It should be no surprise to most here that I’m a strident fan of Milton Friedman and that his passing was quite a bit more than a garden variety celeb obit for me. While I’m a geek of rather high proportions, there are quite a few of us for whom the loss left an almost personal hollowness. 
“The current danger is that India will stretch into centuries what took other countries only decades” – Milton Friedman, 1963Because he called San Francisco home, I actually had the honor of seeing Uncle Milt speak in person about 2 years ago at a benefit gala for a thinktank I’m a contributor to.
And earlier this spring, I had another opportunity to see Milton & Rose Friedman in person at the unveiling of a PBS documentary on his life and times. At the time, I implored several friends to join me with the argument that “at 94, homey ain’t gonna be around too much longer – see him while you can.” Unfortunately, a bout of flu kept Friedman from joining us that evening (Rose did, however make it) and alas, my words were sadly prophetic.
Interestingly, at that event, Gary Becker was on tap for Milton & Rose’s intro. In nearly any other context, Becker’s own Nobel Prize would have garnered him a headline act. But given Friedman’s ginormous stature, Becker’s intro speech was instead somewhat rudely met with idle chatter from the back of the banquet hall. You’d think scoring a Nobel prize would earn a little more respect – apparently not so when you’re between an audience and the Friedman’s.
‘Tis the curse of the passage of a generation that we take for granted previous, hard fought accomplishments – both material and intellectual. In its extreme, we just assume that he world we see around us had to be rather than recgonize the role of volition, creativity, and intellectual accomplishment which enabled it to be.
In Friedman, India, and recent economic history, we see all this wrapped up in a neat tidy little package. So much that seems obvious now was contrarian then. And so many of the arguments we use to excuse and ignore the outcome of disastrous policy was plainly predicted and evident decades ago.
For the SM crew, one of the most striking and relevant pieces of Friedman’s massive body of work was an article written in 1963 after a series of official and not-so-official trips to India to gauge its economic climate [Friedman’s essay on India in 1963.pdf (66 KB) – thanks for the doc Prashant!]. The treatise is classic Friedman – simple, direct language that is both approachable by non-economists and simultaneously sophisticated & rigorous enough for the most seasoned policy makers. It’s ominous thesis, written all those years ago, is proof of the power of a few percentage points of compounded growth and a real world forecast of economic crisis –“India lacks none of the basic requisites for economic growth … comparable to that which occurred in Japan after the Meiji restoration” – Uncle Milt
Even at the officially estimated 1 1/2 percent per year growth in per capita output, it would take over a century of steady growth at that rate for India to reach the current level of per capita income in Japan, and well over three centuries to reach the current level of per capita income in the United States. The current danger is that India will stretch into centuries what took other countries decades.
Count Friedman as one of the fiercest opponents of the so-called Hindu Rate of Growth. In describing his hopes and dreams for the teeming throngs of Desi’s, Friedman had high expectations and decidedly first world aspirations for the subcontinent –
I am myself still persuaded, as I was in 1955, that India lacks none of the basic requisites for economic growth except a proper economic policy. I believe that drastic, but technically feasible, changes in economic policy-the substitution of a freely floating exchange rate for the present fixed rate and elimination of the exchange controls, import restrictions, and export subsidies designed to prop up the present rate; and a similar policy of substituting the free market for direct controls in the domestic economic scene-could release an enormous reservoir of energy and drive and produce a dramatic acceleration of economic growth in India comparable to that which occurred in Japan after the Meiji restoration.
The great untapped resource of technical and scientific knowledge available to India for the taking is the economic equivalent of the untapped continent available to the United States 150 years ago. – Friedman, 1955
The problem connecting this potential with reality, of course, was a disastrous intellectual climate which drove equally disastrous economic policy –
When India attained its independence, it was strongly socialist in its orientation, its intellectual atmosphere having been shaped largely by Harold Laski of the London School of Economics and his fellow Fabians. In the initial decade after independence, a series of left-wing advisers, including Oskar Lange and Michael Kalecki from Poland, and Nicholas Kaldorand John Strachey from Britain, visited India.
…The intellectual climate of opinion about economic policy is almost wholly adverse to any changes in the direction that seems to me required.There is a deadening uniformity of opinion in India, particularly among economists, about issues of economic policy. In talks to and with students and teachers of economics at a number of universities, personnel of the planning commission, economists in the civil service, financial journalists, and businessmen, I encountered again and again the same stereotyped responses expressed often in precisely the same words. It was as if they were repeating a catechism, learned by rote, and believed in as a matter of faith. And this was equally so when the responses were patently contradicted by empirical evidence as when they were supported by the evidence or at least not contradicted.
The remainder of his article is a series of examples of just how much entrepreneural energy was waiting to be unleashed and just how badly it was being held back by an intelligentsia obsessed with top down economic planning. For example, the following bit demonstrates the utter impotence of external policy tools like aid and directed investment in truly influencing growth rates –
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Pacific Research Institute – Sept 2004: My glimpse of Milton & Rose Friedman in Real Life |
…the years after independence saw a great inflow of resources from abroad. External assistance during the decade spanning the first two Five Year Plans averaged about 11/2 per cent of national income, which means that it provided something like a fifth of net investment; and external assistance was disproportionately concentrated in the Second Five Year Plan period, when it amounted to about 2 1/2 per cent of national income or to over a fourth of net investment. On that score alone, growth should have accelerated during the Second Five Year Plan rather than apparently slowing down a bit.
