SPEECH OF AMARTYA
SEN-------
This was on the eve of
India's independence from British rule on Aug. 15, 1947. India would not only
be, we were told, a fully democratic and secular state but also a country that
will fight for "the ending of poverty and ignorance and disease and
inequality of opportunity." It is interesting to ask how far along we have
gone in 60 years in fulfilling that momentous resolve.On the democratic front,
India's success was immediate and came with astonishing speed. India became
overnight the first poor country in the world to be a full-scale democracy. And
there was--and is--success enough here. There was a short-lived hiccup in the
1970s when there was a brief attempt to change the system, but when the
government sought endorsement in a general election for those changes, it was
driven out of office by the voters.There have been regular
and orderly elections, and the ruling parties have vacated office when defeated
in general elections, rather than calling in the army. India has also had other
essential features of a democracy, in particular continued freedom and vigor of
the media and independence of the judiciary, with the Supreme Court often
disallowing decisions of those in governmental office on constitutional
grounds.So democracy has indeed
flourished nicely in India, and that has been the case right from the time when
India became independent after two centuries of authoritarian British colonial
dominance. India's democratic success is sometimes seen only as a consequence
of British rule, but that is comparatively recent history shared by a hundred
or more other countries that also emerged from the empire, none of which has
had quite the easy success that India has had with democracy.In fact, as I have tried
to argue elsewhere India's long argumentative tradition and toleration of heterodoxy, going
back thousands of years, has greatly helped in making democracy flourish with
such ease. This would be remarkable enough for any poor country, but it was a
much harder task in a land with a great many major languages, each with a long
and proud history, and with a rich and old literature.And there was, of
course, the challenge of the multiplicity of religions in India, with nearly
every religion well represented. Jews came to India in the first century;
Christians in the fourth; Parsees immigrated as soon as persecution began in
Persia in the late seventh century; and early Muslim traders started coming to
the western coast of India from the eighth century, well before the later
invasion of the north of India by Muslim conquerors in the late tenth century onward.Even though British
India was partitioned into India and Pakistan in 1947 on religious lines, the
vast majority of Muslims on the Indian side chose to stay on in India, and
today India has nearly as many Muslims as Pakistan and many more Muslims than
Bangladesh.India chose to have a
solidly secular constitution, and it is as a secular democracy that India has
flourished. Secularism has been threatened from time to time by actions of
sectarian groups, but the massive support for secularism across India has
asserted itself again and again, the last time in the Indian general elections
in 2004. In the political field, India's success today is a firm vindication of
what, 60 years ago, it breathlessly tried to achieve.The story is very
different on the economic side. The growth rate of the Indian economy remained
stuck at its low traditional point of 3 per cent a year for a very long
time. The economic policies needed substantial reform. In the old days, some
wise guys used to put forward the thesis that India's growth rate was low
because of its democracy, which seemed to many of us rather ridiculous.But with continued low
growth, that anti-democratic point of view gained some ground among high-octane
commentators (never with the general public, though). When India changed its
economic policies, the growth rate picked up as expected, without India
becoming any less of a democracy to achieve this result.The economic changes
came amid much hesitation and huge resistance. To start with, India hastened
slowly. The 1980s, which saw some moderate reforms, produced some quickening,
with an economic growth rate of 5 per cent, which may now seem sadly slow but
was much faster than what had happened in the early decades of independence,
not to mention a century of colonial semi-stagnation.But the economy was
still full of problems connected with financial instability, trade imbalances
and choking public administration. In general, what used to be called the
'license Raj' made business initiatives extremely difficult and at the mercy of
bureaucrats (large and small), thereby powerfully stifling enterprise while
hugely nurturing corruption.
When Manmohan Singh came
to office in the early 1990s as the newly appointed finance minister, in a
government led by the Congress Party, he knew these problems well enough, as
someone who had been strongly involved in government administration for a long
time. (This was after his stint as a very successful university professor at
Delhi University where I was privileged to have him as a colleague.)And Singh's response was
sure-footed though cautious, given the complex politics of policy
reorientation. While the going has been rough from time to time, the direction
of policy change has been unmistakable from that point onwards, endorsed even
by successor governments run by other political parties.India is now getting
used to its much higher rate of growth, first around 6 per cent a year and
now about 8 per cent, occasionally touching 9 per cent. It is also remarkable
that India's main success has come not in traditional areas of exports but
largely on newer industries, with a large component of high-tech, such as the
information technology industry, which has rapidly grown to be a giant from a
very modest beginning.
