The issue is if Sen’s policy prescriptions will ameliorate shortfalls in social indicators or accentuate them, says Bhagwati
First Published: Tue, Jul 23 2013. 04 26 PM IST
In a brilliant article on Bhagwati versus Sen published in Mint on 10 July, Niranjan Rajadhyaksha unwittingly took one step in the wrong direction in arguing that I could be the economist for Narendra Modi and my good friend Amartya Sen for Rahul Gandhi. Let me explain.
First, I have argued (with Arvind Panagariya) that Gujarat has produced growth and also that the change in its social indicators is remarkable, whereas Kerala is by no means the great model of development that Sen has long extolled for its “redistribution” under the communist regimes, and that Bangladesh to which Sen has now turned is also no paragon of virtue. I refer the reader to the new Bhagwati-Panagariya book, referenced below, where Sen’s assertions are pretty well demolished with evidence and argumentation. Amusingly, now he has even turned in The New York Times to China, which he used to excoriate us for being “obsessed with”: but that will not survive scrutiny either.
I also believe that the Gujarat template is ideal: its people believe in accumulating wealth but they believe also in using it, not for self-indulgence but for social good. This comes from the Vaishnav and Jain traditions that Gandhiji drew upon as well. The best “foreign” model of this type is exemplified by my most distinguished Columbia University colleague, Simon Schama, who wrote about the Dutch burghers who had similar values and lifestyles. It is also a great model for India, I believe.
Second, the notion that I am for growth per se whereas Sen is instead for poverty reduction and “social progress” reflects ignorance. Not merely did I spend my early 1960s in the Planning Commission, working on poverty reduction, but Sen showed at the time no particular concern for that issue. Besides, in the early 1970s, when gender issues were not fashionable, I produced an influential paper in 1973 in the Oxford journal World Development, showing how female children were being neglected in education and nutrition. Padma Desai and I also worked through several Indian elections to show how women candidates were few and far between, and that the Left-wing parties were surprisingly not better at fielding female candidates. I also gave the Rajiv Gandhi Memorial Lecture on the importance of democracy (a theme that is integrated more pointedly into the analysis of Indian development in the Bhagwati-Panagariya book).
Sen has caught up with such issues only later and is sometimes described as the Mother Teresa of economics. But she did a lot of good at the micro level, whereas (as I discuss below) his policy prescriptions have done huge damage instead. Let us not insult Mother Teresa.
Let me then focus on the issue of growth and redistribution in relation to India’s policy framework. As Panagariya and I have documented at great length in our book—India’s Tryst with Destiny, from Collins in December, and retitled Why Growth Matters in the US/international edition from PublicAffairs in April—significant redistribution in India could not have preceded growth as there were too few rich and too many poor. Growth, therefore, would not merely pull people above the poverty line but it would have the added beneficial effect that it would generate revenues which could then be used to undertake redistribution. I had noted these two points in my Vikram Sarabhai Memorial Lecture on poverty and public policy in Ahmedabad almost 25 years ago, also writing that added incomes earned by the poor need not necessarily translate into improved nutrition, for example, and that education was necessary to nudge people into making good choices.
Sen, with no evidence and with only wishful thinking to support his assertions, claims instead, and is at least construed by many to be arguing, that redistribution should precede growth whereas I (and Panagariya) believe that it is the other way around. As we clarify the matter again, for the umpteenth time, in our Letter to the Editor of The Economist in the 10 July issue, Sen puts the cart before the horse; and the cart is a dilapidated jalopy!
(Sen, in a reply last week in a letter to The Economist, takes me to task for “unilateral” attacks on him. This is strange. Intellectuals write for the public as John Maynard Keynes did, instead of seeking prior, bilateral agreement! We act individually according to our lights; we expect informed debates to settle the differences. He also claims that he embraces growth. But in our book, I and Panagariya quote him extensively to show that this is pro forma, at best, much like an anti-Semite would claim that Jews are among his best friends! To take just a single example out of the many we have recorded, he has attacked the Indian press for concentrating on issues such as foreign direct investment, which is growth-enhancing, and neglecting coverage of the poor.)
Sen is not simply wrong; he also poses a serious danger to economic policy in India. Indeed, having opposed implicitly or explicitly the liberal reforms that, starting vigorously in 1991, transformed the Indian economy and pulled it out of its abysmal growth rate, and pulled millions above the poverty line, Sen had suffered the misfortune of having seen Indian policy and economy pass him by. Now, he seeks to resurrect himself by endorsing programmes such as the National Food Security Bill, or NFSB, (which, of course, predates Sen’s endorsement by a long shot) which promise substantial “redistribution”.
