Three Takeaways From An Hour With Raghuram Rajan
I first met Governor Raghuram Rajan at the Reserve Bank of India headquarters in Mumbai a few months before 2014’s disruptive elections. It was my ritualistic ‘business editor’s call’ on every central bank governor since the early 1990s.
Governor Rajan was exceedingly cordial and friendly. Given the state of play, we hardly spoke about any economics. It was politics all the way, and I shall claim privilege on what was discussed. It was an altogether agreeable encounter.
Later, when Governor Rajan concluded his RBI stint — in a somewhat controversial manner — and went back to teaching at Chicago’s Booth School, I kept pace with his columns and interviews. Since I had been stridently critical of India’s demonetisation, I enjoyed reading between the lines as Professor Rajan wrote with remarkable restraint, but with occasional flashes of candour, about an economic misadventure that he was thought to have opposed when in office on Mint Street.
So, when my friends at the Asia Society asked me to “facilitate” a webinar with Professor Rajan on “vaccines, jobs, and governance in post-pandemic India”, I jumped at the opportunity to touch base again. We logged in ten minutes before the scheduled hour for a ‘practice session’. There was a genial chatter about whether we had the wrong topic, since everybody was consumed by the tragedy unfolding in Afghanistan. But we decided to stay our course.
Strangely, the conversation veered towards artificial intelligence. I shared an anecdote about how I was stunned when a computer programme scanned a dozen articles on Afghanistan, picking up the best lines and stringing those together into a remarkably lucid machine-written piece. I was about to call it “machine plagiarising”, when Professor Rajan smilingly said: “but isn’t that how all of us write our pieces, Raghav?”. Everybody broke out in laughter, and whatever little awkwardness there might have been, vanished. We were ready to go.
I will share three critical strands of thought that emerged.
Robust Global Leadership Missing In Vaccination Effort
After stumbling through an early phase of trial and error, the global vaccination programme has stabilised, but it’s astonishingly uneven. Poor countries have barely covered even a tenth of vulnerable citizens. Unfortunately, nobody has taken global leadership of the vaccination programme. Each country is focusing only on protection within its borders. While that’s an understandable impulse, it’s also hugely myopic in such a terrifyingly contagious pandemic.
It’s also astounding how the world has ignored the compelling cost-benefit ratio of mass-producing vaccines.
It costs hardly anything to manufacture billions of doses when compared to the trillions of dollars saved in medical care and human deaths. Perhaps the world’s governments could have pooled their resources to pay pharma companies and ‘universalise’ vaccine IPRs to permit mass production anywhere and everywhere.
A similarly open architecture is needed to make ‘vaccine passports’ globally effective. It’s unfathomable that countries are creating artificial ravines as opposed to a wide, frictionless highway. For instance, the United Kingdom says it will accept only those who are vaccinated in its National Health Service; it is even differentiating between AstraZeneca doses produced in India versus other geographies! The United States says only those who’ve got American vaccines will make the cut. China does likewise. Once again, a robust global leadership is needed to enforce fair, undifferentiated, un-discriminatory standards for ‘vaccine passports’ across the world.
Scary Inequalities Threaten A Post-Pandemic World
Perhaps the only benign fallout of the Covid-19 pandemic has been on a lessening inequality in the developed world, especially in America. Since rich governments have transferred unprecedented amounts of cash to ordinary citizens, income levels at the bottom of the pyramid have risen in several instances. With personal consumption and lifestyle costs falling, people have saved more, adding to assets and wealth. Alas, this is a narrow phenomenon.
Elsewhere, in Africa and Asia, inequalities have become deeper, more entrenched, among poor/unemployed citizens, and between industrialised and laggard economies.
School children who would have lost two crucial years of early education — whose learning abilities, therefore, may have regressed by three to four years as children tend to forget easily — could become the ‘black hole’ of this pandemic. Unless their learning skills are rapidly restored, a whole generation of ‘educationally disabled’ people could become an inestimable drag on global growth for the next six decades! Given the sorry state of education in India, this black hole is the scariest unknown of the post-pandemic world.
A Toxic Mix Of Rising Protectionism, Lessening Competition
Finally, the scourge of ‘protectionism’. It can be understood as a reflex in the face of such an extreme global crisis. Countries withdraw into cocoons, shutting out trade and travel.
But unfortunately, India was in the grip of a protectionist creep much before the pandemic, as we raised import tariffs and pumped cash into “chosen” sectors to subsidise a state-orchestrated manufacturing/export thrust, aka the production-linked incentive schemes of atmanirbhar/self-reliant India. While such an injection of synthetic adrenalin does create a temporary high – witness India’s spiking exports and rising share of domestic manufactures – by itself it hardly ensures a sustained, long-term advantage. For that to happen, the country needs to alter its research/technological genes, skills’ base, and productivity profile. However, a high tariff regime could be the very antithesis here, slapping a tax on exports and domestic demand.
So, instead of blindly cloning China’s manufacturing miracle through the 1990s, India could pivot towards the emerging trade in services and digital products. Instead of retreating behind tariff walls, India should deploy its strengthening economic muscle and diplomatic heft, especially among the “concert of developed democracies”, to write new rules to globalise services. That could engineer an Indian miracle.
Of course, India also needs to grapple with a toxic concentration of economic power within its domestic economy.
When combined with creeping protectionism, it creates a ‘lose-lose’ whammy. India’s competitive architecture needs much more teeth to ensure that conglomerates do not swallow smaller companies to create monopolies or oligopolies in key markets. Our watchdog needs to shake off its lethargy and get going as a feared, effective protector of competitive markets. It’s equally critical to enable smaller, informal outfits to become larger, formal challengers to the big boys.
So, to become a truly efficient economy, we need to throw a double switch – curb protectionism across borders and create competitive markets within.
Raghav Bahl is Co-Founder – The Quint Group including BloombergQuint. He is the author of three books, viz ‘Superpower?: The Amazing Race Between China’s Hare and India’s Tortoise’, ‘Super Economies: America, India, China & The Future Of The World’, and ‘Super Century: What India Must Do to Rise by 2050’.