Another area is that of
pharmaceuticals. Even though in that field the Indian entry began with generic
drugs (with a huge reduction--sometimes a cut of 80 per cent or so in the
price for many essential drugs, like AIDS medicines), it is now going much more
into new research as well.There is reason enough
to celebrate many things happening in India right now. But there are failures
as well, which need urgent attention. For example, there is still widespread
undernourishment in general and child undernutrition in particular--at a
shocking level. The failures include, quite notably, the astonishing neglect of
elementary education in India, with a quarter of the population--and indeed
half the women--still illiteratThe average life
expectancy in India is still low (below 64) and infant mortality very high (58
per 1,000 live births). It is certainly true that India has narrowed the
shortfall behind China in these areas--that is, in life expectancy and infant
mortality--but there is still some distance to go for the country as a whole.The problems are
gigantic in some of the more 'backward' states like Bihar and Uttar Pradesh And
yet there are other states in which the Indian numbers are similar to China's.There is also one state,
Kerala where the life expectancy is higher than China's (75 years at birth, as
opposed to China's 72), and infant mortality lower (12, as opposed to China's
28). Kerala has had good state policies of supporting school education for all
and making sure that it works, and has provided free health care to all for
many decades now. Even though now many better-off families choose private
medical care, everyone still has the option of having health care from the
state.If India has to overcome
these failures, it has to spend much more money on expanding the social
infrastructure, particularly school education and basic health care. It also
needs to spend much more in building up a larger physical infrastructure,
including more roads, more power supplies and more water. In some of these, the
private sector can help.But a lot more has to be
spent on public services themselves, in addition to improving the system of
delivery of these services, with more attention paid to incentives and
disciplines, and better cooperation with the unions, consumer groups and other
involved parties.
On the basis of some
investigations that have been done by the Pratichi Trust (a trust I was
privileged to set up in 1999 through the use of my 1998 Nobel money), it is
clear how much needs to be done and can be done to change the organizational
structure of school education and basic health care. (We studied only one part
of India, but the results from other studies from elsewhere in India are often
quite similar.)However, aside from
organizational change, more public funds, too, will be needed. Where will the
money come from? Well, to start with, India can spend a much higher proportion
of its public resources on school education and on basic health care, on both
of which its percentage share of public spending is among the lowest in the
world.There is, furthermore,
good news that has been discussed astonishingly little. If the total revenue,
from taxes and other channels, of the central and state governments keeps pace
with the rapid growth of the economy, when the economy is growing at 8 per
cent a year, that would be a big rate of increase of available funds for
public services.
As it happens,
government revenue has persistently grown faster than the growth of gross
domestic product: in 2003-04, the economic growth of 6.5 per cent was
exceeded by the revenue growth of 9.5 per cent, and in 2004-05 to 2006-07, the
growth rates of 7.5 per cent, 9 per cent, and 9.4 per cent have been
bettered, respectively, by the expansion rates of government revenue (in 'real
terms'--that is corrected for price change) of 12.5 per cent, 9.7 per
cent and 11.2 per cent.Money will continue to
come very rapidly into the government's hands if the fast economic growth
continues. What is critically important is to use these generated resources to
remedy India's continuing deficiencies, in particular in basic health care, in
school education and in rapidly expanding its physical infrastructure.So, as we look back over
the last 60 years, some things have happened well enough, and some, where the
gaps were large, have started to catch up. However, there are other areas in
which there are still huge shortfalls. These gaps would need to be urgently
remedied. We know what to do, and there are resources to do it. What we need
now is some determined action to do what we can do and must do.
'Amartya Sen’s
Contribution to Economics', Delivered over All India Radio Kozhikode, November
7, 1998.
