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#India – Labour laws have been counter-productive: Amartya Sen

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Mihir S Sharma  |  New Delhi   July 23, 2013 , BS

 

Q&A with Nobel prize-winning economist

 

Nobel Prize-winning economist Amartya Sen, who has just written An Uncertain Glory: India and its Contradictions with Jean Dreze, tellsMihir S Sharma that he doesn’t understand why his book has received an angry reaction, or why he is being called anti-growth and pro-redistribution.

Is it startling to discover that you are being called a licence Raj socialist?

It is very strange indeed. Perhaps some of this reaction is because of anxiety over growth, but there is nothing to panic about, really.

Brazil and South Africa are doing less than 1%; we have fallen in growth terms exactly as much as China has. The rising is Indonesia – but that is relevant to our story because they are benefiting from a much better education and healthcare base than we have.

Was the nature of ’s high growth in the 2000s problematic?

If you haven’t got an educated and healthy labour force, by nature your growth will be concentrated in a small group of sectors, like IT or specialised auto parts and so on – and that is not a good basis for the expansion of demand in the economy. Nor does it allow the possibility of what the Chinese have – a labour force that can build anything, from alarm clocks to safety pins to “Native American” souvenirs.

Your book says India’s real wages have been stagnant. But we have just learnt of a sharp decrease in and a startling increase in rural wages in recent years.

Well, remember that the educational base has suddenly been expanded a great deal in the past nine years. So you’d expect a bump from that. In addition, with learning-by-doing, you’d expect some maturity to come in, helping productivity increase. But compare things to China – even though real wages are rising, they have continued to be competitive despite the rise in wages.

If we had a seven% rise in wages, we wouldn’t be competitive at all. China can survive it only because its workers are educated, they can help China go up the value chain, and the economy take off – as happened in Europe, in Japan quite rapidly and in Korea even more rapidly. And to do that you need many other things first. Certainly, India’s labour regulations have been counter-productive.

But won’t growth itself take care of it?

There isn’t a single place where growth has taken off without an educated and healthy workforce.

You are being called the creator of the Food Security Bill.

Yes, I don’t know why. That is indeed a paternity suit I’m currently fighting. People are accusing me of being the father.

The Bill is supposed to address malnutrition. But could some of the symptoms of malnutrition actually be caused by poor sanitation?

Or by poor healthcare. I quite agree with that. But you should ask: if the proportion of malnourished were halved, would it change the need? Of course not. Let me say I don’t necessarily believe undernourishment is overstated. I do believe that sanitation and primary healthcare are as important as nourishment.

But are not undernourishment statistics overstating the problem? Look at Bangladesh, where most other child health indicators have improved far beyond ours, but they have child malnourishment and stunting statistics close to India’s.

There are other intriguing problems with Bangladesh too. Three. One is this about child nourishment. Another is – well, their schooling indicators show great success, their mean years of schooling is higher than India’s, but they have a problem with the quality of their education.

And the third is that, while women’s agency has been improving, they have not been able to secure safety for their workplaces. These are things I really want to think about. And, as is often the case, how I think about that is to ask Jean to think about that. So he’s off to Bangladesh soon. [Laughs]

You’ve worked with Jean Dreze a long time.

Our first book was Hunger and Public Action, in 1989. He was very young. He was in the Indian Statistical Institute then. I knew his father, and I knew that Jacques Dreze’s son – some hippie type, I had been told – was in India, but actually doing something productive at ISI.

And then he wrote to me, this letter about my poverty and famines book. He said: in order to show there was no causal connection between food availability and famine, it wasn’t enough to just show cases where there had been famine without any food availability problems.

You should have also considered cases where there has been a food availability problem, but no famine. I was in Finland for the summer, then, and I had a very little research money, so I told him to come and work on it. It is very easy to buy Jean, because he doesn’t know how to charge. He came, and eventually a book came out of it.

What about the distortions that giving people physical entitlements of grain causes to their diet, and to cropping patterns?

Absolutely, that’s a proper – a serious objection. Even in the book, we are not anti-cash at all. I am also a big supporter of Aadhaar. Whether you give benefits in cash or in kind, you have to know who the poor are, you have to identify them.

Earlier you had nothing with which to approach the state…

There is some legitimacy to the opposite side of the argument, that what if it is the state approaching you, knowing all your data. I have some libertarian sympathies – giving that sort of power to someone, it worries me. But for those who have nothing, it is an entitlement: then Aadhaar is pro-freedom, and not anti-freedom.

You have argued in your book that power subsidies need to be ended, and people should pay the proper price for power. But you also say more investment is needed – but we have more than enough capacity in the power sector now, it’s a question of inputs…

It may not be. I think that may be wrong – it is more likely a question of reforming the organisation, and correcting subsidies.

People are saying you’re for redistribution.

That’s totally illogical. Look, using taxes to pay for public services open to all is not redistribution, anyone can come. I’m not a believer in means-testing, either. I know it saves too much money, but it gives too much power to those who can say no, you do not qualify.

In any case, most times, the money doesn’t really come from taxing the rich, it comes from corporations. Don’t think of it as rich and poor. It’s not for the poor, it’s for everyone; and the money is not from the pockets of the rich, it’s from corporations who will also eventually benefit. To call me in favour of redistribution is to enter Derrida-like territory, to reinterpret terminology.

India’s a democracy. Why isn’t there a demand for better utilities through politics and voting?

That question’s quite central to determining how democracy can make a difference, what is it that we must change. So far, we have had the lazy thought of assuming that people don’t know the connection between public services and not just how the lives of the poor will go, but why that is the very basis of high and sustained economic growth. That’s our point, and we have the examples of Japan and China and Korea and so on.

After all, some of the kind of products that we are thinking of making – how will the individual perceive his ability to make them? In China, they can take on, say, the making of solar panels, because they have people who can read and write and count and follow instructions and talk with people.

Can any individual here imagine that they can go and make solar panels on their own? It has to be a collective or a corporation effort. The absence of the ability to make solar panels, of other people making solar panels, can make individuals wonder what do I gain from an education – but that’s an illusion, isn’t it?

Why aren’t Indian companies lobbying for better public utilities then?

Going into a new area is much harder than continuing to do just what you’ve done for a long time. In India, we’re particularly like that. We can get stuck doing the same thing, instead of the rude courage that is needed.

 

 

 

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