Saturday, August 3, 2013

Neither Amartya Sen Nor Jagdish Bhagwati

Recently Nobel prize winning Indian economist Amartya Sen created lot of flurry by saying, that he does not want Gujarat chief minister Narendra Modi as his prime minister or India's prime minister. In the economic academia world the debate is on-going between two rival camps about how to make the Indian economy and society progress. Amartya Sen is on one side of this debate and Columbia economists Jagdish Bhagwati and Arvind Panagaria are on the other side. Sen's growth model gives priority to social sectors of education and health, whereas Bhagwati and Panagaria are for more economic growth first. Here I want to show you that both Sen and Bhagwati-Panagaria are wrong. Indians neither need the Sen model nor the Bhagwati Model. What Indians need is total freedom from the parasitic State aka the government, which none of the above mentioned models are promising or even talking about.

Let's briefly take a look at both Sen and Bhagwati model. Sen's ideas re his social engineering model for the Indian population is mainly presented in his most recent book, An Uncertain Glory; his recent CNN-IBN interview gives a quick recap of his ideas. Whereas Bhagwati-Panagaria social engineering model is presented, also in their most recent books, India's Tryst With Destiny and Why Growth Matters. You can see Bhagwati criticizing Sen in this interview while discussing briefly his ideas. In the outset itself I will inform you all that I haven't thoroughly read their books and this article is not a detailed review of those books. I am mainly criticizing Sen and Bhagwati's underlying statist ideologies which drive their academic work and, importantly, policy prescriptions.

Sen is an outright socialist so there is nothing much to discuss about his ideas. Twentieth century has emphatically demonstrated the failures of socialism/communism and its main vehicle, the State. As Ludwig von Mises so brilliantly demonstrated almost hundred years ago in his extremely important but so far neglected work Economic Calculation in the Socialist Commonwealth, in the absence of market price and profit and loss system, the socialist planners won't be able to economically calculate anything; they won't be able to allocate resources where they are most urgently needed by the consumers. The failure of world socialism/communism in the form of the fall of former USSR and the Berlin Wall (also Cuba, North Korea etc.) gave ample demonstration of Mises's theory of impossibility of socialist economic calculation. Sen wants government to provide services like health and education, but theory and history both show, that this is an impossible task. Governments can't provide anything let alone education and health. As Murray Rothbard said, the State is a gang of criminals, writ large, and a gang of criminals can't produce anything; they can only consume and destroy society's wealth. Professor Sen unfortunately doesn't understand this political reality of the true nature of the State, and we will see below Professor Bhagwati is also oblivious of this fact. As Professor Robert Higgs said recently, The State is Too Dangerous to Tolerate.

The biggest danger actually comes from people like Jagdish Bhagwati who walks under the banner of Laissez Faire Free Market economics, but actually loves  - or at least not hate - the State simultaneously. His model of governmental interventionist liberalization is nothing but socialism masked behind the veneer of free market capitalism. Prof. Bhagwati and Panagaria give priority to economic growth (their track I reforms), but their ideas and policy prescriptions are all in the wrong direction e.g., in chapter 7 of their book 'Why Growth Matters' they discuss their Track I and Track II reforms and say, therefore the need for sustained and accelerated growth, which is progressively more inclusive in its impact, remains acute. Likewise, the redistributive programs must be made more effective even as they expand with the intention of providing greater benefits to the poor. This strategy calls for future reforms to proceed on two tracks, Track I: reforms aimed at accelerating and sustaining growth while making it even more inclusive, Track II: reforms to make redistributive programs more effective as their scope widens. This is nothing but an advocacy for 'Crony Capitalism/Fascism' and not true 'Pure Free Market Capitalism'. Bhagwati is in favor of redistributive policies and he wants to, in fact, make them more effective! He wants government to enact all these Track I reforms. This is like putting the wolf in charge of the hen house!  Not only this, his Track II reforms of making redistribution more effective advocate things like 'school vouchers' and 'public private partnership (PPP)' in social development projects. This is again pure fascism where the hand of evil State is ever so present. The true champions of Laissez Faire economics like Mises demonstrated the failures of such government interventionistic middle of the road policies (read this). The middle of the road policies of Bhagwati leads straight to full fledged socialism, as we are already witnessing during this world financial crisis. Government interventionism results only into running away inflation, acute periods of business boom and bust and wealth transfer from productive class of the society to the unproductive class. Bhagwati doesn't understand, that without cutting the Gordian knot of government, the society and economy can not progress let alone grow. The striking growth which Bhagwati talks about in his book was all an illusion of central bank money printing, which is now exploding in an on-going bust in the Indian economy where growth figures have come down dramatically. Bhagwati accuses Sen of harming the poor people twice, but his own policies are no better and will equally harm the poor people ultimately. By (falsely) walking under the banner of Laissez Faire Capitalism, Bhagwati advocates government interventionism. He is doing more damage to pure Capitalism then prof. Sen who is a known socialist. Prof. Bhagwati is India's Milton Friedman who similarly damaged the cause of Freedom by advocating things like central banking, school vouchers, withholding tax etc., etc.

What the Indian economy and society really need is true radical ideas of people like Murray Rothbard and Hans Hermann Hoppe. As the ideas of both Rothbard and Hoppe show, what the Indians need is total freedom from the parasitic grip of the State. Prof. Sen and Bhagwati don't see the mortal danger of a 800 pound Gorilla in the room i.e., the State. Any reform which ultimately is not aimed at totally dismantling the State is going to fail. We don't need these phony reforms. What we need is a total change in the present status quo. As long as the State is present, it will continue to exploit productive people for its own gains. If Prof. Sen and Bhagwati truly want to care and help poor people and humanity overall, then, they will have to understand this fact. As long as the idea of the State is not going to be erased from peoples' minds, things will not change for better. Indians have tried both Socialism and Interventionism in past, and they both have failed. Let's give one try to 'Pure Free Market Capitalism' by dismantling the State.     

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