Got that? It takes a serious economic basket case to take in twice as much money as last time around and convert it into roughly half the growth. Usually this sort of calculus is the domain of “diminishing marginal returns” for cutting edge development, not the deep “come from behind” that characterized India of the era. Or how about here, where Milton describes a supply chain disaster of Randian proportions –
Some of the entrepreneurs at Ludhiana estimated that an eighth to a quarter of their working time was being spent on either getting allocations or finding ways to acquire the materials they needed by more devious channels.
Presumably, the people’s representatives in charge of these “allocations” were there to ensure that higher, social justice needs were being met as material was directed towards the benefit of the broader community of stakeholders. At the minimum they were needed to protect India’s rich body of social tradition in the face of rapacious, Western capitalism. Or something like that. At least at first. Blech.
Reading the article it’s impressive to observe Friedman’s knowledge of and respect for the texture of India, the role of the diaspora & how it could shape it’s unique growth path forward. Here are a few excerpts from the nearly dozen snippets in the PDF –
The hope for India lies not in the exceptional Tatas or similar giants, but precisely in the hole-in-the-wall firms, in the small- and medium-size enterprisesWhat is the reason for the disappointingly slow rate of growth? One frequently heard explanation is that it reflects the social institutions of India, the nature of the Indian people, the climatic conditions in which they live. Religious taboos, the caste system, a fatalistic philosophy are said to imprison the society in a strait jacket of custom and tradition….These factors may have some relevance in explaining the present low level of income in India, but I believe they have almost none in explaining the low rate of growth.…[Post-Partition,] The Punjabis have doubled the average agricultural yield in the area in which they resettled, and have besides been among the most enterprising, active, and dynamic business groups in India. The Bengali have had great difficulties in resettling, many of them are still in government resettlement camps some 15 years after partition, and they have been a drain on the country rather than a source of growth.
…One reason why westerners so often feel that enterprise and entrepreneurial capacity is lacking in India is because they look at India with expectations derived from the advanced countries of the West. They think in terms of the large, modern corporations, of General Motors, General Electric, and other industrial giants. But it was not firms like this that produced the Industrial revolution; they are, if anything, its end products. The hope for India lies not in the exceptional Tatas or similar giants, but precisely in the hole-in-the-wall firms, in the small- and medium-size enterprises, in Ludhiana, not Jamshedpur; in the millions of small entrepreneurs who line the streets of every city with their sometimes minuscule shops and workshops.
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Moreso than his Nobel-prize winning papers, “Capitalism And Freedom” is widely considered Friedman’s Magnum Opus |
The Achilles heel of the Indian economy at the moment is the artificial and unrealistic exchange rate… It will, I fear, take a major political or economic crisis to produce a substantial change in the course on which India is now set in economic policy, and I am not at all optimistic that such a crisis if it occurs, will produce a shift toward greater freedom rather than toward greater authoritarianism.
For privileged folks today, it’s actually sorta hard to envision just how real the forces of authoritarianism were back in the day. Just imagine if India’s currency crisis had hit, not in 1991 but instead a decade prior — before the fall of the Berlin Wall & with it, much of the Soviet intellectual ediface. The answer to the crisis could have just as easily been more government to save us rather than less… For contemporaries of Friedman’s work, memories of the role of economic crises leading to Nazi Germany, the Soviet Union, Red China, and to a lesser extent authoritarian Chile, Argentina, Bolivia, and so on burned fresh.
Thankfully, history rolled a different way and Uncle Milt was able to watch, approvingly, as the economic reforms of ’91 were enacted. In a new forward written in 2000 he had the following to say –
I have been in India only once since our 1963 trip. That was in 1979 when we filmed briefly in India in connection with our television programme ‘Free to Choose’. Nevertheless, I have tried to follow from a distance the economic developments within India. I continue to be impressed by India’s enormous potential and depressed by the contrast between that potential and the minimal progress that has been achieved in the forty-five years since I was first in India. The latest decade shows more signs of change. India may finally be on the way to realizing its potential. If so, it will be a blessing for the people of India and for the world as a whole.
I leave you with the following video that’s been widely circulated on the blogosphere since Uncle Milt’s death. Depending on your proclivities, it either has everything or nothing to do with India. Either way, it’s a highly entertaining and educational experience & a tribute to a man of great ideas –
Matt Lauer. The Today Show has had such a monumental impact on Baltic economies that Latvia just elected Katie Couric as the new head of their central bank and brothers Bryant and Greg Kaczyński are now president and prime minister of Poland, respectively..
Uncle Milt looks desi in that top picture…
42, circus in jungle says
If Friedman had his way there wouldn’t be free education by government, which in turn would not have produced enough economists (read Manmohan Singh), engineers (read no IITs and RECs) and so there wouldn’t have been proper human resources to utilize the liberalization.
