Subsidiarity is the notion that decisions should be taken as close as possible to the people affected by it whether or not they form a community or exhibit strong bonding and bridging ties. Tiebout sorting is the notion that different towns, regions, or Marshallian industrial districts, should be allowed to choose their own mix of local taxes and 'club goods' and that free movement between such 'Tiebout models' would raise allocative and dynamic efficiency and improve Social Choice. The problem is that there will be winners and losers. Mobile factors of production shift to where growth is rapid. Those left behind face a narrowing horizon. It is now recognized that there are 'externalities' here such that some type of Government 'levelling up' program is required. One reason is that declining communities have less incentive to educate kids who are bound to leave. Japan has come up with a scheme whereby declining areas give a small present to those of their young people who relocate. This triggers the instinct to reciprocate by voluntarily ticking a box such that the tax system automatically transfers some of their money to the natal Prefecture. In Germany, they have a different system. Unless you opt out, a portion of your tax money is automatically sent to your religious denomination.
Both the State and the Market already have evolved ways to 'internalize' externalities associated with the existence of geographically defined communities. Sadly, because of increased Knightian Uncertainty, the associated problems are likely to worsen rather than improve. What is worrying is that structural economic and geopolitical changes may be giving rise to an irrational type of xenophobia which might impose foolish restrictions which worsen the underlying problem. It may be argued that Racism was the foundation of the prosperity of settler colonies like America and that a return to racist or nativist policies would restore prosperity to the indigenous working class. Thankfully, there is a notion of 'koinonia'- or fellowship and joint participation- which Theistic religion promotes as an alternative to a narrow, racialist, conception of 'oikeiosis' or 'natural belonging'. However, an amelioration of racial or regional animosities can go hand in hand with pro-nativist policies.
A separate problem has to do with bad actors and bad 'mimetic targets' in bad neighborhoods or 'proximate communities'. Poor people or those with dependents may be unable to flee from crime-infested ghettos. There is a 'third rail' which electrocutes the aspirational dreams of its young residents. They are dragged down by their peers. Here, arguably, bleeding heart liberals worsen the underlying problem by refusing to permit the type of punitive policing which had enabled other communities to become affluent- essentially by killing or permanently incarcerating bad actors.
The other problem, for which Liberals are blamed, is mass immigration more particularly of bogus asylum seekers or genuine refugees who, however, might wish to impose their own bigotry on the host community. Once again, we may speak of an undesirable change in the 'proximate community' which acts like a 'third rail'- i.e. increases hazard for ordinary people. It may be that 'competitive virtue signaling' leads the libtard community to make more and more horrible suggestions for how to totally fuck up Society and the Economy. If one says 'we must help those fleeing Islamic persecution', the other ups the ante by suggesting we must take in all the Islamic persecutors whose victims have banded together against them. Just as the 'proximate community' in a gang-ridden ghetto causes bad outcomes, so too may the proximate community for Ivy League academics force them to pretend to love Hamas and want to boycott Israel- which produces very good quality academic research.
This is not to say that illiberal policies from the past should be revived in a mindless fashion. Prior to 1965, America severely restricted immigration from countries like India. The American Dream was for White Men, not darkies or females. Once the US permitted the immigration of more highly skilled or entrepreneurial Asians, quite predictably, there was a higher return on education- more particularly in STEM subjects and Management Science- and thus, ceteris paribus, lower relative wages for less educated and skilled White males. Females joined the workforce thus permitting some families to maintain a middle class lifestyle. But marriages came under pressure. There were more divorces and single parents and greater use of alcohol, drugs, etc. Angus Deaton speaks of 'deaths of despair' amongst the White male non-College educated American. Robert Putnam describes the increased loneliness and anomie of the less affluent condemned to 'bowl alone'. Meanwhile, immigrants to America have tended to do very well for themselves more particularly if they retain their traditional family and spiritual values. Raghuram Rajan himself has certainly done well. Yet he writes in 'The Third Pillar' of the need to revive 'the community' (which, in America, is racialized and wants immigrants to fuck the fuck off) as a counterweight to the State and the Market.
Markets and the state have not only separated themselves from the community in recent times
Rajan comes from India. The reason his parents and grandparents spoke English was because financial markets in England had created an East India Company which was taken over by the British Crown. Thus, in India, both the market and the State 'separated themselves from' both the British and the Indian community centuries ago. It is only in recent years that more and more of India has come to be ruled by people who struggle to speak English. Markets too are increasingly dominated by people who were 'vernacular medium'. Their English may be perfectly functional. But they are rooted in their own communities even if Rihanna and Bill Gates turn up for their weddings.
but have also steadily encroached on activities that strengthened bonds within the traditional community.
Kipling and other such late Victorian writers did indeed reject a Bismarck type Welfare State for this reason. Chesterton described a dystopia in which Prohibition was imposed on the Brits by an army of Turks hired for that purpose by a rabidly Wesleyan Liberal politician. In another novel, there is a National Health Service which certifies as insane and incarcerates every decent English man and woman. By decent, obviously, I mean those who thought Jews should fuck off to Palestine and take the fucking Wogs with them.
However, the English working class didn't buy any of this guff. They were even prepared to tolerate colored immigration for the sake of a better National Health Service.
The truth is, Rajan's Polanyi type notion of 'embeddedness' has no evidentiary basis in English economic history. This is because Karl, unlike his brother, was a stupid refugee who knew shit about Economics and shit about English history.
The FT has this to say about Rajan's book- '
The “third pillar” of the title is the community we live in. Economists all too often understand their field as the relationship between markets and the state, and they leave squishy social issues for other people.
But both markets and the state deal with such squishy social issues as crime, drugs, abortion etc. Economists do make recommendations for improved mechanism design in these areas.
That’s not just myopic, Rajan argues; it’s dangerous.
It is false. There are plenty of economists working on 'squishy' policy issues. Rajan scarcely mentions any of the interesting ones.
All economics is actually socioeconomics – all markets are embedded in a web of human relations, values and norms.
None are. There is a wide difference between a Cartel or Club where transactions occur and an open market. The plain fact is that the market destroyed Polanyi type 'embedding' some time after the Black Death killed of serfdom or the rising price of wool made it profitable for 'sheep to eat men'. But that was a couple of centuries before English 'Political Arithmetic'- which was empirical and data driven- first appeared in the sixteenth century.
It is a different matter that some agents who move to an area associated with a particular open market or which they think will become Schelling focal for it may form close mutual relationships and adopt 'values and norms' which promote in-group trust and increased frequency of transactions. But such agents may belong to diverse communities. In the diamond trade we may have pious Gujaratis as well as pious Haredi Jews. Their 'values and norms' are different. They belong to different communities and they may use different languages to communicate with each other. Yet their communities may be embedded in the same market.
