by Udit Misra, Forbes India

To reclaim a high growth trajectory, prioritise expenditure on education and healthcare instead of ill-directed subsidies and tax exemptions, the Nobel Prize-winning economist Amartya Sen tells Forbes India at the launch of An Uncertain Glory: India and its contradictions, a book he’s co-authored with Jean DrezDuring the last two or three years, India has seen a lot of outrage, like Anna Hazare’s demonstrations or where lot of people came out on the streets of Delhi to protest against the brutal rape of a young woman. Did things change as you were writing the book? Especially, did the democratic response in India change?

It didn’t change. It confirmed some of my hopes and it confirmed some of my concerns. The hope included that people could, on the basis of learning more about what’s happening to another human being’s life, take a sufficiently firm interest to do something about it, and to organise and agitate—which is what happened following the 16th December incident.Second, that it led to the quick setting up of the [Justice] Verma Commission, itself a major indication that time had come for the government to listen to this kind of thing and they did it very quickly. All that is a great achievement and it confirms the power of public reasoning and public agitation.

The limitation that you named—and it is not a serious limitation—is something that we still have to think about. The Verma Commission did emphasise sexual trafficking of young girls, which is very big in India and big business too. And that the Verma Commission report and the Act [Criminal Law (Amendment) Act, 2013] did mention it is a criminal offence anyway. But, in order for the criminal offence to be actually used to change the system, that didn’t happen. Public consciousness required to be raised on that topic. The fact that Jyoti—as we know her name now or Nirbhaya as she used to be called—even though she came from a humble family background economically, the fact that she is a medical  student training to be physiotherapist made it a lot easier for the middle classes to sympathise with her predicament. And the predicament of sexual trafficking is a lot harder [to sympathise with] because mostly the people who are affected happen to come from much poorer families.

Rape is an easier issue to politicise than sexual trafficking. So that way the harder problem still remains to be engaged. So yes I was encouraged—so far so good—but I would like a bit more. Quite a bit more.

Before I get to some of the more substantive issues that you mention in the book, there is—and I guess you would be asked this time and again here (in India)—in my opinion a dumbing down of the development debate to a very simplistic Left-versus-Right kind of approach, which is definitely not the truth. Can you elucidate when you say (in the book) that how we make use of the democratic process is the substantive element and not ‘Left vs Right’ or how much private sector involvement should there be?

I guess I am usually classified as part of the Left [laughs] even though I have been very critical of the Communist Party (Marxist) position, which I often voted for in the past. So, I guess, probably I would be classified, with some justice, as being Left. On the other hand, in support of my argument, I have drawn on the arguments of many people who might not be on the Left at all.I think the Left [front in India] was, unfortunately, not clear-headed on sufficient opposition to the licence raj. Contrary to what you might read in other one or two papers, I have always been quite opposed to the Licence Raj—that did not seem to be the right way of pursuing anything.

The Left was also relatively soft on education.

A lot of people are neither particularly Left nor particularly Right. It’s interesting that DFID [Department or International Development], which is part of the UK government, was pointing to the need for education more strongly than the Indian government seemed to be doing [laughs].

Similarly, Milton Friedman. His economics is not mine. Nevertheless, the fact that when he came to India [in 1955] he did write the report where he criticised the government of India for putting too much focus on physical capital and too little on human capital—education and healthcare—which is very much in line with what we are arguing. Do we feel happy to quote him? Yes, indeed. Did we quote him? Yes, we did.

Similarly, being secular is very important for me. Now, some of the secular leadership, with the greatest of the imagination, have not been democratic in the normal sense. Take the example of [Singapore’s first prime minister] Lee Kwan Yew. I think very few people have the record of the comparable imagination of Lee Kwan Yew in constructing a multi-ethnic, multi-religious, multi-cultural society in Singapore.

Do I think there is something that Mr Modi could learn from Lee Kwan Yew? The answer is yes. And it’s not because Lee Kwan Yew is a model of democratic practice [chuckles]. And if it came up today, and I sincerely believe that Mr Modi won a democratic election, I would be on Modi’s side rather than on Lee Kwan Yew’s. On the other hand, when it comes to the treatment of minorities, I would be on Yew’s side. And I would add that democracy is not only about elections but also about minority rights. And I think, certainly in terms of the ethnic question, there is a huge amount to be learnt from Lee Kwan Yew. Incidentally, if you learn about the Lee Kwan Yew’s and Singapore’s story, you will learn about the importance of education and healthcare being very important for business as well.

So I have no hesitation in learning from people whose overall political position I don’t agree with. But that entire resource would be denied to us if we went by ‘Left’ and ‘Right.’ We have to assess argument and accept wisdom no matter which quarter it comes from.

