Left parties have claimed credit for preventing financial disaster from striking India. The Communist parties have claimed that but for their resistance on ushering in sectoral reforms, a financial tsunami would have hit the country.
There’s no truth in this claim. A combination of sound regulatory institutions and conservatism by the Reserve Bank of India has kept India out of harm’s way.
As reported in Mint on Tuesday, the Left expects to reap political mileage from its stand in the form of more adherents to its brand of politics.
It’s an interesting argument, one that has striking resemblance with what an 18th century mathematician, Thomas Bayes, said. Bayes stated a famous theorem bearing his name, one that allowed the calculation of probabilities for complex events. Unlike the usual, fixed formulae for such calculations, it allows for changes in one’s knowledge of events and the world to arrive at more precise results. It’s a process commonly known as Bayesian updating.
Our comrades have undergone a Bayesian updating. From blind recitation of 19th century Marxist formulae about revolution and class struggle, they now incorporate the effects of the stock market downturn, job losses and wobbly financial markets in making a political argument.
Ideally, the updating process should continue, private sector employees should see wisdom under a red flag and, voila, we’ll all be reds soon. Alas, no such luck. The Indian economy is still growing at an enviable 6%-plus range (never mind the 7% and more growth claims) and, as the hacks would say, the fundamentals are strong and the India growth story continues.
What happened? For one, the comrades indulged in a fallacy of composition: They mistook a wrinkle in the economy for a systemic crisis. But they are not the only ones to be blamed. It was for our politicians to educate young people that in a business cycle you can lose jobs as quickly as you gain them during an upswing. Here, the Left lied. On the one hand, it wants more employment for all, but on the other, it wants cradle-to-death job security. It’s a trade-off the youth and potential entrants to the labour market are not told about. Pity they don’t believe in Bayesian updating for citizens.
Did the Left prevent a crisis? Tell us at email@example.com