Sen vs Bhagwati

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And now that the dust has settled on popular media coverage of Sen vs Bhagwati, a coverage punctuated by sweeping generalizations, grotesque over-simplifications (Bhagwati is Modi and Sen is Rahul Gandhi) and of course the gratuitous, knee-jerk intolerance (“Take back his Bharat-Ratna”) that characterizes much of public discourse today, it may be time  to look at what exactly is the difference between the world-views of these two great economists.

There is much intellectual and theoretic nuance here, which only a specialist can explain.

I am not such a specialist, which is why I believe I am not qualified to comment on this topic.

But I can present to you someone who is.

Dr. Alok Ray, retired professor of economics at Indian Institute of Management, Calcutta who has also held faculty positions at places like Cornell and U of Rochester.

He also happens to be my father.

Here is his article in the Deccan Herald. But I would request you read the extended article that Dr. Ray wrote, that was since edited and shortened in “The Deccan Herald.”

A healthy debate

Alok Ray

Sen-Bhagwati positions

Though the so-called Amartya Sen-Jagdish Bhagwati debate on economic policy has been occupying a huge amount of media space in recent weeks, the truth is that the differences between these two best known Indian economists date back to much earlier times. 

For many decades, Sen, along with his co-author Jean Dreze, has been arguing that growth alone is not sufficient to bring about significant improvement in the quality of lives of the underprivileged. Growth, in order to be meaningful for the poor, needs to be supplemented by public expenditure and provision of food, nutrition, education, health, and sanitation for the masses. They cite evidence from inter-state (specially between Kerala and other states of India) and inter-country (between India and China and Bangladesh, in particular) differences in performance on growth and human development indicators in support of their position that substantial improvement in the quality of lives of people can be made, irrespective of the growth performance of a state. They emphasize, in particular, the role of education, information, agitation and involvement of the local people (public action) in improving the quality and delivery of public goods and services to the poor.

Bhagwati, along with Padma Desai and T N Srinivasan, apart from providing the intellectual rationale behind the economic liberalisation beginning in 1991, puts much greater emphasis on growth as the mechanism to bring about sustained reduction in poverty, as opposed to various subsidies and redistributive measures launched in the name of the ‘poor’ but benefiting a lot of the non-poor. According to this line of thinking, growth helps the poor in two basic ways. One, by directly creating more productive jobs and income for many, including the poor.  Two, by generating more tax revenue which can be used for financing social expenditures.

Regarding what  should come first (‘sequencing’ of policies), Bhagwati, for practical reasons, would first go for growth and then redistribution in a country like India where there are too few rich and too many poor which  limits the revenue-raising capacity of the government.  Otherwise, financing of over-ambitious schemes of redistribution would lead to fiscal disaster and flight of investment (both domestic and foreign) away from India which would eventually hurt the poor.

As evidence, one may point to the recent slowdown in economic growth which is leading to unsustainably high fiscal and current account deficit, scaring away investors, pushing rupee down and inflation further up.  This would make it increasingly difficult to finance the ever expanding areas of entitlement in the form of food security ordinance (which seeks to provide highly subsidized food to nearly 70 per cent of the population), right to work (MGNRES), right to education  and so on, not to speak of  open-ended fertilizer and fuel subsidies.

Difference in positions

The difference in positions between Sen and Bhagwati, as they stand now (though the difference was much starker earlier, like before economic liberalization of 1991, which Bhagwati, justifiably, can point to), is not really that great. Sen has made it clear, in many interviews in recent weeks, that (like Bhagwati) he is in favour of growth and even cash transfers on the basis of UID card (rather than physical distribution of food grains through PDS which many left-wing activists strongly support), against controls like licence-permit raj (which he recognises as the biggest source of corruption and inefficiency, though he was not that outspoken on this earlier) and also against many subsidies in the name of the poor like those on fertilizer, cooking gas and diesel. But (unlike Bhagwati) he would like to put emphasis on public provision of subsidized food, education and health for the masses from the very beginning, instead of waiting for the high growth phase to ensue. Sen believes that public investment in education and health for the masses, apart from their immediate redistributive effects, would help broad-based sustained economic growth in the longer run by producing a better quality work force.

