The argumentative economists

The new book by the prolific pair of Jagdish Bhagwati and Arvind Panagariya puts the word debunking in its subtitle and doesn't look back

Indians, a well-known economist once claimed, are argumentative people. Economists, by and large, are also a species that loves a good wrangle. Indian economists are thus, by descent and disposition, the most combative of human beings. As proof, for such an assertion requires proof, I present India’s Tryst with Destiny, the new book by the prolific pair of Jagdish Bhagwati and Arvind Panagariya, which puts the word “debunking” in its subtitle and doesn’t look back thereafter.

Professors Bhagwati and Panagariya, have, perhaps, much reason to be incensed. Economic policy in India is more politically fraught than in many other countries, and is far more a matter of life and death than in any other democracy. And yet economic debate is mired in a swamp of half-truths and contestible assumptions, of misunderstandings and outright falsehoods. There are “popular and populist critiques in need of refutation”, say the authors, and they will not lay their pens down and rest on their considerable laurels while that work remains to be done. Besides, there are always old enemies to confront.

They have arranged this book into three parts. The first, and most entertaining part, deals with the myths that they wish to “debunk”. In Parts II and III they discuss, first, what policies need to be put into place to accelerate growth; and then, how to improve growth’s inclusiveness. In doing so they address debates that are very much in the public eye at the moment, detailing critiques of the food security Bill, the Right to Education and so on, particularly in Part III, which should be required reading for those on either side of the conflicts on those and similar legislation. The second part, which details the obvious next steps forward on infrastructure, higher education and so on, is not quite as compelling.

 It is the first part of the book that is most worthwhile. On some of the points, Professors Bhagwati and Panagariya take stands that are broadly familiar to what is, one hopes, India’s vast and erudite oped-reading public. They attack the estimates of malnourishment in India, for example, as based on benchmarks that don’t take into account ethnic differences in stature. They re-enter the lists against those economists, like Bradford DeLong and Dani Rodrik, who claim that the reforms of 1991 did not galvanise growth, the pro-business orientation of the Congress governments of the 1980s did. They have broadly won both these arguments already; others, such as their championing of the social-sector successes of Gujarat over those of Kerala, remain more controversial.

This first part of the book also contains the clearest and most succinct elucidation of what, precisely, has happened to poverty and inequality in the post-1991 period. It is extraordinary, of course, that there are still people in this day and age who claim that poverty has increased since 1991; the authors assemble the massive evidence to the contrary. On the question of inequality, the data are more nuanced, and so is the authors’ answer. They point out, amusingly, that the results of one major paper by Angus Deaton and Jean Dreze reveal that there is “no clear trend in rural inequality and a small increase in urban inequality”. But, the authors complain, Professors Deaton and Dreze nevertheless conclude “we find strong indications of a pervasive increase in inequality in the nineties”.

But there are several issues, equally current but perhaps less studied, where this book shines. For example, on Pallagummi Sainath’s theory linking farmer suicides to reform, where they show the evidence for causal connections is weak – particularly in any links with the introduction of genetically modified cotton. Not all their arguments in such issues are strong; their dismissal of the commonly drawn analogy between India’s political economy today, growing fast but riddled with corruption, with America’s “Gilded Age” in the late 19 th  century and its robber baron is frankly weak, resting as it does on the unsullied reputations of a few IT billionaires.

Most interesting is the authors’ take on certain aspects of India’s turn to the market. They comprehensively refute the still-repeated belief that India’s reforms were scripted by multilateral agencies in Washington. Here Professor Panagariya, then at the World Bank, draws on his own experience to argue that, after the first structural-adjustment loan of December 1991, the Bank “chose to lend to India not because the latter accepted its conditionality but because it wanted to stay involved in the country. It was the Bank that needed India, and not the other way around.”

But more surprising and counterintuitive, perhaps, is their robust defence of India’s first prime minister, Jawaharlal Nehru. Rather than attacking him blindly, as most adherents of the free market in India do, Professors Bhagwati and Panagariya say that, in the 1950s, socialism “did not constrain the actual policy framework” he adopted. Nehru was liberal on licensing and on foreign investment, they argue – indeed, Professor Bhagwati draws on his own youthful leftism to reminder readers that he had attacked the regime in 1961 for merely speaking of socialism, and nowhere implementing it. It is pretty obvious that Nehru was an economic pragmatist rather than anything else, but he still raises so many hackles that few have considered the issue dispassionately.

This book is readable, interesting and useful. However, the tone in some places is even more combative than even self-conscious “debunking” requires. The authors’ long rivalry with Amartya Sen and his acolytes, for example, shows up far too often for comfort. Someone should tell Professors Bhagwati and Panagariya that every time they get personal with Amartya Sen while he remains superciliously above the argument, it is they who lose both argument and face.
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INDIA’S TRYST WITH DESTINY
Debunking myths that undermine progress and addressing new challenges
Jagdish Bhagwati and Arvind Panagariya
Collins Business, 2013; 283 pages
Rs 599