As he shows, throughout history, technological phase shifts have ripped the market out of those old webs and led to violent backlashes,
Backlashes cease to be violent if, as General Napier said to the Chartists, one side has greatly superior 'physical force'. Markets supply the money for such superior force. If British Generals suppressed Luddites and Chartists in their own green and pleasant land we might think this has to do with 'embedded' class relations. But when we notice that British Generals- like 'Chinese Gordon'- were also doing this in China, first with the Opium Wars and then by helping to suppress the Taiping rebellion- we must acknowledge that embedding works in the opposite manner to the one Polanyi suggested. The 'Great Transformations' occur where violent backlashes can be easily crushed by superior military technology. On the other hand, it is true that American Indians organized a violent backlash against the English at the Boston Tea Party. George Washington personally scalped a number of British Lords. Jefferson was kinder. He was content to make William Howe his squaw. Sadly, Howe was unable to furnish Jefferson with a papoose and so he drove her out of his wigwam and began a relationship with an African American lady who had been ripped out of her old webs by technological phase shifts.
and to what we now call populism.
unless we, like Jason Stanley, call it Fascism. Did you know that Trump personally gassed to death six million of his son-in-laws?
Eventually, a new equilibrium is reached,
nobody wants to reach a fucking equilibrium. Evolution is a far from equilibrium phenomenon.
but it can be ugly and messy, especially if done wrong.
is what brides say on their honeymoon night.
Right now, we’re doing it wrong.
No. Right now we are merely talking bollocks.
As markets scale up, the state scales up with it,
The opposite happened in post-Napoleonic England. Income Tax disappeared. Free Trade triumphed. Government spending as a proportion of GDP was lower in 1869 than it had been in 1689. It is only when war 'scales up' and becomes 'Total', that there is a 'ratchet effect' whereby 'Wagner's Law' comes into operation. Interestingly, one of the few countries where there is strong empirical support for the notion that Government spending rises more rapidly than National Income, is India.
concentrating economic and political power in flourishing central hubs and leaving the periphery to decompose, figuratively and even literally.
That's not what happened in the UK. As financial markets burgeoned, there was more economic activity in the North and other now 'peripheral' areas. However, a 'Dutch disease' effect set in because the 'invisible' surplus caused the currency to appreciate relative to industrial competitors. That's why it became 'grim ooop North'.
Instead, Rajan offers a way to rethink the relationship between the market and civil society
Since Aristotle, koinōnía politikḗ, the free citizens of the City State, have been defined as 'civil society' separate from the King or Emperor and distinct from the Pope or Archbishop. Civil Law is Roman law dating back to the Republic. Common Law is its supposed Anglo-Saxon equivalent. King's Equity was the Royal form of Justice. Canon Law came under the Church. The 'third Estate' was neither feudal nor ecclesiastical but bourgeois. As markets developed, burghers could buy Charters from the Crown for their Cities and even their mercantile enterprises.
and argues for a return to strengthening and empowering local communities as an antidote to growing despair and unrest.
One way to do this would be to appoint Dukes to lead Duchies and Counts to lead Counties. Corvee labour could be introduced for public-works- e.g. the peasants having to devote thirty days per year to road-maintenance and the practice of Archery. Rajan can lead a violent backlash to the Sheriff of Nottingham who, notoriously, is a fucking Neo-Liberal who goes to Davos every year.
Rajan is not a doctrinaire conservative,
he is a verbose gobshite competing with Amartya Sen to be the most vacuous virtue signaler out of the UPA stable of libtards.
so his ultimate argument that decision-making has to be devolved to the grass roots or our democracy will continue to wither,
though American democracy is bottom up. That's why America has dual sovereignty. Sadly, Indian democracy is becoming bottom up which is why a 'Backward Caste' dude is PM instead of Rahul.
is sure to be provocative. But even setting aside its solutions, The Third Pillar is a masterpiece of explication, a book that will be a classic of its kind for its offering of a wise, authoritative and humane explanation of the forces that have wrought such a sea change in our lives.
It is ignorant shite. Rajan studied electrical engineering. He doesn't know shit about Economics or History. The IMF hired him even though he wasn't a macroeconomist. Why? He had co-authored a silly book titled 'Saving Capitalism from Capitalists'. No doubt the IMF hoped he would produce a sequel titled 'Saving Savers from having any fucking Savings by making sure the Banking sector collapses.' That way the IMF would have a bigger role.
Returning to Rajan's tome, we find that 16 years after he saved Capitalism, he has turned his attention to delivering babies.
Consider some functions the community no longer performs. In frontier communities, neighbors used to help deliver babies;
which is why a lot of those babies died. In India, as Kipling pointed out, wolves would often provide essential child-minding services to village ladies. Snakes and bears too were very helpful in this regard. We need a fourth pillar- one which involves wild animals- to support the 'third pillar' which is the community.
today most women check into a hospital when they feel the onset of childbirth.
Also they send their kids to a creche rather than abandon them in the Jungle so as to obtain the child-minding services of a kindly she-wolf.
They naturally prefer the specialist’s expertise much more than they value their neighbor’s friendly but amateurish helping hand.
India decided that it didn't want the specialist expertise of a Rajan or Kaushik Basu or the more egregious yet, 'Viral' Acharya. Thus they have returned to their American communities where they often serve as mid-wives to their elderly male colleagues. What? Couvade is a real thing.
On a more mundane level, we used to offer to take our elderly neighbor shopping because she did not have a car.
Nor did we. Thankfully, a passing elephant would seize her with his trunk and get her to her destination.
Today, she orders her groceries online. Similarly, the community used to pitch in to rebuild a household’s home if it caught fire;
But the community would also pitch in to burn that house down. Then, they took turns raping and killing those who escaped the flames.
today the household collects its fire insurance payment and hires a professional builder.
The first Fire Insurance Company in America was set up in 1735. Sadly it could not get itself insured and thus failed quite quickly. For Insurance to work, you need a re-insurance market.
Indeed, given the building codes in most developed countries, it is unlikely that a home reconstructed by neighbors would be legal. The community still plays a number of important roles in society. It anchors the individual in real human networks and gives them a sense of identity; our presence in the world is verified by our impact on people around us. By allowing us to participate in local governance structures
which arise by State action
such as parent teacher associations,
which arise by State action in publicly funded schools.
school boards, library boards, and neighborhood oversight committees, as well as local mayoral or ward elections, our community gives us a sense of self determination, a sense of direct control over our lives, even while making local public services work better for us.
But public services are provided by the State or else are subject to regulation and oversight by the Judiciary which too is a branch of Government.
Can Rajan point to any non-market, purely private, activity a community can accomplish on its own? I can. In America, there is no established Church. Thus every sect is based on a particular community. No doubt, that community may send out missionaries and thus a particular sect may spread to other communities. It may also be that inter-marriage between people of the same faith but different original ethnicity creates a new community.
Importantly, despite the existence of formal structures such as public schooling, a government safety net, and commercial insurance, the goodness of neighbors is still useful in filling in gaps.
Neighbors may be of different communities. The analogy is with fellow travelers on a plane or ship who help each other for the duration of the journey.
When a neighboring engineer tutors our son in mathematics in her spare time, or the neighborhood comes together in a recession to collect food and clothing for needy households, the community is helping out where formal structures are inadequate.
Equally, when a neighbor rapes our child and the community gets together to burn down our house, the community is doing something which 'formal structures' might not be able to achieve. The Rwandan genocide was community based.
Given the continuing importance of the community, healthy modern communities try to compensate for the encroachment of markets and the state with other activities that strengthen community ties, such as social gatherings and neighborhood associations.
