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Towards Corporate City-States?

By Aseem Shrivastava

12 February, 2008
Countercurrents.org

“I would rather be vaguely right than precisely wrong.”
- John Maynard Keynes

“London is the whole world in one city.”
- London Mayor Ken Livingstone, July 2005


We are used to thinking of the world in terms of nation-states and, in the era of globalization, have heard all too often from various quarters that they are on the decline, as economic integration of markets across the globe grows rapidly. However, the developments since the end of the Cold War, not just in India but in the world as a whole, are actually pointing in a different direction altogether: while the nation may be on the decline, the state is not. It has strengthened its hands by relying on new laws and greater spending on security in a context of rising inequalities and a crisis of legitimacy in many poor countries. It is also true that its role in the economy has changed – from regulating the corporate sector and engaging in social spending in order to ameliorate the excesses of capitalism to creating an investor-friendly deregulated environment for private capital accumulation and growth. The trend is a global one and policy trends in India since 1991 mirror it. This is certainly one key aspect of the political changes that have transpired in the wake of globalization.

In India, as in some other parts of the world, the other significant development has been the growing economic and political importance of cities. Special Economic Zones (SEZs), and the panoply of legislation that has been created to back them, need to be understood in the wider context of ongoing urbanization and the establishment of new (private) cities. Legislation (such as the Urban Land Ceiling Act) is being removed or changed to speed up the process. Vast stretches of prime land are being acquired across the country not just for SEZs but for private cities, IT Parks, Biotech Parks, Special Tourist Zones, Science Cities and the like, the state and the legal system being the chief catalyst in the process. Much of this land is agricultural (because it has the most developed rural infrastructure) and the conversions will have consequences for food security in the future. Its effects on livelihood are already beginning to show.

While many of the economic aspects of SEZs have been analysed at length by different commentators, the political meaning of SEZs in the wider context of development policies with a pronounced urban bias has received relatively less attention. The corporate and policy-making elites of this country have a fairly clear idea of where they would like to take India by 2020. This speculative essay seeks to draw an outline of the place of SEZs in such a vision. By no means do I imply that such a vision will necessarily come to fruition. But it is good to have some sense of where the current crew of the ship would like to take it, assuming that it does not encounter insurmountable political obstacles to its project, in the form of serious electoral debacles and decisive protests (for instance in the wake of such likely imponderables as runaway inflation after the next general elections).


Cities as the centrepiece of corporate globalization

The idea that cities constitute the very meat and marrow of what has come to be called corporate globalization merits little discussion. Cities are the key nodes in the circuits of global capital today. This did not happen in a day. Economic development, as conceived and implemented during the past 60 years, not to forget industrialization everywhere for the past three centuries, has had a definite urban bias all along. Traditionally, industry has won pivotal terms of trade battles with agriculture around the world in virtually every country. Using relative prices advantageous to itself (by design), industry (capitalist or socialist) has been able to extract resources and food surpluses, draw upon cheap, abundant labor pools, and even generate markets for its products. It has treated the countryside as a mere hinterland from where resources can be extracted and industrial effluents and pollutants can be dumped at will. The accusation is often heard nowadays that “there is no money in agriculture.” But what’s new about that? There never was, because that is the way the urban-based policy-making elites have planned industrial development everywhere. Once transnational agribusiness has positioned itself successfully to exploit economic opportunities in agriculture in the poor countries – just like it has in the affluent nations – money will naturally return to agriculture.

Globalization has added both speed and seemingly impressive visible transformation to the process of India’s relentless urbanization. Migration – both distress and voluntary – is on the rise, as rural livelihoods are short-shrifted by displacement (in turn induced by development projects) and the economic unviability of agriculture (caused by benign neglect of agriculture and related occupations which have sustained hundreds of millions over the decades). Even if urban infrastructure is sorely inadequate to meet the needs of a rapidly growing urban poor population, the visible part of it – metros, flyovers and suchlike – has made enough of an impression on the imagination for policy-makers to persist with the framework of neo-liberal city-centred decision-making.

