"Goods and Power: A review of Dreze and Sen", 'Economic and Political Weekly', October 2013

Goods and Power in the Progress of Nations

By Pulapre Balakrishnan

“It is in the transition that we actually have our being.”

J.M. Keynes: The General Theory of Employment, Interest, and Money

Parsimony is not a criticism that can be laid at the door of the authors of An Uncertain Glory: India and Its Contradictions a book that has received much attention in the media and is likely to be read widely. This most recent work of Jean Dreze and Amartya Sen comes across as a tide of ideas and reportage on an unusually wide range of topics related to India. However, those seeking an answer to her economy’s current condition, wherein the promise of double-digit growth has been replaced by double-digit inflation, are likely to be disappointed, for the authors have little to say on this. Instead they have taken the long view of economic development in the country. As authors are at liberty to choose what they wish to write about, I confine myself to the concerns of Dreze and Sen.  

            Dreze and Sen start by asking, no doubt rhetorically, the question whether we have by now a ‘New India’. This they do in the context of the celebration of a putatively rising power that has pervaded the discourse on India in the early 21st century. As if in answer to their own query, they describe the condition of the country in 1947 by quoting (p. 2) from a forthcoming book by Angus Deaton: “The deprivation in childhood of Indians born around mid-century was as severe as that of any large group in history, going all the way back to the Neo-lithic Revolution”. Since then, they point out, there has been a substantial advance, particularly in the sphere of democracy, namely, periodic elections, the expansion of civil rights, and a free and active media. However, democracy is also about social justice. Not only does deprivation continue to exist in India, but the institutions of India’s democracy do not give it the attention that it deserves. In a comparison with China the authors point out that while its leadership may be authoritarian it has yet eliminated hunger. But, they find the Chinese system not without flaws, an instance of which is the famine of the late nineteen fifties when Mao’s disastrous economic policies, and his dogged pursuit of them, had left an estimated 30 million dead. The strength of a democracy is that is allows information to flow from the bottom up, making it possible for course reversal when necessary.  

            Having evaluated contemporary India they move onto what may be seen as the core of their argument, constituted by chapters on growth, development, and education, respectively. First they argue that growth and development, by which they mean human development underpinned by health and education, are integrated. Growth provides the resources necessary to build capabilities which in turn enhances growth via a more productive labour force. Dreze and Sen go on to identify what they consider the apotheosis of the integration of growth with development, namely, the ‘Asian Development Model’. They trace its historical origins to Japan in the middle of the nineteenth century following the Meiji Restoration. Significant are both the zeal with which education was spread and the fact that this was mostly state led. Following Japanese imperial expansion, this model was to spread to the Korean Peninsula, Manchuria and Formosa. Subsequently, independent governments in China and south-east Asia did the same, i.e., spread education. For India, this identification of an Asian Development Model as such is significant, for it suggests that it is replicable. It would appear that there is something distinctly Asian about this model, for the east is represented by a mix of political regimes ranging from democracies to dictatorships, but we cannot overlook the liminal presence of Confucian values in its societies. Beyond the common feature of widespread human development, Dreze and Sen suggest that in east Asia growth was combined with its distribution. This does not mean that the income distribution was equitable, but that the fruits of growth were distributed. We are shown data on the impressive growth of real wages in manufacturing in China since 1980. On the other hand, this has not been the case in India. The message that the authors drive home is that the latter was left behind in the growth league tables because it failed to integrate growth with development. Surely this is a most useful corrective to the narrative that India lost out to East Asia because it did not give enough of a role to markets or had neglected the opportunities that come with openness to trade, i.e., because the economy was shackled. Such critiques miss the point that freedom is not opportunity, for opportunity is defined by capability. This becomes clear to the reader when the authors move onto arguing that education is central to the process of integrating growth and development, and thus to the progress of a people.

