Sunday, July 28, 2013

Reforms and contradictions

One of the best things to have happened to Indian politics has happened over the last few months. I refer to the involvement of major economists, and therefore of economics, in the debate on how India should develop. Finally we can stop asking if the Prime Minister will be X or Y (where X=RG and Y=NM). How is that the point, until we know what they will do once in power? When it comes to issues where the UPA and NDA agree, it doesn't matter who forms the government, so the electorate needs to know where exactly they differ (and not what names they - or their increasingly idiotic supporters - are calling each other).

Given this situation, I welcome the ongoing debate between Amartya Sen and Jagdish Bhagwati. Two economists with a substantial research and publication record, and faculty positions at two of the world's leading universities (Harvard and Columbia), have concrete things to say about whether India is making the right economic decisions and what it should do next. It's true that they didn't just start expressing these opinions recently, both having written numerous books on economics some of which are specifically about India. As far as I can make out, Mr Bhagwati's major books on India are "India in Transition" (1993), "India's Reforms: How They Produced Inclusive Growth" (2012) and the recent "Why Growth Matters" (2013). I assume India also plays a significant role in other books of his about underdevelopment etc. Many of Bhagwati's books are co-authored with Arvind Panagariya. Amartya Sen's major books specifically on India's economy are "India: Economic Development and Social Opportunity" (1995), "Indian Development: Selected Regional Perspectives" (1997) and "An Uncertain Glory: India and Its Contradictions" (2013). Many of his books are co-authored with Jean Dreze.

It's interesting that both authors have chosen to write books about the Indian economy after a long gap of over ten years.Another symmetry is that both are linked to models based on development in a particular state. Bhagwati supports the Gujarat Model while Sen supports the Kerala Model. Only in a limited sense is this a "right vs left" conflict. Gujarat has a strong trader culture and follows a somewhat strident form of capitalism. Kerala by contrast has a strong unionist orientation and follows a rather militant form of... no, not what you think. Whatever anyone might claim, it follows capitalism like every other state in India, but puts a left-leaning emphasis on it.

It's easy enough to condemn both models: one for being focused too much on business and showing insufficient concern for the weak and underprivileged, the other for being focused too much on rights and too little on the obligation of hard work. But these criticisms are not entirely fair. In Gujarat there is an emphasis on overall development and infrastructure including schools, roads and hospitals, and these things immensely benefit poor people. In Kerala the literacy rates are enviable, medical care and education are good and a large majority is able to lead a meaningful middle-class life. Compared to some Indian states I can think of, both Gujarat and Kerala seem to be doing quite well. I would also argue that, given the culture and history of each state, the Gujarat model might not be possible to implement in Kerala and vice versa.

Both Bhagwati and Sen agree on the importance of economic growth of an inclusive kind. Their dispute is only about the relative importance of growth and inclusiveness. Sen prefers to emphasise the inclusive aspect while Bhagwati emphasises the growth aspect. Their similarities of outlook are greater than their differences: as another Indian-American economist, Pranab Bardhan, points out in today's TOI, the media "is blowing up relatively small and perfectly normal differences of opinion between two respectable economists".

So why are Bhagwati and Sen fighting at all? Well here the asymmetry comes in. Bhagwati may be correct or incorrect about economics, I can't be the one to judge this. But his manners and his way of handling disagreement come across as slightly dubious. The following quotes are taken from an article by Bhagwati that you can read in full here:

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. 

Sen, with no evidence and with only wishful thinking to support his assertions...

Sen puts the cart before the horse; and the cart is a dilapidated jalopy!

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 gharanas as “dhobis”! As I once remarked jokingly, we Indians are so ingenious that we multiply by dividing!

This kind of writing does nothing to enhance the stature of an otherwise respected economist. The line "falling at the feet of great figures like Sen and me" should raise your eyebrows (it certainly did mine) and the incoherent nature of the last paragraph suggests Mr Bhagwati's own jalopy may be veering dangerously off the road.

Now I can't very well prevent Mr Bhagwati from embarassing himself. But can one hand clap on its own or did Mr Sen also say rude things to him and his friends? In the above article Bhagwati makes a specific accusation to this effect. He claims that Sen, in a panel on NDTV, said "Panagariya could not speak on NFSB issues as he lived in New York". I would be surprised if Sen really said this, since a philosopher such as himself would know the pitfalls of argumentum ad hominem. I couldn't find any evidence on the net, other than Mr Bhagwati's claim of what was said, but I'd be happy to see the evidence if it exists. Sen's own recent comments about the controversy and about the Indian economy are published here today in the form of an interview. His economic and political opinions are stated bluntly but there are no personal attacks.

To return to my original point: debates about economic policy in India are important and worthwhile. If they are conducted in a professional vein then we will all learn something and Indian democracy will be stronger for it.

1 comment:

rajphys said...

Sunil, modulo the embarrassing rants from Bhagwati, there is a crucial difference in their policy prescriptions, Sen prefers govt investment in social sectors and thinks that growth will come as a result of improved social markers (Bihar or Kerala model), while Bhagwati thinks that govt should invest in pro-growth (read pro business) policies and this would result in improved social markers (Gujarat model). Saying they both prefer inclusive growth masks this crucial difference in policy prescriptions.