I. The
Nobel Prize for Economics in 1998
Amartya Sen, Indian by birth and citizenship,
has been awarded the 1998 Nobel Prize for Economics. All major awards carry a
citation and what is interesting about the citation in this case is that
several areas have been mentioned as having received a contribution by Sen.
Prominent among these are the area of Welfare Economics and the field of
Development Economics. Let me start by saying something about his contributions
in each of these.
II. Welfare
and the economics of development
Welfare economics, as the very name suggests,
is concerned with the well being of individuals. Where welfare economics has
attempted to evaluate social states it has been guided by utilitarianism.
Utilitarianism is based on the concept of utility, a measure of the
pschycological satisfaction that an individual derives from various actions or
events. To borrow a term from arithmetic we may factorise, so to speak,
utilitarianism into the following constituent parts: welfarism, sum-ranking and
consequentialism. What is welfarism? Welfarism is the judging of the goodness
of states by the goodness of the set of individual utilities in each of these
states. Sum-ranking is the judging of any set of individual utilities entirely
by their sum total, that we simply sum-up the individual utilities. Now the set
of individual utilities with the highest sum would be adjudged the best.
Finally, consequentialism. This is the idea that the rightness of actions – and
more generally the choice of control variables – must be judged by the goodness
of the set of individual utilities in the respective states. Sen has thrown
light on each of these. Regarding welfarism, he is critical of the idea that
utilities may be considered as adequate information for judging states of
affairs. Sen has proposed that alternative states of affairs be judged
according to what he refers to as the capabilities of individuals in each of
them. Capabilities define the ability to function, and are it is argued by Sen
the most natural measure of the extent of positive freedom enjoyed by a person.
Positive freedom itself was defined much earlier by the philosopher Isaiah
Berlin as the freedom to act and was itself to be distinguished from negative
freedom or the freedom from external restraint. Sen has championed the
superiority of the notion of capabilities over utility. Utility arises from the
consumption of goods. However it is more important to consider the capabilities
that goods may enhance. Thus the possession of rice may free an individual of
malnutrition and increase his capability for action. To this extent the
possession of goods, in this case rice is valuable, but they are not to be
valued for their own sake.
Regarding sum-ranking, Sen has had to say
that it can leave utilitarianism devoid of justice. When a state is considered
superior if the sum total of the individual utilities is higher, utilitarianism
would recommend a distributive system whereby we reward those with a higher
psychological response, termed marginal utility. Thus consider a person
disabled in some way. If his disability leads to a lower utility from an
equivalent reward, in the utilitarian scheme he or she would be rewarded less
than an able person precisely because it would lead to a higher sum-total of
utility. Actually our instinctive response would be to recommend the exact
reverse of the utilitarian scheme. Finally consequentialism. We have already
defined consequentialism as the judgement of actions by their consequences, or
in terms of the `outcome morality’, that is the morality involved in judging
states of affairs. The concept of personal liberty and rights have often been
seen as a challenge to consequentialism. For instance libertarians have argued
that personal liberty is valuable independent of its consequences. Sen has
argued that this is problematic for utilitarianism for it could result in such
absurd situations as the situation involving the violation of an individual’s
rights by a gang of fellow citizens may have to be described as a good outcome
if the utility of the violators exceeds that of the one whose liberty has been
violated. So Sen has recommended that rights be incorporated into the `outcome
morality’ itself, judging the outcome in terms of whether people get their
entitlements as specified by a system of rights. From this brief discussion of
Sen’s critique of the utilitarian foundations of welfare economics, we can see
emerging some of the ideas that would stick with him – the idea of the primacy
of capabilities, the appropriate treatment of rights and the value of a just
distribution of these in a society.
Sen’s critique of Welfare Economics forms the
basis of a large part of his contribution to the field of Development
Economics. Development Economics is really only the study of changes in an
economy over time. It has, however, got to be associated with the study mostly
of poor economies, such as that of India for instance. Stemming from his
emphasis on `capabilities’ Sen has argued that when studying poor economies in
the process of development, income can be a misleading indicator of well being.
