Poor Economics, Doughnut Economics

Let no one think that just because the going’s got a little tougher than usual my mental life has stopped, that I am spending all my spare time either beating my breast over the family misfortune or wandering about in pubs, dance halls and shopping malls for solace and distraction. Yes, it did take a little time to get things back into gear again – I was especially worried about how my mother would cope, seeing that she is getting on in years too – but otherwise I have been just as engaged as I always am unless I am on holiday or in hospital myself. As proof, here are my reflections on a book I recently finished reading, and a movie I watched after a gap of a quarter century.

Poor Economics –  written by Abhijit Banerjee and Esther Duflo, published in 2012,  elaborates the idea that poverty can be greatly ameliorated if not entirely abolished through aid, but much aid is stolen or wasted or at least very inefficiently spent because it has not traditionally been based on careful micro-level monitoring of the way it is actually utilized at the grassroots level. The authors themselves have done an enormous amount of detailed and pin-pointed field work to buttress their claims, building up an impressive 18-country data bank in the process, which a lot of agencies are now drawing upon in designing their plans for future aid disbursal and monitoring. They are neither too optimistic nor too gloomy about the prospects of removing extreme poverty (defined as people having to live on less than one US dollar a day) within this century. But, they insist, we must concern ourselves less with grand theories and sweeping ideologies and far more with the nitty gritty of facts on the ground, buttressed by a rigorously scientific method of testing hypotheses that they call Randomized Control Trials. And they give a wealth of fascinating examples of how things actually work (or don’t) in the real world – how poor people make bad choices despite being as rational (or irrational) as you or me, how they often starve though they can well afford an adequate diet, how they are often forced to borrow in order to save, how they often buy TVs rather than health care because it is precisely the best choice in their given circumstances, how the vast majority of small-scale entrepreneurs are so not by choice but by compulsion, and their prospects of ever becoming affluent are very dim, regardless of all the media hoopla about a microscopic few becoming overnight tycoons, how micro-finance doesn’t often work miracles for them despite the best intentions of the deliverers, and, most importantly, how a little tweaking of rules and conditions – letting petty bureaucrats know that they are being monitored for corruption, for instance, reserving seats for women in panchayats and municipalities and making working conditions tolerable for village nurses and schoolteachers, lowering banks’ security requirements for giving loans to fledgling micro-businesses,  giving voters more specific choices to decide upon, and sometimes, even small technical improvements (electronic voting machines and Aadhar cards, for instance, things started long before the BJP came to power, mind you) – can make very significant though usually small changes for the better, even in the long run.

Read the book, if only to find out there is reason for hope – those of you who have social interests, intellectual orientations and consciences as well. As for me (remember I was formally trained to be an economist), I find it heartening to see that some economists, instead of weaving grandiose cloud-cuckooland theories for creating utopias and then spending most of their time cooking up arcane and convoluted rationalizations for their failure, are doing solid if unglamorous work to  really earn their living (the mention of the Poverty Action Lab at MIT reminded me of the joint work of Mehboob-ul Haq and Amartya Sen decades ago to persuade the UNDP to adopt their Human Development Index to draw up report cards for all the nations of the world) – recalled to mind Keynes’ and my hero Galbraith’s hope (how many ‘educated’ people below 40 today are even capable of reading their books?) that, though economists have lost the status of Delphic oracles long ago, they might, if they try carefully, remain as socially useful if unglamorous as dentists.

At the same time, I shall continue to insist, unrepentant socialist that I am and shall remain, the authors are missing the real point. As they themselves say towards the beginning of the book, an economist of no smaller stature than Jeffrey Sachs asserts that the overall quantum of aid disbursed worldwide is too small to make a difference, no matter how cleverly dispensed: by Sachs’ estimate, US $190 billion, if given away every year from 2005 to 2025, could have done away with poverty completely. Let’s put that in perspective – the United States alone spends a trillion dollars every year on defence (which, not to put too fine a point on it, means provisions to kill people), and wealth inequality is now so great that a few dozen billionaires have more money than six billion people.

Therefore I am one of those people who continue to believe (and I refer you strongly to my four successive essays on the necessity of, and prospects for socialism) that there will be no major change for the better without revolutionary changes in the realm of ideas – as some technical people love to call it, a paradigm shift. People in the large will have to start looking for real alternatives to capitalism as we know it, convinced that it cannot solve far too many critical problems, and indeed, creates or exacerbates a lot of them (mass unemployment, rapid natural resource depletion, disastrous climate change, widespread socio-psychological anomie and a tendency to war, to name just five). People have always been searching, I must grant that. The last very significant effort to change the basics of economic thought and practice was made, as far as I know, by Erich Schumacher of Small is Beautiful fame. It didn’t work, of course, but it did inspire a lot of fruitful grassroots experiments that have made the world better in a lot of small, scattered, piecemeal ways. Now Kate Raworth, author of Doughnut Economics, is suggesting another carefully-thought out alternative. Thank you for letting me know about it, Rajdeep. I shall look forward to reading the book.

Alright, about Satyajit Ray’s Agantuk, in the next post, fairly soon, because otherwise, it seems, this one would get too long.