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Thursday, August 15, 2013

The Sen-Bhagwati 'debate', part two

The Pioneer of Delhi carried this article of mine yesterday. My bit for Independence Day this year.

And this is Gopal Gandhi's edit page article in The Telegraph today. I am glad the Mahatma's grandson thinks the way I do, and immensely proud that he has mentioned some teachers with respect.

To pick up the threads from where I left off in the last post:

First of all, despite being as keenly aware as the next economic historian of how much growth has done for humanity over the long term (I have myself written elsewhere that the average American factory worker today lives a lifestyle that would be the envy of medieval kings in many ways), I am with Galbraith in believing that growth is not a cure for all diseases, and growth beyond a point, unguided growth especially, can itself become a terrible disease.  

For one thing, anyone who knows how national income/product accounts are drawn up knows how much jugglery and fudging is involved (polite and canny economists refuse to mention such things to laymen). I won’t go into details here: ask if you are interested. But this means that growth figures not only hide as much as they reveal, but are also far too misleading to be regarded with as much awe and excitement as most economics-illiterate journalists do – are paid to do. For another, as honest professors tell even undergraduate kids, any kind of increase in output is growth: more lifesaving drugs yes, more narcotic drugs yes, too; more nightclubs count for no less in the aggregate national accounts than more schools and libraries and museums! So growth cannot be called a ‘good thing’ without strict qualifications, and a lot of serious value judgments. Third, growth has very unhealthy ‘side effects’, to put it mildly: witness the epidemic of obesity, heart disease, ADHD, casual crime and suchlike that invariably comes hard on the heels of the kind of growth that lets people eat more (of the worst kind of food), work less manually, and have too much leisure and ‘entertainment’ of the tweeting sort. Fourth, there can be near-‘jobless’ growth, as has been by and large the case in virtually all developed countries over the last three decades, so that average unemployment levels have been steadily rising. Fifth, the kind of growth that simultaneously causes rapid depletion of critical non-renewable natural resources and extreme forms of environmental pollution can be sustained at most for a few decades more: no economist can answer that except with the prayer ‘I hope not in my kids’ lifetimes, not at least in my country!’ I can extend this list considerably, but if my point is not yet taken, that is only because the reader just doesn’t want to listen. So it is already a sad fact that both Sen and Bhagwati are eager to assert that they are equally in favour of endless, aimless, pointless growth, important as that may be for the poor in the poorest countries still. Surely economists and politicians could think of higher aims. Once upon a time they actually did!

Now, even if it is admitted that growth is essential, there are still important things to think of.

1.   Who benefits from growth, and how much? The usual pattern – especially in the absence of correctional intervention by government – is that the already rich and privileged get obscenely richer, while the poor keep scrounging, or things get actually worse for them, or at best improve at an agonizingly slow pace (in a slight variation of the idea of ‘you will get your rewards in heaven’, economists keep telling them ‘things will get better in the long run’. Lord Keynes’ unanswerable repartee was ‘In the long run we are all dead’). The difference tends to become steadily wider, as successive generations of the rich get things ready made and cut out for them, and ‘money begets money’. Not fair at all. Only a very selfish or very foolish person will claim otherwise.

