25 November 2007
Budgets & Financial Positions of Three of India’s Most Populous States (combined population c.300 million)…Brought to you especially by Dr Subroto Roy… Feel free to use (with acknowledgment)…
3 June 2014
May 29 2009:
November 7, 2010
From Facebook October 15 2010
Subroto Roy thinks the Sonia-Manmohan Govt throwing auditors with their rule-books ex post facto at the Games’ organisers is a good if miniscule first step (though it is, in my estimation, the third Rajivist step in total, see infra…). May we please have the same done asap to military contracts (especially for Russian fighter jets, used aircraft carriers etc), Boeing & Airbus contracts, railway contracts, power sector contracts including nuclear business contracts, IIT and IIM building contracts, in fact *all* government sector building contracts, in fact *all* government sector contracts……
From Facebook March 28 2010
Subroto Roy is pleased that according to this morning’s news reports of a “national convention” on “Law, Justice & the Common Man”, the Sonia-Manmohan Congress took a small second step yesterday on the same road that Rajiv Gandhi and I had chalked out in 1990-1991. Better late than never!
From Subroto Roy & WE James’s Introduction 1989-1990 to Foundations of India’s Political Economy: Towards an Agenda for the 1990s edited by them, published by Sage 1992, received by Rajiv Gandhi on September 1990 in manuscript form.
“Finally, no discussion of the subcontinent’s political economy can ignore the fact of the monumental poverty of external goods on the part of a vast population, in contrast with a fairly large class of people with adequate livelihoods, in turn contrasting with small islands of indolence and conspicuous consumption. Benjamin Disraeli said of Victorian England that it consisted of two nations. The Indian subcontinent today consists in many respects of two nations living side by side, the real division being much less longitudinal on religious or communal lines (as intended by Muslim separatists at the time of Partition and Hindu imperialists today) as it is latitudinal on class lines between “bhadralok” and “janata”, middle class and working classes, bourgeoisie and masses, “nomenclatura” and proletariat. The sheer numbers can justify speaking of whole nations, the janata in India alone consisting of something like seven hundred million people, the bhadralok of one hundred and fifty million. The Indian bhadralok on their own constitute one of the largest nations on earth.
The bhadralok are not to be distinguished from the janata by any self-styled civility, nor is there any inevitable conflict which will lead to the victory of one and decimation of the other, nor is it that one derives its income from productive effort or enterprise and the other does not. A more effective criterion by which to distinguish the two nations of India may have to do not with work but with leisure, as well as with the kind of capital that comes to be inherited over time. The janata are the unleisured nation of India, people who mostly due to the meagreness of their initial resources come to possess little or no leisure in the course of their lifetimes. They are scattered and illiterate, without connections in high places, often too involved with the hardships of daily life to care for much else. They eat and sleep to maintain the minimum energy needed to survive, reproduce and send their children to school or work, travelling through life day by day and week by week. They may have some short time devoted to religion or entertainment, but life is too often too hard, not so much without happiness or culture as without much time for either. Expectations of what life has to offer may be unambitious and yet successful.
Inequality from an economic point of view may consist of the fact that the poor do not inherit any leisure from the past. They do not inherit the savings of their parents and ancestors because most did not have parents and ancestors who had any savings to leave behind. Capital and the income it generates, and the consumption which such income makes possible, are among the most subtle notions of political economy. As a rough approximation, if we distinguish between human capital, physical and financial capital, and social and political capital, it may be said that the inheritance of economic inequality in India may consist of the inheritance of economic inequality in India may consist of the inheritance by the janata of no form of capital except their own stock of human capital. There is little or no inheritance from parents of savings or any other form of capital. Hence the janata are also the “garib lok”, the masses are also the poor folk.
By contrast the bhadralok are also the leisured nation of the subcontinent, with the time and inclination to praise or decry the state of the culture or the economy or the prime minister, to visit or return from the outside world (“baahar”) to the subcontinent or vice versa, to take a walk in the morning or a nap in the afternoon, to express compassion for or embarrassment about the existence of the janata (especially in relation to the foreigner since the bhadralok have to explain both their privileged position relative to the janata and their often underprivileged position relative to the foreigner with whom they desire to consort), to study the janata or lead them in revolution or take measurements of them, and to read, write, edit or publish books such as this one. The bhadralok are the “respectable people” of the subcontinent, with names, family histories and reputations, literate and often highly educated, bilingual at least, with an inheritance of or illusions about acknowledged places in society. They inherit from their parents and save for their children physical and financial capital, invest in their human capital, and bestow to them as much social and political capital as they can. The mercantile and industrial bhadralok own and transfer to their children relatively more physical and financial capital, while the managerial, administrative and professional bhadralok may transfer relatively more social and political capital. At the apex of both groups is an elite amounting to a few million people, united perhaps by their membership or attempted membership of the post-British social clubs and centres of intellectualism, or foreign universities and the lower middle classes of Britain and North America.
