 "Model economist")
AN ECONOMIST IN THE REAL WORLD: THE ART OF POLICYMAKING IN INDIA
Author: Kaushik Basu
Publisher: Viking Pages: 265
Price: Rs 599
Kaushik Basu, the genteel, self-effacing economist, had a great view of the disastrous economic policies after 2009 of the Congress-led United Progressive Alliance (UPA), which was presided over by Prime Minister Manmohan Singh. No doubt, the former prime minister and the UPA high command were positively inclined towards Basu, a student of Amartya Sen and a Padma Bhushan awardee in 2008. Nevertheless, his appointment as chief economic advisor in 2009 was quite surprising; by this time, the position had arguably lost much of its influence and Basu would have known that. But what his tenure did was to reveal the inner workings of the government to one of the deepest Indian economic thinkers of our time.
Basu's views are reflected across 10 well-written chapters, interspersed with humorous anecdotes and examples.
Chapter 1 sets the stage for his arrival in Delhi and the start of his tenure as the chief economic advisor. He mentions that he is going to share both his "joys and frustrations" and also utilise India as a "lens through which one may understand the basic principles of economics". He does a fairly good job of the latter. So for the student of economics this book will provide a great set of insights into how economic models correlate with real-world situations and how they help us approach actual problems.
Chapter 2 provides an interesting glimpse into Jawaharlal Nehru's socialist proclivities and Gandhiji's discomfort with them. Basu reflects briefly on how the former did not understand or agree with the latter's views. I would have loved a deeper look into the matter, for Nehru's worldview and inclinations seeped deep into the Indian economy in so many different ways that we are both benefitting from and grappling with today. He then looks into India's accelerating growth since Independence and provides a crisp glimpse into post-Independence Indian economic history. Basu identifies a growing savings rate as an important contributor, which was due to government intervention in the financial sector.
Chapters 3 and 4 look at how India built up relatively high fiscal deficits, sustained inflation and also relatively high interest rates.
Chapters 5, 6 and 7 delve into a gamut of issues, ranging from poverty and food grain policy to exchange rate management, inequality and taxation. Each section has a structure that starts with the experience in India and then goes into the various dimensions explained, using a modelling rather than an institutional approach.
The author really comes into his own in chapters 8, 9 and 10. He is among the few mainstream economic thinkers to have made substantial efforts towards understanding the importance of morality and the interface between law and economics, and who have attempted to connect economic thought with other social sciences. Some of that is also reflected in this book. Take, for instance, the "focal point approach". He argues that simply having a credible law can create conditions in which people start following them without the need to implement them; or, for that matter, his argument that providing protection to whistleblowers could reduce one form of corruption.
I, however, was left deeply dissatisfied and quite disappointed. What is missing, then? All the really important stuff. I would have liked to see a greater description of his relationship - or non-relationship - with the National Advisory Council and Sonia Gandhi. What were his views on the Mahatma Gandhi National Rural Employment Guarantee scheme? Did he agree with the Right to Education Act? What did he do when he first heard of the Right to Food Act? And what about the land Bill? Or, for that matter, the high fiscal deficits and high sustained inflation? And there was a massive environmental logjam, the corruption, or the bureaucratic freeze. The author saw it all from close quarters, yet he prefers to be silent, apart from throwing some models at the reader.
Were the watchful eyes of good economic minds - and Basu was one of them - blinded by loyalty? Why did he not think it worth his while to point out and correct the multitude of problems with these laws and policies? Was it that the politicians understood the problems but did not listen? What large and small motivations drive politicians? The author knows very well that economic policy is more about the political economy than economics. In chapter 9, he states the obvious: "Good managers get to know who can be trusted with what and apportion work accordingly. Yet in crafting and executing development policy, this approach is seldom used." Why? Don't the politicians and bureaucrats know this? Did the prime minister and his close advisors also not know this? Did the National Advisory Council not know this? Does the Indian Constitution prevent this? So, what happened? Will it happen again? Basu is silent, hiding behind his policy economics.
This, then, is a book that should be read by both students and those interested in seeing the connection between economic models and real-world economic policy. But it falls short of sharing the "joys and frustrations" Basu says he wanted to do. We expect much more from those who are better endowed, knowledgeable and have no reason to conceal. Surely that is something we can demand from their conscience.
The reviewer is an economist
