He has challenged the utilitarian roots of economics and redefined development policy, but how does he feel about India?by Meghnad Desai / July 20, 2000 / Leave a comment
Rabindranath Tagore was the first Indian to win the Nobel prize for literature, in 1913. The adulation which followed in his native Bengal distressed him; he sensed that “the people honour the honour in me and not myself.” His fellow Bengali, the economist Amartya Sen, might have echoed those words when he too was mobbed by thousands on his return home in 1998 with Bengal’s second Nobel prize.
Tagore was a global figure in the first quarter of the 20th century but is hardly known today. It was he who conferred the title Mahatma (Great soul) on Gandhi. And as a family friend it was also he who chose Sen’s unusual first name. Amartya means someone who is impossible to kill. Sen was born in Santiniketan (the home of peace), a university in the forest founded by Tagore. Amartya’s maternal grandfather, Kshiti Mohan Sen, author of a classic work on Hinduism, worked there, and his daughter had gone back to Santiniketan for her confinement.
Santiniketan was a modern version of the ashrams where ancient rishis in olden times imparted knowledge. But it was the humanist Tagore who made it likely that Sen would be a citizen not of Bengal nor even India, but of the world. British colonialism was in its last retreat by the time Sen was born in 1933. It had its defects, none so blatant as the Great Famine in Bengal in 1943, which took 2m lives. Yet what endured in Sen’s life was not just the memory of the famine, but the sound educational system of St Gregory’s School of Dhaka and then the prestigious Presidency College, Calcutta. Here was the best of an English education provided by those clever colonials themselves. You hear echoes of it in the hauteur of Nirad Chaudhuri (the most anglophile Bengali ever).
Calcutta, Bombay and Madras acquired modern universities in the mid-19th century. In these port cities, creations of the East India Company, a mixture of Indian commerce and western education flourished. Bengal led India in the 19th century. It acquired municipalities, libraries and reform movements. It produced the clerks and higher civil servants who held the empire together. It also produced the doctors, lawyers and engineers who became the pioneers of the nationalist movement. Its writers and poets-Tagore was chief among them-articulated their aspirations.
But by the 1940s, Bengal was in decline. The 1943 famine was followed by Hindu/Muslim riots in 1946, and after partition in 1947 Bengal industry was deprived of the jute which lay in east Pakistan. Calcutta became a stronghold of the Communist party of India. Bengali intellectuals read the Marxist classics. In coffee houses around the Presidency College, the battle of text and counter-text raged-who had the most subtle reading of Marx and Lenin, who could best reconcile Marxism and Hindu philosophy? It was in this crowd that, in the early 1950s, Sen’s quick mind, vast reading, and his polite but persistent manner of wearing down opponents in argument were already standing out. He was not unique. Indeed, he was a type—the left-wing Bengali intellectual. Many flourished in their college days, only to shrink away into comfortable jobs as civil servants. But Sen belonged to a new generation which had come of age in an independent India. They were patriotic, but they could also now take on the world in their own right.
The first step in any such quest was to go abroad. The world takes little notice of the home-grown writers and intellectuals of the non-western world. In the 1950s it took even less notice. Sen went to Trinity College, Cambridge as a student in 1953. There had been a trickle of Indian economists coming to Oxbridge and the LSE through the 20th century. Indeed, economics was if anything overdeveloped in India before independence. But it was economics of an applied kind, devoted to helping develop the nationalist policy platform, using the tools learnt back in Blighty. The new generation had a much more ambitious agenda. Soon Sen was joined in Cambridge by Jagdish Bhagwati (now at Columbia University), Manmohan Singh (finance minister of India, 1991-1996, and pioneer of economic reform) and Mahbub ul Haq who became a leading light in Pakistan, in the World Bank and at the UN Development Programme.
