Tags

, , , , , ,

The clash of ideas between two prominent practitioners of the dismal science (aka economics) need not be dismal as well.

Amartya Sen and Jagdish Bhagwati have proposed two intriguing and different approaches on how India should grow. Both have influenced government policies and it is useful for the engaged citizen to understand their ideas.

While both support the market reforms underway, they sharply differ on how much we should focus on GDP growth.

Jagdish Bhagwati prefers 2 track reforms – Track 1 reforms focussed on driving GDP growth & rising incomes and (almost sequentially or with a significant time lag) Track 2 reforms focussed on social welfare. The rationale is we first need to generate wealth to spend it. A diluted focus on GDP growth may significantly hamper social welfare efforts. So, grow fast and then spend well.

Amartya Sen prefers a multi-pronged focus on both GDP growth & social welfare. A focus on driving growth in the industrial & agricultural sectors if accompanied by an equal (or perhaps higher) focus on social welfare efforts can have positive impacts on each other. Improved human capabilities through better education & healthcare can drive GDP growth faster. So, grow well and, simultaneously, spend well.

Both of them cite many examples & statistics to support their arguments. However, the practical difficulty is to figure out where & how to draw the line. How much growth should we pursue before we start increasing spends on social welfare? How to allocate our budget & efforts between industry & welfare? Of course, we have many case studies from china, the asian tigers, other emerging economies & the developed countries. Most of them offer inspirations, but no guarantees. No wonder policy makers are often confused.

Zubin Mehta and the Israeli Philharmonic Orchestra @ Jamshed Bha

If we liken the process of running a massive country like ours with myriad issues & vested interests to that of conducting a complex orchestra, then what we need is a PM who performs like a virtuoso conductor. The musical scores have been provided by the likes of Amartya Sen & Jagdish Bhagwati. The adroit PM has to interpret the score, understand the nuances of the various musical instruments & the capability of the musicians, figure out the preferences & moods of the audience, and deliver an exhilarating musical experience deserving an encore. Not an easy task. Which is why the right leader makes a big difference, even if his approach is unconventional or his team is below par.

Sen makes a more compelling case than Bhagwati, though we currently seem to be pursuing a path more in line with the latter’s ideas. Sen’s argument that our policies are unduly influenced by the more vocal and privileged upper middle class (the well-to-do, well-fed and well-heeled sections of the ‘aam aadmi’ class) rings true. Sen makes a more holistic appeal which perhaps deserves more attention.

Both of them cite success stories like Japan, South Korea & Singapore, all of which pursued intelligent policies and were led by intelligent leaders.

We have the musical scores. Where is the Indian Lee Kuan Yew to perform the magic?

Why Growth Matters? By Jagdish Bhagwati & Arvind Panagariya

An Uncertain Glory By Jean Dreze & Amartya Sen

 

Advertisements