Lessons from Yanis Varoufakis for the NDA government
Yanis Varoufakis’ pragmatism is in sharp contrast to the ideological and moralistic rigidity of NDA that has played a big role in crimping economic dynamism in the country
Yanis Varoufakis is a self-confessed Marxist-Leftist professor of economics. His Twitter handle says he wrote obscure texts for years before fate or destiny thrust him into the arena to battle with the troika—the European Commission, the European Central Bank and the International Monetary Fund in Europe. He was introduced to the Syriza, a radical-Left party in Greece that railed against the bailout loans thrust on Greece by the troika. When Syriza was voted to power, Varoufakis, based on a modest proposal for resolving the eurozone debt crisis that he co-authored, was made the finance minister in charge of negotiating with the troika. He remained finance minister for 162 days. He was either sacked or resigned. Did he fail?
Well, the people of Greece voted in a referendum, that the Tsipras-led Syriza government called, against taking another loan with its conditions attached. So, they proved him right.
In Britain—except those living in the city of London, Scotland and Gibraltar—people voted for Brexit. The German chancellor won a fourth term in office but her vote share shrank significantly and her grand alliance with the Social Democrats might have dented the latter’s credibility. In Italy, elections have resulted in two Europhobic parties emerging as winners. A government is yet to be formed but Italians appear to have woken up from their European dream. Central European nations like the Czech Republic, Hungary and Poland have become hostile to the European project. The rise of populist and anti-European sentiment across broad swathes of Europe vindicates Varoufakis.
His book, Adults In The Room, is a must-read for both politicians and pundits. It has all the elements of a thriller—intrigue, deceit, conspiracies (beware of who has authored your Word document first before you receive it and edit it further), ego clashes and policy conflicts. The space that this column provides is too short for a review of that book. But his policy pragmatism should interest Indians. Varoufakis might proudly proclaim that his natural place is outside and not inside the portals of power and that he is a Marxist-Leftist economist but he was prepared to do many things that a so-called capitalist finance minister would have been glad to own up to.
He was willing to reduce the number of value-added tax (VAT) rates and the rates themselves. He said it made no sense to have a top VAT rate of 23%. He favoured privatization of Greek railway whereas, as a Marxian academic, he opposed the privatization of British Rail. That is the essence of economics. Context matters and should matter more than rigid ideology. Throughout the book, he rails against the corrupt Greek oligarchs and still does. Yet, he was willing to contemplate reducing corporate tax rates and come up with a tax amnesty scheme with very reasonable rates (15%), no questions asked. He was prepared to allow tax evaders to start paying into the tax system in small increments so that they got back into the tax registration system. He was willing to let them come into the system without scaring them away straightaway with raids, fines and extortionist demands. Of course, in terms of genuine austerity, he was willing to sell two expensive German cars that his ministry owned while restoring employment to the cleaners who were fired as part of the troika conditions on public sector employment. Finally, and just as importantly, he was prepared to seek advice from foreigners who were known for their free-market leanings, such as Larry Summers, Jeffrey Sachs and Norman Lamont, even as he kept a close friend and Leftist academic, James Galbraith, by his side. Whereas in India, leaders close to the ruling party railed even against Indian experts, calling them foreigners and worse.
Varoufakis’ pragmatism is in sharp contrast to the ideological and moralistic rigidity of the National Democratic Alliance (NDA) government that has played a big role in crimping economic dynamism in the country. The Congress party too needs this kind of intellectual oxygen to revive its policy cadaver. If a Marxist-Leftist academic could quickly seize upon what made sense to an ailing economy, a political party deriving its strength from the entrepreneurial class should have had even fewer qualms in embracing pragmatic and reasonable policies. Unlike Varoufakis, NDA had no one in its ranks (nor did it appoint those that had done so to the council of ministers) who had done the homework on the economic conditions and economic health that it was inheriting. This columnist had listed in September the six big economic mistakes of the NDA government. These rested on the three pillars of no vision, no homework and no conviction.
Consequently, it failed to reverse the path of de-liberalization or anti-liberalization that had characterized the 10 years of the United Progressive Alliance (UPA) regime. Instead, it embraced them and doubled down on some of their bad policies such as the “right to education” policy and, worse, on tax terrorism. It should have marshalled its majority in the Lok Sabha to think through, and push, important governance reforms that would improve the lives of ordinary people and small businesses. Bharatiya Janata Party-ruled states should have been the ideal laboratories for such reforms. Instead, it overlaid its policies with excessive morality that does not quite stand up to scrutiny.
India is still looking for public policy leadership that has gone missing since 2004. On present form, it is not on offer from any political party in the country.
V. Anantha Nageswaran is an independent consultant based in Singapore. He blogs regularly at Thegoldstandardsite.wordpress.com. Read Anantha’s Mint columns at www.livemint.com/baretalk
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