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K.N. Raj
(1924 - 2010) |
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For
students of my generation, Dr. K.N. Raj, who passed away recently,
was a truly iconic figure. The earlier generation of economists,
V.K.R.V. Rao, Bhabatosh Datta and A.K. Dasgupta were temporally
distant from us; his illustrious Bengali contemporaries were
spatially distant from us. Dr. Raj was centre stage, brilliant
and inspiring. His precise speech, his robust socialism, his
thoughtful writings and his absolute command over empirical
data left us spell-bound.
Within days of my joining the Delhi University for an Economics
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degree,
Dr. Raj came to my college for an after-dinner talk on the Chinese
Communes. His argument was that it was essential for the means
of production in society to be collectivized, but not the means
of consumption (as the Chinese Communes were trying to do).
Its impact on a 16-year old (as I then was) was a lasting one.
We thronged to all his public lectures and we read every word
he wrote. The texts of his lectures used to be available at
the Delhi School library before they were published; the queue
of readers who signed up to read them was so long that it would
often take days to get them. And Dr. Raj was absolutely prolific
in the decade of the sixties: his Nalanda lectures, his Cairo
lectures on employment and unemployment which were truly path-breaking,
and his work on growth models in Indian planning, culminating
in the famous Raj-Sen model, which carried the logic of the
Mahalanobis argument a step further, were products of this period.
At the M.A. level he taught us Macroeconomics, and while giving
us bread-and-butter Keynesian economics, also introduced us
to Michael Kalecki, to Chapter 17 of Keynes's General Theory,
and to Oskar Lange's Price Flexibility and Employment which
had anticipated by more than a decade the much-celebrated argument
of Don Patinkin in Money, Interest and Prices about the so-called
''real balance effect''. He was fascinated by Keynes's suggestion
in Chapter 17 that in certain societies excessive land preference
could have played the same role as excessive liquidity preference
did in the advanced capitalist societies, in keeping down productive
investment. He thought that this had been true in the case of
India and wanted to write a book on it. The book never materialized,
but the basic direction of his thought can be discerned from
an article he wrote where he argued, in opposition to Kaldor
and Reddaway who had denied the possibility of land ever playing
this role (since the rise in land price they thought would always
bring down the rate of return on land sufficiently to eliminate
excessive land preference), that the ''subjective rate of return''
on land (arising from considerations such as safety and prestige)
was downward inflexible with respect to changes in land price.
Even a brief and cursory discussion of Dr. Raj's intellectual
output, however, will require several specialized articles and
is beyond the scope of the present one. But one particular shift
in his overall trend of thought must be mentioned here, both
because it has gone largely unremarked, and also because it
underlies what I think is one of his most outstanding, though
little-known, contributions. This shift relates to the fact
that while in his earlier writings on the Indian economy the
problem of demand scarcely makes an appearance, his later writings
on the subject are dominated by considerations of demand.
The fact that his earlier writings on India scarcely mention
the demand side, despite his being steeped in the Keynesian
tradition, should cause no surprise. Since the Indian economy
was a ''planned economy'', not exactly comparable of course
to the Soviet Union but with a significant public sector nevertheless,
it was taken for granted that the question of the ''stimulus
for investment'' that had so occupied economists from Rosa Luxemburg
to Michael Kalecki had little relevance for India. True, there
might be fluctuations in the level of activity arising from
fluctuations in the level of public investment, caused for instance
by harvest fluctuations, but these happened even in centrally-planned
socialist economies. The question of the overall growth of demand
setting a limit of some kind on the growth rate of the economy
as a whole could never arise. After all, with Keynesian demand
management, it was a moot point if it could even arise any longer
in the advanced capitalist economies (the Kaldor-Mirrlees growth
model had argued it could not). But where there was planning,
with a substantial public sector, it was certainly irrelevant.
Accordingly, one finds in Dr. Raj's writings through the fifties,
sixties and even the early seventies, an emphasis on constraints
on the supply side: the foreign exchange constraint (as in the
Raj-Sen model), or the savings constraint (as in his numerous
excellent writings on the savings rate in the Indian economy),
or the foodgrain constraint (as in his statistical analysis
of inflation in India published in the mid-sixties). Starting
from the mid-seventies, however, there is a discernible shift.
His celebrated article in the Economic and Political Weekly
during the Emergency critiqued the devaluation-cum-import liberalization
package adopted by the Indian government in 1966 under US pressure,
on the grounds that, unlike what the US-World Bank economists
had been saying, the unutilized industrial capacity at the time
of devaluation was caused by a shortage of demand and not of
current inputs (and hence not, indirectly, of foreign exchange);
from this it followed that the import liberalization that accompanied
devaluation was uncalled for.