Development in India today is almost exclusively about urbanization. The urban and suburban landscape is changing rapidly as expressways, shopping malls, luxury high-rises, amusement parks and golf courses emerge around every major city, creating California-like islands of prosperity in a sea of sub-Saharan misery. Much of this conforms to the wider pattern of growing urbanization in the age of globalization the world over. Advances in transport, telecommunications and IT have made it not merely possible but imperative for decision-making elites in “world cities” to be closely networked. This is so because of the rapid rise in the mobility of capital across global financial markets, thanks to processes of deregulation facilitated since the Thatcher-Reagan years, and given a big impetus by the internet boom of the 1990s.

Needless to add, corporate globalization is premised on world cities, whose ecological and resource footprints stretch, octopus-like, well beyond the neighbourhoods in which they are physically located. When a Londoner consumes coffee from Ghana in front of TV sets produced and assembled in China, reading newsprint produced from felling timber in the Amazon, it is meaningless and misleading to think in terms of cities as territorially circumscribed human settlements. Given energy-intensive global supply and disposal chains, their tentacles – for resource extraction as well as for disposal of wastes – stretch across the surface of the globe. Without easy access to rural hinterlands, cities could not exist today.

Before we examine the political consequences of a pattern of globalized urbanization which has brought much of Mumbai culturally far closer to London than to villages less than a few hundred kilometres away, a brief look at the rise of real estate markets in India in recent years is essential.

“Real Estate Zones”: The emerging iceberg

The possibility of SEZs turning into a gigantic real estate scam remains all too real, if not the most likely outcome, especially if investment in production units is not forthcoming or if exports fail to take off. The problem is that not all the area acquired for an SEZ is meant for industrial processing and manufacturing.

The processing area within an SEZ was first pegged at 25% of the acquired land. It was raised to 35% under pressure from critics, and has now, under more pressure from the public, been raised to 50%. The rationale for such a set-aside clause is obviously the uncertainty surrounding the economic attractiveness (and ultimate viability) of SEZs. If adequate productive investment is not forthcoming, the SEZ developer can at least cash in on the land value through enormously profitable leases (strictly speaking land is not transferable by sale within an SEZ). Conglomerates like Reliance already own upwards of 100,000 acres of land in the countryside.

A walk around any large Indian city today offers a blinding spectacle of construction activity. It is aimed not only at making roads and flyovers. The greater part is actually engaged in building luxury residential high-rises, exclusive commercial office space, world-class retail space, glittering shopping malls , multiplexes, amusement parks, deluxe hotels, IT parks and, near the suburbs, SEZs. It looks apparent that Downtown India is ready to take off from the stench of neighbouring slums, fly into a globalized stratosphere and assume its pride of place in the company of the world’s most powerful nations.

In the years to come real estate is likely to replace IT/BPO as the lead growth story in the Indian economy. According to a recent report of ASSOCHAM the real estate market in India “is currently growing at 30 per cent per annum and offering maximum returns to investors. The domestic real estate market, which is presently estimated at $16 billion (Rs72,496 billion), will increase by over by three and a half times and touch $60 billion (Rs271,860 crore) by 2010.” A forecast by Merrill Lynch concurs: the Indian realty sector will grow from $12 billion in 2005 to $90 billion by 2015. A senior executive at the investment banking firm Goldman Sachs says that “India is the most exciting real estate market in Asia.”

Real estate developers are developing at least 130 SEZs, constituting nearly 50% of the total area under them. There is big money to be made. Unitech, one of the largest real estate firms in the country, reported net profits of Rs.452 crores during the third quarter last year, as compared to Rs.13 crores during the corresponding period in the previous year, a 3190% jump. As one would expect, its share prices sky-rocketed. But how high was the sky? Between March 2004 and December 2006, Unitech’s market capitalization flew from Rs. 324 crores ($ 72 million) to Rs. 37,784 ($ 8396 million) a jump of 11,561%! The real estate story may contain the secret to the wealth of Indian billionaires, and why there are more of them in India than in China (which has only recently legalized freehold private property).

