Indian Liberals

B.R.Shenoy’s Forgotten Voice of Dissent B.R.Shenoy’s Forgotten Voice of Dissent Chandrasekaran Balakrishnan July 29, 2011 Indian Liberals On a pleasant   March day in 1963, Milton Friedman met US Ambassador J. K. Galbraith for lunch in New Delhi. The invitation from Galbraith read, “As you know, I do not agree with your ideas, but they will do less harm in India than anywhere else…” Even Galbraith — a great proponent of planning — recognised the relation between corruption and interventionism. Unfortunately, a great majority of India’s economists toed the Gosplan line. (Gosplan is short for Russia’s state committee for planning whose Five Year Plans continue to be a model for India.)  B.R. Shenoy is the only Indian economist to write a note of dissent to the second Five Year Plan. Shenoy, India’s first monetary economist, thought that “the only hope of eradication of corruption on the current scale is a complete U-turn in our policies”. An ombudsman will not solve the problen of corruption in the world’s 10th largest economy, only more business freedom will. In February 1975, Shenoy delivered a lecture in Ahmedabad putting forward the thesis that interventionism is the root cause of corruption. Shenoy says corrupt payments arise because “a piece of paper which costs nothing, but the signature of the government official concerned to produce” has value. And it has value because government policy mandates acquiring licences, permits and quotas (LPQ) to run businesses. Data backs Shenoy’s theoretical ideas. There is a strong empirical relation between Heritage Foundation’s measure of ‘business freedom’ and Transparency International’s corruption index. In 2010, seven of the world’s 10 ‘least corrupt’ countries ranked amongst top 10 in ‘business freedom’: New Zealand, Singapore, Denmark, Canada, Sweden, Finland and Iceland. The 10 most corrupt countries have an average business freedom rank of 154, the 10 least have a rank of 12. India’s business freedom rank is 167!The Nordic countries from whom the concept of Ombudsman is borrowed, have an average ‘business freedom’ rank of 8. These countries do not have LPQ levers which bureaucrats could use to extract rents. According to the Swedish Parliamentary Ombudsmen Report for 2007-08, only one case ended in “prosecution and disciplinary proceedings”. The Ombudsman does fine-tune a well functioning system; it cannot fix a broken system like India. Unfortunately, the great Indian corruption debate is a battle between two camps of interventionists: Neither the government nor Team Anna realise that corruption is a consequence of entrusting few ‘wise’ men with too much, more of the same will not solve the problem. Shenoy, with his 1931 Quarterly Journal of Economics article, became the first Indian economist to publish in an academic economics journal. But India chose to ignore his critique of central planning. What followed was a tragic verification of his theoretical vision.   (Vipin P. Veetil is doing his Ph.D. in Economics at Iowa State University. B. Chandrasekaran is in the Planning Commission, New Delhi) Facebook Instagram X-twitter

Gandhi,the Liberal Gandhi,the Liberal Chandrasekaran Balakrishnan July 23, 2011 Indian Liberals  Are Gandhian economic policies incompatible with free market economics? Gandhi advocated limited government intervention, unfettered individual liberty and freedom, higher education in private hands and sex education in schools. In the wake of the global economic crisis, it is pertinent to examine Gandhi’s views on economics and ethics. Writing in Young India (1921), Gandhi argues: “I do not draw a sharp or any distinction between economics and ethics.Economics that hurt the moral wellbeing of an individual or a nation are immoral and, therefore, sinful. Thus the economics that permit one country to prey upon another are immoral…The economics that disregard moral and sentimental considerations are like wax works that, being life-like, still lack the life of the living flesh. At every crucial moment thus new-fangled economic laws have broken down in practice. And nations or individuals who accept them as guiding maxims must perish.”This is akin to what Adam Smith emphasised in his first book, The Theory of Moral Sentiments, in which he coined the phrase‘invisible hand’. Gandhi, as a philosopher of human action, seems to be well aware of the consequences of the moral sentiments.Advocating individual freedom and liberty, Gandhi wrote in the Harijan (1943 & 1942): “If individual liberty goes, then surely all is lost, for if the individual ceases to count, what is left of society? ….No society can possibly be built on a denial of individual freedom. It is contrary to the very nature of man”. Further he went on to argue that “Every individual must have the fullest liberty to use his talents…Individual liberty and inter-dependence are both essential for life in society.” Indeed, there is some convergence between Gandhi and Ambedkar on their views on the individual and society. Ambedkar argued that: “Unlike a drop of water which loses itsidentity when it joins the ocean, man does not lose his being in the society in which he lives. Man’s life is independent. He is born not for the development of the society alone, but for the development of his self…The first is that the individual is an end in him self and that the aim and object of society is the growth of the individual and the development of his personality. Society is not above the individual and if the individual has to subordinate himself to society,it is because such subordination is for his betterment and only to the extent necessary. Man is an individual who holds himself in hand by his intelligenceand his will; he exists not merely in a physical fashion.” Both liberals and opponents of Gandhihave misinterpreted his argument on selfsufficiency. Gandhi wrote that:“Only a Robinson Crusoe can afford to beall self-sufficient…A man cannot becomeself-sufficient even in respect of all thevarious operations from the growing ofcotton to the spinning of the yarn. Hehas at some stage or other to take the aid of the members of his family. And if one may take help from one’s own family, why not from one’s neighbours? Or otherwise what is the significance of the great saying, ‘The world is my family’?” This contradicts the image of absolute self-sufficiency that one finds in Gandhian literature. On the question of State intervention in public affairs, Gandhi was very much concerned about the State’s role in protecting the individual freedom and its role in trying to be friendly with neighbours. He wrote (1948 & 1935): “I look upon an increase of the power of the State with the greatest fear, because although while apparently doing good by minimizing exploitation, it does thegreatest harm to mankind by destroying individuality, which lies at the root of all progress.” He further argued that the “State represents violence in a concentrated and organised form. The individual has a soul, but as the State is a soulless machine, it can never be weaned from violence to which it owes its very existence…What I would personally prefer would be not a centralisation of power in the hands of the State, but an extension of the sense of trusteeship; as in my opinion the violence of private ownership is less injurious than the violence of the State. However, it is unavoidable, I would support a minimum of State-ownership. Today, the government rules out “coercion completely in the efforts for population stabilisation”. For years population was seen as a problem rather than a key resource. Interestingly, Gandhi was completely against population control strategy. He said (1925) that “…it is contended that birth control is necessary for the nation because of overpopulation. I dispute the proposition. It has never been proved. In my opinion, by a proper land system, better agriculture and a supplementary industry, this country is capable of supporting twice asmany people as there are in it today.” Writing in the Harijan (1946) he noted that “The bogey of increasing birth-rate is not a new thing. It has been often trotted out. Increase in population is not and ought not to be regarded as a calamity to be avoided. Its regulation or restriction by artificial methods is a calamity of the first grade, whether we know it or not.” Earlier he had argued that “This little globe of ours is not a toy of yesterday. It has not suffered from the weight of over-population through its age of countless millions. How can it be that the truth has suddenly dawned upon some people that it is in danger of perishing of shortage of food unless the birth-rate is checked through the use ofcontraceptives?”At a time when India is debating higher education policy, Gandhi’s views on the subject are particularly interesting (1937, 1938,1947 & 1948): “I would revolutionise college education and relate it to national necessities. There would be degrees for mechanical and other engineers. They would be attached to the different industries which should pay for the training of the graduates they need. Thus the Tatas would be expected to run a college for training engineers under the supervision of the State,