A few days ago the Finance Minister spoke about atma nirbharta. That reminded me of a mystery I have written about before: there’s no atma nirbharta in our economics.
After all, the BJP has decolonised politics. It has decolonised history. It has decolonised philosophy. But economics?
So why is it not decolonising economics? Why are its underlying principles still governed by Western theories? Why are economists trained in Indian institutions missing in action?
This doesn’t mean total import substitution. But it does mean showing more respect to economists who didn’t do their PhDs in the West. The first thing a potential employer looks for is where the economist was trained.
But over a career spanning half a century in economics, I have come across the most acute brains trained in India. They can be found in business, academics, government and journalism.
They don’t have to conform to the prevailing orthodoxies like the ones in academic professions do. That’s why their economic insights are probably far superior to the ones with standard issue foreign PhDs.
There is another aspect that we have overlooked. Western economics is rooted in Western cultural and even religious traditions. Those origins are now forgotten but while the foundations can be obscured, they cannot be obliterated.
To see how deracinated our economics is, we need to look no further than the work done by the economic historian, Jaishankar Krishnamurthi, who also happens to be foreign minister S Jaishankar’s maternal uncle.
Krishnamurthi’s book is called Towards Development Economics: Indian Contributions, 1900-45. It talks about India’s forgotten economists. They published their works before Independence. After 1947 their work was ignored.
Culture and economics
What exactly does culture have to do with economics? Do Hindus behave differently from peoples from other religions? Do economic incentives and disincentives work differently for different cultures and religions?
The answer is both yes and no. Yes, because as individuals they respond in the same ways to incentives and disincentives.
But as societies the response is very different. For example, after demonetisation individuals responded with the usual pursuit of self-interest. But as a society we responded with extraordinary dignity and patience.
Western economics focuses almost solely on individuals. It has almost nothing to say about the behaviour of societies. Marx did in terms of class behaviour. But class is just a subset, it’s not the whole society.
There’s a reason for this: culture. Non-Western cultures tend to focus a lot on groups. This might seem like a massive generalisation, but let someone disprove it and not just dismiss it.
The thing is that you can’t impose a set of Christian values and ignore indigenous ones. You are bound to fail if you do that, as India’s historic encounter with gold shows. As a society we prefer it as a store of value rather than as a mere jewellery. Streedhan, for example.
This is where decolonisation comes in. Even in the late 1930s, Sir John Grigg, the finance member of the Viceroy’s Council, thought Indian economists were useless because they were protesting against the British exchange rate and protectionist policies.
The Indian societal understanding of these variables was very different from the Western one.
Equity over efficiency
The real variance lies in what economists call utility and its maximisation. It’s strange but true: Indians seem to show a greater proclivity to subordinate individual utility to social utility. It’s inherent in our cultural upbringing.
That’s why Indian sociology also has to form the basis of Indian economic policy. This requires strong cross disciplinary research.
One area of interest should be the subliminal Indian preference for equity over efficiency. This has its roots in our culture. It permeates the writings of pre-Independence economists.
Let me conclude this short appeal for atma nirbharta in economics with a quote from a now almost wholly forgotten Indian economist, who was also the teacher of many very famous Indian economists, AK Dasgupta.
On December 5, 1959, he wrote: “One word of caution to our ‘model-builders’... Let them not, in their intoxication with ‘model-building’, forget that if they are to be economic practitioners — as they may need to be — they must know the character of the social environment into which the models are proposed to be projected.
“Here is the occasion for the economist to take assistance from other disciplines. I would not expect the economist to cultivate these other disciplines himself... the economist, if he is to be of use to society, must not divorce himself from what is happening outside his own field.” One immediate thing the Finance Ministry can do is to examine the economic sociology of the Indian middle class. With economic growth it’s going to grow and can’t be ignored for much longer because consumption depends on it.