Recently I got to know about Zoom and even had a zoom webinar a few days ago. I think we should give Zoom a spin and hold an “ask me anything” session. Just generally chat. Particularly we can discuss why Shabana Azmi is a moron. Here are the details:
If you click on the image on the left, you will see the tweet that Shabana Azmi made. Perhaps she will be told that she’s stupid and delete it. Hence the screen capture.
She has 3.2 million followers. Imagine! Doesn’t that tell you something about how stupid people are in general — they follow a brainless lefty.
Anyway, if you’d like to chat about things, here’s your opportunity.
When: Tomorrow. Sat 27th Oct. At 10:30 AM Eastern. 8:00 PM Indian.
Where: Zoom URL
To join the meeting, all you have to do is to click on the Zoom url above and you’re done. I will be there for a half hour.
UPDATE: AMA postponed. I have to attend to another matter at that time. Will reschedule later.
Atanu Dey : Life is a Random Draw 
Shabana Azmi’s only honorable way out now is to claim that it was a sarcastic tweet.
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I saw this video recently. I know you don’t hold Gurumurthy’s economic knowledge in high regard, yet I wonder if you see any merit in his views expressed here – especially the stats he brings up related to unemployment, small businesses, the need for better financing of small businesses (which he says is the basis for the government’s Mudra Loan scheme). https://www.youtube.com/watch?v=IvXkSkEappo
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Namami, I am happy to address your question. I only request that you explicitly frame the question so that I can properly address the points that matter to you. S Gurumurthy is wrong in so many ways in so many areas that it is difficult for me to figure out where I should be begin. I can’t do that without a book-length treatise on the matter. I hope you understand my position.
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Thank you. I wouldn’t mind if you ignore this — because in attempting to write up my question, I notice continuous and effortless contradiction and dropping of terms loosely in SG’s narrative. And I’m a neophyte in economic matters so I hope I am not following his lead!
I’ll pull out some angles (in 3 separate replies) to ask if these are instructive. I am less interested in evaluating SG’s theory of “social capital” and our family style relationships being a superior model and not being recognized as powerful in the west.
At 27:37 in the video, SG says that per a Credit Suisse report, listed corporates account for 5% of India’s GDP. Listed and unlisted corporates put together account for 15% of the GDP. (The rest seemed to be lumped as agriculture and tiny something). Both the listed and unlisted corporates produce only 9% of India’s employment. Are these stats valid? Is it really true that 91% of the employment is by what – government, education, small businesses (not corporations) agriculture and service jobs? If that is more or less true? In the US, best that I am aware, agriculture is about 4%, self-employed work force is 6%, all types of government is around 15% industry with services is 65% and manufacturing is 10%. SG’s classification that he quotes does not exactly map to this division I’ve mentioned in the US. But for what it is worth, 40% of US employment is in corporations with 1000 or more employees, 65% of US employment is in companies with 100 or more employees. My question: does a growing and healthy economy in a very large country correlate with increasing share of employment in companies with more employees, that will better leverage scale? Should India be proud of its large number of “entrepreneurial” small business, unorganized sector?
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Namami, first lesson. Use numbers sparingly.
Only about 10 percent of India’s labor is in the organized sector, which includes the people who work for the government. The worker in the post office (govt sector), people who work in the railways, the CEO of a corporation, the worker in the Mahindra car factory, the checkout person at a department store — these are in the organized sector. They have salaries, benefits, pensions, etc. Labor in the organized That’s the organized sector. The rest are in the unorganized sector. That includes the rickshaw driver, the farm laborer, the farmer with a tiny parcel of land, the guy who sells stuff at the street corner, the guy who washes cars, the chowkidar, the maid — the list is endless.
When 300,000 people apply for 22 available jobs as peons in a government department, it tells you that they prefer a job in the organized sector as opposed to becoming entrepreneurs. Educated people work in the formal sector, and uneducated people are forced to work in the informal sector. Firms cannot hire illiterate people for obvious reasons.