In other words, as of now,  both Bhagwati and Sen regard growth to be an important necessary condition for generating significant benefits for the poor but Sen would not consider growth to be as central or close to a sufficient condition (as Bhagwati does) for poverty reduction. In Bhagwati’s scheme of things, private investment climate and growth hold the centre stage and the scope of redistributive policies would be limited by the revenues generated by growth.

Bhagwati would insist that, despite China’s superior performance in human development indictors, relative to India, in Mao’s redistributive China, poverty reduction took place at a fast rate only after Deng’s economic reforms gave rise to the high growth phase of China. The recent NSSO finding that poverty ratio has come down fastest (more than twice the rate of earlier times) in the high growth phase  (2004-05 to 2011-12) of India can be cited as  further evidence in support of the Bhagwati position that growth is the best antidote to poverty. On the other hand, Bangladesh’s superior performance in human development indicators, despite its near-half per capita income level of India, can be largely attributed to better performing government administrative machinery and the important role of NGOs and social activists in Bangladesh (for example, in successfully implementing immunization programmes and distributing oral rehydration packets and vitamin supplements). This may be interpreted as evidence in support of the importance of factors like local level involvement and public action in the successful implementation of social welfare programmes (the Sen position).

To sum up, both Sen and Bhagwti agree on the need for growth and redistribution. There is no necessary conflict between growth and equity, at least in the longer run and one can reinforce the other, giving rise to a virtuous cycle. The difference between the two stalwarts largely boils down to the extent to which redistributive policies can be carried out at any given point in time.  Here the level and growth of per capita income determining government revenue as also the administrative capacity to efficiently implement various social welfare schemes would be crucial considerations. The proper balance or the mix of public and private interventions in the economy, even for providing basic education and health services, is another area where the two would differ. The availability of public and private funds, the cost and quality of the goods and services delivered and the efficiency (along with wastage and diversion from the intended beneficiaries) of alternative delivery mechanisms should ideally determine this mix.

After he wrote this article, he received two emails. One was from Prof. Bhagwati himself. And one was from Prof. Aravind Panagariya , professor at Columbia University, who has co-written with Prof. Bhagwati “Why Growth Matters: How Economic Growth in India Reduced Poverty and the Lessons for Other Developing Countries” and “India’s Tryst with Destiny: Debunking Myths that Undermine Progress and Addressing New Challenges”. I reproduce both emails, with minor edits and with permission from Prof. Bhagwati and Prof. Panagariya, as it pertains to the article, for the further insight they throw on this most fascinating debate.

First, Prof. Bhagwati.

Alok

Yours is a fine contribution which speaks to the real issues between  Bhagwati and Sen.

But there are just a couple of things I would clarify:

1. No one has ever “accused” Sen of being a supporter of the 1991  reforms that transfoirmed India AND reduced poverty. The intellectual  pioneers here are, without doubt, others.

2. In fact, with Haq, Sen decried GNP and contrasted it with poverty  as our objective since the 1950s: this has been fully documented, also  by TN in other places, in the Bhagwati-Panagariya book. Sen also  pooh-poohed public sector reform: see his big paper at DSE on how  private losses are compatible with social good: a silly piece that had  little bearing on the situation which Galbraith beuatifully decribed  as one of “post office socialism”! He also did not speak in favour of  tariff reforms at the time. He has been against DFI; and even now I do  not know of any statement on his part supporting the Retail Sector  liberalization on which I have written extensively AND researched with  Professor Rajeev Kohli. I could go on. But just read our book, in Part  I on Myths.

3. So Sen was TOTALLY passed by at this critical juncture in our economic life.

4. He also never appreciated that people like me were for Growth, NOT  per Se, but BECAUSE that would pull up the poor above the poverty  line. When Chidamabaram says that Bhagwati has passion for Growth  whereas Sen has compassion for the poor, that is really nonsense: I  too have passion for the poor (in fact, I worked on poverty reduction  in the Planning Commission in the early 1960s), which prompts my  embrace of the Growth (strategy) and therefore I have done good to  the poor whereas Sen professes compassion for the poor but his  implicit and explicit opposition to what we call Growth-enhancing  Track I reforms actually harmed the poor. There is no point in  asserting that you are for the poor while you actually harm them!