The Ku Klux Klan, the Mafia, Hamas etc.
Economists Raj Chetty and Nathaniel Hendren attempt to quantify the economic impact of growing up in a better community.
They found that the children of non-Mormons do better if their parents relocate to a Mormon neighborhood. This is 'Tardean mimetics'. If you move to the ghetto your kids may want to become gangbangers or coke-whores.
They examine the incomes of children whose parents moved from one neighborhood into another in the United States when the child was young.
Those with money try to buy their way into a better neighborhood, better schools, colleges etc. The Market is what enables this type of Tardean mimetics. Equally, if the State keeps slaughtering gangbangers and incarcerating coke-whores, bad mimetic models are removed and the life-chances of the young improve. There is evidence that longer prison sentences actually improved outcomes for the families of habitual criminals. Indeed, for some cohorts, 'three strikes' improved life expectancy, educational attainment etc. In prison, you have to make a shiv before you can knife a guy. On the outside, guns are easily available.
Specifically, consider neighborhood Better and neighborhood Worse. Correcting for parental income, the average incomes of children of longtime residents when they become adults is one percentile higher in the national income distribution in neighborhood Better than it is in neighborhood Worse.
Which is why property values there are higher. There is a 'separating equilibrium' based on a 'costly signal'- viz. having the dosh to buy a house in the good School District.
Chetty and Hendren find that a child whose parents move from neighborhood Worse to Better will have an adult income that is, on average, 0.04 percentile points higher for every childhood year it spends in Better.
Parents who move away from the crime ridden ghetto probably also invest more in their kids which is why they have better life-chances.
In other words, if the child’s parents move when it is born and they stay till it is twenty, the child’s income as an adult will have made up 80 percent of the difference between the average incomes in the two neighborhoods.
This is why so many Black Economists and Jurists are socially conservative. Even if they themselves don't feel like going to Church, they do so for the sake of the kids. This also means they are less quick to have affairs, take drugs, and get divorced.
Their study suggests that a child benefits enormously by moving to a community where children are more successful (at least as measured by their future income). Communities matter!
Real estate markets matter. That's why darker skinned people wanted to get rid of 'restrictive covenants'. Sadly, 'bussing' as Thomas Sowell pointed out, could worsen outcomes.
Perhaps more than any outside influence other than the parents we are born to, the community we grow up in influences our economic prospects.
Tardean mimetics matter. The State should proactively get rid of bad mimetic models- lock up the too-cool-for-school gangbanger- and promote good mimetic targets- e.g. letting the nerdy Vivek Ramaswamys of the world get rich and politically influential.
Importantly, Chetty and Hendren’s finding applies for a single child moving—movement is not a recipe for the development of an entire poor community. Instead, the poor community has to find ways to develop in situ, while holding on to its best and brightest.
Kill or incarcerate the bad element. Build Churches not Brothels.
It is a challenge we will address in the book.
No you won't. You are a fucking libtard.
There are other virtues to a healthy community.
Provided there is free entry and exit based on market transactions in a free real estate market. Things like rent-control can cause the decline and death of a community. So can electing paranoid populists with a woke agenda.
Local community government acts as a shield against the policies of the federal government,
Which is why America could have Jim Crow and Southern trees which bore strange fruit.
thus protecting minorities against a possible tyranny of the majority,
Jews and homosexuals living in areas with a rising Islamic population would be well advised to sell up and move out. The Hindus would have already fled.
and serving as a check on federal power.
Crime is a check on the power of the State. Fuck the laws! Let's just rape and loot and commit arson as a way of subverting the Neo-Liberal Patriarchy.
Sanctuary communities in the United States and Europe have resisted cooperating with national immigration authorities in identifying and deporting undocumented immigrants.
The Church as taken a leading role in this. The concept of sanctuary arises from Canon Law.
Under the previous US presidential administration,
Obama's administration. This book was published in 2019.
communities in the state of Arizona resisted in the opposite direction, ignoring the federal government while implementing stern penalties on undocumented immigration.
About 29 percent of their population is foreign born or first generation American. I think this proportion will rise. Still, as Hispanics get increasingly reclassified as White, xenophobia there should decrease. The problem is that Hollywood won't accept that Hispanics are decent Church going people rather than crazy Cartel members who worship bloodthirsty Aztec gods.
Although no country can function if every community picks and chooses the laws they will obey, we will see that some decentralization in legislative powers to the community can be beneficial, especially if there are large differences in opinion between communities.
This already exists in the shape of 'Tiebout models'- i.e. different districts having a different mix of local taxes and 'club good' provision- which, ceteris paribus, should raise allocative and dynamic efficiency. Sadly, increased Knightian Uncertainty has complicated the picture. We don't know if current 'tech hubs' might not be wiped out by an innovation or scientific discovery which has just been made.
In 1987, Rajan joined the Tatas but soon left for America. At the time, the received wisdom was that a smart chap like him would do much better for himself overseas. Few would have predicted that some of Rajan's fellow IIM graduates would help create new industries and become billionaires.
Rajan writes-
The technological revolution has been disruptive even outside economically distressed communities.
No kidding! It is extremely fucking disruptive to discover that a guy like Adani, who dropped out of school at the age of 15, is worth 80 billion dollars! Rajan has done well for himself but he hasn't done that well. No wonder he likes Rahul who is now shouting himself hoarse against Adani and 'neech' people like the 'chai-wallah' who has usurped Mummy's throne.
It has increased the wage premium for those with better capabilities significantly, with the best employed by high-paying superstar firms that increasingly dominate a number of industries.
There is a Pareto law which becomes more extreme when the market is expanding rapidly. You can narrow wage differentials in a sick or dying industry. Where talent pools in a particular sector, there is 'synergy' and 'network effects'- i.e. external economies of scope and scale. This creates new Tardean mimetic targets. Why be an andoloanjeevi like the cretin Rahul when you can aspire to be an Adani?
This has put pressure on upper-middle-class parents to secede from economically mixed communities
i.e. places with lots of muggers
and move their children to schools in richer, healthier communities,
where the local police, or security companies, quietly kick in the heads of muggers
where they will learn better with other well-supported children like themselves.
There are better mimetic models in posh skools.
The poorer working class are kept from following by the high cost of housing in the tonier neighborhoods.
Wow! Rajan figured that all by himself! He truly is a genius.
Their communities deteriorate once again, this time because of the secession of the successful.
Actually communities deteriorate when poor immigrants move in or there is rent-control leading to a 'doughnut' effect. The same thing happens when rabid woke nutters get into City Hall and tax enterprises and the wealthy till they run the fuck away.
Technological change has created that nirvana for the upper middle class, a meritocracy based on education and skills.
Productivity. Rahul has plenty of education. His great skill is to keep Modi in power. That way Rahul won't meet the same fate as his Daddy and Granny.
Through the sorting of economic classes and the decline of the mixed community, however, it is also becoming a hereditary one, where only the children of the successful succeed.
Only the children of Soniaji can succeed in leading the Congress Party. Rajan is cool with that.
The rest are left behind in declining communities, where it is harder for the young to learn what is needed for good jobs. Communities get trapped in vicious cycles where economic decline fuels social decline, which fuels further economic decline . . .
