Indian economic counterfactual

This article draws attention to a thesis put forward by Swaminathan Aiyar, a right-wing economist, that Indian economic growth would have been far more rapid and had human development benefits if it had moved to "liberalise" its economy earlier.

Counterfactuals are always difficult to prove or disprove, but I would point out that the economic growth enjoyed by South Korea and Taiwan since the 1960s has been historically unprecedented. India's slow economic growth rate in the 1947-80 period is the norm for developing countries. Pakistan, Indonesia and most African and South American countries had similarly low growth rates.

I always find it strange that, when right-wingers praise the economic models of South Korea and other "Tiger economies" they point out that they were capitalist and had a big role for the market. However, when - as in 1998 - they face a crisis, right-wingers then immeadiately say "oh, they are crony-capitalist not proper liberal capitalists like in the West". I think that people should be consistent in how they view the economic model of the Tiger economies.

It strikes me that, like India, South Korea was a mixed economy. It had a big role for the state and so the state as key in creating the conditions for development and so the system can be described as "state-capitalist". In that sense, both India and South Korea were state capitalist - they just followed different policies and initiatives. South Korea's ones were far more effective.

It has to be noted that, until the 1980s, South Korea was normally a dictatorship and was ruled by generals and their (technocratic) advisers. They were thus able to carry through policies that would be politically nigh-on impossible in a democracy.

The South Korean state invested a lot in infrastructure, as far as I understand. It did not leave this to the private sector. India, on the other hand, spent less on infrastructure. Without good infrastructure it is difficult to have "take off" and rapid economic growth. Politically, infrastructure and capital spending is not as popular as current spending [or tax cuts], so it can be seen why a democracy like India would find it more difficult to allocate scarce resources to capital spending than a non-democratic state.

There was also greater availability of credit for industry in South Korea. This may have been, in part, due to a greater willingness to open themselves up to foreign capital - fitting in with the thesis that "liberalisation" helped. However, a lot of it might also have been to state policies that gave incentives to businessmen to re-invest profits rather than, for example, take dividends out of their firm. This contrasts with the "Anglo-American" capitalist model which is based on shareholder power and a tendency to high dividend payments. It is a more state-led, developmental model and a less free-market one.

Additionally, from my understanding, given the ideological threat posed by North Korea, South Korea opted for land reform. A military government was able to carry this through in a way that previous governments, dominated by short-sighted, civilian, right-wingers was unwilling or unable to do. India has not gone for land reform. This, arguably, contributes to both greater inequality and greater inefficency in Indian agriculture when compared to S.Korea.

South Korea also spent a lot on education - and ensured that everyone got a decent basic education. In many parts of India, this is not done. Education for the rural poor tends to be quite bad in India, outside of a few progressive, well-organised, states like Kerala.

Additionally, of course, India - as a vast country - faced all kinds of short-term crisis caused by ethnic, linguistic, religious and regional tensions. This made the political system lean towards short-term expedients to keep the country together - rather than the bold, long-term policies that many Asian tigers opted for.

The South Korean economic model was one of export-led growth - rather than the import-substitution model that India went for. However, export-led growth is easier for a small country than for a large one. There is easily a big enough market in the developed world for South Korea to sell her wares. However, I am not sure that there would have been room for India to sell [as a percentage of GDP] as large as percentage of its output to the developed world.

It does strike me that, in comparing South Korea and Indian, Aiyar is not comparing like with like. Instead, he has a certain ideological agenda and is pushing it.

New EU President and Foreign Minister selected

The EU has selected its first President and 'Foreign Minister' under the Lisbon Treaty. Herman Van Rompuy, the Belgian Prime Minister, has got the Presidential job and Catherine Ashton, a former Leader of the Lords, government minister and British EU Commissioner, has got the Foreign Minister job.

The selection of relatively unknown candidates for the job does suggest the EU had to try hard to find compromise candidates. This is either a good or bad thing, depending on whether you think it is better to try and reach a consensus behind a candidate or whether it is better that candidates have a high-profile and good name recognition [even if they are controversial].

