Originally published on August 8, 2013
In a 1925 pamphlet “The Economic Consequences of Mr. Churchill,”John Maynard Keynes made a compelling argument against Britain’s rapid return to the gold standard after the Great War, and emphasized the human cost of conservative policies in terms of high unemployment and labor action – predictions that were well borne out by events. The quality of the mind behind the careful arguments commanded respect. Churchill upon receiving a letter from Keynes which said: “Dear Chancellor of the Exchequer, What an imbecile Currency Bill you have introduced!” responded with: “My dear Keynes. Apologies for not writing sooner… I will read your article enclosed and reflect carefully, as I always do, on all you say” (pp 749-50). The adverse consequences of the British austerity policies are carefully documented in a recent IMF World Economic Outlook (pp. 110-2).
With this precedent in mind, I had high expectations for an article entitled “The Economic Consequences of Professor Amartya Sen” by economist Arvind Subramanian, a fellow Washingtonian with an office nearby. I imagined he might analyze and perhaps critique the key policy recommendations in the new book by Jean Drèze and Amartya Sen, An Uncertain Glory: India and Its Contradictions. Or perhaps provide a reasonably engaging account of the many ways that Sen’s research has reoriented development policymaking to focus on human outcomes.
Instead I was left wondering whether the author had read this book or any of Sen’s works at all. In a classic polemical style, Subramanian assigns the name “Redistribution through Rights and Entitlements” or “RRE” to the imagined enemies of the good – the many programs he sees as responsible for busting the Indian budget. He never defines the term RRE, only condemns it, then proceeds to apply it far too liberally. Is redistribution really the only reason a government provides public goods and services? No, there are clear efficiency reasons for doing so, including to sustain long-term economic growth as well as advance human capabilities. In table after table of data, Drèze and Sen document how India has neglected critical investments needed to deliver sustained growth – including basic activities of government like those described by my friend Indira Rajaraman as cited in his article. Subramanian neglects this neglect – and its detrimental effect on long-term growth.
Indeed, Subramanian gives sparse evidence that he understands the broader philosophical issues, including the justification of these investments – that it is not just growth, but rather the quality of growth, and especially its inclusiveness across groups of people and dimensions of wellbeing, that are important and hence what we should be aiming for. Sen’s broader conception of growth and development is now the accepted understanding of diverse economists including Nobel Laureate Jim Heckman at Chicago and Angus Deaton at Princeton. Sen and Drèze laud India’s progress in growth narrowly defined, but then rightly critique the low inclusiveness of that growth in comparison to other countries in the neighborhood. They express a wider concern about the sustainability of that growth if it continues to fall short in inclusivity terms.
Since we are speaking of the economic consequences of Sen, then clearly all of the budget breaking RRE policies like energy subsidies are supported by Drèze and Sen, right? Of course not! Time and again Drèze and Sen rail against fuel subsidies and other giveaways that benefit primarily the richer folks. They provide reasoned assessments about the policies they support and those they don’t. But these clear distinctions are not relevant for Subramanian, who attributes the lot to Sen and company.
Surely the programs supported by Sen must represent a large portion of government expenditures in India, and are directly responsible for the various macroeconomic ills recounted by Subramanian, right? No, the programs supported by Drèze and Sen represent a relatively modest proportion of the budget. Even the Asian Development Bankconcludes that India is way below other countries in terms of public investments and social assistance programs (as a share of GDP), with only half the average level of social protection expenditure as a proportion of GDP across lower middle income countries in Asia. If there has been an increase of 75% in these meager expenditures – which is less than the increase in GDP during the same period – and India is still way below average, then this clearly indicates just how low the original figures were. In addition, the evidence provided of links from ‘Sen policies’ to the macro problems Subramanian raises is, to put it nicely, rather thin. For example, my family in Chennai has seen a proliferation of imported food products in recent years, which begs the question: how much of the food price rise (or other ills) is attributable to the actions of another Washington neighbor (and erstwhile fellow GWU professor) Ben Bernanke? Subramanian is short on causal evidence about the economic consequences of Professor Sen.
If the main arguments on economic consequences fall short, Subramanian’s final reflections display a vivid lack of comprehension of Sen’s work for someone who alleges to have been an admirer. Subramanian struggles with the idea that Sen could support public action to provide cereal directly to families to combat malnutrition, when his work on famines identified terms of trade issues as the cause and not aggregate shortages. Why the difficulty? Isn’t it obvious that malnutrition and famine may have very different proximate causes and hence different solutions? Or that if the cause of a problem is market-based, the solution need not be? Subramanian also finds it difficult to accept that Sen can support freedom on one hand and public action for food on the other. Perhaps a quick read of Sen’s Development as Freedom would remind him of the notion of effective freedom, which is enhanced when a marginally nourished family now has the capability to be sufficiently nourished due to public action. It would also reveal that Sen the academic and Sen the advocate have always been one and the same, and moreover that the quality of the mind behind the careful arguments should command respect.
