Category: India

Commentary – 4

Devashish Mitra writes on Ideas for India (October 2022):

With India’s overall per capita income 2.5 to 3 times the average income in its agricultural sector, we can expect the expansion of this sector to create only low-productivity and low-wage jobs in the absence of significant technological breakthroughs. Turning to the service sector: with only 12% of India’s population holding bachelors’ degrees or higher, and with 59% in the primary-school, middle-school and illiterate categories combined, only a small proportion of the population has any chance of qualifying for good service-sector jobs.

Thus, India must focus on manufacturing to make any significant dent in the jobs problem. As documented by NITI Aayog (2017), small firms (those with less than 20 workers) employ 75% of all manufacturing workers, but produce slightly over 10% of all manufacturing output. This implies several-fold higher labour productivity in larger firms. Besides, the average wage of a formal-sector manufacturing worker is six times the average wage in informal-sector enterprises, which are generally small, low-productivity,  unregistered, and exempt from most labour regulations (NITI Aayog, 2017). Thus, good jobs will mainly have to be created in relatively large firms, and mainly those in labour-intensive industries, since that is where output growth is bound to be accompanied by employment growth. The large scale of production is expected to reap economies of scale, leading to higher productivity and wages.

… Agriculture and services cannot be engines of job creation and growth. Therefore, giving up on manufactures and their exports is equivalent to giving up on growth and forsaking the creation of good jobs.

As the introduction to the essay states: “He posits that four factors can help the export-oriented manufacturing model succeed – further labour reforms; the signing and implementation of free trade agreements and establishing special economic zones; and participation in global supply chains. This will allow India to leverage its labour, along with advanced-country technology, to create productive jobs.”

Pankaj Chandra writes on Ideas for India: “Most small firms remain small all their life. In emerging markets, they face three key challenges: capital, relationships, and reach. Small firms compete on variety and small volumes, while a large firm competes on volumes and cost. The former has to innovate at a lower cost, while the latter owns channels of distribution and hence has a better reach in the market. The big question of our times is then: how should small firms compete and especially against large ones? Is there a model of technological development that would allow a small firm to have all its natural advantages as well as those of a large firm (that is, produce variety in small volumes and still be competitive on costs)? I argue that the challenge in India has been our inability to organise small firms as part of a network…This thereby deprives them of the ability to invest scarce capital in building distinctive capabilities; find a mechanism to form ties with competitors on shared services; and of course, be able to become part of large and distributed supply chains. Those that have managed to do so have grown out of their ‘tininess’, provided valuable products and services to their customers and have grown their endowment.”

A New York Times article in June 2022 wrote:

Even as India is projected to have the fastest growth of any major economy this year, the rosy headline figures do not reflect reality for hundreds of millions of Indians. The growth is still not translating into enough jobs for the waves of educated young people who enter the labor force each year. A far larger number of Indians eke out a living in the informal sector, and they have been battered in recent months by high inflation, especially in food prices.

The disconnect is a result of India’s uneven growth, which is powered by the voracious consumption of the country’s upper strata but whose benefits often do not extend beyond the urban middle class.

…“There is a historical disconnect in the Indian growth story, where growth essentially happens without a corresponding increase in employment,” said Mahesh Vyas, the chief executive of the Center for Monitoring Indian Economy, a data research firm.

…For Indian politicians, a high unemployment rate “is not a showstopper,” said Mr. Vyas, the economist, adding that they were far more concerned with inflation, which affects all voters.

…Analysts say [that] greater efforts [are needed] to build up India’s underdeveloped manufacturing sector. They also say that India should ease regulations that often make it difficult to do business, as well as reducing tariffs so manufacturers have an easier time securing components not made in India.

There have been many books in the past few years which discuss India’s past and future roadmap. Here is a sampling:

• The Struggle and the Promise by Naushad Forbes
• Unshackling India by Ajay Chhibber and Salman Anees Soz
• Countdown by Anshuman Tiwari and Anindya Sengupta
• India 2030 edited by Gautam Chikermane
• Jobs Crisis in India by R. Jagannathan
• Reviving Jobs edited by Santosh Mehrotra

So, what does tomorrow hold for India?

