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Saturday, August 26, 2006

Don’t Look for an Economic Mahatma

A Classic Indian Solution?

Amit Verma writes in TCS (via The Acorn) about transforming Indian mentality landscape, presumably about economic matters. While his diagnosis is valid, his solution, which he concurs with Gaurav Sabnis and Nitin Pai, that of waiting for an economic Mahatma is a simplistic one.

It’s simplistic because one, there can never be an economic “Mahatma”. I can’t imagine someone who says “being rich is glorious” or a Milton Freidman unfettered free market (who, by the way, advised Nehru to follow a different economic model in early 50s – unfortunately Nehru chose to listen to the recently deceased John Gilbraith) ever conferred a Mahatma status. The person who comes closest to an economic Mahatma was an 18th century Scotsman. The current so-called socially liberal institutions will not allow it. Even the messages of original Mahatma with regards to social, such as on untouchability and religious tolerance, and economic, such village economic microcosms, matters were, and continue to be, largely ignored.

And two, creating sound market and incentive based economics policy, unlike independence from imperialism, is not a one shot deal. It is continuum. Sure it would have helped to an Alexander Hamilton to set the right economic framework soon after independence (while Indian constitution framers studied US constitution, which was supremely important, they seems to have ignored Federalist Papers where the meat of US economic frame work lies). But one Nehru or Mao or Mugabe can destroy decades of established economic framework in just few short years. Getting the right economic environment is not just for one time prime minister, but it is an on going process, as the Japanese and, especially, Europeans societies and leaders have show so vividly in recent decades.

Borrowing and extending one of Peter Drucker’s management theories – that a successful company is one that does not rely on extraordinarily talented people to function, but rather is one that rely on ordinary people to be productive and be successful - an economically successful country can not rely on a Mahatma to make it productive. It needs ordinary policy makers who can make incremental policy changes to increase incentives for productive economic behaviour and disincentive for bad ones. It is needs ordinary entrepreneurial people who are willing to take risks. It needs ordinary bureaucracy to enforce the policy incentives. India has all three ordinary groups that are getting larger and increasingly more successful.

I guess I am more sanguine about the state of Indian economy in the long term. And I don’t wish for an economic Mahatma. I agree we have long way to go, but a Mahatma can do more harm than good economically.


Alex said...

I agree to your view.

By the way i spotted a typo-its Friedman, not Freedman.

Chandra said...

Alex, thanks for your correction and comment. I corrected the name.

Nitin said...


Just saw this...and cannot disagree with this.

Mahatma Gandhi's innovation, as I point out in my post, was not so much coming up with a great idea. Rather, it was to shape the consensus on "freedom" and give everyone a DIY kit to work towards achieving it.

So the "mahatma" I refer to is not "the mahatma". Rather, a leader who can simplify some unfamiliar concepts for everyday use.

Chandra said...

Nitin, the roadblocks that impede Manmohan, the person in charge who claims to understand economic freedom, shows it's a hard thing to do. May be someone with lot of charisma and wit and keen understanding of economic policy impact on wealth creation to deal with status quo advocates. I am just not sure we can wait for him or her to appear.