In the same article he made a scathing critique of the argument,
articulated at the time by Union Cabinet Minister Siddhartha
Shankar Ray, that a ''liberal'' economic policy which allowed
the growth of output to cater to the demands of the affluent
consumers (who, though small relative to population, were large
in absolute numbers), would both stimulate the growth-rate of
the economy and keep the ''middle class'' satisfied, even while
having a ''trickle down'' effect on the poor. In critiquing
Siddhartha Ray's position, Dr. Raj was in effect critiquing
what was later to become the official policy of the government
in the era of neoliberalism.
But what did he suggest in lieu of this ''liberalization'' strategy?
This is an issue which he addressed in his speech to a plenary
session of the Golden Jubilee Conference of the Indian Statistical
Institute at Calcutta. He was talking about both China and India.
He saw the growth process in these countries in the context
of an exchange of products between the agricultural and non-agricultural
(industrial) sectors. The rate of growth of the latter, and
hence by implication of the economy as a whole, depended upon
the rate of growth of the agricultural sector, which provided
the market for the latter. If the growth of the economy was
less than what the growth rate of agriculture warranted, then
the government could step in to push it up to the ceiling; but
it could not raise it beyond the ceiling without causing inflation.
The growth process in economies like China and India therefore
had necessarily got to be agriculture-led.
Dr. Raj's argument here, arrived at on the basis of his own
understanding of the growth process in China and India, echoed
strongly the argument that Nicholas Kaldor had been advancing
in some of his later writings, namely that while growth had
to be ''export-led'', these exports did not necessarily mean
exports to other countries; they could mean, and in the context
of the world economy as a whole they could only mean, exports
to the agricultural (primary commodity-producing) sector.
It followed from Dr. Raj's perception that the real route to
India's development was through stepping up the rate of growth
of agriculture, and for this it was essential not just to make
more inputs available to agriculture, but, above all, to undertake
land reforms. The one consistent theme that ran through all
his writings was the necessity of land reforms. Right from the
mid-fifties when his support for the Mahalanobis strategy was
predicated upon the presumption that increasing investment allocation
in favour of the investment goods sector must be counterbalanced
through ''institutional changes'' in agriculture to ensure that
the availability of consumer goods did not suffer as a consequence,
until his ISI address, Dr. Raj remained a consistent votary
of land reforms.
Curiously, his argument that a more vigorous and broad-based
growth of the economy can be ensured only through the implementation
of land reforms, echoed the similar argument advanced by Lenin
in the context of Russia, which later formed the basis of the
demands of the Communist movement all over the third world.
This is ironical since Dr. Raj, despite being influenced by
Marxism, was a strong critic of Lenin. His political position
was perhaps close to what he himself attributed to Nehru in
the special obituary issue of the Economic Weekly on Nehru,
namely that Nehru was a believer in the Marxist theory of class
and class struggle, but not in the Marxist theory of the State.
To describe Dr. Raj as a ''Nehruvian'', however, would also
be an oversimplification. At the time of the First Five Year
Plan when Nehru wanted an ambitious Soviet-style plan, Dr. Raj,
all of twenty-six years old, who was an architect of the plan,
had opposed him on the grounds that the high rate of investment
required for his ambitious plan would be incompatible with democracy,
as it would place too heavy a burden upon the people. On the
other hand, he remained a consistent votary of land reforms,
even though Nehru, after the mid-fifties, had perhaps given
up on them.
Dr. Raj's opposition to Lenin was reflected in his generally
critical attitude towards the organized Left. He had close friendships
with individuals within the organized Left, including a warm
and cordial relationship with E.M.S. Namboodiripad. But towards
the organized Left movement as a whole his attitude was deeply
sceptical. I have myself faced his ire on many occasions for
some supposed transgression made by the CPI(M) in Kerala which
had angered him. After giving me a dressing down for such transgressions
(of which I would be completely unaware), he would, however,
give me a fond embrace and say that he could take such liberties
with me because I was his student. Through all such admonitions
and disagreements, Dr. Raj always remained for me an iconic
figure, a giant of a person both in terms of intellect and humanity.
The last word must lie with Joan Robinson, a close friend of
Dr. Raj. On what might have been her last visit to India, she
asked me, after we had talked for a while about India's Extended
Facility loan from the IMF, what Dr. Raj thought about it, to
which I replied that Dr. Raj had not written about it and was
perhaps not keeping well at the time. She asked me with her
customary directness, ''Oh, if Raj isn't well, then who is the
moral voice of the country at present?'' Dr. Raj was for long
the ''moral voice'' of the country. He contributed much to the
making of modern India.
Aug 9,
2010. |
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