Article
Nobel for Amartya Sen
Contextualising Welfare Economics
Arindam Sen
(Here we carry two articles, the first by Arindam Sen and the second by Arvind N.Das, representing two different reactions on the Nobel Prize for economics being awarded to Prof.Amartya Sen.)
Why so late? Asked Sen’s admirers with a rueful smile. Some in Santiniketan, his alma mater even went to the extent of suggesting that Amartya-babu should renounce the prize in protest against the delay. Little did these well-meaning people know that the Nobel prize in economics (as in other disciplines for that matter) is awarded every year not so much for the intrinsic absolute worth of an awardee as for the immediate practical utility of his or her work in a given situation. Such was the guideline left by Sir Alfred Nobel himself, and this decided the choice of Nobel laureates in recent years.
Less than two years ago, an economist from Calcutta met Professor Asar Lindbeck, member of the Nobel economic committee, at a conference in Stockholm and put across to him an oft-repeated question: how come Sen was being overlooked for the prize year after year? Lindbeck pondered over the question with all seriousness and replied that much of Sen’s work was on the fringes of the subject called economics. This was an insider’s view, quite in tune with the prevalent mood in the highest echelons of international opinion-makers. Welfare economics was indeed regarded as a peripheral topic, with its opposites-- neo-liberalism and market fetishism--claiming undivided attention. The 1997 Nobel prize in economics therefore went to America’s Robert Merton and Myron Scholes, who had just developed a model for pricing "derivatives" such as stock options. This model or technique was expected to help speculate ‘scientifically’ and reap megaprofits safely.
But a little embarrassment was waiting for the Royal Swedish Academy of Sciences (RSAS). Barely a month before the 1998 awards were announced, the Long Term Capital Management-- a hedge fund where Merton and Scholes were partners and which worked according to the prized technique-- went bust. This was no isolated incident, however. The Foreign Institutional Investors (FIIs), or speculators in plain language, had already been facing some rough weather on stock and forex (foreign exchange) markets worldwide. As expert fishers in troubled waters, they were shifting their investments with lightening speed, in the process wreaking havoc on the South Asian economies. The meltdown had not even spared South Korea and affected even Japan, China and Latin America. Coupled with the Russian crisis and then the approaching footsteps of a world recession, the international economic scene during 1997-98 forced the bourgeois think-tanks to rethink, though belatedly. The IMF policies came in for sharp criticism. To take one example, in an op-ed piece appearing in The Wall Street Journal, February 3, 1998, America’s former secretary of state George Shultz, former secretary o treasury WE Simon and former chairperson of Citicorp/Citibank W B Writson jointly pleaded for the abolition of the IMF, which they dubbed "ineffective, unnecessary and obsolete". From within mainstream bourgeois economics, voices that questioned the unbridled globalisation - liberalisation- privatisation package, grew louder and acquired a new prestige.
It is these ominous developments in the real economy and their reflections in bourgeois theoretical thought that set the stage for and influenced the choice of this year’s awardee. Some shift of focus from market worship to welfare economics was considered overdue. And once this political near-consensus emerged, it was easy to name the most prominent figure in the field. Shortly before the Nobel prizes were announced this year, a poll on the E-Joe (European Job Openings for Economists) had picked Sen as the winner. He got 72 votes, while Hoppe finished a distant second with 58 votes. Earlier in the year, the Queen of England had appointed Sen to one of the most prestigious chairs in the academic world: Master of the Trinity College, Cambridge. With all these pointers, for the people to know the choice for this year’s Nobel in economics became "utterly unsurprising and totally predictable" as Nicholas Barr of the London School of Ecomomics put it.
When Professor Sen begged the medallion, the political force, which surpassed all others in its euphoria, were the ruling Marxists of Bengal. The way they eulogised him gave the common man an impression that the Nobel-laureate would be a Marxist or at least an anti-establishment, left-leaning economist. Well, let us undertake a quick review of his work to see whether this is true and what binds Jyoti babu and Amartya babu together.