What may be expected in the long run is mobility between the two nations and in both directions. Through indolence or bad luck, families can fall by a half or a third of a social class each generation, or move in the opposite direction through chance or cunning or enterprise and effort. It is an essential feature of mass economic development that there will be net mobility upwards in the long run, and an attendant breakdown of social barriers and the gradual assimilation of classes and castes into one another. Contrary to an assumption of the working classes being united in their despair and contempt for the middle class, and motivated in their desire to bloodily dispose of them, it may be more accurate to say that what unleisured people want most (after employment, food, shelter and clothing) is what they value most at the margin, namely, leisure. What the working classes desire most may be something like the kind of life as the bourgeoisie. Let aside there being a potential or open conflict arising from the janata against the bhadralok, the truth of the matter could be there is a desire of the janata to have at least some leisure like the bhadralok.
If this is an accurate assumption, the main source of conflict between the two nations of India or the subcontinent could be different from what is often supposed by many people. Instead of being revolutionary in nature and deriving from below, the source may be reactionary in nature and amount to resistance from the top. Like all cartels, the bhadralok may want to preserve their numbers and not look with favour at the prospect of large-scale mass economic development, entailing as this will greater competition on all fronts, the erosion of privilege, the breakdown of social barriers and the assimilation of classes into one another.
The Jacobin/Bolshevik/Maoist method of reducing inequalities was to expropriate physical and financial capital, and decimate social and political capital and all that stands in the way of such destruction. The upheaval and chaos of such blood-letting leaves a new order which is, or seems, for a moment, more egalitarian than the regime it replaces. But it also leaves a society without knowledge of its past, alternately enervated by its present and terrified of its future. Recovery from such a state of near social death has been long and hard and painful, where it has happened at all. Despite the wishes of a few, India does not seem likely to experience such social death on a national scale, although the temporary effects of terrorism and civil chaos in pockets of the country would seem to be similar.
A more far-sighted method would be by the creation of capital for the janata to increase their sources of income and consumption and thereby reduce the inequality of wealth and political power. It would mean investment in the only form of capital that the janata have: their own human capital. It would mean fundamentally a change of focus away from the theoretical and grandiose in the drawing-rooms and corridors of New Delhi (and Washington), and towards the simple and commonsensical: stopping the wastage of the tax-resources; making the currency sound at home and abroad; redirecting public investment towards public goods such as civil justice, roads, fresh water and sanitation; and fostering a civilized rural life, built around village schools with blackboards and chalk, with playgrounds and libraries and hot meals, with all-weather buildings and all-weather roads to their doors.
India today resembles a kind of gigantic closed city with high walls and few gates. Within the walls are concurrently represented many different ages in the history of man, from pre-historic and early Aryan, to medieval and Moghul, to Dickensian and American, the members of each age having some common and some individual sets of life-expectations, yet all being due to enter the next century together. Outside is the rest of human civilization, as well as the free circulation of gold and foreign exchange. Nearabouts the gates of the city, and with ability to travel in and out, are the few million of the elite. If the walls of the city are to be knocked down or at least if the gates opened and kept wide open, it will have to be the elite who do this or consent to have it done.
If it is done properly, after adequate preparation of the economic and political expectations of citizens, there may be many positive results, not only for the economy but also for the culture and civilization of the subcontinent as a whole. The free flow of ideas and opportunities across national borders; the freedom to travel in the world; the free movement of goods and capital; the freedom to save one’s tangible wealth, small as this may be, in whatever form or currency one considers best — these are fundamentally important freedoms which have been denied to most of the people of the subcontinent thus far and yet are taken for granted elsewhere in the world. There seems little reason to doubt that if such freedoms come to be gradually exercised by the janata there would be a permanent trend of increase in mass income and consumption.
Yet there are genuine questions of sovereignty which have to be anticipated as well. The consequences of a true opening are not fully or easily foreseeable. The prompt arrival of new East India Companies may be expected. Will there be enough competition between them? Or will the elite come to be further subverted, taking the first Indian Republic with it? After the long experience of foreign rule and nationalism and independent democracy, is the Indian polity mature enough to survive and gain from such an opening, or will it collapse once again as it did in the eighteenth century? The spectres of Plassey and Avadh must haunt every Indian nationalist, even as the hopes of a free economy and a progressive culture and an open civilization, beckon from the future. Is it a silent and implicit fear of this sort which constitutes the only possible rational barrier to greater freedom? Has the continued poverty been, in effect, the cost of nationalism? These are hard questions to which answers may not be found easily. It is hoped by the editors that the present volume may engage the citizens and friends of India to reflect upon them….”
