Praising Dweep’s post, Pragmatic asks “Where will the demagogues [sic] of right and left seek refuge? Bravo!”
I don’t know about the demagogues of the right or left, but this ideologue of the right seeks refuge in logic and data – and he doesn’t cherrypick data to find what suits him.
First, Dweep has managed to confuse economic growth and globalization when he interprets Prof. Bardhan as saying that “economic growth may have less to do with poverty reduction in China than previously imagined…”. What Bardhan is saying is that globalization has less to do with poverty reduction in China than commonly believed. This is not surprising. The China of 1978 did not require globalization as much as it required sound economic policies. Mao’s policies had reduced pretty much the entire country to starvation and occasional cannibalism. Getting out of it was not rocket science. Deng’s policies caused economic growth – and it brought a huge chunk of people out of poverty.
Next Bardhan says that “the rate of decline in poverty [in India] somewhat slowed for 1993-2005, the period of intensive opening of the economy, compared to the 1970s and 1980s, …”
Let’s see the poverty figures between 70 and 74:
Now let’s see the poverty figures between 74 and 87:
And between 87 and 93?
I have not got the figures for all years – the years between 74 and 87 are quite sparse, but I hope you can see what I am seeing. Before 74, there is no trend of poverty reduction. The number of poor people was entirely dependent on the monsoon. Between 74 and 87, you saw a real decline in poverty, and you can guess why – we enjoyed the green revolution. By the mid 80s, the revolution had run out of steam. The country settled back to its old pattern, albeit at reduced poverty rates, till the crisis of 91.
With these figures, is it fair to say that ”the rate of decline in poverty somewhat slowed for 1993-2005″, implying that we had a high rate of decline earlier? The blame for this misrepresentation, incidentally, does not lie completely with the professor – he just chose one word poorly. In other parts of the article, he agrees with what I am saying. It is Dweep who uses the figures to declare that the figures contradict “what is now taken as an article of faith within the economic liberalization community.” I am keenly interested in knowing which article of faith that is. The story the figures tell is clear enough for me. When the economy does well, the poor do well. When it does badly, the poor do badly. The growthless year of 1991 was terrible for the poor – their proportion went up from 36% to 40% in a space of two years.
Is it true that the green revolution has done more for the poor than economic reforms? I can accept that. The green revolution was a pragmatic step which cannot be slotted into the ideologies of the right or left. The ideologues of the left hate it, because where it was carried out, it involved junking land ceilings and letting farmers own as much land as they could and plough it with tractors. They also hate it because it is supposed to have hurt the environment.
This ideologue of the right has misgivings about the Minimum Support Price mechanism, which is an illiberal policy. Yes, it gave farmers an incentive to produce more, but it also made food more expensive. I have read glib comments on this blog saying that we shouldn’t care about food prices because rich software engineers can afford to pay a bit more for food. I am sure they can, but it is a pity about the landless labourers, who constitute 40% of the poor. They work on land, but they also have to buy their food.
The bottomline is that the gains made from the green revolution could not have continued for ever. If the productivity gains from the revolution had continued, the government would have had to increase its subsidies to unsustainable levels. Also, we’d have the difficult question of what to do with all those mountains of food. The only way out would have been to reduce the number of people working on land, and we could have sent them… where?
I will not dwell too much on the rest of Bardhan’s article, which is a shameful apologia for China’s inequality. He thinks up convoluted statistics to claim that China is less unequal than India. Why does he use the Gini coefficient for land distribution in rural areas? Because if he had used the Gini coefficient for consumption inequality – which is the standard, China would have come way worse. China’s consumption inequality is 44% – much, much worse than India’s 32%. Also, when it comes to China, inequality is apparently a positive force. The fact that the queue is moving for others is reason for the poor to hope that their time will come. It is not clear why the same logic cannot apply to India.
What are we left with once the fog of fuzzy thinking clears? Free market fundamentalism is the only sustainable and reliable way to ensure growth. Economic growth is the only way to reduce poverty. Globalization is a part of free markets, not a substitute for them. The fundamental things apply.
(Updated to add a clarification for better readability)