Sunday, May 25, 2014

A Note on Arvind Panagaria's - the likely chief economic advisor of PM Narendra Modi - Economic Views

Arvind Panagaria is a, as newspapers are describing him, renowned economist from the Columbia university. He and his senior professor colleague Jagdish Bhagwati are famous for supporting and favoring Narendra Modi's so-called market oriented economic model of Gujarat. Panagaria recently gave an interview to TOI where he outlined his main economic views for the Modi government if he becomes PM's chief economic adviser. One look at his views makes it clear that if Panagaria gets his way and becomes PM Modi's adviser, then, we are surely heading for more economic troubles. Below I present Panagaria's views immediately followed by my comments.


1. Upon asked what should be the three priority areas of Modi government, Panagaria said:
End the paralysis in decision-making in the Central government, end the policy uncertainty for investors including retrospective taxation and other surprises visited upon entrepreneurs by the authorities, and replace the current draconian land acquisition act by a more pragmatic one.
Except the second policy of removing the policy uncertainty (he should better focus on removing the much broader problem of 'regime uncertainty' (as first discussed by Prof. Robert Higgs) which is quite different from the narrow idea of policy uncertainty), both measures of ending paralysis of decision-making and replacing current draconian land acquisition act by a more pragmatic one will be a big danger for the common man. Ending paralysis of decision-making can be good for people only when those decisions are in the direction of ending government intervention in economy or in peoples' lives; only when the government is rolling itself back, people can be free to pursue their ends of living a happy life. If decisions are made for more interventions and more crony capitalist fascist policies where businesses will loot the public, then, it is better that such decision making process remains paralyzed.

And, the only interpretation of land acquisition act is that many more land owners - mainly poor farmers - are going to lose their land to the State in the name of phony development and growth. Arvind Panagaria or Narendra Modi or general voters who voted for Modi have no idea of 'Justice' in their mind. The thought that you can not take away someone's property against his wish never crosses their mind. People won't bother for property rights issues as long as they are not losing their land.

2. He was asked about the possibility of lowering the rate of interest to kick start the lack luster economy, and the following was his answer:
The real issue is whether we are willing to tolerate 8-10% inflation or insist on bringing inflation below 5%. If the latter, the answer has to be in the negative. On the other hand, if we show more tolerance for inflation, it is possible to ease up on monetary policy and let the interest rates fall.
In simple words, get ready for more inflation. The whole idea that people are tolerating even 5% inflation is insane. No one tolerates even 0.1% inflation willingly. Will you tolerate government stealing 5% of your annual income every year? And who are these "We"? "We" here only means common man. Inflation benefits government officials and other people who are well connected with the government (people like Panagaria himself), so they are never going to bother about inflation. It is only the common man who gets crushed beneath the weight of creeping inflation. If Modi government is going to go and print more money to fund these mammoth infrastructure projects, then, that will surely kill the Indian economy because printing and spending money is not real growth.

3. On Welfare programs like MGNREGA, Panagaria has this to say:
Definitely. In the current form, both Public Distribution System (PDS) and MNREGA are failing miserably in meeting their objectives, with vast leakages along the distribution chain.
So, Modi government is not actually going to totally end these wasteful welfare programs; they are only going to rework them and change their current form! That is a pure baloney. Making an economically wasteful program more efficient means making the whole process of wasting our precious resources more efficient!!! Changing current form of so-called welfare program is not free market economics; it is not even leaning in the direction of market. Such middle of the road interventionistic policies, as Ludwig von Mises said, only leads to disaster and full socialization of the economy in the long run.  What we need is an end of the whole welfare state itself. We don't need the Nanny government itself.

As I said above, if Panagaria becomes PM Modi's chief economic adviser, then, expect more inflation and more fascism in India. This ain't any free market economics; This is pure fascism.

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