Different Approaches To Fish
Pratap Bhanu Mehta writes in the Telegraph:
The Left thinks that throwing state money with good intentions is the solution to most problems. The Right on the other hand, seems to move from the plausible assumption that throwing money is not always a solution to the more dubious proposition that it is not a necessary part of a solution. The Left is enamoured of a certain kind of idealized statism, the Right of a knee-jerk cynical anti-statism. The Left argues that more spending on welfare is necessary, the Right cautions that almost all of it will go waste.
The Right speaks of regulatory reform, freeing up the markets, protecting property rights, privatizing, removing labour market rigidities, balancing the budget as crucial ingredients of sound economic policy. The Left gives all of these things short shrift and argues instead for greater spending on social security, employment guarantees, welfare schemes, job security and so forth. The Right wants to remove the barriers that bind those who want to create wealth. The Left is interested in the fate of those who might not be able to. The Right wants reform of the state first; the left does not want the cause of justice to wait till the state puts its house in order.
Of course, these contrasts are stylized. In principle, few economists of the Right will deny that they are for more social welfare. They just disagree about the means and strategies that will make welfare programmes efficient and sustainable. It is often patently disingenuous of the Left to accuse those championing the cause of trade and privatization to be anti-poor. Nothing could be farther from the truth. As Burke said, those who yelp loudest on behalf of the poor do not always do the most to help them. But it has to be acknowledged that sometimes excessive attention to a particular class of issues relating to efficient markets can render some important welfare challenges invisible. It is more likely that economists on the Left will oppose some of the market discipline and regulatory sanity of their colleagues on the Right. But they have something of a point in bringing to attention the fact that India will, down the line, need not just pro-market reform but something like a genuine welfare state as well.
What’s my take on this? Well, I quite agree with what Lao Tzu
This last line of Mr. Bhanu’s disturbs me:
Just why does a country like India, which at this point and for much of the foreseeable future has a government that is too inept to even provide basic healthcare to all its citizens need the added burden of a welfare state that it cannot afford? Furthermore, judging by the difference in growth between such beacons of welfare statism such as France and countries like the US and Australia where welfare statism isn’t as entrenched, I’m inclined to see the welfare state that the author has in mind as too much like giving out fish. A safety net, sure that’s justifiable. An all encompassing nationalized pension system would be too expensive and do nohting except give corrupt officials more money (more of India’s citizens’ money!) to lay their hands on.
So right! The sooner India’s legislators realize that, the better. By the way, glad to see this blog up here. I think this proliferation of blogs on India’s economy and current events in India is a great thing.
Comment by airrahul — August 18, 2005 @ 9:22 am
Furthermore, judging by the difference in growth between such beacons of welfare statism such as France and countries like the US and Australia where welfare statism isn’t as entrenched, I’m inclined to see the welfare state that the author has in mind as too much like giving out fish.
On the other hand, the Scandinavian welfare states are registering healthy GDP growth, and per capita GDP growth is at least as strong as the U.S. in every case. Also, the US and Australia also have demographic factors in their favor in terms of the GDP metric, being among the few advanced industrialized nations with high population growth. In any case GDP is hardly a perfect metric for international comparisons, as measurement standards differ considerably from nation to nation, particularly in the measure of inflation.
The U.S. and Australia also have something else in common — extremely high current account deficits — reflecting a general loss of industrial competitiveness in tradable goods over the last 30 years. For a nation that needs to cultivate its manufacturing base, the contemporary U.S. and Australian economies offer little more than fine examples of what not to do.
All that aside, a developing state should not necessarily adopt the economic models and tendencies favored by developed states. It is much better to look at successful models of development for ideas, and if one wants recent examples that means looking East.
Comment by walker — August 18, 2005 @ 3:56 pm
Mr. Walker, I don’t dispute your points and I agree, our and the Australian economy aren’t great examples for India to follow. Also, I agree completely that development models from East Asia would serve as better examples for India.
Also, a little nitpick about the Scandinavian countries. They have some of the lowest levels of corruption in the world (Transparency International’s 2004 survey). This IMO may have something to do with the viability of their model, as would the fact that they have smaller populations than India does and the fact that countries such as Norway have oil. Plus, I don’t see India in the near future having enough money to fund such a system or having enough transparency to ensure that a welfare system doesn’t become a blackhole of money due to corruption.
