On the side of intelligence

One of the many dis-services that US-led economics has done is to have relegated to the background some excellent explanations of why things between countries are the way they are. One such is the "centre-periphery" explanation put forth by Raul Prebisch, an Argentinian economist, in 1950.

It says that the industrial countries are the "centre" and the non-industrial, primary producers are the "periphery". The latter sell primary products to the former, who then sell back manufactured products to them. The exchange is heavily weighted in favour of the centre, which gets richer, while the periphery remains poor, if not actually getting poorer.

It was a powerful thesis to explain the one-sided nature of international trade but it suffered from a major flaw: it did not foresee that countries in the periphery could start becoming part of the centre. Prebisch's subsequent dependency theory pretty much ruled this out.

But the industrial emergence of first the East Asian tigers and then China has shown why he got that bit wrong and why Ricardian economics, which Prebisch set out to challenge, was more right than he was. Certainly, the dependency theory, which flowed from the centre-periphery thesis, has been shown not to work. It is possible not to stay dependent forever.

The essays in this collection of Sanjaya Baru's research papers and newspaper articles bear this out. They have two major themes. One dwells, as the title suggests, on what we can expect as India joins China in moving from the periphery to the centre. The other is the importance of regional trading blocs and the insistence that that is the way to go.

The latter, when you pause to think about it, is fundamentally a trade-unionist approach, which is not surprising given where the author has come from intellectually""JNU and CDS. But trade-unionist or not, it is also the right approach because, as has been famously said, if we do not hang together, we will hang separately.

Baru's background in the Left""which he acknowledges sheepishly but has fortunately left behind""has also given him a very strong inclination towards political economy. Unlike his fellow economists who like to pretend that politics does not exist, he analyses economic issues mainly in terms of their political or power-relations content.

This is what has enabled him to examine the strategic consequences of India's economic performance""which he says have been good but hugely below potential""and to put forth the strong endorsement of regional trading blocs. The case for the latter is not just economic; it is also political because it defines, all the more sharply, the strategic consequences of economic performance.

One word occurs frequently in his writing""intelligently. India must, he writes, globalise intelligently. It must exploit the opportunities intelligently. China has globalised intelligently. And so on. But being highly intelligent himself, he doesn't define "intelligently". However, given the context, it must be assumed to mean a mixture""nimble, flexible, sharp, focused, swift, ruthless, opportunity-seeking and, in sum, like China.

This leads Baru to the crux of the Indian problem. "... [T]he roots of our problems are internal ... If we cannot get our act together, we will have to stew in our juice" (p. 334).

More than anyone else, perhaps, it is 10, Janpath that should pay heed to that warning.

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STRATEGIC CONSEQUENCES OF INDIA'S ECONOMIC PERFORMANCE

Sanjaya Baru
Academic Foundation
Price: Rs 795; Pages: 495