All the big players in the Indian real estate market – DLF, Unitech, Ansals, Omaxe, Rahejas, Hiranandanis, Parsvnath and many others – have put in applications for SEZs. Most of them have already obtained clearance.

Obviously, there is something about SEZs which is extremely attractive to a developer. In an infrastructure-poor country like India, even a little investment in developing the land fetches a disproportionately high premium in the real estate market. The RBI has thus, appreciating the risks of land speculation (which bankrupted so many banks in China), classified loans for SEZ investment as “real estate lending”, involving higher rates of interest.

All the problems with regard to SEZs are exacerbated by the entry of large amounts of foreign capital, especially private equity, into the Indian real estate market. The government liberalized foreign direct investment (FDI) in Indian real estate in January 2007. This is likely to boost FDI coming into India this year significantly.

Share of real estate in FDI coming to India (in US$ billion)

Year FDI Share of real estate in FDI
2003-04 2.70 4.5 per cent
2004-05 3.75 10.6 per cent
2005-06 5.54 16 per cent
2006-07 * (estimated) 8.00 26 per cent *
Source: ASSOCHAM Report, Study on Future of Real Estate Investment in India. http://www.domain-b.com/industry/associations/assocham/20061120_estate.html (Accessed on April 2, 2007)
As the data in the above table makes clear, overseas businesses may not be too optimistic about the Indian economy in general, but are certainly quite buoyant about the real estate sector. “The rush for Indian real estate projects is a reflection of the higher returns from properties vis-à-vis the stock market”, The Times of India reported recently.

Here are only some of the international players planning investments in Indian realty:

Companies Investment plans of overseas investors
Royal Indian Raj Intl' $2.9 billion
Blackstone Group $1 billion
Goldman Sachs $1 billion
Emmar Properties $800 million
Pegasus Realty $150 million
Citigroup Property Investors $125 million
Lee Kim Tah Holdings $115 million
Salim group $100 million
Morgan Stanley $70 million
GE Commercial Finance Real Estate $63 million

SOURCE: ASSOCHAM op. cit.

Not for nothing do our newspapers nowadays come wrapped in Property Market pull-outs screaming “Venice in Greater Noida.”

In the next section I summarize some of the key political trends of the past decade or so which, together with the above backdrop on cities and real estate, will enable us to speculate usefully on the political changes that the SEZ Act may usher in over time. Given limitations of space, I leave it to the rationally disciplined imagination and memory of readers to interpolate the logic and evidence behind the observations below.

Changing character of the Indian state

There have been two far-reaching shifts in Indian policy-making during the past few decades. The first began around 1991 when the government started opening up the economy to international trade, investment and finance by giant corporations. Falsely called “globalization” (which has arguably not happened yet in fact!), it is best understood as the sudden acceleration of corporate imperialism in India.

The second shift began in 2005 with the passing of the SEZ Act, the announcement of the Prime Minister’s urban development plan JNNURM, and the liberalization of real estate, allowing corporations to acquire land cheaply, often forcibly, from rural populations, traditionally dependent on agriculture, forestry, fishing and related livelihoods. This is already having dramatic consequences for social relations, Indian democracy and sovereignty, on human settlement patterns and on the very way we live in this country.

There has already been what is tantamount to a counter-revolution in policy-making, affecting the long-term character of the Indian state. While the state itself has become strengthened, the nation-state might be yielding way to another form of government in the future, reviving memories of the city-states (rajwadas) of medieval and early modern India. Fiscally autonomous, globally networked city-states – bound by shared environmental and security agreements and articulating their foreign and defence policy needs in common, via New Delhi – are likely to emerge as the ruling political form in the next decade if present trends continue.

Since space is limited I restrict myself here to a statement of key observations leading to my main conclusion.

1. There has been a rapidly growing severance of state from civil society in India since 1991. This mirrors a global trend in the same direction during the years following the end of the Cold War. While formal electoral democracy still survives in India, as in the West, the sustained success of totalitarian China has meant that the monster economy sets the pace for all others. In a closely networked world it affects not merely the economic sphere (binding everyone to a “china price” in most areas of production) but also the political one, inducing other nations including India to, for instance, violate human rights in order to achieve competitive economic success.