Yes, the IITs/ RECs have had some benefits for India. But were they the best use of the Indian taxpayers money? As Friedman said, there’s no such thing as a ‘free lunch’. In my opinion, if the government had lef higher ed to to the private sector, and focused on primary health and education, India would have been much better off.
http://www.deeshaa.org/who-actually-paid-for-my-education/
MF had some good ideas, some very good ideas and some horrible, horrible ideas wrt India.
And pray, tell… what exactly are these ‘horrible’ ideas that you speak of?
In the India of 1970s, you had to wait for two years to get a goddamned scooter. Yes, you guys heard me right. I heard this story from my father. First, you had to approach the government to get a permission. The government determined whether you had legitimate reasons/background to buy a scooter. The processing of the papers for getting the permission would consume anywhere between six months to a year.
Can you cite a source for the above? Seems kinda silly to me.
ANNA – Uncle Milt looks desi in every picture. In that particular photo, I’m thinking “Yash Chopra” – anyone second that?
To the people who wrote that they celebrated his death and popped champagne, you are disgusting excuses for human beings. You probably have no clue that Friedman was against the draft and continuation of Vietnam, or that he has been an impassioned critic of the War on Drugs and its effect on minority communities. Judging a man by his idea, and then relishing in his death becuase you disagree with those ideas is pathetic.
Some quick observations that amount to an appeal for greater rigour:
To Anindo:
Could you care to explain why you think South Asia was not a “land of minimum-wage-earning peasants” prior to 300 years ago ?
To Anindo (again!):
I grew up in India in the mid-70’s. In my opinion, your father is exaggerating the darkness that prevailed in India during those years. What you describe was perhaps the case with trying to get a telephone connection (from the state-owned provider) – but the issue there was not of excessive red-tapism or corruption, but because not sufficiently many handsets were being made at the few plants, which were plagued by labour unrest (which is, arguably, a different sort of corruption). I appreciate the point you are making, but your own point is ill-served by the above sorts of anecdotal reporting.
To Santhosh V.
Maat Laar’s regard for Milton Friedman borders on the hagiographic, so it is not clear how your quote contributes to a critical appreciation of Friedman. I take particular issue with the citation of Estonia’s implementation of the flat tax as an example of the sophistication of Friedman’s ideas. Estonia is a relatively homogeneous society – economically and otherwise – and a flat tax is not particularly damaging to it. But, one would be well advised to consider that a majority of policy-oriented economists regard the flat tax as a concept that is damaging to any economically heterogeneous society that values a state with welfarist tendencies.
To GujuDude:
Obnoxious rhetorical strategy! It is an interesting exercise in counterfactuals to wonder whether the Internet would have existed if there were no capitalism. To me, it’s not an open and shut case. Besides: are you telling people that they must feel guilty for using the Internet to point out the insidious qualities of capitalism???
This did happen during the 1973 oil crisis. The crisis tragically came at the time when Mrs. Gandhi’s political capital was at its highest (after the Bangladesh war). Her response was typical – if it moves, nationalize it. If it doesn’t, send an inspector to check for a valid license.
I don’t understand economics particularly well, but it seems pretty clear to me that at least in India’s case, Friedman was right.
Brown Girl in the ring (#17),
I seriously believe that the Socialist approach in India was the right way to establish basic infrastructure etc through state involvement.
But the state started doing everything and that is precisely why it couldn’t invest in infrastructure to the extent it should have. Industries where the private sector would have done extremely well were killed with draconian policies. MRTP, import substitution, FERA etc etc.
Amfd and GB, I’m not sure about having to obtain govt permission, but it the picture that Anindo paints is not all that far fetched. Even until the early eighties, one had to wait six months to get a Bajaj scooter. Bajaj pretty much had a monopoly.
While we can and should debate Friedman’s legacy, please lets not publish any fairy tales about the indian economy in the 70s. A more appalling scenario based on political corruption and disrespect for ordinary citizens can maybe only be found in the soviet union and the most backward of its satelites.
Here are just a few situations I personally witnessed:
(1) A shoe manufacturer in calcutta sets up manufacturing in excess of its “quota”. A business rival complains. The shoe manufacturer is forced to shut down the new factory, fire people and reduce the number of shoes it manufacturers!
(2) The indian govt. (federal) owned and created a milk supply business, a bakery and a hotel chain during this period. The only goal here was to ensure availability of jobs for politically connected people. AND ALL THIS WHILE REFUSING TO CREATE SCHOOLS, ROADS OR MAKE ANY PUBLIC HEALTH IMPROVEMENTS !
Yeah, this is all “anecdotal” – doesnt make it any less real – but anyway, here is a more broader analysis of the dire period of indian history, a period from which the indian nation hasnt yet recovered.
Take a look at the Center For Civil Society website.
Adding a few data points to the general success of socialism/communism in the indian context.