This generation did not have to devote itself merely to analysing India’s problems. They could be economists from India rather than Indian economists. Of course they would go back and help India’s efforts to develop a modern industrial economy through planning. But first they had to master the sciences taught by the west. Some, like ul Haq, were sure that only by learning the “neo-classical stuff” would they know enough to undermine it, and help poor countries prosper in the face of western hegemony. Others, such as Bhagwati, wanted India to benefit from the rational principles of international trade theory and escape from the high costs of autarky. Bhagwati came from Bombay, the rival to Calcutta, a commercial city with less radical traditions. Gujaratis from Bombay tend to be traders (banias) while Bengalis are clerks (babus). Gujaratis believe in compromise and reform (Gandhi was a Gujarati). Bengalis see themselves as radicals.
What sort of economist was Sen going to be? Consider the choices open to a clever 25-year-old Indian economist. Cambridge was divided between a left Keynesian and a right Keynesian faction. On the left were Joan Robinson, Maurice Dobb, Pierro Sraffa. They were engaged in a critique of neo-classical economics. On the right were Dennis Robertson, Austin Robinson and James Meade. They were moderate neo-classicals and not averse to the Butskellite compromise. Cambridge had been the centre of two revolutions in economic theory before 1939. The first was Pierro Sraffa’s work on perfect competition, which showed that the accepted version of Alfred Marshall’s theory of equilibrium among competing firms was logically incoherent. The second revolution was wrought by Keynes’s General Theory, which showed that a high level of unemployment was quite consistent with a properly functioning market economy. Cambridge had thus undermined the case for liberal free market economics. Or so it thought. In the 1940s and 1950s, the American economists came back to reverse the two revolutions. They were more professional, used more formal techniques, and their discourse was less political. Economics was to be a pure, value free science. Neo-classical economics was extended and redefined to absorb the Cambridge critique. We were all neo-Keynesians now.
The Cambridge left was outraged at this bastard Keynesianism, created by Paul Samuelson and others. It intended to extend the inter-war critique of neo-classical economics into a full assault on the economics of capitalism. Socialism needed a different economics. Who was going to provide that, if not young economists from the third world?
Even in his twenties Sen rose above such stereotypes. While he did not neglect to write on development and on “Indian” topics, he chose not to be a development economist like ul Haq or a trade theorist like Bhagwati. Instead, he took on the most philosophically abstruse field of social choice theory. This did not make him popular. He went back to India to teach at the Delhi School of Economics at the age of 30, but he never accepted an assignment from the government. He confined his serious work to social choice, the field opened up by Kenneth Arrow’s 1951 essay “Social Choice and Individual Values.” This work relied on mathematical logic rather than calculus, linear algebra or topology. When there were urgent problems of poverty, hunger and unemployment, why was one of India’s brightest stars concerned about transitivity, symmetry and the problems of utilitarianism? It is only now, 40 years later, that an answer can be given, and the ambitious architecture of Sen’s economic thought has become clearly visible.
in the 1950s, to choose between left and right was to choose between alternative means of state management of the economy. But how was one to know that this management was truly in the interests of the majority? As Arrow pointed out, counting heads in a referendum on economic policy ignores the fact that different people vote yes or no with different intensities of preference.
The problem of preferences also arises in the defence of redistribution. Suppose that there is a simple case of imposing a direct tax which will take money away from the rich and give it to the poor. If there are more poor than rich, then surely society is better off on utilitarian—”greatest happiness of the greatest number”—grounds? Money is a means to an end. The end is well-being and this is best measured by the utility an individual derives from consuming things. The principle of diminishing marginal utility means that an extra £100 is worth less to a rich person than it is to a poor person. This was the economic rationale for the welfare state advanced by the Cambridge economist Arthur Cecil Pigou, Keynes’s teacher and colleague at King’s College, Cambridge.
But some economists, of both left and right, found this utilitarianism unsatisfactory. How can you compare the satisfaction I get from spending £100 on a seat at the Royal Opera House with the satisfaction that a homeless person may get by blowing the money on, say, junk food and booze? Surely you cannot compare utility across individuals—you cannot add it up as if it was the same for everyone? So argued Lionel Robbins of the LSE, and others on the free market right.