From Facebook 7 Sep 2010:
Rajiv Gandhi received this book in manuscript form in hand from me on Sep 18 1990, and it contributed to the origins of India’s 1991 economic reform as has been described elsewhere. I am delighted to hear his son Rahul has in the last few days also been referring to India as “Two Nations”, rich and poor. Dr Manmohan Singh received the book itself in hand from me at the Indian Ambassador’s Residence in Washington in Sepember 1993; I am glad to see he too has yesterday mentioned the same “Two Nations” theory that I had applied from Disraeli’s book about Victorian England.
Dr Manmohan Singh has in a televised meeting with children said about himself:
“I am an aam admi“.
I am afraid this caused me to say at Facebook today:
Subroto Roy finds disconcerting Prime Minister Manmohan Singh’s claim of being himself “a common man”.
In “Rajiv Gandhi and the Origins of India’s 1991 Economic Reform”, I wrote about my encounter with Rajiv:
“I said the public sector’s wastefulness had drained scarce resources that should have gone instead to provide public goods. Since the public sector was owned by the public, it could be privatised by giving away its shares to the public, preferably to panchayats of the poorest villages. The shares would become tradable, drawing out black money, and inducing a historic redistribution of wealth while at the same time achieving greater efficiency by transferring the public sector to private hands. Rajiv seemed to like that idea too, and said he tried to follow a maxim of Indira Gandhi’s that every policy should be seen in terms of how it affected the common man. I wryly said the common man often spent away his money on alcohol, to which he said at once it might be better to think of the common woman instead. (This remark of Rajiv’s may have influenced the “aam admi” slogan of the 2004 election, as all Congress Lok Sabha MPs of the previous Parliament came to receive a previous version of the present narrative.)”
I am afraid I do not think Dr Singh was whom Rajiv or Indira had in mind in speaking of the common man.
From Facebook June 10 2011:
Subroto Roy remembers Gopi with respect and affection.
We met first at his IMF office in Nov 1992 when I had been briefly at the World Bank; hearing of my 1990-91 encounter with Rajiv Gandhi which sparked the 1991 economic reform, he immediately insisted I come to the Fund and it was due to him I became a consultant there in early 1993 (working on exports and exchange-rates of India, Pakistan, Sri Lanka, Bangladesh seen together for the first time as requested for by the Saudi Exec Dir M Al-Jasser).
I had phoned him from Bombay when I arrived from the USA in June 1996 and he immediately sent out three names and contacts of senior business figures he wanted me to meet. But I became a Professor instead. When we met again at his Grindlays office in Delhi later that year, he was just as keen to push me forward saying “You should be in the PMO”. But there was uncertainty in Delhi at the time with the new Deve Gowda Government.
We last met about October 2003 when he treated me to lunch at the IIC Delhi and we then flew together to Calcutta; he told me then the Finance Ministry had become a complete and total *mess* — it was remembering that today that I decided to write this. I had said to him I could not point to any serious macro economists in Delhi who really comprehended the gravity of the problem; he laid great store by one (unobvious) name but came to be disappointed there too.
On September 5 2009, he wrote on my blog “This short piece by Dr Roy on Jinnah is a gem. It puts paid to the theories peddled by all those who have not been introduced to geo-politics”. I was very sorry to hear just two months later that he had died. He embodied a clear-headed and intelligent Nehruvian nationalism which has become vanishingly rare in New Delhi today. “He was my friend, faithful and just to me”.
“Manmohan and Sonia have violated Rajiv Gandhi’s intended reforms”.
I said inter alia
“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 like the CPI-M in West Bengal, DMK/ AIADMK in Tamil Nadu, Congress/NCP/ BJP/Sena in Maharashtra, TDP /Congress in Andhra Pradesh, SP/BJP/BSP in Uttar Pradesh etc. 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….Rajiv Gandhi had a sense of noblesse oblige out of remembrance of his father and maternal grandfather. After his assassination, the comprador business press credited Narasimha Rao and Manmohan Singh with having originated the 1991 economic reform. In May 2002, however, the Congress Party itself passed a resolution proposed by Digvijay Singh explicitly stating Rajiv and not either of them was to be so credited. The resolution was intended to flatter Sonia Gandhi but there was truth in it too. Rajiv, a pilot who knew no political economy, was a quick learner with intelligence to know a good idea when he saw one and enough grace to acknowledge it. …Rajiv was entirely convinced when the suggestion was made to him in September 1990 that an enormous infusion of public resources was needed into the judicial system for promotion and improvement of the Rule of Law in the country, a pre-requisite almost for a new market orientation. Capitalism without the Rule of Law can quickly degenerate into an illiberal hell of cronyism and anarchy which is what has tended to happen since 1991. The resources put since Independence to the proper working of our judiciary from the Supreme Court and High Courts downwards have been abysmal, while the state of prisons, borstals, mental asylums and other institutions of involuntary detention is nothing short of pathetic. Only police forces, like the military, paramilitary and bureaucracies, have bloated in size….Neither Sonia-Manmohan nor the BJP or Communists have thought promotion of the Rule of Law in India to be worth much serious thought ~ certainly less important than attending bogus international conclaves and summits to sign expensive deals for arms, aircraft, reactors etc. Yet Rajiv Gandhi, at a 10 Janpath meeting on 23 March 1991 when he received the liberalisation proposals he had authorized, explicitly avowed the importance of greater resources towards the Judiciary. Dr Singh and his acolytes were not in that loop, indeed they precisely represented the bureaucratic ancien regime intended to be changed, and hence have seemed quite uncomprehending of the roots of the intended reforms ever since 1991.”
