The primacy of politics


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DISCUSSIONS on social security in India have resurfaced in recent years, apparently as a consequence of ‘globalisation and its discontents’. Economists and political scientists have long suggested that vulnerability due to the move towards an increasingly open economy puts pressure on the government to increase the scope of the public economy and social protection. In post-reform India this pressure has so far been enfeebled by the rather stubbornly-held belief of the economic elites that labour market flexibility is the key to efficiency and more employment. However, the political classes find hard to publicly favour this view and thereby support, out of political compulsion, initiatives such as the National Commission for Enterprises in the Unorganised Sector (NCEUS) which has recently made important recommendations on social security for workers in the unorganised sector. The Commission has put forward a draft bill in this regard and the legislative process has taken off.

There is, however, a danger of falling prey to an easy kind of nihilism, despite the remarkable success story of public action that recently led to the enactment of the National Rural Employment Guarantee Act. The nihilism does have a basis, though. Even at the time of independence, social security in India had come sufficiently of age to be recognised as an obligation of the state. Following the historic Beveridge report published in 1942, the Government of India appointed B.P. Adarkar to look into the possibility of social insurance in India, and based on his recommendations the Employees’ State Insurance (ESI) Act came up in 1948.1 The Constitution of India included explicit statements on social security and social insurance.2 Yet, what we have accumulated so far is a strange medley of schemes and programmes which are impossible to reconcile with the goal of any reasonable social security system. In this context, one should welcome the Report of the NCEUS on Social Security for Unorganised Workers (2006) as an important attempt to give operational shape to a long-held idea in a time when such ideas are in retreat.

The report takes on a greater significance at the present moment as the so-called competitive pressures tend to plunge economies around the world into a ‘race to the bottom’. Policy-makers have been racing to make their markets more competitive and increase incentives to invest. Labour markets are being subject to changes intended to increase flexibility and lower labour costs. Social security measures are perceived as inimical to competitive advantage and growth. That the inevitable result of all this is widening gaps in income and well-being is now accepted by many with greater equanimity than before. Few seem to appreciate the idea that there is no inherent trade-off between dynamic efficiency and basic income security for the working poor, despite a long stream of theoretical literature supported by strong empirical evidence which challenges the fallacious depiction of the trade-off.

The present system of social security in India is grossly inadequate and inequitable. The gap between the official rhetoric and reality is as wide as in most other areas of concern. While the public sector employees, and to a somewhat lesser extent the workers in the organised sector, enjoy high degree of protection from contingent risks like old age and sickness, the vast majority of workers in the unorganised sector have only a modicum of economic security. Why has this dualism persisted for so long?


Apart from the obvious political economy reasons, the distinction between promotional and protective may be recalled at this point.3 Social security measures, which by and large aim at maintaining a minimum standard of living, fall under either of the two conceptual categories – promotional and protective. Promotional type measures include those which aim at improving the economic condition of the poor – subsidised food through the Public Distribution System (PDS), transfer of productive assets like milch cattle for poverty alleviation as envisaged by the Integrated Rural Development Programme (IRDP), mid-day meals for school children, and so on. On the other hand, social security systems in the industrialized world are primarily protective, i.e. they aim at protecting household incomes from the risk of loss due to unemployment, sickness, loss of ability to work and so on. It is often argued that given the high proportion of population below the poverty line the thrust of social security policy in India should primarily be promotional.4 


This ignores the fact that the remarkable achievement of Kerala on the social development front has been the result of both promotional and protective kinds of arrangements that have evolved in the past four decades or so.5 More importantly, the Kerala experience shows that an exclusively normative approach to social security cannot take us far unless we appreciate the political dynamics underlying the evolution of social security arrangements. While a normative viewpoint helps us appreciate criteria such as fairness, distributive justice, or efficiency that a well-designed social security system ought to satisfy, it subsumes the importance of politics and political act. Politics and interests are often relegated to the background in discussions of development policies. This essay is woven around this central theme, recognising the primacy of politics. For illustrative purposes we focus on Kerala’s experience with the specific protective type of social security scheme, i.e. the one based on ‘welfare fund’. It is a form of social insurance for workers in the informal sector based on contributions from employees, their employers and the government.

