Political Economy requires ideographic knowledge and the ability to make meaningful comparisons. Indian Political Economy has been of poor quality because most people who write about it have little knowledge of what is happening in different States or of developments in similar countries.
A further problem has to do with the poor quality of official statistics and the ideological biases of academics and senior journalists.
Pranab Bardhan, though hard working, is not a good political economist. He is the prisoner of his own earlier work which was done when the official ideology of India was very different. Still, in the Nineties, there was some chance that he could have persuaded the Left Front in West Bengal to pursue sensible policies of the sort Bangladesh had been forced to adopt. But that hope faded.
Project Syndicate has published the following interview with Bardhan who is now 83 years old. How out of touch is the old coot? Let us find out.
This week in Say More, PS talks with Pranab Bardhan, Distinguished Professor Emeritus at the University of California, Berkeley, and the author, most recently, of A World of Insecurity: Democratic Disenchantment in Rich and Poor Countries.
Project Syndicate: In February, you highlighted “the symbiotic relationship between business and political elites under [Indian] Prime Minister Narendra Modi,”
The World Bank would have been the partner of choice for Indian Governments when it came to infrastructure projects. Sadly, the 'activists' gained wealth and fame by chasing away the World Bank. Thus Indian administrations at the State level had to turn to indigenous promoters like the Ambanis, Adanis etc. But this is not a symbiotic relationship. It is a business arrangement. If an entrepreneur- like Anil Ambani- fails to deliver, there will be no bail-out. The fellow is welcome to go bankrupt or, indeed, to go to jail.
the leader of the ruling Bharatiya Janata Party, arguing that rampant political favoritism is impeding India’s economic growth and development.
That was certainly the case under the license-permit Raj. But 'favoritism' can't extend to bailing out over-ambitious or crooked promoters.
Would the end of BJP rule be enough to bring about the demise of “India’s crony oligarchy,” or are structural reforms or other policy interventions also needed to boost competition?
What India needs is less policies, less interventions and letting competition take care of itself. Also judicial overreach must be curbed.
How might such efforts advance the goal of “generating sufficient productive employment” for India’s young people?
Scrap Labor and other such codes which are currently only a source of corruption or else are circumvented in various ways.
Pranab Bardhan: While India’s business-politics nexus has existed for many decades, corporate concentration and the dominance of some favored oligarchs have become more egregious under Modi.
Because there has been a shake out. 'Frothy' business models- like that of Anil Ambani- have crashed and burned. But anti-cyclical business models based on sweating the small stuff have succeeded. Adani got a little too big for his boots and is having to retrench. But his deeply boring business model is sound enough. It appears that Hindenburg did the Indian value investor a favor.
This has made the imperatives of structural reform and stronger competition policy much more pressing.
Bardhan is from Bengal and thus hates Modi. He thinks structural reform is a stick to beat Modi with. But Modi is not dependent on Adanis or Ambanis. He has a very high approval rating. What is needed is competition from a good rival candidate for the top job.
Compounding the urgency, India is now in the brief period in its demographic transition when large numbers of young people are entering the labor force.
But this has always been true. Anyway, states which have undergone demographic transition can bring in as many migrant workers as they like. Why speak of urgency when the same problem has persisted for at least eighty years? The answer is Bardhan hates Modi. It is urgent that they guy is defeated in the 2024 election even if this means telling stupid lies about 'Modani'.
But good, productive jobs are scarce –
because guys who get those good productive jobs won't show up for work because they can't be sacked. That's why you have contract workers whose jobs are productive but not good at all.
a problem that the government exacerbates by supporting favored conglomerates in skill- and capital-intensive businesses in non-traded or protected/heavily-regulated sectors.
The alternative is not to have those businesses. No electricity, no ports, nothing.
A better approach would focus on supporting smaller, often informal, enterprises, which have the potential to create the needed jobs.
Very true. 900 million Indians have small informal enterprises which involve cooking dinner or scratching themselves. Each such enterprise should be given a loan of at least ten lakhs which can be written off just before the elections.
Credit, marketing facilities, infrastructure, and technical-extension services are imperative to make those jobs productive.
So, conglomerates with a proven track record have to provide the infrastructure. If the Government does it, the thing will be crap.
Government efforts to foster skill formation among young people have also been rather half-hearted.
Because, more often than not, no fucking skills are formed. Ved Mehta tells the story of the Principal of the School for the Blind in which he was educated. It turned out the fellow had been appointed only because he was illiterate. The problem with Government funded skills training is that only useless people get the jobs as 'trainers'.
PS: Though China is now “experiencing a palpable – and expected – slowdown,” you recently argued, it is likely to remain a “major manufacturing and trading power for many decades.”
D'uh! Japan is still a major power of that sort. Why not China?
What explains China’s economic resilience? Are President Xi Jinping’s efforts to strengthen that resilience – from deepening ties with Russia to attempting to reduce China’s reliance on the West – likely to succeed,
They have succeeded. China has done a lot of investment in strategic technological fields. Vivek Ramaswamy, being in the bio-tech field, understands that America could become dependent on China in life sciences and other vital areas. This means China will have the whip hand. There are already unofficial Chinese police stations on American soil. If America doesn't pull up its socks, soon their will be official police stations and Vivek's kids will have to answer to them if they say something nice about the Dalai Lama.
or are they examples of “errors in judgment” stemming from the “lack of a strong civil society or independent judiciary”?