Days after the article appeared there were press reports Dr Singh was murmuring about quitting, and then came a fierce speech in Hindi from the Congress President saying “enemies” would receive their dues or whatever – only to be retracted a few days later saying that no more had been meant than a local critique of the BJP in Haryana politics! (Phew! I said to myself in relief…)
Today I am very happy to learn that Dr Manmohan Singh spoke on Sunday of the importance of the Rule of Law and an effective and efficient judiciary. The new Law Minister in the second Sonia-Manmohan Government has been eagerly saying the same.
All this is constructive and positive, late as it is since Sonia Gandhi and Manmohan Singh both became heavy-duty Congress Party politicians for the first time a dozen years ago.
“….….The most serious examples of the malfunctioning of civil government in India are probably the failure to take feasible public precautions against the monsoons and the disarray of the judicial system. …The Statesman lamented in July 1980:`The simplest matter takes an inordinate amount of time, remedies seldom being available to those without means or influence. Of the more than 16,000 cases pending in the Supreme Court, about 5,000 were introduced more than five years ago; while nearly 16,000 of the backlog of more than 600,000 cases in our high courts have been hanging fire for over a decade. Allahabad is the worst offender but there are about 75,000 uncleared cases in the Calcutta High Court in addition to well over a million in West Bengal’s lower courts.” Such a state of affairs has been caused not only by lazy and corrupt policemen, court clerks and lawyers, but also by the paucity of judges and magistrates. . . . a vast volume of laws provokes endless litigation as much because of poor drafting which leads to disputes over interpretation as because they appear to violate particular rights and privileges…. When governments determinedly do what they need not or should not do, it may be expected that they will fail to do what civil government positively should be doing.” A few months ago was the 25th anniversary of this statement… ! 🙂
Yes Prime Minister, having an effective and efficient judiciary is indeed a premier public good and one that has failed to be provided to India’s people from Nehru’s time and through Indira’s. I managed to persuade Rajiv about it completely. Might I next be so bold as to draw attention as well to the paragraphs of the 2007 article that followed?
“Similarly, Rajiv comprehended when it was said to him that the primary fiscal problem faced by India is the vast and uncontrolled public debt, interest payments on which suck dry all public budgets leaving no room for provision of public goods. Government accounts: Government has been routinely “rolling over” its domestic debt in the asset-portfolios of the nationalised banks while displaying and highlighting only its new additional borrowing in a year as the “Fiscal Deficit”. More than two dozen States have been doing the same and their liabilities ultimately accrue to the Union too. The stock of public debt in India is Rs 30 trillion (Rs 30 lakh crore) at least, and portends a hyperinflation in the future. There has been no serious recognition of this since it is political and bureaucratic actions that have been causing the problem. Proper recognition would entail systematically cleaning up the budgets and accounts of every single governmental entity in the country: the Union, every State, every district and municipality, every publicly funded entity or organisation, and at the same time improving public decision-making capacity so that once budgets and accounts recover from grave sickness over decades, functioning institutions exist for their proper future management. All this would also stop corruption in its tracks, and release resources for valuable public goods and services like the Judiciary, School Education and Basic Health. Institutions for improved political and administrative decision-making are needed throughout the country if public preferences with respect to raising and allocating common resources are to be elicited and then translated into actual delivery of public goods and services. Our dysfunctional legislatures will have to do at least a little of what they are supposed to. When public budgets and accounts are healthy and we have functioning public goods and services, macroeconomic conditions would have been created for the paper-rupee to once more become a money as good as gold ~ a convertible world currency for all of India’s people, not merely the metropolitan special interest groups that have been controlling our governments and their agendas.”