Even now all the toppers / high performers from West Bengal move out of the state in search of greener pastures. The Sachar commission on situation of minorities (read Muslim) paint an unflattering picture of the state. That basically becomes almost axiomatic, once you factor in the fact that Muslims tend to be more entreprenueral (sp?) and tend to go toward small businesses, (tailoring and such like) and it is precisely this segment that has been hit the hardest by socialism. Of course, now that all the party cadres and their cousins have their real estate development business the policy might improve a bit, but it is more likely that we will drift toward crony-capitalism, which in spite of its name is no capitalism.
Re: Real Estate Devt business: The party thought that this was the cheap way to reward the cadre in the nineties, given that the state govt was already running on massive debt and was getting harder to sanction state govt jobs for the faithful, and in any case, everyone figured out over the eighties that you had to be cpim member to get a job, so everyone did so, and their was this massive liability on the parties hands in the nineties. Of course the effect was a spate of building collapses around the city; and stealing of prime agricultural / fishing land in the suburbs/sunderbans area + poaching and such like. We are doing far better than Bangladesh, which have killed all their tiger population and come by to the Indian side to poach and run guns etc.
Aside: Rest of bengal, if you are not a cpim member, you face problems in your day to day life, barring exceptions like the 1999 assembly elections. In the sunderbans you drift out to the Bay of Bengals, making some fish very happy. We visited a small “model” village there, it was remarkable in not having a single grafitti. It was a one-party rule, really.
I am surprised that there has been so many criticism of Friedman. He might have made a few mistakes (monetary policy) but developing countries are better off following his recommended policies than any sort of socialism/third way policies. Wealth inequalities do occur (for example, look at China, where its southeastern side is richer than its interior) and disparities between groups are growing, primarily the groups that take advantage of globalization and those that do not, but overall, it is better for some people to be wealthier and richer than for everyone to be kept artifically poor by social policies. The best policies that work for the poor are the ones that make sure they can compete in the global market like better education (public schools are woefully lacking) and less market controls. It is easier to deal with monopolies than it is to deal with absolute poverty.
Imagine the emotive power of the socialist line of thought, that even with the heart-rending examples of the havoc socialism and top-down economic planning has wreaked on India, desis still sing hosannas for socialism and froth in the mouth at rapacious capitalism. If I call it a madness, would I be far off?
The world needs more Friedmans.
/sad
Did anyone say Internet (www) and free market in the same breath? Looks like we need another history lesson.
GB: I grew up in India in the mid-70’s. In my opinion, your father is exaggerating the darkness that prevailed in India during those years. What you describe was perhaps the case with trying to get a telephone connection (from the state-owned provider) – but the issue there was not of excessive red-tapism or corruption, but because not sufficiently many handsets were being made at the few plants, which were plagued by labour unrest (which is, arguably, a different sort of corruption). I appreciate the point you are making, but your own point is ill-served by the above sorts of anecdotal reporting.
Actually, Anindo is correct. One had wait for 1 year (or more) to get a scooter. You got it earlier if you paid in dollars. So there was a rush of folks trying to convince their US based relatives to send them dollars!! [Seriously!].
Having stood in grocery (ration) queues for hours to get adulterated rice, kerosense and dal, I am glad that India has semi-liberalised. I wish it would go the whole hog though. The small business sector is not yet free.
7times6
You have raised a great point – the emotional power of “socialist” hypocrisy that somehow fits well with some aspects of indian politics and culture.
Even after all this suffering, the thuggish indira gandhi’s astonishing machinations, the daily torture of indian citizens at the hands of their goverment, still many of our educated people continue to regurgitate these formulas.
So instead of saying: it is a disgrace that we dont have every indian child in school, it is a disgrace that shop owners and small vendors dont get support from the goverment, that young indians cannot get decent paying jobs, we have the spectacle of politicians handing out TVs and scholarships and rice to selected people while at the same time refusing to invest in infrastructure and education. And our educated folk continue to believe that this is a good way going and forward!! Why, because it is “socialist” and so must be OK…
So true, Qizman
Anyone who sings paens to the (semi) socialist way of lifestyle, did not live in india. or, if she/he did, likely belonged to the priveleged class, who could buy everything “imported”.
I was in India in the 80’s and that sounds like a nominal waiting period for the time. You had to wait up to 10 years to get a phone (if you were not a government employee). For a gas connection the waiting period was about 3-5 years. If you wanted cement to build a home, getting a permit for that could take a year or two, but most people got around it by bribing the right people.
SM Intern : Sorry about the multiple posting, please ignore/delete
To Anindo (again!): One example: In the India of 1970s, you had to wait for two years to get a goddamned scooter… First, you had to approach the government to get a permission. The government determined whether you had legitimate reasons/background to buy a scooter. The processing of the papers for getting the permission would consume anywhere between six months to a year.
I grew up in India in the mid-70’s. In my opinion, your father is exaggerating the darkness that prevailed in India during those years. What you describe was perhaps the case with trying to get a telephone connection (from the state-owned provider) – but the issue there was not of excessive red-tapism or corruption, but because not sufficiently many handsets were being made at the few plants, which were plagued by labour unrest (which is, arguably, a different sort of corruption). I appreciate the point you are making, but your own point is ill-served by the above sorts of anecdotal reporting.