2. Consequently, there is now a concerted attempt on the part of the ruling urban elites in India to insulate the economy from the democratic political system, much like what has already been achieved in the US after decades of corporate effort in public relations, lobbying and campaign finance. It does not suit “sovereign” investors to be subject to the vagaries of democratic politics after every election. Hence, increasingly what is being observed is that political parties in power will do the bidding of powerful financial, commercial and industrial interests in a manner indistinguishable from each other. The trend is the same the world over, if the experiences of Mandela in South Africa in the 1990s and of Lula in Brazil more recently are anything to go by. Their radical politics was sterilized by the imperatives imposed on their countries by global finance via so-called “multilateral institutions”.

3. Since 1991, there has been growing and far-reaching intervention in Indian policy-making (in virtually every sphere from urban development to health) by international financial institutions such as the IMF, the World Bank, the Asia Development Bank and the WTO. There are many strict conditionalities on the loans (small and large) being advanced by these institutions, which tightly constrain policy alternatives for elected governments in the country, making them publicly unaccountable and effectively unresponsive to popular needs. The enterprise of remote-controlled corporate imperialism is facilitated greatly by the fact that a large and influential number of top bureaucrats, technocrats, economists and experts move freely between public responsibilities in New Delhi and offices in Washington, Geneva or Manila.

4. The influence exercised by world corporate oligarchies through this influential class of versatile (Indian) technocrats and bureaucrats has meant that the traditional socio-economic roles of the state – in supporting agriculture and public availability of affordable food as much as spending on health and education – has suffered a huge setback with perceptible consequences. This does not mean that the role of the state in the economy has diminished. On the contrary, it has merely been redefined and enlarged in certain chosen respects. New legislation like the SEZ Act (and many others similar to it in terms of transferring resources and powers from the public to the corporate sphere) show clearly that instead of mitigating the excesses of market/corporate capitalism as the (welfare) state has done everywhere in the world since at least World War II, the state (as in most parts of the world) is now hiding behind myths of “trickle-down” growth to give itself license to strengthen the hand of corporate elites, thereby contributing at once to accelerated growth for the already enriched and growing poverty for the impoverished. It is thus contributing to rapidly rising economic inequality. The state is now effectively corporate, no matter what rhetoric is deployed to camouflage the obstinate fact.

5. There is a growing tendency, reinforced by media representations, to conflate the private with the public interest. This is utterly dangerous, as anyone with even a nodding acquaintance with the history of democratic institutions in India and the West can attest. The time-honoured distinction between private and public interest (especially in the context of a capitalist economy) is one of the cornerstones of modern democratic thought and practice. To seek to erase it is fraught with both predictable and unforeseeable perils. For instance, land is still being acquired by state governments for corporations and private developers promising to build SEZs, under the “public purpose” clause of the anachronistic Land Acquisition Act of 1894.

6. What is neo-liberalism for global elites (which include big business from India) is corporate totalitarianism for the vast bulk of the populace. We live under the tyranny of Mammon. As in the past, trade is free only for the powerful. Credit is easy only for the already rich. Industrial, import or mining licenses are more difficult for small-scale industry even as they have become much easier for big business. Economic growth is an ever more exclusive phenomenon, even as the rhetoric of inclusive development is maintained in the face of incriminating statistics – on growing poverty, inflation in food, essential goods and services, rising unemployment and the accumulating corpses of tens of thousands of farmers led to suicide by induced or inadvertent economic distress.

7. As in much of the rest of the world, the market mantra is recited every day by virtually all political leaders, regardless of their affiliation or ideology, as the panacea for virtually all of India’s intractable socio-economic problems. What is never noticed in the fog that has been cultivated is that market fundamentalism is merely the mask of corporate totalitarianism. In a world as dramatically unequal as ours is today, markets are even less innocent than they were at any point of time in the past. They operate on historically given playing-fields which are inflected by sharp and obvious inclines.

