When Amartya Sen was awarded the Nobel Prize for Economics, I was astounded to get a request from a prominent editor to write on the topic, “Does getting the Nobel Prize vindicate Sen’s stand against IMF policies and economic policies which genuflect only before the market to the exclusion of social concerns and safety nets?”
This showed me two things. First, the richness of Amartya Sen’s work is being trivialised and distorted by people anxious to squeeze it into a simplistic Left versus Right framework. Second, the Indian Left has successfully misled people into believing that Amartya Sen is one of them, defying IMF and World Bank.
This is rubbish. Sen is neither Left nor Right, his work transcends that obsolete ideological divide. More than just an economist, he is an ethical philosopher. Above all, he is a lover of freedom and a humanist. He has focused on the poor, viewing them not as objects of pity requiring charitable handouts, but as disempowered folk needing empowerment. Education, health, nutrition, gender equality, safety nets in times of distress, all are needed to empower people. That, says Sen, is the role the state should play (rather than taking over the means of production while neglecting social sectors as Nehru did).
Sen (along with others) has influenced the World Bank and IMF so much that today they sometimes sound like Sen himself. He has done several assignments for the Bank, and I especially recommend his lead chapter in the 1996 Bank publication Public Spending and the Poor.
The attempt of the Indian Left to hijack Sen was punctured at his press conference in New York after getting the prize. “There are major gains to be made in globalisation,” he said, “so I am pro-globalisation.” However, he warned that globalisation would fail in countries that did not invest in education, health and safety nets.
Who else has long pleaded for globalisation plus social investment? Swaminomics, of course. The World Bank too. Even IMF. Indeed, there is a global consensus on this.
The World Bank lends to poor countries mainly through its soft- loan affiliate, the International Development Association (IDA). All IDA loans have to be poverty- related, for things like education, health, nutrition, population, safety nets and rural development. Sanctions imposed after India’s nuclear tests mean that the World Bank can give loans only for basic human needs, yet such loans will touch $ 3 billion this year, says finance minister Sinha.
Unlike the Bank, IMF is not a development agency. It is a lender of last resort to countries that overspend and go bust. Returning to solvency means over spenders must cut spending. For decades, IMF borrowers cut social services rather than bloated wage bills. Reacting to criticism from people like Sen, IMF in the 1990s started safeguarding social and anti-poverty programmes in structural adjustment loans.
Surprised? Please read chapter 3 of IMF’s latest World Economic Outlook, which has a summary of loan conditions and advice given on structural adjustment to crisis-hit countries in Asia. The social policy summary is as follows.
- Labour-intensive public works programmes (Indonesia, Thailand) and expansion of the unemployment insurance system (Korea).
- Protection of low-income groups from increases in the prices of food and other essentials (Indonesia, Malaysia, the Philippines, Thailand).
- Provision of higher spending for health and education (Indonesia) and the reallocation of budgetary expenditures to health programmes for the poor (Thailand).
- Expansion of scholarship and loan programmes to minimise number of student dropouts (Thailand, Malaysia). You can almost hear Amartya Sen cheering.
Sen has often criticised the Bank and IMF. And the annual Human Development Report, inspired by Sen, differs in emphasis from the Bank-IMF.
But almost all now agree on the overall message: We need dynamic markets, social investment and good governance to end poverty.
An important part of Sen’s social advocacy stems from his work on famines. Since World War II, droughts have led to mass starvation in many countries. Governments and aid donors traditionally saw the problem as one of food scarcity, and tried to rush additional food to stricken areas. But thousands died nevertheless.
Sen showed that the problem in a drought is a lack of purchasing power rather than food. A drought leaves small farmers with no crops to sell and rural labourers with no work. Such penniless people will starve even if government godowns overflow with food. Grain production in India fell only slightly in 1943, yet millions died in Bengal for want of purchasing power.
Sen describes how during the Irish potato famine of the 1840s or Ethiopian famine in the late 1970s, food actually moved out of drought-hit areas into areas with higher food availability. Why? Because the market drives food to where the money is, not where empty stomachs are.
The answer is not for the state to substitute markets, but to gye purchasing power to the needy through employment schemes or other entitlements like food stamps. Once that is done, the market drives food to the poor even when it is very scarce.
To illustrate this, Sen compared the experience of Maharashtra and the countries of the African Sahel. Both experienced a string of drought years in the 1970s. Food availability (local production plus grain brought in from outside) was far lower in Maharashtra than in the Sahel, sometimes barely half as much (see accompanying (chart). Yet Maharashtra avoided mass starvation, while thousands died in the Sahel.
Why? Because rural employment schemes in Maharashtra gave the poor enough money to survive. The Sahel had no such mechanism, and so suffered mass deaths.
Indian politicians are not nobler than those elsewhere. Why, then, did India find the right solution, but not Africa? Because India had democracy and Africa did not. Democracy forced ruling parties in India to check mass distress or risk losing the next election. African dictators had no such compulsions.
Mao cared more for the poor than most Indian politicians. Yet during China’s Great Leap Forward, 29 million died of starvation. Unlike India, China had no free press or opposition parties to raise early warnings about the drought and expose bureaucrats anxious to keep bad news from their bosses. Mao simply did not know the extent of the disaster, and overestimated food reserves by 100 million tonnes. Democracy saved Indians from starvation, Communism condemned the Chinese to death.
Indian Leftists like KN Raj objected to Amartya Sen’s criticism of Mao.
Other Leftists like Ashok Mitra sneered that Sen had simply discovered what every beggar in the street knows, that you starve if you do not have money. But Amartya Sen stuck to his guns. And he has finally been rewarded with the Nobel Prize.
|Net food availability per head*
(Kilos per year)
|* Food availablity is local production plus grain brought in from outside|