GROW THE PIE HIGHER:

Blind to Progress (Sebastian Mallaby, May 17, 2004, Washington Post)

When he was young and so was India, Jagdish Bhagwat left Oxford to work at the Indian Planning Commission. He was assigned to grapple with his country's biggest problem -- how to raise the incomes of the poorest -- and he soon came to the conclusion that the key was economic growth. For one thing, the "exploitative rich" were irritatingly few, so nationalizing their fortunes wouldn't get you very far. But Bhagwati was also impressed by data showing that no poor country has achieved egalitarianism in incomes. If inequality was more or less a given, the only hope was to expand the pie rather than slicing it up differently.

I tell this story partly because I've been reading Bhagwati's new book, In Defense of Globalization. But the episode also sheds light on the oddity of last week's Indian election, or at least on the way it was greeted. Comparing Bhagwati's snapshot of India in the early 1960s with today's transformed country tells you something about globalization -- and about why Bhagwati, who's now an eminent professor at Columbia University and a fellow at the Council on Foreign Relations, feels the need to defend it.

The Bhagwati of the 1960s was no pro-business conservative. His views reflected the Anglo-Indian intellectual consensus; he believed in government direction of the economy rather than free markets, import substitution rather than free trade. But the remarkable thing is that his enthusiasm for growth wasn't controversial among India's left-leaning intellectuals. It was shared even by Jawaharlal Nehru, the father of India and of Indian socialism. To ensure "an irreducible minimum standard for everybody, the national income had to be greatly increased," Nehru wrote shortly before India's independence.

This faith in growth has since been vindicated. With the advent of internationally comparable poverty statistics, it's grown clear that inequality varies more across countries than Bhagwati imagined 40 years ago. But it's also become evident that inequality varies little across history: Income distribution appears to be hard-wired into the DNA of a nation, so that tackling poverty via redistribution is a fool's errand. On the other hand, tackling poverty by creating growth has proven repeatedly successful, most obviously in East Asia. There are exceptions -- the Philippines under the Marcos dictatorship -- that have managed to experience growth without reducing poverty. But they are few and far between.

Yet if the India of the 1960s was right about growth's importance, it was wrong about how it might be achieved. The economy crawled along during the 1960s and 1970s, and the Indian Planning Commission was a large part of the problem.

It's truly an exquisite thing the way the laws of economics vindicate conservatism and repudiate Left egalitarianism.

Posted by Orrin Judd at May 20, 2004 8:04 AM