Welfare funds came into existence in Kerala not because ‘people’ had achieved a wide ethical consensus on the normative criteria that are satisfied by these forms of intervention, but because various groups came up forcefully with their demands, and political considerations forced the state to realise the need for accommodation. In what follows we present a very brief review of the sequence of events that has led to the present system of social security for the unorganised sector workers in Kerala.6 


Initially, it was the employers who wanted to see formation of workers’ organization in Kerala. In the 1920s, when the coir industry had been facing labour scarcity, in order to secure access to a disciplined work force, employers supported workers to form organizations. This kind of phenomenon was quite common in other parts of the world. In What Do Unions Do? Freeman and Medoff argue that unions may enhance efficiency by providing employees with a collective voice in communicating with the management. The standard economics of public good and market failure can explain why unions may enhance overall efficiency. There are a number of aspects of the work environment that share the characteristic of a public good, that one individual’s enjoyment of the good does not diminish the quantum available to others. The examples are safety regulations, procedures for redressal of grievances, job security policy, and so on. To facilitate a meaningful aggregation of the preferences of the workers on these issues, it is not surprising that the employer would feel the need for a collective bargaining institution.


The 1930s, however, saw a reversal in what was seen in the previous decade. The Depression and the associated fall in prices and wages intensified conflicts between workers and employers. In their struggle to secure the minimum necessities of life, workers turned to community resources – social capital in modern day parlance – and informal networks of mutual help developed among the workers.

Since its formation in 1957, the democratic state has acted as a mediator in disputes between the employer and employees. Various prolabour bills were passed in the legislative assembly. Political parties put further effort in extending their base from the organised to unorganised workers. But the scope for wage bargaining in the latter was limited by low labour productivity. As a result, demand for economic security was considered a meaningful alternative to the self-defeating move to press for higher wages. With active state support the first welfare fund for toddy tappers was set up in 1969. By the end of the 1980s there were eleven such funds, and the number has subsequently grown to nineteen. It seems that successive governments have been competing with each other to create a larger number of welfare funds.

From a normative standpoint, criticisms of the present arrangements of welfare funds in Kerala can be easily made. There has been a tendency to replicate funds without much regard to the specificities of the industry/labour market, and as a result, some funds have been more successful than others. The Kerala Toddy Workers Welfare Fund is a case in point. The employer-employee relationship in the case of toddy tapping is in a flux. With a welfare motive, the government introduced a system of auctions for toddy tapping rights. The abkari contractors buy these rights and employ tappers. By introducing a system of auction, the government is able to collect the employers’ contributions to the welfare fund. This particular system has worked splendidly, and unlike several other funds, Kerala Toddy Workers Welfare Fund has not faced financial difficulty, even though it does not receive any financial contribution from the government.


The specificities of different groups of workers in terms of the nature of production, the history of struggle, the community or gender, have resulted in wide variations in amounts of contributions, systems of benefits and other features across funds, for which one finds no apparent rationale. What may appear even more disturbing from a normative standpoint is that the present form of the welfare fund system in Kerala seems to deviate from certain notions of fairness or justice. For example, there is a norm that the government contribution maintains a stable proportion with employees’ contributions. The workers who have higher ability to contribute get a higher share of the total contribution of the government. This punishes workers with lower ability to contribute and biases benefits to the other group.

What is common among almost all the funds is the overwhelming presence of the government in management of the fund, no matter whether a fund receives the government’s financial contribution or not. Most funds incur high administrative costs relative to the benefits disbursed. This implies a disproportionate transfer of resources to highly protected government employees – the fund managers – instead of the workers in the unorganized sector who earn far less.


There are other features that one should be critical about. There is a tendency to collude among employers and trade unions to restrict new recruitment, which obviously hurts interests of the currently unemployed and creates an ‘informal sector’ (segments of workers who are ‘unregistered’) within the formal sector. And second, for a variety of reasons, the funds for sectors dominated by women workers – such as cashew, handloom and coir – have been generally struggling for viability. This has serious implications for gender justice.

From such criticism, it may appear that the welfare fund system in Kerala is replete with undesirable features and, therefore, ought to be reformed. One might also like to draw positive lessons from the system in the hope that this would inform the policy-makers in designing a better social security system. Even though the need for learning from the so-called best practices is frequently emphasised, discussions on the question of design invariably follow a normative route, centering on the ought rather than the how.

Successful implementation of a well-designed social security system presupposes favourable political institutions which are expected to shape mutually reinforcing relations between governments and groups of engaged citizens. These relations can take a variety of forms depending on what sociologists call ‘embedded-ness’, that is, the ties that connect citizens and public officials across the public-private divide.7 The government’s presence in the tripartite system of welfare funds does not automatically guarantee equal participation and voice in all cases. The ‘decisional distance’8 between the government and the workers may be longer in some societies than in others. While social security is widely understood in Kerala as a political right and citizenship claim, in other states it may degenerate into an instrument for patronage. In Kerala, tradition and politics is less likely to go against an increased demand for income protection. In the absence of favourable political institutions in other states, one can anticipate a setback in implementation of whatever act is passed in this regard.


