21 July 2013

Sen, Dreze, Bhagwati, Dasgupta and Panagariya on India's "Arrested Development"

This month's Prospect magazine has an interesting interview with Amartya Sen, Nobel Prize winning economist, about his new book with Jean Dreze "An Uncertain Glory: India and Its Contradictions".  The book is reviewed by Partha Dasgupta, a famous economist working on economics and the environment, in tandem with another book just out by two other famous Indian economists, Jagdish Bhagwati and Arvind Panagariya called "Why growth matters: how economic growth in India reduced poverty".

In a nutshell:

  1. Dreze and Sen argue that the type of GDP growth India has generated has not led to sufficiently fast improvements health and education (the slow pace of reduction in undernutrition was their starting point).  This they argue is because the quality of growth is not high--not broad based, market governance stacked against poor etc.  They say that in a democracy, the population has to fight for these improvements and that the poor in India have been much too patient.  
  2. Politically, Bhagwati and Panagariya are far to the right of Dreze and Sen.  The former pair argue that getting GDP growth is essential to poverty reduction and to generating the kinds of revenues that can now be invested in health and education.  
  3. Dreze and Sen would counter this by saying GDP growth that does not raise health and education is denying itself a further source of sustainable growth--we know that improvements in health, nutrition and education further spur growth. 
  4. Dasgupta says they both are missing the point--the extrenalities generated by India's growth are eroding natural capital such as ecosystems, exacerbated by increasing population pressure and that this is a key trap that is preventing growth from generating improvements in human welfare. 

My view?  I have some sympathy with parts of all the views, but I come down most strongly on the side of Dreze and Sen.

India's growth is doing well in reducing poverty (Bhagwati and Panagariya), but this poverty reduction is not translating fast enough into education, health and nutrition reduction (Dreze and Sen).  This may be due to deep-rooted but misguided beliefs (e.g. Panagariya's vies on the inappropriateness of the global nutrition standards on height for under 2's, even though India was one of 6 countries that generated the standards!), discrimination (e.g. caste and gender--Dreze and Sen), environmental externalities (e.g. half of the Indian population defecates in the open--Dasgupta), poor management of public resources that are expended on health and education programmes (e.g. the ICDS programme which has highly variable performance--Dreze and Sen), a complacent government (where is the urgency on the issues?--Dreze and Sen) and a too-placid civil society (can Brazilian/Turkish/Egyptian riots be far away?).

The Indian Government's apparent complacency on these issues seems like a very dangerous stance to take.  As I have said before in the attached paper, they should be as obsessed with child growth as they are with economic growth.  If not they might be thrown out of office by an Indian electorate that sooner rather than later decides it just isn't going to take it any more.

8 comments:

  1. As someone who is in favour of more redistribution, this was a lazy article

    1) Left v right is the wrong frame when one is talking about acheiving a shared goal of poverty reduction using different means. An 80% tax in 1990 would yield less than a current government revenue. For a growing economy, the measure of relative contribution of growth vs redistribution is important.

    2) Sen came in support of a gigantic FSB (estimated cost of 3% GDP)which aims at exactly the opposite of what is lacking - cereal subsidy. Protein and micronutrients are what is the cauase of lack. Further, these programs are extremely leaky, further increasing the waste of money.

    3)The economists debating Sen want government financing of education and healthcare. But, he is questioning Sen's dubious endorsement of this program and are instead in favor of alternative solutions like food stamps. This is the context of the current debate, which is missing in the article.

    ReplyDelete
  2. Minor corrections of previous comment, Please ignore earlier version.

    As someone who is in favour of more redistribution, this was a lazy article

    1) Left v right is the wrong frame when one is talking about acheiving a shared goal of poverty reduction using different means. An 80% tax in 1990 would yield less than current government revenue. For a growing economy, the relative contribution of growth vs redistribution is important.

    2) Sen came in support of a gigantic FSB (estimated cost of 3% GDP)which aims at exactly the opposite of what is lacking - cereal subsidy. Protein and micronutrients are what is the cause of malnutrition.

    3) These programs are extremely leaky, further increasing the waste of money. Surjit Bhalla says that grain is probably left to rot and diverted to liquor.

    4)The economists debating Sen want government financing of education and healthcare. They also acknoweldge the contribution to growth. Instead they are questioning Sen's dubious endorsement of this program and are in favor of alternative solutions like food stamps. This is the context of the current debate, which is missing in the article.

    ReplyDelete
  3. Minor corrections of previous comment, Please ignore earlier version.

    As someone who is in favour of more redistribution, this was a lazy article

    1) Left v right is the wrong frame when one is talking about acheiving a shared goal of poverty reduction using different means. An 80% tax in 1990 would yield less than current government revenue. For a growing economy, the relative contribution of growth vs redistribution is important.

    2) Sen came in support of a gigantic FSB (estimated cost of 3% GDP)which aims at exactly the opposite of what is lacking - cereal subsidy. Protein and micronutrients are what is the cause of malnutrition.

    3) These programs are extremely leaky, further increasing the waste of money. Surjit Bhalla says that grain is probably left to rot and diverted to liquor.

    4)The economists debating Sen want government financing of education and healthcare. They also acknoweldge the contribution to growth. Instead they are questioning Sen's dubious endorsement of this program and are in favor of alternative solutions like food stamps. This is the context of the current debate, which is missing in the article.

    ReplyDelete
  4. BTW, Dasgupta's point on the habitat destruction is extremely important Mining interests ravaging forest habitats is a big problem. This is not what the current debate between Sen and the others is about.

    ReplyDelete
  5. Have you actually read the Panagariya paper? It seems from your comment that you haven't. He is objecting to the one-size-fits-all approach (the WHO composite) to measurement based on assumptions unsupported by data. Further, he asks questions on the standard that people haven't been to answer, for instance the height differences between Japanese and Dutch.

    He has at no point in the paper downplayed the importance of malnutrition as a serious problem that needs to be addressed. He just calls for proper measurement.

    ReplyDelete
  6. The debate is not so simple, in my opinion ; or rather we have mis-construed them. Even Sen, now accepts growth is a must whether preceded by 'investment' in health care and education or not. And there is not much contradiction between the two economists about the future and present polices to be pursued. Only issue missed (esp by Sen and Dreze)is that no matter how much money is poured into
    these two sectors by govt, the results will not match the cost, simply because of outdated socialistic policy of 'permanent' jobs for govt staff. It is
    impossible to make them accountable and work efficiently with the present permanent tenure system.

    And with due respects to all of you, I can say unless one becomes an entrepreneur or an executive, the academicians and theoreticians (many live in ivory towers far from
    ground reality), it is impossible to understand this aspect of human nature.

    Swaminathan Aiyar is a rare exception who keeps arguing about the inability to fire errant teachers and medicos which prevents good results in spite of pouring more and more money.

    ReplyDelete
  7. Wow, lots of comments. Let me try to respond

    On the FSB--I'm aware that the main argument against is why spend all this money when effective action is dependent on an ineffective PDS programme? This is a valid argument it seems to me. But the counter is that greater citizen rights will put pressure on PDS to clean up its act

    The Habitat destruction points are v important, I agree, I did not mean to disparage Dasgupta's many good points

    I have read the Panagariya paper. The WHO standards are entirely appropriate for Indian babies and infants brought up in a healthy environment. The only valid question is: can we expect this healthy environment to work within one generation? The rapid declines in stunting in Bangladesh over the past 10 years suggest we can

    And as an executive in the education sector I can certainly understand the challenge of linking job security to performance--you are right, accountability has to be addressed whichever perspective is right.





    ReplyDelete