exports sector grew from just under four and a half million to nearly 10 million over the same period.

At the same time sitting in Jakotra I could not dismiss the palpable anxiety of the villagers that they will eventually be out-competed by mechanized, large-scale manufacturers from far and wide.

The Indian government used to guard against this risk by declaring that certain products must only be produced in the small-scale sector.

Such policies may have been fine earlier but is folly in today's global village, since other nations can go for cheap, large-scale production of those goods and export them to India.

So although globalisation has so far served the handicrafts sector well, there is no denial that some of these products will come under attack and India will not be able to ward that off.

Action plan

Unless one is a market fundamentalist, one is forced to confront the question: What should the government do?

The handicrafts sector has been a major beneficiary of globalisation.

First, it will have to spread education so that workers are able to shift from one sector to another as demand shifts.

Second, it will have to provide a system of social security to protect the poor against new competition and adjustment unemployment.

Instead of opposing globalisation or leaving it all to the market, pressure should be put on government for those kinds of limited interventions which provide shelter for the groups at risk.

Such a policy is pragmatic.

Globalisation and technological progress are the outcome of individual actions of millions of people.

It is doubtful if there is any government, organisation or corporation that can stall it, certainly not the governments of South Asia.

This being so, it is better to channel India's energy to counter its possible negative fall-out.

To pit oneself against a phenomenon where one has no chance against it is to court failure.

As Oscar Wilde said on his deathbed in a drab hotel room: "This wallpaper is terrible. Either it goes or I do."

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Here is a selection of comments about this article.

The situation has improved greatly since India began liberalising in 1991- poverty rates are falling, the economy is growing well and GDP per capita is on the rise too. However, too much of the benefits remain for the upper middle and corporate classes of India. The poor, the most downtrodden still remain bereft of most of the benefits globalisation can bring. India's prosperity should be judged not on how many people are below $1/day, but how many people have two meals, a job and a home.
Aruni, India

Refreshing to read an Indian expert balances concern for social welfare with a keen understanding of the benefits and challenges of globalisation. I wish the many so called 'intellectuals' in India who have made careers and fortunes out of castigating globalisation had the wit to understand Mr Basu's comments instead of indulging in the usual meaningless rethoric whilst playing into the hands of trade protectionists and anti-capitalists.
H S Trivedi, UK

Globalisation is the best phenomenon South Asia experienced ever since discovering zero. No doubt about that. There are too many success stories. If not for globalisation how could Sri Lanka ever survive from a 20-year-long war that had virtually ruined its economy? If not for globalisation how could India became the high church of IT in the whole world instead of being confined to its self-imposed wheel chair? If not for globalisation, how can we talk so high about the Bangladesh and Nepal becoming key business players in the region? Let us not mince words. It�s a fact. The only way South Asia could make its mark in the world map is by providing the products and services it produces to the international market, by taking the best use of the environment created by the forces of globalisation.
Chanuka Wattegama, Sri Lanka

The views put forward by Kaushik Basu apply especially to low-income nations whose integration into global product markets can be either beneficial or disastrous. Most of the workforce are employed in the production of low-wage and labour intensive goods and must compete with other countries for markets in developed countries. Although employment and production levels in such sectors may rise, eventually the phenomenon called 'immiserizing growth' is a real possibility unless they are able to maintain their competitiveness through upgrading (mainly by moving up the value chain). Furthermore, the rise of new trade rules on labour and the environment poses a danger as the rise of new forms of non-trade barriers and 'credence goods' characteristics attest. The reality jeopardizes the chance for low income producers who depend on such goods for their daily survival. Eventually, developing nations must improve the quality of their workforce and move up the value chain quickly or find new areas of 'comparative advantage' that must be translated into 'competititve advantage'.
Shyamal K Shrestha, Nepal

It seems like a preposterous argument that the best way to develop is to isolate our selves from the world. Globalisation like the market forces are a matter of fact that we must deal with, just like communists where completely off the track when they ignored the marketfoces, just as completeley off the track are nationalists when it comes to globalisation. But beware of the European left, they are false friends that fight to keep their jobs in Europe and from the Asians. They could not care less about our welfare.
Sanjay, Sweden

Change is implicit with globalization = and like change in any situation, some (if not most) of it is good and some bad. Fighting change - which is what the anti-globalization movement is about- can only result in stagnation. That is hardly an optimal outcome.
Vijay Dandapani, USA

I agree. The government specially needs to prepare the nation for the downturn which is speedy at times and the workforce has to be flexible rather as part of their psyche. Protectionism, either by the state or the labor force has to be reigned in. But there will be a human cost. Only preparedness will soften the blow.
Somesguha, USA

I am pained to read this article, not by the pitiable condition of the artisans living in India, but by the pathetic solutions offered by the learned economist. These are the ideas of 20 or maybe 30 years ago of a socialist Indian mindset. Where is the creativity of the new age? I thought, we produced better economists than that, or maybe you picked one from the wrong bunch. How can you solve every problem by completely putting the responsibility on the government. For how long can the government sustain every poor group in our country of more than a billion people. Combined with the latest technologies with their talents, Indian industry can beat anybody in the world.
Apoorva Mathur, India

