By TCA Ranganathan
The economic debate in India nowadays is about the post-Covid recovery. Such debates beget a question which troubled a WhatsApp doctor faced by a patient of uncertain health. The doctor is depicted commenting, ‘before we talk about your return to normalcy, we need to be confident that you were normal in the first place.’ It was perhaps these or similar doubts which had so troubled the newly anointed Nobel Prize winner Abhijit Banerjee that he along with Gita Gopinath, Raghuram Rajan and Mihir S Sharma, jointly released a co-edited book What the Economy Needs Now containing essays by fourteen eminent economists. The range is diverse, moving from ‘Healthcare’ to ‘Schools’ to ‘Land Markets’ to ‘Women Work Force’ to ‘Welfare Reform’ and from ‘Reforming Energy’ to ‘The Environment and Climate Change’. It is not the quality of the essays which generates interested speculation (each of the essays is by a well-recognized domain expert and represents focused thought) as the fact that such a book was considered necessary well before the Covid induced economic meltdown in a country which boasts of seven decades of development oriented governance and to secure which it has created, not only the world’s largest but also the most empowered and well entrenched economic bureaucracy.
To understand why what is happening has actually happened, we need to go back to the sunset hours of the British Raj. A unique initiative was witnessed in 1943/44 of Indian Industrialists (which included JRD Tata, GD Birla, Lala Sri Ram and others) in anticipation of Independence. As a scheme for securing speedy national development, ‘The Bombay Plan’ was conceived and drafted. The strength of the document was the universality of the canvas. The Bombay Plan: Blueprint for Economic Resurgence edited by Sanjaya Baru and Meghnad Desai revisits this document and its legacy by collating essays/commentaries written by leading commentators over different periods of time. While this plan was never recognized (let alone implemented) by newly Independent India, the concept of planned growth was practiced in the subsequent decades. The current consensus is that the Indian effort at planned development was not a happy one. This book, though ostensibly focused on the Bombay Plan, seems to convey that to understand why planning failed, we have to study the undercurrents of political economy and sociology which subsist amongst our reflexes. It submits that the broad conclusion amongst scholars is that unlike in some other countries in Asia, e.g., Japan, Korea, Taiwan, the commercial class in India (the so-called bourgeoisie) could not align itself with the ruling class. This is because unlike other Asian countries, in India there is an innate prejudice about the business class as a profiteering group.
This is even though India’s New Capitalists: Caste, Business, and Industry in a Modern Nation by Harish Damodaran brings out that in India, the number of millionaires has crossed the figure of one lakh (100,000) and that the overall entrepreneurial gamut had started crossing religion/caste barriers. The current social base of Indian capital was much more inclusive than it was some decades ago because the business arena was expanding so rapidly and the ‘old capitalists’ were willy-nilly yielding ground to the new technology-savvy generation. To prove his point, Damodaran presents a caste-wise breakup of 119 Indian billionaires by 2018 net worth in the latest Forbes 2018 list. At the top figure 38 billionaires from the non-traditional non-‘Gujarati/Bania/Marwari’ category, 10 Gujarati Bania/Jain, 8 Parsi, 6 Sindhi and a mixed bag of 15 Brahmin, 5 Muslim, 4 Patidar, 3 Christian, 2 Jat and 10 other castes with 1 billionaire each.
We need to understand why, despite this developing sociological transformation, aligning with business is still and has always been considered politically questionable for our nation-state. It is not that businessmen themselves have not done well in the post-Independence era; they have. Some names in Damodaran’s book are now in the global league tables. Additionally, Parul Bhandari in Money, Culture, Class: Elite Women as Modern Subjects while exploring through ethnographic research, the ways in which elite women use and view money in order to construct identities–of class, status, and gender, brings out that the foibles of our ‘Richies’ echo those of the West.
Unlike other emerging market economies, India is unique in its possession of an extremely erudite, yet heterogeneously inclined intelligentsia which is able to command attention even in the most prestigious academia of the world. The mix of ideologies and sociology that prevail amongst us are not only rigorously well formulated and richly pedigreed in their claim to seek all round development but are often mutually incompatible. A sample of some recently published works illustrate this:
In Pluralistic Economics and its History Ajit Sinha and Alex M Thomas discuss the evolution and development of economics as a subject in post-Independence India (ranging across pre-classical, classical, Marxian, neoclassical, Sraffian, post-Keynesian, Cantabrigian and institutionalist as also econometric traditions) —through a collation of seventeen papers by some leading economists such as KL Krishna, GC Harcourt, Meghnad Desai, John King, Cristina Marcuzzo, Roberto Scazzrieri, CT Kurien, Anjan Mukherjee and others (each a well-established specialist of a particular discipline/sub discipline) who reflect on their lifelong work.