            In the modern world where much depends on the written medium, being illiterate is like being imprisoned and school education opens a door through which people can escape incarceration. Illiteracy, Dreze and Sen argue, muffles the voice of the people and make democracy less effective. The importance of education has increased under globalization in the last two decades. China’s success in trade is related to its ability to meet the stringent demands of a global market which requires producing to international standards. The authors flag the very low standards in India, revealed both by student performance in international tests such as PISA but also from independent audits of learning in our schools. [It may be pointed out that the Pratichi Trust founded by Sen has been at the forefront of devising methods of assessing learning in the schools of West Bengal. This might make us reflect upon the fact that in India where the government collects data on almost every aspect of economic activity, almost in the spirit of surveillance, it has not considered it necessary to collect data on outcomes in the educational sector, leaving it to NGOs to do this for us.] Dreze and Sen identify a neglect of education by international standards in India both in terms of coverage and quality. They emphasise this is not just unjust but inefficient in generating the basis of a dynamic economy. So what is needed is universalization of education with quality. One might mention that this is an important observation as among social scientists in India there is a certain squeamishness towards arguing for quality for fear of being identified as ‘elitist’. The fact is that while arguing for quality may go against the cannon of radical chic, it’s importance for the poor is demonstrated by the rising spending on education in private schools at the bottom of the income distribution. From this it would seem as if the poor, actually, want the best for their children. In all likelihood, it would require very little by way of resources to ensure that they get this. Allocations under Sarv Shiksha Abhiyan have enabled increased public expenditure on schooling substantially in the last decade. Furthermore, Dreze and Sen provide data to show us that teacher salaries are not the issue in this regard. Teacher salaries in relation to GDP in India are far higher than in much of the rest of the world, being two and a half times the OECD average and over three times the Chinese. In Bihar it is an incredible 15 times the OECD average. Whatever the numbers actually are, they point to something that is common knowledge in India. Teachers in its government schools are relatively well paid. Neither absent incentives, an argument stemming from the right of the political spectrum, nor fairness, usually invoked from the left, seem to be useful ways to approach the dearth of quality in the schools. There is no escaping the fact that we need to govern the system. I shall return to this theme.

            The authors next move on to demonstrating that growth does not necessarily lead to development. This is done by comparing India with its neighbours in south Asia over the recent period of high growth in India. India’s ranking in terms of social indicators, mostly with respect to health, has fallen behind that of many of them. Of particular interest is the case of Bangladesh, India has by now moved ahead with per capita income twice that of Bangladesh but Bangladesh has moved ahead of India in terms of social indicators. Interestingly, the authors suggest that this may be related to the fact that Bangladesh has managed to involve its women in social programmes and thus the development process much more than India has. 

            Till this point the book is a veritable tour de force illuminating the field of development economics of course, but also purveying a whole methodology, the hallmark of which is that it combines economic theory and history to make sense of the world. By their sustained effort to substantiate their arguments with data, the authors also bolster the prestige of economics as an applied discipline. However, from here on the book takes the form of a series of snapshots about India today, ranging from a crisis in healthcare to the state of the media. It is difficult to any longer identify a central argument running through these passages except perhaps the obvious message that a glorious future is yet to be assured. The review must now follow the format of the book, but l shall discuss only the main issues the authors raise.                

     Prominently, Dreze and Sen discuss two important initiatives of the UPA II government, namely, the NREGA and the Right to Food Bill which was yet to be enacted at the time of their writing. They are enthusiastic about both. On the former, they point out its favourable impact on the rural wage, which after stagnation in the first half of the last decades begins to rise steadily after the introduction of the Act. While the fact that rural labour now has a higher reservation wage due to the introduction of NREGA is a good thing, it is important to recognise that if the productivity of labour does not increase agricultural output can be produced only at an ever rising cost. That something of this kind is at work may be surmised from the fact that food price inflation has accelerated from around the time of the introduction of the programme onwards. A condition for the productivity of labour to rise is that the employment creates assets. Of course this caveat could hardly have escaped the authors’ attention, but it does not figure prominently in their discussion of the consequences of the NREGA. The importance of the cost of production of food to the development process is one of the lessons we have learned from a history of the rise of the West. Trumping Ricardian pessimism its countries have steadily produced food at a lower cost until quite recently when climate change began to threaten the dynamic. If this virtuous pattern is to be replicated by us in India, the public distribution system, even in its glorious form of the Food Security Bill, is not the solution. The PDS can only ensure that food is distributed at a price less than the market price – or even the cost of production, as is set to happen under the provisions of the Food Bill – it does cannot address the issue of producing food cheaply. For the system as a whole, the resources released and the demand generated for manufacturing and services are a function of the cost of production of food. India’s parliamentarians appear to have overlooked this aspect. On the PDS itself, of course Dreze and Sen reveal an awareness of the shortcomings in its functioning, but they yet make a pitch for universalization, and against cash transfers, on grounds that a universal PDS generates a solidarity across classes that ensures better delivery. The judgment appears to be a little overoptimistic in light of the evidence that the fact of all Indians facing an obstructionist bureaucracy is yet to produce a common front against this interest group.  But on the fiscal cost of the Food Bill the authors are entirely right to say that it does not amount to much when set against the combined bill due to the subsidization of fertiliser, oil and cooking gas. These subsidies they correctly term “regressive”. Even though they themselves fall short of calling for their abolition, they may have unwittingly introduced an element into the public discourse on how the government should spend its revenues for Opposition MPs have begun to speak of “subsidies for the rich”. Right now, an additional argument for ending, or at least scaling down considerably, the subsidy on oil, fertilizer and gas is that it contributes to macroeconomic instability via the balance of payments. 