Can institutions be designed? There is no easy answer to this question, even though most policy-makers would perhaps give a positive answer. Institutions in the sense that many political thinkers use the term evolve, grow or – rather ironically – become ‘institutionalised’. An attempt to design them by fiat may produce perverse and unintended outcomes. Nevertheless, often there is no serious alternative to designing or redesigning institutions. However, the design must be based upon a proper understanding of history and power relations. Otherwise, there is danger of falling prey to either ‘policy reform triumphalism’ or a pessimism about politics due to an exclusive focus on its instrumental worth.


Thus, studying an institution – such as the welfare fund system of social security – in isolation from the totality of the history of the people of Kerala may produce an improper understanding. Kerala has had a long tradition of caste and community activism. But this kind of activism could not produce the outcome that we are now discussing unless the activist tradition had been harnessed to a more universalistic set of identities. In India, despite the gradual weakening of traditional forms of communitarian bonding of people, the process of individuation is far from complete. A perception of disadvantage or oppression continues to be expressed in terms of social identity based collectivities rather than interest-based ones. In modern Indian politics, democratic struggle for workers’ rights and social security does not turn out to be the dominant mode.

The principle of the self-identifying actions of people and political mobilizations is often a perception of discrimination based on social identities rather than class interest. Mobilisation against perceived discrimination and against denial of workers’ rights and privileges can yield quite different political trajectories. Since social security measures of the kind we are discussing here are socially unindexed, the prospect of political mobilisation around the issues is likely to vary from state to state.

One important aspect of Kerala’s industrial relations is that, because of various protective measures and the system of wage bargaining, the vast gap that separates the organised sector from the informal sector in the rest of India has been significantly narrowed down in the state. Gaps among different categories of workers within each sector are also narrower than what is usually observed in other states. It is often argued that a compressed wage/benefit structure across various skill levels may create disincentives for skill acquisition. As the real income of those at the low-end of the skill distribution increases, it effectively reduces the private return on investments in education and training.


But this argument is too simplistic even if we judge it by pure economic logic. Skill acquisition decisions depend on the expected return from the skill, which includes the probability of securing employment for the particular skill. If the relative wage of the unskilled workers increases, firms hire fewer such workers. To avoid unemployment, therefore, people may decide to acquire more skill. Anyway, it is not our intention here to replace one weaker economic argument with a better one of the same kind. What we emphasise instead is that judging an outcome as imperfect, ‘sub-optimal’ or not ideal from a normative-evaluative standpoint is not very illuminating. Even a so-called imperfect institution, evolved out of conflictual political competition, may create political openings that can be used to further desirable societal goals.

The lesson to draw from the Kerala experience is that the civil societal space needs to be kept open for institutional innovations through democratic politics. That the outcome sometimes deviates from the acceptable normative criteria is no good reason for replacing them with a ‘well-designed’ alternative imposed from above, undermining democratic politics itself. A moral consensus on such criteria as efficiency, distributive justice or fairness is not something metaphysically prior to or above politics; it is the activity of politics itself.



1. S. Guhan, ‘Social Security in India’ in Barbara Harriss, S. Guhan, R.H. Cassen (eds), Poverty in India, Oxford University Press, New Delhi, 1992.

2. Their real worth is rather uncertain though, as they are tucked in the Directive Principles of State Policy, the part of our Constitution that contains ineffectual good intentions.

3. E. Ahmed, Jean Dreze and Amartya Sen, Social Security in Developing Countries, Oxford University Press, New Delhi, 1991.

4. Although Osmani does not endorse this view, his excellent analytical survey of social security arrangements in South Asia focuses exclusively on the following: security through control over land, self-employment, creation of wage employment and public provision of basic needs, which are all promotional. See S. Osmani in E. Ahmed et al., 1991.

5. K.P. Kannan and Shaji K. Francis, ‘State-assisted Social Security for Poverty Alleviation and Human Development: Kerala’s Record and its Lessons’ in Mahendra Dev, P. Antony, V. Gayatri and R.P. Mamgain (eds), Social and Economic Security in India, Institute for Human Development, New Delhi, 2001.

6. This is largely based on K.P. Kannan, ‘The Welfare Fund Model of Social Security for Informal Sector Workers: The Kerala Experience’, Working Paper, Centre for Development Studies, Trivandrum, 2002; and Nata Duvvury and Sabu M. George, Social Security in the Informal Sector – A Study of Labour Welfare Funds in Kerala,(mimeo), Centre for Development of Imaging Technology, Trivandrum, 1997.

7. Patrick Heller, ‘Social Capital as a Product of Class Mobilization and State Intervention: Industrial Workers in Kerala, India’, World Development 24(6), 1996, pp. 1055-1071.

8. The phrase, borrowed from Michel Foucault, indicates the distance between a decision made and the individual it concerns. With increasing distance of this kind, the decision becomes less intelligible to the individual.