‘We always hear reforms lack a human face… But they have had a massive impact on poverty’

• It’s sad because these are great institutions around which India built its solid reputation for brain power.

Well, there was a time when Sukhomoy Chakravarti, who’s a very great economist, Amartya Sen, I and several others were here and it was really the premier institution in Asia.

• Well, institutions in India are starving for all kinds of things—funds to intellectual support to government back-up to corporate back-up and maybe that’s because a lot of intellectual capital is going overseas.

Well, that’s part of the problem because when we were coming back, we were among the generation following the still earlier generation of Dr V K R V Rao and others who had come back and stayed permanently. But we ourselves disappeared after about 8 or 10 years.

• So this is one of the premier institutions that produced so many famous economists.You and Dr Manmohan Singh who’s taught here.

Well, right now, it’s still one of the really good schools in the country. But I don’t think it has the same premier position in all of Asia because other countries have also come up…

• Also, it needs infrastructure.

Badly needs infrastructure…
They need a lot of funds to be able to bring in visitors, to have that great sense of intellectual excitement, which I think without funds today it’s very hard to maintain. I think there are bright, young people here who will get somewhere, but ours was a sort of golden age.

• But they are all 96 percenters and above or something like that. They’ll all end up being fund managers and make a lot of money for themselves.

No, I mean they’re producing a good set of students.

• My last guest to record at this venue was Dr Manmohan Singh, who was to become the Prime Minister within two months. This is not such a bad step for you to take.

I thought you were a well-wisher of mine!

• And this is the same jacket I wore on that show!

He’s a dear friend. In fact he was with me at Cambridge.

• A year junior and a year senior…

That’s right, and we were in the same corridor. I remember him because he was extremely studious, conscientious, very spartan in his tastes. I knew he was going to get somewhere.

• And I believe very correct.

Correct in a good sense, always mellow, a thorough gentleman but basically coming from a very poor family, so the opportunity was soothing he had to put good use to.

• His competition was you and Dr Amartya Sen.

Yes, but all three of us did extremely well. When I first went to Cambridge, my tutor brought me in and said—he was the great Alfred Marshall’s nephew and he was supposed to help me—and the first thing he tells me is ‘‘You Indians don’t do well in economics’’…That’s hardly a thing to say to a young person who’s just come from India. Three years later, Sen had got a first. Next year, I had got a first and Manmohan Singh had got a first. I almost felt like getting a knife and stabbing him.

• Preferably in the back?

Yes, in the back…That trio transformed the reputation of India altogether in Cambridge.

• When Manmohan Singh became PM, you wrote an article in our paper and said it was a great moment for India that on the cusp of change it had a PM like Manmohan Singh. But you put one rider. You said you were not quite sure that he had the guile a politician needs for the job. You met him after that, have you discussed the guile department?

No, but I think he’s turned out to be a better politician from handling…if you look at the way the system is developing right now, it’s a bit like the last Bush administration, the younger Bush, the 43rd President, now he’s the 44th. And Bush 41 which was his father and Bush 43 got from Bush 41 all the unsatisfied conservative hawks like Dick Cheney and Rumsfeld who felt Iraq had not been dealt a decisive blow.

• So it was a blood feud?

And they happened to take over Bush 43, getting him into trouble on Iraq and my worry is while Dr Manmohan Singh is clear, in terms of where he wants to take the country, in terms of making the reforms stick more, there are still a lot of dissatisfied socialist hawks who were displaced during the period of reforms who now seem to have made a comeback because the election in my view is being misinterpreted as really a repudiation of reforms. And I don’t think, this is certainly not the view of the Prime Minister, most definitely not from whatever one can gather. But he’s going to be constrained to some extent because he’ll have to contend with this internal dissent, not just with the external one from, say, the Communist coalition and others.

• So a failed socialist is tougher to manage than say a successful socialist, if there is such a thing?

Only in the sense that when they get an opportunity to come back, they are that much more demanding…even the Communists I feel, I mean we have to be careful about how practical they are. James Wolfensohn of the World Bank was here the other day and I think, clearly desirous of a third term, was being extremely affable to us Indians and saying very pleasant things about us. But basically the problem is with the socialists when they are at a state level. They have to compete with other states so they are not making policy; the policy is set largely by the Centre on many things. When they get a hand in setting the rules themselves, then I’m not so sure that they will in fact be as pragmatic simply because it’s a different ball game.

• Part of that mythology, the economic mythology of three decades was also this fear of exports. We kept on working on import substitution. Abid Hussain saab has a great story of when he was commerce secretary to V P Singh who was minister. V P Singh once told him ‘‘Abid saab let’s give this country a slogan ‘export or perish’. And Abid saab being Abid saab said ‘Do no such thing, this country shall decide to perish!’.’’