This is laughable. An independent judiciary can do stupid shit- as happens in India. A strong civil society might want lynching legalized.
PB: The sources of China’s economic resilience have more to do with internal factors than external ones. China has a large domestic market and skill base, a relatively efficient bureaucracy, and world-class physical infrastructure.
Why? Edwin Lim of the World Bank has explained that the Chinese agreed to get in state of the art infrastructure even if came from the Japanese. Soon they themselves became the best in infrastructure. However, unlike Gorbachev, the Chinese never surrendered Party control of the Economy though the West didn't understand this till about ten years ago.
Moreover, its tech sector benefits from both direct government support and an abundance of available data. That said, Xi is an autocratic leader whose errors in judgment –
I suppose Bardhan means Xi's 'Zero Covid' policy. But it has had no permanent effect. The Party learnt some valuable lessons as did those foolish enough to think they could defy the Party.
exacerbated if not caused by repression of opposing views – will sorely test China’s economic resilience in the coming years.
Repress opponents by all means. You can always steal their ideas when and if it suits you. That is the Communist way.
PS: “For all its allure,” you wrote in 2017, “the Chinese development model is deficient in fundamental respects, and not easily reproducible elsewhere.”
The Party came to power by wading through a sea of blood and conquering the entire mainland. Nobody can reproduce that.
You expand on these deficiencies in your book, A World of Insecurity: Democratic Disenchantment in Rich and Poor Countries, in a chapter called “The Temptation of Authoritarianism.”
If your guys didn't conquer your country then you can't do what Stalin or Mao did. Nehru realized this when his scheme for cooperative farming was shot down. Even the Commies realized that you can't kill 'kulaks' because the sons of the kulaks are in the Army. They will take their time killing you if you wag your tail.
But, while developing countries should not seek to replicate China’s development model, are there aspects of that model that are worth emulating or adapting?
Get rid of any type of 'iron rice bowl'. Do plenty of 're-education'. Don't bother with Human Rights or Democracy. South Korea rose rapidly as a military dictatorship. But it took sensible advise from people like Irma Adelman. Forcing the corrupt to invest their ill gotten gains in indigenous conglomerates was a smart move. The Koreans also did their own version of a 'cultural revolution' in the country side.
PB: While few developing economies can benefit from scale on par with China’s, they should be working to replicate some of the aforementioned sources of resilience, such as strong infrastructure,
which only Adanis or Ambanis can provide
a robust skills base,
Modi is sponsoring a new education policy which is skills based.
and a merit-based system for assessing bureaucratic performance.
why not just transfer useless people to useless Departments?
As I describe in my book, the Chinese system of economic decentralization also holds many lessons for other countries, particularly as they work to build up their infrastructure and support regionally competitive local-business development.
Nonsense! Chinese 'decentralization' had two features- the internal passport system, and ability to acquire land cheaply- which other countries simply don't have.
But China’s combination of political centralization and economic decentralization forms a unique system, rooted in China’s long imperial history.
Stuff like 'internal passport' and collective punishment for clans some members of which rebelled or engaged in anti-social activities.
Countries should also recognize that Chinese-style authoritarianism is neither a necessary nor sufficient condition for development.
Unless development is what the authoritarian regime wants.
PS: In A World of Insecurity, you challenge arguments urging countries to embrace more bottom-up decision-making and community-based initiatives as a way to “take back control” from distant or faceless authorities.
Nothing wrong with 'subsidiarity'. As Adam Smith pointed out, the parish is better at spending its own money in a way that creates a virtuous circle within the parish- though many Scots agreed with Dr. Johnson's dictum- 'The noblest prospect which a Scotchman ever sees, is the high road that leads him to England!' But the Scots could do even better in America or India or distant Hong Kong. Truly a remarkable people. They raised up their own country through their thrift and enterprise.
What is the proper role of the community – specifically, the “devolution of power to local community associations” – in a democracy, and what are some of the “political and economic pitfalls of the communitarian position”?
Some parts of India are ecologically fragile and need to be depopulated. All parts of India need to go through demographic transition sooner rather than later. Still, population movements means that areas bound to get depopulated have less incentive to educate and train their young people. Japan has a scheme where by depopulated areas give a gift to those of their people who have moved to urban centers in return for which they are given a bigger monetary gift.
PB: As I note in my book, there are many examples of devolution leading to better decisions – from the point of view of efficiency, equity, and fitness to specific local conditions and challenges – in both rich and poor countries.
Not if there is bound to be depopulation. Devolution will try to create barriers such that young people become less mobile and stay at home to grow poorer and poorer.
But it is in projects that rely largely on the use of local information and initiative – for example, managing the local commons – that local communities excel.
Unless they don't. Plenty of decaying cities or parts of the countryside decline more steeply because of foolish policies adopted by local 'leaders'.