This article suggests that taking Herman Van Rompuy away from Belgium could be bad for Belgian domestic politics - since it might make forging a new governing coalition harder. And this piece on Catherine Ashton suggests she hasn't had that many important jobs before and, therefore, implies she might be out of her depth.

The thing I noticed about this is that Western European member states seem to have got both key posts. The Eastern European countries seem to have got left out. And, Britain got the foreign minister job, which seems rather surprising to me - since we are one of the most semi-detached members of the EU! I would have thought the EU would prefer to give both of the top jobs to someone from a member state that was in the euro - and not one to a member state that was both out of the euro and had significant international representation of its own as a permanent member of the UN Security Council.

Tax revenue is falling more than expected and government spending is increasing less than expected

Chris Dillow points out , as has been said before, that the budget deficit is increasing because of a shortfall in tax revenues. Tax revenue is 10.1% down [compared to a forecast decrease of 7.2%].

In contrast, spending has gone up by 7.2% against a 8.3% forecast. Spending does not seem to be increasing fast enough to stimulate the economy that much, but the fall in tax revenue is what is making the fiscal position more unbalanced.

It goes to show that our tax system seems to be disproportionately dependent on revenue from certain transactions that seem to have fallen [most notably stamp duty from housing sales]. It also emphasises the need for a crackdown on tax avoidance/evasion.

Presents are economically inefficient!

Chris Dillow points out that, because people sometimes don't know what the person they are buying a present for really wants, presents are often worth less than their market value.

It seems that an American economist has worked out that the cost of unwanted Christmas presents amounts to about $12bn (0.1% of GDP).

Former Tory MP becomes chair of ITV

It seems that the former Conservative MP Archie Norman is to become Chair of ITV. I wonder if this will increase concerns about right-wing media bias in the run-up to the general election.

An extention of 'Godwin's Law'?

Krugman suggests some possible additions to the 'laws' of internet debate . Having read more than enough internet comment threads in my time, there definitely are a lot of people who compare even minor government interventions to the USSR; a little bit of inflation to Weimar or Zimbabwe and who make exaggerated claims about the problems of public debts in developed countries - and so demonstrate their lack of perspective.

An illustration is taken to task here , where FreeThinkingEcon points out that a "top bond manager" is claiming there is a risk of Weimar-style inflation. Now considering that is thousands of percent a month; then I seriously doubt it is on the cards here in the UK. And he shouldn't be in such a job if he does think that - as there would be little point in holding bonds. It is more likely that he is just saying this to get attention and to get people to support misguided right-wing anti-inflationary policies at a time when the real problem facing the country is unemployment.

Genes and language

This article points out similarities between genetics and language families. Those groups sampled who have the most genetic similarity tend to have similar languages.

The piece particularly focuses on Australian Aboriginal languages and the languages of Papua New Guinea. Considering the low population of these places, they have a remarkable amount of linguistic diversity and, genetically, they may have diverged from other human populations as long as 50,000 years ago when it was easier to travel from what is now Indonesia to Papua New Guinea and Australia using low-tech travel methods.

US consumption growth is US health spending growth

This piece on Duncan's website shows that a lot of US consumption growth over the past few decades has been health care spending growth. Unless the US can control healthcare costs, then it will find it difficult to raise its investment level to the heights it was in the 50s and 60s.

On the hatred of Obama among US conservatives

Michael Tomasky points out that the hatred of Obama that some right-wing Americans seem to have has reached a fever pitch. To some degree, this is inevitable for a left-of-centre president [as Clinton found]. However, there is a racial aspect to it - albeit it may be subconscious in some cases.

The regions of the country that are most hostile to him tend to be the Deep South and neighbouring states. Additionally, the conservative movement itself is mainly white and, due to its history of opposition to civil rights, encompasses a lot of racist opinion in the US.

However, the good thing is that this conservative bloc amounts to a minority of the electorate. To win in 2012, Obama needs to keep hold of swing voters and stop them being lured into the hardline right-wing camp.

A Wikipedia paradox

This piece implies there is a paradox to notability in Wikipedia.