Rajan is describing the India of his parents. His generation was encouraged to emigrate. The country would remain trapped in a Gandhi-Nehru-Pappu Yadav ideological quagmire.
The consequences are devastating. Alienated individuals, bereft of the hope that comes from being grounded in a healthy community,
emigrated to Amrika
become prey to demagogues on both the extreme Right and Left,
Rajan was eager enough to serve the demagogues of the Dynasty.
who cater to their worst prejudices.
Gandhi and Nehru, though personally very friendly to the Brits, catered to the worst prejudices the Hindus have about 'Mlecchas' who are probably draining our wealth by stealing the oil in our hair.
Populist politicians strike a receptive chord when they blame
Adani and Ambani? That's what Rahul is doing.
the upper-middle-class elite and establishment parties.
Gandhi dressed up as a peasant to appeal to the masses. Even Jinnah donned a sherwani.
When the proximate community is dysfunctional, alienated individuals need some other way to channel their need to belong.
Rajan ran away to Amrika and got his Green Card. He needed to belong to a White dominated Capitalist country. Now he is whining about 'community', though he has worked very hard to get away from his own community. As a fellow Tambram, I can't say I blame him.
Populist nationalism
like that of Gandhi, Nehru, Jinnah etc.
offers one such appealing vision of a larger purposeful imagined community— whether it is white majoritarianism in Europe and the United States,
Why can't those damn whites at least paint on black stripes like the Zebra? By refusing to do so they are engaging in majoritarianism. Biden must undergo gender re-assignment surgery so as to promote the minoritarianism of the Trans community.
the Islamic Turkish nationalism of Turkey’s Justice and Development Party,
Ataturk, of course, wasn't a nationalist. Also, he had gender reassignment surgery and painted black stripes on his body.
or the Hindu nationalism of India’s Rashtriya Swayamsevak Sangh.
Hindus should support Hamas. Why are they not clamoring for the establishment of a Global Caliphate? Majoritarianism truly is the pits.
It is populist in that it blames the corrupt elite for the condition of the people.
Rahul and Mahua are saying that the Indian power-elite is stealing from the poor to give to Adani and Ambani. Rajan has no problem with that.
It is nationalist (more precisely, ethnic nationalist, but I will leave the nitpicking for later) in that it anoints the native-born majority group in the country as the true inheritors of the country’s heritage and wealth.
Which is what the Palestinians are doing. Will Rajan denounce Hamas because it objects to Jews whose ancestors only began to immigrate to Palestine about a 130 years ago?
Populist nationalists identify minorities and immigrants—the favorites of the elite establishment—as usurpers, and blame foreign countries for keeping the nation down.
There were plenty of 'populist nationalists' in the UK from the 1880s onward even though the country was 'top dog' and regarded immigrants as a valuable resource. (Though staunch Imperialists, like the Indian MP, Bhownagree, supported curbs on Jewish immigration)
These fabricated adversaries are necessary to the populist nationalist agenda, for there is often little else to tie the majority group together—it is not really based on any true sense of community for the differences between various subgroups in the majority are usually substantial.
Very true. Churchill fabricated adversaries like the Kaiser and then Hitler. There was never any such thing as a German Army. During the Blitz, the RAF bombed British cities and blamed the Luftwaffe. Look at Zelensky. He is pretending that the peace-loving Putin has sent sociopathic mercenaries to invade his land. As for India, when did Pakistan or China ever attack India? This is all a myth cooked up by the RSS.
Populist nationalism will undermine the liberal market democratic system that has brought developed countries the prosperity they enjoy.
Though populist nationalism replaced Emperors and Popes who had no truck with liberalism or financial markets or democracy. Still, it is true that Rajan's grandparents were wrong to demand independence from the House of Windsor. But this was only because the House of Nehru was shittier.
Within countries, it will anoint some as full citizens and true inheritors of the nation’s patrimony while the rest are relegated to an unequal, second-class status.
Which is why Rajan was in a hurry to emigrate to Amrika where the police are very good at shooting darkies.
It risks closing global markets down just when these countries are aging and need both international demand for their products and young skilled immigrants to fill out their declining workforces.
Rajan wrote this before Putin invaded Ukraine for the second time. He had got away with seizing Crimea in 2014 because of 'the war on terror'. Rajan doesn't seem to have objected to his tax money going towards the slaughter of 1.3 million Muslims.
It is dangerous because it offers blame and no real solutions, it needs a constant stream of villains to keep its base energized,
Rahul certainly thinks Adani is a villain. Oddly, he also seems to hate Aishwariya.
and it moves the world closer to conflict rather than cooperation on global problems.
What moves the world closer to conflict is invading armies or crazy terrorists.
While the populist nationalists raise important questions, the world can ill afford their shortsighted solutions.
Does Rajan have any solutions? No. He says 'Communities are very nice. Be nice to your neighbor. It is nice to be nice but not to the fucking RSS because they are Hindu, rather than Chinese, nationalists.'
You may ask, what is wrong with saying 'it is nice to be nice'? Surely virtue signaling is still a useful signal if people will pay for its product- e.g. this shitty book?
The answer is that virtue signaling is bad if it is done by a Professor who is spouting ignorant shite. Consider the following
Schools, the modern doorway to opportunity,
in ancient times, if you went to skool, the door of opportunity was shut and barred against you- right?
are the quintessential community institution.
No. In most countries they are the quintessential State or State funded institution though, if the State Schools are shitty enough, people may have to send their kids to private schools with poor facilities.
Why shouldn't 'communities' set up and run their own schools? This does happen in some areas at the primary level. But why isn't it more common? The answer is that there are 'externalities' and 'coordination problems' which require State intervention. Poor communities will underinvest in education more particularly if many of the young are bound to move elsewhere. Also, some will be disadvantaged because they were not taught to a common curriculum. There is a better 'correlated equilibrium' based on public signals from the Government. That is why, even in laissez faire England of the first half of the Nineteenth Century, there was a demand for capitation grants, a set curriculum, common examinations and a system of School Inspectors.
The varying qualities of schools, largely determined by the communities they are situated within, dooms some while elevating others.
No. What determines the quality of the school is resource allocation and discipline. Thomas Sowell mentions a Black School whose alumni did as well or better than those of comparable White Schools. Sadly, the Black School had higher attrition rates for socio-economic reasons. Later, after de-segregation, that School declined. Better educated Black teachers (who were trapped into teaching there because of prevailing bigotry) were replaced by stupider, less educated Whites.
When the pathway to entering the labor market is not level, and steeply uphill for some, it is no wonder that people feel the system is unfair.
No. People understand that the distribution of income and wealth has nothing to do with their notions of fairness. It is a different matter if the law compels the Government to spend money to improve educational outcomes but that money gets stolen or misspent. In India, since it is difficult to sack teachers in State Schools, many refuse to teach or else have bogus credentials and thus are unable to do so.
They then are open to ideologies that propose abandoning the liberal market system that has served us so well since World War II.