Can democracy override these objections? If a majority prefers one thing over another, is that not enough? Yes—but only if the voting procedure truly reflects people’s preferences. Arrow showed that given three options (1, 2 and 3), three people (A, B, and C) with diverse preferences would find it hard to arrive at an appropriate choice. Let us say that A prefers 1 to 2 and 2 to 3, B prefers 2 to 3 and 3 to 1, and C prefers 3 to 1 and 1 to 2. Which option do you take? Moreover, the intensity of first preference or second preference may differ over the three individuals. Thus A may prefer 1 only mildly more than 2, but would rather have 2 than 3 in any circumstance. Reflecting the true preferences of a collective is much harder than the crude theories of democractic choice imply.
In attempting to unravel Arrow’s paradox, Sen returned to first principles on the nature of choice. If we observe an individual buying fish rather than meat, how do we know it was his/her consistent preference and not just a whim? Or, I may choose fish not because I like it more, but because I am boycotting meat this week in support of the meat workers’ strike. Thus my choice may not reflect an egotistical, utility maximising action, but a more inclusive set of preferences, including my commitment to solidarity with strikers. Sen showed that we must take into account notions of sympathy or commitment in order to understand such things as voting behaviour, paying for public goods, looking after elderly relatives, sticking together in a marriage for the sake of the children, and so on. This may seem obvious to non-economists, but Sen helped to take economics out of the confines of private consumption into real life behaviour where families, groups, collectivities have claims on us. He did this not by an emotional diatribe but by using logic. Buried in some highly technical material was a formidable challenge to Homo oeconomicus.
Sen also showed that the freedom to choose, beloved of the political right, may not be a real freedom at all. Many seemingly free people can be observed making apparently free choices which are in fact a reflection of their dependence or interdependence. Elderly widows in Indian households often eat very sparingly, and if asked, say that is what they prefer. But if they were not dependent on the son or daughter in whose house they live, they would behave differently. (Modern psychology is partly based on the idea that the sovereign, conscious, choosing self is a kind of illusion—but economists, including Sen, have paid little attention to psychology.)
In 1970, Sen finished his ten years of work on social choice. His book Collective Choice and Social Welfare was a definitive advance on Arrow’s work. Young economists, many of them Indians, began to work on these topics. But it was now that Sen began the long journey back from theory to practice. He also left Delhi, in 1971, and joined the LSE. Although he has retained his Indian passport, he has not worked in India since. The hostility of a section of the Indian academic establishment, and his divorce from his first wife, the Bengali poet and novelist Nabaneeta, with whom he had two girls, partly explain this decision.
During the 1970s, Sen began to apply his critique of orthodox economics to the questions of inequality, poverty and national income measurement. Right-wing economists, who reject the utilitarian logic for income redistribution, are often the first to argue on utilitarian grounds that a higher per capita national income is good for a country. This is logically inconsistent. At the very least, one might worry about the distribution of income, not merely its total growth, which may flow to a small number of “winners.” (The left-wing anti-utilitarians, such as Sen, can also be accused of inconsistency on this point—as their egalitarian critique of national income rests on Pigou’s applied utilitarianism.)
But Sen, now in his early forties, had moved on again to ask some basic questions about well-being. In both his previous fields he had been clarifying, sharpening, improving, existing tools. But the new direction Sen now broke into had deep roots in his childhood, and in the humanist, anti-instrumental ethos of Santiniketan, where he had grown up.
The bengal famine of 1943 had shattered the illusion of a Golden Bengal. Sen began to write about the famine in the mid-1970s. I remember receiving his first draft while I was teaching in Belgium. I was excited by the draft and wrote to him at once saying that he ought explicitly to challenge neo-classical theory because that was what his article did. In his analysis of the famine, Sen was to show that the conventional wisdom that people died because of a shortage of food was mistaken. His detailed work on weekly arrivals of food grains into Calcutta showed that food availability had improved rather than deteriorated. People starved not because there was no food, but because they lacked purchasing power. They lacked purchasing power because the demand for their labour services had collapsed. Their entitlements, normally sufficient for a modest livelihood, fell to below subsistence. Just as Keynes had shown that a market economy could be in equilibrium with many people unemployed, so Sen showed that a functioning market economy could leave millions dead.