You can dispute the veracity based on your experience. However, this is what I experienced in 70s India as part of a lower-middle class joint family with no influence (political/administrative) in a medium-sized town.
State run companies manufactured scooters (eg., Vijai from AP Scooters) with terrible quality. The other option was a private company (eg., Chetak from Bajaj Scooters) with much better reliability. Vijai could be delivered within 3 months in the colour of your choice however, the Chetak had a waiting list of 6 years if you picked it up from the dealer at the manufacturers price. There was also a shorter waiting time (2 years) for the Chetak if you were willing to fork over the equivalent dollar amount to the dealer which required RBI (Reserve Bank of India) approval. There was also an intermediate waiting time (3-4 years) if you worked in the Indian armed forces. You just let Bajaj know every time you were relocated. In fact, you also got an armed services discount.
There was 2 year waiting time for any NEW cooking gas cylinder (LPG). A family is allowed only 1 replacement every month. Any replacement had to be ordered 2 weeks prior to delivery. A cylinder typically lasts 4 weeks with a reasonable amount of cooking. The alternative until you get allotted a NEW gas cylinder was kerosene. Of course, kerosene was not available in the open market but only in “ration shops” and provided once a month.
The “free” education was a joke. My grandfather saved and paid for my education at a Jesuit school.
The “free” healthcare involved waiting the whole morning in line to be seen by the doctor. Of course, if you paid extra you got seen quicker.
Half your time is spent on finding who you could contact/grease to get something done for your business or your family.
So please spare me the “What they want is a chance to feed their family and socialism speaks to that” attitude.
Yes, of course. An important piece of history that we forget at our own peril. Rah rah uncle milt, unfettered capitalism and unfettered celebrity !
According MF, even health care and education (from what I read/saw he didn’t distinguish primary and higher) should be privatized. I agree with his basic principle that govt is inefficient in distributing the resources. The problem that I have is that people doesn’t seem to recognize that neither free markets are efficient in all areas. MF wanted a pure free market economy which would have never worked in early independent India. I am not sure even now whether it will work.
Big surprise Indians glorifying Friedman, since captialism did work for you ABCDs at the “centre”, but screwed and continues to screw those of left behind in the “periphery”, I will refrain from jumping on your bandwagon.
Several people have corroborate the above. I will also have to say that the wait time for a scooter was atleast 1 year or more. Those who went to work in the Gulf, came back with foreign exchange and paid it go get a scooter earlier. What an utter waste of human potential.
I would like to refute that. I tend to be a supporter of socialist programs, and grew up in India in the 1980s. I’m not sure how you define “privileged” but my family was pretty solidly middle class with an annual income of around $2000-3000. We didn’t have a car, a VCR, or fancy imported stuff. We did have a TV and a telephone which the majority of Indians did not have at the time, and I did go to a private school, which a lot of Indians do regardless of their social status. So I guess we were privileged compared to the majority of Indians but were not living a lifestyle of excess. However, I think free healthcare is better than no healthcare, free education, crappy though it may be, is better than no education, and having a completely free market economy is unrealistic in a country like India. What makes you think the US is succesful because we don’t have a “semi-socialist” way of life? We do! We have free education and healthcare, interest free loans and Pell Grants for higher education, food stamps, and disability, and the US continues to be relatively economically successful. So why advocate taking those programs away from other countries?
Yes, we might have had to wait 2 years for a scooter, but compared to people who were living in slums and dying of dysentery we were relatively well off.
kali billi (47):
Yes, a corporation is beholden by its stockholders to its bottom line, but that bottom line is a sum of many factors. Furthemore, many of these factors aren’t entirely under the corporation’s control, so it’s silly to suggest that we ‘cannot let corporations dictate all the terms in a free market economy.’ If that were possible, it wouldn’t be a free market economy, by definition.
It’s true that trade unions can impact one part of the bottom line, labour costs. The government can use its police power to either undergird or undermine specific people, companies, or industries. In a free market, customers can choose where to purchase goods and services. Also, giving individuals the freedom to innovate allows them to create new technologies and products to compete with established firms (see Google and Linux vs. Microsoft).
Finally, I disagree with this notion of `excessive profits’. Yes, Exxon-Mobil generated 10.49 billion USD in net income last quarter, but this is from 99.563 billion in revenue–a modest profit margin of 10.5%. On the other hand, Coca-Cola had a profit margin of 22.6% to generate 1.46 billion USD in profit. Microsoft boasted a 3.478 billion USD profit (about a third of Exxon’s), but on revenue of only 10.811 billion USD, a profit margin of 32.2%. Google generated 733 million USD in profit from 2.69 billion USD in revenue, a 27.2% profit margin. What about the profiteers from PS3 sales? If you paid $600 for a PS3 and then sold it for $2000, you have a 70% profit margin. How is that for excessive profits?
The only problem with your comparison is that the East India Co. was a monopoly that was created by both the British and Mughal governments. In a free market, companies do not have the backing of the state’s police power.
I think his intentions were clear: that allowing people to be free to choose and control how they earn and spend their money creates an economic system where all benefit.
