Month: October 2019

It is a sign of the present times that jubilations that followed last week’s announcement of Nobel have been the shortest. Criticism began almost immediately after Abhijit Vinayak Banerjee was declared co-winner of the Nobel Memorial Prize for Economic Sciences.

Social media critics have called him a fellow-traveller, if not an outright communist, in the best Bengal tradition. Some have questioned his middle name given by his Maharashtrian mother. Others say the “much-married” man got the Nobel for marrying a Christian. Actually, it is his criticism of the Modi Government’s economic policies. Its Commerce Minister Piyush Goyal has labeled Banerjee “Left-leaning”.    

Abhijit and wife and co-winner Esther Duflo, a French-American, are unperturbed and hope to continue working with various Indian state governments irrespective of their political orientation, including those ruled by the ruling Bharatiya Janata Party (BJP).

They are in the company of the 1998 Nobel laureate, also an eminent economist, Amartya Sen. Conferred Bharat Ratna, India’s highest civilian honour by an earlier BJP-led government, Sen also had a prolonged ‘honeymoon’ with the Manmohan Singh Government. But political and ideological battle lines are sharp now.   

Banerjee criticized the 2016 demonetization, saying he never understood the logic behind such a drastic step, adding it was being viewed with “bewilderment” in serious academic circles.

He joined 107 well-known economists to assail the tendency “to suppress uncomfortable data” during Modi 1.0 (2014-2019) and sought restoration of access and integrity to public statistics. Their joint statement in March came after the government had held back publication of job data. The job situation has only worsened since.

Banerjee has advised the current policymakers in cryptic terms: Don’t waste time worrying about monetary policy as the economy is in a “tailspin”. Instead, find ways to revive demand to lift the sinking economy.

Post-Nobel announcement, he told a press conference called by his current employers, the Massachusetts Institute of Technology at Cambridge, US, that the need of the hour was to pump money into the economy “especially in the hands of the poor”.

Banerjee’s comments come in the backdrop of concerns about a protracted slowdown, with India’s GDP growth moderating to five percent in the first quarter and the index of industrial production slipping to 1.1 percent for August. The aviation, passenger vehicles, telecom and banking sectors are facing rough times.

Gita Gopinath, Chief Economic Advisor of the International Monetary Fund (IMF), another high profile Indian-American economist, also gives similar advise to the Modi Government whose political management of the economy has forced out two governors of the Reserve Bank of India, the country’s central government.

Unsurprisingly, Finance minister Nirmala Sitharaman during her US visit took pot shots at critics all-around and unmistakably, at former premier Manmohan Singh who unleashed economic reforms.  

It is politics driving economics. Banerjee and Duflo had devised the “Nyuntam Aay Yojana (NYAY), a poverty-alleviation measure that Singh’s Congress Party had promised during this year’s elections that it lost. Unsurprisingly, again, Goyal has declared that like the Congress, this scheme was also “rejected by the people of India.”

However, the Modi Government continues with many of the Congress’ welfare measures by merely tweaking them and changing labels to its own heroes. Actually, when it comes to anti-poverty measures, all parties are guilty.

To be fair to the Nobel-winning couple, the dole it recommended under NYAY was Rs 2,500 per family per month. But the Congress hiked it to Rs 6,000. Banerjee told a TV channel: “There is always a little bit of a willingness in India to announce policies because they sound good or have a political purpose.”

He told a TV channel that India’s economy is “on a shaky ground” and that the government should do pilots of policy initiatives carefully. He also suggested formulating policies that work rather than “imposing those which the government imagines will work.”

This not-easy-to-dismiss advice comes from those who have not just worked on theories, howsoever realistic and relevant, but have actually worked on development models in India and other countries. The Nobel is for “experimental approach to poverty alleviation” that includes a randomized control trial (or RCT).

Banerjee, with Duflo and Sendhil Mullainathan, founded the Abdul Latif Jameel Poverty Action Lab (J-PAL) in 2003. They have  concentrated on researching how policy interventions like de-worming programmes or after-school hours tutoring for first-generation learners can help reduce poverty. Their work on a body of experimental economics work has helped developing countries in Africa, South and Southeast Asia.

Then, why is this criticism? A good part of it, against Banerjee especially, comes because he is too contemporary to be placed on a high pedestal.

An alumnus of Kolkata’s Presidency University (then a college under University of Calcutta) from where Sen had also graduated, Banerjee preferred the vibrant Jawaharlal Nehru University (JNU) to sedate Delhi School of Economics for his Masters. He shunned all political party-affiliated students’ bodies but was indeed, Left-leaning and did argue, agitate and go to jail. 

At 27, he earned his doctorate from Harvard University. Duflo, his wife, co-researcher and former student, is 47, the youngest and only the second woman to win a Nobel in Economics. She hopes her success will inspire many women.

With Banerjee, she wrote ‘Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty’, which won the Financial Times and Goldman Sachs Business Book of the Year Award in 2011.

Michael Kremer, the third co-winner, is the Gates Professor of Developing Societies in the Department of Economics at Harvard University. A Fellow of the American Academy of Arts and Sciences, a recipient of a MacArthur Fellowship, the economist has similarly worked on health and agricultural interventions to fight poverty. In sum, the trio, with 400 personnel of J-PAL, has done considerable, solid, work on anti-poverty interventions.

That they’ve been awarded the highest honour in the discipline is recognition of the fact that there’s still hope to fight poverty without succumbing to the polarizing debate between Right and Left-wing populism.

This comes when welfare-ism, although essential, has been found to be wasteful, breeding sloth among the beneficiaries and corruption among those who distribute the largesse in different forms. 

Taking the larger picture from them, it is essential to know what causes poverty and how poor behave. For, although the global economy has grown faster than ever under capitalism, millions have failed to reap its benefits. Capitalism’s defence, especially in a democracy, is that it is possible to help the have-nots by making policies directed towards them. Many such policies have been made and implemented. Yet, as the Hindustan Times points out, poverty persists, and so does inequality as growth models are doubted.

There is no quick-fix. Banerjee, for one, favours higher taxes at higher incomes. The tax system should deal with inequality. But higher growth doesn’t necessarily breed inequality. No economic law indicates a tradeoff between the two.

All this may be ‘Greek’ to the political class across the world. But it needs to be understood and imbibed if they genuinely want to “serve the people.”The writer can be reached at mahendraved07@gmail.com