Thursday, July 06, 2006

India Shining: II

The response to two recent items in the news, illustrates, I feel, the two basic ways in which to tackle economic development. Right and Left. (Right and wrong? :))

Last week, Warren Buffet donated $32 billion to Bill Gates for philanthropic use of his foundation. For the Telegraph's New Delhi correspondent, Peter Foster, the fact that so much money is concentrated in so few hands is a Bad Thing.
This is a stunning figure and, I have to say, it makes me feel slightly uneasy. I’ve no doubt that the BMG Foundation has completely honourable intentions – they have apparently done excellent work to date - but to have such vast resources concentrated in such few hands raises significant questions.

The first, and most obvious, is that these two phenomenally wealthy men are essentially giving their money to fix the problems of inequality caused by the very system which made them so wealthy in the first place. They are attacking the symptoms, not the cause.
There follows a litany of Big Business is Evil and Will Rule the World rhetoric. [Read the comments. They're quite instructive. And even intelligent!]. Notice the very clear assumption here -- the system that made these two men so rich is the reason why there is inequality. "They are poor because we are wealthy" in that old guilt-inducing line. Foster also assumes that what the Gates foundation is doing is simply charity. Giving money away. Which is manifestly not the case.

Contrast this with Swaminathan Aiyer's query in a recent Times of India op-ed, "Why no Indian Buffet or Gates?"
A new era of giant non-profit foundations has arrived. In earlier decades, foundations focussed on charitable activities. But the new breed of foundations is different. The Gates Foundation aims to tackle areas that governments should be tackling but are failing to do so.

This includes innovations in education, health, environment and microcredit. Pharmaceutical MNCs have little interest in developing vaccines for Third World diseases: the low profit and sales in such countries would not justify the R&D costs.

Logically, such R&D should be financed by governments of large countries like India: it could save millions of lives. The Indian government has far more money than any foundation. But most of its huge R&D budgets go towards bombs, space rockets and nuclear plants.

It has never developed an anti-malaria vaccine, or a new drug to combat kala-azar, which kills one lakh people a year in Bihar alone. The Gates Foundation is now doing what the Indian government should have.

It has financed R&D for vaccines for malaria, AIDS and other diseases. It has recently given a grant of $4.2 billion to OneWorld Health, a non-profit pharma company, to start Phase III clinical trials for using paromomycin to treat kala-azar.
Aiyer then traces the history of the great 19th century American philanthropists and argues that the culture of charitable giving that they created is lacking in India. And the point is clear. Foundations such as the Gates Foundation are not just giving aid. They're stepping into a vaccuum left by corrupt states.

Also worth reading is this week's Economist. Billanthropy.

This month's issue of the journal Foreign Affairs is devoted to India. And has a lead story by Gurcharan Das that charts the economic history of the country in the twentieth century. What is clear is that liberalization and economic reforms are what has helped lift so many out of poverty. In a way the micromanaging Nehruvian model did not. The answer is to increase the scope of those reforms -- especially in the labor market, in education, in healthcare. And move away from this ludicrous idea of the government as God. Besides, the reform has proceeded almost despite the state so far. The state needs to grow up and catch on and do its job.

Contrast this with Pankaj Mishra in today's New York Times, The Myth of the New India. The reforms are only helping the elite, while revolution brews in the backwaters. The many holes that Mishra points out (with the characteristic dourness I've come to associate with a certain kind of Leftish writer) are indeed true. Poverty in India is real. It's pathetic. But it has been reduced Not by revolution (which never really benefit the poor, now, do they?). But by market reforms.

This sucks less than any other darn alternative out there.

And, this side of the Kingdom, in an imperfect, fallen world, where we don't have a magic wand to suddenly turn everyone into a saint, it's the only way there, I'm convinced more and more.

[There's much I haven't said. I mean, basically, it's a matter of philosphy. How one sees the world. Human nature. All that. And for heaven's sake, don't equate a support for capitalism in principle as being anti-poor. If one believes that, then head towards Econ 101]

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