Ultimately, it is not simply stock holders and corporate titans who choose the bottom line over other concerns. It is average people who make the same sorts of choices. Would most people pay extra to buy a sneaker that was manufactured in Cambodia where minimum wage and other labour laws exist? No, most people simply go for either the cheapest (probably manufactured in China or Vietnam where no such labour laws exist) or the most stylish. Are people willing to pay extra money to get their energy from renewable sources? No, they generally just go for the provider that offers the cheapest rate. To blaim enviornmental and social ills on corporations is misguided; the corporations merely reflect the choices and attitudes of the populace.
Again, I disagree. Man is (given to be) greedy–plain and simple. No economic system can change that. In the end, a free market will rein in the greedy by allowing competition to step in and offer an alternative. On the other hand, in a planned economy, once someone has the power of the state, a person’s greed can do much more damage–and the little guy is stuck without a choice.
In the end, we should remember that Milton Friedman was not only a proponent of economic freedom, but of all individual freedom (some may argue there is no difference).
In the end, we should remember that Milton Friedman was not only a proponent of economic freedom, but of all individual freedom (some may argue there is no difference).
I think most rational people would agree that personal freedoms in an organized society have to be limited for the good of society. Otherwise we might as well abandon laws resort to vigilante justice. (As in “that brown gas station owner looks like Osama Bin Laden, let’s shoot him with our muzzle loaders”). Which brings me to your other point
Blanket statements about the immutability of human nature are not convincing. You might as well argue that “Man” is given to being violent and we might as well abandon the laws of society and let the laws of the jungle decide who gets to be alpha wolf.
desishiksa … free healthcare is better than no healthcare, free education, crappy though it may be, is better than no education, and having a completely free market economy is unrealistic in a country like India. What makes you think the US is succesful because we don’t have a “semi-socialist” way of life? We do! We have free education and healthcare, interest free loans and Pell Grants for higher education, food stamps, and disability, and the US continues to be relatively economically successful. So why advocate taking those programs away from other countries?
Yes, we might have had to wait 2 years for a scooter, but compared to people who were living in slums and dying of dysentery we were relatively well off.
There is no free lunch 😉
The point is slums and dysentry could have been markedly reduced by adopting a more liberal economy (without the licence-permit raj). India could also retain it’s democratic structure and still grow 5-8% over these five decades.
Amaun–
Are slums and dysentery markedly reduced now that India has a more liberal economy? Not a rhetorical question, I’m asking because I don’t know, and if someone is going to answer yes, I’d like to see some statistics. Thank you.
For #78, There are definately less percentage of population of India below poverty line today compared to the ’70s. I dont think that anyone really wishes the “good old” days of licence raj back.
I think desishiksha’s comments provide a vivid illustration of the emotive underpinnings of socialism that tends to override empirical evidences. Inspite of the many personal anecdotes and evidences provided by the commentors, they are all shrugged off in the name of generalities and platitudes. If desishiksa is the face of Progressive Liberalism now, one has to note that it wasn’t always like this. Prog. Liberalism got a big boost in the first third of the 20th century, partly due to to efforts of Louis Brandeis and others, who insisted that one should rely more on empirical evidences and less on emotive platitudes. But somehow, due to FDR and others, prog. liberalism tended more and more towards centralized thinking, which wanted all actions to be centralized, all activity to be driven by what ought rather than what is, with little care for the results on the ground vis-a-vis actual liberal values.
If someone is arguing that centralized planning is harmful for liberalism, the latter part doesn’t register at all, because centralized planning is equated with social justice, ergo a lack of centralized planning is bad for social justice, empirical evidences be damned.
If it is too much to ask prog. liberals to digest Edmund Burke and Friedman, surely they can at least go back to their Brandeis roots?
Desishiksa,
Do you think today’s India is a liberal economy?
Yes, we are liberal as compared to the “Big Brother” economy of the 1970s or 1980s. But, are we really liberal?
Regards,
desishiksaYes, we might have had to wait 2 years for a scooter, but compared to people who were living in slums and dying of dysentery we were relatively well off.
That is exact problem with socialism. It works to drive everyone to the lowest common denominator. Well, everyone, except the civil servants and politicians (and their crony businessmen).
After India’s liberalisation programme, a huge middle class has been formed. They contribute their time and money for educating India’s poor. The number of good NGOs that have sprung up are testament to the growing influence of this so-called elitist middle class. They’ve done more for establishing decent schools (while measuring metrics on outcomes) than grandiose central government schemes that simply throw more good money after the bad.
Regarding your last question – I don’t know about India, but U. C. Berkeley had done studies on the impact of privitization on infant mortality. Privitization reduced mortality. [Govt’s btw, are notoriously inefficient in providing basic services for the poor. Indian slum dwellers pay astronimical rates to slum-lords and black marketeers for water which is brought in tankers]
desishiksa (76):
I don’t think Friedman ever advocated anarchy, and such a suggestion is certainly absurd. So long as we accept that people have individual rights such as the right to life, property, and the pursuit of happiness, we have to acknowledge that the nature of these rights are such that one person cannot violate the rights of another. That should be the purpose of law.
