Growth Vs Caring: A 'Stupid' and
'Nonsensical' Debate!
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Chasing growth is
"stupid" says Professor Amartya Sen. That he is obsessed
with growth is "nonsense" says Professor Jagdish Bhagwati.
At the time when the government's stewardship of the economy
is being called into question over high food prices, growing
public debt, corruption scandals and imports financed with
flighty foreign money, heavyweight economists are wrangling
over its economic orientation.
Nobel laureate
Amartya Sen has called the government's pursuit of faster
economic growth and the desire to outpace China as "stupid,"
triggering an online debate among economists led by Columbia
University professor Jagdish Bhagwati who says Sen's
position is "untenable," while affirming that his is "the
appropriate one."
Professor Bhagwati
had endorsed the government's twin-track "inclusive" growth
strategy on December 2 at the Professor Hiren Mukerjee
Memorial Lecture to Parliament when it was itself torn
between the Opposition's demand for a committee of lawmakers
to probe a telecom scandal and the government's refusal to
give in.
Growth did not
passively trickle down to those lower down in the food chain
after the big cats had feasted on the kill. It actively
pulled people out of poverty while generating tax rupees for
the relief to those still steeped in it. Poverty is now seen
by the down-and-out as removable, and this "Revolution of
Perceived Possibilities" was for Prof Bhagwati a ringing
endorsement of economic reforms.
Prof Bhagwati said
growth would get an impetus from a push to "stage 1 reforms"
like an across the board cut in import duties, substantial
easing of restrictions on retailing and less onerous labour
laws. These, he said, would generate resources for stage 2
reforms to improve the well being of the poor - food
security, schooling for all and universal healthcare.
But Prof Sen seems
to believe that the economy can take care of itself; the
government should be worried about more pressing concerns.
In a sense this reflects the divide between the growth
orientation of the Planning Commission of which the Prime
Minister is the chair and the welfare orientation of the
National Advisory Council whose chairperson is Sonia Gandhi.
While addressing
students and young entrepreneurs in Delhi on December 21,
Professor Sen told India to pay greater attention to hunger
and poor nutrition among its half a billion people and ask
why it was "falling behind" in feeding them at a time when
food prices were high. For Professor Sen how India's 8.5
percent growth compared with China's 9.5 percent rate was
"not a serious question." Instead he wanted India to learn
from China about social improvement. Higher growth was a
"positive thing" in the context of social justice, poverty
reduction and directing more money towards health and
education.
The Financial
Times' report of Prof Sen's remarks, reproduced in turn by
Chinese publications, had sparked the debate (facilitated by
CUTS, a Jaipuri-based free-trade advocacy group). During a
meeting with President Obama in Washington last year, Prime
Minister Manmohan Singh had said that India could aspire to
an annual growth rate of 10 percent over the next many years
(higher than that projected for China). In September last
year, the Economist had said that India could surge past
China by 2013 and narrow the gap with an economy which is
four times larger.
Joining issue,
Prof Bhagwati's colleague Arvind Panagariya said Prof Sen's
view rested on three "rather implausible" assumptions that
(a) current income levels and revenues could finance social
programmes of the desired scale (b) attention to growth
would divert attention from social programmes, and (c) a
focus on welfare would itself stoke growth.
Only in India do
serious intellectuals dream of debating the trade off
between growth and welfare, says Financial Times columnist
Martin Wolf. It is not growth but higher incomes that are a
necessary condition for better state-funded welfare and
better jobs. India is still a very poor country. Poverty
would be lower at higher income levels and the point of
faster growth is to get there as quickly as possible.
Without
productivity growth real incomes would stagnate, says Sumit
Majumdar, professor of technology strategy at Texas
University's school of management. India has experienced
"extensive growth" driven by the pent up demand of a billion
people and has not seen a supply side revolution. India's
manufacturing sector productivity story is "grim" and the
services sector story so far is about leveraging white
collar wage differentials with the West. Prof Majumdar says
India should aim for an annual productivity growth rate in
excess of 10 percent.
While faster
growth has lifted income levels, the spread of cheer has
been uneven says Rajesh Shukla of the National Council of
Applied Economic Research. Comparing NCAER's data over the
ten-year period to 2004-05, Shukla says inequality has
widened in rural and urban India, a finding that Prof
Bhagwati disputes. The Gini coefficient that Shukla relies
on is not as fine a measure as (Dutch economist Henri)
Theil's index. By this gauge, a study by Pravin Krishna (of
Johns Hopkins University) to be unveiled in March finds that
inequality, while rising initially after the 1991 reforms,
has fallen by 2004 to 1988 levels. "So a straight rise in
inequality cannot be asserted," says Prof Bhagwati.
Of course it would
be naive to assume that the state's enhanced capacity for
welfare will necessarily result in it. TCA Srinivas Raghavan,
a journalist with Hindu Business Line, sees an impediment in
the lack of administrative reforms. For this lack of
accountability he blames a colonial law imported wholesale
by independent India that virtually insures civil servants
against dismissal. "So the work that a government employee
does really depends on his goodwill." Prof Bhagwati agrees
that setting up schools and clinics within walking distance
requires greater, not less, state involvement. Persuading
teachers and doctors to earn their pay requires better
governance.
When Professor Sen
suggested that the government shed its obsession with growth
rates he was telling it to address the governance deficit
that denies the poor and the underprivileged the welfare
benefits that higher growth makes possible. That does not
seem like such a stupid thing.
This news can
also be viewed at: http://ibnlive.in.com/
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