13 Book Format - 675 – November 2015 60 Books POVERTY AND PROGRESS: Realities and Myths About Global Poverty by Deepak Lal. Oxford University Press, Delhi, 2015. THIS is not a politically correct book. It is opinionated

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  • S E M I N A R 6 7 5 N o v e m b e r 2 0 1 5


    BooksPOVERTY AND PROGRESS: Realities and

    Myths About Global Poverty by Deepak Lal.Oxford University Press, Delhi, 2015.

    THIS is not a politically correct book. It is opinionatedand brilliant because, true to form and reputation,Deepak Lal attempts to substantiate logically andempirically every assertion he makes. In the main, hisconclusions are that the classical-liberal package ofeconomic recommendations have served both theeconomy and the poor around the world well. The keycomponents of the liberal package are an increase ineconomic freedom and in openness, and obviouslyboth components must be above a certain minimumthreshold level to be effective.

    Notice the debate about reforms in India today on ease of doing business, the need for labour reforms,and the need for lower tax rates (which will be achievedonce the GST is passed). Associated with economicfreedom is a decline in government intervention in thelives of mortals. Deepaks conclusions are valid, bothfor countries that follow the economic liberal package,and those that dont, i.e., if wrong turns or diversionsare taken then economic performance falters.

    Poverty and Progress will prove to be a greatreference work for most of the ideas in developmenteconomics and a lot of it is Lals own work. Readingthrough one appreciates that Deepak is deeply inter-ested in the integration of ideas, and outcomes. He cor-rectly cites another great economist, Angus Deaton,that, The best empirical work in economics uses eco-nomic theory as a framework for integrating all of the

    available evidence, tacit and algorithmic, to tell a con-vincing story. If I had to pick one phrase that describesDeepaks book, it would be this.

    It would be unfair to describe Poverty andProgress as being just about poverty. It is also aboutmethodology, about intellectual dishonesty, and aboutclimate change. But the key to the book is the gener-ally unrecognized progress that the world has made inthe removal of absolute poverty. And if it werent forthe intellectual dishonesty of the poverty peddlers likethe World Bank, the world would be talking a lot moreabout how to satisfy the demands and dreams of anaspiring middle class rather than pursuing policies thatcorrupt in-the-name-of-the-absolute-poor populism.

    What is the evidence? Read Deepaks book andbe convinced. In the 1960s, the developing world wasvery poor, with China and India among the poorest. Theworld felt that there was a need for international coor-dination to help advise governments, and provide fund-ing for the reduction of absolute poverty. The WorldBank, originally set up as a project-financing institutionin the mid-1940s, changed its colours under the dynamicleadership of Robert McNamara. There was fundflow, technical assistance, and the war on poverty wasbegun in earnest in the late 1960s. Poverty began to beever so marginally reduced in the developing world.

    And then came globalization. Real per capitaincomes in China grew by an average of 8.4% perannum between 1980 and 2013; for India, the averagewas 4.5%. The two countries together accounted forabout 80% of world poverty in 1980 and their per capitaincomes collectively increased at a 6.6% annual rate.

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    That is doubling of incomes every 11 years, which alsomeans that incomes went up more than seven times inthe last 31 years. Yet the World Bank continued to main-tain, as late as 2013, that more than a fifth of the China-India population was absolutely poor, which would havemeant that 80% of Indians and Chinese were alreadydead in 1980. Documentation of this intellectual dishon-esty of the World Bank, and that of the angels of aid, iswhat occupies nearly half of the book.

    Deepak documents and knows what he is talkingabout. The key is that Deepak is no armchair philoso-pher or economist; he has worked with governmentsaround the world, including India where he was anIFS officer; he has written some outstanding bookson poverty, economy and society (I would stronglyrecommend his two-volume, The Hindu Equilibriumand Unintended Consequences: the Impact of Fac-tor Endowments, Culture and Politics on Long RunEconomic Development). You question his work,or most of his conclusions, at your intellectual peril.

    The reason I say most is that Deepak has a chap-ter on the origins and causes of climate change. Thischapter challenges the conventional and near univer-sal view that it is CO2 emissions from industrializationthat are the major cause of climate change. Time willtell whether Deepak is right in his conclusion but bythe time we know for certain, we will all be dead!

    Through his book, Deepak has thrown a thinlydisguised challenge to practitioners on the other side prove, not through internally consistent models withempirical irrelevance but with actual evidence,many assertions about what reduces poverty. Forexample, many poverty practitioners in India offer theconclusion that programmes like NREGA have helpedto substantially reduce poverty in India. Recall thatlike food for work programmes/NREGA were inventedfor times of famines; their success lies in the self-targeting made possible by offering a wage that onlythe truly needy will accept. But what happens whencorruption sets in and many more non-needy peopleenter the fray, and no work gets done? This is the realityof NREGA in India; the NREGA advocates are notinterested in doing their homework right, becauseif they did, it would defeat their basic arguments andrecommendations. But Deepak Lal calls this bluff anddocuments why ideological snake oil is just that snake oil.

    There are several conceptual and empirical gemsin the book. How private transfers among familiesare more important for poverty reduction than govern-ment transfers; how a vast majority of foreign aid has

    failed to alleviate poverty; how particularly for themerit goods, primary health care and primary educa-tion, even if there is a case for public financing, thereis none for public production; how a need for asocial safety net does not prejudge whether thisshould be provided through private or public action;how in many labour-abundant (and land-scarce)parts of the Third World, the squatters are encroach-ing on private land or public land designated forparks, drains, and other public goods; and how someof the important methodological techniques (e.g. manyrandomized control experiments) are akin to statisticalsnake oil.

    As is his wont, and expertise, Deepak does nottake a narrow bite of history to inform us of progress.He takes a whole chunk, in this case about a thousandyears. So just as a matter of historical documentation,record keeping if you will, Deepak has produced amasterly volume. But it is not just record keeping thewhy and how also have to be answered, and DeepakLal does that very well.

    Surjit S. BhallaChairman, Oxus Investments, Delhi

    INTERROGATING INCLUSIVE GROWTH:Poverty and Inequality in India by K.P. Kannan.Routledge, India, 2014.

    SCHOLARS in Development Studies have in recentyears drawn our attention to the fact that a significantsegment of the population in developing countries remainsdisadvantaged and often excluded from the dynamiceconomy governed by the logic of capital. The bookunder discussion, Interrogating Inclusive Growth:Poverty and Inequality in India by K.P. Kannan is awritten in this tradition. Published in 2014, it draws onarticles written between 2008 and 2013 which take stockof the experience of neo-liberal growth in India (i.e.growth experienced in India after the formal accept-ance by the Indian state of a policy stance distinctly infavour of big global and domestic capital) on incidenceof poverty and vulnerability (the book adopts a specificdefinition of classifying households that are vulnerablebased on both consumption and additional indicators),on employment creation and quality of employment, andon the situation of inequality.

    Chapter 2 assesses the impact of Indias muchvaunted high growth performance on the poverty sta-tus of the households. Kannan classifies all householdsaccording to different thresholds of poverty, using the