5. Just one final word here. Without Track I reforms producing the  enhanced revenues, the Track II expenditures/reforms could not have  been financed. Sen has never produced any convincing  argument that  Track II expenditures/programmes could have been mounted at the outset  of our Plans in any significant way. Even now, he supports FSB expenditures expansion when in fact the  growth and hence revenue expansion has been reduced, opening up the  real danger that we will have a disjunction between revenue slowdown  and (social-)expenditure expansion which will likely produce inflation  that will hurt the poor (and hence the UPA government, in turn).

Again,congratulations on a fine article.

Warmest regards to you & Sara, as always,

Jagdish

And now, Prof. Panagariya.

Dear Alok,

Your article is very well done–unlike most others, you clearly did lots of home work to understand where Amartya Sen currently stands.  His position in terms of recognizing the value of growth and reforms has clearly come a long way from his passionate patronage of Mahbub-ul-Haq with whom he launched the first Human Development Report as late as 1990.

One point on which I would like to press you a bit, however, is India-Bangladesh comparison.  I felt you accepted the conclusion that Bangladesh has done better in health indicators than India too readily from Dreze-Sen.

No doubt, Bangladesh must get credit for achieving health indicators similar to the average of India at a much lower per-capita income just as it should also be subject to criticism for falling so far behind the average of India in per-capita income and, therefore, its fight against poverty.

But this is not the same thing as saying that Bangladesh has done better than India in terms of health indicators.

I would like you to take a quick look at just three pages (attached) from the Bhagwati-Panagariya book that show otherwise.   Main points are:

1.  HDI: If you go by the HDI, which Sen helped Mahabub-ul-Haq launch, Bangladesh ranks ten places below India.

2.  IMR and Child Mortality Rate: Once you correct for the differences in still births, India actually does better.  India has been far more successful in bringing down still births than Bangladesh, which has in turn left its IMR and CMR higher.

3. Life Expectancy: Three points here: (i) Differences if any are tiny; (ii) In part, the lower IMR (which is itself the result of higher still births) contributes to higher life expectancy; and (iii) at independence, Bangladesh began with about five years of lead over India.  That a very significant head start, which persists over time. The 1971 war led to a significant drop in life expectancy in Bangladesh but it then returned to the past trend.  Such a return also makes it look like Bangladesh made speedier progress than India.

4.  Maternal Mortality: On this score (as one one expect from stillbirth rates), Bangladesh does much more poorly than India.  One has to wonder why the civil society in Bangladesh whom we instinctively applaud has failed in this hugely critical area.

5.  The right comparison is with West Bengal: Because of its sheer size, various parts of India vary big time in history and geography.  Hardly any two parts of Bangladesh are likely to exhibit the differences that Uttar Pradesh and Kerala exhibit on this score.  So one has to ask what part of India is most comparable to Bangladesh. To my mind, it is perhaps West Bengal.  Again, one must recognize that Bangladesh is much poorer than West Bengal.  But its health indicators are not superior to those of West Bengal.

May be you find none of this persuasive.  But I felt I should at least put my side of the story on the table.

Arvind

Fascinating, and makes me wish I had studied economics when I had the chance.

31 thoughts on “Sen vs Bhagwati

  1. A fascinating battle indeed. The piece crisply and sensibly captures the essence of the debate leaving the noisemakers to keep blowing the horns to attract attention. But i always thought amartya sen became a voice only thru his nobel and not thru his works. I neve read abt him in my economics studying days. Unless mr.sen wd give a compelling theory on how expenditure expansion wd propel high growth, i stick to mr.bhagwati”s views.

  2. At last the lies of the leftists are shattered. Too long have they brushed aside any protest by an appeal to their axioms apparently espousing “equality” and “social justice”, each of them false from both social and biological considerations. I have always wondered how bangladesh, an essentially criminal society could in any way be “better” than us (though we do have many mini- stans from which almost all criminality emanates). The answer, as shown above is creative use of statistics, as usual by the leftie brigade, but one can hardly expect them to admit their faults as they are “morally superior”.

  3. Leveraging opportunities in both “social sector redistribution” and “growth” is the key, That though is ideal. It can only happen with public will, co-operation and very very heavy innovation and experimentation.

    On the other note, thank you Arnab for the article.

