The Clash Between Two Famous Indian Economists Echoes Larger Battle

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Subhendu Ghosh / Hindustan Times via Getty Images; Antoine Antoniol / Bloomberg via Getty Images

Nobel laureate Amartya Sen, left, and Jagdish Bhagwati, professor of economics at Columbia University

Not often does an economists’ spat make the evening news. Yet that’s precisely what happened earlier this month in India, where breathless correspondents have recorded in tit-for-tat detail the very public tiff between Jagdish Bhagwati and Amartya Sen. It’s not the first time that the India-born Ivy League professors — Bhagwati teaches at Columbia University, Sen at Harvard — have been at opposite poles over the economic direction of their motherland. But their divergent views on how to lift millions out of poverty is more than a mere academic feud — it reflects the uncertain future of Asia’s third largest economy.

An abridged version of the clash of the economic titans goes like this: Bhagwati argues that continuing the market reforms started when the Indian economy liberalized in 1991 will help create the growth needed to bring more citizens out of poverty. Sen, a Nobel laureate, argues that focusing on growth alone is not enough, and that public expenditure on social programs, especially health care and education, is vital to help the country meet its full potential. The long-running chicken-and-egg debate was revived earlier this month after the Economist reviewed An Uncertain Glory: India and Its Contradictions, Sen’s recent book co-authored with Jean Drèze. Bhagwati and Arvind Panagariya — his co-author on their recent book Why Growth Matters: How Economic Growth in India Reduced Poverty and the Lessons for Other Developing Countries — responded with a letter to the editor, claiming that Sen had only “belatedly learned to give lip service to growth.” Sen took the bait, submitting an equally curt letter defending his record. A frenzy of commentary in the Indian press ensued.

(MORE: At the World Economic Forum, Indian Elites Fret Over Their Country’s Future Growth)

The shrillness of the debate has mellowed, but the questions it raised linger. Righting the grim fiscal landscape — and keeping India on an upward trajectory that will continue to improve citizens’ lives — has been a national priority since the country began to fall off its high-growth path two years ago. On July 30, the Reserve Bank of India cut its growth forecast for the current fiscal year from 5.7% to 5.5%. This week, following the rupee’s fall to a record low earlier in the month, Prime Minister Manmohan Singh met with business leaders to discuss how to combat the weak currency and boost investor confidence. “The reason [the Bhagwati-Sen debate] is resonating now is because of what is happening in India — the sense that growth is slow, and that maybe the country is on the verge of a financial crisis,” says Arvind Subramanian, a senior fellow at the Peterson Institute for International Economics in Washington. “Essentially, we have had three decades of reasonable growth, and the question is whether that model has run out of steam.”

The debate’s stark polarization can also be traced to India’s other central preoccupation: politics. In this month’s media scrum, the economists’ opposing philosophies have been shoehorned into the evolving narrative of national elections set for next year. Sen and Drèze support social-welfare programs, a calling card of the ruling Congress Party; Sen has also openly criticized Narendra Modi, the recently appointed campaign chief of the opposition Bharatiya Janata Party. These remarks have led many in India to conclude that the two academics back Singh’s Congress-led government. Bhagwati and Panagariya, for their part, have pointed to Gujarat, the state where Modi is chief minister, as a model of growth and social progress. (Modi, a controversial and divisive politician because of the killing of at least 2,000 Muslims during unrest in Gujarat in 2002, is expected to go for the country’s top job next year.)

(MORE: Is Narendra Modi a Step Closer to Becoming India’s Next Prime Minister?)

What’s the right way forward for India? Most economists working in India today, says Partha Mukhopadhyay, a senior research fellow at the New Delhi–based Centre for Policy Research, fall somewhere on a “sliding scale” between reform-oriented growth at one end and government-led redistribution of wealth at the other. (One example of the latter is the recently signed Food Security Bill, which aims to give some two-thirds of the population 5 kg of subsidized grain a month at a cost of billions to the treasury.) But more important, Mukhopadhyay says, “if the Indian growth story is to happen, the state has to learn how to function.” In other words, if government spending on health care and education is not yielding higher quality and efficiency — which many argue it is not — then the money is going to waste. On the other hand, simply letting the state off the hook for underperforming in these areas, and counting on private-sector growth to pull them forward, is not practicable either.