Cabinet Government has become far too unwieldy and impractical in India, and the new Cabinet chosen by Sonia Gandhi and Manmohan Singh over almost a fortnight — of some 79 Ministers, almost certainly the largest number in the world — may be destined to be so as well. If there is going to be “fiscal prudence” as the PM and Finance Minister have declared, it really needs to start at the top with the Union Government itself. Remember we also have more than two dozen State Governments plus Union Territories and myriad local governments too.
Here then is an example of a better-designed Cabinet for the Government of India with Cabinet Ministers in bold-face, others not so:
– Parliamentary Affairs
– Intra-Government Liaison
Defence War/Forces ( Raksha, Yudh/Fauj)
– Navy & Coast Guard
– Air Force & Strategic Forces
– Money & Banking
– Accountant General
– Law & Justice
– Internal Security
– Disaster Management & Civil Defence
– Archaeology, Art & Culture
– Commerce & Tourism
– Overseas Indians
– International Organisations
– Roads & Highways
– Shipping & Waterways
– Civil Aviation
– Urban Development
Agriculture & Food
– Rural Development
– Water, Flood Control & Irrigation
– Forestry & Tribal Affairs
– Competition and Monopoly-Control
– Petroleum and Energy
– Chemicals & Fertilizers
– Coal and Mines
– Communications and IT
– Higher Education
– Vocational Education
– Science and Technology
Labour & Employment
Health and Human Services
– Women and Child Development
– Social Security
There are just eleven Cabinet Ministers (in bold-face above) including the PM, so, along with the Cabinet Secretary, they could sit with ease around a normal table which should help the process of deliberation.
This document has arisen out of one during my work as an adviser to Rajiv Gandhi in his last months in 1990-1991 though the latter never reached him; I had intended to talk to him about its contents but it was not to be.
It may be profitably read alongside my “Distribution of Government Expenditure in India”, which is part of my ongoing research and was released in the public interest last year.
Subroto Roy, Kolkata
Why has the Sonia Congress done something that the Congress under Nehru-Indira-Rajiv would not have done, namely, exaggerate the power of the Rajya Sabha and diminish the power of the Lok Sabha?
It is now coming up to be 3 pm Indian Standard Time on May 13, the last day of India’s 2009 General Elections, and there are two hours left for the polls to close. I am happy to predict a big victory for the Congress Party, and Sonia Gandhi and her son Rahul will deserve congratulations for it.
How the victory takes shape is, I think, by their having won the median voter on both the economic and the secular-communal axes of Indian politics. (See my 2008 published graph on the Median Voter Model in Indian politics, available elsewhere here).
I have met Sonia Gandhi once, in December 1991 at her home, where I gave her a tape of her husband’s conversations with me during the first Gulf War in 1991. Her son and I met momentarily in her husband’s office in 1990-1991 but I do not recall any conversation. I have had nothing to do with her Government. Dr Manmohan Singh and I have met twice, once in Paris in the autumn of 1973 and once in Washington in September 1993; on the latter occasion, I was introduced to him and his key aides by Siddhartha Shankar Ray as the person on whose laptop the Congress manifesto of 1991 had been composed for Rajiv, something described elsewhere here. (I also gave him then a copy of the published book that emerged from the University of Hawaii perestroika-for-India project, Foundations of India’s Political Economy: Towards an Agenda for the 1990s, edited by myself and WE James.) On the former occasion, Dr Singh had kindly acceded to my father’s request to visit our then-home to advise me on economics before I started as a freshman undergraduate at the London School of Economics.
In May 2004 I was interviewed by BBC television in England and I praised the UPA in prospect — in comparison to the horrors of the Vajpayee-Advani regime (including my personal experience of it, when their Education Minister had sent an astrology-believing acolyte to supposedly run a scientific/technical institute).
Since 2005, especially in the columns of The Statesman, I have dispensed rational criticism of the UPA Government as harshly as I have criticised the BJP/RSS and the Communists. Principally, I believe they have got some (perhaps most) much of their economics (quite badly) wrong as well as their jurisprudence and foreign policy; they have also been willingly under the influence of the powerful organised lobbies and interest groups that populate our capital cities.
Even so, I think there is a large electoral victory in prospect for the Congress, and I send them my early congratulations. They have done enough by way of political rhetoric and political reality to maintain or enhance their vote-share; their oppositions on either side have both failed badly. The BJP may make some marginal gains especially in Bihar but they have generally done enough to lose the day. The CPM too will lose popularity especially in Bengal, and will never progress until they fire their JNU economists which they are never going to do.
So, Sonia-Rahul, well done!
But please try to improve your economics.
And, also, you simply must get Dr Manmohan Singh a seat in the Lok Sabha if he is to be PM — Ambedkar and Nehru and all their generation did not specify that India’s PM must be from the Lok Sabha because it was something totally OBVIOUS.
