Experts are blind men, economy is an elephant

A sizable audience turned up for a public lecture at the National Institute of Advanced Studies, where G Balachandran, professor of International History and Politics at the Graduate Institute of International and Development Studies, Geneva, Switzerland, spoke about the ongoing financial crisis in the West on Thursday.

The teacher of politics and history took the audience through several slides that described how the crisis unfolded, and how the tools to make sense of the situation holistically were just not available.

Institutions and individuals only saw what they wished to see, blinded by belief.

Economists had long been accustomed to what the speaker called ‘end of history’ imaginaries, drawing on the work of Francis Fukuyama.

According to that predominant narrative, the liberal western democracy had come to stay as the end-point of social evolution, and all lesser developed societies would strive to that ideal, the final form of human government.

Thus, conflict and friction were written out of much theorising, and there was also great faith reposed in the ‘efficient market’, where assets are priced appropriately without need for regulation.

Demonstrating how predominant trends could sometimes stifle free thinking, the speaker cited the instance of American economist Hyman Minsky, who in the 1980s, warned of impending crises.

In prosperous times, large cash flows can create speculative euphoria, which in turn could cause people to run into debts they cannot repay.

0Minsky explained that credit availability will then be tightened, and the economy could experience shrinkage. The movement of a financial system from stability to shrinkage has since been termed the ‘Minsky moment.’

The speaker recalled that Minsky was reviled at the time, and gradually became irrelevant within the establishment, even though his ideas would later prove prophetic.

The pressure to conform to established beliefs within the academia is something that Balachandran termed ‘disempowering’.

Are we, ultimately, returning to a belief that social crises too are like many natural disasters, impossible to predict or correct by human agency? Is there a paralysis of the intellect?

Balachandran noted that there is no one definitive way in which the crises in the West, still unfolding, has been named. This is also a reflection of the inability to comprehend it.

He described what he called a ‘sequential disequilibrium’ that started with the mortgage market, then spread to banking and became a crisis within the system.

It was also a crisis that would not correct itself spontaneously, exposing as false, to the utter incomprehension of policy-makers and economists, the myth of the ‘efficient market’.

Even as the crisis unfolded, the dominant belief was that the system would tide over, once the ‘bad eggs’ were taken care of.
Callous treatment of people in India

“So what lessons does this experience hold for India?” One woman in the audience asked. Learning lessons takes a willingness to learn.

There is little evidence of that, the professor remarked, even though he added that India had examples in the millions for every kind of behaviour—parsimony and saving, as well as huge debts amassed on credit cards.

Asked about the problems the crisis would pose for India, the professor exhorted his audience not to look elsewhere for India’s problems — there are enough problems within, one of the biggest of these was the utter disregard and callousness with which human resources are treated.

China, the bugbear
One member of the audience wanted to know if the crises in Western economics would leave China ever more powerful.

Balachandran quoted former Singapore PM Lee Kwon Yew, saying “China will be old before it is rich.” The underdevelopment of China’s interior areas, the huge migration out of rural areas, the corporatisation and alienation of land on an unprecedented scale would all pull China back, and there was little reason for India to make a bugbear of China.