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Why Jagdish Bhagwati is perhaps not correct

Debraj Bhattacharya

Updated: July 25, 2013, 7:00 PM IST
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"I also believe that the Gujarat template is ideal: its people believe in accumulating wealth but they believe also in using it, not for self-indulgence but for social good. This comes from the Vaishnav and Jain traditions that Gandhiji drew upon as well. The best "foreign" model of this type is exemplified by my most distinguished Columbia University colleague, Simon Schama, who wrote about the Dutch burghers who had similar values and lifestyles. It is also a great model for India, I believe."

Jagdish Bhagwati, Why Amartya Sen is Wrong

Jagdish Bhagwati, a noted economist, has recently written an essay in 'Mint' titled "Why Amartya Sen is Wrong" where he has launched into an attack on the new book by Jean Dreze and Amartya Sen, "An Uncertain Glory: India and its Contradictions". My wife recently bought the book and I have just finished reading it. After reading the book and then reading Bhagwati's essay I must say I am stunned by the misinterpretation of the book. The personal attack that Bhagwati has made in the essay is unfortunate to say the least. He also makes certain claims which are strange. For example - he started working on gender issues before Sen. Good, but what is the point?

For those who have not read the book as yet, let me clarify that the book nowhere says that India's growth is undesirable or that liberalization is something bad. There are other economists and commentators who have made such arguments but not Sen and Dreze. In their earlier work also they have taken a middle ground between "market mania" and "market phobia" to use two of their terms. Also it will be a mistake to think that Sen is a "leftie" i.e. Marxist, as he has extensively quoted Adam Smith and not Marx to justify his position. If one has to pin down Sen from an ideological perspective then one can say that he is a Social Democrat rather than a Communist or Marxist. The book has favoured economic reforms such as ending "license raj" but goes on to argue that economic reforms have not resulted in provision of basic services to the poor such as education and health care and India must concentrate on these issues along with attempts to improve growth rate.

The argument that Sen and Dreze make for improving health care and basic education is also backed by historical evidence from different parts of the world, especially China and Japan and other East Asian countries and also countries like Brazil and other BRIC countries. They have argued that, there is a consistent historical trend that the countries which have made a transition from "third world" to "first world" have a history of spending on and successfully achieving a minimum level of human development (basic healthcare, education etc) for all its citizens in order to achieve sustained economic growth over a period of time. They have also given examples of three Indian states - Kerala, Tamil Nadu and Himachal Pradesh - which have invested in human development are as a result now have remarkably low poverty.

Unfortunately Bhagwati has not tried to challenge the historical claim regarding East Asian countries that Sen and Dreze make. Nor has he tried to show how a country such as India, which is largely dependent on internal market rather than export, can continue to grow if a large section of the population simply cannot have their basic needs of life fulfilled.

There is an assumption in what Bhagwati has written that if an economy (read GDP) keeps growing it will ultimately lift people out of poverty. He does not however explain how when the global economy is facing a recession, Indian economy will keep growing at double digit rate and for how long.

What is even more bizarre is that he has tried to project a "Gujarat model" as ideal. To do this he has quoted famous historian Simon Schama and I think landed him in a soup. Let us for the sake of argument assume that Bhagwati is right about Gujarat's "Vaishnav and Jain traditions" that believes in making money and also sharing that money. His own argument is that this is a historical phenomenon. So how can this be replicated in, say, Arunachal Pradesh? So in order to make the "Gujarat model" replicable one would need to transplant the "Jain and Vaishav" tradition into Arunachal Pradesh? Clearly this is not possible. Poor Professor Schama, I feel sorry for one of my favourite historians!

Secondly, the performance of Tamil Nadu in terms of growth and human development is much better than that of Gujarat. There is no controversy about this. But this has nothing to do with Jain and Vaishnav traditions. Similarly when Chhattisgarh improved its PDS system to be among the best in the country it was done not because of following a Gujarat model. Surely there's lot of good things about Gujarat, but no state in India can be considered an "ideal model" for rest of the country. Every state has to find its own way to achieving development goals. Neither Gujarat model nor Kerala model will work in all states, but there are lessons to be learnt from all success stories. Incidentally, the growth rate of Sikkim is more than that of Gujarat, so Bhagwati may take a look at the "Sikkim Model" as ideal for India.

In another important way the "we must grow first and then redistribute" argument is a purely academic exercise. India is committed to achieving the Millennium Development Goals. In 2015 this round of MDG will be over and it will become clear as to which country has achieved the MDG targets and which have not. If India fails to achieve them then it will be a national shame. India's claim to be an emerging superpower will be laughed at in the international arena.

Surely those who hate the "lefties" but love their country would not like to see this happening.
First Published: July 25, 2013, 7:00 PM IST