Postscript: Someone at a website has referred to my prediction above and remarked: “Perhaps the good doc is aware of the money in play”. The answer is no, I have absolutely no special information about any “money in play” on any side. My prediction is based on a layman’s observation of the campaign, as well as more specialised analysis of past voting data from the EC. In an earlier post, I pointed out the BJP had gotten some 17 million fewer votes than the Congress in 2004, and I asked if they had done enough to get enough of a net change in their favour. The answer I think is that they have not done so. To the contrary, I think there will be a quite large net change in favour of Congress thanks to a better-run and better-led campaign. Of course it is just a prediction that may be found to be incorrect.
On the Blacksburg campus February 1982, my second year in America.
I had come to Blacksburg in August 1980 thanks to a letter Professor Frank Hahn had written on my behalf to Professor James M Buchanan in January 1980.
I was in an “All But Dissertation” stage at Cambridge when I got to Blacksburg; I completed the thesis while teaching in Blacksburg, sent it from there in September 1981, and went back to Cambridge for the viva voce examination in January 1982.
Professor Buchanan and his colleagues were welcoming and I came to learn much from them about the realities of public finance and democratic politics, which I very soon applied to my work on India.
Jim Buchanan had a reputation for running very tough conferences of scholars. He invited me to one such in the Spring of 1981. We were made to work very hard indeed. One of the books prescribed is still with me, In Search of a Monetary Constitution, ed. Leland Yeager, Harvard 1962, and something I still recommend to anyone wishing to understand the classical liberal position on monetary policy. The week-long 1981 conference had one rest-day; it was spent in part at an excellent theatre in a small rural town outside Blacksburg. This photo is of Jim Buchanan on the left and Gordon Tullock on the right; in between them is Ken Minogue of the London School of Economics — who, as it happened, had been Tutor for Admissions when I became a freshman there seven years earlier.
(I must have learnt something from Jim Buchanan about running conferences because nine years later in May-June 1989 at the University of Hawaii, I made the participants of the India-perestroika and Pakistan-perestroika conferences work very hard too.)
My first rooms in America in 1980 were in the attic of 703 Gracelyn Court, where I paid $160 or $170 per month to my marvellous landlady Betty Tillman. There were many family occasions I enjoyed with her family downstairs, and her cakes, bakes and puddings all remain with me today.
A borrowed electric typewriter may be seen in the photo: the age of the personal computer was still a few years away. The Department had a stand-alone “AB-Dic” word-processor which we considered a marvel of technology; the Internet did not exist but there was some kind of Intranet between geeks in computer science and engineering departments at different universities.
It was at Gracelyn Court that this letter reached me addressed by FA Hayek himself.
Professor Buchanan had moved to Blacksburg from Charlottesville some years earlier with the Centre for Study of Public Choice that he had founded. The Centre came to be housed at the President’s House of Virginia Tech (presumably the University President himself had another residence).
I was initially a Visiting Research Associate at the Centre and at the same time a Visiting Assistant Professor in the Economics Department. I was very kindly given a magnificent office at the Centre, on the upper floor, perhaps the one on the upper right hand side in the picture. It was undoubtedly the finest room I have ever had as an office. I may have had it for a whole year, either 1980-81 or 1981-82. When Professor Buchanan and the Centre left for George Mason University in 1983, the mansion returned to being the University President’s House and my old office presumably became a fine bedroom again.
I spent the summer of 1983 at a long libertarian conference in the Palo Alto/Menlo Park area in California. This is a photo from a barbecue during the conference with Professor Jean Baechler from France on the left; Leonard Liggio, who (along with Walter Grinder) had organised the conference, is at the right.
The first draft of the book that became Philosophy of Economics was written (in long hand) during that summer of 1983 in Palo Alto/Menlo Park. The initial title was “Principia Economica”, and the initial contracted publisher, the University of Chicago Press, had that title on the contract.
My principal supporter at the University of Chicago was that great American Theodore W. Schultz, then aged 81,
to whom the Press had initially sent the manuscript for review and who had recommended its prompt publication. Professor Schultz later told me to my face better what my book was about than I had realised myself, namely, it was about economics as knowledge, the epistemology of economics.
My parents came from India to visit me in California, and here we are at Yosemite.
Also to visit were Mr and Mrs Willis C Armstrong, our family friends who had known me from infancy. This is a photo of Bill and my mother on the left, and Louise and myself on the right, taken perhaps by my father. In the third week of January 1991, during the first Gulf War, Bill and I (acting on behalf of Rajiv Gandhi) came to form an extremely tenuous bridge between the US Administration and Saddam Hussain for about 24 hours, in an attempt to get a withdrawal of Iraq from Kuwait without further loss of life. In December 1991 I gave the widow of Rajiv Gandhi a small tape containing my long-distance phone conversations from America with Rajiv during that episode.