India should be as proud of the fact that its formal sector is only around 10 percent of its labor force as the fact that it is one of the poorest countries. It should be as proud of that fact as the fact that 60 percent of its labor is employed in agriculture. Compare that to the US: About 2 percent of its labor is in agriculture. India is poor because it has not had an agricultural revolution and an industrial revolution.
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At 37:35 in the video SG claims that the behavior of the people did not lower their individual percentage of income saved between the pre-liberalized (pre 1991) era and in the 15 years after that. This comes after he criticizes what he says was Jagdish Bhagwati’s exhortations for Indians to save less, to average less than 10% of income and become more of a consumer heavy society. He goes on to say that the best growth period in the economy was fueled by increasing individual rate of income savings, which is part of the national/cultural ethos. My question: if this isn’t a chicken and egg problem, is a healthy economy really strengthened by higher individual savings rates?
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Namami, my advice on this is to focus on principles and use logic to reason through things. It is best to avoid reading news, watching talking heads discussing things. They waste time without helping us in our understanding.
Check out this video. https://www.youtube.com/watch?v=5NwS42ML0JI&feature=youtu.be
Did you understand anything? Probably not. I did not understand anything at all in it. What the heck was Raghav talking about?
So, the principles and logic is what we chiefly need. I will answer the question that matters — what are savings and how do they matter.
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Finally (and in third video in this series), based on the first point of small businesses being so essential to India’s economy, SG talks about how the mudra bank/loan scheme to give small loans to small business entrepreneurs and break away from the formal banking sector is essential to keep this key sector vibrant and is hugely important. We know that Raghuram Rajan was heavily against this and said it poses dangerous systemic credit risk, which I would think he knows only too well. Do you align with Rajan here?
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I take it as a maintained assumption that SG is a moron when it comes to economics. Perhaps he knows something about finance or accounting — I can’t judge his competency in those domains since I don’t know finance and accounting. I do know a bit of economic, however.
My advice. It is best to try to comprehend the world in small chunks. Understand each little bit, and then add them up in some logical way to get the big picture. Take small bites and in a number of small steps, complete the meal. Trying to stuff it all in your mouth is painful and just does not work.
What is a business? What is a small business? Why are some businesses small and others large? What’s a small loan? What is an entrepreneur? What’s banking? What’s formal banking?
All these are the small bites that I refer to. All of those can be answered and understood. I will do so in blog posts. Thanks for asking.
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Ah – I found your take to Part 1 of that conversation on this site earlier this year. I asked about aspects of Part 2 in my comment above. I understand if you just want to ignore this after I read your take about Part 1.
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Namami: I was a Gurumurthy, Malhotra and Swamy fan myself for some years until I realized all three of them are intellectually shallow who instill into their followers a feeling that they’re heroes doing national work. Their followers are their literal bhakts who think that these men are great intellectual giants to whom everyone must pay attention.
Coming to criticism of Gurumurthy’s ideas. I had watched his entire lecture series by Gurumurthy at IIT Bombay.
Gurumurthy’s first complain is about theories of macroeconomics, especially that of Keynes(Though it doesn’t occur to him that his complain is against Keynes, whom he greatly admires), particularly his prescription of spending more. When he criticizes this, he thinks he has woken economics profession from it’s “dogmatic slumbers.” But Keynesian opinion is just one of the many strands of economic thought. There are other schools who had argued against this very prescription of Keynes before Gurumurthy was even born, and they continue their criticism till this day.
Also, Austrian school of economics has argued against macroeconomics as a discipline with a rigor that Gurumurthy can only aspire to achieve.
His second obsession is with Max Weber’s thesis of Calvinistic sources of capitalism. Because Capitalism has Calvinistic sources, economic system of India should be something which has Hindu sources. Thus, he argues for a desi economics. Here is Nobel Prize winner in Economics, F.A. Hayek, talking with another Nobel Laureate in Economics, James Buchanan. Watch from 20 minutes and 8 second mark.