Sen has drawn on two examples from the world of developing economies, Sri Lanka
and Kerala State in India. He has observed that in 1980 in Sri Lanka the life
expectancy at birth was higher than in South Korea an economy with an income
per capita five times higher. The moral of the story is not that growth does
not matter, but that it matters only for the associated benefits that are
realised in the process of economic growth. Moreover it may be a less efficient
means of attaining some of these, which are better attained through what Sen
has termed public action. By comparing the cases of Sri Lanka and Korea we may
surmise that were we to depend on the growth of income alone it may take much
longer for these to be realised. For Sri Lanka attained these benefits for its
population through public action, including an elaborate welfare scheme
covering health, nutrition and education.
The second example chosen by Sen to make his
point about the relation between growth and well being is the economy of Kerala.
Kerala is unquestionably the poorest of the Indian states in terms of per
capita income. However, many of the social indicators for this state, such as
life expectancy at birth, literacy, and the birth rate are superior to that of
not only much richer Indian states but also that of China as a whole. On the
feature that Kerala has a birth rate lower than that of China, Sen has
commented that it shows that coercion in the form of the abrogation of
democratic rights is not necessary for population control. I shall return to
Sen’s observations on Kerala. But for now notice how his work in the area of
Welfare Economics has influenced his work in Development Economics. The focus
on such indicators as life expectancy is entirely in line with his argument that
it is the capabilities of individuals that matters more than the utility
derived from the consumption of goods. Thus while income does bring with it
opportunities what are far more important are capabilities. This means that
development should be seen as an expansion in the range of capabilities of the
individuals of a society. In this project of course growth is an important
instrument. However, Sen sees the expansion of capabilities as contingent on
the expansion of basic education and the provision of basic health facilities
neither of which follow from high growth in income. Finally, by public action
Sen has meant more than just government intervention. It involves citizens’
groups and voluntary agencies, essentially non-profit initiatives aimed at the
public good.
III. Poverty
and Famines
While we might believe that we know exactly
what we have in mind when we speak of poverty we often come upon surprises when
it comes to measuring it. A popular approach to the measurement of poverty has
been the head-count ratio. Here the practice has been to first define a poverty
line. The poverty line is the level of income which, at the prevailing prices,
translates into a basket of goods considered sufficient to keep a man out of
poverty. Now the Head-count Ratio treats poverty as the ratio of those below
the poverty line to the entire population. It is easy to see that the
head-count ratio is a clumsy measure in that it does not matter if those below
the poverty line have two rupees or nineteen rupees so long as the poverty line
is twenty rupees. The head-count ratio would show poverty as unchanged in the
two situations. This is clearly unsatisfactory for these two situations are not
identical as the poor as clearly better off in the second situation. Amartya
Sen devised a measure of poverty which corrected for this, in the sense that it
is sensitive to how far below the poverty line the poorest are. More
ingeniously, the Sen index shows a reduction in poverty when there is a
redistribution of income among the poor towards the poorest. This brings values
centrally into our analysis, a feature many are unhappy with in Economics but
something Sen has pursued nevertheless. It seems to have impressed the Nobel
Committee though, for they have explicitly mentioned Sen’s contribution here.
It also brings into focus the possibility that the values of any two economists
might differ so much that any further debate is not possible. Here the trick is
to carry your arguments to as far an audience as possible, something that Amartya
Sen has been able to do more than most economists.
Sen’s last major work was the book `Poverty
and Famines: An essay on entitlement and deprivation’. An aspect of this work
is a theory of how famines occur. To understand what Sen is saying it is
helpful to appreciate the notion of entitlements. This actually relates closely
to the idea underlying the construction of the poverty line which I have
described above. Basically the income that one has defines a certain
entitlement in terms of food. Clearly therefore when one’s income declines or
the price of food rises one’s entitlement to food declines. In the extreme
case, such as during famine, this translates into death due to starvation.
Sen’s attempt is to highlight the possibility of famine even when there is no
decline in the amount of food available in the aggregate within the economy.
The prevailing idea has been that famines occur when the availability of food
declines such as during a bad harvest. The interesting aspect of Sen’s work is
that he illustrates his case with reference to three famines – the ones that
occurred in Bengal in 1944, in Wollo province of Ethiopia in 1973, and in
Bangladesh in 1974. Some of this has been questioned, but the theory of
exchange entitlements remains an important contribution to our understanding of
why people go hungry even when the stores are well-stocked..