While Subramanian has been critical of Sen’s advocacy of heavy social expenditure, he also doubts the contention by Bhagwati and other free-marketeers that reforms alone will translate into the growth needed to reduce the country’s devastating poverty. “India is now one of the most open countries to foreign direct investment, but foreigners are not going to come in because they have absolutely no faith in the stability of the regulatory regime,” he says. “The state has to do a lot of basic things that it’s not doing.” Ensuring that rule of law and basic services are functioning will be crucial to creating more growth and stopping the flight from the public sphere of more and more members of India’s growing middle class, who are increasingly seeking private health care, living in gated communities and sending their kids to school overseas. Perhaps the question that Indian voters should be asking themselves today is not whose economic theory is correct, but who are the men and women in government who can make things right.

MORE: First, Fix the Plumbing — Politics and Sanitation Could Take the Shine Off India’s Market Reforms

15 comments
SridharReddy
SridharReddy

Instead giving Indians the knowledge / skill / jobs to handle themselves, Congress govt in India is giving free foods.  It is like giving bowls to beg for food....  Sonia Gandi and Indira Gandi are a witch of this country...  we lost 25 to 30 years in the making...

librahitech
librahitech

It does not matter at all if Sir Amartya Sen is uncomfortable with the likelihood of Sir Narendra Modi becoming the Prime Minister of India shortly - Prathapan Gopalan

PeterFernandes
PeterFernandes

I think the core of our Indian Govt is not bad with guys like Mrs. Sonia Gandhi & Mr. Manmohan Singh. The Govt of India does come up with good schemes, but the problem lies with the execution of these plans. Much flows down the throats of greedy politicians down the line and it makes our respected above 2 economists look like a bunch of jokers. This Sonia regime is not at all willing to take the bull by the horn and that is the major problem. There is no accountability at all with this or any of our national parties. Put the accountability bill in place and the rest will follow.

ramgopaldass_77
ramgopaldass_77

"Modi, a controversial and divisive politician because of the killing of at least 2,000 Muslims during unrest in Gujarat in 2002, is expected to go for the country’s top job next year.)"

Well, the author needs to do more fact checking and post actual figures rather than taking it and parroting the false figures obtained from spurious sources. She doesn't seem to care that scores and scores of Hindus too lost their lives due to Muslim mobs and police firing.

As per government records (both Federal and State), the casualties were: ~790 Muslims and ~254 Hindus. The figure of "2,000 Muslims" killed are mainly quoted by the hardline Islamist, Christist, and Pseudo-secular crooks to keep the pot boiling.

KRONiS
KRONiS

it's ALWAYS how you execute it... being a strategy, campaign, play in hockey...

duduong
duduong

Sometimes, it is not the strategy that matters; it is how well you execute it.

It seems to me that India's greatest problem is in providing a good government, not in what type of good government.

GSFNetwork
GSFNetwork

The issue of Growth vs Equality is not new so far as the Capitalistic vs socialistic economic thought is concerned.

http://life.satishankar.com/2013/07/the-sen-bhagawati-controversy-media.html

The issue of Modi vs Congress has been mostly placed with lopsided facts and explanations....If Congress favoured Equalit or better say "distribution" this is what they have been doing since India got freedom, sorry, independence... the socialistic pattern of Society of Nehru... but unfortunately the institution starts nurturing the problem, for eradication of which it was created just to sustain itself. What Govt and its politicians do if there is no unemployment, or poverty? There is always a fear of becoming jobless among them.

India Gandhi said "Garibi Hatao" ie, we are still not sure what this "hatao" meant to her, to eliminate or eradicate or displace... but it is still there compelling along with its electoral interests, to enforce Food Security Bill, again to give food to keep poors alive  for its own sustainability and for future elections.

Now Bhagwati's plea, theoretically Growth and equality can not co exist so long as we adhere to  the Marginalist principl of Capitalism. Congress itself has ignored its own PM, P V Narasimha Rao who gave a U - turn to Nehru's Socialistic....the modernization which we see in India has been due to that U- turn and NOT Garibi Hatao.

If Chidambaram wishes to combine both, he will have to face various strings of International Financial Institutions and Banks...

Now, counting Hindu and Muslim dead bodies in year 2002 as the only Hiroshima incident in India is extremely misrepresented and aimed to FOOL the innocent, and illeterate people of india and ignorant people of the world. Much heavier casualties have been before and after that  which #PaidMedia  and Governments suppressed for their vested interests.An example can be seen in a summary giving information on ruling Govts, http://blog.gsfnetwork.com/2013/07/riots-and-ruling-governments-in-india.html

This very clearly shows how justified we are when we see 2002 as the ONLY communal clash and when we declare all pre and post 2002 as clean.

