India: Past, Present & Possible Futures

Like last year in September, I am once again in Bangalore. Once again I am going to be speaking at Infosys on Wednesday. This week’s presentation (not yet composed) will be on the relationship between positive rights, freedom and prosperity. These are some of my thoughts related to last year’s presentation.

India: Past, Present & Possible Futures
September 2012

The title of a series of talks I gave recently at a number of venues in India – including Wipro and Infosys in Bengaluru and at the Asian School of Business in Thiruvananthapuram – was “India: Past, Present & Possible Futures.” As usual, I learned a great deal from the discussions following my prepared presentation. I will visit those points in a future piece. In this series of posts, I highlight some of the main points that I made in the talks.

The first main point that I attempted to convey was that economic development is critically dependent on India attaining economic freedom. Which means of course that India is not economically free since India is clearly not a developed economy. Moreover, two of the most frequently used terms when talking about the Indian economy are “reforms” and “liberalization” – both of which underline the facts that the Indian economy is dysfunctional (which is why it needs reforms) and that it is shackled (which is why it needs to be liberated).
Actually, all societies which lack economic freedom fail to prosper. This is an historically established fact and can be analytically supported from first principles. India cannot be an exception to what appears to be an universal law. Expecting India to be economically chained and still prosper materially is unreasonable and futile.

It is widely reported that India attained freedom from British colonial rule in 1947. What is not generally appreciated it that it was a restricted freedom of a specific kind. There are different kinds and degrees of freedom. There are three distinct kinds: political, economic and individual freedom.

In general, freedom has both instrumental and final values. Its instrumental value obtains from the fact that freedom is a means to some desirable end — such as economic growth. Freedom is also a final value since it is also an end itself. It is good to be free regardless of whether or not it leads to other outcomes.

It is possible to have some kinds of freedom and lack others. You can have economic and personal freedom without having political freedom, for instance. Moreover these freedoms can be ranked by individuals, depending on their specific circumstances and preferences. In my case, if I had to choose only one, I would choose economic freedom over political freedom.

Political freedom allows one to choose the form, the function and the style of the government. Personally speaking again, I don’t really care who constitute the government or what type of government it is. I am happy with any form of government as long as it delivers good governance. If the democratic form is unsuited for a country (given its particulars) and it leads to undesirable outcomes, I would be happy with a different type. I prefer the type of government that works, and I am not stuck with some ideal type that does not work.

Economic freedom allows one to do as one wills in those activities that define our economic lives, namely, production, consumption and exchange of goods and services. As individuals, we attain our best level of material prosperity (a necessary but not sufficient condition for individual welfare) only when we are free from coercion in what we produce, consume and exchange. At an aggregate level, this translates into maximum social welfare and economic prosperity.

As a student of economic development and growth, the most important lesson I have learned is this: economic growth is neither impossible nor is it inevitable. Scores of countries have been supremely economically successful demonstrates the possibility. That scores of other countries have tried and failed to climb out of desperate poverty – India being a case in point – shows that economic development is not inevitable.

Every time in public talks when I refer to India’s failure to develop, I invariably get pushback from a few audience members. How dare, they say, I claim that India is poor or underdeveloped? It’s almost as if had cast aspersions on their honor or dignity. It pains me to repeat the long list of unfortunate facts that prove that India is indeed a desperately poor country but I have to do this.

India is a poor country. It does not have to be so but it is. Not just that it is a poor country, it is an impoverished country. India has been made poor. India has been deliberately made poor. India’s poverty is a choice.

We are never entirely free of our past. We have to understand that India’s past has something to do with its present deplorable state. The future is determined by the present but we do have the freedom to choose from a set of possible futures. We have to envision that future and choose wisely.

India’s present as summed up in the dismal figures – malnutrition, child mortality, poverty, farmer suicides, social unrest, etc – should make us weep for the pain that innocent people suffer needlessly. We have to do something to change this state of affairs. We have a choice and we have to choose.

Robert Lucas, Jr., economics Nobel laureate put it thus, “I do not see how one can look at figures like these without seeing them representing possibilities. Is there some action a government of India could take that would lead the Indian economy to grow . . . ? If so, what exactly? If not, what is it about the “nature of India” that makes it so? The consequences for human welfare involved in questions like these are simply staggering: once one starts to think about them, it is hard to think about anything else.”

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