Kaushik Basu's divisive imbecility

It is a fact that the Indian Economy is slowing down. It is also a fact that Kaushik Basu is a partisan of the previous administration which employed him for cosmetic purposes. A third fact is that Basu and his ilk are against Modi whom they accuse of being 'divisive'.

Taken together, these three facts are bound to cause someone like Basu to blame India's slowdown on not just Modi- which would be a reasonable view- but on 'divisiveness', as if the reason for Ind's economic ills is a lack of trust between agents.

Suppose Basu were correct. In that case, the minority, not the majority, should do all it can to 'toe the line' and refrain from 'making waves' because 'Divisiveness' is the common enemy and, obviously, the cost of conformity by a minority is less than the cost of the majority changing their behaviour. In other words, Basu- with typical maladroitness- impugns what he and his ilk are themselves doing, while giving Modi a clean chit.

Kaushik Basu writes in Foreign Policy Magazine-

India presents a striking example of the limitations of pure economics. From 2003 to 2011, the world’s largest democracy was growing at a phenomenal rate, exceeding 9 percent each year between 2005 and 2008.

So what? China was doing even better. This was 'catch up growth' featuring 'low hanging fruit'. However, since India failed to fix problems related to
1) Infrastructure
2) Education and Training
3) Paternalistic Labor laws
4) Judicial delay and capriciousness
5) 'Inspectorate' Raj
6) Corrupt, incompetent, crony capitalists and a Banking sector riddled with bad loans
7) Rahul being a dunce and the Left tilting at the windmill of 'Fascism'

it was obvious that sooner or later there would be a shakeout and a slow down.

Even after 2011, it kept up a reasonable rate of growth. However, since 2018, the economy seems to be spinning into a crisis, with growth declining to 4.5 percent, consumption in India’s vast rural sector declining at rates not seen since the late 1960s, and the overall unemployment rate at a 45-year high. The 2018 Accidental Deaths and Suicides in India Report, recently released by the National Crime Records Bureau, highlights a stark mood of despair: Since 2017, there has been a noticeable rise in the relative share of suicides by daily wage earners. They are among the poorest people in the economic ladder, thereby suggesting a rise in poverty.
What is causing this economic turnaround in a country that until a few years ago was perceived as exemplary? Mistakes in fiscal and monetary policies have played a role, of course. But the sharpness of the decline suggests that something more is going on, and part of the cause lies in ruptures in the normative and institutional foundations of the nation caused by divisive politics.The rise in divisive politics, whipping up of religious tensions, and marginalization of minorities … are undoubtedly taking a toll on people’s sense of belonging and trust in the nation.

But Basu's ilk started this divisive politics based on whipping up religious tensions. They painted the Hindus as diabolical. They considered the BJP to be a Fascist party representing those diabolical Hindus. They didn't care that one branch of the dynasty was with the BJP or that Sonia gladly accepted ex BJP politicians like Shankarsinh Vagela and made them CM candidates despite their roots in the RSS. Currently Congress is tied up with the Shiv Sena in Maharashtra. In other words, Congress was just like the BJP. However, because Rahul did not come out of the closet as a sacred thread wearing Brahman till too late, Basu and Co. spent their time vilifying Hindus. This was silly, because Hindus are a majority in India. Moreover Baus and his ilk were themselves Hindus. Thus they came across as stupid, ignorant and useless.

Trust and a sense of belonging are not economic variables, but they form an important part of the underlying normative foundation of an economy. These values are eroding in India.

Trust and a sense of belonging are economic variables. People exit milieus where trust or a sense of belonging are lacking. Basu should know. He left India a long time ago and only came back to burnish his C.V by holding some high sounding post in the Administration. That done, he returned to a place he trusted and where he felt he belonged.

Currently, people like Basu are trying to get Indian Muslims to lose trust in India's Citizenship and other laws. It is trying to scare them into believing they are at risk of deportation or incarceration. Some Muslims, reacting to this fake news have acted in a manner such that other people feel they don't really belong to the neighborhood because they keep killing non-Muslims and setting their houses on fire. Congress and the Left Liberals have created this situation. But, because they live abroad or in posh neighborhoods, they don't have to pay the price for their divisive politics based on hatred and repeating stupid lies.