The argument was developed in Poverty and Famines, which extended case studies to the horn of Africa as well as Bengal in 1943 and Bangladesh in 1976. Poverty and Famines received a savage review in the Indian journal, Economic and Political Weekly, from a fellow Bengali economist and former adviser to the Indian government—Ashok Mitra. He derided Sen’s book as old hat. The famine code of British India itself had laid it down that to relieve distress in famines, the local state should create jobs, not worry about food supplies, which the market could take care of. This episode of Bengali fratricide is revealing. Sen may be a world-class economist and philosopher, but he remains a Bengali of whom Bengalis are possessive and envious at the same time. He had abandoned his Bengali wife and his country for lucrative professorships abroad. He had to be chastised. Yet Mitra had missed the larger significance of Poverty and Famines. A clever Marxist though he is, Mitra did not notice that the foundations of Sen’s “entitlements” were in the classical labour theory of value. It was done without once mentioning Marx, but the entitlement of the individual is based on his/her labour power. In a normative twist to the classical theory, Sen argued that people in poor agrarian economies are “entitled” to enough goods to reproduce their labour power.
The next step in Sen’s journey to a humane economics involved looking at the problem of poverty in a radically new way. Many people argue that there are no “really” poor people in the rich countries today. This implies that poverty can be and should be defined in a universal way, valid across time and space. Progressive social scientists in the developed countries reject this idea by defining poverty in relative terms-no longer just food and shelter, but the degree of inclusion in the daily life of the community.
Sen shifted the terrain. Yes, there is a universal definition of poverty. No, it is not in terms of income or purchasing power, but of “capabilities” and “functionings.” Again this was a challenge to the utilitarian calculus of neo-classical economics. It was not some abstract utility (or its indirect measure, income) which was a measure of well-being, but someone’s capabilities. People can do any number of things: eat, sleep, play music, read a book. Potentially, they can do many more things; education is a key to realising their potential. The poor are poor because their set of capabilities is small—not because of what they don’t have, but because of what they can’t do. In other words, the poor can’t do very much with their time. (The emphasis of centre-left governments in the developed world on equipping people with the skills to compete in the global economy is an echo of this argument.)
The capabilities measure is, in theory, universal. If you can nail down a basic set of capabilities somewhat like basic needs, it may cost more in France than in Tanzania, but it will be the same set everywhere. The capability to lead a healthy and productive life, to communicate and participate in your community, to reproduce biologically with the partner of your choice, to move about freely, may exhaust the minimal list.
There was now a distinct Sen agenda. Utility and income had been displaced from their primary positions in orthodox economics. Well-being is captured by things people can do rather than things people have. If their set of capabilities grows larger, people can do more of the things they would like to do. Thus we arrive at a new and dynamic definition of freedom—choice over a larger and larger set of capabilities.
Throughout the cold war, choice was a right-wing, western, slogan. The Soviet bloc talked about economic and social rights—employment, freedom from hunger, housing. The negative freedoms—of speech, of belief, of movement—were the monopoly of the west. Sen’s famous assertion that no serious famine has ever taken place in a democracy shows that he was never dismissive of these negative “bourgeois” freedoms, but his work on capabilities ties together the two freedoms. Economic development expands the choice people have over their capabilities. Freedom is choice with a larger and larger content.
These ideas have become remarkably influential, partly thanks to good timing. Towards the end of the 1980s, the developing countries were in a fragmented state. They were struggling with a debt crisis and the structural adjustments insisted on by the IMF. But the communist world had lost its allure, and the 1950s model of growth through import substitution-led industrialisation had exhausted itself in India, Mexico, Brazil. The open economy, export-oriented “tigers” of Asia had shown that rapid growth was possible within the capitalist paradigm. The anti-market, anti-business, statist industrialisation strategy, which had dominated left-wing development theory for the previous 20 years, was in disgrace.
The market alternative worked, but at what price? Many countries found that in undergoing IMF-led structural adjustment, they had to achieve targets-balanced budgets, reduction of trade deficits, exchange rate depreciation-which had an adverse effect on their populations. They had to cut their health and education spending to balance the budget. The question became: are we balancing the budgets as we are unbalancing the lives of people?