Commentary – 3

Praveen Chakravarty wrote in ThePrint (September 2022): “In the decade of the 1980s, every percentage point growth in India’s nominal GDP generated roughly two lakh new formal sector jobs. In the 1990s, every percentage point growth in GDP only generated one lakh jobs and in the 2000s, it fell to half a lakh jobs. To put another way, India’s GDP needs to grow four times as fast to produce the same number of jobs that it did in the 80s. The idea that, qualitatively speaking, GDP growth in the 80s may have been better for the average Indian family than today’s GDP growth, may sound incredulous and even facetious to the elite readers of this column, for who, life is vastly better today than four decades back. To be abundantly clear, I am not arguing for a reversal to the economic policies of the 1980s. But it is also important to be intellectually honest and acknowledge that contemporary economic models are not working for the vast majority of people in terms of improving their incomes and livelihoods. And to be sure, this is not just an India story or an indictment of one political party versus another but a global economic phenomenon, agnostic to political ideology or country.”

A Times of India editorial (October 2022) wrote, shortly after the Indian government had kicked off a recruitment drive for 1 million central government posts: “Unless manufacturing is able to absorb a far larger number of youth trying to get out of barely productive farm work, India will not escape the jobs crisis. Manufacturing’s share in employment has fluctuated around 12% in the last three decades, even though it’s the best phase of economic growth India experienced. Policy attention needs to focus on removing barriers to sectors such as textiles that have the potential to absorb a lot more young, especially women, coming off farms. When encouraging manufacturing, GoI must take employment intensity of the sector into account. In a fast-changing world, multiple reforms must operate simultaneously. Both GoI and states need to enhance the quality of their association with industries to enable quick skilling of young job seekers. Today’s jobs crisis is tomorrow’s social crisis.”

Swaminathan Aiyar wrote in Economic Times (October 2022): “The future lies in services, not manufacturing. This is good news since India has a greater comparative advantage in services than in manufacturing, and should be building on its strengths. Instead, the government seems obsessed with manufacturing and is pouring enormous subsidies into that sector. This is a mistaken priority. The services that require priority are not just high-profile sectors like IT but education and health, and both have been grossly underfunded for decades. Rising subsidies for manufacturing will cut into limited funds for human development… Some may argue that India desperately needs import substitution in manufacturing to reduce the imbalance. The right conclusion is that the trade deficit has worsened despite rising import duties for five years, plus Atmanirbhar and PLI. The approach is not working. The answer is not to pour evermore money into the wrong bucket. Economist Anne Krueger demonstrated decades ago that a dollar invested in export promotion yields more than a dollar invested in import substitution. Becker showed that investing in human capital was the best investment. Those are the right directions in which to go.”

Ajay Shah: “I’m sceptical of the state bureaucracy being able to understand and anticipate which sectors will do well and which sectors will do badly. It is very difficult to forecast the future. Only risk-taking entrepreneurs can take speculative bets, such as saying the computer hardware industry or automobile component manufacturing will do well in India. Who could have predicted that two-wheelers in India would fight off foreign competition pretty well while dozens of other manufacturing businesses would get butchered by foreign competition? It is not feasible for officials in bureaucracies to look at the industrial landscape and make speculative calls. That’s because they do not have the necessary information or the forecasting ability. Nor do they have the incentive, like private businesses do. Also, there is nobody to protect them if their speculation goes wrong; when their speculation goes wrong, they will be investigated by the Central Bureau of Investigation and the Enforcement Directorate. So, which official is ever going to take a risk? For all these reasons, the task of figuring out which sector to focus on is best left to the private sector. The job of the government is to create a broad enabling environment… The competitive advantage of operating in India is that labour is cheap. But it doesn’t mean everything has to be cheap. There will be a variety of inputs that goes into an industry and each firm has to figure out whether it is competitive to operate in India. What policymakers should focus on is just mistakes of public policy. We should focus on things like the way the Companies Act works, the way Indian capital controls work, the way income tax works, the way GST works, etc.”