The issue is that current Government has been submersed fully in rampant corruption, shielded by the #CagedParrot and #PaidMedia, dieing under the sin of ignoring Mr. Narasimha Rao alongwith utterly failed governance in record has nothing to offer other tha a "Fear" to minorities, food to starving and shelter to Corrupt collaborators.... that is why it sees and repeatedly broadcasts the fear of Modi....

manula
manula

Ancient India was from Iran,Iraq to Indonesia, and Tibet to Srilanka. It shows how peaceful are Hindus. If one Gujarat incident happened it is on the world map what about us who became minorities in the world due to invasions and genocide, who were from oldest and biggest religion on the earth.

Mazo
Mazo

This article states "Modi, a controversial and divisive politician because of the killing of at least 2,000 Muslims during unrest in Gujarat in 2002, is expected to go for the country’s top job next year." 

The official record states that :" the riots resulted in the deaths of 790 Muslims and 254 Hindus;". This figure of "at least 2000 Muslims" being killed is a fabrication that is unsupported by any academic research. Please make the necessary edits to reflect this if this is still a NEWS outlet. 

sridhar.sid
sridhar.sid

The recent statement by MR. Chidambaram summed it up well. What India needs is a good dose of Bhagavati plus Sen models. The trickle down theory of 'growth will automatically lift people from poverty' does not work in a country like India. Entrenched class,caste considerations cause the stratification of society. Unless there is State intervention, the rich Brahmin/Kshatriya living in a posh area of Delhi will wish to do very little for the millions of poor in Bihar or UP. But, India and the UPA Government has only been able to bring in new schemes to help the poor, because the Country has achieved growth. My recommendation is that the elected Government should focus on lean/mean administration to distribute the wealth, but allow growth to happen, at all cost

SureshDeman
SureshDeman

I watched Profs AK Sen & Lord Meghnath Desai on NDTV and this discussion was about his new book that he co-authored with a young colleague, ...

It is disheartening to say that both models are good as marrying two might lead to a disastrous outcome.The important differences are:Bhagwati’s focuses mainly on growth and he goes to the extent of refuting well known Adam Smith’s emphasis on manufacturing which is very important for generating employment and higher output. He argues that countries could always trade manufacturing for services.Given higher rate of growth poverty will be ridden by itself due to percolation effect, hence for Bhagwati growth is an end in itself!

On the other hand, Sen argues that growth is a mean but not an end.He cited example of China and Kerala and emphases need of investment in social sectors, like, education, health, transportation, and other public services.Growth rate does not make any sense if the fruits ofdevelopment are reaped by a handful of people by creating more billionaires.Sen quoted from a WB report that over 50% people do not have even toilets facilities compared to only 8.4% in Bangladesh.This is shameful for a country which claims to be globalised by way of reforms.

In fact, India's growth is going nowhere as it is driven by growth of energy intensive consumer durable goods and financial sector and very little growth in other sectors (e.g., agriculture) leading into emergence of two India, rich and poor. Mechanism which is causing this is: (i) output growth is higher than the growth in employment, (ii) efficiency, i.e., productivity growth, (iii) sensitivity of financial sector due to uncertainties of financial markets, and (iv) increasing disparities between profits and wages. Hence India's growth strategy continues to accentuate inequalities of income and creating a unique demand pattern (a black hole). History of past financial crises has witness that some of the reasons for the period of financial turmoil included huge debt-servicing expenses and an inequitable distribution of wealth, as most of the wealth remained in the control of a few elite. Unfortunately, some consciously and the so-called left unconsciously caught into the Neo-Classical and Keynesian cobweb. Hence, Panagaria + Bhagwati World Bank models are of no consequences and their advocacy is an exercise in naivete to perpetuate lumpen capitalism which has accentuated, unemployment, disparities and poverty.

Unfortunately, AK Sen one time Avante Garde champion of cultural revolution and emphasised the important of non-material incentives in his 1971 Dharam Narain memorial lecture at Delhi School of Economics (published in the Indian Economic Review) is now hesitate to talk about the system that is needed do implement the social programs that he proposes for India. talks about.   

