Blind to Progress
By Sebastian Mallaby
Monday, May 17, 2004; Page A21
When he was young and so was India, Jagdish Bhagwati left Oxford to work at the Indian Planning Commission. He was assigned to grapple with his country's biggest problem -- how to raise the incomes of the poorest -- and he soon came to the conclusion that the key was economic growth. For one thing, the "exploitative rich" were irritatingly few, so nationalizing their fortunes wouldn't get you very far. But Bhagwati was also impressed by data showing that no poor country has achieved egalitarianism in incomes. If inequality was more or less a given, the only hope was to expand the pie rather than slicing it up differently.
I tell this story partly because I've been reading Bhagwati's new book, "In Defense of Globalization." But the episode also sheds light on the oddity of last week's Indian election, or at least on the way it was greeted. Comparing Bhagwati's snapshot of India in the early 1960s with today's transformed country tells you something about globalization -- and about why Bhagwati, who's now an eminent professor at Columbia University and a fellow at the Council on Foreign Relations, feels the need to defend it.
The Bhagwati of the 1960s was no pro-business conservative. His views reflected the Anglo-Indian intellectual consensus; he believed in government direction of the economy rather than free markets, import substitution rather than free trade. But the remarkable thing is that his enthusiasm for growth wasn't controversial among India's left-leaning intellectuals. It was shared even by Jawaharlal Nehru, the father of India and of Indian socialism. To ensure "an irreducible minimum standard for everybody, the national income had to be greatly increased," Nehru wrote shortly before India's independence.
This faith in growth has since been vindicated. With the advent of internationally comparable poverty statistics, it's grown clear that inequality varies more across countries than Bhagwati imagined 40 years ago. But it's also become evident that inequality varies little across history: Income distribution appears to be hard-wired into the DNA of a nation, so that tackling poverty via redistribution is a fool's errand. On the other hand, tackling poverty by creating growth has proven repeatedly successful, most obviously in East Asia. There are exceptions -- the Philippines under the Marcos dictatorship -- that have managed to experience growth without reducing poverty. But they are few and far between.
Yet if the India of the 1960s was right about growth's importance, it was wrong about how it might be achieved. The economy crawled along during the 1960s and 1970s, and the Indian Planning Commission was a large part of the problem. As Bhagwati realized soon after he arrived to work there, there was no way that government planners could know how many tractors or machine tools India needed. Meanwhile, import substitution was no match for the export-focused strategy of the East Asian tigers.
Which brings us to last week's election. The incumbent government going into that contest had accelerated the reversal of India's failed development strategy, and had reaped the benefits. The economy is now humming along at 7 to 8 percent annually, twice as fast as in the statist 1960s and 1970s: India has at last achieved the expansion that Nehru wanted. And yet the government's reward was to lose the election to opponents who complained that growth was not reducing poverty. The leader of those opponents was Sonia Gandhi, the head of the Congress Party that Nehru once presided over and the widow of his grandson.
There were several reasons for this electoral upset. But prominent Indian intellectuals -- Salman Rushdie in The Post, Arundhati Roy in the British Guardian -- could not resist declaring that the failure of growth as an anti-poverty strategy explained at least part of the result. The "immense countryside India," Rushdie wrote confidently, ". . . has not benefited in the slightest from the recent economic boom." According to Roy, the election represented a decisive defeat for "neo-liberalism's economic 'reforms.' " And so we have a curious inversion. India used to understand growth's importance, but not how to achieve it. Now India knows how to achieve it; but some famous Indians, and perhaps millions of ordinary voters, have lost sight of growth's importance. People don't seem to have noticed that, whereas India's poverty rate stuck obstinately above 50 percent during the low-growth 1960s and 1970s, it is now falling precipitously: To 36 percent in the government's household survey of 1993-94; to 29 percent in the next survey, six years later. The idea that the countryside has not benefited is simply spurious. In the interval between the two most recent surveys, rural poverty fell from 37 percent to 30 percent.
And that, in a nutshell, is the problem with globalization -- we can't seem to appreciate the good things that it brings. Bhagwati's new book offers other examples: He explains how globalization is good for women's rights, good at reducing child labor, good for the environment. If only the globo-skeptics would spend less time celebrating India's odd election and more time reading him.
© 2004 The Washington Post Company