Which it was doing anyway, unless we integrate ourselves into the world economy. But I think basically the fear was that of globalisation or outward orientation, whatever you want to call it, on trade, multinationals, foreign investment coming. All of that was considered a peril rather than a promise, a threat rather than an opportunity.

• But how did this change in 1991? Dr Manmohan Singh was there and you were here also…

But I think this understanding had grown quite a bit and I remember, I’ll take only a slight intellectual credit for it, not a great deal, because the book I and my wife Padma wrote in 1970 on India, we documented virtually everything, where the public enterprises were going wrong due to incentives being under perverse direction, the Kafka-esque growth of industrial licencing, import licencing, inward orientation. Sometimes, people say that there’s a liberal fallacy that all good things go together, there’s also an opposite fallacy and unfortunately that’s not always a fallacy. In our case it was a truth!

• In fact, that’s more like a Hindu belief that all vipada comes together.

And so I remember one particular very generous moment on the part of Manmohan Singh when he came out and as finance minister, and it was at a lunch and it was really interesting because there was a Sikh, I think joint secretary for External Affairs, and there was Montek Ahluwalia and there was Dr Manmohan Singh, all three of them Sikhs. It was really very heartwarming to see, whatever you call it, the multi-ethnic diversity, religiosity and so on. And then as we came in, all the top CEOs were there from General Electric, General Motors and so on. And Manmohan Singh interviewed me and my wife and said these are my good friends and they wrote this famous book on reforms and if we had only followed their advice at the time we would not be having this lunch because you would already be in India by now. So he was very graceful and very generous.

• When you wrote that book you were in a minority of two.

Oh, we were just renounced as simply…reactionaries, because to raise questions about our whole policy framework was supposed to be sacrilegious and so we suddenly went from being very creative people to very destructive people. And our idea was sound. Because you had to look at these policies in the eye, and look are they working or not working. You can’t just commit yourself to means, you have to commit yourself to objectives.

• But I believe in sales now your book is almost coming as close to Stiglitz’s, it’s about to overtake…

I think it’s about to because mine has reached 40,000 in six months, which is what his has done in three years. So maybe there’s still God in heaven.

• I bet they bought some to burn them, the anti-globalisation…

I hope if they did that, they did it in Alaska or something, generated some necessary heat and warmth!

• It takes a brave man to defend globalisation because it seems to be in such bad odour, especially from the chic crowd and nobody wants to get out of the chic crowd.

Yes, but it’s basically a matter of repeating the same cliches again and again and most of what they say now has become a way of simply masking your inability to analyse these things. What I basically do in my book is take the contentions, their fears, phobias and analyse them using economics, sociology, reasoning and saying is there any truth in it. Because I basically…I may not believe it but I went in with an open mind.

• At the other end of the spectrum, who are you competing with intellectually? Stiglitz, or Arundhati Roy, or Chomsky? Or is it all of them?

I would say all of them, though actually Stiglitz is my colleague at Columbia and he’s hard to pin down because when he talks with people like us he sounds very amiable and agreeable but then he goes in front of a crowd of a hundred thousand in Bombay at the World Social Forum…suddenly all restraint and wisdom gets dropped, and then he’s sort of speaking to a large crowd. He actually told me that he faced a hundred thousand people at Bombay.

• But there’s a difference. An anti-globalisation wallah will get a hundred thousand people anywhere, pro-globalisation wallah will not.

But…a hundred thousand? No. But I did tell him that he should not get too excited because I grew up in Bombay and when I went for a walk to the beach, I saw about two hundred thousand people! So that doesn’t mean very much of Bombay.

• What about the other two—Arundhati Roy and Chomsky?

I think Arundhati Roy is just…

• You wouldn’t like your book to be reviewed by one of them.

I would love to see what they have to say. But Chomsky is the only serious person there because Chomsky is the world’s greatest linguist. He is a man known for his intelligence and ability and…you get arguments you can put your teeth into. Most of the time I do disagree but he’s really an intellectual. Arundhati Roy is unfortunately…unfortunate because she’s our compatriot and she’s written one very fine novel…but her conclusions are far more obvious than her arguments and that makes it impossible to function. You don’t know where to begin or where to end. Stiglitz is really more worried about the IMF’s policies which are not of great relevance to us.

• It is more his discontent with the IMF.

Yes and he was very upset with the way it functioned, but of course he got the whole thing wrong also. I mean he was worried about IMF conditionalities being imposed on…

• Dr Tom Friedman says the books should have been renamed ‘Globalization and Stiglitz’s Discontents’.

Yes, I know and I think Tom Friedman got it right as usual.

• In your book you say that governments will decide in various countries on the question of reform and globalisation with a human face, because that will determine whether they want to limit the impact of reforming globalisation or they want to enhance it.

Exactly.

• In that equation, where do you see India today?