2.   They claim – the ‘neoclassical’ (currently mainstream-, because they are good with the calculus, matrix algebra and statistics) economists – that there’s no way you can get growth going without encouraging private entrepreneurship, and private entrepreneurs ‘need’ to make astronomical fortunes in order to keep going: deny them that right, and they will sulk and sit back and let things slide, and the whole nation’s fortunes will suffer. Now, there are three things I must note here: a) they have no real theoretical underpinning for claiming such a thing, for no theory really ‘explains’ growth unless you are willing to start off with all sorts of ridiculous assumptions about human beings, b) funny that only entrepreneurs ‘need’ the lure of vast fortunes in order to make them do their thing, when so many other socially valuable types, from teachers to musicians to soldiers can get along fine without similar blandishments, always done! and c) the historical record says that all countries, including that much-vaunted paradise of ‘free enterprise’, the US of A, have achieved growth and increased social welfare only by virtue of continuous governmental monitoring, regulation, intervention and assistance at times of dire crises in the larger public interest (indeed, American corporate tycoons have a glorious record of insisting on ‘freedom’ only when the going is good, and they run to the government for help when disaster strikes far more eagerly and shamelessly than the poor do – though it is always the poor who are blamed for wanting to live on ‘unearned entitlements’!), and indeed, the ‘best results’, from the collective point of view, have been achieved precisely in those countries which have neither tended too far towards communism nor pampered laissez faire capitalism but steered a steady middle course, from Germany since the time of Bismarck (barring the chaos between 1914 and ’45) and Japan to the Scandinavian countries and Switzerland, New Zealand and the like. Growth may have been somewhat slower there, and they have far fewer billionaires to show off, but from the national point of view, it never really mattered. Both crime rates and poverty are far less there, and the highest average standards of living overall, even if you leave out cultural and environmental criteria.

3.   Sen keeps insisting not only that large-scale government initiatives on building infrastructure, spreading basic education and health care (government, because nowhere on earth do private businessmen want to spend on such things – too expensive, returns too low and slow and risky – though they want the benefits thereof: let the government build the roads while they make the cars, but government is BAD because it calls on them to pay for the roads through increased taxes!) are not only good things in themselves but they actually accelerate growth. I have never stopped wondering how supposedly educated and worldly-wise people could ever think otherwise, blind to all the evidence before their eyes. Whereas Bhagwati actually wants these things too, but seems to imagine they can happen without the presence of that ‘great evil’ called government!

4.   Bhagwati and his tribe see only efficiency and high productivity and maximum all-round social welfare ‘in the long run’ from unfettered competitive laissez faire, while government brings only ‘corruption’,  tyranny, red-tapism and stagnation. Half truth, and as usual, half truths are often more dangerous than outright lies. For one thing, governments do not have a monopoly on the aforementioned evils, as anyone who has lived half a life in the real world and does not have an ax to grind in favour of the private sector will admit (yesterday an old boy was telling me how he has got far better service in a public sector bank compared to a famous private one; and I, for one, have been cheated more than once by private insurance companies and others). For another, the private sector wouldn’t even exist in safety and peace without the protective umbrella provided by governments via the law, the courts, the police and the civil services: the rich actually need government far more than the poor.  For a third, we need governments for reasons far beyond the preservation and development of the economy, a fact that economists too easily forget; slavery would not have been abolished without government effort, nor sati nor child marriage and a hundred other ancient evils. The real debate should centre on how much government we need, without surrendering to extremist notions and perverse SPIN on either side.

P.S.: This editorial in Monday’s issue of my newspaper says that Bhagwati has come down to abusing Sen personally. No better admission of defeat!


Shilpi said...

Thank you for linking your article in The Pioneer and for this post. Not having the net in the morning - I'd been wondering for more than half the day what you'd write for Independence Day. Gopal Gandhi's article too talks about the lack of good leaders. As for your point about man making - that is not disconnected to this 'debate' that you've been covering.

That debate is old hat and I hadn't read anything on it before you wrote here. I even find it embarrassing that Bhagwati being an old and academically distinguished economist can be seriously arguing that the poor might as well wait for the benefits to trickle down to them. Sen's pov is (and he has been more sympathetic all along) towards the poor but as far as both are concerned as economists - your first point and concluding point in your previous essay says what needs to be said. Given that, I think and with reason that Bhagwati is the more wrong-headed of the two.

As for Amartya Sen - I don't think he's a Tagore or anybody exceptionally great and I don’t always agree with him but I didn't find anything objectionable in what he said. As for the food security bill specifically, over which they are also arguing - I do wonder apart from other matters about the storage facilities and the processes in the middle and end through which the grain actually gets to people. This was a problem 20 years ago and it still is a problem – grain and more rotting and wasted because of inadequate storage facilities and lack of planned and honest implementation of distribution measures.

