Robert Solow Died at 99

Recently, the Nobel Prize winning economist Rober Solow died aged 99. Below are few articles on his life and works, of which some are very relevant to Indian economy:

Solow's lessions for Indian economy 

Solow changed the way we think about economic phenomena. He made seminal contributions to growth theory

His elegant work established that the main determinant of economic growth was technology, not growing capital and labor.

He left school in 1942 to join the Army and served in North Africa, Sicily and Italy until World War II ended in 1945. Back at Harvard, he delved into economics and became research assistant to Wassily Leontief, the Russian economist who would win the Nobel in 1973

Solow’s interest in the topic dates back to the 1940s: his doctoral thesis at Harvard focused on income inequality, though his perspective then was markedly different.

He was also known for highlighting the role of technological innovation — and economies’ capacity to adapt to it — as the ultimate force behind sustained economic prosperity.

Robert Solow: An Affectionate Portrait

“Everything reminds me of sex, but I try to keep it out of my papers.”

Robert Solow's interview

Economic History and Economics by Rober Solow

idea that everybody is everywhere and always maximizing profits turned out to be not quite right.

Political Economy of Tamil Nadu

I have a new piece on political economy of Tamil Nadu and its high growth trajectory. A slice from the piece below:

 

"However, despite their divisive polity, a competitive spirit can be seen among the leaders across the political spectrum towards inclusive development and growth of Tamil Nadu. At times, it is astonishing to see a sustained progress of the Tamil Nadu economy compared to other states in India. What drives Tamil Nadu is its core competence and capacities of sectors like healthcare and nutrition, education and entrepreneurship which are the main ingredients of the State’s sustained high growth trajectory. The average growth rate in the two decades following liberalisation was 7 per cent per annum."

Can’t we have Comprehensive Vision for $5 Trillion Economy by 2025?

Can’t we have Comprehensive Vision for $5 Trillion Economy by 2025?

B.Chandrasekaran, works in public policies.

At a time when the economy is moving towards a downward spiral rapidly, the most contested public debate among economists is about the rationale of achieving a $5 trillion economy by 2025. Largely, the debate is about whether the economic growth slowdown is temporary or likely to be the longer and an economist's terms “cyclical” or “structural” trend. In the process, the best of minds seems to be undermining the sectoral focus of the most critical sub-sectors which have large junk of labour forces in the economy.

The vision of a $5 trillion economy by 2025 was first announced on October 11, 2018, by the Ministry of Commerce and Industry, Government of India. The ministry also announced that “the underlying strengths” and "dynamics provide us grounds to target achieving 1 trillion dollars from agriculture and allied activities, 1 trillion from manufacturing and 3 trillion from services" sectors. In November, 2018, the Modi Government had also released the Niti Aayog’s “Strategy for New India@75” which aims to achieve “a USD 4.0 trillion economy” by 2022. However, the vision of a $5 trillion economy by 2025 has become the main agenda for all policy templates.

Though, there are several underpinning challenges and opportunities in the primary, secondary and tertiary sectors which have been failed to articulate in the Working Group Report of the Ministry of Commerce and Industry to achieve the $5 trillion economy by 2025. More importantly, the growth of the manufacturing sector has been stagnated for decades which need to be strategically unleashed by reforming the land and labour laws. Further, the Report’s identified measures for specific policy actions in sectors are not in tune with the ground realities. Also, the Niti Aayog’s strategy document’s sectoral visions are not in confirmatory with the government’s actions in the implementation of policies and programmes. The idea of $5 trillion economy is not just numbers which need to be boasted but it’s the impact on billion more people.

Nevertheless, why the vision for only the overall size of the economy? Why not also have bold visions on sectoral aspects of the country? Can’t we have some constructive vision documents with goals to be achieved by 2025 by revisiting the Niti Aayog’s Strategy? The following aspects will play a major role to define what we mean by New India either positively or negatively depends upon the kind of policies that the Modi government envisions and implement it in the next five years to 2025:

 (1) How to increase the one million employment opportunities every year for youth? At present, 10 million Indian youth enter the workforce every year.