Devolution of power can also help ease social and political tensions and ensure local cultural and political autonomy.
Or it can lead to civil war. The wider problem is how to make transfers from richer to poorer regions incentive compatible. Europe doesn't have the answer. Regional Policy failed. Plenty of American cities and regions are getting depopulated. We simply don't know what the route forward is. Not even the Chinese have solved this problem.
But there are limits to local communities’ advantages. For many types of projects – from the construction of large irrigation systems to the development of school curricula – supra-local expertise and coordination are essential.
You can always hire experts and where property rights are well specified there is a Coasian solution. School curricula don't matter.
Furthermore, local communities can be more vulnerable to “capture” by local oligarchs and vested interests –
but this guy says that the whole of India has been captured by 'Modani'!
especially in contexts of high social and economic inequality – than central entities, which tend to be forced to balance the interests of more groups.
Nonsense! Central entities don't give a fuck about anything but themselves.
PS: In your book, you make the case for “rejuvenating” social democracy,
which has never existed in India or America.
“though with a great deal of modifications to its older forms,” and advocate the introduction of a universal basic income to bolster security in poor countries.
Then, the country falls of a fiscal cliff and there is an entitlements collapse and 'haircuts' all round.
What is the most compelling rationale for a UBI, and why must we avoid framing it as an “anti-poverty” intervention?
Free money is nice. Gimme.
PB: In my book, I call for UBI mainly in poor countries,
which will quickly go off a fiscal cliff. Look at Pakistan or Sri Lanka.
where a decent income supplement is fiscally feasible.
Initially- perhaps. Rahul Gandhi's 'NYAY' scheme would have given the bottom twenty percent a handout of about 500 dollars (under purchasing parity) a month at a cost of about 12 percent of Government Revenue. The problem was that demographic factors would soon cause this to balloon to 40 percent. The voters didn't believe Rahul could deliver. Targeted benefits- e.g. Kharge's scheme to give a little money to unemployed graduates- might get out the vote. We shall have to wait and see what happens in Karnataka.
(In rich countries, such a supplement may require a complete overhaul of the expensive welfare systems that already exist.)
But such overhauls are already occurring. The problem is that financial markets may take a dim view of such shenanigans. 'Ricardian Equivalence' cost Truss and Kwarteng their jobs.
In poor countries, vast numbers of marginalized workers – especially women – face tremendous economic uncertainty, from which a UBI can provide relief.
Till it abruptly disappears. That's the problem. If people don't think the thing is sustainable, it won't have the required effect in terms of overcoming risk aversion and raising factor mobility.
I view a UBI as part of every citizen’s fundamental right to minimum economic security,
but who will provide the remedy when the Government runs out of money? Will it be the IMF?
which poor-country governments do not currently provide. Instead, these governments often pursue targeted “anti-poverty interventions,” which rely on a complex process of means testing to determine who qualifies for support.
But this also means that take-up is predictable and can be budgeted for. Instead of the whole program collapsing, it just becomes more stringent in bad times.
But means testing is particularly difficult in countries with a large informal sector,
which also means that the Government has to rely on expenditure taxes
and the process is both costly and prone to corruption and mistakes, with both inclusion and exclusion errors proliferating.
Yet, it can affect expectations. If people feel there is a safety net, they are less risk averse. Sadly, when they discover otherwise participation rates can drop.
A UBI avoids most of these pitfalls. Yes, the rich also receive the basic income allocation, and that costs the state money. But it is worth it to avoid exclusion errors, thereby guaranteeing the fundamental right to minimum economic security.
Till there is no money in the kitty. A right is not a right if there is no remedy to its violation.
It is much like the right to physical security: even if a business tycoon can afford their own personal guards, they still have a right to police protection.
Sadly, police protection is a scarce good. You may have a right to it but you may not receive it.
PS: You have written a memoir in a series of weekly installments, with the full memoir set to be published this year. Why did you choose this share-as-you-go approach, and how did it affect the end result?
The guy is 83 years old! It is best to publish while you can rather than waiting because the Grim Reaper may get to you first.
PB: My latest memoir was serialized in the blog 3 Quarks Daily for over a year, and a much-revised version – entitled Charaiveti: An Academic’s Global Journey – will be published by Harper Collins India later this year. The advantage of this approach was that I received feedback from readers from different walks of life, rather than only (or primarily) close academic colleagues. This gave me the opportunity continuously to revise and improve my work.
In fact, this is the second time I took this approach: a different version of my memoir, written in in my first language, Bengali, was serialized in a literary magazine in Kolkata, before being published as a book in 2014. But that memoir was written with a local readership in mind – for example, it included many references to local songs, movies, and literature – whereas Charaiveti is intended for a global readership. The references are thus familiar to an international audience.
Bardhan was a good and hardworking man. Sadly, Political Economy requires an understanding of Politics. Moreover, Economics isn't really about magical money trees. It is about scarcity.
Still, Bardhan hates Modi and so he keeps spouting ignorant nonsense in the hope that this will lead the Indian masses to vote against the fellow. One might as well stick pins in a voodoo doll.
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