Will the Government of India’s new macroeconomic policy dampen or worsen the business-cycle (if such a cycle exists at all)? No one knows! “Where ignorance is bliss, ‘Tis folly to be wise.”

I began a two part article published in The Statesman last year (September 23-24 2007) titled “Against Quackery” saying:

“WASTE, fraud and abuse are inevitable in the use and allocation of public property and resources in India as elsewhere, but Government is supposed to fight and resist such tendencies. The Sonia-Manmohan Government have done the opposite, aiding and abetting a wasteful anti-economics ~ i.e., an economic quackery. Vajpayee-Advani and other Governments, including Narasimha-Manmohan in 1991-1996, were just as complicit in the perverse policy-making. So have been State Governments of all regional parties…. Our dismal politics merely has the pot calling the kettle black while national self-delusion and superstition reign in the absence of reason.  The general pattern is one of well-informed, moneyed, mostly city-based special interest groups (especially including organised capital and organised labour) dominating government agendas at the cost of ill-informed, diffused anonymous individual citizens ~ peasants, small businessmen, non-unionized workers, old people, housewives, medical students etc….

The cheap money policy announced yesterday and now the so-called “fiscal stimulus” announced today may be a case in point.  Dr Manmohan Singh’s main economic policy aide said the aim was for Government to act in a “contra-cyclical”  manner,  presumably referring to an attempted “counter cyclical policy” to dampen the amplitude of a business-cycle.

But has anyone asked — let aside, does anyone know — where precisely, in terms of phase, period and amplitude, India’s macro-economy happens to be on its presumed business-cycle?  Of course not.   No one has the faintest clue.   There are no models of such a cycle existing and there are no data which have been fit to such non-existent models.   Not in Delhi, not in Mumbai, not with any international agency.

[Inspector Gregory (Scotland Yard detective): “Is there any other point to which you would wish to draw my attention?”
Sherlock  Holmes: “To the curious incident of the dog in the night-time.”
Inspector Gregory: “The dog did nothing in the night-time.”
Sherlock  Holmes: “That was the curious incident.”]

A cheap money policy and a so-called “fiscal stimulus” may in fact, for all that anyone in the Government of India or outside it really knows, exacerbate the amplitude of a business-cycle — making it worse, not better.

In such a  state of ignorance,  it is odd for policy-makers to go about glibly formulating and announcing so many policy-changes at once.   (It may all add up to be just incoherent waffle.)   Such has been the typical pattern to emerge from the process of political lobbying by “well-informed, moneyed, mostly city-based special interest groups”.   Organised capital and organised labour (as well as of course bureaucrats and politicians) will likely do very well from all this as usual, at the expense of  “ill-informed, diffused anonymous individual citizens” of India.


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Dr Rice finally gets it right (and maybe Mrs Clinton will too)

When, or perhaps if,  the full story of the George W Bush Presidency comes to be written, it may be found that Dr Condoleeza Rice’s political connections at Stanford contributed more to the chances of the Texas Governor winning the Republican nomination than has been widely known.   Dr Rice was without a doubt a Republican star at the time  but when she became National Security Adviser, she had the wrong expertise!  She was a USSR expert by training from Cold War days and knew next to nothing about the Middle East.  Now finally, as America’s foreign minister in the dying weeks of the Bush Presidency, she has come into her own as a world diplomat: her intervention following the Mumbai massacres may have yet staved off an Indian military retaliation against Pakistani targets and also induced Pakistan to move slightly towards governance and away from terrorist anarchy.   Learning-on-the-job has been productive for Dr Rice — she and Robert Gates also appear to have staved off a Bush-Cheney attack on Iran.

Would it not be interesting to see her on the top of the 2012 Republican ticket against Barack Obama?

Her successor, Hillary Clinton, may too become a competent American diplomat and have finally found her calling after all — assuming she is able to transcend domestic interest groups and ignore all politically correct nonsense like  “climate change”.