Sunday, 22 January 2006

End poverty? Growth alone can do it


Wednesday, January 18, 2006 21:14 IST

MUMBAI: Taking on the critics of a growth-centred development strategy, eminent liberal economist Jagdish Bhagwati reiterated that growth is the only way to end - or at least reduce - poverty.

At the same time the professor of economics and law at Columbia University, acknowledged that supplementary policies are also needed to ensure that the laggards also move forward. He was delivering the Sukhamoy Chakravarty Memorial lecture on "India's development strategy: which way out," jointly organised by the Sukhamoy Chakravarty Foundation and the Indian Council for Research in International Economic Relations.

Another liberal economist, Lord Meghnad Desai, speaking at a different forum - the sixth editor's conference on social sector issues - hit out at the idea that only the state can provide protection against the market. A lot of this is based on aggrandisement by whichever group has captured power, he said.

"The bulk of India's workers live in the free market. They have no protection and submit themselves to market forces every morning."

While admitting the need for supplementary policies, Bhagwati wasn't about to concede any ideological points to the socialist economists.

Refuting the criticism that the strategy of obsession with growth didn't care for the poor, he argued that no one was pushing for growth as a target or objective.

Economists were always treating it as a way to achieve the other objective - to remove poverty. "It is very insensitive not to have it as an objective," he said. If poverty didn't get reduced, it was because there was no growth for decades and not because growth was seen as a target.

"Growth strategy is the clear instrument of doing the job," Bhagwati said. He strongly defended liberal economics against criticism that it was elitist and did not care for the poor. The fact that additional variables and policy instruments were needed were always understood, he said.

He also took on the charge that social sector spending had been neglected. The first two plans, he pointed out, were full of proposals to increase spending on health and education. If spending got neglected, it was because there was no money.

He made light of the suggestion that governments should spend less on defence. "Everybody says they can spend less on defence, but they don't." There will always be a security issue that comes up which will make out a case for increasing - or at least not reducing - defence spending.

Desai, for his part, felt the state could only be an enabler. "We have to see the human development budget as removing constraints on families," he said. "Whatever development happens, happens because of the way households spend. Development will not fall from the sky. It is not a function of capital-output ratio."

He was also impatient with the criticism that rural distress had increased because of liberalisation and globalisation of the Indian economy. "Rural distress is not a new or a purely Indian phenomenon. It is necessary to understand whether such behaviour is specific to certain areas or crops." He was also not sure if changes in interest rates could address the problem.

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