Delhi can never be improved — until the rest of India improves!

As a general rule, capital cities are economically unproductive places. They neither grow food nor create industry. What they produce, or are supposed to produce, are public discussion, debate, decisions, as well as data and information for governance of the country as a whole.  People who come to capital cities — whether politicians or foreign diplomats or businessmen or students or even bureaucrats and journalists — should come there only for  temporary purposes, and then, once their work or business is done,  leave for their own “native places”… 

Of course only one city is a capital city.  Other cities and towns develop naturally in response to economies of scale in commerce and industry. My second piece of academic research at Cambridge back in 1976-77, which I talked about at the Delhi School of Economics in 1977-78 as a  Visiting Assistant Professor, had to do with India and other developing countries markedly being “Dual Economies”, where city and countryside, towns and metros and hinterland, are linked continuously by that wonderful two-way mass movement known as internal migration….

There is obviously seasonal migration of agricultural workers in search of urban employment during the time a crop is growing in the ground, returning home for the harvest and other festivals.  Beyond such seasonal flows, we may expect  rural-urban migration to continue depending on individual family calculations of expected employment, income, benefits etc, until as it were, the last person who has been thinking about migrating from village to town or from town to city decides not to move but to remain where he/she is.  Families typically maximise their well-being by having some members here, other members there or there etc, meeting up again during seasonal festivals when they can.  Besides, with modern commuter railways, large numbers of day-workers and vendors travel in and out of cities from the towns and villages every day.

The academic literature is vast and excellent, starting with Dale Jorgensen “The development of a dual economy”, 1961 EJ, Harris-Todaro, 1970, AER, and easily available, Jerome Rothenberg’s 1975 MIT discussion paper “On the economics of internal migration” http://dspace.mit.edu/bitstream/handle/1721.1/63948/onmicroeconomics00roth.pdf?sequence=1… See too e.g. from 2010 http://www.csae.ox.ac.uk/conferences/2010-edia/papers/275-eberhardt.pdf

In case of Delhi, despite its lack of water and its inhospitable climatic conditions on the edge of the Rajasthan desert, the British stamped it to become their Imperial child in India for ever more…  Yet even the British routinely fled to Simla or England every summer — as the current Delhi elite flees abroad to their exported children in America, Europe, Australia etc…  

Since British times, Delhi has been pampered with India’s public resources.  Not making its own food or clothing, it must import everything from the rest of India. After 1947,  millions of Hindu & Sikh refugees from the new Pakistan set up shop… then came migrants from all over, Bengal, the South, North East, UP, Bihar, Haryana, Rajasthan, Punjab, Kashmir — everywhere.  Now Delhi’s problems can never be solved until the endless migration slows down. Delhi is India’s capital and the more it is pampered, the better it seems to become and hence the more attractive it seems to India’s many millions of free people.  It is not hard to see that Delhi can never do enough for its residents because, since, qua capital city, it does not grow food or create industry (and is supposed to produce only public debate, decisions etc as a service industry), whatever it spends on public services comes from India’s exchequer, which in turn creates incentives for mass migration to continue from everywhere with no equilibrium being ever reached. 

The fascist solution that was, as I recall, suggested momentarily by a former Congress CM of Delhi, would be to forcibly prevent people from coming in from the outside.   Apparently the PRC as a totalitarian regime has some kind of system of internal passports which restricts citizens from travelling into metros on their own free will.  That cannot work in free India, where the Constitution would forbit it. Hence the correct long-term way to help Delhi solve its problems probably involves trying to improve the rest of the country!  It is something for the AAP Government to think about when it talks to Narendra Modi: seek to help the aam admi *outside* Delhi if you want to really help the aam admi inside Delhi!  In the meantime, try to improve efficiency in the local public goods the local government is supposed to produce, and do not ask for more resources from India.

This has been a 15 minute analysis…More to come…   

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Silver Jubilee of “Pricing, Planning & Politics: A Study of Economic Distortions in India”

May 29 2009:

It is a quarter century precisely today since my monograph Pricing, Planning and Politics: A Study of Economic Distortions in India was first published in London by the Institute of Economic Affairs.

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Its text is now available (in slightly rough form) at this site here.

