Instead, from within the political bounds of India's divided government, Kerala initiated what has purportedly become the most successful social welfare programme in the developing world. Within less than a generation, the state had achieved effectively universal literacy rates and life expectancy levels close to many western societies. At the same time, it was stagnating economically.
Taken as a whole, Kerala was unique not only within India but also the rest of the developing world, where policymakers, NGO workers and politicians in low-income settings endlessly struggled to achieve Kerala-style results. It is no wonder, then, why others looked to Kerala as a 'model' for human progress.
The real story, however, is quite different from this received wisdom about the 'Kerala model'. In fact, government policies in Kerala had a less positive impact on social development and a more negative impact on economic development than has been commonly perceived. Not only do many of the state's successes trace back to institutions such as Christian missionary schools and hospitals that predate the welfare state, socio-economic realities within Kerala reveal a society trying its best to break free from the yoke of statism.
For example, despite the wide availability of public healthcare services, Kerala has the fourth highest level of private health expenditures in the country - more than 86 per cent of total per capita healthcare spending in Kerala is conducted in private institutions. Consider also the massive impact of migration on the state. Yes, Kerala has outpaced Gujarat in economic growth over the last several years, but this has been driven completely by remittances, which made up more than 20 per cent of the state's income in 2007. Indeed, Keralites simply voted with their feet, travelling abroad for the economic opportunity they lacked at home.
Dirigiste policies have also made Kerala one of the most difficult states for conducting business in all of India. In the World Bank's 2009 Doing Business in India report, which compared business regulation in 17 major cities across India, Kerala's commercial capital Kochi ranked 16th. The report found that it took a new business in Kochi more than 210 days to obtain building permit approvals and utility connections, whereas a business in Hyderabad could do the same in about 80 days.
We have heard about Thiruvananthapuram's renowned Technopark, the first of its kind in India. But looking at per capita information technology (IT) exports in the state, we see that Kerala is one of the worst performers in India. While Karnataka had Rs 1,36,383 in IT exports per higher-educated graduate in 2005-06 and Maharashtra had Rs 28,887, Kerala posted a mere Rs 1,422 per higher-educated graduate. Even Orissa had more per capita IT exports than Kerala!
Some proponents of the Kerala model argue that the state simply chose to improve social conditions without concerning itself over economic growth. But we must ask the inverse: why did Kerala not improve its economic conditions naturally with its latent human capacities? Thus, after commending Kerala's successes in human capital development, we must declare the end of the Kerala model. For too long it has held Kerala back rather than moved it forward.
On the world stage, India is an emerging power - one of the BRICs slated to make structural impacts on the global economy. It is a country renowned for its world-class scientists and engineers and its booming IT, telecommunications and manufacturing industries. Yet, India often lacks the influence and authority on the international stage that should be coupled with this latent power. It is hobbled by domestic challenges such as corruption, poverty and stark health and educational disparities. Paradoxically, Kerala has learned how to resolve such basic issues of human development and governance, yet it doesn't lead the country in its economic rise, sauntering along instead in mediocrity.
Indeed, Kerala is a state with enormous potential. Its comparative advantages - in high technology, education and healthcare - are India's comparative advantages. And Kerala's economic goals - to improve infrastructure, boost service exports and strengthen its knowledge economy - are India's economic goals. Kerala's fate is India's fate.
It is this dormant potential of Kerala that makes its story to date so baffling and almost tragic. For India, Kerala should not just be an example of successful human development; it should be a warning about economic underachievement. For the world, Kerala should teach us that there is no developmental force as powerful as human capital. Nothing, that is, except for one potentially more powerful force: statism.
From: Ending The Kerala Model - The Times of India
