Based on a survey of members of the American Economic Association over four decades, the December 2021 study ‘Consensus Among Economics 2020: A Sharpening of the Picture’ (bit.ly/3rcSJAN) by Doris Geide-Stevenson and Alvaro La Parra-Perez of Weber State University, US, investigates ‘an increased consensus on many economic propositions, specifically the appropriate role of fiscal policy in macroeconomics and issues surrounding income distribution’. What economists are agreeing about, at last, is that there should be more equality. Also, that anti-trust should be more rigorously enforced.
Till recently many said the problem of inequality was being exaggerated by the likes of Oxfam and Thomas Piketty, adding that inequality is a stimulus for growth, to spur those left behind to catch up. Many economists continue to say government regulation of business is an interference with business competition and innovation. Sharp differences about regulation of the technology industry highlight their contradictions.
Again, till recently, the consensus of mainstream economists was that governments should leave economics to the market. Now, disagreements about levels of inflation and government fiscal activism have increased a lot, the survey reveals. A matter economists remain split on is the question of increasing income and wealth taxes. Here the divisions are becoming sharper. Some are beginning to defect from the side of neo-capitalists to socialists admitting that higher taxes will not only reduce wealth inequality; they are necessary to provide governments with resources for public provisions of health and education to level the playing field, to enable those left behind to catch up.
Hollowness in the Enlarging Pie
One wonders what a survey of Indian economists will reveal? India has become one of the most unequal countries in the world. The latest ICE 360 household survey conducted by People Research on India’s Consumer Economy (PRICE) reveals that the income of the poorest fifth has plunged 53% in five years, while incomes of the richest fifth increased 39%. Moreover, hardships have increased for a majority of Indians: incomes of the lower 60% of the economic pyramid have declined while the wealth of billionaires has multiplied. GOIs celebration of the emergence of unicorns, rather than the rising of more enterprises, who provide employment and incomes for more people, is rather lopsided.
India’s economic problems can no longer be papered over by increasing the size of the economy, and higher GDP. The problem lies in the shape of the economy, and the distribution of opportunities within it. India’s working age population has increased from 96 crore to 108 crore in the last five years. Young people who have been getting educated in larger numbers than ever before, even learning vocational skills, cannot find jobs. People are dropping out of the employment market seeing no hope in it.
The Centre for Monitoring Indian Economy (CMIE) estimates that in Uttar Pradesh, the number of persons of working age who have a job has decreased in the last five years from 43% to 33%. In Uttarakhand, another relatively poor state, the decline is from 40% to 30%. Even skilled workers and educated youth are unable to get stable jobs with social security and decent incomes. The problem is not confined to only poor states. In Goa, one of India’s richest states, numbers have declined from 49% to 32% and in Punjab from 42% to 37%. The problem is nation-wide.
Nirmala Sitharaman will be announcing the national budget tomorrow. One wonders who are the economists whose opinions the government relies on and their economics’ ideology? ‘Official’ economists are spread around the Finance Ministry, which now has a new Chief Economic Adviser in V Anantha Nageswaran, the NITI (National Institution for Transforming India) Aayog, the Economic Advisory Council to the Prime Minister, and the Reserve Bank of India (RBI).
Other economists with strong views about India’s economic policies speak loudly in public forums. Perhaps the government listens to them too. Several live abroad; some have advised the Indian government earlier and can credibly claim knowledge of Indian economic and political realities. Others, whose views the Indian media also has a lot of room for, are advisers to large international financial firms or large Indian business houses.
A Democratic Economy
How will the vicious circle of increasing inequality and under-funded public services be squared up? What are the real views now of economists who advise private sector firms, especially on matters of taxation and the balance of government budgets? Publicly, they must support their employers’ interests. Generally, they are the hawks about lower wealth and income taxes and low government deficits.
Economics has become too important for the citizens of India to be left to economists alone. It is time for wider deliberations about India’s development trajectory. ‘Non economists’ (according to economists) must be listened to. Economic policies focused on increasing the top line of GDP are not the solution. Policies must focus on the bottom-line—on increasing incomes at the bottom faster for all. The “lower caste” parties are reframing the debate once again. It is not about Hindu vs. Hindutava; it is about people left behind in the economy. Follow the farmers: they have shown a way to unite Indians of all castes and religions to fight together for economic justice.
(This was published in The Economic Times on 31 January 2022)