Now in May 1984, Indira Gandhi ruled in Delhi, and the ghost of Brezhnev was still fresh in Moscow.   The era of Margaret Thatcher in Britain and Ronald Reagan in America was at its height.   Pricing, Planning & Politics emerged from my 1976-1982 doctoral thesis at Cambridge though it came to be written in Blacksburg and Ithaca in 1982-1983.   It was the first critique after BR Shenoy of India’s Sovietesque economics since Jawaharlal Nehru’s time.

The Times, London’s most eminent paper at the time, wrote its lead editorial comment about it on the day it was published, May 29 1984.

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It used to take several days for the library at Virginia Tech in Blacksburg to receive its copy of The Times of London and other British newspapers.    I had not been told of the date of publication and did not know of what had happened in London on May 29 until perhaps June 2 — when a friend, Vasant Dave of a children’s charity, who was on campus, phoned me and congratulated me for being featured in The Times which he had just read in the University Library.  “You mean they’ve reviewed it?”  I asked him, “No, it’s the lead editorial.” “What?” I exclaimed.  There was worse.  Vasant was very soft-spoken and said “Yes, it’s titled ‘India’s Bad Example'” — which I misheard on the phone as “India’s Mad Example”  😀

Drat! I thought (or words to that effect), they must have lambasted me, as I rushed down to the Library to take a look.

The Times had said

“When Mr. Dennis Healey in the Commons recently stated that Hongkong, with one per cent of the population of India has twice India’s trade, he was making an important point about Hongkong but an equally important point about India.   If Hongkong with one per cent of its population and less than 0.03 per cert of India’s land area (without even water as a natural resource) can so outpace India, there must be something terribly wrong with the way Indian governments have managed their affairs, and there is.   A paper by an Indian economist published today (Pricing, Planning and Politics: A Study of Economic Distortions in India by Subroto Roy, IEA £1.80) shows how Asia’s largest democracy is gradually being stifled by the imposition of economic policies whose woeful effect and rhetorical unreality find their echo all over the Third World.   As with many of Britain’s former imperial possessions, the rot set in long before independence.  But as with most of the other former dependencies, the instrument of economic regulation and bureaucratic control set up by the British has been used decisively and expansively to consolidate a statist regime which inhibits free enterprise, minimizes economic success and consolidates the power of government in all spheres of the economy.  We hear little of this side of things when India rattles the borrowing bowl or denigrates her creditors for want of further munificence.  How could Indian officials explain their poor performance relative to Hongkong?  Dr Roy has the answers for them.   He lists the causes as a large and heavily subsidized public sector, labyrinthine control over private enterprise, forcibly depressed agricultural prices, massive import substitution, government monopoly of foreign exchange transactions, artificially overvalued currency and the extensive politicization of the labour market, not to mention the corruption which is an inevitable side effect of an economy which depends on the arbitrament of bureaucrats.  The first Indian government under Nehru took its cue from Nehru’s admiration of the Soviet economy, which led him to believe that the only policy for India was socialism in which there would be “no private property except in a restricted sense and the replacement of the private profit system by a higher ideal of cooperative service.”  Consequently, the Indian government has now either a full monopoly or is one of a few oligipolists in banking, insurance, railways, airlines, cement, steel, chemicals, fertilizers, ship-building, breweries, telephones and wrist-watches.   No businessman can expand his operation while there is any surplus capacity anywhere in that sector.  He needs government approval to modernize, alter his price-structure, or change his labour shift.  It is not surprising that a recent study of those developing countries which account for most manufactured exports from the Third World shows that India’s share fell from 65 percent in 1953 to 10 per cent in 1973; nor, with the numerous restrictions on inter-state movement of grains, that India has over the years suffered more from an inability to cope with famine than during the Raj when famine drill was centrally organized and skillfully executed without restriction. Nehru’s attraction for the Soviet model has been inherited by his daughter, Mrs. Gandhi.  Her policies have clearly positioned India more towards the Soviet Union than the West.  The consequences of this, as Dr Roy states, is that a bias can be seen in “the antipathy and pessimism towards market institutions found among the urban public, and sympathy and optimism to be found for collectivist or statist ones.”  All that India has to show for it is the delivery of thousands of tanks in exchange for bartered goods, and the erection of steel mills and other heavy industry which help to perpetuate the unfortunate obsession with industrial performance at the expense of agricultural growth and the relief of rural poverty.”…..

