Perpetual subsidies undermine dignity
“This obsession with mathematics is an easy way of acquiring the appearance of scienticity without having to answer the far more complex questions posed by the world we live in”
All manifestos in this election contain promises to make India a more equal place by diverting funds to those who suffer most from the current inequality. While the Congress is promising ₹72,000 each year to the 20% of the population who are poor, the Bharatiya Janata Party (BJP) is promising ₹6,000 a year to small and marginal farm households (that is, farmers who have land holdings of up to 2 hectares). In Odisha, where elections to the assembly are also taking place, the BJP is trying to rival Naveen Patnaik’s existing provision of rice to the poor at ₹1 per kg with a commitment to provide 1.5 kg rice with dal and salt free. In West Bengal, the Trinamool Congress has pointed out that it already provides grain at ₹2 per kg.
It would be harsh to deny the benefits the poor enjoy from these schemes but their effectiveness is limited. A dole, which is what free or heavily subsidised food is, doesn’t help the poor to earn a decent living, nor does it provide them with dignity. Being on the dole is not dignified.
The series of loan waivers for farmers demonstrate that they only solve the problem for the moment. Farmers still can’t find markets to sell their produce at prices which enable them to balance their books. While writing a chapter on farmer’s suicides in a book 17 years ago, I visited the University of Agricultural Sciences, Dharwad, where a plant physiologist said: “Farmers come to us and say, ‘We did everything you told us to produce crops, now tell us where to sell them’. This bitter lesson has only just been learnt.” But it hasn’t. If it had been then, distress in the countryside wouldn’t be an issue this election. The vice-chancellor of the university blamed governments for farmers not getting their rewards. “Governments are on the side of the consumers entirely. All they want is cheap food,” he said.
I would say relying exclusively on short-term solutions such as debt relief is another cause. But I would like to suggest there is a more fundamental reason for the inequality in India, of which the need to provide doles and debt relief is only one sign. This reason is that India is misled by what is known as neoclassical economics, which relies on the market to distribute a nation’s resources. But markets take no account of equity. When I was discussing neoclassical economics with Ramgopal Agarwala, who was once the head of the economics unit of the World Bank in China, he said to me: “A self-equilibrating market is nonsense”.
Neoclassical, or market economists, justify their dominance over economic thinking by maintaining that their way is scientific, and using mathematics to prove it. Ramgopal, as I know him, obtained a PhD in econometrics from Manchester University and went on to work in that field. But eventually he lost faith in the role of maths and econometrics in economics. Now he believes: “We must give up this scientification of economics.” Ramgopal’s view is endorsed by the economist, Thomas Piketty, whose book criticising the dominance of neoclassical economics caused such a stir. He said: “This obsession with mathematics is an easy way of acquiring the appearance of scienticity without having to answer the far more complex questions posed by the world we live in.”
Ramgopal believes that India has a lot to learn from China where, as he puts it, “neoclassical economists were told to buzz off and the Chinese grew their economy in their own way”. Starting in 1991 with a per capita income lower than India’s, China has grown much faster than India and has practically eliminated poverty.
According to Ramgopal, with his experience of China and India, there are two changes in the latter’s economic policies that could create faster and more equitable growth. One is relaxing controls on the fiscal deficit to allow the government to increase spending on social and physical infrastructure.
The second is an increase in savings, including higher taxes, to fund the infrastructure programmes. India’s neoclassical economists, who have dominated policy since the reforms of the 1990s, will not approve of either. I have not read of any manifesto which calls for higher taxation.
The views expressed are personal