This article was written by an eminent economist ; it highlights the human tragedy caused by socialist policies followed by India till the early 1990s.

Delayed economic reform killed 14.5 mn children

S A Aiyar,
15 November 2009

The 20th anniversary of Communism’s fall is a good time to estimate the costs borne by countries like India that did not become Communist but drew heavily on the Soviet model. For three decades after Independence, India levied sky-high taxes, strove for self-sufficiency, and gave the state an ever-increasing role in controlling the means of production. These socialist policies yielded economic growth averaging 3.5% per year, just half of that in export-oriented Asian countries, and yielded poor social indicators too.


Growth accelerated with tentative reforms in 1980, and shot up to 9% after reforms deepened in the current decade. How much lower would infant mortality, illiteracy and poverty have been had India commenced reform a decade earlier, and enjoyed correspondingly faster growth and human development? I have published estimates in a paper for the Cato Institute (see http://www.cato.org/pubs/dbp/dbp4.pdf). This shows that the delay in reforms led to an additional 14.5 million infant deaths, an additional 261 million illiterates, and an additional 109 million poor people. Indian socialism delivered a monumental tragedy, lacking both growth and social justice.


Economists frequently estimate what would have happened had policies been different. The assumptions on which such estimates are based can always be questioned.


For instance, Nobel Laureate Amartya Sen has popularized the notion of 100 million missing women on account of gender discrimination in China, South Asia, West Asia and North Africa. These regions have 94 females per 100 males, against 105 females per 100 males in other countries with equal gender treatment. Sen assumed that without gender discrimination, the female:male ratio in the four developing regions would also have been 105:100. On this basis, he estimated that gender discrimination had caused a shortfall of over 100 million females — what he called ‘‘missing women’’.


Sen’s model was so simplistic that he did not send his paper to an economic journal: he published these estimates in the New York Review of Books. Various economists complained that he had neglected other causes of gender differences, and some came out with alternative estimates.


Despite these objections, Sen’s estimate of 100 million became world famous, and his phrase, ‘‘missing women’’, became standard lexicon in gender debates. What mattered was not the precision of his estimates, but the magnitude of the social disaster he was able to highlight.


In the same spirit (but without implicating Sen), i have sought to estimate the number of missing children, missing literates, and missing non-poor arising from the delay in economic reforms. Had reforms started in 1970 rather than 1980, India would have grown faster. In this fast-growth scenario, i assume that per capita income growth in the 1970s would have been what was actually achieved in the 1980s: growth in the 1980s would have been what was actually achieved in the 1990s: and growth in the 1990s would have been what was achieved in 2001-08.


I calculate the rate of change of infant mortality, literacy and poverty with GDP since 1971. I then apply this rate of change to the fast-growth scenario. This reveals what infant mortality, literacy and poverty would have been with faster growth.


In a fast-growth scenario, infant mortality would have been less every year, and in 2008 would have been 27 deaths per thousand births, against the actual 54 per thousand. The cumulative number of ‘‘missing children’’ turns out to be a massive 14.5 million. This is two-and-a-half times the number of Jews killed by Hitler.


I use trends from the latest surveys to calculate actual literacy and poverty levels in 2008, and compare these with literacy and poverty levels in a fast-growth scenario. With faster growth, literacy would have been virtually 100% by 2008, and 261 million more people would have been literate. Again, faster growth would have reduced the number of poor people in 2008 from 282 million to 174 million. This means we have 109 million ‘‘missing non-poor’’ on account of delayed reform.



Doubtless critics will object, as they did after Sen’s exercise, that i have used a simple model that neglects other factors affecting infant mortality, literacy and poverty. Demographer Ansley Coale reworked Sen’s calculations to show that the number of missing women was probably 60 million, not 100 million. That did not dent public horror at the social tragedy that Sen unveiled.


I invite critics to produce more sophisticated models on the impact of delayed reform, as Coale did in the case of missing women. If these more sophisticated models conclude that Indian socialism killed only 10 million children and not 14.5 million, i will shrug. My point about the magnitude of the social tragedy will stand.

Courtesy Times Of India.


another informative article by the same author..


India's great escape from the socialist zoo

S A Aiyar, 18 April 2010, 01:12 AM IST

I view myself as a freedom fighter, who for 45 years has sought to promote every kind of freedom — economic, political and social. "Escape from the Benevolent Zookeepers", a 2008 collection of Swaminomics columns, emphasized that the socialists who led our Independence movement, and then shackled us for decades through the licence-permit Raj, were not evil. Rather, they were golden-hearted leaders determined to banish the poverty they associated with British colonialism.