I felt this may have been intended to be laudatory but it was also inaccurate and had to be corrected.  I replied dated June 4 which The Times published in their edition of  June 16 1984:

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I was 29 when Pricing, Planning and Politics was published, I am 54 now. I do not agree with everything I said in it and find the tone a little puffed up as young men tend to be; it was also five years before my main “theoretical” work Philosophy of Economics would be published. My experience of life in the years since has also made me far less sanguine both about human nature and about America than I was then. But I am glad to find I am not embarrassed by what I said then, indeed I am pleased I said what I did in favour of classical liberalism and against statism and totalitarianism well before it became popular to do so after the Berlin Wall fell. (In India as elsewhere, former communist apparatchiks and fellow-travellers became pseudo-liberals overnight.)

The editorial itself may have been due to a conversation between Peter Bauer and William Rees-Mogg, so I later heard. The work sold 700 copies in its first month, a record for the publisher. The wife of one prominent Indian bureaucrat told me in Delhi in December 1988 it had affected her husband’s thinking drastically. A senior public finance economist told me he had been deputed at the Finance Ministry when the editorial appeared, and the Indian High Commission in London had urgently sent a copy of the editorial to the Ministry where it caused a stir. An IMF official told me years later that he saw the editorial on board a flight to India from the USA on the same day, and stopped in London to make a trip to the LSE’s bookshop to purchase a copy. Professor Jagdish Bhagwati of Columbia University had been a critic of aspects of Indian policy; he received a copy  in draft just before it was published and was kind enough to write I had “done an excellent job of setting out the problems afflicting our economic policies, unfortunately government-made problems!”

Siddhartha Shankar Ray told me when  we first met that he had been in London when the editorial appeared and had seen it there; it affected his decision to introduce me to Rajiv Gandhi as warmly as he came to do a half dozen years later.

Within a few months though, by the Fall of 1984, I was under attack by the “gang of inert game theorists”  who had come to  Blacksburg following the departure of James Buchanan.  By mid 1985 I had moved to Provo, Utah, really rather wishing, as I recall,  to have left my India-work behind me.  But by late 1986, I was at the University of Hawaii, Manoa, where the perestroika-for-India and Pakistan projects that I and WE James led, had come to be sponsored by the University and the East West Center.

The unpublished results of the India-project reached Rajiv Gandhi by my hand on September 18 1990 as has been told elsewhere.  A week later, on September 25 1990,  Rajiv appointed a small group that included myself, to advise him.  It was that encounter with Rajiv Gandhi that sparked the origins of the 1991 economic reform.  Yet in 2007 one member of the group, declaring himself close to Sonia Gandhi, brazenly lied in public saying it was Manmohan Singh and not I who had been part of the group — a group of which I had been in fact the first member!  Manmohan Singh himself has never claimed to have been present and in fact was not even in India at the time it was formed.

I have explained elsewhere here why I believe this specific  lie  came to be told by this specific liar who shared membership with me in the group that Rajiv had formed:  because I had also pleaded with  many and especially within this group that Rajiv had seemed, to my layman’s eyes, very vulnerable to assassination, and none of them had lifted a finger to  do anything about it!  Such is how duplicity, envy and greed for power make people mendacious and venal in politics!

As for Pricing, Planning and Politics, Dr Manmohan Singh received a personal copy from my father whom he had long known through the Kaul brothers, Brahma and Madan, both of whom were dear friends of my father since the War and Independence.   From a letter Dr Singh wrote to my father,  he would have received his copy in late 1986 when he was heading the Planning Commission in his penultimate appointment before retirement from the bureaucracy.

Readers of Pricing, Planning and Politics today, 25 years after it was published, may judge for themselves what if any  part of it may be still relevant to the new government that Dr Singh is now prime minister of.   The work was mostly one of applied microeconomics or the theory of value; in recent years I have written much also of applied macroeconomics or the theory of money as it relates to India.  My great professor at Cambridge, Frank Hahn, was kind enough to say in 1985 that he thought my “critique of Development Economics was powerful not only on methodological but also on economic theory grounds”; that to me has been a special source of delight.