We have had a mixed-economy since 1945. High inflation and 'fiscal drag' during the Seventies caused a popular revolt which led to the rise of Reagan, Thatcher etc. However, the State's share of the economy (if you include legislatively mandated 'compliance costs) has probably risen (though this does not take account of the offshoring of income and wealth).
The way to address this problem, and many others in our society, is not primarily through the state or through markets.
There is no third way. If the people of a community say to each other 'let's set up a truly excellent school so all our kids will become IT mavens or medical doctors', they will fail unless some billionaire provides the funds. Things may be different in a very affluent area but it is a pipe dream to suggest that some rural shithole can create a school which is the equal of Eton.
It is by reviving the community and having it fulfill its essential functions, such as schooling,
Very true. Essential function of the hunter gatherer community is running a school which is better than Eton or Harrow.
better. Only then do we have a chance of reducing the appeal of radical ideologies.
Killing or incarcerating such ideologues reduces their appeal. On the other hand, if material standards of living are rising and no existential national security threat is on the horizon, people are less inclined to give ear to ranters. This is why Rahul's antics are actually helpful to Modi.
We will examine ways of doing this, but perhaps the most important is to give the power the state has steadily taken away back to the community.
The community was previously allowed to burn witches and chop off the dangly bits of those they didn't like. Sadly, the State put an end to such pleasant pastimes.
As markets have become global, international bodies, driven by their bureaucrats or the interests of powerful countries, have drawn power from nations into their own hands, ostensibly to make it easier for global markets to function.
But if the Judiciary- which is a branch of the State- is shitty at enforcing Treaty Law, then the thing does not matter in the slightest.
The populist nationalists exaggerate the extent to which power has migrated into international bodies, but it is real.
Only if the State enforces Treaty Law. The UK could have avoided Brexit if it had simply cheated like other countries.
More problematic, within a country, the state has usurped many community powers
Previously, the good folk of my village had their own nuclear deterrent and aircraft carriers. The State usurped this power of ours. Fuck you State! Fuck you very much!
in order to meet international obligations, harmonize regulations across domestic communities, as well as to ensure that the community uses federal funding well. This has further weakened the community.
No. A community is stronger if it is protected from external and internal threats and if 'coordination problems' have 'universal' Muth rational solutions.
We must reverse this. Unless absolutely essential for good order, power should devolve from international bodies to countries.
Those countries will then find it expedient to create multi-lateral or even international bodies. It is all very well to say 'by getting rid of the wheel, communities will once more thrive because people won't be able to walk very far from home'. The problem is that even if you succeed in getting rid of the wheel, it will be re-invented.
Furthermore, within countries, power and funding should devolve from the federal level to the communities.
This is 'subsidiarity'. Will Rajan go on to talk of the economics behind 'Tiebout sorting'? No. He is merely virtue signaling. There is no intellectual content to this book.
Like many vapid libtard Indian Professors, Rajan witters on about not 'Constitutional patriotism' but
CIVIC NATIONALISM Instead of allowing people’s natural tribal instincts to be fulfilled through populist nationalism, which combined with national military powers makes for a volatile cocktail,
No. It makes for a country free of the danger of invasion, insurrection, civil war or ethnic cleansing.
it would be better if they were slaked at the community level.
It can't be because of economies of scope and scale. Some nations- e.g. India may be militarily and economically viable even if 'non-aligned'. But most nations don't have that luxury. As for communities, they would soon perish if left to defend themselves. Even the valiant Ukrainians need a lot of help to hold Putin's hordes at bay.
Still, Rajan is right that communities in Arunachal Pradesh should be allowed to 'slake' their patriotism by battling the Chinese People's Army all by themselves.
One way to accommodate a variety of communities within a large diverse country is for it to embrace an inclusive civic definition of national citizenship— where one is a citizen provided one accepts a set of commonly agreed values, principles, and laws that define the nation.
This has already happened. However, in most countries there is no requirement to agree to shit. It is a different matter that you may be punished for waging war on the State.
It is the kind of citizenship that Australia, Canada, France, India, or the United States offer. It is the kind of citizenship that the Pakistani-American Muslim, Khizr Khan, whose son died fighting in the United States Army, powerfully reminded the 2016 Democratic National Convention of, when he waved a copy of the United States Constitution.
Khizr Khan had moved to Dubai to earn money so as to be able to emigrate to the US. As a dual-citizen, he chose to brandish the US Constitution rather than the Islamic Constitution of his other country. Nothing wrong with that. But his story- and that of his son who joined the Army to earn money for Law School- is about Markets and the State. It has nothing to do with 'Community'.
That document defined his citizenship and was the source of his patriotism.
It was a Supreme Court decision, not the Constitution which established 'citizenship by birth'. Previously, Chinese origin people born in the US were being excluded from re-entry despite the 14th Amendment.
However, the source of Khizr's patriotism was his desire to move from Dubai, where he was doing well, to America where he and his children would do even better. Nothing wrong with that at all. What isn't true is that one day, Khizr Sahib was browsing in the library and came across a copy of the US constitution. As he read it, he fell in love with America. He rushed home to tell his wife and kiddies to pack their bags. 'Hubb al watan min al-Imam'- love of country is part of religion, even if the country you love is far away. What matters is whether or not its Constitution gets you hard.
Within that broad inclusive framework, people should have the freedom to congregate in communities with others like themselves.
This costs money. If they have it, no problem. If not, they are fucked. I wish to congregate with super-models in expensive night-clubs. Sadly, I am poor and few believe that I am actually Kendall Jenner.
The community, rather than the nation, becomes the vehicle for those who cherish the bonds of ethnicity and want some cultural continuity.
But that community may have to relocate to a place where the State will protect them from murderous mobs.
Rajan gives the example of Pilsen, in Chicago, as an area that pulled itself up by the bootstraps. Once the area became thoroughly Hispanics and the Churches and local community leaders got behind a 'Resurrection Project', it has certainly turned a corner. But this is because Hispanics are hardworking, Church going, and have strong family values. It took some time for immigrants to assert themselves against criminal gangs and a corrupt and incompetent City Hall.
Is there a moral here? Certainly. Koinonia- community- is only good if it is on the basis of Sacred and Family based values. Just babbling about communities is useless. Some ought to decline or will do so regardless of their virtue. Others will burgeon. Both the Market and the State can support better outcomes but only if people are willing to pay for it. There is no magic money tree. Rajan should explain that to Rahul. Sadly, RSS has brainwashed that moon-calf. He is now saying he is a janeodhari Brahmin! Chee Chee! That is totes majoritarian. He should have gender reassignment surgery and paint black stripes on this body and campaign for the establishment of a Global Caliphate. The only reason he is not doing so is because, as a Member of Parliament, his 'proximate community' is heavily Hindutvadi.
It must be said, in an educational context it makes sense to speak of the 'external' costs and benefits of physically interacting with other students. Go to school with dullards and you yourself might become dull. Go to a top school and you and your chums might soon be ahead of your teechurs. Sadly, we can't say in advance if a guy like Modi, who got his degrees as an external student, will be better or worse than a chap- like Rahul- who went to the best Schools and Colleges.
THE PROXIMATE COMMUNITY We are shaped by the people who surround us.
