An Optimist’s Diary: A Philosophical Economist Observes
Our World
Guy Sorman
Full Circle
R595
Pp 592
Madan Sabnavis
AN OPTIMIST’S Diary will certainly make champions of ‘the market’ happy. In today’s world, where we have tended to get suspicious of markets and their ability to deliver fair results, Guy Sorman offers a strong defence for capitalism. In fact, it is not so much a defence as it is a series of observations in this diary.
The basic observation is that there has been manifold increase in the standard of living of people where countries have tilted towards capitalism in various degrees. The cut-off point is the fall of the Berlin Wall, after which things have only improved. This is visible across countries in Africa, Latin America and Asia. Further, the countries that still seem to be struggling are those that have stuck to the communist or socialist dogma.
Sorman does admit that free markets failed when the financial crisis set in. The solution is not to reject it, but repair, which is being done today. He is hence critical to the point of being peevish when commenting on Joseph Stiglitz, who has launched a tirade against anything that capitalism stands for, as well as Paul Krugman, who has been critical of it too. He refers to Stiglitz’s views as ‘pop economics’. Here, he lambasts them, saying they are short-sighted and fail to offer any solutions or alternatives.
Sorman argues that capitalism runs on the Schumpeterian theory of creative destruction, where we are learning all the time. He also criticises Keynes and Marx for their philosophies, which he considers outdated. This probably is a problem with economists who are rigid in their stance and are unwilling to accept views that do not fall in line with their own. Hence, Friedman gets applause and Keynes his scorn.
In his diary, which goes chronologically from 2007 to 2012, he attacks the China story, which is thought-provoking. While lot of us like to revel in the way in which China has progressed, he shows that the double-digit growth has helped only the top 200 million while the rest of the one billion or more people live in penury. His travels and interviews reveal that a dictatorial regime that does not value human life and runs after growth numbers has literally squeezed the one billion by denying them basic facilities like health, education, water, electricity, etc, and has favoured growth of a very corrupt class. In fact, he goes on to highlight that China has nothing to say for its own production and most of what sells are foreign investment and foreign brands, which use these sweat shops to produce goods. China is more of a sub-contractor than innovator.
China on its own should be scorned for validating human rights and depriving its people of a humane living standard. He writes about how those who speak out disappear and even today, those killed during the Tiananmen massacre are unknown. Further, AIDS has spread widely in the interiors and the government is least concerned about the deaths. If what he says is true, then all those who talk of the China model should review their arguments, as no fair-minded country or government would like to do what China did to reach where it is today.
He puts forward 10 propositions for a more prosperous world. First, a market economy is the best. Even mathematical models used by economists like Gerard Debreu reinforce the claim made by Frederich Hayek in the mid-20th century that a market economy works the best. Second, free trade helps economic development. Third, good institutions are necessary for success, as there is a lot of Akerlof’s asymmetric information, which has to be corrected. Fourth, the best measure of an economy is growth and we should not try and camouflage this with abstract concepts like ‘happiness’. His stance is that even if environment has to be compromised, so be it. Fifth, creative destruction is essential, as it is the only way that innovation comes in and new enterprise emerges.
Sixth, momentary stability is essential for growth, as inflation comes in the way. Seventh, unemployment among unskilled workers is determined by the cost of labour. If we put too many restrictions like what France does for separation, then firms will employ less labour. Eight, the author believes that a welfare state does no good and once people are dependent on doles, the rot sets in. This has been argued in India too, where we have subsidy and employment programmes under which money is given out to people as part of welfare activities. This only makes people more dependent, wastes resources and leads to lower productivity. Ninth, complex financial markets have brought about economic progress. While the financial crisis was about the failure of some of them, he feels that the benefits have surpassed the cost of crisis. Derivatives have brought cheap capital everywhere around the world. Last, competition is largely desirable.
He is gung-ho about the US, which remains the leader in today’s world with a combination of private entrepreneurship and academic excellence. The dollar still remains the main anchor currency. And if one feels it is unpredictable today, the others are even more chaotic. Further, its military is the only one that can keep the global order ticking. More importantly, it is an exporter of values of democracy, individualism, gender equality and religious diversity. On this count, there will be little argument, as we have seen these values transcend all the revolutions we have witnessed in Algeria, Tunisia or Egypt. He also gives an example of how the US, its media and judicial system tackled the Dominique Kahn incident by providing justice to the coloured lady, which never happened in France where Kahn’s indiscretions were known, but protection of the elite was more important for the media.
There is also a chapter on Mahatma Gandhi, which Indians may not like. Besides Gandhi’s sexual preferences, which, he says, were a personal issue, he highlights the ambivalence in his approach to progress. Gandhi was for swaraj and asked people to burn anything foreign, yet he travelled in trains built by the British and not in an ox-cart. He also had a British surgeon when he needed an appendectomy. Sorman refers to him as the first 20th-century media-savvy political actor, as he walked briskly for the famous Dandi march when a film crew covered his steps and shifted to a leisurely pace when the cameras were turned off. But Sorman does praise him for bringing in values of hard work and honesty.
An Optimist’s Diary is a good book to read and is refreshing in this age, where we tend to be overly critical of the markets. That we have reverted to the markets after disdainful talks for five years shows that there is no alternative. It does get a bit distasteful when he attacks Stiglitz and Krugman, as it gets personal and goes beyond ideology. His revelations on China do make one think hard on whether this is the right way to go about it and if this kind of model is sustainable. A social uprising cannot be ruled out if pushed to the corner. And its economic model does not sound as alluring once we digest what goes on inside.
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