(2) How do we ensure the unrestrained flow of credit access to millions of micro, small and medium enterprises in the country? Though Government is saying that they have mission-mode project of creating 5 crore jobs in next 5 years in the MSME sector.

(3) How to achieve the learning outcomes of children in primary schools by adopting psychological methods of teaching tools?

(4) How to reduce different kinds of violence against children and women; the demographic dividend will be defined better how the government policies and programmes are dealt with children and women?

(5) How do we minimize the millions of court cases pending (32 millions) for decades especially the heinous criminal cases against children, women and elderly people?

(6) How do we handle the challenges of municipal solid waste which has been projected to be 150 million tonnes by 2030 three times of present 55 million tonnes?

(7) How to recycle the municipal sewage and industrial effluents of millions of liters (40,000 million) which has been let out into the rivers, streams, channels, lakes, ponds, bore wells, etc. across the country causing health hazardous for millions of people, animals, birds, etc?

 (8) How are we going to manage the growing urban population of 590 million by 2030 from the present 340 million without adequate civic developments?

(9) How to handle the electronic waste generation of 20 lakh tonnes (2017) which has increased from 1.47 tonnes in 2005. India is the 5^th largest e-waste generated and has recycled only 0.036 MT per annum in 2017.

(10) How to rehabilitate and provide sustainable likelihoods to nearly half a million destitute, shelters less and beggars people in the country? Do they don't have an aspiration for New India?

The idea of new India is worth if only the governments make sincere efforts to try and understand the urgency of the above issues and challenges besides others to help 1.3 billion people to achieve their aspirations bestowed on the governments. It’s high time to think about how ease is dealing with each of the above issues in terms of responses from the government departments for improving the lives of the people.

Once in five years, the people's faith in political leadership is not for the rhetorical wisdom of having a vision for a $5 trillion economy by 2025 but also how to unfold that vision into sub-sets of objectives and goals to achieve the aspirations of billion more people. Unfortunately, the present governments are not showing interest in having a constructive vision for the subsets of the $5 trillion economy by 2025 for inclusive New India.

Narendra Modi Mania-Tall Order or Tall Leader

There comes time when someone seems as ordinary becomes special and extraordinary in a few months time. Like this can only happen in the open-media society like the one we are blessed with now and enjoying in the middle of this revolution. Narendra Modi become one such person for all the good reasons and causes. Modi's ideas have been hot debate now more intensively. Some are very interesting and few are more political in nature. But that is always the case for any persons who work in the political process in any country.

The purpose of this post is to re-count the economic ideas of Mr Modi. Some grant ideas.

• urbanisation, infrastructure, education and healthcare, apart from cracking down on scourges such as inflation and black money... Modi...wish list includes Indian Institutes of Technology, Indian Institutes of Management and All India Institutes of Medical Science in every state, 100 new smart cities and bullet trains to all four corners of the country. 
• "If the railways is modernised, we can give impetus to progress. By the time the country celebrates the diamond jubilee of independence (2022), we should have bullet trains going in four directions. The world will start seeing us with a new vision,"
• Modi spoke also of building Brand India through 5 Ts - talent, tradition, trade, tourism & technology and said India’s demographic and democratic dividend along with these plans will set in motion the investment cycle and revive India’s stalled growth.
• 'Nobody has a textile policy like us. It is based on five Fs. Farm to fibre; fibre to factory; factory to fashion; fashion to foreign,' 

Here are some articles: One, second, third, four, five, six, seven, eight, nine, ten, eleven and twelve. Other articles: here,

Good reading

The man called Minoo Masani

The good, the bad and the ugly of India's rural transformation

Raghuram Rajan on Five Pillars of RBI's Financial Sector Policies

The god that failed: Nehru-Indira socialist model placed India in precipitous decline relative to the world

Economics 101 for RG

The poverty guessing game in India

Some links

Last two days, I participated in the first Regional Conference on "Reforms for Citizen Centric Governance" held in Hyderabad. There are many new innovations taking place at State level in terms of improving the services delivery. 

