Crisis of development economics

By J.D. Sethi

As the Planning Commission is busy in preparing the draft of the 12th five -year plan, it has to take into account the uneven growth in the states, region -wise, state-wise and area-wise even within districts. It means growing disparity between regions in a state, and between states. It is a highly disturbing development. It will build up intra-state and intra-regional tensions cutting at the roots of the democratic polity.

Development economics and economic developments can be viewed as two sides of the same coin, one representing theory the other its practice. But the five decades of experimentation have ripped them apart. The only way to get to the root of the problem is to find out how the theory of unity in practice was misconceived or whether or not the two were in serious conflictual relations.

Development theories put forward by economists were of various ideological persuasions: radical, moderate and some downright conservative. But they ware all based on a single paradigm. Experiences differed, but the paradigm did not change. Economists failed to see through pet models as traps laid for them. The hundred-and -odd developing nations were found to be grouped in a few major categories, each dominated by different structuring of the same paradigm. Some succeeded, but most failed.

The historical experiences of nations, their proximity to centres of development, the character and quality of their leaders and the acuteness of the problems, determined the course of economic development of each nation. Although, one may say that each nation is a unique experience or experiment in economic development, but finally, nations were grouped into some broad categories of development syndrome. The illusion created was that each category represented a different paradigm.

However, there are many ways of categorising development experiences of nations. Nations themselves would like to be looked upon in terms of well-defined categories. For instance, some liked to call themselves socialists even when their socialism was very thin. Others preferred to project themselves as examples of successful market economics even when there were large non-market institutions and forces operating for sometime. Some were described as those in whose views political (ideological) development took precedence over economic development while others liked to assume the opposite. Some others saw themselves in their capacity to have successfully integrated themselves with the international economy through trade and finance while the opponents slipped into dependency via phoney self-reliance. But all this was within a single paradigm.

Another critical assumption in this paradigm was the belief in secular and linear economic progress which was mostly propagated by liberal economic historians and Marxists who saw economic development as a sequence of stage of economic development. They totally ignored the more profound theories of Spangler, Toynbee, Gandhi etc., who showed from the history of mankind of successive or overlapping life cycles, from birth to decay, of independent civilisations and thus challenge the concept of linear progress. One does not have to accept one theory of history against the other but the latter could have been used as a corrective to any impending stagnation or precipitous decline. If the crisis of Indian economic development is a part of a civilisation decline, which some believe it to be so, then in order to reverse this decline; a crucial instrument would be an alternative paradigm of development economics which can encompass the whole spectrum of crises.

It is of utmost importance that a category should be so defined that it indicates meaningful judgement of development economics and to suggest new roads for further development. Unfortunately, this exercise was either never undertaken or was very poorly done, partly because the most critical and distinctive categorisation remained fixed on the secular growth rates of the economy rather than unravel the full measure of its political economy.

Paradoxically, the value-premise that lay behind theories of development economics was by definition value-free and philosophically positivistic. Welfare economics itself was conceived as value-free and the most arid part of the theory. Although, those were the heroic years of the Keynesian revolution, which to many seemed the final answer to the problems of business cycles, particularly recession and depression as phases which produced misery, the economic models were implicitly made parts of the business cycles. Later, the Left Keynesian artificially stretched the short-term trade theory to long-term growth theory in order to marry it to Marxism. After three, decades, Reaganomics on the one hand and Gorbachev's perestroika on the other broke up that marriage, leaving behind the illegitimate child of development economic to nobody's care.

Nevertheless, the Keynesian revolution, not withstanding its defeat and pre-occupation with the short run, did energise economists to produce models of growth equilibrium with stability and social justice. For the first time, the economic discipline was obliged not only to explicitly integrate national and international economics but also growth and its distributive consequences, notwithstanding the spanners of welfare economics.

What kept chasing and hounding the theory of economic development was its refusal to prove the value of this self-sufficiency and self-righteousness by ignoring the other social science disciplines particularly politics, sociology and management. Economists have always defined their theories by assuming away, under the title of ceteris paribus, whatever they thought was inconvenient or unmanageable for their theories. Every country faced this problem of divorce between economic developments in social development and found ultimately that the road to full development would be blocked without evolving comprehensive models for the society as a whole.

As feared economics could not be defined in broader terms. Growth, saving and investment, export and inflation remained the final components of the paradigm. Economists refused to pursue an interdisciplinary approach, while the policymakers were forced to follow more realistic approach. The distance between development economic and economic development widened as employment growth the real focus of many disciplines, declined while economic growth went up.

The stark fact is that notwithstanding all the modelling and a few significant success examples in growth, poverty remains the central problem of a vast majority of nations. Nor is it the only problem. Inequalities, denial of human rights, social deprivation, the rise of corrupt elites and the entire-bureaucratic class are problems of equal intensity. In view of all this, both economic theory and development economics and policy have been discredited.

From Mahalonobis to Mandal, India has faced five decades of hope, agony and defeat in her experiments both with economic development and development economics. The crisis is as much social and economic, were based on a consensus and development economics. The crisis is as much social and political as economic. All the models of development be they political, social and economic, were based on a consensus and promise of an uncorrupted and responsible ruling class.

The Indian tragedy is that though we have rulers but we do not have ruling class proper. Whereas the central focus of the power elite is on the bureaucracy which is organised as an internal empire with total moral nullity that of the intellectual elite is phoney moral outrage with the confines of colonised debate. A desperate but futile search is going on for alternative models of development.

The planning commission of which I was once a member made some attempts to reformulate strategies of development in order to break out of the culde-sac. The commission did not have the authority, the political support and even competence, to shift completely from old to new strategy but in its Approach paper, the commission suggested three or four sharp transformations which if implemented, could have interjected some new elements into development economics as well as change the direction of Indian economic development. Unfortunately, that exercise was cut short and we are now back to square one. Surprisingly, development economics taught in the universities for decades still remains the same. INAV