“India was relatively unhurt in the global financial crisis. The developed countries have a lot to learn from our highly regulated financial system.”
This is a popular claim. And this is, of course, nonsense.
I also suspect that this is an extension of the philosophy of the people who are not-so-intelligent (Right wing people) by the people of so-called intelligence (Leftist people).
I recently read Ila Patnaik’s response to this claim:
“India is a very poor country. We know very little about how to establish institutions or regulate markets that can support a sophisticated economy where a billion people can enjoy high productivity. Nobody in the world wants Indian-style monetary or financial policy-making. Our path ahead lies in learning how fiscal, financial and monetary institutions work in countries where per capita GDP is many times bigger than what we have in India. Our hope for making progress lies in learning these things with an open mind, and demanding a pace of change in India so that we can become more like an OECD country. A villager with no roads may foolishly boast of having no accidents, but he cannot teach people how to regulate traffic on busy intersections. It is important for policy-makers to remember that India has no lessons to offer to regulators operating in the sophisticated world of finance, and proposals suggesting that they should learn our style of regulation only make us look foolish.”
Why would people disagree with that?
- India is a very poor country. Poor countries are poor because of a reason: Their economic policies are disastrous. Now, why do poor countries adopt such disastrous policies? Ultimately, it is the public opinion that influences policy. In poor countries, the level of political ignorance is quite high. Is it even plausible that people know how to establish institutions that require sophisticated understanding of economics and finance in a country where the political literacy is shockingly low?
- Why would other countries want Indian model monetary policy making? Central banks in the developed west are often reasonably efficient government enterprises. They have delivered a relatively low rate of inflation for long. The inflation rate has been pretty high in India for 6-7 years.
- Monetary economics is very complex. Indian economists are mainly duds. There are, of course, economists who claim that we do not have enough money, and that data collection costs money. But, I am talking of incompetence of a fundamental nature. You do not need data to know the basic principles of economics. It does not have anything to do with money.
- But, why would people even want to make such claims? This is a claim that should make them look like idiots. But, they do not mind that. Worse, they do get away with it. Doesn’t this say something about the Indian society?