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Business Commentary / Ashwin Mahesh

The quest for the middle ground

It is opined freely that the Nobel Prize awarded to Amartya Sen is a recognition that economics without ethics is meaningless. Dr Sen himself put it about repeatedly that he was glad that welfare economics was being accorded some recognition. Couched in this language of acceptable discourse is a powerful accusation -- that modern economic theories and practices, with their penchant for laissez-faire capitalism, are devoid of ethics. Instead, we are told, free markets and their attendant institutions have ravaged the poor under the pretence of free trade and economic freedom.

That's a pretty nasty statement, that the George Soroses and Goldman Sachses of this world, allied with avaricious multinational corporations, have eroded even the simple means available to the world's poor. Lest it remains unnoticed, let me also point out that this refrain is not even hotly disputed, the shambles in Asia and Latin America appeared to speak as with one voice against any contrary opinion. And while welfare economics hogged the limelight following the award of the Nobel, hardly anyone came forward with a contrary opinion.

But is there really much truth to this accusation? The traditional counter has been to point the finger at the obvious failing of the so-called welfare societies throughout this century. Whatever their egalitarian economic rhetoric, neither the die-hard communists of eastern Europe and Asia, nor their more tolerable cousins peddling social justice in more open societies like India, accomplished anything in the last five decades that might remotely pass for success.

But that cannot be all of it. Competing half-truths about different socio-economic models of growth and justice might make good academic discussion, but surely the dominant theories of our times remain answerable beyond merely demeaning their vanquished competition?

If malicious greed on the part of neo-classical economics were indeed real, it might be construed to be a horrendous crime against humanity. Perhaps now, with welfare economics and its self-proclaimed voice of the oppressed holding centrestage momentarily, it behoves us to remind ourselves of the socio-economic articles of faith we have enshrined into our daily lives.

To be rich is glorious. The credit for this pithy gem, you may recall, goes to that icon of communism, Deng Xiaoping. After the countless years his party spent sniping at free enterprise and its resulting prosperity, he had this punch line to deliver. Psst, I lied.

His everlasting shame aside, the comment raised a serious question, still largely unanswered. At a time when the most ideologically egalitarian groups in the world have quietly shelved a large component of their long-held views, how well do we understand the balance between our material and social lives?

Let's examine the word itself -- rich. What does it mean? The Oxford English Dictionary offers a plethora of meanings ranging from the quality of mineral ores to the level of fat content, but let's take one that applies reasonably well to our particular discussion. Rich: Having large possessions or abundant means; wealthy or opulent. Sounds like the one comrade Deng was going for.

In this age of relatives, isn't it odd that one of the simplest constructs of the modern economy is phrased entirely without benchmarks? What exactly is a large possession -- a tin shack? Those lexicons need lessons in common sense. Let's try a different definition -- "having greater possessions and means than average". We can argue all day about what it means to be average, but I suspect that this definition is one that a fair number of folks will nod to in agreement.

This raises some difficult questions right away, notably this one. If "rich" is defined as having possessions greater than average, how can we all hope to be prosperous? Simple -- we can't. Perhaps comrade Deng meant no more than that it was glorious for him to be personally rich. I can understand that, I suppose we'd all feel likewise if we were to be opulent, especially if we were as opulent as those at the helm of the People's Party. As for Deng, we'll let byegones be byegones -- which he is -- and stick to scrutinising the realities that motivated his pronouncement and their implications for our generation and beyond.

Modern economies are anchored at least partly on the premise that through the concerned actions of those who benefit the most from free markets, several others can reap indirect gains. This voluntary participation of the affluent in the upliftment of others is a necessary component.

The question is -- are the affluent sections of our societies living up to this standard, or do we neglect the social obligations which are inextricably related to the economic advantages we enjoy? This is no trick question, practically every economic theory that ever holds sway ultimately seems to revolve around the social relationship between the haves and have-nots.

The ostensibly welfare-minded, or Left-leaning, political organisations which have become accustomed to shouting themselves hoarse over this question and their proposed measures to ensure an affirmative answer, are slowly losing their foothold in the political arena. Jyoti Basu is busy wooing international investors, and whatever he might call his pussyfooting on the core agendas of the comrades, it just isn't old-fashioned communism anymore.

But then, like Deng Xiaoping before him, he isn't so much deserting the party as putting a spin on it. Media management has replaced political ideology because the latter is expendable, power is not.

On the other side of the spectrum, things aren't much better. The advocates of free and open trade aren't necessarily concerned with the immediate impact of their ideas on the poor. They argue that the long-term benefit to the economy far outweighs any temporary setbacks the poor might face, and in any event are quite happy to point out that dealing with such problems is a government function. Conveniently, economic ideas become tied to or separate from the government which is being asked to implement them, depending on the matter under debate.

But where does the middle ground lie? Where does the path of individual prosperity meet the road to compassionate and concerned living? Some weeks ago, The Economist magazine carried a brief piece on a fundamental premise of modern economic thought, the rational pursuit of our self-interest. Somewhere along the way, the author tried to remind us that our self-interest is not necessarily tied up with selfishness, and that recognising the economic value of acting selflessly is just as rational as looking for the best deal we can get on our next stereo. Efficiency doesn't have to wage war on equity, if we can remember all of the theory.

Enter welfare economics, wearing exactly this garb and a heady "while we are rich, let us not forget" motto. To address the needs of those in these lower economic strata, professors like Amartya Sen have devised helpful measures of economic growth which don't merely add up the numbers in a GNP soup.

As a helpful complement to their academic solutions, social responsibility, philanthropy, etc, are held in some regard by society, where these are seen as vehicles by which opportunities can be created for those who get left behind.

With a little application, the two worlds can be combined easily enough, this is probably what the majority of us do anyway. So we write cheques to the Red Cross, some flood relief fund, or the United Negro College Fund, we run to cure cancers we ourselves don't have, and we pass out the odd quarter to those listlessly shuffling their feet at street corners.

Whether it is the liberal yearning toward egalitarianism or capitalist philanthropy that lies behind these actions is only mildly relevant to the beneficiaries.

For our part, we need only remind ourselves that our wallets are passports to the kind of society we want our children to inherit. The economic choices we make do not merely determine how rapidly money flows into and out of them. Ultimately, they also decide the public morality that future generations will live with.

Perhaps that is the big deal about recognising welfare economics. The once-in-5-or-6-years rotation employed by the Nobel Committees appears to be no more than a way of reminding themselves, and us, that the the topsoil of free enterprise must extend to the buried social obligations.

Don't get me wrong, Dr Sen is by all accounts a fine economist, but within the larger framework of the way global economics works, his kind of work isn't considered progressive. While most other economists are happy to thank him for providing them a conscience, they simultaneously aver that the brilliance of his ideas does not render his policies worth pursuing.

So we are left with the bottom line, and the occasional reminder that ensuring social mobility for the underprivileged is the burden of the achievers. Such a reminder is elitist, perhaps, but not to be scorned for that. What is the free market if not a celebration of special abilities? Within its fascinating possibilities, we must remember that finding the balance between social concern and individual materialism is key to the continuance of opportunities.

Somewhere between an impossible Utopia that exists only in the hearts of sociologists, and the workman-like data that is so much an economist's delight, we must continue to search for middle ground on which we can build homes, shake hands, and make lives.

Ashwin Mahesh

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