8. There has been a convergence of interests between the Neta-Babu classes who held the reins of power before 1991 and the country’s corporate classes who have been on the rise since then. (Together the two make up less than 1% of the country’s population.) The former are now convinced that the business of winning elections and retaining power cannot be conducted without the active cooperation of and client-patronage relations with the latter. The latter, as always, need the state to organize a favourable policy framework and smoothen the day-to-day running of businesses, apart from maintaining political stability to ensure the right climate for attracting foreign investment. Corruption, far from ending, has only grown and shifted sites to more invisible spots in the increasingly opaque decision-making power structure, even as demands for transparency and accountability have grown, almost helplessly.

9. As the state – regardless of the particular political configuration holding office – finds itself falling repeatedly short of coming close to meeting the minimal expectations of the people, it finds itself in a crisis of legitimacy in many parts of the country, especially in rural India. As rebellions grow in number, frequency and intensity of violence there is ever more attention to the “challenge of internal security”, which the Prime Minister himself has underscored on numerous occasions. State violations of human rights seem to match those of the extremists, not merely in Kashmir and the NorthEast, but in places like Chhatisgarh (where the state has armed children against their own tribe and Naxalites) as well. Under the present dispensations of political economy, it is more than likely that the security apparatus of the state will be vastly reinforced and expanded in the future.

10. Underlying the gloss and glitter of a seemingly “globalized” capitalist economy is the resilient structure of feudal society. Its presence is so overwhelming still that it easily escapes notice, especially in an age devoted to cosmetic revolutions. The best proof of the obstinate survival of feudal social relations in “globalized” India is the fact that labor has been informalized and casualized in the name of “flexible labor markets” to serve the interests of corporate expansion and competitiveness. The state continues to play its part in keeping the working population as docile and pliant to the needs of capital as is necessary. Net growth in formal employment, where workers have due rights, is virtually stagnant, while teeming millions are being engaged as informal labour, domestic help in cities, as migrant construction labor, or are having to seek some form of utterly meagre self-employment in either urban or rural areas.

11. Where does all this leave democracy? It is receding and even threatens to disappear in the face of the corporate onslaught. Formal electoral democracy survives but, for reasons already mentioned, is increasingly impotent to answer the survival needs of toiling millions. The legislative and executive branches of the state are increasingly biased in favour of corporate interests and economic growth at any short or long-term cost (violation of human rights, environmental standards, etc.). What is even more troubling is that the judiciary too, judging from their pronouncements in some recent cases (including Narmada), has thrown its weight behind the rising power of global/Indian corporate elites.

12. Finally, the Indian state continues to abide by its faith in the SEZ model of economic growth (which itself is seen increasingly as a shorthand for development itself, despite the obvious, continuing and universal failure of the so-called “trickle-down effect”), already discredited in China. This is happening in the face of massive protests against the policy across the country. Seen in conjunction with all the other factors enumerated in the points made above, with the widely reported boom in the property/real estate sectors of the economy and with the rapidly growing influx of foreign liquidity (especially private equity) in this sector, with the consuming elites’ passion for “world-class” “private/smart cities”, it shows the determination of the powerful Indian/global corporate elites to convert the Indian nation-state into hundreds of fiscally autonomous, globally networked, corporate city-states over a period of time. New Delhi may ultimately end up with the residual role of managing the defence and foreign policy concerns of the new corporate rajwadas, and coordinating their security and environmental needs (a combination of the UN and the expected role for the EU). The rest of the populace – the bulk of us – will be cordoned off by a heavy security apparatus into concentric zones of receding affluence around the wealthy centre, entry to which will be exclusive to pass-holders. Towards the periphery, far from the centre, flung in the ravines, will be war zones, home to drugs, crimes, human trafficking, prostitution and the residual violence of warring groups of political dissidents. The corporate city-state model has a resonance with the Indian feudal past of rajwadas and should not be dismissed out of reckoning merely because we are unable to imagine a political form quite radically different from the putatively prevailing one.

The autonomous corporate city-state: A pilot experiment in private governance?