Interesting readings:

Fasten your seatbelts by Nitin Pai

Countdown to the greatest of all time by Aakar Patel

What Reform, Mr PM? by S Gurumurthy

BBC Masters of Money: F A Hayek

Quotas in education meaningless by P V Indiresan

Shibboleths of Indian economic orthodoxy

This article gives a very good case study for how to do a make over.

Very interesting comment from new chief economic adviser. 

He says I'm not going to give any number because I don't think it's an useful exercise...While I was the IMF's chief economist, the one thing that we were always wrong on is projection of growth."

Bloomed vs Doomed

Shankar Aiyar rightly asks a serious of questions which needs to be pondered:

• There was, however, no explanation on why the economy was in a crisis. The Prime Minister says an “unsustainable increase in government expenditure vis-a-vis government income” would lead to “steep rise in prices and loss of confidence in our economy” as indeed had happened in 1991. The question is did this happen overnight? How did we get here? And who let this happen? Was the writing on the wall in Greek? 

Razeen Sally on Asianeconomies and its need for “Limited government—a strong but small state that performs its core functions well—and free markets at home and free trade abroad: These are the ingredients for a new Asian century.”

‘Fifth Nation syndrome’

The title of this post is taken from Dr A.P.J Abdul Kalam's recent speech. Taking cue from his wise words friend Arvind really goes further digging the Indian economic history and gives many interesting narratives on why we need to go back to our own way of practicing free gold market system for transactions in the society. A bit from his piece in DNA:

• In response, the Swaraj Party demanded that a sound monetary system be put in place and its member Jamnadas Mehta articulated the party’s position on the gold market, “We shall insist in the select committee that an automatic system shall be provided for the expansion and contraction of currency following a free inflow and outflow of gold in a free gold market.” Similar demands have sprung up in the West only in recent times after the occurrence of economic crises in the US and Europe.
• Jamnadas Mehta also rejected the claim that the bank’s board would be elected by an “independent” body of shareholders and stated, “We say that as the executive of the bank owe their existence to the government, they will simply carry out the government mandate in the running of the bank; the directors will have no control whatever.” In the past few decades, his prediction has come true not only in India, but also in other countries where central banks are supposed to act independent of the government.

Here is a very timely analysis by PB Mehta about political economy of India:

• The most criminal example of government mendacity has been its talk on the banking system. During the financial crisis, we patted ourselves on the back for having a prudent approach to banking. Guess what? The government told you lie after lie as the banking system became the main conduit through which crony capitalism flourished. Banks were running Ponzi schemes, giving out loans when there was no rational basis, failing to do due diligence if the borrower was too big to fail, shutting out small and medium enterprises and letting a handful of big players mop up credit at will. Of course, no government will talk the economy down. But no one is being held accountable for the major catastrophe in the making. Banks were put in this position in part because of a prior failure to bring in reforms. Now that they are in bad shape, their fragility is being used as an argument to not diligently clean up the system.

More interesting part is the following lines:

• The central driver of good economics is recognising the problem. Despite the slowdown, government will continue to produce lawyer-like alibis: the whole world is slowing down, the global conditions are adverse, five-and-a-half per cent is not bad. These arguments are patent nonsense. 

Interesting reading

The great liberal Rajaji propounded that the State funded election expenditure should be the norm instead of corrupted political party funded election system. Professor Indiresan really pushes the arguments made by stalwarts like Rajaji on What can deter political corruption?

Poor will never ever govern the economy to achieve the ever aspiring higher prosperity in society.

Ramachandra Guha on "the national interest is regularly subordinated to partisan point-scoring." 