            Dreze and Sen discuss corruption but restrict themselves largely to the bureaucracy, pointing out that it is unaccountable and protected by colonial laws. This is indeed correct and relevant. However, while bureaucrats can stall projects and otherwise harass the citizenry, they can only play second fiddle to the politicians in the large-scale corruption associated with policy decisions. The latter are the prerogative of the political class. Recent instances of alleged corruption  relate to the allocation of spectrum and licences for mining coal. Altogether Dreze and Sen overlook the current crisis of democracy in India a manifestation of which is that the political class is ungovernable once it is elected into power. While their much higher levels of education are a factor, norms to be observed in public life are very likely a factor in the functioning of the European democracies. It is not clear what we in India can do till these are in place. One can hardly expect the authors to have an answer to this question, but to overlook it is to not provide a solution to the democratic deficit in India that they, rightly, point to.  They appear to fight shy of the instrumental argument for democracy while celebrating the democratic practice of ‘public reasoning’. The former it that democracy is about realizing the public will, for which task it is more suited than any other form of government.  It is also not far-fetched to assume that the people of India aspire to public goods and expect that the politicians that they elect set about providing them. Indian democracy is not delivering these public goods in anything like sufficient quantity, and the challenge is to explain why. Clearly, resources in the aggregate are no longer the problem. India has by now surpassed Japan as the world’s third largest economy in Purchasing Power Parity terms. It is no longer a poor economic entity but harbours poverty, exacerbated by the absence of public goods. Public goods are scarce in the economy because the section of the population empowered to do this, namely its political class, successfully evades this aspect of governance. The principal-agent problem identified in economic theory helps us understand this. Rather like the separation of ownership from control under managerial capitalism, under Indian democracy the people own the democracy, so to speak, but it is the political class that controls it by collectively holding the levers of power. Elections may come as a periodic check to the ambitions of the different political parties but cannot check the ambitions of the political class as a whole. Nothing reveals the fact that politicians irrespective of party affiliation act as a class more than the Indian parliament’s recent attempt to hastily amend the Representation of People’s Act to allow convicted criminals to retain their seats despite successive Supreme Court rulings that it contravenes the Constitution. Almost as a rule, there is no inner-party democracy within India’s political parties. Thus the Westminster model of politics transplanted to the sub-continent luxuriates here in the form of either dynastic politics or, where dynasties are not possible, a mild version of fascism characterised by allegiance to a supremo. Acquiescence is purchased by allowing party members to enrich themselves once it, or coalition, has captured the state apparatus. It is not clear how much a more vigorous form of public reasoning, championed by Dreze and Sen, can do in this regard. It is not particularly relevant to us in India whether our parliamentarians have heard of “deliberative democracy”; the question is whether they even care for it. During the Cold War western socialists disenchanted by the tragic evolution of East European communism coined the expression actually existing socialism to guard against being blinded by some ideal vision of it. Such an  approach is advisable when we rely on democracy, which we must, in India.

            There is though an aspect of the working of Indian democracy that is of even greater relevance to the proposals of Dreze and Sen. They advocate a “rights based” approach which includes welfare and the public provision of health and education. It is possible to be on the same page with the authors on this while at the same time remaining skeptical of the capacity, or even the intent, of the Indian state to deliver these outcomes without administrative reforms. There is evidence that substantial spending increases in the areas of education, health and infrastructure are not being realised as improved outcomes in these areas. [See my “Mainstreaming the Marginalised in Development: Conceptualizing the Challenge in India”, ‘World Bank Legal Review’, forthcoming 2013.] In fact it can be argued that an uncertain glory awaits India precisely because of poor governance. The poor who must rely on public services are the most adversely affected due to this deficit. Legislating rights is insufficient to empower the poor so long as the public sector on which they rely is governed without a mandate. The world over social democracies have effectively delivered welfare and services, even without the panoply of rights that are currently being legislated in India, because the public sector is governed by a suitable incentive structure and its performance subject to social audit.