But, for reasons discussed by many (such as Panagariya and Arvind Subramanian among them), therein lies, not glory, but yet another disaster that will make Sen the only well-known economist to have inflicted damage twice on Indian policy and therewith on poverty reduction: first, by supporting the counterproductive policies that undermined growth prior to the 1991 reforms and now, by supporting populist measures such as NFSB that would deal a blow yet again against the poor (as I explain below). The road to hell is indeed paved with good intentions.
There are four additional points that the reader should keep in mind. First, Sen seems to think that I am bursting to debate him. Frankly, I am not. It was N.P. Ullekh of The Economic Times who asked me why Sen would not debate with me the differences we have. So, I replied that he should ask Sen that, not me. Now Sen says that I want to debate him but he will not debate me. So much, of course, from Sen who has conned foreigners into believing that Indians believe in debates that lead to an informed democracy. As it happens, Indians traditionally are more into falling at the feet of great figures like Sen and me. Alternatively, they indulge in personal attacks like musicians who describe singers from other kiranas as “dhobis”! As I once remarked jokingly, we Indians are so ingenious that we multiply by dividing!
Sen has so far dodged any invitation to argue face to face with those who disagree with his assertions. He indirectly responded to my Lok Sabha speech some time ago, which may have annoyed him as it had an unprecedented response in the country, unlike his own, by telling the Financial Times that concern with growth was “stupid”. On an NDTV panel on NFSB, where Panagariya unexpectedly turned up to oppose him, he lost his cool and said that Panagariya could not speak on NFSB issues as he lived in New York, to which Panagariya calmly responded that Sen lived in Cambridge! He was flooded with emails saying he was a hero to have brought Sen down a peg.
It is this tendency to degenerate into personal attacks as against debates on issues that we need to avoid. On the same programme, Sen’s friend, the activist Jean Drèze, produced some toy animals and told Panagariya that he was a unicorn! He is lucky that Panagariya did not respond bitingly and say that Drèze should have described himself as the Nandi bull, with his senior colleague Sen as Lord Shiva who had hurt masses of India’s poor. But is this what Sen wants us to do rather than debate issues in a professional way?
Second, it is simply untrue that my policy prescriptions would be unacceptable to Rahul Gandhi or, in fact, any political leader who cares for social progress and poverty amelioration. If they are going to spend money on health, education, etc., they will have to find the moneys to finance them. Uncle Sam has no money to give; and God is asleep at the switch and not inclined to drop manna from heaven. Unless they want to hear Sen’s soothing but irresponsible reassurances on behalf of populism, they will have no option except to read and implement the reform programmes that we have advocated in the Bhagwati-Panagariya book for both intensifying and broadening the growth-inducing reforms we call track I reforms and also cleaning out and improving the revenue-spending programmes for health, education and public distribution system (PDS) that we call track II reforms.
Third, Sen keeps describing India’s shortfalls on social indicators, as if Indian planners and intellectuals were blind to them. The real issue is whether his prescriptions will ameliorate these shortfalls or accentuate them. Here, he fails us. And his flawed exaggerations of India’s failures on nutrition, successfully challenged by Panagariya, also leave him as a misguided analyst.
Finally , the United Progressive Alliance government is now poised to damage the economy, and to harm the poor as in the pre-1991-reforms years, because its near-paralysis on track I reforms has meant that revenue growth has slowed too, making it more difficult to finance the track II reforms on health, education and PDS expansion for the poor. At the same time, owing to electoral pressures and with the populist rationales provided by the likes of Sen, the expenditures on such track II policies are set to go up this year. So, we have a disjunction between slowing revenue growth and rising track II expenditures. This will mean inflation for sure: and this will definitely hurt the poor (many econometric studies have shown that the poor are hurt by inflation) while likely leading to a return of intervention in the food market, etc., that will likely undermine the earlier track I reforms in turn.
Surely, it is time for all politicians, especially the progressive ones regardless of which political party they belong to, to therefore finally stand up and say: enough is enough! May I urge at least the Prime Minister, a close friend whom I have known intimately for almost 60 years from our Cambridge days and is a proud architect of the 1991 track I reforms that I among others advocated for years and which have now turned us around, to finally abandon his silence and say to Sen and his friends publicly: “You are wrong”?
Jagdish Bhagwati is university professor of law and economics at Columbia University.