Aakar Patel on Casting out Boardrooms in India


Arun and Sudhir Krishnaswami analysis (pdf) on Healthcare Law in the US and the RTE in India Steps towards Universal Provision of Social Goods

Measure growth at individual level

Mani Shankar Aiyar writes: 

• ...........at a function where S Tendulkar the Chief Economic Advisor to the Prime Minister, drew attention to the Presidential Address of Simon Kuznets - the greatest authority the world has ever seen on national income - to the American Economic Association, where he said, “…all growths lead to widening inequality and therefore the higher the growth rate the wider is the chasm that grows between the better off and less well off.” He argued that this inequality does not amount to any lack of equity because the processes of growth raise the living standards of all. I think, statistically it is impossible to deny this. The only thing is that it does not apply to any one generation of people. It takes 250 years in historical terms for levels of living to be raised in society as a whole to render questions of inequality as being beyond the pale of democratic politics. 

• In India we ought to recognize that we are doing something that is historically without precedent: creating a full-fledged democracy before embarking on the processes of growth. In the USA, the constitution proclaimed the right of all to life, liberty and the pursuit of happiness but denied it to those who were the indigenous people of the USA. Perhaps some of the worst expropriations of other peoples land without the payment of any compensation and with death inflicted as punishment for refusing to part with land was in the same USA. It was quite late that the right to life, liberty and the pursuit of happiness was in theory granted to an entire people who had been stolen from another continent and transported across the Atlantic Sea to provide the manpower for the economic development of North America. After the proclamation of the emancipation of the slaves in 1863, it then took another 101 years till 1964 for the Civil Rights Bills to be passed to enable the American Black to enjoy the same civic political rights as others in his country.

• In the United Kingdom, democracy took approximately 1,000 years to evolve from being a matter of the rights of the Barons vis-à-vis the King which is what the Magna Carta was about, to women getting the Right to Vote in 1928. In France, they had a revolution in the name of ‘liberty, equality, fraternity’ and because fraternity means fraternal relations between brothers, half the population of France - the women - did not get the vote until after Hitler had been defeated in 1945. It is not surprising that the first feminist was a French woman called Simone De Beauvoir and her most celebrated book is called the ‘Second Sex’. Trade union rights, which are a phenomenon of the second or third century of the industrial revolution in developed democracies, had been enshrined in our Constitution and our law approximately 25 years before we even began our industrial revolution. So, as a result of 60 years and more of unbridled democracy, we have created a class consciousness among people that doesn’t require a dictatorship of the proletarian. These people, who have exercised political rights, are today asking themselves increasingly the question ‘what is in it for us’? What profits us if Bangalore becomes the IT capital of the world? What profits us if in pharmaceuticals the Indian industry is unbeatable? Curiously, the question becomes more and more serious as you go down the social hierarchy for it is by the most poor, the most deprived, the most exploited and the most discriminated-against segment of the Indian population, namely the tribals, that this very disturbing question is being put to the Indian State.

"three dangers facing the people of India"

Is the “GDP, per capita growth rates and national poverty line” according to Congress Nut Leader and Socialist Politician.

And more:

• "GDP growth rate is no index of what is happening in our country. The per capita growth rate, derived from the GDP growth rate, is also a wholly, not inadequate, wholly misleading index of what is actually being attained in terms of progress by the people of India,"

• "designed to pull wool over your eyes because it gives them easy way of describing how poverty alleviation is taking place when in fact it's hardly, barely taking place".

• "real enemy of the Indian people" ……… "higher and yet higher GDP growth rates means an increasing squeezing out of national resources from areas where people needed to areas which will boost growth"

Low probability but high-impact

Niranjan Rajadhyaksha on “economic instability is more likely in nations with weak institutions. Democracy is one of them: Others have shown that democratic countries experience less economic volatility than dictatorships.”

The dream is good but we have to wait and see how beast government acts

Mr V RAGHUNATHAN writes in the Economic Times “I recall waiting for somebody in Beijing once for 20 minutes on a street and during this short interval, saw one wall of a whole floor of a building rising up, as the cranes moved huge pre-fabricated blocks in place incessantly. May be, that is why in the time that it took Bangalore to build its Indira Nagar flyover, Beijing got ready for the entire Olympics”