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A file photo of Indian Prime Minister Manmohan Singh. Photo: AFP (AFP)
A file photo of Indian Prime Minister Manmohan Singh. Photo: AFP

Manmohan Singh govt main target in Sen vs Bhagwati battle

Their perspectives might differ, but both Sen and Bhagwati fear that Singh hasn’t done enough for 1.2 bn Indians

Over the past six decades, three ambitious Cambridge-trained economists have dominated modern Indian economic thinking. Each took a different direction. Jagdish Bhagwati was an early and influential enthusiast for and explicator of the power of free trade and globalization to lift India out of its morass of poverty and its introverted dependence on statism and subsidies. Amartya Sen, meanwhile, greatly enlarged the conceptual vocabulary and moral foundations of the discipline with his work in welfare economics, such as social choice theory and the capabilities approach to measuring human development. In 1998, he won the Nobel Prize for his work that resulted in the formulation of the Human Development Index as a tool for measuring human well-being.

As the only one of the three to choose the career path of technocrat over university professor, Manmohan Singh found himself in the right place at the right time as finance minister in 1991, when, responding to a balance-of-payments crisis, he retracted many of the controls of the socialist Indian state over the economy and opened up a new chapter in the country’s history. He became prime minister in 2004, the most intellectually developed figure in that post since Jawaharlal Nehru. Two men who have his ear as he tries to turn ideas into policy are Sen and Bhagwati, now prominent economists at Harvard and Columbia University, respectively. Their analysis of India’s recent past and their prescriptions for the Indian economy, however, were so different as to be almost irreconcilable.

Now, both Sen and Bhagwati fear that, after nine years at the helm, Singh’s government hasn’t done enough to improve the livelihoods and future prospects of 1.2 billion Indians. In recently published books—Sen with his long-time collaborator Jean Dreze, Bhagwati with Arvind Panagriya—neither has felt shy about saying so. Over the last few weeks, the two intellectual titans have stimulated a widespread debate in India about economic causes and effects as they clashed on the pages of the Economist and elsewhere. This was after the Economist endorsed, with some reservations, the development path recommended by Sen and Dreze in their new book, An Uncertain Glory: India and its Contradictions. Last week, the Telegraph of India ran Bhagwati’s rejoinder to the review and Sen’s response to Bhagwati on its front page.

The dispute pits an economist who holds that political choices have to be about more than just growth-oriented policies and that India is especially at risk of losing sight of this truth in the years of post-liberalization prosperity, against one who argues that the tried and tested laws of economic growth have been hopelessly obscured and neglected by 60 years of bad ideas, and that India is dangerously close to abandoning the very principles that allowed it to move forward so quickly since 1991. The argument undergirds the elections in 2014.

Sen provided a precis of his ideas in a recent op-ed in the New York Times:

India’s underperformance can be traced to a failure to learn from the examples of so-called Asian economic development, in which rapid expansion of human capability is both a goal in itself and an integral element in achieving rapid growth....

Unlike India, China did not miss the huge lesson of Asian economic development, about the economic returns that come from bettering human lives, especially at the bottom of the socioeconomic pyramid.

Bhagwati protested that Sen “continues to assert that redistribution has led to rapid growth in Asia, a proposition that has no basis in reality and puts the cart before the horse. Growth has made redistribution feasible, not the other way round." Soon, other economists and economics journalists joined the debate. Vivek Dehejia sided with Bhagwati, saying: “While Bhagwati was in the ascendant after 1991, since 2004 it has been Sen."

While Sen’s rights-based approach is initially seductive, and emotionally appealing, it is, alas, a sophisticated retread of the failed socialist policies that led us to the very brink of economic ruin in 1991. And its embrace by the Congress-led United Progressive Alliance (UPA) since 2004, with its emphasis on large entitlement-based programmes to the detriment of growth, once again sees us close to, if not on the edge, of the precipice.

I don’t myself think that Sen’s vision for India, and trenchant critique of the state’s growth-disabling failures in health care and primary education, can be considered merely “a sophisticated retread" of the republic’s love affair with socialism. Sen’s work persistently, but rarely emotively, brings us back to questions of justice, necessary in a society still as iniquitous, hierarchical and morally complacent as India, not to mention in systems as susceptible to self-regard as capitalism.

Even so, siding with Dehejia, one might argue that the Indian state’s sorry record on the delivery of public goods and the current lack of intellectual direction from the country’s two major political parties have generated a political entropy that will prove hard to reverse, as Sen and Dreze demand.

The historian Ramachandra Guha made an eminently sensible point recently in the Financial Times: Not all of those who advocate market solutions for addressing deprivation in India today are market fundamentalists. Rather, seeing the current condition of the Indian state, they despair of what might happen if it acquires even more power and (ir)responsibility. The insulation of postings and procurement from politicians; the lateral entry of qualified professionals into a civil service dominated by an antiquated cadre of generalists; punitive action against corrupt officials and ministers (and against lazy schoolteachers too); the promotion of internal democracy in parties that are now family firms; changes in the electoral law to make funding more transparent—as and when these institutional reforms take shape, the case for welfarism will look more robust than it presently does.

Fifty years from now, it may be clear whether Sen or Bhagwati got it right, and whether Singh did enough to entrench India in a new economic dispensation. For now, though, we can thank these three grizzled men, intellectuals of long mutual acquaintance, for providing the arguments to dramatize and clarify the choices before India today as it readies for an election year. Bloomberg

Chandrahas Choudhury, a novelist, is the New Delhi correspondent for World View

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