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!