Amartya Sen’s most influential book dates back to 1970: Collective Choice and Social Welfare. In this classic contribution to what they call social choice theory, he showed how and under what conditions individual values and choices could square with collective good. This signified partially surmounting the so-called "Arrow Impossibility Theorem" constructed by Kenneth Arrow, his forerunner in this field. But this scholarly work had hardly any direct policy implication. It was therefore ignored by the RSAS. This was quite normal, let us note in passing, for a body that has a record of ignoring scientists like Stephen Hawking, Roger Penrose et al, while rewarding the inventors of viagra, the sexual stimulant that has already killed scores of users.
Sen later moved on to emerge as the acclaimed "Indian expert on hunger, famine and poverty". He redefined poverty by focusing the spotlight on the extent of mass deprivation in terms of education, nourishment, health care, entitlement of weaker sections etc. the recalibrated inequality in a more meaningful manner, gave us a technically rigorous demonstration of the common experience of the downtrodden that famines in our time result not from food-shortage but from social circumstances which deprive the weaker sections of purchasing power. In these discussions, contained in such celebrated volumes as On Economic Inequality (1973), Poverty and Famines: An Essay on Entitlement and Deprivation (1981, which the Nobel committee specifically mentioned as "a key contribution to Development Economics"), Inequality Re-examined (1992) etc., he drew attention to two basic problem areas of capitalism. First, he underscored the need for alleviation of mass poverty of relative pauperisation-- an essential condition of capitalist accumulation-- lest it should cross the danger mark and threaten the very existence of bourgeois society. This is an old concern of the bourgeoisie, as the authors of The Communist Manifesto had shown 150 years ago:
"A part of the bourgeoisie is desirous of redressing social grievances in order to secure the continued existence of bourgeois society.
"To this section belong economists, philanthropists, humanitarians, improvers of the conditions of the working class, organisers of charity….
"They desire the existing state of society minus its revolutionary and disintegrating elements…."
Marx and Engels called these people "bourgeois socialists". With constructive criticism and farsighted advice, they appear as the ‘conscience’ of the bourgeois class; through various reform activities they endeavour to save the existing social order from the fire of revolt and revolution. That the services of these people do not go unrewarded was demonstrated to us few years back when Mother Teresa got the Nobel for peace. Sen was in fact just another addition to the long list of bourgeois visionaries who appear on the scene from time to time and call upon the bulk of profit-only businessmen to reduce the stockpile of inflammable materials in the society.
Second, indirectly and in effect--though usually not in so many categorical terms-- Professor Sen in his late works drew attention to a very crucial factor for economic growth: human resources or the so-called human capital. Without proper investment in this sector (education and training, for example) modern techno-intensive or knowledge-intensive growth cannot take place. Here again, Sen is not alone in laying the stress. To cite just one example, the United Nation’s Least Developed Countries Report 1998 force fully points out that LDCs are backward basically because of non-investment in this area. Many other eminent persons and organisations have also been harping on this theme, along with themes of land reforms, decentralisation, empowerment of weaker sections etc. for purposes of economic growth. But it is especially now when huge funds are lying idle owing to recession, that investment in so-called human resources development appears to be a particularly attractive proposition.
Summing up, we see that the two most essential and closely connected strands in Amartya Sen’s accredited work are the need to arrest the growing polarisation of society between haves and have-nots, and the need to take better care of labour (‘human capital’), the very source of surplus value. Old as the themes are, they acquired a new urgency in the critical context of the worsening world economy and growing mass resentment against the ultra-rightist socio-economic policies as reflected in the pattern of change governments in many countries.