Commentary – 2

A stark statistic from a Business Standard story (June 2022): “Over 94% of 276.9 million informal sector workers registered on the e-Shram portal have a monthly income of Rs 10,000.” More: “Age-wise analysis of the data show that 61.72 per cent of the registered workers on the portal are of the age from 18 years to 40 years, while 22.12 per cent are of the age from 40 years to 50 years. The proportion of the registered workers aged above 50 years is 13.23 per cent, while 2.93 per cent of workers are aged between 16 and 18 years… Gender analysis shows that 52.81 per cent of registered workers are female and 47.19 per cent are male…Occupation wise, agriculture is at the top with 52.11 per cent of enrolments done by those related to the farm sector followed by domestic and household workers at 9.93 per cent and constructions workers at 9.13 per cent.”

Ajit Ranade wrote in Mint (July 2022): “About 13 million young people join the workforce in India every year. Even assuming only half of them seek jobs, i.e., a workforce participation rate of 50%, we still need 6-7 million new jobs (or livelihoods) every year. These are in addition to the churn among existing job holders, which add to the count of total job seekers. Except for a few thousand, most new jobs are not created by large corporates, public or private. These jobs don’t even come from the railways, post office department, the police or the armed forces. They mostly come from small, medium and tiny one-person enterprises. Thus, 6 million new jobs need at least 60,000 businesses to be born every year. Hence, our clarion call for job creation should be accompanied by a stirring call to create enterprises. What does it take to set up new businesses at such scale? Are these to be born mainly in urban areas? Do the midwives at birth present a formidable hurdle? What is the burden of formal registration, tax compliance and other regulations, including at the local and state levels? Will these enterprises have high infant mortality? Do many more therefore need to take birth? Will an inspector raj thwart ambitions?”

He adds: “Among graduates, we see the strange phenomenon of multiple attempts taken at exams for government jobs. These jobs are a lottery to which millions of youth seem addicted, and waste precious years of their early adulthood. The success rate is barely 1%; yet, aspirants spend fortunes on preparatory tuitions and keep trying until their age limit is breached.”

Vivek Kaul wrote in Mint (October 2022) about this love young Indians have for (diminishing) government jobs: “A good portion of what should be a youth’s working life is spent waiting. This is clearly visible in the unemployment data published by the Centre for Monitoring Indian Economy. In September 2022, the rate of unemployment for those in the 20-24-years age category stood at 41.9%. The rate of unemployment for those in the 25-29-years age category was at 9.8%. Beyond that, unemployment was almost non-existent, with the rate for those in the 30-34-years age category being 0.8%. Now what does this tell us? It tells us that unemployment as a phenomenon almost evaporates as soon as an individual’s age turns 30. By this time, age catches up and many individuals become ineligible for most government jobs or the number of attempts they can take to write the exam finally runs out. This forces them into taking on an informal job in the private sector or alternatively look at becoming self-employed. And that leads to the rate of unemployment falling for Indians in their thirties.”

Shankar Acharya writing in Business Standard (September 200): “India’s population is still young, with about 55 per cent below 30 and over a quarter below 15. Its billion-strong working age population embodies an enormous potential for jobs and economic growth. About 19 years ago, I had warned that this demographic dividend could be squandered in the absence of right policies. Since then, successive governments have persisted with wrong or weak policies and programmes, including a poor public education and skilling system, an extremely complex and anti-job-creating maze of labour laws and regulations, foreign trade and exchange rate policies that discourage labour-using exports and import-competing domestic production, weak infrastructure that undermines productivity and connectivity and avoidable policy shocks like demonetisation. The Covid pandemic hasn’t helped. There is mounting evidence that the dividend is dissipating, with seriously adverse consequences for young India.”

Rathin Roy: “You have two options. Either you accept that you are going to become a more expensive country, or you put in place a plan to produce the things you take from China, more cheaply in India. India has been in a situation where we can produce high-end products for our consumers, but when it comes to mass market items, we are uncompetitive, compared to other countries, not just China.”