Subroto Roy

“I’m on my way out”: Siddhartha Shankar Ray (1920-2010)

I  am grieved to hear of the death of Siddhartha Shankar Ray last night.

I was introduced to him by an uncle who had been his college-buddy, and he took up a grave personal matter of mine in the Supreme Court of India in 1990 with great kindness, charging me not a penny, being impressed by a little explicit “civil disobedience” I had had to show at the time towards Judge Evelyn Lance.

He also told me he and his wife had been in London on May 29 1984 and had seen *The Times*’s leader that day about my critique of Indian economic policy. He invited me to his Delhi home where I told him about the perestroika-for-India project I had led at the University of Hawaii since 1986, at which he, of his own accord, declared

“You must meet Rajiv Gandhi.  I will arrange a meeting”.

That led to my meeting with Rajiv Gandhi, then Congress President & Leader of the Opposition, on September 18 1990, which contributed to the origins of India’s 1991 economic reform as has been told elsewhere. https://independentindian.com/thoughts-words-deeds-my-work-1973-2010/rajiv-gandhi-and-the-origins-of-indias-1991-economic-reform/

Rajiv’s assistant George told me Rajiv had said he had not heard more fulsome praise.

In Bengal, he took me as a guest to visit the Legislative Assembly in session when he was Leader of the Opposition; it was the legislature of which my great grandfather, Surendranath Roy, had been a founder, being the first Deputy President and acting President too; Surendranath had been friends with his maternal grandfather, CR Das, leader of the Congress Party before MK Gandhi, and he said to me in the car heading to the legislature about that relationship in Bengal’s politics some seven decades earlier “They were friends”.

He introduced me to all the main leaders of the Bengal Congress at the time (except Mamata Banerjee who could not come) and I was tasked by him to write the manifesto for the State elections that year, which I did (in English, translated into Bangla by Professor Manjula Bose); the Communists won handily again but one of their leaders (Sailen Dasgupta) declared there had never been a State Congress manifesto of the sort before, being as it was an Orwell-like critique of Bengal’s Stalinism.

In a later conversation, I said to him I wished he be appointed envoy to Britain, he instead came to be appointed envoy to the USA.

In Washington in September 1993, he said “You must meet Manmohan Singh”, and invited me to a luncheon at the Ambassador’s Residence where, to Manmohan Singh and all his aides, he declared pointing at me

“The Congress manifesto (of 1991) was written on his (laptop) computer”.

In later years I kept him informed of developments and gave him my publications.   We last met in July last year where I gave him a copy, much to his delight, of *Margaret Thatcher’s Revolution: How it Happened and What it Meant*.

I said to him Bengal’s public finances were in abysmal condition, calling for emergency measures financially, and that Mamata Banerjee seemed to me to be someone who knew how to and would dislodge the Communists from their entrenched misgovernance of decades but not quite aware that dislodging a bad government politically was not the same thing as knowing how to govern properly oneself.

He,  again of his own accord, said immediately,

“I will call her and her main people to a meeting here so you can meet them and tell them that directly”.

It never transpired.

He and I were supposed to meet a few months ago but could not due to his poor health; on the phone in our last conversation I mentioned to him my plans of creating a Public Policy Institute — an idea he immediately and fully endorsed as being essential though adding

“I can’t be part of it,  I’m on my way out”.

“I’m on my way out”.   🙂

That was Siddhartha Shankar Ray — always intelligent, always good-humoured, always public-spirited, always a great Indian.

I shall miss a good friend, indeed my only friend among politicians other than the late Rajiv Gandhi himself.

Land of my fathers: Why I am Indian

From Facebook:

 

Subroto Roy  says to Mr Tripathi: “An oath is an oath. For myself, my love for America, where I lived some 16 years, age 25-41, was enough for me to wish to become an American — if I did not have to abandon the land of my fathers which needed me perhaps more.”

 




see too https://independentindian.com/life-of-mk-roy-19152012-indian-aristocrat-diplomat-birth-centenary-concludes-7-nov-2016/


Just how much intellectual fraud can Delhi produce?