The most notable article that is not eligible for inclusion in Wikipedia is itself notable for that reason. As such, should it be in Wikipedia? If so, then it would cease to be notable. If not, then Wikipedia is not noting something that is notable!

It is a bit of a play on words/concepts, but a curious thought nonetheless.

David Cameron and Margaret Thatcher

This article points out how David Cameron and Margaret Thatcher's views are actually quite similar. When Cameron tries to distance himself from Thatcherism, he distances himself from a caricatured laissez-faire ideology. In fact, of course, Thatcher was no abstract theorist of laissez-faire. She was in favour of a role for the state, but one different from that of social-democrats and centrists. It was a state that would aid capitalism rather than regulate it.

Additionally, of course, she was actually quite a good tactician. She did not attack those aspects of the welfare state which were most popular with her base - such as the NHS or free university education. Cameron's stated plan to reduce public spending but to safeguard health spending falls within this pragmatic Tory approach.

In a democracy, an electorally-successful conservative party is unlikely to stand for pure laissez-faire. Instead, it is likely to stand for use of the state to help business and for the provision of welfare services which their middle-class core vote is most attached to.

Is a better name for our current economic system a "bankocracy"?

Stephanie Flanders asks that question . It seems that, while ordinary people and many manufacturing and small service sector firms are in trouble, banks and financial institutions have got by far more aid from the state than any other sector. And they are still able to pay their top people - many of whom acted in a foolish way which brought on the crisis - massive amounts of money.

Truly, it seems we are in a bankocracy, where the financial sector seems to be inflicting costs on the rest of society and reaping private rewards.

East Coat mainline back in public ownership

This article points out that the East Coast Mainline has now gone into public ownership . National Express, the previous private sector owners, do not seem to have been able to run it properly.

I hope further renationalisations of rail routes follow - and that such renationalisation is permanent.

The need for a million more affordable homes

This article points out that there are a million fewer social rental homes than there were in 1979. This has meant that there are many people waiting on council house waiting lists and often having to put up with sub-standard private accommodation in the meantime. Political priority must be given to constructing more social housing units to alleviate this problem. Failure to do so plays into the hands of the BNP and others who wish to blame migration for the nation's ills.

Frank Skinner on the MoD bonuses, bankers' bonuses and the analogy with the MPs' expenses saga

The comedian Frank Skinner has a good article on the furore being created about MoD bonuses, just like there was a furore about MPs' expenses earlier. The sums of money involved are far less than bankers' bonuses and the other payments that those in the City pay themselves, but the right-wing media has generally reserved its ire for civil servants and politicians rather than for greedy bankers.

Skinner realises the strangeness of this and comments:

"Nevertheless, it may sound contrary but the MPs’ expenses scandal has actually restored my faith in politics rather than destroyed it. When it came down to it, those at fault really were accountable to us. They bared their backs, took their public lashes and time will tell if they’ve been forgiven. The credit crunch has completely destroyed my faith in our financial institutions because it’s shown them to be essentially a law unto themselves."

Members of Parliament are democratically accountable and so had to reduce their indirect remuneration via expenses when public outrage became manifest. The bankers, despite having paid themselves far more, seem to have avoided showing any such contrition.

Glasgow North-East by-election

It's been a while since there was an elections post on this blog. The Glasgow North-East by-election took place yesterday to replace Michael Martin, who stood down as a member of the House of Commons when he stood down as Speaker.

Labour won the by-election comfortably with 59.4% of the votes cast. The SNP got 20%. The Tories got 5.2%; the BNP got 4.9%; Solidarity [Tommy Sheridan's party] got 3.9% and the Lib-Dems got 2.3%. The turnout was 33.2% - about 12% lower than in the general election.

The result does show that Labour is able to get its vote out in Glasgow. This could mean that the SNP government is now becoming unpopular and left-leaning Scottish voters are 'coming home' to Labour. Alternatively, it could be that - in national elections - voters still prefer to vote for a party that can form a government for the whole of the UK - Labour - than for the SNP. The result also, perhaps, suggests that, when it comes to real votes in real ballot boxes, Labour might not do as badly as some polls suggest.