An important hint of this comes from the decline in India’s investment rate—investment being dependent on trust and confidence—from nearly 39 percent of national income seven or eight years ago to 30 percent today.

Modi inherited this situation. People hoped he'd make land acquisition easier and carry out labour market reforms. But that hot potato keeps getting hotter. Indeed, all the problems which had previously accumulated continue to have salience. All we can say of Modi is that he is the person most trusted to unwind the mistakes of the past.

Still, continual carping by Basu & Co may- as he says- be damaging investor confidence in India just as it may be stoking paranoia amongst India's Muslims.

This may well be contributing to the slowdown. Market economies rely on trust in several ways. For most transactions, there is a gap between service and payment. The auto shop repairs your car today, and you pay tomorrow. You pay the painter today, and she paints your home over the following week. Without trust, all these transactions would slow down and malfunction.

But all these transactions would slow down and malfunction if there was an abundance of trust which was misplaced. I offer you a magical spell to make Beyonce fall in love with you. You trust me, so you pay me for it. But the magic spell doesn't work. So your trust disappears.                                                  

Francis Fukuyama noted the correlation between a society’s level of trust and economic prosperity, and, in a 2013 paper, Yann Algan and Pierre Cahuc use statistical analysis to show that trust can be critical for economic growth. By their calculation, an Africa with Sweden’s trust levels would achieve six times the per capita income it currently has.

This is sheer stupidity. Africans may have much more trust than Swedes but, for reasons of economic geography, more often than not, it is misplaced.

A recent Harvard Business Review paper shows that if a company’s workers have a sense of belonging, they improve their job performance by 56 percent, with a 50 percent drop in churn and a 75 percent reduction in sick days.

But what about all those other firms where employees had a tremendous sense of belonging but which went bust because their business model was shite? Those don't get measured because they are defunct. This is Junk Social Science because 'sense of belonging' in falling or 'shadow' enterprises (i.e. entities which would turn into firms if only their business model weren't shite)  aren't being taken into account. In any case, if you can see your productivity is going up, you would expect to be retained and get rewarded for loyalty down the line. In other words, what is driving this result is the feeling that the company has a good business model. It is worth one's while to feel a sense of belonging rather than a sense that you should be circulating your resume to rival firms so as to be able to jump ship before it sinks.

For a 10,000-person company, this would result in annual savings of more than $52 million. Extrapolate this to a nation, and you get a sense of why nations where large segments feel excluded do poorly.

This is utter nonsense. A country with a great sense of belonging but which is doing stupid shit will still come a cropper.

The rise in divisive politics, whipping up of religious tensions, and marginalization of minorities that we have seen over the last four or five years in India are undoubtedly taking a toll on people’s sense of belonging and trust in the nation.

But it is the minority in Parliament and politics generally which is whipping up these tensions. If they stop doing so and tell the truth then divisiveness would disappear. But the economy still would not improve.

The role of trust and sense of ownership get endorsement from a very unusual source: The British music conductor Charles Hazlewood noted in an interview that while discipline and obedience play an important role in a successful performance, the critical element between the conductor and individual musicians is trust. Giving them space to use their own judgment and creativity is what leads to truly great music.

Why does Basu not trust the present administration? Does he not understand that, as some British music or bus conductor said, doing something rather than some other thing is the dog's bollocks, Guv?

Something similar is likely true for the economy. With globalization and dramatic changes in technology, our world is transforming beyond recognition. It is not enough to simply collect data and examine the axioms of economics. Instead, economists must unearth some of the hidden assumptions of our discipline—the norms that we, knowingly or unwittingly, assume to be there, which may not be there or may have shifted. It is time to bring anthropology into economics and to rewrite our models. In short, this may well be economics’ Euclidean moment.

In other words, since economists have failed as economists because they are as stupid as shit, they must now start bringing anthropology and astrology and any other shite into economics so as to plumb new depths of stupidity.