However, 200 years of colonial subjugation gave them a serious inferiority complex. Lacking confidence in India's ability to export its way to prosperity, Jawaharlal Nehru sought economic independence by retreating from international trade into a cocoon of self-sufficiency, forgetting completely that international trade had made India a world power for centuries before the British Raj.


Critics pointed out that other developing countries like Korea and Taiwan had opted for export-oriented growth rather than self-sufficiency, and been rewarded with 10% GDP growth, thrice as fast as the Hindu rate of growth in India. The socialists smiled condescendingly and said that these countries were neo-colonial puppets falling into an imperialist trap, and had no future. In fact, the supposed puppets soon became richer in per capita income than their colonial master, Britain. India, alas, remained mired in poverty.


Apart from self-sufficiency, golden-hearted socialism sought to protect Indians from the rapacity of businessmen, and promote prosperity as in the Soviet Union through planning and government domination of the economy. So, they made India the land of a million controls. Everything was forbidden unless specifically allowed. Government bureaucrats with no business experience were supposed to know better than any businessmen what should be produced, where, and how. They were supposed to know better than consumers what was good for the consumers themselves. No citizen had free choice in buying anything; the government chose on his behalf the list of goods that could be produced or imported.


Entrepreneurs were forbidden to start a business without a licence, forbidden to import raw materials or machinery without a licence, and forbidden to close a business if it was unprofitable. If any businessman was innovative enough to produce more than the listed capacity of his machinery, he faced a jail sentence for the terrible sin of having dared to be productive. (Narayana) Murthy of Infosys recalls that it took him almost two years to get a licence to import a computer and another two years to get a telephone when he was setting up Infosys in the 1980s.


All in the public interest, you understand.


Insane though it sounds today, golden-hearted socialism held that prosperity would be best achieved when nobody had the freedom to do anything other than what they were told. Citizens were told that the world was a dangerous place, full of predators. So, said the leaders, the licence-permit Raj does not really put you in cages; it puts you in protected enclosures for your own security. In these enclosures we will ensure your basic needs.


They failed even in this. Literacy, infant mortality, life expectancy, poverty and every other social indicator was always far worse in socialist India than in Asian miracle economies (and even in some poor African countries). Vast sums spent on health and education were wasted; teachers and health staff had an absenteeism rate of 18% to 58%, but were protected from disciplinary action by strong trade unions (supposedly the vanguard of socialism). So, the socialist cage gave Indians neither economic growth nor social justice. This remains an area of grave concern: opening the cages will not solve problems of basic education and health, so public-private partnerships may be needed.


The leaders themselves were not caged, of course. Indeed, many zookeepers became incredibly wealthy by using controls imposed in the holy name of socialism to line their pockets and create patronage networks.


R K Laxman had a brilliant cartoon about a journalist interviewing a minister in a palatial mansion. The politician says, "Of course, socialism is applicable to us also. But we have promised it to the people and so must give it to them first."


Everybody agrees we need democracy. Why? Because democracy empowers citizens with the freedom to choose, and this remains invaluable even if it is constantly eroded or manipulated away by politicians. Democracy, warts and all, is far better than a system where supposedly benevolent dictators decide everything.


For the same reason, we need freedom of choice in the economic marketplace. The case for democracy and the case for liberal economic policies is the same: both are flawed systems that are nevertheless better than the alternatives. Both empower citizens through the freedom to choose. No matter how tattered at the edges, freedom to choose is nevertheless better than being put in cages by benevolent zookeepers.


After 20 years of economic reform, the cages have been opened and the enclosures have been destroyed one by one. Have Indians been swallowed by predators, as predicted by the socialists? Have our companies been killed by foreign multinationals or become neo-colonial slaves? Not at all. Indian companies have become multinationals in their own right.


Indian liberalization has created more billionaires than exist in Japan or China. These are mainly people of middle class origins like Narayana Murthy and Nandan Nilekani of Infosys. Shiv Nadar of HCL was once an employee of DCM, but is now a hundred times bigger than DCM.


These self-made men have beaten hollow Indian business families and multinationals. Prime Minister Manmohan Singh once said these newcomers are not the children of the wealthy; they are the children of economic liberalization. Having escaped from the socialist zoo, they have proved that Indians can roam the global jungle proud and fearless. Let us celebrate that escape, that new freedom.

Courtesy TOI.