Commentary – 1

A few months ago, Janmejaya Sinha wrote in Hindustan Times: “Just in terms of per capita, there are three Indias. If we go by purchasing power parity (PPP) estimates for per capita in India, there is a Europe of about 50 million people with a per capita of $45,000 per annum; an Indonesia of 425 million people (double the size of Indonesia) with a per capita of $9,500 per annum; and a sub-Saharan Africa of over 900 million people with a per capita of $3,300 per annum, including about 300 million people, whose income levels rank even below sub-Saharan Africa. The first two Indias are good enough for business. It’s a consuming India, growing rapidly with increasing aspirations.”

He added: “As the consuming power of the top two Indias grows, businesses worldwide focus on them and cater to their needs. These segments are powering the Indian economy, already the world’s third largest in PPP terms. Yet, India cannot achieve its potential, or ever be called a developed country, without improving the lot of those living at sub-Saharan levels. What is worse is that the growth rates in the income of the top two segments are faster than the bottom, so by 2030, India’s Europe and Indonesia will account for over 70% of the total consumption spending. In 2030, there will remain 200 million people living below sub-Saharan Africa levels.”

Harish Damodaran analysed India’s jobs crisis in Indian Express (August 2022) with the help of the chart below:

The movement of workforce from agriculture that India has witnessed over the past three decades or more does not qualify as what economists call “structural transformation”. Such transformation would involve the transfer of labour from farming to sectors – particularly manufacturing and modern services – where productivity, value-addition and average incomes are higher.

However, the share of manufacturing (and mining) in total employment has actually fallen along with that of agriculture. The surplus labour pulled out from the farms is being largely absorbed in construction and services. While the services sector does include relatively well-paying industries — such as information technology, business process outsourcing, telecommunications, finance, healthcare, education and public administration — the bulk of the jobs in this case are in petty retailing, small eateries, domestic help, sanitation, security staffing, transport and similar other informal economic activities. This is also evident from the low, if not declining, share of employment in organised enterprises, defined as those engaging 10 or more workers.

Simply put, the structural transformation process in India has been weak and deficient.

He added: “Not everyone can be an IT professional. Given the lack of jobs in manufacturing — the sector potentially best placed to absorb the children of farmers and agricultural labourers — the bulk of the rural workforce is engaged in construction and the informal services economy. The somewhat better educated aren’t qualified enough to be programmers or write software code. They, then, aspire to join the armed forces or write the Railway Recruitment Board’s exams for NTPC (non-technical popular categories) posts. It’s another thing that not much recruitment is happening nowadays in these sectors. This, even as more jobs are getting created in industries requiring different skill sets — and in no position to absorb surplus labour from the countryside.”

P Chidambaram wrote in Indian Express: “The bulk of the jobs are outside government. They are in the private sector…There is a huge population that has multiple needs that are not satisfied. Fulfilling those needs, even partially, will create millions of jobs. Take personal transport: 24.7 per cent of households do not own a car or a motorbike or a cycle. Or consider household goods: in a tropical country, only 24 per cent of households own an air conditioner or air cooler. Just providing these essential goods at affordable prices to millions of households will vastly expand the country’s manufacturing capacity, create thousands of jobs and make life happier.”

Arvind Panagariya

Prof. Arvind Panagariya, in his 2020 book, “India Unlimited”, writes:

If India is to follow the well-trodden and only known path to job creation at decent wages in the early stages of development, it must take steps that would enable manufacturing, especially of the labour-intensive variety, to grow significantly faster.

A minority of commentators in India argues, however, that India is different and that it should eschew manufacturing expansion and build on its successes in services alone. However, these manufacturing sceptics do not offer a roadmap for the creation of well-paid jobs for hundreds of millions of workers with limited or no skills. The workers are either employed in agriculture and informal-sector enterprises or are self-employed. Dynamic services sectors, such as software and finance, generate relatively fewer jobs for them. Tourism, transportation and construction hold greater promise but their potential itself greatly depends on the performance of manufacturing. For example, transportation flourishes when the manufacturing sector generates demands for its services. Likewise, tourism and construction are spurred by higher incomes generated by manufacturing. Therefore, if the creation of well-paid jobs for some of those currently employed in the agriculture and informal sectors is an important objective, reliance on services as the exclusive engine of growth will not do.