IV. On
India today
It is natural to wish to know Sen’s views on
the reforms introduced in the Indian economy since 1991. Before I even mention
these it is important for me to convey that Sen has contributed very
significantly to studies on the Indian economy. Among these is the finding by
Sen that in the nineteen fifties in India the smaller farms were more
productive than the large ones. Even though this finding did not feature in the
citation by the Nobel Committee it must be recognised as having hit upon an
important aspect of agriculture worldwide, the survival of the family farm as
an efficient form of organisation in agriculture. Amartya Sen has tended to be
sceptical of the potential of the current reform strategy in India. Sen has
taken the view that the liberalisation strategy though necessary would bring
limited opportunities to those who do not have the ability to take advantage of
what it can offer, and that more generally the lack of widespread education in
India will mean that growth will not take off significantly. Sen sees a
fundamental flaw in Indian economic policy since Independence. This is that we
have focussed on the instruments – such as heavy industrialisation or, now,
liberalisation – rather than on what ought to be the object of our attention,
the well-being of humans. The underlying theme of Sen’s work has been that
mainstream Economics targets goods and not people.
Listeners would be interested to know that in
the interviews held after the award of the Prize Sen has been asked to clarify
his earlier observations on Kerala. The journalist Paranjoy Guha Thakurta has
posed the following question: "Professor Sen, in your publications, you
have pointed out the tremendous diversities among different regions in India.
For instance, you have pointed out that the literacy rate in a state like
Kerala, the healthcare situation in Kerala, is superior to that of China,
wheareas the situation is very different in States like Bihar and Uttar Pradesh
where literacy levels and indicators of healthcare are far lower than the
national average. In other words, what you’ve said is that India has a lot to
learn from within, and not only from the experience of other countries. So
could you elaborate on what ways the government, or government policies, could
help reduce these regional disparities?" Amartya Sen has replied:
"Well, it is not just the question of government policy. Of course, it is
a question of public action which is a much broader thing and includes
government action, but it also includes political activism, and there is a
particular role for opposition parties too in focussing on some issue, and
making it so embarrassing for the government to neglect certain things like
illiteracy and lack of healthcare and so on. And some of it is govenrment
policy and some of it is general politics. To some extent the difference
between the Communist Party in Kerala and the Congress party in Kerala, in
terms of commitment to literacy has been much less than the difference between
the Congress Party in Kerala and the Congress Party elsewhere. But, now, that’s
not the only difference though, because Kerala has not only much to teach the
rest of India, it has also to learn something from the rest of India. Because,
despite these great social opportunities, I think the fact that Kerala has
remained very sceptical of providing economic incentives has made it a
relatively business-unfriendly state, so that the economic opportunities of
social expansion that could have made business expansion that much easier have
not been seized. And if you look at East Asia, it is a combination of expanding
education and health care on one side, and giving opportunities for business
expansion on the other. It is that combination. Now Kerala has done the social
opportunity in the way that many other states have not done, on the other hand,
on the economic opportunities side, being rather pro-business, it has really
not done that much."
V. The
person behind the prize
It is important to end this talk with a
reference to Amartya Sen the person. Sen is sixty five years old, having been
born in Santiniketan in 1933. His father and grandfather were professors. When
interviewed recently Amartya Sen has said that Santiniketan has had the
earliest and strongest influence on him. Sen was educated at Presidency
College, Calcutta and at Trinity College, Cambridge. From there Sen went on to
become one of the greatest teachers the Economics profession will perhaps ever
know. In 1997 Sen returned to his alma
mater as Master. The
mastership of Trinity is the most coveted academic position in the United
Kingdom. Though we read that the Master of Trinity is appointed by the Queen of
England, this is really only a formal act. The head of the College is elected,
as Amartya Sen himself was. It is a measure of the affection with which Sen is
held there that when the news of his having won the Nobel Prize for Economics
in 1998 was announced his colleague James Mirrlees, himself a Nobel laureate in
Economics, is reputed to have remarked "we are not surprised"!
