India's National Magazine
From the publishers of THE HINDU

Vol. 16 :: No. 05 :: Feb. 27 - Mar. 12, 1999

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BOOKS

Economic issues in perspective

C. T. KURIEN

Economics as Ideology and Experience - Essays in Honour of Ashok Mitra edited by Deepak Nayyar; Frank Cass, London, 1998; pages 291; £19.50.

ASHOK MITRA, member of the Rajya Sabha and formerly Finance Minister of West Bengal and Chief Economic Adviser to the Government of India, is one of the most highly respected persons in our public life. The volume under review consists of a biographical sketch of Ashok Mitra by its editor Deepak Nayyar, which concentrates on Mitra as an economist, and 16 essays contributed by his admirers, all well-known economists, two of them from outside India. The papers are of high quality and offer commentaries on some pressing economic issues.

However, it is not possible to do justice to all the contributions in a brief review like this as they deal with diverse themes. Fortunately it is possible to take some of the essays together on the basis of their common features. Three essays examine the causes of the collapse of the socialist economies, mainly that of the erstwhile Union of Soviet Socialist Republics. These pieces, by Nirmal K. Chandra of the Indian Institute of Management, Calcutta, C.P. Chandrasekhar of Jawaharlal Nehru University and Amit Bhaduri, formerly of Jawaharlal Nehru University, all known for their sympathetic disposition towards the socialist cause, offer some explanations and hypotheses which deserve attention. (These will be dealt with in a separate article in a subsequent issue of Frontline.) All of them refer to what Bhaduri quite explicitly refers to as the "internal contradictions" of socialist systems.

Prabhat Patnaik's paper deals with a form of involuntary unemployment not covered by the three standard explanations of the phenomenon - lack of complementary resources, insufficiency of effective demand, and inflexibility of wage rates. This type of unemployment is widely prevalent in underdeveloped countries because the goods produced by (traditional) workers do not meet the needs of the changing lifestyles of the elite consumers and cannot easily find markets elsewhere. Amiya Kumar Bagchi writes on the manner in which modern transnational corporations (TNCs), which combine trade, industry and finance, use their global operation in "rent-seeking" activities.

One of Ashok Mitra's pioneering contributions is a study of the terms of trade between agriculture and industry in which he establishes that a mere sectoral approach is not enough in this context and that the class composition of the sectors is also necessary to interpret changing price parities. For instance, terms of trade in favour of agriculture may benefit only large farmers who sell their produce, and not small farmers who use what they produce for their own consumption or agricultural labourers who are frequently buyers of foodgrains. N. Krishnaji and (the late) T.N. Krishnan make use of this approach to suggest that in the Indian economy there is a "food constraint on growth". With foodgrains constituting a major item in the budgets of most households, an increase in the price of foodgrains will constrain the market for manufactures and thus the growth of the economy. Terence Byers of the University of London suggests that Ashok Mitra's work on inter-sectoral terms of trade is likely to be enlightening for those European historians who might wish to do serious work on a relatively neglected aspect in European economic history.

Two papers in the volume are exercises in the comparative approach method that Byers deals with in general terms. Utsa Patnaik compares the Chinese and the Indian methods of mobilisation of the rural labour, the former described as "revolutionary" and the latter as "conservative". The greater success that China has had, argues Patnaik, is the result of radical land reforms where India's record, as is well-known, has been pathetic. In a jointly authored paper, Jayati Ghosh and Abhijit Sen point out that the large-scale international movement of capital is not a recent phenomenon of the 1980s and the 1990s, but similar movements were seen in the second half of the 19th century and the first two decades of the 20th century. They, however, point out that the recent movements are qualitatively different.

Several papers deal with the role of the state in the economy and related issues. Iqbal Gulati discusses India's internal debt and A. Vaidyanathan provides a review of the planning process in the country. Of special interest is the paper by Rehman Sobhan of the Centre for Policy Dialogue, Dhaka, who points out that in Third World countries in general, public sector enterprises arose in the context of decolonisation when it was necessary to bring under national management foreign enterprises owned by non-indigenous bourgeoisie. It is ironic, says Sobhan, that half a century later the privatisation of these enterprises has become an essentially ideological issue.

Through a study of the historical evolution of markets and a critical evaluation of the performance of "market economies", Arun Ghosh examines the role of governance in economies. He shows that the nature of the market system is inextricably linked to the nature of the state. Although this position is reflected in some of the other writings also, nobody has really developed the theme to bring out the centrality of the state in a modern economy. In the context of the evolution of the theory of international trade, Deepak Nayyar brings out the consequences of economic analysis that leaves out the state and political processes. While the early writers on the subject, Adam Smith and David Ricardo in particular, were concerned with large issues such as capital accumulation, growth and, above all, income distribution, the international trade theory widely used today has come to concentrate almost exclusively on comparative advantage, that too in an essentially static sense.

That, of course, is a telling illustration. But the catastrophic consequences of economic analysis that excludes or ignores the political processes and the role of the state need to be pursued more systematically. This otherwise excellent collection of essays would have been more complete if it had such a contribution, because Ashok Mitra, through his writings and more so by his life has shown the impossibility of separating economics and politics.