I think India has to certainly admit to the fact that globalisation has a human face. You go around and see, because when I say it has a human face, I mean a social agenda like the removal of poverty, removal of child labour and all of these faces. There’s plenty of evidence we have today, not just in India but around the world that really we’ve no trade-off problem, meaning it’s not that we’re increasing incomes of people but then increasing child labour as well or increasing incomes for you and me but not for the poor.

• But you know, in the government, in fact in our entire establishment, it’s as if every time you take a reformist step, you have to hold up a human face.

I know. Actually I’m worried because they’re always pretending that somehow whatever is going on lacks a human face and actually there is no evidence (of)…But the way they talk about a human face I almost think of Indian mythology. That you’re going to have lots of Ravanas with 10 human faces! That way we’ll be populated by Rakshasas as a result of this political talk! But I think there is a real danger that when someone sensible like the PM keeps repeating this, then at least people around him will probably wind up thinking that we really were doing soothing dramatically wrong, that we really weren’t paying attention to things like poverty, when, in fact, as he himself pointed out frequently, we’ve in fact made a big impact on poverty. As a result of the reforms, and the answer is more reforms and the current election results are being totally misinterpreted in my view.

• In your writing, two things stand out. The qualifications that you put on globalisation—one, you say the governments will have to do things to manage occasional downturns in globalisation. What do you want India to do in that area? And second, you talk about complete liberalisation and reform but you say India did a sensible thing by providing support prices, for e.g. during the Green Revolution.

You see, you need institutional support for the downturns in the sense that you liberalise your trade, farmers turn…from crops for the local area to cash crops. But the trouble is the international economy is now so competitive, people are looking over each other’s shoulders to see if your government is doing something which is actually going to create unfair competition for me. Because these little margins of competitive advantage…so you are always looking over people’s shoulders to see is somebody coming and stealing in from behind. Once I was at my daughter’s training camp and there were people complaining about…

• Your daughter was a captain with the Marines I believe.

Right. She’s now at Harvard.

• Must be a tough girl.

She is. She wanted to do something her father couldn’t possibly do! Like do push-ups!

• The only Gujarati officer in the Marines.

I know. I can’t believe and I’ve earned a lot of kudos for it…Because I got an honorary degree from Chandigarh University. A former commander-in-chief of the Indian Armed Forces was there and I think he was rather contemptuous of me, and I told him my daughter was a Captain in the US Marine Corps. Suddenly his respect for me went up!

• Professor Kissinger on this show talked about rising anti-Americanism and very often that is the same as anti-globalisation.

To some extent.

• Then it becomes anti-MNCism. The same people complain about MNCs taking away Indian jobs, or Indian resources or taking away American jobs to Bangalore.

Globalisers have to deal with that issue by saying look, the anti-Americanism and anti-globalisation sometimes go together simply because a lot of people are worried about it, and now increasingly worried after the Bush intrusion into Iraq, that Americans become the only hegemonic power, there’s no constraining, countervailing power from the Russians, so they are upset about it. So spitting on globalisation which they see as the central…

• …symbol of American power.

So it’s like spitting on America… For them it acquires a symbolic value of that kind. But multinationals are a very big thing because most of the people who are on the Left, and there are a large fraction of these people, like Arundhati Roy, whether she’s genuinely Left I don’t know but she likes to mouth these cliches.

• She probably is if you see the passion.

Right. Maybe if you can convince yourself that you’re one, if you talk like that long enough and besides it has a huge payoff, so the incentive is becoming more and more to the left. But there you see the multinationals are like the B-52s of globalisation. So you have to be against them and if they make progress it’s even worse. And one of the things I say in the book, if you look at Medieval times, moneylenders and usury would never get a fair deal. In the same way, in modern times, that is how it will be for the multinationals and globalisation. So no matter what you and I say, no matter how much evidence there is, they are going to be there. It’s like a deep visceral conviction.

• To conclude, the article you wrote in The New York Times—why the jobs were moving to Bangalore. Many were surprised that you being a Democrat, you were taking on John Kerry on outsourcing. Did it come from your belief in globalisation or you thought Kerry was wrong?

I think it’s the latter because if you want to stand for public policy rather than be just a party hack, if you are a public intellectual which I try to be, you have to play exactly as it’s necessary even if it’s your own party, my party. As a naturalised American, as against the natural-born American, I think it’s my duty to point out what’s going wrong and Kerry was so wildly off on everything and I think he’s suffered for it. It was strange because on two issues which relate to globalisation, one is immigration into the United States…

• And for supporting the liberal cause on both, you were attacked.

Yes. Three nights running there were attacks and a lot of hate mail, calling me a curry nigger for example. Normally in language two negatives add up to a positive, but in this case they were just two negatives.

• Your party may have lost but I hope you win your arguments.

I am winning the argument…