GLOBALIZATION, DEMOCRACY AND CORRUPTION: AN INDIAN PERSPECTIVE
Pranab Bardhan
FrontPage Publications Ltd
250 pages; Rs 495
This book is a spirited collection of short articles and occasional pieces by Pranab Bardhan, a major figure in the pantheon of Indian economics. It is wide-ranging, with seven sections of topical interest in the following order: Globalisation; Capitalism; Inequality and Poverty; Democracy; Corruption; India-China; Indian Polity and Economy. Only the last two sections are explicitly about India, but India figures one way or another in nearly every article.
Two features of the book hit the reader squarely in the eye. The first is the emphasis on discarding the traditional ideological divisions between Left and Right. Prof Bardhan is dead against "...the chanting of catechisms: Market bad, State good; public sector good, private sector bad …America bad, China and Russia good". The second striking feature is the interweaving of economics and politics throughout the book. Prof Bardhan certainly lives up to his reputation as India's leading intellectual exponent of political economy.
In the first section, on globalisation, Prof Bardhan comes across as neither a cheer-leader nor a fear-leader. He is reluctant to attribute the recent rise in inequality in many countries to globalisation, given other contributory factors such as labour-saving technical progress. His overall position is that globalisation is beneficial for countries that get the economic and institutional basics right.
The section on capitalism argues that its success in the modern world requires not only smoothly functioning land, labour and capital markets but also public legitimacy. Both these requisites, he shows, are problematic in India. Another article in this section has a sharp rebuttal of Milton Friedman's contention that economic freedom is a necessary and sufficient condition for political freedom. The following section, on inequality and poverty, shows that inequality in India is much greater than commonly appreciated and explains why.
Section four, on democracy, contains a powerful critique of the working of India's democracy. Prof Bardhan is emphatically not an advocate of authoritarianism but he wants Indian democracy to be more deliberative and disciplined and less populist, and makes several suggestions that could help to bring this about. In the section on corruption, he argues that in combating it, it would be wise to move away from the tendency to see it as a moral failing to be cured by ever harsher punishments of bribe-receivers. The right way forward is to change incentives, via institutional reform, for bribe-givers as well as bribe-receivers. The section on India-China takes a nuanced and cool look at various aspects of economic policy and political economy in the two countries. Neither country escapes strong criticism.
The last section, on Indian polity and economy, is also the longest. One of the articles in it ("The Avoidable Tragedy of the Left in India") is a scathing critique of the Left in India as blinkered, dogmatic, and out of touch with a changing world. Prof Bardhan thinks it should adjust its thinking to admit the importance of the market mechanism, and of competition in particular. He thinks the Left should focus on economic security rather than job security.
In several other pieces, Prof Bardhan takes policy positions that differ markedly from the traditional Left. For example, he argues that the Indian economy is held back by the presence of inefficient and regressive subsidies, which he would replace by cash transfers. He is in favour of opening up the country to foreign investment in the retail sector. He is in favour of more flexible labour laws, if an unemployment compensation scheme could be introduced at the same time. (However, he also thinks that poor infrastructure is a more binding constraint on the manufacturing sector than labour market regulations.) In Prof Bardhan's view, to be Left-wing is to be committed to social justice. Whether this aim is better achieved by direct state action or through the market mechanism depends on the context.
If the book has faults, they arise from: (a) the irregular time-line of writing the articles, with the result that considerations of current interest are sometimes missing; and (b) the brevity of many articles, which on occasion impedes deeper treatment of a topic, where necessary.
I have space here for only one example. Prof Bardhan's critique of the Left raises the question of how he would demarcate the economic boundary of the state. The conventional position is that the state should provide not only pure public goods but also "public services", including infrastructure, education, health care, and sanitation. An opposing view distinguishes between the financing of "public services" and their production and delivery, and advocates that the state should do the former but not the latter.
This line of thought leads to issues such as the costs and benefits of public-private partnerships, and of state versus private provision of primary education and health. Prof Bardhan doubtless has views on these topics of contemporary Indian relevance. The appeal of the book would have been enhanced if he had added a longish introduction to the book to fill the gaps and to bring it up to date.
In sum, I think that this book, despite some minor blemishes, will be of enormous interest to a broad, intelligent readership.
The reviewer is an Emeritus Fellow of Merton College, Oxford.