…If the creation of well-paid jobs for those with limited skills is an objective, accelerated growth in manufacturing with special attention paid to labour-intensive products remains an important component of the strategy for economic transformation of India in the forthcoming decades.

…As the Indian economy transforms, it must walk on two legs, manufacturing and services, with agriculture progressively modernizing and releasing workers. It must endeavour to create an ecosystem in which large-scale, high-productivity firms may emerge and capture the world markets in both manufacturing and services.

…If India progressively adopts policies that would improve its efficiency as measured by its ability to capture a larger and larger share of the world export markets in both goods and services, it will accomplish in the next twenty years what China did in the last twenty.

Prof. Pangariya has specific recommendations: “Policymakers must…recognize that the bulk of the current employment in industry and services is concentrated in micro and small enterprises. These enterprises are characterized by low productivity, high underemployment and barely subsistence-level wages. The prospect of employment in them is not enough of an attraction for most agricultural workers to migrate out of their current employment. Therefore, the key to pulling the economy out of the current equilibrium is a set of reforms that would help firms grow larger, especially in sectors with high employment per unit of investment such as apparel, footwear, furniture and other light manufactures. [In addition], export markets remain the key to bringing about the transformation India seeks and needs. Survival in the export market requires high productivity and steady increases in it. It also requires continuous product innovation to retain existing customers and win new ones. Enterprises that rely on export markets are typically large and therefore better able to exploit scale economies. The existence of these firms plays a critical role in creating a competitive ecosystem in which smaller firms also become more productive.”

Let us also consider opinions from others.

Raghuram Rajan

India’s growth depends not on government jobs, but private sector jobs. And what type of jobs? Manufacturing or services? One view is that the manufacturing window has closed and the future for India lies in services. This view is echoed by Raghuram Rajan, as reported by moneycontrol (October 2022).

Former Reserve Bank of India governor Raghuram Rajan has expressed concern over India’s employment situation, calling it “really alarming”, and said the government must focus on promoting labour-intensive jobs such as those in the services sector.

…According to Rajan, the government’s approach to boosting growth and increasing employment through a heavy focus on the manufacturing sector is misguided.

“I am not in any way saying that we should not focus also on manufacturing jobs. What I am saying is that the enormous subsidies that are now going into manufacturing, we need to think of whether they would be better employed in creating the underpinnings of strong service jobs, not just in this country but as exports,” he said.

…Rajan, however, argued that it may be much easier to increase services exports than manufacturing in the current global environment. Further, service sector jobs are more labour intensive, which would help create more jobs.

The Eocnomic Times (October 2022) has more on Rajan’s views:

“Weightless services also consume little energy on the way to the final consumer, unlike manufactured goods. Export-led services growth will be much less environmentally harmful – the world cannot afford India to follow China’s path, even if it were open to it,” Rajan said.

He said liberalising manufacturing has diminishing returns and is politically fraught.

“One reason industrial countries have soured on open borders is their manufacturing workers have been disproportionately hit by global competition and outsourcing, while service workers have benefited. Both politically and economically, further liberalization of manufacturing has diminishing returns.”

He explained that services, unlike manufacturing, can be distributed across a country and reduce pressure on megacities that are turning into heat sinks and becoming increasingly unlivable.

Such a distribution of services away from large cities will boost rural incomes and provide an alternative in case of loss of agricultural incomes.

“The production of these services can be distributed across a country. In developing countries, this will reduce the burden on the large megacities that are becoming heat sinks and increasingly unlivable. It will also generate a source of income and a reliable stock of human capital to seed rural communities that would otherwise lack the economic capacity to survive the loss of agricultural incomes,” Rajan highlighted.

In an interview with Karan Thapar (The Wire, in March 2022), Raghuram Rajan said:

Remember that 70% of GDP in the industrial world is services. So, when you are tackling manufacturing, you are tackling 20% of GDP. When you are tackling services, you are in the same group as 70% of their GDP. Now that’s what they produce but it is also what they consume. In a sense, there is a much bigger market for services and importantly we already have a reputation, on software we have a good reputation but think of doctors. In the West when they think of a doctor, often they think of an Indian doctor because so many of our expats have gone there and become good, respected doctors in those areas. So, there are areas where we already have a reasonable reputation which we can build on. Consultants, every consulting firm in the world is full of Indian consultants, so why not sell them the services from India?