  4. Alok Ray’s effort was sorely needed, precisely for the reason you mentioned (gratuious and knee-jerk intolerance).
    In this debate, I am pro-Bhagvati. I hated Amartya Sen. However, I have learnt not to criticise Sen flippantly. I ate humble pie after I went through ‘Argumentative Indian’. I was wrong to hate him, although, many of his views still remain unpalatable.
    Hence it pains me to see folks repeating my mistake (abusing Sen on the basis of bits and pieces picked from editorials, magazines and talk-shows).

    • Agree with you completely. Sen might be wrong with his stance on FSB (I am not qualified to judge but as others think) but to discredit his lifetime of work based on that is preposterous.

  5. Unfortunately too touchy-feely and wishi-washy. Policy and law makers need numbers, hard numbers. And some members of the population, certainly some reading this blog, are capable of understanding numbers and much more. I am really not interested in any of Ray, Bhagwati, Panagariya or Sen or their conflicts per se. There are far more important numbers and predictions. E.g., for how long can public services be financed by taxpayers amounting to 3% of the population who have negligible voting and political power? (Now that socialism is safely behind us,) what is the stability of a system where the folks who fork the cash have little say on how it should be spent? Is most reform in India to be attempted by throwing money at the problem (or the middlemen between you and the problem) and never by improving people — how (much) they work per day and how many kids they beget? There are now more Indians supported by REGS than the total number of Indians in 1947. Will food security lead to more Indians on dole in 2050 than there are Indians today? In which case, what exactly would we have achieved? Will the already under-way and massive upcoming surge in cancer treatment and subsequent deaths give a great boost to GDP? Will research on pesticide and cutting down diesel consumption reduce that much-needed contribution to GDP “growth”? In which case, should we invest in cancer hospitals or energy research? Will I ever be able to walk at peace along a clean sidewalk in a major Indian city within my lifetime? See, middle class people keep track of this Bhagwati-Sen-et-al mumbo jumbo, if they do, purely to sound erudite at parties. At heart they know they have played their best hand and lost.

  6. Hi GB,

    there seems to be a typo in point 2 in mail from Mr. Bhagwati – “He has been against DFI”. I think you mean FDI.

  7. Very sad to see GB holding a brief for fellow-bong Sen, someone criminally responsible for keeping millions from rising out of poverty. While theoretically claiming to support growth, he does not support specific policies aimed at growth. He only supports ideas that lead to leaky, inefficient programs that drain money away from being in a position to help the poor. His contribution to the country’s economy is likely negative. Proving some abstract theorems is no penance for all these sins.

    Of course, this is apart from his being anti-Hindu etc. which is a topic for another debate.

    • I am happy to see that despite *nothing* except the first para being written by me, I am accused of holding a brief for parochial reasons. Says volumes for those who like to put labels like “anti-Hindu”.

      • Unfortunately this is just a reflection of uninformed and impatient cynicism that Indians love to indulge in. They are too lazy to invest some effort to understand the issues and rather find it more convenient to paint people and ideas with broad brushes and then do some emotional name calling. They, though well meaning, remain inconsequential to whatever happens in the country because of their confused ideas and laziness.

      • 1. I was writing about the first para wonly. Anyway I don’t think you will have the patience to listen if I explain.

        2. Labels like “anti-Hindu” – are you saying that none can possibly be labelled “anti-Hindu” at all?

  8. Please note how Prof Bhagwati has no problems rubbishing other people’s works; his work is excellent but far from free of error.

    • First, Bhagwati is not **rubbishing** Sen’s work. He is criticising Sen’s policy prescriptions for India. Prof Ray has explained the differences between the two- do read it again.

      Secondl what are the errors that Bhagwati has made? Do tell us (well me, anyway); I am really curious. Or is this a cheap shot in defence of Sen? Not that Sen is in need of your or anyone’s defence.

      • “Sen also pooh-poohed public sector reform: see his big paper at DSE on how private losses are compatible with social good: a silly piece that had little bearing on the situation”

        Calling someone’s work “silly” is not being critical. It is rubbishing. Note the juxtaposition of the “big paper” being a “silly piece”.

        As far as error is concerned: there is virtually no appreciation of the problems of moral hazard, asymmetric information, measurement problems or any of the organizational concerns that are endemic when considering the division between state and market (Growth versus redistribution is just another way to talk about this division).

        This is an error, but it would be stretching things to say Bhagwati is being “silly” when he ignores the above: everyone cannot be an expert in everything.