The Collected Works of Amiya Kumar Dasgupta (16 July 1903–14 January 1992), often described as ‘one of the founding fathers of modern economics in India’, a co-founder of the Economic Weekly in 1949 and a renowned teacher with an illustrious list of students (including inter alia: SR Sen, Ashok Mitra and Amartya Sen), were published by Oxford University Press in three volumes (Two Treatises on Classical Political Economy (Vol. I), Essays in Economic Theory (Vol. II), and Essays in Planning and Public Policy (Vol. III) compiled and edited by Alaknanda Patel. Each of the volumes is preceded by very detailed introductions by learned economists (Dilip M Nachne, Partha Dasgupta and IG Patel) and are additionally enriched by the inclusion of commentaries by Professor PR Brahmananda and Dr SR Sen. The biographical sketch, written by the author’s daughter and the series editor, Alaknanda Patel dwells on the rare combination of tradition and reason of a man who questioned and looked for answers on every issue, a unique blend of scholarship and acute practical observation.
Chaitra Redkar in his recent book Gandhian Engagement with Capital-Perspectives of JC Kumarappa takes us down an alternate path less trod upon. JC Kumarappa was a prominent Gandhian economist who attempted a ‘green’ critique of both Capitalism and Communism as both followed development policies that enhanced inequality and deprived a large number of people from their livelihood. His critique was based on the Gandhian critique of sustainable development. Kumarappa criticized capital because of its money economy, mechanized industrialism, centralization of power and production fuelled by consumerism. Instead, he advocated development of a network of village industries, khadi and skill-based handicrafts, and agriculture based on farmers’ collectives.
Theories of Value from Adam Smith to Piero Sraffa by Ajit Sinha analyses the works of Adam Smith, Ricardo, Marx and Sraffa to understand how classical thought differed from the current ‘marginalist’ principles of value. This book has become highly recommended and widely used. Roger Guesnerie, Rt., Chair of Economics, Collège de France and Founding President, Paris School of Economics, describes it as ‘a brilliant illustration of the fact that the history of economic thought, on the one hand, and economic analysis, on the other, are neither antagonistic, nor substitutes, but necessary complements.’
Financial Economy: Evolutions at the Edge of the Crisis by Smita Roy Trivedi and Sutanu Bhattacharya explores the global economy in the post ‘Global Financial Crisis’ and the ‘Pre Covid Crisis’ period using a framework termed ‘Economic Circuit Theory’ having its origins in the writings of the 18th century French Physiocrats (they viewed production as a cycle beginning with advances, that is, capital expenditure, and ending when the goods that had been produced were sold), implying an endogenous theory of money. The modern version harks back to two intriguing articles written by Keynes when he was transiting from his Treatise on Money, 1930 to his General Theory of Employment, Interest, Employment and Money, 1936. These were his ‘A Monetary Theory of Production’ (1933a) and ‘The Distinction Between a Cooperative Economy and an Entrepreneur Economy’, in D Moggridge (ed.) 1933b, (The Collected Writings of John Maynard Keynes, Vol. XXIX, London: Macmillan Press). Employment is not determined by the interplay of supply and demand in markets, but unilaterally by entrepreneurs who make a decision with reference to the demand they expect for their output. This is where Keynes himself, and many post-Keynesians after him, introduced the role of uncertainty. Depending on psychological factors, entrepreneurs may feel more or less confident with regard to their forthcoming proceeds from sales, and so increase or decrease employment. On this view, economic policy should aim at sustaining confidence and reducing uncertainty, notably in establishing stable institutions.
A plausible view can be that the planners were uncomfortably aware of the deep-seated intellectual divides that exist with each ‘thought sect,’ equipped not only with a developmental focus but convinced that the other’s alternate views will bring not prosperity but economic misery. An additional detail was that no particular point of view could ‘intellectually beat’ the other in debate. Yet the country was faced with a burgeoning population, poverty and unemployment. Something had to be done. They thus tried to please all quarters at the same time. Accordingly, micromanagement of economic matters by the state came to be considered a felt need. The resultant consequence is the unhappy reality that Indian development has lagged behind not only its erstwhile peers like China or Japan or even early competitors like South Korea or Taiwan but may also soon lag behind those like Bangladesh/Vietnam, who earlier were not even in the development race.
Additionally, state micromanagement has also resulted in a steady diminution in the independence of the adjudicators of an equitable society. In The Story of the Reserve Bank of India, Rahul Bajoria delineates the tumultuous history of one of our primary institutions in the economic arena. In the very first decade of our Independence, Governor Rama Rau encountered ‘the sharp-tongued businessman TT Krishnamachari (TTK), who had little time for bureaucrats or procedure, pressed for industrialization via the deficit financing route, and even made an announcement that was the opposite of the RBI’s stance.’ He was compelled to write to Nehru about TTK’s ‘personal rudeness’, passing ‘rude remarks’ and ‘indulging in rude behaviour’. In retaliation, TTK called RBI ‘a section of the finance ministry’ and let fly ‘in the loudest of voices’ as to who was in charge. TTK was; Governor Rao resigned. The journey then on has been a bit of a rollercoaster that has seen devaluation, bank nationalization, populism, a Right-Wing Government, populism again, bankruptcy, liberalization but always with a clear understanding about who is the boss up to Governor Patel’s resignation.
