India’s economy is in crisis – and adulation for Abhijit Banerjee’s methods won’t solve it

News of Indian-born economist Abhijit Banerjee’s Nobel Prize win has been met with a triumphal response in the Indian media. Excerpts of his forthcoming book have been circulated. Several interviews with him have been published. His mother has been featured in the news, not only to express her pride at her son’s achievement but also because she was invited by West Bengal Chief Minister Mamta Banerjee to comment on poverty policy over tea.

This much is par for the course in a country where the media is practiced in expressing unthinking adulation. What is surprising is how the media has positioned Banerjee’s prize (which he shares with Esther Duflo and Michael Kremer)as a slap in the face of Prime Minister Narendra Modi, whose economic policies Banerjee has criticised in the past. As India’s economic crisis deepens, Modi’s opponents have used this Nobel win as an opportunity to blame the Bharatiya Janata Party’s unsound policies for the slump.

Dangerously, criticism of the BJP has not come in the form of reasoned democratic debate. Instead, it is being carried out by replacing one authority, Modi, with another, presumably higher authority – liberal economists like Manmohan Singh, Raghuram Rajan, and now Abhijit Banerjee.

An anti-Modi symbol?

Journalist Vinod Dua, for instance, in a recent show spoke of Banerjee in uncharacteristically reverential tones, casting the MIT economics professor as practically a freedom fighter and a revolutionary. Dua’s programme, like a lot of the news coverage, turned Banerjee into a symbol of all things anti-Modi: because Banerjee is an alumnus of Jawaharlal Nehru University and has won the Nobel, Dua assumed him to be a champion of secularism, good economic policy and of India’s poor. One can only imagine Dua’s disappointment after Modi and Banerjee’s recent show of camaraderie on Tuesday.

Ironically, Dua’s main point was that this Nobel is a decisive verdict on the importance of free and critical thinking. But not once did Dua use his own free and critical thinking to tell us what Banerjee’s research achieved that is so significant. Like much of the rest of the world, Dua too farmed out his thinking on this subject to experts placed on pedestals, in this case the Nobel Committee. But really using our free and critical thinking would entail asking: why exactly should we celebrate Banerjee’s Nobel Prize? Do we really understand what he thinks?Do we know his politics and should we agree with them?

Banerjee was awarded the prize for bringing an experimental method to development economics: the randomised controlled trial. As explained in some recent articles, a randomised controlled trial involves breaking the problem of poverty down into infinitesimal, disconnected pieces. Bad health outcomes, for instance, are broken down into smaller factors like medical staff not coming to work, poor quality medicines, the lack of preventative vaccinations, and so forth. Each factor is then individually “experimented” on.

For example, researchers might dock the pay of one group of nurses for each day they are absent, and then compare this group’s results to a group of nurses who weren’t targeted. This helps researchers to see if punishing nurses is the way to fix attendance. Similar experiments are done with other tiny issues. In the end, a set of tiny policy prescriptions emerge.

Methodological problems

Influential economists have severely criticised this method in many different ways. First, the scope of randomised controlled trials, in terms of the evidence they can generate, is just too small. There are many problems to scaling up findings: does something that works in rural Rajasthan also work in metropolitan Delhi? How do we know which results are applicable to which places?

Second, randomised controlled trials don’t build on existing economic data or even on real-world situations. The scenarios they create are invented, like a lab, whereas the real world is messy.

Third, randomised controlled trials focus on a narrow set of questions that almost always have to do with individual choice: why do nurses choose not to come? Most often the questions asked are about the supposed faults of the poor: why don’t they save? Why don’t they forego cups of tea and eat only rice? Why don’t they buy expensive farm equipment? Why so irrational?

This is where the gravest criticisms come in: a randomised controlled trial approach like Banerjee’s simply ignores empirically established explanations for poverty that are supported by a wealth of data. Instead, Banerjee’s work focuses on the individual causation of poverty, providing explanations of the type that 2015 Nobel Laureate Angus Deaton has called “fairy stories”.