SEZs will inaugurate a fresh chapter in the privatization of governance. To serve their purpose, they will have to be run quite differently from the rest of the province in which they are geographically located. It might be a bit like the centralized rule under which Union Territories in the country function – minus the local elections. Given that every SEZ Authority will be made up of the Development Commissioner, three officers of the central government and two representatives of the private developer, there will be no elected local government drawn from state legislatures, town councils or local panchayats. Nor will there be any labor welfare officers. Selections and elections are distinguished from each other by but a consonant. What is to prevent a corporate oligarchy to emerge from such a cabal of officials?

Many of the SEZs, like the MahaMumbai SEZ (to be built by Reliance Industries) are planned like a mid-sized city, over 100 sq km in area (the size of Chandigarh). The ‘Development Commissioner’ and the SEZ Authority will govern the area with the main aim of facilitating economic growth. Infrastructure, like power, roads and water supply has been guaranteed to investors and developers, not to people of the region. Several lakh people may be living/working inside the SEZ. All the non-economic laws of the land under the IPC and the CrPC would be formally applicable to SEZs. However, internal security will be the responsibility of the developer. Would the SEZs turn ultimately into sovereign city-states – treasure islands of prosperity in a sea of poverty and misery – unaccountable to the vast majority of citizens in the neighbourhood?

If erstwhile rural areas are going to be reclassified as urban, it is not clear whether SEZs will fall under the jurisdiction of the village Panchayats or the city municipality. What is clear is that SEZs, being developed by a private party, will be outside the purview of town planners and Gram Sabhas alike and will be run exclusively by the SEZ Authority. This, as has been noted widely, is a violation of the 73rd and 74th amendments to the Constitution which guarantee respectively, constitutional status to urban local governance and Panchayats. It has implications for the rural poor who will stand to suffer most from regional environmental damage (like drying up of groundwater) but helpless to prevent it. The Chinese SEZ city of Shenzhen, with a devastated hinterland, is a warning poster on the wall.

Further, entry into (physically bounded) SEZs will be regulated by identity cards, making them even more inaccessible to people of the region. Creating artificially a “foreign territory” within the geographical boundaries of the nation undermines constitutional rights like freedom of movement.

The SEZ Act also lays down that grievances related to SEZs can only be filed with courts assigned by the state governments which will only exist for trials related to civil matters.

SEZs have been declared “public utility services” under the Industrial Disputes Act. This, as mentioned earlier, transfers all the powers of the State Labor Commissioner to the Development Commissioner of the SEZ – who will arbitrate in any labor issues or disputes in the SEZ area, even as he is obliged to further the goals of the SEZ: growth and profit-making above all.

A most dangerous precedent that is being set by the SEZ policy of the state is the raw, unabashed conflation of private and public interest. Within SEZs, given their “public utility status”, shopping malls and golf courses, luxury apartments and multiplexes will be treated on a par with roads and streetlights, schools and hospitals. All of these things constitute one or another form of “infrastructure”, exempt from taxation.

In all countries (especially in the Western world), and in India hitherto, the aims of corporations – maximization of profits, market shares, growth – have been rightly regarded in law as private objectives which have to be distinguished sharply from public goals. SEZs however, offer us a key-hole view into the future desired by global corporate lobbies. They can be seen as a pilot experiment in real time and space, with real people, with a new political order: the autonomous corporate city-state.

What evidence is there to sustain such a view? One can offer at least two instances straightaway. The real estate developer from Delhi, Ansals was granted in 2006 2500 acres of land near Ghaziabad by the UP state government to develop a township at a cost of about Rs. 1000 crores. This is officially not an SEZ (yet). According to The Times of India, Ansals will have the right to collect taxes, just like a municipality. “Collection of taxes…by a developer is unheard of”, the newspaper adds. The last time India was witness to something of this order was when the British colonial rulers did revenue farming via Zamindars and Jagirdars, with the difference that the latter had to pass on a fraction to the colonial government. Who knows, perhaps developers in independent India will do the same for what looks increasingly like a privatized government. If private security firms can fight patriotic wars for American corporations in Iraq, the bar has been set quite high.