In contrast, the equations amongst similar power centres in the developed economies are quite different. Illustratively in Firefighting: The Financial Crisis and its Lessons the power trio of Ben S Bernanke (Chairman of Federal Reserve), Timothy F Geithner (President of Federal Reserve Bank of New York during Bush and Treasury Secretary under President Obama), Henry M Paulson Jr. (Treasury Secretary during Bush) join together to discuss how institutions in the USA respected each other’s boundaries and yet could effectively and forcefully collaborate to create a response to the Great Financial Crisis of 2008, which surmounted the ideological divide of the Republican/Democratic Presidencies in the previous decade.
If ‘governance by circumstance’ or in other words, micromanagement by an erudite bureaucracy has failed to deliver, the logical question is, what is it that needs to be done? Ideologies, whether of one type or the other, however intricately crafted and passionately held, need a bureaucracy to implement. If one bureaucracy has failed us, so will not any other? A non-bureaucratic solution needs to be tried and this is where Empty Planet: The Shock of Global Population Decline by Darrell Bricker and John Ibbitson could be read with interest. The intent of the authors was actually quite different. They wanted to shock the world of readers worried about explosive population growth and climate change, etc. The authors build a plausible case that fertility rates could fall more than currently projected by the United Nations (UN) as the world modernizes and urbanizes. Women with more access to education, careers, and family planning have lower rates of childbearing in many developed countries, resulting not in population growth but a world of rapidly shrinking population.
The linkages between modernity and urbanization is an aspect that India has never explored. The planners absorbed themselves with producer goods/consumer goods, etc., and various dimensions of ideologies but never urbanization. Delhi/State capitals were well looked after but not the rest of the country. The US economy is dependent on 250+ cities while China depends on 600+. The belief that India lives in its villages has however held strong, even though the country’s population had meanwhile burgeoned by a factor of four in the post-Independence decades. This has created what the World Bank frequently calls ‘messy urbanisation’ with its filthy air and allied inconveniences because those assigned by fate to the left-out areas had no option but to migrate to the handful of cities to survive. They lived in shanty towns which came up unnoticed in the long hours of the night. Till now they were the ‘invisibles’. The Covid related lockdown and the forced ‘long march’ home of the domestic migrant workers came as a shock. It may be time for our planners to meditate about the benefits of planned urbanization. Otherwise we will continue to live in our uniquely Indian duality: the quality of thought reflected in our publications, compete with the best in the world, but if the book/newspaper is put down and one steps out, the ground realities of day-to-day living in India belie this, irrespective of all competing ideologies.
Abhijit Banerjee, Gita Gopinath, Raghuram Rajan and Mihir S Sharma (eds). What the Economy Needs Now, Juggernaut, 2019
Sanjaya Baru and Meghnad Desai (eds). The Bombay Plan: Blueprint for Economic Resurgence, Rupa, 2018
Harish Damodaran. India’s New Capitalists: Caste, Business, and Industry in a Modern Nation, Hachette India, 2008
Parul Bhandari. Money, Culture, Class: Elite Women as Modern Subjects, Routledge, 2019
Ajit Sinha and Alex M Thomas. Pluralistic Economics and its History, Routledge, 2019
Alaknanda Patel (compiled and edited). The Collected Works of Amiya Kumar Dasgupta, [Two Treatises on Classical Political Economy (Vol. I), Essays in Economic Theory (Vol. II), and Essays in Planning and Public Policy (Vol. III)] Oxford University Press
Chaitra Redkar. Gandhian Engagement with Capital-Perspectives of JC Kumarappa, Sage publications, 2019
Ajit Sinha. Theories of Value from Adam Smith to Piero Sraffa, Routledge, Second edition with an ‘Afterword’, 2018
Smita Roy Trivedi and Sutanu Bhattacharya. Financial Economy: Evolutions at the Edge of the Crisis, Taylor & Francis, 2018
D Moggridge (ed.). The Collected Writings of John Maynard Keynes, Vol. XXIX, London: Macmillan Press
Rahul Bajoria The Story of the Reserve Bank of India, Rupa, 2018
Ben S Bernanke, Timothy F Geithner, Henry M Paulson Jr. Firefighting: The Financial Crisis and its Lessons, Penguin Books, 2019
Darrell Bricker and John Ibbitson. Empty Planet: The Shock of Global Population Decline, Crown Publishing Group, New York, 2019
TCA Ranganathan, former CMD of Export Import Bank, and former Non-executive Chairman of Indian Overseas Bank, is the co-author of All the Wrong Turns: Perspectives on the Indian Economy (Westland, 2019).