As such, it is not so much that ‘personal freedoms…have to be limited for the good society’, but rather one has to acknowledge that individual freedom is an individual right. As such, it is the protection of individual rights that creates a good and organised society.
I think you have misinterpreted my statement. My suggestion is that since we cannot really change human nature, we should try to create an economic system where human nature will be best applied.
What of the slums, which have grown in size? And urbanization? How will the masses fare who have nothing to sell? Some countries glance the other way but India’s masses are too numerous and politically vocal.
How do all the free market proponents explain the success of controlled economies in some of the Scandinavian countries. They seem to be doing fine!
I think I provided a personal anecdote of my own, not generalities and platitudes.
A good point if true since infant mortality is a good indicator of the success of a society. I did a little google research on my own and found the following about infant mortalityin India: Infant mortality decreased by 14.73% between 1971 and 1981, 27.27% between 1981 and 1991 and by about 15% between 1991 and 2000. So the %decrease of infant mortality BEFORE liberalization of India’s economy exceeded the % decrease AFTER, which was about the same as the supposedly terrible 70s.
I’m not trying to argue against economic liberalization. I am, however, arguing against a system without any socialist programs, a system that we don’t even have in the United States. My extended family has benefited a lot from India’s new economic policies so this is by no means a form of sour grapes. I’m just skeptical of the free market being able to provide adequate healthcare when in the United States I see patients that drive 7 hours to my ER for non-emergency care because only a government-funded hospital will take care of them. (another personal anecdote, not a platitude)
desishiksa, before #85, your assertion that you were middle class in India in the 80’s does not constitute an anecdote against centralized planning. The sentences before and after it that compared 2 year scooter waits as preferable to dying in the slums, while assertions, are divergences in the least, and platitudes at best.
I should mention that Friedman is responsible for the genesis of the Earned Income Tax Credit, which is an important poverty alleviation programme; he has also advicated vouchers for the poor so as to increase their choice.
Let me reiterate the point in my earlier comment (#80), that many of a (classical) liberal persuasion are not against the values of prog. liberalism, they in fact believe in the value of empirical evidence towards selecting means that advance the cause of liberalism. As such, in the face of the vast amounts of evidence of the havocs of socialist centralized planning, no right thinking prog. liberal should advocate their use if he or she cares at all about liberalism.
Are slums and dysentery markedly reduced now that India has a more liberal economy?
Since 1950 India had a compounded growth rate of about 3.7%. My point is, if the rate of 6.5% could have been achieved with a liberal economy (keeping democracy intact) the percapita would be more than 3 times this years number. A lot of the slums in urban areas are due to the fact that the agricultural component has not grown commensurate with other areas of the economy. Assuming agriculture will not contribute to the additional growth rate of ~2.8% the transient workers in the slums would have been absorbed into the growing areas of the economy. Factor in 3 times the percapita, this would imply less slums and less dysentry.
You cannot just liberalize the economy for 5 years and expect 50 years of migration to disappear.
This is ” proof of the power of a few percentage points of compounded growth ” like Vinod indicated in his awesome post.
Exactly. So even if liberalization were to ultimately improve the situation for most Indians, it won’t happen overnight, so in the meantime, social programs are necessary as a stopgap if nothing else. On the other hand, the United States has had a functioning capitalist (though admittedly not lasseiz-faire)economy since the Civil War but a sizable segment of the population still needs the support of social welfare programs, so where does that leave us?
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A spectacular example of flawed logic. Reduction of infant mortality gets more and more difficult as you achieve reduction over a period of time. Remember that these numbers are at the margin, each % point in reduction represents the reaching of a lower stratum of the society. Put it simply, the early reductions in the mortality were just the low hanging fruit while the latter reductions were much harder to achieve. The effort it takes to reduce infant mortality from 50 per 1000 to 25 per 1000 is an order of magnitude higher than that required to reduce it from 100 per 1000 to 50 per 1000 even though the reduction is the same in % terms, i.e., 50%. If you take this into consideration, then you can see that liberalization has been stupendously more successful than the socialist era. Part of that is because people are richer in general and they can now afford to spend more on privat healthcare even as the government owned and operated health infrastructure continues to deteriorate.
Desishiksa and like, I have a suggestion for you, please educate yourself on some economics, try Homosexuality and Income Inequality as a starter, and then regularly read Cafe Hayek for six months, followed by “Marginal revolution” for another two months, and in the meantime please stop commenting on economics.
