A storm has broken out in the financial media between Jagdish Bhagwati and Amartya Sen on India’s economic policies. Bhagwati is well known for his work on international trade. He was one of the first to advocate a liberal trade regime for rapid economic growth.

While the ‘Asian tigers’ (South Korea, Taiwan, Singapore) pursued such an export-driven strategy, India and China were insular in their approach. China, however, overtook and went far ahead of the rest once it realised its folly. India is yet to learn, despite Bhagwati having numerous followers in the ‘establishment’.

Bhagwati was also pretty far-sighted in warning of the dangers of capital flows. It would not be wrong to describe him as pro-trade but anti-open borders for foreign capital in domestic financial markets. The Asian crisis of the late 1990s proved his point.

Doesn’t put a foot wrong, one would think.

But, surprisingly, he’s got into a losing spat with Amartya Sen.

He accuses Sen of being obsessed with income inequality and welfare to the exclusion of growth. Sen thinks Government has an active role in providing goods and services that improve the quality of life and prospects for the poor.

He is a vociferous supporter of food security (in the generic sense). That’s an outcome of his research on the Bengal Famine, when, he found, to his surprise, that it wasn’t food shortage but bad distribution which caused the massive numbers of starvation deaths. (Of course, it can also be an argument for government inefficiency and corruption).

Wider canvas

Bhagwati is a first rate economic theorist and a distinguished faculty of the prestigious Columbia University.

Sen too has gone through the mill, contributing to high-flown equilibrium theory like Kenneth Arrow. But, in recent years, he has operated a much wider canvas involving economic philosophy, which says a lot of his maturing beyond economics. His latest works are more in the realm of how we can build ‘just’ societies.

His emphasis on efficient and effective public services in education and health care to the poor seem unexceptionable. (Judging by his criticism of Sen, it seems Bhagwati hasn’t heard that Bill Gates too agrees and is acting in these areas through his Foundation).

The payoffs for these, even in the much beloved financial returns of classical economists, are incalculable.

Sen has barely replied to Bhagwati except to the charge of being anti-growth. Which economist in his senses would be?

While the growth mission is unexceptionable, a basic and minimum needs approach is not growth conflicting — in fact never can be.

The failure (and in many, inability) to grasp this is at the root of the growth issue itself not only in India but globally.

One thought Bhagwati was evolved enough to understand this.

(The author is a Chennai-based financial consultant.)

> balakris@vsnl.com

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