I had driven with my sheltie puppy from Blacksburg to Palo Alto — through Tennessee, Arkansas, Oklahoma, Texas, New Mexico and Arizona; my parents and I now drove with him back to Blacksburg from California, through Nevada, Arizona, Colorado, Kansas, Missouri, Illinois, Indiana, Kentucky, West Virginia. It may be a necessary though not sufficient condition to drive across America (or any other country) in order to understand it.
After a few days, we drove to New York via Pennsylvania where I became Visiting Assistant Professor in the Cornell Economics Department (on leave from being Assistant Professor at Virginia Tech). The few months at Cornell were noteworthy for the many long sessions I spent with Max Black. I shall add more about that here in due course. My parents returned to India (via Greece where my sister was) in the Autumn of 1983.
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: A Study of Economic Distortions in India emerging from my doctoral thesis though written in Blacksburg and Ithaca in 1982-1983, came to be published by London’s Institute of Economic Affairs on May 29 as Occasional Paper No. 69, ISBN: 0-255 36169-6; its text is reproduced elsewhere here.
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.
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:
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 of the monograph 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!” My great professor at Cambridge, Frank Hahn, would be kind enough to say that he thought my “critique of Development Economics was powerful not only on methodological but also on economic theory grounds” — something that has been a source of delight to me.
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.
In the Autumn of 1984, I went, thanks to Edwin Feulner Jr of the Heritage Foundation, to attend the Mont Pelerin Society Meetings being held at Cambridge (on “parole” from the US immigration authorities as my “green card” was being processed at the time). There I met for the first time Professor and Mrs Milton Friedman.
Milton Friedman’s November 1955 memorandum to the Government of India is referred to in my monograph as “unpublished” in note 1; when I met Milton and Rose, I gave them a copy of my monograph; and requested Milton for his unpublished document; when he returned to Stanford he sent to me in Blacksburg his original 1955-56 documents on Indian planning. I published the 1955 document for the first time in May 1989 during the University of Hawaii perestroika-for-India project I was then leading, it appeared later in the 1992 volume Foundations of India’s Political Economy: Towards an Agenda for the 1990s, edited by myself and WE James. (The results of the Hawaii project reached Rajiv Gandhi through my hand in September 1990, as told elsewhere here in “Rajiv Gandhi and the Origins of India’s 1991 Economic Reform”.) The 1956 document was published in November 2006 on the front page of The Statesman, the same day my obituary of Milton appeared in the inside pages.
Meanwhile, my main work within economic theory, the “Principia Economica” manuscript, was being read by the University of Chicago Press’s five or six anonymous referees. One of them pointed out my argument had been anticipated years earlier in the work of MIT’s Sidney Stuart Alexander. I had no idea of this and was surprised; of course I knew Professor Alexander’s work in balance of payments theory but not in this field. I went to visit Professor Alexander in Boston, where this photo came to be taken perhaps in late 1984:
Professor Alexander was extremely gracious, and immediately declared with great generosity that it was clear to him my arguments in “Principia Economica” had been developed entirely independently of his work. He had come at the problem from an American philosophical tradition of Dewey, I had done so from a British tradition of Wittgenstein. (CS Peirce was probably the bridge between the two.) He and I had arrived at some similar conclusions but we had done so completely independently.
Also, I was much honoured by this letter of May 1 1984 sent to Blacksburg by Professor Sir John Hicks (1904-1989), among the greatest of 20th Century economists at the time, where he acknowledged his departure in later life from the position he had taken in 1934 and 1939 on the foundations of demand theory.
He later sent me a copy of his Wealth and Welfare: Collected Essays on Economic Theory, Vol. I, MIT Press 1981, as a gift. The context of our correspondence had to do with my criticism of the young Hicks and support for the ghost of Alfred Marshall in an article “Considerations on Utility, Benevolence and Taxation” I was publishing in the journal History of Political Economy published then at Duke University. In Philosophy of Economics, I would come to say about Hicks’s letter to me “It may be a sign of the times that economists, great and small, rarely if ever disclaim their past opinions; it is therefore an especially splendid example to have a great economist like Hicks doing so in this matter.” It was reminiscent of Gottlob Frege’s response to Russell’s paradox; Philosophy of Economics described Frege’s “Letter to Russell”, 1902 (Heijenoort, From Frege to Gödel, pp. 126-128) as “a document which must remain one of the most noble in all of modern scholarship; a fact recorded in Russell’s letter to Heijenoort.”