Today’s English-language newspapers report a front-page story that suggests the extent of intellectual fraud emanating from our capital-city’s English-speaking elite may be unending and limitless and uncontrollable (and this  Delhi-based elite has spread itself to other places in the country too).

Such  may be a source of our ridiculous politics, paralleled by the corruption in organized business in both public and private sectors.  Delhi was perhaps the wrong place to which to move India’s capital  one hundred years ago; the geography was such that it made ordinary survival hard or at least highly stressful, and when you have a capital-city in which the elite have to work so hard all the time merely to remain within the city-limits, it was inevitable perhaps that truthfulness and honesty would become  major casualties.

Subroto Roy, Kolkata

Pakistani expansionism: India and the world need to beware of “Non-Resident Pakistanis” ruled by Rahmat Ali’s ghost

The Government of Pakistan is said to be due to release its initial report on the involvement of Pakistanis in the Mumbai massacres.  It is reportedly expected that the G o P will partly if not mainly or wholly attribute responsibility for the planning of the massacres to expatriate  Pakistanis  in other countries, perhaps in Europe and Britain.  If so, a fact the Government of India might find prudent to recall is that the Government of Pakistan in bygone decades did deny citizenship to Rahmat Ali himself    (who invented the acronym “P, A, K, I, S, T, A, N” ) and even deported him back to Britain from where he had carried out his vituperative and bigoted campaign against Hindus.

Rahmat Ali’s British grave has become a site of pilgrimage for expatriate Pakistani extremists and his ignorant hate-filled ideology from the 1930s has been inspiring their modern manifestos.  I said this in an article published in Karachi’s Dawn newspaper in 2005, which also pointed to Iqbal and Jinnah’s disdain for Rahmat Ali’s views (see “Iqbal and Jinnah vs Rahmat Ali” republished here).  American nationals and  British subjects of Pakistani origin inspired by Rahmat Ali’s  ghost are spreading theories of Pakistani territorial expansionism at the cost of the destruction of the Indian Republic and many other countries.

The fact that at one such website recently I myself, presumably because of my Hindu name and Indian nationality, have been referred to as a “monkey- or donkey-worshipper” 😀  may speak to the somewhat  rabid nature of such ideologies.  (Drat! And there I was expecting some elementary Pakistani courtesy and acknowledgment let alone gratitude for having created, at great personal cost at an American university twenty years ago, the volume with WE James titled Foundations of Pakistan’s Political Economy: Towards an Agenda for the 1990s with its mundane chapters on agriculture, macroeconomics, education etc!)

Incidentally, British newspapers are reporting today that America’s  CIA has been deeply concerned about British subjects of Pakistani origin being a source of international terrorism. It may be pertinent to recall  that terrorism in India’s Punjab had much support among numerous Sikh expatriates and immigrants in North America and Britain, and the same kind of thing may be true of Tamil expatriates from  Sri Lanka.  Being isolated and alienated as immigrants in a foreign country may lead to psychological conditions that contribute to such phenomena, whereby political and other events in the faraway country-of-origin take on exaggerated proportions in an individual’s mental make-up.   Certainly Rahmat Ali himself was a rather tragic lonely figure who wasted his own potential to properly contribute to Pakistan’s political history  through his own self-blinding hatred of Hindus.

SR

Become a US Supreme Court Justice! (Explorations in the Rule of Law in America)

 

For almost two decades, Since the summer of 1988 when *Philosophy of Economics* got accepted for publication, I have found myself in a saga exploring the Rule of Law, the nature of justice and freedom, and the nature of racial animosity and xenophobia in the United States. Judge it here for yourself. Files 1 and 2 marked SCOTUS are the front-matter and Petition for Writ of Mandamus as received by Circuit Justice Sandra Day O’Connor of the Supreme Court of the United States in February 1996. Files 3 to 10 constitute the Appendix of Record giving the rulings of the US District Court for the District of Hawaii and the US Court of Appeals for the Ninth Circuit, including especially in File 8 the “after-discovered” evidence of how my attorney had been covertly purchased by my opponent. An example of perjured trial testimony is contained in File 2. In September 2007, I asked my opponent — the Government of one of the 50 States — to voluntarily admit its wrongdoings to the present Chief Judge of the US District Court as is required by law. Government lawyers should, after all, try to act lawfully.

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