Unless we choose a 'mimetic target' far far away. I myself decided to quit Chanakyapuri and try my luck in Hollywood. 'Pretty Woman' is based on my youthful struggles in that City. True, I wasn't a hooker but rather an external auditor and I was in London rather than LA. Still, no one can deny that Julia Roberts closely copied my mannerisms in that film of hers.
Our joys are more pleasurable when they are cherished by our friends, our successes more enjoyable when they are applauded by those whose opinions we care about, our protests are less lonely and our indignation less unsure when shared by our supporters, our hatreds more corrosive when goaded by fellow zealots, our sorrows less burdensome when borne with our family.
The opposite is equally likely. I recall telling an old college buddy whom I bumped into on the street about the daring speculation by which I was able to make a profit of ten thousand pounds. Then I Googled him and found out that fucker was a billionaire.
Moreover, we gauge our actions based on how they affect people near us, on the indentations our actions make on their lives.
This is not the case with our important actions. You take the job which pays best even if people near and dear to you would prefer to watch you suck off hobos.
Without such effects, we would be ephemeral passersby, with little evidence of ever having existed.
No. By ignoring the opinions or needs of people around you, you can make something of your life. However, this may involve relocating so as to enjoy a more dynamic 'proximate community'.
Each one of us draws from multiple overlapping communities that help define who we are,
No. We make choices. Rajan quit the Tatas to emigrate. He couldn't remain with the Tatas while being a Professor in Amrika.
that give us identity over and above the core we think is uniquely us.
That core is our body. Different predicates apply to it at different times and in different contexts. But our identity remains singular and unique. It isn't really the case that I am Kendall Jenner.
There are varieties of communities, some more tightly bound than others. A community could be a group of people who are linked together by blood (as a family or clan)
This would be true of endogamous sects or sub-castes. However, 'mixed marriages' tend to dissolve the 'community' as opposed to biological aspect of the identity class.
or who share current or past physical proximity (as people in, or having emigrated from, a village). A community could be those who have a common view on how to live a good life (as in a religious sect),
this is not necessary. People with very different ideas of how to live well in this world, may still want to go to the same 'Good Place' after death
share a common profession (as in the movie industry),
you have colleagues but those colleagues don't constitute a community save if they face a pressing collective action problem.
or frequent the same website or chat groups (as in my college alumni group, where everyone seems to have a different opinion on everything that they absolutely must express). Each one of us has multiple identities, based on the groups we belong to.
Sen-tentious shite! We have one identity though many predicates can be applied to it.
Moreover, some of us have virtual identities in addition to real ones.
Mine is that of a super-model. Honeytits Cumbucket is my 'Only Fans' screen-name.
As communication has improved, and transportations costs have come down, more distant communities have gained importance.
Rajan's ancestors belonged to the Brahmin community. Even with poor communications and high transportation costs, there was a remarkable homogeneity re. orthodoxy and orthopraxy within it across the length and breadth of the sub-continent.
For some of us, these communities may be much more important than our neighborhood.
Which is why, during Partition, millions fled from their murderous neighbors.
Indeed, a central concern in this book is about the passions that are unleashed when an imagined community like the nation fulfills the need for belonging that the neighborhood can no longer meet.
Rajan thinks Islam was an 'imagined community'. He should very kindly explain this to Owaisi. The truth is nations and religions existed before any extant neighborhood was created.
Nevertheless, we will focus on the proximate community for much of the book for a variety of reasons.
There is only one reason to do so. Virtue signaling. Rajan is pretending that Markets and the State are very evil. We should return to the autarkic village existence Gandhi advocated. There would be no Hindu or Muslim or invidious distinction between Mummy and a nice she-wolf who might want to raise you up alongside her cubs.
Through most of history when distances really mattered, it was the only kind of community that had a serious influence on most people’s lives.
Nope. We now know that the influx of agriculturists could lead to the almost complete replacement of indigenous hunter-gatherer populations. At the time of the great 'folk wanderings' of the Dark Ages, vast territories came under the sway of invaders who imposed their own language or religion. Neighbors might band together but Atilla's or Genghis's hordes slaughtered them easily enough.
Even today, it is where much economic activity is centered.
No. We produce for a global market. It is not the case that Rajan's neighbors buy his books in return for which he introduces their children to nice she-wolves willing to raise them up alongside their own cubs.
For most of us, the neighborhood is still what we encounter every day, and what anchors us to the real world.
Not if you have a job. You know your colleagues pretty well. You may not know your neighbor at all.
It is where we participate as sociable humans, not as clan members,
clan members are anti-social beasts
coreligionists, professionals, or disembodied opinions on the web.
In which case, few who read this book are 'sociable humans' even if we don't have jobs. This is because our neighbor's work for a living and are less than delighted if you invite yourself to dinner more particularly if it is four o'clock in the morning.
It is where we have the best chance of persuading others that our humanity unites us more than our ethnicity, profession, or national origin differentiates us.
Rajan spends hours every day haranguing the residents of his apartment building on why they should look upon him as a human being. 'I am not an animal!' is his cry. They pretend to be persuaded.
It certainly is where we debate and persuade as we elect officeholders and participate in the governance of the local public services that affect us.
This may be true of Rajan. Sadly, where I attempt to debate with the good folk down the boozer, they tell me to fuck off. This is probably because they think I am a camel, not a Tamil.
It is where we congregate to start broader political movements.
Rajan congregated to Amrika to start broad political movement- thinks nobody at all.
As we will see later in the book, a healthy, engaged, proximate community
which you have to pay a lot of money in property taxes and mortgage payments to belong to
may therefore be how we manage the tension between the inherited tribalism in all of us
Rajan is a Red Indian. He used to scalp White people. Thankfully, he has now buried the hatchet and smoked the peace pipe because of the nice 'proximate community' he has bought his way into.
and the requirements of a large, diverse nation. Looking to the future, as more production and service jobs are automated, the human need for relationships and the social needs of the neighborhood may well provide many of the jobs of tomorrow.
Servants, handymen, prostitutes, Indian economists who knock on our door to persuade us that they aren't camels.
In closely knit communities,
there's a lot of incest
a variety of transactions take place without the use of money or enforceable contracts.
Uncle raping you is an example.
One side may get all the benefits in some transactions. Sometimes, the expectation is that the other side will repay the favor, but this may never actually happen. In a normal family, members typically help one another without drawing up papers and making payments.
Which is why, if those 'normal families' get rich, they spend a lot of time suing each other. Look at the Hindujas.
In many societies, friends don’t really care who pays the bill at dinner, indeed the ability to not keep count is the mark of true friendship.
This is true if the cost of the dinner is a small fraction of the value of the time you are spending.
Contrast transactions within a community with a typical market transaction. I just bought a bicycle tire tube. I searched for one of adequate quality at a reasonable price through an online platform, paid by credit card, and the tube was delivered within the time promised. Even though this transaction took little time, there is an elaborate explicit understanding or contract behind it. If the tube is not delivered or it proves defective, I have contractual remedies. The transaction is arm’s length and one-off. Neither the seller nor I know each other. Each one of us is satisfied we are better off from the transaction even if we never transact again. We do not look for further fulfilment through a continuing relationship. The more explicit and one-off the transaction, the more unrelated and anonymous the parties to the transaction, and the larger the set of participants who can transact with one another, the more the transaction approaches the ideal of a market transaction.