Hayek explicitly mentions that Weber was completely wrong in his thesis of Calvinistic sources of Capitalism.
Gurumurthy doesn’t understand that economics is a value neutral science[See introductory part of “Human Action” by Ludwig von Mises.] It takes as given that people have values, whatever those may be. And it arrives at conclusions which aren’t affected by the value system of people. Take for instance Ricardo’s law of comparitive advantage. It doesn’t matter whatever creed you may belong to, the law works inspite of that. Gurumurthy takes advantage of the part of economics profession who claims economic theories are inductively arrived at through empirical testing — a methodology which has serious drawbacks in economics — and he uses empirical data, many a times wrongly, to make theories which go against mainstream macroeconomics opinion.
His third obsession is that since Indian economy doesn’t have much of a formal sector therefore stock market is not a barometer for assessing Indian economy’s health. A clichéd observation for which Gurumurthy pats on his back N number of times.
His fourth obsession is methodological individualism, which he misunderstands. Methodological individualism advocates the view that individuals have values, not such wholes as family or society or nations — an idea which is not incompatible with the existence of families and societies. That’s the way economic analysis proceeds. Gurumurthy thinks methodological individualism means destruction of family as an institution, which is absurd. Economics is a science of how to employ means to fulfill your goals, whatever they may be. It has no obsession with your goals. If anything, the only goal of economics is to create a system which leaves maximum space for everyone to pursue their own goals.
Lastly, his favorite thinker is John Kenneth Galbraith whom Hayek regarded as another shallow intellectual. Watch this video from 43.33 to 46.15 minute mark.
P.S. – Gurumurthy says that India has 6,68,000 villages and towns and only 12,500 police stations and then goes on tl claim that India has one of the lowest rates of crimes. It doesn’t occur to him as to how will crimes get even recorded if there’s such serious lack of polic force. However, it’s something interesting to note that India is in order inspite of such lack of police force.
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Mark Pattison had remarked ” a man who does not know what has been thought by those who have gone before him is sure to set an undue value upon his own ideas.”
This holds true for the trio I mentioned in the beginning of my reply.
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Thank you for all the videos and the details, @keshavbedi. I have a lot of reading (and some listening) cut out for me. I’ll start with some highly recommended books and then graduate to understanding subtler issues about the different schools of thought. In the past @Atanu has suggested Hayek’s Constitution of Liberty. Considering I’m on his blog, I’ll start with that!
@Atanu – I liked your summary for my first question: “India should be as proud of the fact that its formal sector is only around 10 percent of its labor force as the fact that it is one of the poorest countries. It should be as proud of that fact as the fact that 60 percent of its labor is employed in agriculture. Compare that to the US: About 2 percent of its labor is in agriculture. India is poor because it has not had an agricultural revolution and an industrial revolution.” That blunt assessment provides your opinion on the main point of his video adequately. I agree with you.
My third question about the mudra loan scheme can be somewhat answered now. The major intent was to supplant Gurumurthy’s thesis of small businesses being the bed rock of the economy and to smoothen their challenges with easier to get and more reasonable rate loans. Perhaps people in this sector weren’t getting fair deals from banks (no surprise) and this initiative may help in theory. But who’s going to be monitoring it and risk assessing the applicants – the PMO? How does it scale? It will degenerate into the same culture of useless government employees that hang out at nationalized banks. And if this is the case – where is risk studied, modeled and bounded? May be that is Rajan’s angle of criticism. More importantly, this isn’t the wisest use of policy and finance levers the government had over the last 5 years. Spending resources and effort on a sector which is a fall out of a much bigger problem elsewhere, is heavy opportunity cost.
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Keshav Bedi, your comment is very well put. You have made a set of important points. Thanks, especially for the references. I had not come across the Hayek and Chitester conversation. It will be a treat for me. YouTube is a treasure house.
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