Macro Economy

Growth slowdown is just one aspect of economics, focus on social reforms is much needed as well: Esther Duflo

Richa Mishra/Payel Mazumdar New Delhi | Updated on October 29, 2019

Esther Duflo, one of the three winners of the 2019 Nobel Prize in Economics   -  Reuters

Esther Duflo, joint winner of 2019 Nobel Prize for Economics, wants to make it clear that economics is not just about people in suits and ties and discussions about macro economic trend, but it is also about reflecting on the social issues that challenge everyone today.

“Generally economics award comes when you are at end of your career and neither of us at are the end of our career…,” she said with a chuckle adding that “this makes it special. It feels good to be acknowledged. We take this as recognition of collective work of hundreds of researchers, NGOs and government who we work with.”

On why fewer women have so far got the Economics Nobel, she said “it is not bias. I think it is partly because of the perception that economics is just about growth and finance. I do hope that with this prize, people realise there are many things that economists do that is not about interest rates but changing the world.”

In a Skype chat from the US with BusinessLine, a self-proclaimed sportsperson Duflo points out that “When we were writing the book (Good Economics for Hard Times) India was growing very fast, but if you notice we say that it is going to slow down. We exactly ask this question then that what should India do ? You cannot allow growth slowdown to affect you.”

Duflo and joint winners her husband Abhijit V Banerjee and Michael Kremer were awarded for their experimental approach to alleviate global poverty. She believes that empowering the less beneficial will help protect to some extent from the after effects of global economic externalities. Excerpts:

You think that with this award the direction that the Nobel Academy has taken is to put the conversation towards issues that are affecting us right now?

You never know how they think, but it could be that in today’s world it is important to shed spotlight on issues that are affecting the majority. They chose to acknowledge that the fight against poverty is one of the fights, which has been going on for last three decades.

Many things have not gone too well in the world in the last decades, but one thing that has got recognised is lives of poor mainly in India and China has improved.

Today, the concept of welfare state is being debated. What is your view particularly in the context of India?

I think there are a lot of things that have happened in India. What we explain in the book and what we firmly and strongly believe in is that even if in some sense the growth slows down, still a lot can happen if we focus our energy on making sure that the poorest in the society doesn’t die poor. Besides, it doesn’t actually take too much of social expenditure.

Designing such schemes that work well to achieve it, for example, collectively as a nation we decide that we have to improve immunisation rates in the country, because the rates are too low for an economy like India. We can do it. There has been lot of effort on this front and there has been some progress.

For example, we have been working with Haryana government for several years on projects to find out what is the best way to improve immunisation rates. Some work has already been done on making such services available. We work with them to design some programmes to promote it. We found that the State could do something which is really very inexpensive -- mobilise immunisation in a community. It is super effective.

It takes more policy focus, ambition and vision, which the team in Haryana had and some amount of creativity and willingness to stick with it. Even if growth slows down there are so many things that can done.

There was a time when politics and economics were two different things but now in many decisions we see, politics governs economics. Even in the book when you refer to oil or trade, we find that it is the political powers who are governing the economics. So in this situation of economic slowdown what do you think happens?

I don’t know if there was ever a golden age when politics and economics were separate. They have always been intertwined in some sense. But, today we are more aware of it.

May be there was some sort of enormity in the economic policy when we started – we have to do this or that and we had no choice. But, I think there is more to it now. There had been always choices that could be made. I think being aware is not bad because it is then you can as a society think about what are the values that we decide to put forward.

What about growth slowdown?

Growth is slowing down. There is not much that can be done. And it is also a fact that India has a lot to do. We need to make two decisions – do we continue to put the growth indicator as the thing we need to fight for and if not what do we do. I do hope, you as a country think that there are many more things to fight about than the growth rate, which is just one indicator in economics.

Slowdown is not India’s problem alone. We need to acknowledge that growth is beyond our control, so we can just get down to other work. Here the Chinese have handled it beautifully. They have come up with a new normal. Okay, that is still steep, but still lower than double digit. Now their targets are lower, and they are focused on other things like pollution and other social issues.

So, what can be done is that leave growth, and focus on things that will reflect success for our society – that is to see that the most disadvantaged members of the society are doing better. We can make bureaucracy more efficient, implementation more efficient. We can focus on how many kids can read, survive etc etc. This changes the narrative a bit. If you successfully do that it gives you the power to succeed in the matrix that you want to succeed. It is win-win for both.

When we were writing the book the growth rate of India was growing very fast, but if you notice we say that it is going to slowdown. We exactly ask this question then that what should they (India) do? And then we say that you gain back control... You cannot allow growth to affect you.

Whenever growth slows down the first thing that happens is that the Budget on social spending is cut, which is opposite of what you are saying. So should there be a shift in the public discourse?

After the 2008 crisis, you can check on countries that decided to cut on social expenditure and those decided not to. And I think one of the things that we do is to know when there is a crisis, you can go from a bad situation to a terrible situation, and then there is a demand collapse. Demand collapse is more likely to happen if social expenditures are slashed. Economics is not like family Budget. Job of the government is to work on expenditure so that demand doesn’t collapse.

We can learn from crises.

You have travelled across India and worked on different projects. How do you see schemes like Direct Benefit transfer or the financial inclusion programme of the government playing out?

I think it is a very important first step because it puts in a kind of structure that allows the public transfer and makes it easier to deliver. If every individual (men and women) has a bank account, per se, it creates a process for transfers easily. It does away with lot of difficulties that we had – the plumbing of the earlier inefficient system that led to uncertainties.

If the reach is better, it can lead to better dispensation of public expenditure. I would not say this is the do-all, but I would say this is the first step in that direction. This may be taken to the next level and consolidation of some of the schemes, for cash transfers could happen. Universal cash transfer will be the best thing to do. It will help develop economic payment system, simplify transactions.

You say today you see greater polarisation of society. How worrying is it?

It is such a defining feature of our world today. It is a concern.

What are some of the newer projects that you are taking up in India?

Learning in pre-schools has always been my passion. Get kids to read and write. There are things that you can do when kids are 4 and 5 to help them get ready for school. School curriculum in India are too demanding. We at least want the kids to be ready for what is coming. We have done such projects with Delhi government and want to continue doing such projects. Introduce new games that help in learning and in sustaining the kid attention. Social games, is what we call them.

Immunisations projects are another aspect we are involved with and will continue to be.

Published on October 29, 2019

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