That the idea of corporate city governance is in the air in India is borne out by other evidence as well. Sometime back, London’s Financial Times did a feature on comparative urbanization in India and China. The puzzle being solved was why Indian cities suffered from such poor infrastructure. The article suggested that the reason was that politicians were too “obsessed with the problem of rural poverty” and thus took resources away from urban development. “One reason for this illogical approach is politics: India is a democracy. For historical reasons the countryside is over-represented in the political system and power rests with the state government, not with the cities.”

The newspaper interviewed Nandan Nilekani of Infosys to get further insight into the problem. There is “a disconnect”, Nilekani argued, “between the economic power and the political power.” Bangalore with only 10% of the population of Karnataka state contributes 60% of the state's GDP. However, it has only 7% of the state assembly seats. He added: “In China you don't have that problem. India is the only example of urbanisation (on this scale) happening with universal adult franchise.” True enough. Britain only allowed electoral rights to the male members of its propertied classes when the brutal Enclosure Movement was underway – in waves, over a period of some centuries. The US was a slave-owning racist society where only men of the right colour could vote when it was urbanizing furiously. China is still a totalitarian state as it entices dispossessed farmers to cities. And so on.

History probably does not know of too many instances of an enduring mismatch between economic power and political influence. If, for a certain social class, the balance becomes uneven and the former far exceeds the latter, forces are set in motion in society that bring the two into balance again. What India’s increasingly political corporate elite may want to experiment with is a set of legal changes and/or constitutional amendments that fiscally empower (corporate) cities at the cost of the countryside, correcting in favour of urban India the disconnect that Nilekani mentions.

This cannot happen without basic changes in the very structure of Indian government and politics. Nilekani is arguing, in effect, for a “dollar democracy”, where one rupee will count for one vote, rather than one person. What could be a more retrograde step in human affairs? In the end, it appears as Amartya Sen has often argued, that the real debate with regard to globalization, is not about free markets but about inequalities of power.

SEZs may serve as just the sort of experiment that corporate India wants to make. Those who would like to see India grow as “smoothly” as China (or 19th century Dickensian Britain), with the nuisance of things like “democracy” and “rural development” out of the way would surely like to redefine the boundaries between town and country in their favour and empower themselves for further material enrichment. SEZs may become the nucleus of new sanitized Indian cities without the slums, jhopadpattis and resettlement colonies which mar the visual horizon in India’s “natural” cities.

Perhaps the most heroic clauses in the SEZ Act are Clauses 49 and 51. In effect, they give the executive wing of the government the power to legislate and determine the domain of application of the law. In order to meet the goals of the Act, it is laid down in plain English, the provisions of the Act will “have overriding effect” over “anything inconsistent…in any other law…in force.” As to which laws are covered by such an overarching imposition is left happily unspecified. Jurists could be consulted to check whether such legislation is in harmony with the required constitutionality of law-making. In principle, it appears to write into law virtually any illegality or injustice which runs foul of the SEZ Act aims – of maximizing private economic magnitudes!

Concluding Remarks

It is still too early to predict the full political consequences of the SEZ model of economic growth. However, given the speed at which the policies are being enacted and implemented (the latter often in anticipation of the former), it has become imperative to foresee the likely effects and prevent the damage that might result. While the details are unclear, the broad political consequences of SEZs are fairly clear. By shifting the very mode of governance towards the corporate sector, they will render unaccountable and opaque decision-making which will have long-lasting and widespread consequences for the citizens of the country. Not only will the formal success (and consequent expansion)of SEZs threaten more lives and livelihoods in the countryside, they will institute an autocratic labour regime in the workplace. In this and other ways already explored in the essay, they will undermine democracy in India in profound respects and might well pioneer a full-scale transformation of the political system in the direction of formal corporate totalitarianism through the via media of autonomous corporate city-states.


Aseem Shrivastava is an independent writer with an interest in researching issues connected with globalization in India. He can be reached at aseem62@yahoo.com.


Earlier versions of this essay have been presented at the recently held meetings of the ICSSR in New Delhi (April 2007) and the Indian Social Science Congress in Mumbai (Dec. 2007).



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