Where does the buck stop?
The law adviser has reportedly lamented that economists have not provided the government with the correct policy advice. It is not clear whether the adviser meant the economists within the government or those without. Given that self-criticism is almost unknown in the government, one may take the liberty to assume he pointed fingers at the economists not in the government as culpable for the wrong, or less than useful, advice.
Economists are not a lot that are known for unanimity of their views. An oft-repeated joke about them is that if you ask two economists about a problem they come up with three answers! There are several schools of thought in economics; each has its special methodology of analysing economic problems and the recommendations are not necessarily the same as that of the others.
More importantly, the general lack of education and knowledge has promoted the culture of each citizens' group in the country discovering and promoting its own brand of "experts" or "renowned" scholars regardless of their credentials or qualifications. Hence, it is a bit sweeping to say that economists have not provided the right answer. What the adviser probably had in mind is that the particular economists that the government sought advice from, or chose to listen to, have not provided the right advice. It is quite unfair to put the blame on others who did not share these economists' views, and indeed are known to have contradicted them.
Two major policy measures that have landed the government in the soup are the ill-conceived drive against hoarding in order to contain inflation and the crusade against corruption. The government seems to have acted without first grasping the complexities of the problems. Those who advised the government on the issue obviously neglected to inform about the economic consequences of such measures in a market economy.
Every bout of increase in the prices of the essential goods has brought forth with unfailing regularity the claim that a shadowy syndicate was restricting (hoarding) supplies to earn abnormal profits at the expense of the hapless public. This hoarding hypothesis has all the traits of what Galbraith disparagingly calls "conventional wisdom." It sounds plausible and can be defended at the superficial level, it is convenient that does not require much mental exercise, and it finds a scapegoat for a difficult problem that is not amenable to an easy solution, and it has the added advantage that the scapegoat is universally despised. Because of the superficial plausibility of the wisdom many professionals would be reluctant to reject it outright without solid empirical evidence and analytical refutation. These could be obtained only if a thorough study was carried out by credible professional economists and the findings were vetted by their peers. This has never been done.
I have personally written several papers during the last three years (including one in the law adviser's family newspaper) pointing out the weaknesses of the syndicate hypothesis based on my observation and theoretical insights. But a rigorous refutation of the hypothesis was not possible without an empirical exercise. Accordingly I had repeatedly suggested that the government should undertake a rigorous study on the issue to find out the real reasons for the price hike. Unfortunately the government chose to ride with the conventional wisdom that landed it and the economy in this messy situation.
The crusade against corruption appears to be to a large extent politically motivated, but it has massive economic implications. Whoever advised the government on this issue misled it if they did not emphasise the economic consequences of too energetic a drive against corruption. An international conference was held jointly by a think tank of the government, BIDS (unfortunately the government mostly ignores it) and the World Bank on governance issues only a few weeks before the political changeover. The papers read in that conference could have given the government a glimpse into the intractable complexity of the governance problems and the difficulties of dealing with them. A persistent theme to emerge from that conference was that governance cannot be improved upon (or corruption could not be reduced) without improving, or creating, institutions that support good governance. This can be achieved only slowly over a period of time.
The roots of corruption have penetrated too deep and wide into the socio-economic and political fabric of the society. Any attempt to root it out immediately would severely rupture the fabric. The consequent turmoil could easily dissipate whatever economic gains were expected to be had from such an attempt. Good intentions are no guarantee of success; the path to disaster is often strewn with good intentions.
If the government had consulted the right economists they must have warned them about the risks (and gains) of an anti-corruption drive. If so, the government should have foreseen that outcome that we have today. The law adviser's disappointment with the economists would appear to be misplaced.
I recall a conversation I had with a very senior government official a couple of years ago. He said very unhappily that the economists always gave different answers to the same problem; so how could the government take the correct decision? This was a genuine concern of a policy-maker and my instant reply was that the final decision always lies with the government leadership, and when they assume leadership they implicitly also assume the responsibility of the final decision-making and the consequences. I have subsequently pondered hard over this issue but could not improve much upon this instant answer.
The government leadership, political or otherwise, must devise its own ways of choosing between alternatives, and once it has made a decision it must bear the full responsibility of all the ramifications of that decision. The onus is on it if it has chosen the wrong kind of experts and listened to the wrong kind of advice in arriving at a decision. It should not be squeamish about accepting responsibility of a failure when it loses no time in claiming credit for any success.
The author is Professor of Economics and Chairman of Bureau of Economic Research, University of Dhaka.
For all latest news, follow The Daily Star's Google News channel.
Comments