…Every service job, high quality service job that is created, usually creates another five or six other jobs. Now, these are lower quality service jobs and by all means we want to, in the end, get to a place where more and more people have high-quality service jobs.

But think of the lower quality service jobs that a higher quality service jobs today provides. Immediately, the person who has the high-quality service jobs needs somebody to look after their kids, they need a cook, they need a security guard, they need a driver. Now, already we are talking about four-five jobs. Now again, these are not great service jobs, but they are better service jobs than what is available in the village in that low productivity farm which is declining in productivity and getting smaller and smaller. So in the transition from agriculture to services, you will be improving somebody’s life.

…The manufacturing-led growth is harder for democratic countries because often it requires hard decisions like suppressing wages or suppressing the interest rate the households receive or even taking away people’s land without them being able to protest. On the one hand, the more authoritarian countries like Chinas and Vietnams of the world or many of the east Asian countries, when they grew fast, they were able to do a lot of this, I think we cannot.

Too Poor

About a decade ago, I had met (in a small group) a Chinese investor based in America. As the discussion turned to India’s future, he said, “China needs a China of 30 years ago.” I asked him to elaborate. He said that China grew because the world needed cheap labour and China supplied it in plenty. That, among other things, helped pull hundreds of million of Chinese out of poverty. As China moved up the income and manufacturing curve, it will need cheaper labour and there is no country better placed in numbers than India to provide that. That is how India can create millions of jobs and increase incomes. My next question was, “What does India need to do to make this happen?” His answer: “Just the basics. Get the infrastructure right, fix land and labour laws, allow flow of capital.”

Ten years later, India is getting a few things right, but much is still undone. The government is doing well in building infrastructure across the country. But job creation is anemic and income levels have been impacted because of Covid. Land and labour laws remain a challenge. China’s per capita GDP at over $14,000 is now at middle-income level while India is less than a fifth at $2,500, as shown in this chart from Economic Times.

There has been much discussion on the path forward for India. What is agreed is that India needs to move hundreds of millions of people out of subsistence agriculture to jobs in towns and cities. What is not clear is whether they will be engaged in manufacturing or services. India’s factory workers are a small percentage of the labour force. In the future, does the labour force make or serve – that is the big question. How will this transition happen?

Two parameters show the extent of poverty in India. 800 million Indians (60% of the population) are still dependent on free food from the government. The median household income in India is about Rs 20,000 ($250) from what I could estimate from this story from Business Standard based on CMIE data from February 2022. If a household earns more than Rs 40,000 ($500) a month, it is in the top 8% in India.

This is from “Whole Numbers and Half Truths” by Rukmini S published in late 2021: “India’s most recent official statistics on consumption expenditure come from the National Statistical Office (NSO), through a household survey that is designed to be nationally representative and asks people every detail of what they spend their money on. It shows that the average Indian spends a little under Rs 2,500 on average every month. Anyone in urban India who spends more than Rs 8,500 would in the top 5 per cent of the country. And these figures are from before the 2020-21 pandemic.”

She adds: “By other measures too, the majority of the country lives on very little. Just over 3 per cent of rural households have a family member who is a graduate. Over half rely on casual manual labour and fewer than 10 per cent have salaried jobs. In over 90 per cent of rural households, the top earning family member makes less than Rs 10,000 per month. Over half have no land and fewer than 5 per cent own agricultural equipment. Less than 4 per cent have access to agricultural credit of over Rs 50,000. Just 20 per cent own a vehicle and just 10 per cent own a refrigerator.”

So, what can India do to solve its income problem? Income is of course related to jobs and productivity. Can India do a China in manufacturing? Or is the world so different now (deglobalisation) that either we need a new model or we need to temper our future expectations for growth beyond the top 150-200 million (10-15%) Indians?

Let’s begin by looking at two expert views.

