• Home
  • Blog
The Language of Business

Why Growth Matters (Samir Jaluria)

6/3/2013

0 Comments

 
Why Growth Matters, written by Jagdish Bhagwati and Arvind Panagariya, two esteemed Professors of Economics at Columbia University, is a hard-hitting book which basically states that India has grown rapidly since 1991 because of economic and trade liberalization, and that the growth has helped to alleviate poverty.

Written from an economically conservative vantage point, authors Bhagwati and Panagariya lay their stakes in the ground early, sharply criticize left-wing economists such as Joseph Stiglitz and debunk claims such as that growth has not improved the lives of most Indians (I myself, being of Indian descent, have seen many Indian peoples’ lives improve drastically since 1991).  One of their strongest arguments is that income redistribution was not a feasible means of lifting India out of poverty for a long time because there just weren’t enough affluent people from whom to collect money. The main point of the book is that in order for poverty levels to decrease, growth needs to happen. Period.  At their core, Bhagwati and Panagariya do not want a very unequal society (one with a high Gini coefficient) and are genuinely concerned with mitigating as much poverty as possible.

The most surprising thing that I learned is that the main culprit for India’s lackluster growth until 1991 was not Jawaharlal Nehru (India’s first Prime Minister), but his daughter Indira Gandhi.  Nehru believed not so much in nationalization, but rather gradually increasing the size of the public sector relative to the private sector by increasing government spending.  Indira Gandhi, on the other hand, wholeheartedly embraced nationalization, and essentially nationalized many key industries—including many prominent oil and insurance companies.  She even went after foreign companies, causing foreign investment to dry up (Coca-Cola initially left India in 1978).  This policy hampered India’s growth and was unsustainable-- and only stopped with her death.

Overall, the authors are basically saying that while India has made great strides, it is far short of its true potential.  In terms of going forward, they break down reform into two parts: Track I and Track II.  Track I involves an initial (but targeted and effective) investment, including in infrastructure and in cleaning up constrictive labor laws.  For example, India needs to invest much more heavily in ensuring a constant, uninterrupted supply of electricity throughout its country because right now, the constant power cuts are disrupting production, potentially causing companies to look elsewhere.  Track II focuses on longer term goals such as reforming the healthcare system and promoting a more nutritious diet.

I would also add that India’s patriarchal mindset needs to be reformed, as well.  There are a lot of people in India (especially those coming from the more rural, uneducated parts) that firmly believe that a woman’s place is in the home.  Without a shift in this antiquated mindset, many intelligent women with a tremendous amount of potential do not enter the workforce, depriving India’s economy of some valuable human capital.

The one downside to this book is that it is a book written by economists for economists.  I happen to be very interested in development economics and so, it was easy for me to comprehend and enjoy.  I believe that the authors can improve this book by supplementing their arguments with some qualitative anecdotes, such as personal firsthand accounts of poverty reduction in the last 20+ years.

Overall, Why Growth Matters is very well written and I would recommend it to anyone interested in learning more about India and/or in development economics.  This book has resounding implications for India in wake of next year’s National Elections between the liberal-but-politically inexperienced Rahul Gandhi (Indira Gandhi’s grandson) and the freemarket but religiously conservative (some even say religiously intolerant) Narendra Modi. 

0 Comments



Leave a Reply.

    Categories

    All
    Education
    Entrepreneurship
    International Business
    Language

    Archives

    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    October 2013
    September 2013
    August 2013
    July 2013
    June 2013
    May 2013
    April 2013
    March 2013
    February 2013
    January 2013
    December 2012
    November 2012
    October 2012
    September 2012
    August 2012
    June 2012
    May 2012

    RSS Feed


    Useful links:

    CCAFM is our international consulting partner in Beijing, China.  They're smart, creative, honest, successful business people.

    Ms. Beth Goldstein is a good friend and doing some great work in the entrepreneurship space. Check out her blog.

    Mr. Yuya Kiuchi is a periodic guest blogger on this site, originally from Tokyo, Japan. Check out his personal page or Wikipedia profile.

    Mr. Samir Jaluria was one of our standout students in the full-time MBA Program at Boston College, and is a periodic guest blogger on this site. He is currently a management consultant and freelance writer. Check out his LinkedIn Profile.

    Mr. Jeffrey Ross, managing partner of Glenoe Associates LLC has owned or
    operated 6 businesses: Retail, hotels, distribution, fast food and assisted
    living.  Jeff's a Mentor for my Business Planning course. 


Powered by Create your own unique website with customizable templates.