I think there is some misconception about what anti-globalisation campaigners are saying. Although some are very hard-core the vast majority are not really against globalisation per se, but what company owners are doing (shutting down plants in the western countries and moving them elsewhere, leaving millions unemployed only to sell them back what they used to make themselves; opening factories in poorer countries, exploiting child labour and paying ridiculously low wages. That's something they wouldn't dare do in the west), against the IMF and World Bank (who impose draconian measures against countries who ask them for funds to finance their economic recovery). I don't think any anti-globalisation campaigners are against handicrafts. If you argue so you have a very twisted view of reality. So please apply to yourself what you wrote: "To take a one-sided view on globalisation seems wrong."
Norberto Amaral, Portugal

India, like all developing countries has to tread the path to globalisation very carefully. The pressure is on to open up the markets - and to what end? The WTO wants developing nations to open up the agriculture sector so that the West can send in billions of dollars worth of highly subsidised food. Does this make sense? No. The local farmers will starve and the affected countries become dependent on the rich farmers. Why don't the rich countries get rid of the subsidies. The WTO should have a formula which looks at the income per capita increase for the poor countries. Set a target and a time-frame to achieve those targets. Then the whole world will know if globalisation is working.
anil joshi, uk

I am from the same part of Gujrat (Kutch) that you referred to in your article. I am proud of the achievement of people from this region despite all obstacles. You have touched an issue that is at heart of globalization. Your proposal of pragmatic solution is the right way for a country like India. Most people would agree that India can gain large benefit from globalization if correct policies and better execution is put in place. I think the best way to achieve significant results are by creating an environment which fosters growth. The main obstacle in India is still its centralized planning model. When India will decentralize its development effort to local level, it will achieve its fullest potential. This can be achieve by puting in simple policy of allowing local government to decide, collect and utilize taxes as appropriate to their local requirement. This will create competition among local communities and India would be on greater development path. Bottom line, give power to local communites and then relax and watch the growth.
Shailesh Gala, USA

I completely agree with Prof Basu. Globalisation is a force here to stay and in a way I believe India is best positioned to take advantage of this phenomenon. In the short term it might negatively affect the underprevileged but in the long term it has the potential of integrating MERIT to MARKETS in the most productive manner. So we have to ensure that, while going from the short term to the long term, we don't leave behind people not armed to resist the negative onslught of globablisation. Looking forward to more enlightening articles from Prof Basu. thanks
Kunal Munjal, NY, USA

Generally globalisation is good for India and the region But it needs to be supported by good governmence.Beside this people need to be educated on how globalisation works and how they can benefit from it. I think the era of self suffiency and socialist policies are over in India and now the government should focus on how they can use globalisation to improve the life quality of massess.
Suresh Johnpillai, Sri Lanka/ Norway

Good Article, but how about telling the same to US and UK. Why do all Western economists and countries tell us to open up... for the first time India has a little advantage on outsourcing and look at the reaction of the West!!!!! Such hypocrisy.
Ajit Khanna, India

Globalisation is the driving force behind the paradigm shift that is taking place right now. No one is going to be able to resist this change, and it will bring the true global village encompassing the regions nationalistic, economic, religious and political movements.
Thiru K, NJ, USA

The unfettered spread of free markets and technology to the developing world will provide higher standards of living as it has done in every country that has embraced a globalized economy.
David Voigt, Sacramento, California

Very insightful! I've always been an avid reader of Dr. Kaushik Basu's writing.
Hasan Faruq, Bangladesh

I believe Mr Basu is right. Globalization is inevitable and it has benefitted various sectors of the Indian economy by providing employment for many who are a part of the export industry. However, I do not agree with those who believe that globalization and free markets are the answer to world poverty and that opening up of markets has made the lives of the poor better. Yes, they are better off and some of the wealth has trickled down, but the important question is, how much? If they make a couple of dollars more each day because they produce for the global market, is that justified in comparison to the billions of dollars that MNCs and industries make in the form of profits? I don't think so. If the government really believes in improving the lives of the rural poor, they need to step in and offer security and better standards and prices. And, MNCs who believe that they are providing better alternatives for the poor by offering low-wage jobs need to do more than that-again, by offering better wages, working conditions and health standards for their workers. Ultimately, I think, everyone profits from socially- and environmentally-just policies.
Mridula Swamy, India

It is very well for someone like Kaushik Basu to make his ivory tower judgements about Indian village life, but the kind of "limited intervention" he would like to see by the government has been the first casuality of globalization. Spending on health and education have never been lower in India, and welfare in the form of unemployment benefits has never existed. This is one of the key issues taken up by critics of globalization, and a few success stories like the sale of Indian handicrafts in European or US high streets do not change the large, much bleaker picture of Indian poverty.
Ramnath Parkar, India

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