There is a story about a professor who taught a class on “Left and Right in Economic Thought.” Like many good professors, he delineated the arguments for each position with great care, without revealing his allegiances. Finally, an exasperated student asked the professor how we would adjudicate between the two positions. The professor replied: “The Left is right about justice; The Right is right about human nature.” The current debates over economic policy bring this story to mind. For the professor, this statement was meant to be a critique of both positions. The Left was so besotted with a certain language of justice that it ignored the causal mechanisms by which economies worked. Its good intentions constantly floundered on the shoals of actual human behavior, and often its policies ended up hurting the constituencies in whose name it spoke. The Right, on the other hand, was so besotted with its own grasp of economic processes that it often ended up immobilising questions of justice. The Left spoke a language of idealism without responsibility, the Right invoked the discipline of responsibility without due consideration of justice. The current impasse in our economic debates exemplifies these failings of both sides. The Left thinks that throwing state money with good intentions is the solution to most problems. The Right seems to move from the plausible assumption that throwing money is not always a solution to the more dubious proposition that it is not a necessary part of a solution. The Left is enamoured of a certain kind of idealised statism, the Right of a knee jerk cynical anti-statism. The Left argues more spending on welfare is necessary, the Right cautions that almost all of it will go waste. The Right speaks of regulatory reform, freeing up the markets, protecting property rights, privatising, removing labor market rigidities, balancing the budget as crucial ingredients of sound economic policy. The Left, instead, argues for greater spending on social security, employment guarantees, welfare schemes, job security and so forth. The Right wants to remove the barriers that bind those who want to create wealth. The Left is interested in the fate of those who might not be able to. The Right wants reform of the state first; the Left does not want justice to wait till the state puts its house in order. Of course, these contrasts are stylised. In principle, few economists of the Right will deny that they are for more social welfare. They just disagree about the means and strategies that will make welfare programmes efficient and sustainable. It is often patently disingenuous of the Left to accuse those championing the cause of trade and privatisation of being anti-poor. But it has to be acknowledged that sometimes excessive attention to a particular class of issues relating to efficient markets can render some important welfare challenges invisible. It is more likely that economists on the Left will oppose some of the market discipline and regulatory sanity of their colleagues on the Right. But they have a point in arguing that India will, down the line, need not just pro-market reform but something like a genuine welfare state as well. The pity of contemporary discourse is that the two sides are like ships passing each other in the night. Take the debate over the Employment Guarantee Act. One can share the skepticism of the Right that the EGA might be administratively untenable, fiscally imprudent and unsustainable. But simply leaving it at that is not part of the solution either. For, there is no doubt that we will have to think more creatively about social guarantees to a large number of citizens for whom the undoubted benefits of wealth creation are still a distant gleam. On the other hand, the Left does not quite own up to the onerous responsibility of macro-economic prudence. So the debate is stuck between unthinking idealism and intemperate cynicism. Part of what makes the debate difficult is that both Left and Right have acquired material and intellectual vested interests. This allows each side to accuse the other of hypocrisy and thus ignore their argument. Organised labour is part of the Left’s political constituency. It, therefore, sacrifices future job creation by excessively protecting the present incumbents of the organised sector. The Right, on the other hand, is so focused on its target audience of capitalists, that it feels the existential burdens of many in the rest of society far less. Even if one is an ardent supporter of pro-market reform, it would be foolish to shut one’s eyes to the enormous social challenges occasioned by our economic success that will require state intervention. The second obstacle to constructive debate is the almost sensationalised and un-contextualised views of the state and market that dominate the public sphere. There is a danger that an excessive emphasis on the corruption of the state is occluding from view a more sober assessment of its possibilities. There is also the reverse danger that attention to the poor will be blamed for the regulatory warps of our economy, whereas powerful vested interests are exempted from scrutiny. Truth is that, as Adam Smith recognised centuries ago, the future of workers will have to be rescued from labour, and the fate of capitalism will have to be saved from capitalists. So here is a radical thought: why cannot we have disinvestment and increased social spending? Why cannot we have greater labour market flexibility and more social protection for labor? Can tough thinking on incentives and governance be reconciled with a more robust sense of justice? Can there be not a grand social contract where we free up every obstacle to the creation of wealth, but with mechanisms in place to better the condition of the least well off substantially? All this may be naively Panglossian, but constructive policy will have to overcome the fog of ideological dualisms and pay attention to concrete mechanisms to address real problems. This will probably require rigorous eclecticism rather than dogmatism. Perhaps, somewhat like Adam Smith, we may again get an economist who can reconcile justice and human nature.