India’s Future

India missed out on two revolutions which brought prosperity to some nations (especially those in the West) in the 19^th and 20^th century: the classical liberal ideas centred around individual and constitutional constraints on government (with Adam Smith as the guiding light, along with the likes of Mises, Hayek, Friedman and Buchanan) and the Industrial Revolution (which multiplied human productivity). This is what lifted many hundreds of millions out of what had seemed until then as perpetual poverty. Liberalism, entrepreneurship and technology (especially in the harnessing of energy) created the modern world as we know it. And India, colonised first by the British and then subjugated by its own leaders after Independence, remained poor. 75 years after the British left, the per capita income of Indians is only $2,000, a sixth of the world average. Indians have created wealth for themselves outside India (the household income of Indians in America is the highest among all ethnicities) but have not been allowed to do so in India.

Even as the liberal world order faces challenges, India has this moment in time when it can rise. A politically stable and secure leadership can free Indians and open India to the world. A decade of breakthrough ideas like Dhan Vapasi, low taxes, protecting property rights, enablement of education, decentralisation of powers to cities, freeing agriculture from all its constraints, removing trade barriers, ensuring speedy justice and contract enforcement, and eliminating all discriminatory laws can see India rise rapidly to middle-income levels. [For more, see my Nayi Disha writings.]

The next Mont Pelerin Society general meeting will be held in India (New Delhi) in September 2024. The theme is apt for countries like India: “Freedom for the Next 6 Billion.” India needs the vision and ideas that MPS embodies. The intellectual heft of the MPS can be India’s guide as it seeks a roadmap to enable wealth creation for 1.3 billion Indians. Every other system to engineer prosperity has failed; it is only an environment of freedom with minimum government that creates the incentives for people to flourish. As the title of a book by Dierdre McCloskey and Art Carden puts it: Leave Me Alone and I’ll Make You Rich. Indians do not need another welfare scheme or subsidy or handout; what they need is economic freedom. Prosperity is the best legacy any leader can leave.

It all begins with the right ideas. As Mises wrote in 1957, “The genuine history of mankind is the history of ideas. It is ideas that distinguish man from other beings. Ideas engender social institutions, political changes, technological methods of production, and all that is called economic conditions.” Forums like Mont Pelerin Society are the incubators of ideas. We, the educated in India, have a responsibility to take these ideas, which are so aligned with human nature, to the people. A free and rich India can be the real Vishwaguru. With the West caught in the aftermath of its own financial excesses, with Russia and China being led astray by authoritarian leaders, India has a unique opportunity in its 75^th year to transform itself (as this book by Atanu Dey explains). India’s Amrit Kal can become truly that if Indians embrace the ideas of freedom – not just political independence, but real economic freedom for every Indian and in every action. This is the Nayi Disha India needs.

Eamonn Butler’s book, published on the eve of the Oslo meeting, offered this view on the future:

… [T]here is every reason to believe that the Society’s members today can rise to the present challenges and hope to overcome them. Indeed, their predecessors have left them a much firmer foundation on which to do so. The failure of central planning has been exposed, both intellectually and practically. Inflation is better understood than it once was. There is a widespread and healthy scepticism about the ability of governments to run almost anything efficiently, and a broader questioning about the motives of those in power. There is a greater appreciation of the value of peace and stability in a more interconnected world. Trade, in both goods and, increasingly, services has become not only global but also a familiar part of all of our lives. Militarism and aggression are much less respectable.

Moreover, markets have spread into areas once thought to be the preserve of the state. Margaret Thatcher, greatly influenced by Hayek and Friedman and supported by Society member Sir Geoffrey Howe, began Britain’s privatisation of state industries, an idea that would go round the world, even into the former communist-led countries of Eastern Europe. Many other countries replaced their old state-run Ponzi-scheme pension systems with individuated private accounts like those designed by the Chilean minister (and Society member) José Piñera. School choice and school vouchers, ideas rediscovered and popularised by Friedman, began to reform and improve education in yet other places. Property rights have been expanded and business paperwork scaled back in large parts of South America, thanks to thinkers like the Peruvian economist (and another Society member) Hernando de Soto. And parts of the former Soviet bloc have opened up to (or returned to) social and economic freedom, thanks in large part to the ideas, understanding and influence of the Society members located there such as Mart Laar, Václav Klaus and Leszek Balcerowicz.

