Debunking Myths about China and India

Pranab Bardhan, a professor of mine at UC Berkeley, whom we have met before here (see Crouching Tiger, Lumbering Elephant, and Pranab Bardhan on the Indian Economy, for instance) has an excellent article in the Boston Review titled “What Makes a Miracle: Some myths about the Rise of China and India.” (Hat tip: Yuvaraj Galada.)

He states the standard view explaining the rapid growth of the two countries:

What explains this strikingly rapid growth? The answer that continues to dominate public discussion in the United States runs along the following lines: decades of socialist controls and regulations stifled enterprise in India and China and led them to a dead end. A mix of market reforms and global integration finally unleashed their entrepreneurial energies. As these giants shook off their “socialist slumber,” they entered the “flattened” playing field of global capitalism. The result has been high economic growth in both countries and correspondingly large declines in poverty.

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The Communists are Pro-poor

Nothing new about the communists being pro-poor. They make people poor whereever they find a way. Today India is suffering the effects of commie policies. Today, 29th Sept, the commies have struck again in India crippling the transportation system. One day’s loss of production and productivity will add about a few million people to the ranks of the poor. How so you may ask? Simple, there are people at the margin. When the country grows poorer by a little amount, the people who were at the margin suffer the consequences of that shock most acutely.

Will those guys–the communist leaders–suffer? No way in hell. They will continue to live comfortable lives knowing that their policies have added to their vote banks. That is the irony of all. The commies create the conditions for their continued victory in the elections by improverishing the country.

May the commies all rot in hell for eternity.

Related Post: The Privatization of Public Sector Units.

The Government’s Anti-Midas Touch

Continuing on where I left off the last time time, let’s once again quote Mr Bardhan:

In a state like Delhi, for instance, can any private power distributor without an established work force be able to carry out electrification?

The answer to that is of course no. No distributor, private or public, can carry out electrification without an established workforce. But if that question was intended to demonstrate that only the government can have an established workforce, that is patently false. One doesn’t quite know where to begin in trying to point out how ridiculous that contention is. It is empirically false, not just theoretically false.
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Wrong-headed policies condemn millions to misery

Continuing from where I left off the last time, I quote again Mr A B Bardhan:

I am against privatisation of the state electricity boards. I simply do not understand the merits of the decision of setting up state regulatory commissioners even as private distributors increase costs repeatedly. In a state like Delhi, for instance, can any private power distributor without an established work force be able to carry out electrification?

I am not sure what it is about Delhi that makes it so unique in the whole universe with regards to the generation and distribution of electric power. From what Mr Bardhan says one can only conjecture that there is something astonishingly unique about Delhi that it is not subject to the usual laws of the known universe. In the rest of the universe, the generation and distribution of electrical power can be, and has been, handled quite competently by the private sector. Perhaps it is the bit about “private distributors increase costs repeatedly”.
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The Privatization of Public Sector Units

The June 2nd Business Standard carried an opinion by Mr A B Bardhan, Secretary of the Communist Party of India, on the question “Should the disinvestment ministry be scrapped?” He said,

Even Lord Keynes would not have approved of disinvestment! Even he believed that there are some areas the government should not step out of. … Disinvestment means privatizing profits and nationalizing losses…. Profit making public sector units should not be privatized for two main reasons. First, because they are major contributors for taxes, and, second, they pay huge dividends. … Selling profit-making PSUs, like Oil and Natural Gas Corporation, is akin to selling jewels to buy groceries. … I am against privatization of the state electricity boards. I simply do not understand the merits of the decision of setting up state regulatory commissioners even as private distributors increase costs repeatedly. In a state like Delhi, for instance, can any private power distributor without an established work force be able to carry out electrification? …

For the record, I have to make a disclosure first. Mr. Bardhan is a respected elder to me. So when I differ with him vehemently, I do so with the utmost respect and regard for him. With due respect, I think what he says is nonsense and nonsense of the most pernicious kind. The entire piece in the Business Standard is a study in how wrong-headed thinking carried on over an entire life-time can warp the judgment of a well-meaning and idealistic person. I don’t doubt for a moment his total commitment to the lot of workers. I am confident of his sincerity for the well-being of labor. But good intentions are far from sufficient in making things better. Let me save you from drowning, said the monkey to the fish, as he put it up on a tree.
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India’s Wonderful Reforms

In an Indian Express article by Vijay Kelkar (Advisor to the Finance Minister) and Ajay Shah (Consultant, Department of economic affairs) ponder the question Why is this a very happy Diwali? (Oct 2003) Their answer is REFORMS. It is an interesting article and it belongs to the same class as the series of articles that Arun Shourie wrote around mid-August regarding the rise of the Indian economy.

The article by Kelkar and Shah essentially tells us that the Indian economy is not doing badly and that we would not be remiss if we indulge in a little bit of self-congratulatory back-slapping. They indicate with pride the progress we have made. For instance:

In a recent month, we added two million mobile phones, an event that made the global telecom industry sit up. Prices have crashed. In a truly ironic reversal of roles, land lines are now a luxury, mobile phones are cheap and ubiquitous.
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