Economist Jagdish Bhagwati Finds Lessons for U.S. in India's Economic Growth
Jagdish Bhagwati has been thinking about how to reduce poverty for more than 50 years, since he returned to his native India with degrees in economics from Cambridge and MIT to work for the India Planning Commission in 1961.
Now a noted international economist and a University Professor at Columbia, his latest book is Why Growth Matters: How Economic Growth in India Reduced Poverty and the Lessons for Other Developing Countries. In it he explores the policies that helped dramatically reduce India’s poverty rate, to about 20 percent of the nation’s population today, down from half in 1978.
He and co-author Arvind Panagariya, the Jagdish Bhagwati Professor in Indian Political Economy and Professor of Economics at the School of International and Public Affairs, peg India’s economic growth to a series of reforms in 1991 that moved the country away from what they call excessive regulation of private investment and production, protectionist trade policies and limitations on foreign investment.
|University Professor, Jagdish Bhagwati.|
“In large countries like India, Brazil, China and Indonesia, income redistribution to help the poor was not an option; there were too few rich and too many poor,” says Bhagwati. Growth alone makes sense, he adds, “as it pulls people up from poverty by giving them economic opportunity, while also generating revenue to help the poor by providing for their education and healthcare.”
He and Panagariya say that acceleration of growth generally requires liberal economic policies, with market incentives playing a major role. They are not “market fundamentalists,” says Bhagwati, who has advised India’s current prime minister, Manmohan Singh, who previously was that nation’s finance minister. India is moving from its pre-reform embrace of “anti-market fundamentalism” to pragmatism, Bhagwati says.
He acknowledges that some critics con- tend that India’s economic reforms have hurt the poor. “I say get off your high horse and come look at the facts,” he says, citing evidence in his book of improvement to the well being of marginalized groups like un-touchables, tribals and women. Economic growth fuels demand for labor, he says, so low wages in developing countries are bound to rise, as they have in China.
There are lessons for developed economies, too, including the U.S. “Again you need to grow the pie,” he says, to pay for services such as health care and education for the poor. Outsourcing is good, he adds, because by creating jobs for workers in developing economies like India, it provides markets for exports from developed countries like the U.S.
A professor of economics and law, he identifies with both ends of the political spectrum. He call himself a Democrat but also serves as an adviser on trade policies to the right-of-center Cato Institute and has worked with the American Enterprise Institute and the Council on Foreign Relations.
While he agrees with Democrats’ calls for increased spending to “reflate” the economy, he adds that Republicans have a point when they point to restrictions on American business that discourage investment and impede growth. “We should do away with a whole lot of regulations that make no sense,” he says, adding that growth can raise revenue without raising taxes and raising taxes isn’t easy in a democratic society.
|Bhagwati as seen on The Simpsons.|
In a lively and wide-ranging interview in his 11th floor corner office in the SIPA building on 118th Street, he laughed as he read the lyrics from the Beatles’ 1966 song “Taxman,” which are in the preface to his book. Written after British Prime Minister Harold Wilson imposed a 95 percent tax on the country’s highest earners, the lyrics include, “Should 5 percent appear too small, be thankful I don’t take it all ... you’re working for no one but me.”
Now 78, Bhagwati grew up in Bombay (now Mumbai), surrounded by poverty. He initially planned to study social anthropology, but became interested in economics as a way to change society. After teaching at MIT for 12 years, he came to Columbia in 1980 with his wife Padma Desai, the Gladys and Ronald Harriman Professor of Comparative Economic Systems at Columbia and an expert on the Russian economy.
He is frequently mentioned as a candidate for the Nobel Prize in Economics, so much so that he was named a winner in a 2010 episode of The Simpsons, which he includes on his website. Bhagwati jokes that he has taught most of the world’s economic policy makers, including Paul Krugman, a Nobel winner, Mario Draghi, head of the European Central Bank—but not Federal Reserve Chairman Ben S. Bernanke.
Bhagwati is an outspoken advocate of free trade, which he says encourages competition and innovation. In November 2010, he was chosen by the leaders of Britain and Germany to head a panel looking at ways to boost world trade. His 2004 book, In Defense of Globalization argued that, contrary to widespread belief, globalization indeed has a human face.
His next book will be about illegal immigration. “We are the destination for the world, no matter what we do, there will always be illegals here,” he says. “We need to focus instead on treating the illegals with humanity.” He expects the book to be controversial, but what point is there in writing a book that is not?” he says. “Intellectuals can only do public good by becoming a public nuisance.”
—Story by Columbia News Staff
—Video by Columbia News Video Team