In Blacksburg, by the Summer and Fall of 1984 I was under attack following the arrival of what I considered “a gang of inert game theorists” — my theoretical manuscript had blown a permanent hole through what passes by the name of “social choice theory”, and they did not like it. Nor did they like the fact that I seemed to them to be a “conservative”/classical liberal Indian and my applied work on India’s economy seemed to their academic agenda an irrelevance. This is myself at the height of that attack in January 1985:
Professor Schultz at the University of Chicago came to my rescue and at his recommendation I was appointed Visiting Associate Professor in the Economics Department at Brigham Young University in Provo, Utah.
I declined, without thanks, the offer of another year at Virginia Tech.
On my last day in Blacksburg, a graduate student whom I had helped when she had been assaulted by a senior professor, cooked a meal before I started the drive West across the country. This is a photo from that meal:
In Provo, I gratefully found refuge at the excellent Economics Department led at the time by Professor Larry Wimmer.
It was at Provo that I first had a personal computer on my desk (an IBM as may be seen) and what a delight that was (no matter the noises that it made). I recall being struck by the fact a colleague possessed the incredible luxury of a portable personal computer (no one else did) which he could take home with him. It looked like an enormous briefcase but was apparently the technology-leader at the time. (Laptops seem not to have been invented as of 1985).
In October 1985, Professor Frank Hahn very kindly wrote to Larry Wimmer revising his 1980 opinion of my work now that the PhD was done, the India-work had led to The Times editorial and the theoretical work was proceeding well.
I had applied for a permanent position at the University of Hawaii, Manoa, and had been interviewed positively at the American Economic Association meetings (in New York) in December 1985 by the department chairman Professor Fred C. Hung. At Provo, Dr James Moncur of the Manoa Department was visiting. Jim became a friend and recommended me to his colleagues in Manoa.
Professor Hung appointed me to that department as a “senior” Assistant Professor on tenure-track beginning September 1986. I had bargained for a rank of “Associate Professor” but was told the advertisement did not allow it; instead I was assured of being an early candidate for promotion and tenure subject to my book “Principia Economica” being accepted for publication. (The contract with the University of Chicago Press had become frayed.)
Hawaii was simply a superb place (though expensive).
Professor James Buchanan won the Economics “Nobel” in 1986 and I was asked by the Manoa Department to help raise its profile by inviting him to deliver a set of lectures, which he did excellently well in March 1988 to the University as well as the Honolulu community at large. Here he is at my 850 sq ft small condominium at Punahou Towers, 1621 Dole Street:
In August 1988, my manuscript “Principia Economica” was finally accepted for publication by Routledge of London and New York under the title Philosophy of Economics: On the Scope of Reason In Economic Inquiry. The contract with University of Chicago Press had fallen through and the manuscript was being read by Yale University Press and a few others but Routledge came through with the first concrete offer. I was delighted and these photos were taken in the Economics Department at Manoa by a colleague in September 1988 as the publisher needed them.
Milton and Rose Friedman came to Honolulu on a private holiday perhaps in January 1989; they had years earlier spent a sabbatical year at the Department.
Here is a luncheon that was arranged in their honour. They had in the Fall of 1988 been on their famous visit to China, and as I recall that was the main subject of discussion on the occasion.
Milton phoned me in my Manoa office and invited me to meet him and Rose at their hotel for a chat; we had met first at the 1984 Mont Pelerin meetings and he wished to know me better. I was honoured and turned up dutifully and we talked for perhaps an hour. I recall making a strong recommendation that he write his memoirs, especially so that the rumours and innuendo surrounding eg the Chile episode could be cleared up; I also said a “Collected Works” would be a great idea; when Milton and Rose published their memoirs Two Lucky People (Chicago 1998) I wondered if my first suggestion had come to be taken; as to the second, he wrote to me years later saying he felt no Collected Works were necessary.
From 1986 onwards, I had been requested by the University of Hawaii to lead a project with William E James on the political economy of “South Asia” .I had said there was no such place, that “South Asia” was a US State Department abstraction but there were India and Pakistan and Sri Lanka and Bangladesh and Afghanistan etc. Sister projects on India and Pakistan had been sponsored by the University, and in 1989 important conferences had been planned by myself and James in May for India and in June for Pakistan.
I was determined to publish for the first time Milton’s 1955 memorandum on India which the Government of India had suppressed or ignored at the time. At the hotel-meeting, I told Milton that and requested him to come to the India-conference in May; Milton and Rose said they would think about it, and later confirmed he would come for the first two days.
This is a photo of the initial luncheon at the home of the University President on May 21 1989. Milton and India’s Ambassador to the USA at the time were both garlanded with Hawaiian leis. The first photo was one of a joke from Milton as I recall which had everyone laughing.