I believe India should slow down on the quantitative growth and focus on infrastructural development. Soon after the 2008 crises China’s strategy focussed on investment-led growth in three phases: (i) Infrastructure spending, (ii) focus on rural areas to stimulate demand, and (iii) speeding up of economic growth in new regions, generating housing demand leading up to consumption led growth. This strategy made China a darling of both foreign direct investment and portfolio investment suggesting while the global equity markets were in turmoil, China has emerged as safe parking lot for the global funds. China is now at the beginning of third phase of its strategy. As a result of above strategy, China has been able to correct disparities and regional balances to some extent certainly, far better than India and many developing countries.

avinashbhat01
avinashbhat01

@Mazo Everyobe uses this wrong figure of 2000 muslims being killed..like self-fulfilling prophecy. Hope Time corrects the grave factual error

ArchieLeach
ArchieLeach

@SureshDeman:  GOOD GAWD I'VE BEEN SAYING THIS FOR YEARS!: the IDIOTS that have been touting: "oh India is on the way to be modern industrial society because 'we' have strong IT and services economy" = IDIOTS that know NOTHING about economics!  How did North America (minus Mexico) and Europe and East Asia (YES NOW INCLUDING CHINA!) become "modern industrialized wealthy nations"?  BY MANUFACTURING!

How did a worthless nothing island called Britain become the world imperialist?: by taking resources FROM OTHER LANDS - LIKE INDIA - and taking them back to Britain and BUILDING THINGS TO SELL TO THE REST OF THE WORLD!  So while Britain became big and powerful during the 19th century by MANUFACTURING THINGS...... what happened in India????..... THAT ONLY SAW THE BRITISH TAKING RESOURCES FROM INDIA TO MAKE THINGS IN BRITAIN?????....

 So how important are *factories* to economic development to a land?   *Factories* are what led North America (again minus Mexico) and Europe and Japan to be able to go thru the "industrial revolution".   BUT EVERYONE has no clue how important the "industrial revolution IS for what happens to the land that goes thru it.....

What is FAR and above THE most important facet of ALL the lands that went thru the "industrial revolution" is that ALL resulted in the nations going from a place of mainly farmers to one of factory workers/city dwellers.


10 person working with hand tools to farm a land is a waste of human resources.  It is FAR better to take 8 out of those 10 farmers and put them to work in a factory where they can produce the tractor and other farm tools for the remaining 2 still on the farm.  That and the new factory workers are producing goods that can be sold abroad for profit.  That is exactly what North America and Europe and East Asia (now FINALLY China) did with their (formerly) large farmer population.  In the end result, North America and Europe and East Asia became wealthy prosperous modern industrial nations!

This is what China KNOWS: not more than 20 years ago China was still a land of 75-80% farmers.  But by pulling those farmers that were making 1 American dollar a day farming the land to an urban factory that pays 3 to 5  or more dollars a day, China has changed China to a land that is NOW  falling down to being 45% - AND STILL FALLING - farmers.


In China a fresh off the farm person with no education that can be brought to a factory and taught within 30 minutes "how to take this part and put it into that part..... and do it 100 times per hour".  That is what is happening on a massive scale in China as Chinese farmers are leaving the poverty of the farms in China......This is happening in China because China is the "factory to the world" and is the reason why China is rapidly urbanizing....... JUST LIKE ALL THE OTHER BRITAINS, UNITED STATES, GERMANYS AND SO FORTHS DID BEFORE!


AND INDIA?  India has this irrational/illogical/STUPID belief that "IT and services" will bring about wealth for all of India.  Incredibly naive and STUPID belief.  IN CHINA an uneducated illiterate farmer can be shown/taught in 30 minutes how to "put this piece into that piece" in a factory.  BUT how in the he!! does India expect to take an uneducated illiterate poor Indian farmer to go to work in "IT and services" STRAIGHT FROM THE FARM?  A farmer can be taught to put part a into part b (like in China) but there is no way in he!! that IT and services can take an illiterate Indian farmer and put he/she to work in IT!


What the IDIOTS who keep drooling over "India will become industrialized by IT and services" are not capable of understanding is that a VERY small "IT and services" "economy" WILL ONLY lead to one certainty: an India that will consist of a SMALL minority of Indians that will be well educated and live a life in a modern industrial environment that will be like that of the western industrialized societies..... BUT the great mass of Indians will live as desperately poor farmers AND/OR in desperate slums in the cities leading desperate lives AS THEY HAVE NO MEANS FOR DECENT WORK AS THERE ARE NO FACTORY JOBS!!




PeterFernandes
PeterFernandes

@avinashbhat01 @Mazo The factual figures are always much higher than the reported figures my friend. BTW why dont we count the no; of Indians being killed in useless bloodshed than using religious divides as a basis for the count. Time to be an Indian first.