BackDid we help Raghuram Rajan?
Experts ought to know how to disagree on policy matters in private and cheer and endorse policy decisions in public
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Today’s Bare Talk column uses the occasion of the departure of Raghuram Rajan, the Reserve Bank of India’s high-profile governor, to ask a broader question as to whether, unconsciously, we are all relatively less critical of People Like Us (PLU). Frankly, this is as much a personal reflection conducted in public as it is a poser for public contemplation.
Mint had written a lengthy editorial on the Rajan years at the RBI. This column uses that as an illustrative example to make the general case. Intelligent people—even those who are far more open-minded than the rest—end up favouring PLU over the average politician, by disregarding inconvenient evidence.
For example, while we all know that Rajan’s contribution to RBI and Indian public policy are a huge net positive, we are guilty of not holding him to his own higher standards. The edit brushes aside objections to his public remarks by pointing to Ben Bernanke’s comments on fiscal policy and Mark Carney’s remarks on Brexit. What Carney did on Brexit was clever. He channelled Bank of England research on the consequences of Brexit into his public remarks on the topic. In any case, he was on the side of the government and not against it on the Brexit referendum.
His well-wishers—yours truly included—did not help Rajan when they avoided pointing out that he failed to fortify his considerable intellectual quotient with emotional quotient. He certainly did not cultivate New Delhi. He gave the impression that he thought that some of the ministers were not of his calibre and were beneath his intellectual stature. Rajiv Kumar of the Centre for Policy Research was perhaps the only one to refer to this in a public comment in The Indian Express in June.
Also, while Rajan was justified in feeling angry at how his ‘one-eyed king’ remark was misinterpreted, he was wrong to devote the bulk of his lecture at the National Institute of Bank Management convocation to that episode. In general, politicians have much larger egos and an exaggerated sense of self-confidence. Indeed, that is a pre-requisite to achieving prominence and success in political life (and in public life too?). Hence, public policy education for politicians is best conducted in private, with an air of deference and not defiance. While it is bruising to the ego, it is beneficial to the nation.
In a column published in this newspaper in 2009, I wrote that experts ought to know how to disagree on policy matters in private and how to cheer and endorse the policy decisions of their political bosses in public, selflessly. That would be as much an exercise in spirituality as an exercise in public service. Any other approach is actually elitism at work and disdain for the judgment of the people in a democracy.
To a degree, we, Rajan’s admirers, are guilty of the same elitism when we refrain from pointing this out to him. It will be to his benefit, and to India’s undoubtedly, if he were to make this adjustment, for I do not believe that he is done serving India in an official capacity. In fact, if I may speculate here, there is a much greater chance of it happening under this government than under any other government of any other party.
Some of us, commentators, are objective enough to praise politicians for their good deeds. However, when there is a conflict between the political establishment and intellectual establishment, we instinctively fall in line behind intellectuals and refuse to blow the whistle. That is natural, but it is not the right thing to do. Certainly not all the time.
For example, public criticisms of the Federal Reserve monetary policy or that of the decisions taken by Bernanke by fellow academics and policymakers are rare.
Mervyn King is a former governor of the Bank of England. In his book, The End of Alchemy, he is critical of central banks’ policies post-2008. But he refrains from naming names. Very few dare defy that template. A recent and praiseworthy exception has been Kevin Warsh.
Warsh was a member of the Federal Reserve Open Market Committee from 2006 until 2011. Recently, while the annual confabulation of global central bankers from around the world was taking place in Jackson Hole, he wrote a sharp critique of the monetary policies of the Federal Reserve, directly charging it with conducting policy for “the purpose of managing financial asset prices, including bolstering the share prices of public companies". Among financial journalists, only Gillian Tett of the Financial Times was aghast that central bankers in Jackson Hole failed to discuss the elephant in the room—the distortion in financial markets caused by their policies.
After the crisis of 2008, many commentators said that it was obvious that central bankers should have focused on financial asset prices and that they were wrong to focus only on inflation. In 2016, they are egging on the central bankers to commit the same mistake all over again.
Public policy and public causes would be better served if intellectuals subjected fellow intellectuals to the same rigorous scrutiny that they subject politicians to.
V. Anantha Nageswaran is an independent financial markets consultant based in Singapore.
Comments are welcome at baretalk@livemint.com. To read V. Anantha Nageswaran’s previous columns, go to livemint.com/baretalk
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