Structural factors ignored

In the United States where Banerjee lives, the government spent 18% of the per capita GDP on healthcare (and the citizens are demanding more). By contrast, India spends 0.8% of its GDP per capita on healthcare for each citizen. Banerjee clearly knows what development looks like and what causes it in America. Yet in India and other poor countries, his research ignores large structural factors and tinkers with small, usually insignificant ones. It’s clear that this approach will not solve poverty and ismore a donor-pleasing gimmick than a scientific gold standard.

People in India are wasting away and dying of curable diseases, thanks to the dramatic underfunding of the healthcare system. People are illiterate because the public school system has been made defunct. People have low incomes because there are no effective labor laws and hardly any jobs that pay enough. If this is how we understand the poverty problem, the solutions needed are much simpler to figure out – and much more difficult to fight for. Once we see that the task is to fight for a pro-people economic policy regime, it becomes clear that economists like Banerjee are part of the problem.

Experts who are not beholden to market fundamentalism tell us that investing in public goods is the best defense against poverty. Instead, Banerjee’s take is that even the existing investments should be scaled back. Before heralding him as a pro-poor champion, we need to remember that his version of the Universal Basic Income recommendation comes along with recommendations to sell and cut state services. Banerjee’s call to pay wages under the National Rural Employment Guarantee Act, a law meant to provide ruralfamilies households 100 days of work a year, similarly comes with the understanding that the Act itself should be gutted in the long run.

Striking inequality reproduced

It should not be surprising that Banerjee’s genteel liberalism has a conservative side. After all, liberal economist Manmohan Singh, who too is being cast as a voice of reason in light of the ongoing crisis, was the champion of the pro-wealthy liberalisation policies of 1991. That disastrous economic restructuring laid the groundwork for the current fiasco of joblessness (which is being cast as a consumption problem), unregulated shadow banking and tax evasion – a situation where the government’s only possible response seems to be to sell bits and pieces of itself to the private sector for petty change.

The crisis in India today is not that the GDP is falling because of demonetisation and the Goods and Services Tax. Periods of GDP growth are themselves a crisis for the vast majority of Indians. After decades of economist-led growth, the top 1% of Indians own more than half the country’s wealth while the bottom 60% own less than 5%. As incompetent as Modi’s Bharatiya Janata Party seems to be, they did not create this situation. This is not to exonerate Modi for his failed economic governance, but to also implicate his supposed rivals – liberal economists – in that failure. It is foolish to expect that the same people who created this crisis will now rescue us from it.

Abhijit Banerjee’s Nobel-worthy contribution wasn’t asking for NREGA wages to be paid: it was to remove discussions about inequality and public goods from the poverty-alleviation agenda.Indeed, many others have long advocated for NREGA wages being paid, not least of all NREGA workers themselves. Economist Jean Dreze, who has collaborated with two different Nobel prize winners, has been calling for wages to be paid for years while at the same time vigorously resisting the propagation of Aadhar (a biometric unique identification project rife with privacy concerns) and of Universal Basic Income (a proposal to replace most public investment with a nominal, recurring cash-transfer to the poor). Dreze is also against the Modi government while still calling for those crucial public provisions which demonstrably reduce poverty. Why is Dreze not evoked as someone to be proud of? Why has Banerjee been picked?

Having blind faith in experts while paying lip service to free and critical thinking is not enough.

Democratic scrutiny

Instead of replacing the authority of the BJP with the authority of economists, and replacing a Hindutva agenda with a GDP growth agenda, for true change the pedestal of authority itself needs to be brought down by democratic scrutiny and debate.

The exemplary coverage of the Nobel win by NDTV’s Ravish Kumar shows that this can be done. Faced with the opportunity to uncritically use Banerjee as a symbol for his ownanti-Modi politics, Kumar instead used the Nobel win as a peephole into a raging political and intellectual debate on poverty alleviation, inviting a dissenting expert to comment on Banerjee’s work and bringing in a rebuttal as well.

Let’s not jump because someone won the Nobel, he cautioned, or else we’ll be left again with the sweet words of the politicans and a laddoo in our hands.We would do well to heed that warning.

Aparna Gopalan is a writer and educator pursuing her Ph.D. at Harvard University. Her research focuses on the reproduction of inequality and poverty in rural India.