Professor Sen’s views on the Indian economic scene are quite in tune with his general framework. As evident from his post-prize comments in the press and from the books he co-authored with Professor Jean Dreze, he is all for liberalisation and globalisation, which he regards as "a major force for good". But he wants these with a more human face, i.e. backed by adequate national policies in a conducive social environment. In this context he criticises both the central, i.e. the Congress- UF- BJP line of economic policy and its Bengal version. India and Pakistan, he said in New York on 15 October, had neglected education, health–care and land reforms "in a truly regrettable way" and there lay the root of their problems. His particular stress is on education, where he finds the Left-ruled states in India equally insensitive:
"… one of the real achievements of the communist countries was precisely the expansion of basic literacy.
"But, somehow that did not translate into Left-wing commitment in India, with the exception of Kerala where left movements were a successor to the anti-upper caste movements which treated education as a great leveller and the communist movement inherited that. Elsewhere in India, including West Bengal, not only is there a shocking neglect of education by right-wing parties (that is often the case across the world) but also by the Left parties…" (From an interview to Dayamanti Datta, Published in The Telegraph, October 15, 1998).
So this is Amartya Sen -a voice of constructive criticism within the mainstream of bourgeois political economy. Or to put it more aptly (as Robert Solo did when greeting Sen), the conscience of the economic profession. Earlier we have seen that if at all there is any element of socialism in his theoretical framework, that is "bourgeois socialism". The entitlement he speaks of not entail any basic change in the existing property relations; at best it extends up to the bourgeois democratic programme of land reforms. The empowerment he advocates does not recognise a transfer of political power from the exploiting to the exploited classes.
Of course, it is pointless to blame Professor Sen for all this. He never claimed to be a Marxist. Rather he honestly and respectfully owed up his – and fellow professionals’ – debt to Marx. In a Marx death centenary piece published in The Statesman on 14 March 83, he wrote about Marx’s " powerful influence on professional economics" today. He also discussed how he proposed to utilise Marx’s insights into issues of poverty, inequality, individual choice etc. in his own theoretical project. The write-up was concluded with the remark, "There is enough new life in Marx a hundred years after his death." From this essay as well as from his other works taken together, it is absolutely clear that Sen seeks new life in Marxian theory not for a proletarian revolution but for a humanist reform of the capitalist system.
It is in this reformism that the social democrats of Bengal find fraternity with the welfare economist. In fact, the former’s political-economic line that of providing some relief and some semblance of power to the people while avoiding class struggle as far as possible and discarding the revolutionary path, has little to differentiate from Sen’s prescriptions. No wonder, then, that the official Marxists of Bengal would celebrate the award winning achievement of the bourgeois visionary as their own. There was, of course, another instinctive urge: championing the middle class Bengali sentiments – something regarded as a great help in vote catching.
Lastly, to situate this year’s Nobel in economics in a larger historical perspective, one cannot but remember the Great Depression of the 1930s, and the Keynesian intervention,the classic capitalist response to that. The Keynesian theory, and its various practical applications such as the New Deal in America, emerged as the capitalist contender to the theory and practice of socialism. In our country too, the clever bourgeoisie introduced the ‘socialist pattern’ of ‘mixed economy’. In time, however, all this was given a decent burial amidst cries of end of socialism, end of ideology, end of history. But now at the fag end of the century the situation seems to be taking a turn again. In Russia, working class has stepped up its struggle against reintroduced capitalism through political strikes and militant demonstrations. In South-east Asia and elsewhere, people are rediscovering the efficacy of social (state) controls and planned economy in place of absolute marketisation. Worldwide, pundits are predicting the return of Great Depression with greater vengeance. In this overall context, what does the re-acknowledgement of welfare economics signify?
Basically, the political aim of all such moves is to ensure that the gin of communism does not get out of the bottle again. But will this aim be achieved? Will the prized theory of Amartya Sen give a welfare tinge to capitalism once again and thereby reduce the "revolutionary and disintegrating elements" of society?
One swallow does not make a summer; one Myrdal from Sweden or another Sen from India does not change the heart of capitalists or the essence and destiny of capitalism. If anything, this year’s Nobel in economics reconfirms that towards the end of the millennium, capitalism is in for some serious internal churning. About this, more in a later article.