In case you refuse my request here is some Don Boudreaux for your distaste right here
“One reason might be that some of these “liberals” and “progressives” believe that wealth is a fixed stock; the more that Bill Gates has the less that persons living in New Orleans’s Ninth Ward have. Whether or not this is true is a factual question. But economics and history teach me that this fixed-stock-of-wealth view is robustly wrong. In a market-oriented society (which the U.S. still is), the pattern of income “distribution” that emerges is merely the consequence of uncountable numbers of peaceful, consensual capitalist acts (affected, it is true, by tax policy — which takes more money from high-income earners than from low-income earners).”
desishiksa,
The figures for infant mortality in India [PDF], is revealing. Mortality is higher in rural areas and lower in urban areas. They are lower in industralised states and higher in BIMARU states. Maternal mortality rates has declined {DOC] over the years. ” About two-thirds of maternal deaths occur in a handful of the states – Bihar and Jharkand, Orissa, Madhya Pradesh and Chhattisgarh, Rajasthan, Uttar Pradesh and Uttaranchal (the Empowered Action Group or EAG states) and in Assam.” The decline is at the rate of 750/100K (1960s) to 300/100K (2003).
With regard to slums – urban slums (e.g. Mumbai) fare better with respect to literacy levels. Also, see this.
Desishiksa,
My point being that by its socialist subsidies to farmers, the Indian government keeps far too many of them (especially small landowners/tillers) in poverty and in ill health/low literacy. Additionally, if they had encouraged private farmers/agro-industries, the tax base would’ve widened too.
I am way too cynical about government largesse/welfare. I’ve seen too much corruption first hand to know that they have very little effect. I heard the speech in which Rajiv Gandhi admitted that less than 15% of government funds actually make it to the intended party. Read this speech by a grassroots NGO chairman. The beneficiaries are usually corrupt officials who manage and distribute funds, and landlords and powerbrokers who directly or indirectly extract benefits for themselves. In India, over 90% of the agricultural land is owned and partly cultivated by less than 10% of the rural population who are termed farmers; others are mostly laborers. Governments allocate land to the poor, but they are unable to utilize it because of limited water resources, bad soil conditions, and/or the inability to secure credit. Larger subsidies benefit bigger farmers, but the poor do not gain much directly from any government programs. The presumption that with more money, corrupt and inefficient governments and bureaucratic institutions will utilize funds efficiently and improve the deplorable conditions of the poor is an illusion.
Also, see or read the transcript of forum discussion with Gurcharan Das and Swaminathan Aiyer.
HM,
I have a suggestion for you, please educate yourself on some economics
I think the tone of dialogue has been genial. I prefer dialectic, where one engages the other with viewpoints. Where one respects the other. Now, I don’t know whether you wrote it in a genuinely helpful way or whether you did intend to use a condescending tone when you wrote “educate yourself” but I must quote my economics professor who once said that it is probably the only profession in which two contrarian viewpoints can both end up winning Nobel prizes. 🙂
No one is suggesting that goverments should have no role in managing the social order. In many cases, it is only the goverment (state/local/federal) that has the capacity to deliver certain services, maintain order etc.
What we are discussing is the indian states disinterest in enabling its citizens to participate in economic life VS. its interest in running bakeries (“Modern Bread”), dairies (“Mother Diary”) and hotel chains. A more bizarre form of corrupt state-cronyism can be hard to imagine. Ah, but, I am sorry, I forgot – this was socialism and therefore a wonderful thing.
This was refined to a fine art under Indira Gandhi. And, unfortunately, a similar mindset is still clearly visible in many local/state/federal policies today. Recently, the Karnataka goverment attempted to close down 1000s of schools in Bangalore (ooops, bengaluru) becuase they were “illegally” teaching english.
Are you just surmising here? Because I don’t see how the reduction in infant mortality from 50 to 25 (i.e. 25 points) can be necessarily said to be more difficult than the 50 points of 100 to 50. (Incidentally, the infant mortality rate in India is 68 per 1000 births so these figures are obviously hypothetical). You are quantifying effort, which can’t be quantified.
I apologize for my tone in #91 as Quizman #94 pointed out. I got frustrated reading some of the comments on this post.
I think suppression of Ideas through force or disincentives is the biggest hurdle that socialistic governments can put forward. Just compare Good done by the Ideas generated in the free world with the government spending to improve lives of the “people/poor people” and results would be for all of us to see.
desishiksa
You, Quizman, Gujudude, amaun, etc. are already engaged in a discussion with some quantification.
Let me add another prespective. I go to India almost every year for last 7 years. From a sampling viewpoint it is ideal: if I lived there then changes in India will all seem to me gradual to distinctly notice them, and if I went there once in 10 years, my reference point will be outdated.
Opening of the economy has done some real tangible changes in the society at all strata. This is not deny the concept of “inertia“. A hugely populated country like India cannot change overnight.
The biggest change is hope and expectation goes beyond babu sahibs. Twenty-thirty years ago, a very large section of society has resigned to their fate, and that is changing faster than I have ever seen. That in itself is noteworthy.
Just go to a mall in Delhi or wait at a railway crossing, and do people watching. You see toyata SUVs crowded with 10 rural folks jam packed with their bakri (goat) too. That is very heartening
Law of diminishing returns.
Think of how difficult it might be to reach out the remaining 25 as opposed to the 75 cases that were prevented because of easier access to health care.
That’s exactly what someone who majored in economics just said when I relayed this conversation to them 🙂
Regarding the banning of English, I’m not sure that’s so much the government getting involved with social programs as a reactionary anti-English, anti-Western stance. Either way, I’m not a fan.