Deepak Lal doesn’t need an introduction, certainly not to readers of Business Standard. Though he is now a professor at the University of California, Los Angeles, I still tend to associate him with Oxford/London. There are sometimes problems with semantics, but I suspect he will describe himself as a classical liberal. In this era, when classical liberalism is under retreat – not just in the rest of the world, but in India too – all his causes are bound to be lost ones, at least in the short term.
This volume isn’t The Poverty of Development Economics (1983), Unintended Consequences (1998), The Hindu Equilibrium (2004) or Reviving the Invisible Hand (2006). Those were more integrated books and Deepak Lal is planning (he might dislike this word) another one on “Globalization and Order”.
This book is a collection of 10 essays/lectures, with an introduction thrown in. One of these, on the global warming scam, is an expanded version of Business Standard columns published between 2007 and 2011. The essays are on disparate subjects: the predatory state, the National Health Service, privatisation of universities, the European Monetary Union, the economics of tobacco control, terrorism, war on drugs, foreign aid, global warming and the 2008 crash. What knits them together is that classical liberal position and, therefore, their representation as lost causes. Beyond that, it is difficult to weave them together into a unifying whole, and the introduction doesn’t attempt this.
The essays are not written with an Indian perspective in mind; there is a British context, apart from the global. However, India does figure prominently in the essay on the global warming scam. “A study of the costs to the Indian poor of curbing carbon emissions has estimated that, over a thirty-year time horizon, with a 10 per cent annual emission restriction, the poor population increases by 21 per cent, even in the short run, and by nearly 50 per cent for a 30 per cent annual emission reduction.” This is followed by stuff on the Intergovernmental Panel on Climate Change, Himalayan glaciers, Pachauri-Hosseini-Raina and Jairam Ramesh and a priceless vignette. “Wanting to use his charm to get the recalcitrant emerging markets of China and India to agree to mandatory cuts in their emissions, Obama asked to meet Manmohan Singh, the Indian PM, personally before a scheduled meeting with the Chinese President Hu Jintao. He was told Dr Singh was already on his way to the airport. Scheduled to see Hu Jintao, he was told he was in a room nearby. When Obama barged into the small room he found the Chinese President, the Indian PM and the Presidents of Brazil and South Africa in a huddle. There was not even a chair for Mr Obama, and one had to be brought in. During the next few hours they hammered out the meaningless Copenhagen Accord.”
If one looks for a classical liberal position and an exemplary instance of how social cost-benefit analysis should be conducted, one will find it in the essay on tobacco control. “For developing countries, as the World Bank accepts, most of these purported social costs and benefits are irrelevant as they do not have extensively publicly or group funded health, insurance and pension systems. Apart from second-hand smoke, most of the other social costs and benefits adduced above are privately borne. Also this estimate takes no account of the consumer surplus charges associated with smoking and its taxation. Moreover, even for developed countries most of the adduced social costs and benefits are pecuniary externalities which are Pareto-irrelevant… The only truly Pareto-relevant external effect – if it was proven – would be second-hand smoke which damaged the health of others… Smokers are now like homosexuals of yore, being punished for their tastes not shared by the majority of their fellows. There is thus a deep contradiction in the attitudes of the supposedly liberal societies to these two different ‘afflictions’. But these arguments are about logic and it is unlikely people will accept logic when it comes to tobacco.”
Leaving tobacco aside, let us highlight the first three essays — on the predatory state, health and higher education. While these are written with the British context in mind, they should be read by the Indian proponents of public expenditure and inclusive growth. “Though the Swedish model is offered to prove that high levels of social security can be paid from the cradle to the grave without damaging economic performance, the claim is false. The Swedish economy, between 1870 and 1950, grew faster on average than any other industrialised economy, and the country became technologically one of the most advanced and richest in the world. From the 1950s Swedish growth slowed relative to other industrialized countries. This was due to the expansion of the welfare state and the growth of public – at the expense of private – employment.”
In the first essay, there is a rich discussion, including the transition from representative to participatory democracy. “The ever increasing appetite by the state for funds to feed unreformed public health and educational systems could lead to a crisis.” This is about Britain. In India, we are in the midst of a crisis. This collection isn’t just about lost causes; it is also about unpalatable views that are based on the brain, not the heart. That’s the reason we should read the book.
The Retreat from Classical Liberalism
Biteback Publishing, London, 2012
(xix)+265 pages; £14.99