You have talked about the impatience of the (Indian) elite [and held them responsible for not caring enough for those less privileged]. You quoted Economic and Political Weekly’s (EPW) editorial and said it was the ‘misplaced confidence’ of the elite that made them impatient. But is it just because of ‘misplaced confidence’ or is it due to the frustration that existing, government-based systems of service delivery or education or health are so creaky that one is convinced that that is not going to work anymore.
But that is a different point. Ram Reddy [of EPW] is saying—which we are in agreement with—is that they [the government] feel very impatient because they somehow know the answer and the answer is to give more concession to business and growth rate will come back again. And they don’t ask the question, ‘could there be something foundationally wrong?’ Namely, you need an educated healthy workforce to help sustain economic development. Their view that we can fix everything with clever commercial policies, I think, would end in a bigger mistake.On the other hand, there is also the case that there is a tradition in India, even among the business community, to think about the broader social connection.

We quote Jamsetji Tata arriving in Jamshedpur and stating that he has to be not only building a factory but he also has to act as a municipality providing free health care and free education. That’s an Indian vision too. And that is in line with [what happened in] Japan, Korea, Taiwan, Hong Kong, Singapore and China. And we haven’t followed that, and it is quite an unfortunate mistake in the Indian case.

So what Ram Reddy was writing about was immediate self-interest because having an educated, healthy labour force is enormously important for the business community. And you have to be very narrow-minded and partially blind in order to just concentrate on a commercial advantage and not a long-term advantage.

So it is the priority of the present over the long-term vision that I am worried about.

Somebody I was talking to in the industry was saying that when you say “constructive use of public resources” in the book, his argument would be that instead of spending over Rs 1.5 lakh crore that we have done over the last 6 years on the NREGA, you could have put the money into skill development. That would have allowed the rural youth to become employable and take part in the larger growth story instead of giving them just doles.

I think there is substance in that argument. This is one of the points where Jean and I did have a disagreement. And I did think that the argument in favour of educational expenditure was so much stronger than the [expenditure on] employment.But there is some mistake in that thinking too, and it is this: In comparing these two as choices when there are many other choices left in financing education.

Consider two alternatives, One is you (want to) spend money X in education and spend money X in NREGA. That is 2X when you have just 1X to spend. And [one option is] you cut down on one of the many other subsidies [to allow you to spend the 2X], like 2 percent of the GDP being absorbed by electricity even though one-third of the Indians don’t have power connection. You have got fertiliser subsidies, cooking gas subsidies, you have no taxes on jewellery and gold imports.

The second alternative is cut out NREGA, have only education and (continue to) keep electricity and fertiliser subsidies.

Which one will be better? I prefer the former because the benefits are going to the poor there. And you do this at the cost of the subsidies from which the relatively better-off middle classes benefit like they do today.

Regarding healthcare, the view in the top bureaucracy as well as in the Planning Commission is that the government provisioning of health is not going to work in this country. We have over 65 years of experience to show that. So let’s go for RSBY (Rashtriya Swasthya Bima Yojana), where the government simply provides the insurance (and healthcare itself is provided by private players).

When people say it hasn’t worked, I think they make a mistake. It hasn’t worked in some states in India; it has worked quite well in many others.I never regarded Kerala to be a ‘model’ but is Kerala a good example of public service working in healthcare? Yes. So is Tamil Nadu and by and large Himachal Pradesh. So when you are faced with questions of this kind, an empirical scientist has to ask the question, “Why is it working in one place but not in the other?”

And not only working well but in a way that doesn’t eliminate the opportunity of doing it through other means. For example, in Kerala now, over 60 percent of healthcare is provided by the private sector. That wasn’t the case earlier. Those who say Kerala always had that make a mistake just as those who say Kerala was always rich.

I remember, 40 years ago while writing about Kerala, being told that the Kerala growth model is unsustainable because it is trying to spend money that it did not have. And my argument that this way (i.e., by spending upfront on improving education and healthcare) they will also generate more income was dismissed as naïve wishful thinking. Now, Kerala is one of the richest Indian states. But now their argument has changed: Because Kerala is rich, it can afford to spend it [on education and healthcare].

But the question is, “how did they become rich?”

The same is true of China or Costa Rica or Japan and Korea; they became rich by a procedure in the economic stages where they had human capability development combined with the skilled use of the market economy.

So I think when people say that [expenditure on human development] has not worked, I think they are not describing what has happened in India. We have to learn from places where it has actually worked.

Read more: http://forbesindia.com/article/close-range/amartya-sen-you-need-an-educated-healthy-workforce-to-sustain-economic-development/35701/2#ixzz2fmr6Lo3w