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Poor economics in real time

Source : BUSINESS_STANDARD
Last Updated: Tue, Dec 18, 2012 21:43 hrs
India abandons poverty rate benchmark for social programmes

The Politics of Poverty is a fairly unique book to be published recently, given that its author, D K Rangnekar, an economist and journalist who had held multiple posts in various publications, including Business Standard, died in 1984. This book is a collection of his articles. Comments have been provided by both T N Ninan and Sanjaya Baru on the author as well as the selection of articles. The question, really, is: what would be the level of interest in a book that talks critically about economic paradigms pursued from the mid-fifties to 1984, the famous Orwellian year?

There are two compelling reasons to read these thoughts carefully. The first is that Dr Rangnekar was a pro-socialist thinker who believed in Nehruvian Fabian economics, which looked at life more from the point of view of government activity than that of the capitalist. This automatically makes it refreshing to read; readers can compare how things look different today, when we have moved fully to a market-oriented economy and many of these concepts are held to be anachronistic. The second reason is that this is a delight for the researcher who gets in one place all the thought processes and critiques on issues that were held sacrosanct for around three decades. The fact that they are pieces written in those times makes them frank and honest, and therefore not coloured by any retrospective bias.

The book is divided into four parts and the articles are grouped under these headings, not necessarily in chronological order. Part one is called "Social crisis of development". Here the author is critical of the growth paradigm that was being pursued at the time: it was pro-capitalist and anti-poor. Even as the government paid lip service to poverty alleviation, poverty remained high. Consumption was elitist and the system favoured landlords, moneylenders, capitalists, traders and so on. As late as 1982, Dr Rangnekar's belief was that the system was developing cracks, which found expression in riots in Maharashtra where farmers revolted. Price policies were distorted. And while the tilt was towards agriculture till around 1972, it had moved to industry by 1981. Also, when the terms of trade favoured agriculture, it was the kulaks who benefited from it.

Part two, titled "dependencies' independence", talks about our international relations. Contrary to the picture today, when one is either with the US or not, the choice then was between the USSR and the US. This, according to Dr Rangnekar, was good for us because we were able to actually cement co-operation, pursue independent policies and also work towards non-alignment, which would be unthinkable today. The north-south divide was open, and taking aid from the US was inevitable. Therefore, he did not see anything wrong in taking this aid, as long as there was transparency. But when it comes to trade, he favoured import substitution, which does not seem an interesting or efficient option today.

Part three, called "Rope tricks", discusses planning for the development process. The author was critical of the fact that budget sizes increased sharply over the years but this expansion was not being reflected in spending on the poor. This is interesting because even today most economists are critical of programmes like the Mahatma Gandhi National Rural Employment Guarantee scheme and focus on lowering such expenses rather than correcting the system. Dr Rangnekar would certainly not have shared these views. He had also pointed out how the Centre performed better than the states, unlike today when it's the states that are more bound by fiscal responsibility rules than the Centre. Other issues that have been written about – black money, tax rates, tax base, etc – are still challenges on which we as a country have probably made limited progress.

In the last section, the author shares his views on industrialisation. Contrary to what many economists say about this process beginning in 1991, the author has argued that a lot of good happened in these three decades, starting with the industrial policy resolution of 1956. The socialist bent was justifiable since the private sector model did not work between 1948 and 1955. The heavy industry focus built a base for us, which showed foresight by policy makers. He felt that there was a point in controlling large businesses and that licensing was justifiable. He was against the infamous loan from the International Monetary Fund in 1981. Even Joseph Stiglitz has been critical of this in the aftermath of all the financial crises. In fact, he felt all these policies favoured unbridled markets, conspicuous consumption, imports, misdirected flow of funds to speculative activities in stock and commodity exchanges.

On the whole, the book is likely to appeal more to those who have lived through both the pre- and post-reform eras, when we swung from a mixed to an open economic system. The present generation may find many of his views out of place. But when he talks of public policy, poverty and inequality, it rings a bell even today. In that sense, this book is timely and helps evoke introspection.


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