Comment by airrahul — August 18, 2005 @ 5:17 pm
a. Equality is an unnatural state. Inequality is a natural state
b. Greed is rampant. Contentment is rare
c. The natural tendency of a human being is to safegaurd his current life-style and to improve it
d. There are not enough resources in the world for everyone’s greed
e. Wealth is a relative concept
f. Freewill is a myth
g. The life of an individual is a random act
h. In Randomness, Talent and Success are meaningless
i. Nobody achieves anything as freewill doesnt exist, and so everyone is equal in no-achievement.
h. The governing randomness is not logical or fair and hence generates inequality in lifestyle, sometimes more, sometimes less.
j. Judgement is not a logical act, but an example of derived randomness.
Comment by sakreha — August 19, 2005 @ 1:18 am
Welfare states are supposed to provide fishing rods. No point in providing fishing lessons if at the end, those that have fishing rods continue to eat and flourish, while those without rods go home, or just watch others do the fishing.
Advocates for welfare states want enabling policies to be put in place. Free markets and so-called “level playing fields” do not recognize handicaps that players bring into a field. In the US, welfare policy advocates work to ensure adequate job training and education to welfare recepients so that they can enter the job market equipped to take care of its offerings. Its another matter that the Government refuses this option and sticks to the handout option – using private operators to dispense benefits, who then rip off the system. Most fraud committed in welfare benefits is
not by the recipients (who are demonized) but private operators (committed capitalists all) who commit wholesale fraud on the government. But its easier to demonize the recepients since they are
invariably poor and (in the US) not-white.
At the least, there is a gap between feeding fishes and simply providing fishing lessons. This theoretical gap is filled by advocates for welfare states, not by advocates of free markets. An instructive distinction here would be Berlin’s two concepts of liberty. Positive liberty: X is free to do Y. Negative liberty: X is free from Z to do Y. It should be clear that welfare states aim to enhance both kinds of liberties.
Comment by Samir — August 19, 2005 @ 8:01 am
I may be missing something, but the idea of a welfare state as considered here is simply not applicable to the Indian case. Perhaps the PDS was the closest thing we had. I see no inherent problem with (left) ideas like rural employment guarantees (its worked fairly well in argentina and South Africa) for example.
I disagree with Amit’s contention that “A welfare state gives fishes. Genuine free markets enable fishing. Only the latter is a viable long-term solution”- for many reasons. Just to mention two:
1. Logically and theoretically, the contention sets up a false dichotomy between the private sector and the government (after all, much of the ‘third way’ politics is meant to take features from both).
2. Almost every case of big push industrialization and growth (bar the UK and the US, and perhaps Hong-Kong) have had significant government intervention and welfarism-in the form of land reforms, or publicly funded education, or pension schemes-or what have you. This is the very visible hand of government and illiberal markets. Maybe you can call this the “You-need fish-to-be-able-to-feed-yourself-so-that-you-can-fish” principle.
Samir makes some very interesting points, which strike me as right from my little reading of U.S Welfare Reform
Arjun
Comment by Arjun — August 19, 2005 @ 4:08 pm
Arjun, I’d like to draw a distinction between welfarism and government intervention in general. The welfare state is a 20th century development, largely a response to the Great Depression in the 1930′s. For sure, public some public expenditure went toward public education and alleviating poverty before this (ex. the British “Poor Laws” date back several centuries) but the level of welfarism was fairly small in comparison to today.
On the other hand “government intervention”, generally defined, has certainly played a significant role in the industrialization of the U.S., the U.K., Germany, Japan, etc. The form of this intervention is probably best characterized as “Industrial Policy”. The individual policies varied somewhat, but generally they consisted of infrastructure development, trade regulation, support for technology acquisition and development, and subsidies. Such measures are largely orthagonal to (and can even be in conflict with) the goals of welfarism.
Comment by walker — August 19, 2005 @ 6:36 pm
Walker,
You’re right of course, and I was careless in the eliding of government intervention and welfarism.
I think that its hard to think of the East Asian ‘Miracle’ without some combination of the two (I’d certainly call land reform and public education ‘welfare’.
And it remains true that in India, most government support systems are weak at best.
Arjun
Comment by Arjun — August 20, 2005 @ 11:09 am
Walker,
I know this is pedantic, but the origin of the welfare state dates 50 years before the Great Depression, when Bismarck introduced the ‘social insurance’ scheme, which was remarkably similar to the ideas of the modern welfare state.
The term ‘welfare state’ itself was coined by the Archbishop of Canterbury (or York?) during WWII to point out the difference between Britan and Nazi Germany.
Of course, from an American context, the welfare state has its origins in the aftermath of the Depression.
Comment by Reuben Abraham — August 20, 2005 @ 12:17 pm
Reuben, thanks for the correction — the origins in Germany are earlier — though the Great Depression and WWII played a major part in increasing the size and scope of the welfarism elsewhere in the west.
Comment by Walker — August 20, 2005 @ 2:14 pm