  9. I am quite surprised that the intellectual level of discourse among Economists is so infantile compared to that between Physicists and Mathematicians, even after factoring in that Economics is about a messy and uncertain world. Consider, for example, “regarding what should come first (‘sequencing’ of policies), Bhagwati, for practical reasons, would first go for growth and then redistribution” — this makes no sense at all. In any complex economy both will happen all the time. Clearly Bhagwati (or Sen) does not mean putting redistribution (or growth) on hold; it simply cannot be done. If they are now arguing about quantitative balance, where are those quantities? If there is a checklist of growth-enhancing policies and redistribution-enhancing policies, where are the proposed differences (Hamming distance?) between Sen and Bhagwati? What will be the projected impact of these differences 20, 40, 60 years out, assuming certain other conditions hold or are held constant? Will energy availability per capita grow at current slope for another 20, 40, 60 years? If not, what will be the impact on purchase power disparity? I can only hope that Economists are more technically sophisticated when they talk to each other, if not in popular articles. I have done some basic masters level courses in Economics that seeks to pack in some relatively appealing models and theory, but it is quite clear that there are huge gaps between these and messy reality. As long as Economists will complain about “externalities” and not accept that the whole universe is contained in “the market” and nothing is outside it, Economics will not get much respect as a technical field.

  10. For those seeing nonexistent ‘anti-hindu’ stuff here is a bollywood movie version of the entire debate…

    If Indian economy is a bollywood movie, both Bhagwati and Sen claim to be the protagonists. While Bhagwati’s version of script says, he is there from the first scene, Sen, if he wants to may arrive after interval, maybe during last 15 minutes of the climax. Take the inspector who comes and grabs the villain and his chamchas (Poverty being the main villain and malnutrition, low infant mortality, poor education being the McMohan type sidekicks). Sen says, these sidekicks are also equally potent villains. He also says that he should be there from the first scene taking these gundas on all by himself. Bhagwati may or may not be there in the movie. In fact for Sen, Bhagwati is like Anil Kapoor in Shakti , appears only in the last scene (while he himself is Dilip Kumar in Shakti).

    Bhagwati thinks, we haven’t reached the interval as yet. Sen thinks interval is over and he is the protagonist now, but they both agree on one thing, “Picture abhi baaki hai mere dost”

  11. thankfully something to read apart from celeb gup-shups!! I do think making this a sen vs bhagwati situation is too simplistic – there are lots of other factors at play. As the economists say ceteris paribus – but in real life the other things are never the same.
    However both focus on the big picture – neither has any suggestions on how to plug the leakages from the welfare pipeline – less than half of the welfare handouts reach the intended recipients.

  12. To put in simply, decoding both the arguments by Sen and Bhagwati and brilliantly analysed by Mr. Ray I have come to the conclusion that India should aim for the highest possible growth and strengthen the Public distribution system so that it is made free from leakages and corruption. Please correct me if i am wrong. This is the only way out.

  13. @Arnab … I know these are really colossal figures we are discussing here … But i do not think any of these people could have written your Gunda inspired analysis of American economy during the recession !!! I still have a print out of those 3 parts !!! That was something !!!

  14. great article and great replies
    sen seems to incline towards socialism and i ve never been fan of socialism
    its just sibling of communism
    why don’t we adopt the policies from developed countries which have already “worked” ?
    I’ve often noticed that in India we don’t copy things from developed which we should for instance freedom of speech, big fines for breaking laws etc

  15. Refreshing..except for some fool who made anti-bengali comments…) ….Just since Amartya Sen happens to be one (is he actually a Bangladeshi Citizen?)

  16. A Big Thank you to Mr. Alok Ray for writing such an article and thanks greatbong for sharing it with your readers. While Mr. Bhagwati and Mr. Panagariya have a very valid point, I do feel that the manner they criticize Mr. Sen is simply Juvenile. Reading their article makes It hard to believe that they are renowned economists of our generation. Infact I genuinely feel that their motive for their infantile and juvenile attacks on Mr. Sen is related to promoting their book. They never let go any opportunity to promote their books not even in their response to Mr. Alok Ray.

    It is because of their uncivil approach and attacks on Dr. Sen, I refuse to take their comments in this matter seriously.

  17. Pingback: Why You Should Vote For Narendra Modi (BJP) | Truth Prevails

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