As far as this broad debate is concerned - it does go back to what you mention - values and value positions in terms of development or progress which they both see as being synonymous to growth. What strikes me to be absurd is that Bhagwati genuinely believes, in this day and age, that there can be a Track I and Track II program and that India should focus on that Track I program of his, for now (and still?). Apparently there isn't enough money for 'redistribution'. Programs and services for health, education, public works like sanitation and road works, protection of wildlife, preservation and conservation of the environment, promotion of the arts and sciences and culture (through public libraries and museums and galleries) do not imply redistributing money. It is a matter of allocation of money and implies certain value positions.

And then we have all those dollar millionaires and billionaires - making anything from underwear to advertisements on underwear. So the government should allow and make it easy for any speculator or any private entrepreneur to invest money for growth without which growth is impossible – so Bhagwati claims. And that's where I go back to what you cover here in detail - what sort of growth are we looking for? Do we need any more of such growth?

Shilpi said...

You mentioned Galbraith and Adam Smith and Keynes and I'll probably sound like a stuck recorder now with Schumacher. And Schumacher was writing 'Small is beautiful' in the 70s and was panned by critics for being an unprofessional economist. Maybe economists in today's world - in order to make it big and stay there - must keep debating about growth.

Bhagwati also mentions Gujarat and the model applied in Gujarat for which he applauds Modi (even if he won't vote for Modi). He talks of 'social progress' in Gujarat and he hopes that the Gujarat model can be implemented throughout India. I'm afraid that Bhagwati doesn't know what social progress means. How can he be so utterly nonchalant about the brutality and horror of the riots that happened under Modi? Surely he understands that politics and even economics mean something different from allowing and making things easy for private investors? Would he want to be living in a country where a political leader not only incites barbaric communal riots but does nothing to stop them? It goes with your concluding point for this part of your essay. Doesn't Bhagwati know that one of the functions of the government is to curb violence and through generations, to make illegal the worst of a nation's ills including but not limited to discrimination?

And why not mention Kurien if Bhagwati is really looking for some Gujarat model? Has he forgotten that development did not start with Modi in Gujarat? He's even saying that rich people in Gujarat engage in charity because they feel that it is of value. Fine and dandy. Now how many Indian dollar millionaires and billionaires does he see investing the sort of money that would make widespread improvements in living conditions possible or doing the kind of philanthropic work - that did allow the US to prosper socially - in the mould of Andrew Carnegie? Or would he prefer to brush these uncomfortable facts aside?

Bhagwati seems to keep flashing the period of post-liberalisation, which if one reads his interviews would make one think that India has all but solved its poverty problem because of his brilliant measures. His comments makes me wonder again about what you cover in point 1. So whose 'growth' is he interested in and of what sort and can he be utterly oblivious to where India lies in the UNDP reports? And doesn’t he know which people have managed to make the quick and fast buck and at what social costs and what has happened to our values at the collective national level, through these last 20 years especially, where all that matters is how much money one has with no concerns about how that money is made or for what it is utilized?

Shilpi said...

As for what you mention in point 1 - I think that an indecent person or someone being purposefully blind would claim that "things will get better in the long run". Maybe it makes economists and the entire band of social scientists in ivory towers guilty to think of the unfairness and so they cover it up with such bland statements. And what you said about sulking investors should stop many people from saying what they generally do about governmental regulation and private entrepreneurs.

He seems to be in favour of private education in the nation (so there can be some hundred other private IT and engineering colleges started by some more hacks who have some money?)

I don't see how Bhagwati really believes and defends his point that the sectors of health, education and protection of wildlife, availability of clean drinking water, sanitation… can be taken care of by private individuals. But then I’ve never come across one social scientist who can defend why the state should force any individual to work in factories or the fields for a certain number of hours everyday or why the state should be slowly stripped of all its powers.