The author of this question was Mahbub ul Haq, Sen’s contemporary in the 1950s. He had been at the heart of the planning commission in Pakistan in the 1960s, and an adviser to Robert McNamara at the World Bank in the 1970s. Having served in General Zia’s governments in the 1980s, in 1989 he was back in the US, working at the UN Development Programme (UNDP). By then Sen had moved from All Souls, Oxford to Harvard, a move triggered by the death of his second wife, the Italian economist Eva Colorni. Bringing up the girl and boy by that marriage on one salary, Sen found that even a professor’s salary was not enough. Harvard was more generous and more exciting. It was from there that ul Haq enticed Sen to become the key figure on his projected Human Development Report. In the first chapter of the first (1990) report, Sen laid the intellectual foundations of a new concept of human development. This was the translation of his work over a dozen years into terms which were to influence the largest number of policy-makers and opinion-formers.
Human development is defined as expanding the choices people have over things they can do. Economic growth in terms of per capita income (GNP) is downplayed in two ways. First, the distribution of income within a country has to be taken into account as a corrective to a simple “per capita” average. The second demotion of income was by constructing a Human Development Index (HDI). Three variables were chosen to measure human development: life expectancy, adult literacy and income. Taking these three together—health, education and resources—an HDI was calculated for each country. This simple device of ranking all countries—developed and developing—in a single table had a dramatic “benchmarking” effect. Poor Sri Lanka, with a per capita income of $400, fared much better in Human Development Index than Saudi Arabia with 15 times its income. Oman and Czechoslovakia had the same income in 1990, but Oman came 58 ranks lower than Czechoslovakia in the HDI. Very rapidly the value of a country’s HDI and its ranking displaced growth of per capita income in policy discussions as well as perceptions. The Human Development Report is now the most widely reported and read of all the reports published by the UN, IMF or the World Bank.
Human development proved to be the “new paradigm” in development policy. Progress towards increased well-being could be made even without significant spending—for example through improving the status and education of women. Proof was right there in the HDI. Rich countries with unequal income distributions had levels of human development lower than some sub-Saharan African countries. The World Bank under James Wolfensohn began to take these ideas seriously. (Sen’s lectures at the Bank have just been published as Development as Freedom by Oxford University Press). The Asian crisis took the message into the heart of the IMF, with Gordon Brown and others arguing for a social dimension to the IMF’s structural adjustment programmes. The “Washington consensus” has come a long way from its narrow macro orthodoxy, thanks in part to Sen. If you want globalisation with equity, you need not demonstrate outside WTO meetings. Just insist on a human development perspective alongside the market. Tell your MP that the Master of Trinity College, Cambridge, says so.
Sen is one of the world’s most influential intellectuals and therefore—despite his gentle, rather pedantic, manner—he has many detractors. Many economists said privately that the “Mother Teresa of economics” did not deserve the Nobel prize for such “soft” ideas. He causes anxiety by being hard to pin down. He remains a man of the left. Indeed, the West Bengal government, for many years run by the Communist party of India, considers him one of their own. Yet, like his good friend Eric Hobsbawm, he enjoys a place of honour at the heart of the liberal establishment. After a long relationship with the philosopher Martha Nussbaum he is now married to Emma Rothschild, a historian of ideas, and for the past two years he has been master of his old college, Trinity, Cambridge. He remains too much the unworldly academic for a more political position in the World Bank or in any imagineable Indian cabinet.
He has defied easy classification in other ways too. He is neither a macro nor a micro economist, nor a conventional development economist. And he has avoided most of the big economic disputes of the past 30 years-such as monetarism versus Keynesianism. His relationship with India itself has remained fraught. He has unfavourably compared the country’s failure to eradicate illiteracy and illness with China’s efforts. (The Indian state of Kerala is the only one to attract his praise). But in his critique of relativism—the claim that western values should not be applied to non-western countries—he has proudly promoted India’s indigeneous liberal tradition. And in his most recent work on poverty and capabilities—in which all countries are measured by a universal standard-we can see traces of his real intellectual roots: the global Indian humanism of his fellow Bengali, Rabindranath Tagore.