It is impossible to measure with any precision the impact of the Society in these achievements, and impossible to predict its influence on future events. In a very important sense, while its members may have considerable impact individually, the Society itself has none: it is, in Hayek’s words, only a ‘community of liberal scholars’ with no policies or programme of its own. But by bringing authoritative liberal thinkers together, and by expanding the scope and depth of liberal ideas, it ensured that liberalism could not simply be ignored. By offering a challenging critique of socialist thinking, it guaranteed that the assumptions on which socialism was based, and the presumption of its beneficial results, could not simply be taken for granted. By providing its members with mutual support, it gave isolated liberals the strength to hold their ground against the seemingly overwhelming force of the political consensus. By creating networks of liberal scholarship, it brought liberal ideas to active and enquiring young minds across the world. By informing the work of liberal policy institutes and a few thinking politicians, it helped change real events. All these activities continue, and on an ever-expanding scale. So in that sense, the Society’s influence will indeed continue to be significant.

India needs the equivalent of an MPS and economists like Hayek, Buchanan and Friedman who can make the case for liberalism and persuade people that it is only freedom (and especially economic freedom) which offers the lasting path to human flourishing and a life of dignity.

MPS Oslo

So it was in early October that I travelled to Oslo. This was my first visit to Norway. With a per capita income of $67,000 (as of 2020), it is among one of the richest nations in the world. The country’s population is just over 5 million with 20% of the people living in Oslo. Norway has been greatly benefited by the discovery of oil; the value of its sovereign fund exceeds a trillion dollars. Like all the Scandinavian countries, government spending on social welfare is high.

The Airport Express covered the 48 kms from the airport to Oslo Central in 22 minutes. The conference hotel (Clarion Hotel The Hub) was just a five minute walk from the station. While most of the four-and-a-half days were spent in the hotel at the MPS meeting, we did have a half-day excursion to the Oscarsborg fortress via a 75-minute boat ride each way, which gave a glimpse of the beautiful fjords that Norway is so well known for. As National Geographic explains: “A fjord is a long, deep, narrow body of water that reaches far inland. Fjords are often set in a U-shaped valley with steep walls of rock on either side. Fjords were created by glaciers. In the Earth’s last ice age, glaciers covered just about everything. Glaciers move very slowly over time, and can greatly alter the landscape once they have moved through an area. This process is called glaciation. Glaciation carves deep valleys. This is why fjords can be thousands of meters deep. Fjords are usually deepest farther inland, where the glacial force was strongest.”

The meeting was organised as a set of plenaries, with presentations and discussion. The session titles tell the story of the themes:

• Challenges and Prospects for the Liberal World Order
• The New Totalitarian Threats: Russia and China
• The Recalibration of Globalisation and the Future of the WTO
• The Enemies of the Open Society 2.0
• The Climate and Environmental Challenge and Opportunity
• The Challenge of Neo-Planism and Top-down Industrial Policies
• Entrepreneurship, Innovation and Creative Destruction
• Reforming the Framework of the Market Economy
• Freedom, Economy and the Pandemic
• New Perspectives on Liberal Democracy and the Social Contract
• The Monetary, Financial and Fiscal Framework under Pressure
• Federalism, Subsidiarity and the Future of the EU
• Reforming Liberalism: From The Colloque Walter Lippmann to the Present
• Reinventing Liberalism for the 21st Century

For me, it was a wonderful experience being back in the world of liberal ideas, discussion and debate. I came to liberalism late in life – only when I started thinking about India’s lack of poverty and possible paths to prosperity. It was from these ideas that I had started Free A Billion which later morphed into Nayi Disha. While I failed to change minds or channel votes towards a prosperity movement, what became clear to me is that unless Indians demand liberty, it is going to be a difficult path ahead for most Indians. Having lost 75 years to illiberal and interventionist governments, we are in danger of losing many more.