Finally, a certain complacency in the treatment of the empirics appears to have crept into the book. The first relates to the long haul of Indian economic growth. On this, Dreze and Sen have the following to say: “the economic policies of the early post independence period did not succeed either in accelerating the growth rate or in bringing about a major transformation of peoples’s living conditions.” (p. 22) This is not established within the current body of  knowledge. Actually, econometric estimation only confirms what is shown in the pioneering exercise of Sivasubramonian, which is that the nineteen fifties recorded the highest acceleration in the rate of growth in the twentieth century. [See my ‘Economic Growth in India: History and Prospect’, 2010 which Dreze and Sen graciously cite]. That which has been achieved since 1991 does not come close to the magnitude of the swing achieved in the Nehru era. Interestingly, the only recorded downswing since 1947 commenced immediately after, in the mid-60s, and lasted till the late seventies. This history of growth might even hold some clues to understanding how the workings of Indian democracy may have shifted over time. On the second part of their claim, while the authors of course base their comment upon the authority of some well-known poverty researchers, it is important to note the view among others that the database for poverty estimation in the 50s and 60s is unreliable and is prone to yielding overestimates [see M.H. Suryanarayana: “Estimating Rural Poverty: Distributional Outcomes, Evaluations and Policy Responses” in Chetan Ghate (ed.), ‘Handbook on the Indian Economy’, 2012, p. 116].  It is difficult to believe that in the fifties when the growth turnaround had been significant in itself, and the contribution to it was made overwhelmingly by the agricultural sector, the income distribution turned so unequal as to neutralize the increase in per capita income. The judgment on the history of growth and poverty reduction for this period found in Dreze and Sen resides comfortably with the currently ascendant conventional wisdom which recognises dynamism in the economy only after reforms in one form or the other were launched.

While yet on the topic of economic policy in India one can agree completely with the authors’ evaluation of it without agreeing with their explanation. It is anachronistic for Dreze and Sen to refer to Gandhi’s idea of basic education [p. 24] when pointing to the gross neglect of schooling in early post-Independence India. Both historically and metaphorically, Gandhi was dead by the time the First Five Year Plan was written. Nehru had actually written to his mentor declaring that he rejected his vision for post-Independence India. Gandhi’s position on education was defined by the historical moment in which he found himself. He was waging an anti-colonial struggle, and his views on education along with some of his other ideas, such as the need for a national language, must be seen in context. He was undoubtedly critical of the kind of schooling India’s children received but to suggest that he was against spreading primary education is to miss the point of his critique. I quote from the Constructive Programme: “is view on Foreign rule has unconsciously, though none the less surely, begun with the children in the field of education. Primary education is a farce designed without regard to the wants of the India of the villages and for that matter even of the cities. Basic education links the children, whether of the cities or the villages, to all that is best and lasting in India. It develops both the body and the mind, and keeps the child rooted to the soil with a glorious vision of the future in the realization of which he or she begins to take his or her share from the very commencement of his or her career in school.” [Ahmedabad: Navjivan Trust, 1941]. It would be difficult to find a better aid to how we to think about the road to participatory growth or even participatory democracy than this. Incidentally, Gandhi was also for Adult Education, which he thought of as “political education” first and not merely the 3 Rs.

In their account of what makes for a successful nation, in their book ‘Why Nations Fail’ Acemoglu and Robinson pick out the distribution of power as important. This makes immediate sense when we think of the collapse of the Former Soviet Union, where goods had been distributed quite equally but power was not. But it is not as if democracies naturally distribute power even as they may practice periodic elections or allow the televisation of parliamentary proceedings.  Inordinate power with the political class and the bureaucracy vis-à-vis the citizenry can well be a feature of democracies as we see is the case in India. A conundrum that is thrown up by Dreze and Sen is that the social and economic deprivation that they so rightly draw our attention to has co-existed with democracy for decades by now. To expect to see the eradication of this deprivation fully within the framework of democracy as it is experienced today requires knowledge of how its practice will be reformed in order to achieve this. Observing the current flurry of parliamentary bills distributing goods and conferring rights one might wonder whether we are observing the state defining the agenda of democracy or a people’s democracy governing the state. It cannot be a matter of indifference to us which is the case. Our authors are very likely prescient in their view that glory is not assured for the India, but remain reluctant to consider the possibility that this may be due to the form of governance, sustained by the actually existing democracy, that has taken root here. The value of Uncertain Glory by Jean Dreze and Amartya Sen lies in its having enabled us to see this.  

For helpful discussions I thank without implicating Suresh Babu, Chandan Gowda, Ravi Kanbur, M. Parameswaran and, especially, K.P. Sankaran.