Finally, at least for now, Bhagwati talks of stuff like school vouchers in India?! In the rural areas too? I do have to wonder which planet he's living on. Vouchers to cover cost of tuition? And I'm not even getting into the argument of the pro-vouchers who believe that such a system increases efficiency in education and the school system. “Efficiency” in education? I cannot see Bhagwati as being genuinely concerned or even wanting to understand or even being interested in the idea of man making and education or man making and national greatness or even genuine progress and development.

I’ll end this very long comment for now. I’ll wait for your next part.

ginger candy said...

Dear Sir,

Many thanks for writing the wonderful article in 'The Pioneer'. I got tired of reading articles on the eve of Independence Day where most writers (or 'arm-chair intellectuals', as they prefer being called) seem to agree that the worst evils in present India are putting an artist in jail for drawing a cartoon in a newspaper, controversial books being burned and websites getting blocked. Forget the abject poverty in which a vast majority of our population lives in, forget the fact that 73 percent of those living in rural households still defecate in open, forget the rapidly declining standard of primary education in all parts of India, forget the dismal state of higher education in our nation (How many new, decent state universities have we seen in the recent past? And why do we have to keep building newer IITs when the existing infrastructures of existing NITs could have been upgraded? And even if newer IITs have to be built, why not lay equal importance on building state-of-the-art colleges that specialize in medicine, law, humanities and other disciplines?), forget the fact that the huge disparity of wealth between the few riches and the vast lower middle-class population is leading to enormous complications of all moral and legal sorts, forget the miserable state of healthcare in our country (kudos to Mamata Banerjee and her government for introducing the fair price medicine shops. The mere fact that this sort of initiative by the government does not get one-tenth the press coverage and attention that a land acquisition by a private company in a certain Western state gets tells me all I need to know about the Indian media and its top-notch journalists), forget that living in big cities in India is getting ridiculously expensive (there is no way a one-bedroom flat in a godforsaken, unsafe place like Rajabazar should cost that much money) as well as dangerously unsafe, both for men and women (and particularly for women, as it goes without saying), but grab your spades and pitchforks if the government so much as dares to take a website down! So, thank you for pointing out precisely what is wrong with India today, and how badly we need good, strong leaders who can lead by example.

As for the Sen-Bhagwati debate, I agree with everything you have said. And I sensed that Bhagwati was getting too big for his boots when he personally attacked Sen in an article published in Mint and proudly declared that Indians have a habit of falling at the feet of 'great figures' like Sen and himself. Poor old man, I hope he gets well soon.


aranibanerjee said...

It was heartening to see the article in 'Pioneer.' Independence Day bonanza for all of us, indeed!
I think it is the Nobel that's got on the old and fraying nerves of Jagdish Bhagwati. (He’s only got a fictional Nobel in an American TV show!) Having sucked up to the most obvious forms of corporate demons, the least he could have expected to be was to be the prime minister's economic adviser. That too was reserved for someone from the 'other' camp-Kaushik Basu! And, from those amongst his own tribe Montek makes more news than he would do. Therefore, abuse a more famous colleague. Jagdish Bhagwati apart from saying obnoxious things has no currency as an economist in India, liberal or conservative. He continues as something of a joke, no government will dare make policies based on what he says--not even the mindless one we have in our country.
And, therefore, thanks for the caveat. I want to now do a play, 'Who's afraid of Jagdish Bhagwati'.


Debotosh Chatterjee said...

You have rightly pointed out in 'The Pioneer' article that perhaps its high time we stop dawdling with petty issues and start looking at the big picture afresh. Here is another article that carries the same idea ... If only people cared to read some of these, instead of manufacturing jokes in social networking sites, mocking the 'INR'! http://www.thehindu.com/todays-paper/tp-opinion/great-power-and-greater-responsibility/article4980150.ece

Rajdeep said...

Here is an article related to your post.
The Hindu>Charge of the unenlightened brigade