There is no 'hold out' problem on open markets
The more implicit the terms of the transaction, the more related the parties who transact, the smaller the group that can potentially transact, the less equal the exchange, the broader the range of transactions and the more repetitive transactions are over time between the same parties, the more the transactions approach a relationship.
In which case, I am in a relationship with Jeff Bezos. I should sue him for palimony.
The thicker the web of relationships tying a group of individuals together, the more it is a community.
Or a Gulag or slave plantation.
In a sense, the community and the market are two ends of a continuum.
Only in the sense that rape and murder are at the center of that continuum
In his magisterial work, Gemeinschaft und Gesellschaft (“Community and Society”), nineteenth century German sociologist Ferdinand Tönnies
who thought people in a Community subordinated themselves to the Group's goal. The "essential will" ("Wesenwille") of the individual is whatever the Community says it should be. Hitler would have agreed.
argued that in a community tied together by strong relationships, individual interests are suppressed in favor of the collective interest whenever these interests diverge.
Only if there are punitive sanctions. There are plenty of communities tied together by strong relationships where anarchy prevails. Indeed, the system of collective punishment or the levying of 'blood money' on an entire clan was a step towards the establishment of a 'Stationary Bandit' who would make a profit by 'netting out' such claims between clans and gradually enforcing his own laws, again for a profit.
By contrast, in a market transaction, “nobody wants to grant and produce anything for another individual, nor will he be inclined to give ungrudgingly to another individual, if it not be in exchange for a gift or labor equivalent that he considers at least equal to what he has given.”
Nonsense! The drug-pusher gives you drugs for free to get you hooked. But 'streaming services' too offer you a free trial period. We give ungrudgingly if we know that the other will come to depend on us and thus have to remunerate us properly.
In this sense, only individual interests matter, and they have to be met transaction by transaction.
No they don't. There are plenty of mechanisms by which 'memory-less' equilibria are improved by various public signals which simulate such memory. Large firms use algorithms to build 'relationships' even with small fry customers like me. It isn't really the case that Sky TV loves me very much and keeps wanting to reward me for being a 'VIP customer'. Some computer algorithm is entrusted to massage my ego and retain me as a customer.
Rajan seems to think that geographically 'proximate' communities have some intrinsic virtue. Perhaps they do. The problem is that we live in a world of scarcity. If our productivity is lower then sooner of later our command over resources declines even if we spend a lot of time hugging and kissing our neighbors. Modern economics begins with Malthus. Rajan, who ran away from an over-populated shithole to a country where productivity was high, should understand this better than most.
A question economists of my generation (I am the same age as Rajan) must answer is why China soared ahead of India. After all, thanks to Mao, in 1990, China had lower per capita Income. When Edwin Lim from the World Bank moved from China to India, he thought India could grow much faster because it already had many of the things that China was desperately trying to acquire. Indeed, Mao had told Nehru, back in 1954, that India was ahead. Why did India do so badly compared to China? The answer is simple. Productivity. China wanted to raise it by any and all means- though, no doubt, under Mao, some of those means were as stupid as shit. Indians worried about the distributional consequences of letting vulgar little traders or artisans rising up and become super-rich.
Rajan takes a different view-
WHY INDIA HAS NOT DONE AS WELL AS CHINA- China and India used to be sleeping Asian giants, but China awoke first.
Sun Yat Sen wanted China to get rich by raising productivity. Gandhi wanted India to retreat to autarkic villages. Later, when China began to embrace the free-market, Edwin Lim of the World Bank tells us that they were even ready to work with the Japanese- whom they hated- if the Japs were the most productive in a particular sector. But then the Japs themselves had emulated higher productivity America in the Fifties.
Development is about Tardean mimetics. Find the guy who is doing best and try to mimic what he is doing. Sadly, the credulous Indians thought Stalin and Mao were the guys doing best even though millions of their people kept starving to death.
They used to be equally poor, but now China has raced ahead. China’s initial advantages of a healthier and better educated workforce were perhaps more important in the early flush of liberalization,
China had suffered terrible famines, Civil Wars and ferocious invading Japanese troops. That is why, if the Chinese were healthier and better educated it was only because of Darwinian survival of the fittest.
The Communist Party had to wade through an ocean of blood to establish its rule. In India politics was a tea-party, though Gandh & Co would occasionally go sulk in jail, and the administration which the Brits handed over to the Indians was pretty much idiot-proof. Nehru showed ruthlessness in slaughtering Muslims and Commies if they wagged their tail which is why Mao wanted to meet him. Sadly, Nehru didn't want to raise productivity. True, he had some sort of magical belief in 'heavy industry' but productivity is about capacity utilization and making a fucking profit so as to do capital widening and deepening. Also, what agricultural shitholes should do is get girls out of the villages and into giant factory dormitories till there is demographic transition. True, there will be a rising class of producers who will want lots of TV Channels and Temples and nice things to eat, but what the Stationary Bandit should understand is that, as Joan Robinson said, you first have to plant the tree and let it flourish before you can grab all the fruit. Even then, it is more sensible to just take some of the fruit so as to create an incentive for fruit production. What India should have done is taxed export industries just enough to provide better infrastructure while letting the more productive to gain in material terms.
and its lack of a competitive market or private property rights were not disadvantages—
yes they were! That's why South Korea and Taiwan shot up while Mao's China went through a big famine.
indeed, they allowed the state to push favored industries.
This failed. The binding constraint was foreign exchange. China's ship building industry was a joke compared to South Korea in the Seventies and even the early Eighties.
Construction is probably the most important sector in the early phases of industrialization.
No. It is wage-goods- e.g. textiles. India chose to strangle the textile sector in the Fifties. Construction only matters at a later point when people have the money to build 'pucca' houses. I should explain in India 'construction sector' is defined as 'Real Estate and Urban development'. It was only in 2009 that a separate Ministry for Highway construction was created.
It is a sector that employs unskilled workers—and hence can absorb many that leave agriculture.
Mills can employ rural girls with zero education. The same is true of the more docile type of male. But a spell of military service for boys greatly raises their employability as Japan found.
Why did India not do more highway construction in the Fifties and Sixties? One answer is that there was a paucity of cars and trucks. The other problem was that people firmly believed that once the Highway got out of sight of the State Capital, the contractors would steal all the money. Rajan must have heard stories from his Uncles about how they tried to drive down a Highway which the Chief Minister had just inaugurated and discovered there was no fucking highway- not even the sort of kaccha road that zamindars had been forced to maintain.
It is also a sector that contributes to the growth of other sectors, as businesses spring up to make use of the infrastructure. For example, it is quite magical in India to see the economic growth of a village as a good allweather road is built connecting it to the city.
That is transport infrastructure, not construction. A.O Hulme, who founded the Indian National Congress back in the Eighteen Eighties, explained in his book on Indian agriculture that the State needed to devise new taxes (and get rid of the 'Permanent Settlement') so as to set off a virtuous circle of infrastructure investment leading to higher tax yields which in turn leads to more and better infrastructure. Hulme was foolish enough to think that Hindu barristers wanted their country to rise in this manner. All they wanted was to talk bollocks, preferably while occupying one of the nicer bungalows the Brits had built for themselves.
The Indian State still does not understand that it isn't Santa Claus. It is a 'Stationary Bandit' which should use tax revenue so as to get more tax revenue in the future.
The road allows trucks to transport goods to the city quickly,
only if trucks are available
so farmers undertake new activities like dairy and poultry farming and horticulture.
only if this enables them to have a higher material standard of living
As they get richer, shops selling packaged goods and clothes open up in the village.
Only if they get richer. India didn't want its farmers to get richer because they would then want a bigger share of political power. Instead of chaps with Oxbridge accents, you'd have rustics in Parliament jabbering away in some ungodly vernacular dialect.
Soon a kiosk starts selling prepaid cell phone cards, and not too long afterward, the village gets its first bank branch. Construction thus multiplies jobs and facilitates development.
Infrastructure does that. It doesn't matter if people live in shacks.
Perhaps the most obvious consequence of their starting conditions is that China has been able to expand its construction sector enormously, while India has been less successful.
It was only in the Eighties that the Chinese got serious about Highways.
China has moved ahead because it has been able to fund construction projects with cheap credit, and land acquisition has not been problematic because all land belongs to the state.
Edwin Lim says that the World Bank could have provided cheap credit for infrastructure. Sadly 'andolanjivi' activists were better rewarded for preventing development than guys like Montek Singh Ahluwalia. That is why Manmohan tried to crack down on these foreign funded NGOs.
In India, by contrast, credit comes at market rates.
Because the bureaucrats- even those of the World Bank- are afraid of the 'andolanjivis'. Thus Adanis and Ambanis do the infrastructure using funds provided by the nationalized banks. To say this is at the 'market rate' is howlingly funny.
More important, any new project requires a painful and long acquisition of the necessary land from owners. If land rights are not well established, it can take even longer. The time delay involved itself undermines the economics of the project. While the law permits forcible land acquisition for public projects like roads and airports, opposition politicians, sensing the political opportunity, are always willing to organize protests against these.
Why mention 'opposition parties' when 'andolanjivis' are bad enough?
India’s well-developed civil society, with each organization fighting for a special cause, often joins in. If the Indian state were effective, then these elements would provide an appropriate check on its power—indeed, Indian land acquisition laws are models of trying to balance the rights of the owner against the imperatives of development. The state, however, is ineffective, so land acquisition, and hence construction, is unduly delayed.
The bureaucrats are timid. The politicians are nervous of the 'andolanjivis'. The Courts add an extra layer of capricious delay.
India’s infrastructure projects are, for the most part, too little and too late. In the early stage of growth, China has had an advantage.
No. The Chinese knew they were at a massive disadvantage. They imported White English teachers and relied heavily on the Chinese diaspora to begin to rise. Thankfully, they slaughtered the pro-Democracy students and thus prevented the West from fucking them up pre-emptively. Hilariously, they even hoodwinked Jimmy Carter into helping finance some supposed 'grass-roots' democratization! However, it was 9/11 which was the game changer. The Americans took their eye of the ball permitting China to rise. By about 2012, they were in a position to tell Carter & Co to fuck off anytime they started gassing on about Yuman Rites or Tibet or Democracy.
India needs to speed up land acquisition.
It needs to kill people who make a nuisance of themselves. Just one or two will do. Andolanjivis can always find some other cause to get excited about.
It would be tempting but shortsighted to lighten protections for the land owner. That would only bring the politician in to agitate against acquisitions that are deemed arbitrary in the court of public opinion. Instead, India needs to make the land owner a partner in development by giving them back a share of the developed land, as some Indian states are doing successfully.
There is still the problem of nuisance law suits and crazy andolanjivis running amok. Look at Singur. The people there thought Mamta would get them more money. Instead they got shafted. The 'hold out problem' here arises out of the interessement of 'Civil Society' and ranting politicians- like Rahul in his new incarnation as the Messiah of the Backward Castes.
It could also focus some of its limited state capacity on establishing clean property rights in land, thereby easing ownership and sale, while giving up other activities it does less well, such as running an airline or bank. If it does this, India has plenty of easy catch-up growth still ahead of it, building roads, ports, railways, airports, and housing. Moreover, if it continues improving the education of its youth—and the quality of their learning needs to be the focus going forward—it will have the lowcost labor and the infrastructure to establish a larger presence in manufacturing, to add to its capabilities in services.
Fuck that. Reduce expenditure on higher education and the dream of getting into the IAS. Just raise the participation rate for rural girls by shifting them into big factory dormitories. Don't subsidize their remaining in Malthusian shitholes even if they all get MPhil in Gramscian Grammatology from JNU.
Given the right reforms, India can still grow strongly for a long while. And with its vibrant democracy, it is probably better positioned than China for growth once it closes in on the frontier. It needs to get there first, though.
So, Rajan thinks that first you have to get to the frontier after which you can close in on it. That's the sort of thinking which can get you a Nobel Prize in mathematical economics- provided you are brown and say 'boo to Modi!' on a regular basis.
One final observation. China saw a great expansion of literacy in the first Millennium. Unlike India, where literature was either courtly or religious, Chinese literary culture aimed at creating a patriotic 'Mandarin' class. But affluent merchants, artisans, etc, invested in that type of education because it was and remained a 'positional good'. Thus Chinese 'koinonia' was always patriotic and nationalistic rather than religious or other-worldly. Productivity was a good thing. The Magistrate who 'ruled without ruling'- i.e. by letting the productive element rise- was able to send back lots of money to the Capital. On the other hand, 'rain-cycle' based famines (which India also experienced) had a direct political effect. The Mandate of Heaven was withdrawn when the rains failed and there was large scale agricultural distress leading to rebellion. In India, sadly, drought and dearth could be blamed on God not the King. I suppose one might say that China's relative homogeneity is a product of its literary culture. On the other hand, we must admit that the first Utilitarian was Moh Tzu, whom we might call an engineer, who sought to spread peace by giving Cities defensive technology. Thus, underneath a Confucian overlay (which stressed filial piety) there has always been an utilitarian aspect to Chinese thought. There is no reason why India should not adopt a pragmatic 'Arthashastra' which allows the Vyadha (butcher or meat vendor) to live in affluence indifferent to the strictures of Pundits or Princes, while tasting the honeyed wisdom of the Chandogya.
To end on a personal note- I recall Mrs. Thatcher's attempt to impose a 'Community Charge' (poll tax) on me. I protested vociferously that I would gladly pay to leave the shitty community where, because I was poor, I was obliged to reside. It seems the vast majority of Brits agreed. The poll tax was scrapped. My point is that communities can be shitty or, if they actively emulate nicer communities, they might be worth paying to be part of. Koinonia is a function of the mysterious economy by which the Day of Wrath is held at bay by our seeking to emulate the more successful. I myself spent the first fifty years of my life trying to persuade my Mummy that she was actually Indira Gandhi- in which case, I, not some Gujju, would be PM. Sadly, this also meant that I became as stupid as Rahul- albeit without the advantage of an MPhil in 'Development Studies' from Cambridge.
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