Professor Joseph Stiglitz; Dr. George Mathew; Distinguished Guests; Ladies and Gentlemen:
I feel privileged to have the opportunity to attend the Tenth D.T. Lakdawala Memorial Lecture delivered by one of the most outstanding economists in the world, Prof. Stiglitz, who is a household name, specially in the developing countries. I compliment the Institute of the Social Sciences with which Dr. Lakdawala had very close association as its first Chairman, for organizing the Lecture. Professor D. T. Lakdawala was unquestionably a great economist and a quintessential nationalist. Endowed as he was with a deep concern for social and economic justice, Prof. Lakdawala received wide professional and public recognition for his manifold intellectual contributions towards nation-building. A commendable facet of Prof. Lakdawala’s work lay in the area of institution-building and nurturing; and he was closely associated with the establishment of several national level socio-economic institutions. He also chaired several Committees and Commissions appointed by the Central and State Governments. While looking at national problems from varied perspectives he always had a pragmatic approach and would come up with viable solutions to them without compromising the interest of the common people.
Prof. Lakdawala will always be remembered for his deeply ingrained and unwavering concern for the poor and disadvantaged sections of our society and also for his pro-poor policies which he advanced and tried to implement as the Deputy Chairman of the Planning Commission. He also made significant contributions as the first Chairman of the Institute of Social Sciences. It is befitting that the institutions with which he has been very intimately connected, the Planning Commission and the Institute of Social Sciences, among many others, have together instituted an Annual Memorial Lecture in honour of such a stalwart, who had remained a leading light among the Indian academic and intellectual community. Prof. Joseph Stiglitz, in recognition of Prof. Lakdawala’s manifold contributions has appropriately, if I may so, spoken in his honour by reflecting on an issue which is of world-wide importance to the current phase of global economic order, which is witnessing the perils and pitfalls of unregulated economic activities by nation-states.
The 1990s have been a period of profound changes in economic realities and policies throughout the world, including India. In one sense, these changes have been more in the direction of endorsing the notion of the ultimate invincibility of the capitalist economic order. A wave of economic liberalization has swept through many Third World countries which had earlier declared themselves as unwavering followers of Socialism. Many of them extended a very enthusiastic reception to foreign capital and created conditions for the full play of the so-called ‘market forces’ in their domestic economies.
Going by our experiences of the recent past, capitalism has brought profits and prosperity but, at the same time, it has also brought about misery and insecurity to many, both globally and within nations, rich and poor alike. It has linked up national economies but has fragmented economies within national boundaries. Presently, the world economy has been suffering its most severe recession since the Second World War. The current economic crisis has impacted practically the entire world.
The present crisis of global recession is rightly believed to be the direct outcome of the unregulated financial markets where banking and other financial institutions resorted to unsustainable levels of lending for the sake of short-term gains, which fortunately the public sector banks in India did not indulge in. Speculative tendencies in order to make quick and easy money without any productive initiatives have added to the problem. The collapse of the financial sector has now forced governments in the United States and in many European countries, which were otherwise considered to be the ideal models for the play of full blown capitalism, to devise bail-out plans with huge sums of taxpayers’ money.
Such a high level of State intervention, no doubt, is a stark admission of the failure of the ideology of deregulation of markets which has been the corner-stone of a neo-liberal economic doctrine which itself is deeply embedded with the contemporary capitalist ideals. It is also argued that such bail-outs are bound to increase taxes on the common people and add to their hardships.
The whole scenario has shaken the foundation of modern capitalism and has compelled the policy makers to come up with newer sets of regulations and procedures to save their collapsing economies. The fact that even the die-hard enthusiasts of capitalist economy begged and pleaded for State intervention, as a life support system, speaks volumes about the gravity of the crisis that the laissez-faire capitalism is faced with today highlighting the apparent contradictions in this 'invincible ideology'. This is where socially sensitive economists like Prof. Stiglitz, have very important role to play than those whom he justifiably calls the 'free market fundamentalists'.
To find an effective way out of the current crisis, for people like me, it seems neither too much regulation or total non-regulation, will find the solution but perhaps solutions lies in following Prof. Stiglitz’s proposition of the 'third way'. Learning lessons from the mistakes of the past, particularly of recent years, the global community need to devise institutional mechanisms to effectively address the crisis. No single nation, howsoever powerful or omniscient it may perceive itself to be, will be able to address the challenges before the world by its own unilateral actions. This is all the more important in the context of the growing menace of terrorism that many established democracies are confronted with today with tremendous economic consequences.
Markets, which are extolled as the lifeline of capitalism relentlessly, favour the strong over the weak. When the markets fail, it is invariably the poor, the unorganized and the ill-informed sections of society who bear the brunt. Under the given circumstances, the State has a prime duty to step in to discharge its responsibility to protect the economically weaker sections and, for that purpose, to frame new rules to prevent, in future, the kind of activities that lead to such crises and to provide stimulus to the economy for its recovery.
It is contended with great force that free-market capitalism, in its present form, has tended to destabilise the global economic system and to corrupt democracy. In any case, we certainly need a better economic system that is sensitive to the need for more inclusive development and thus conditioned to serve the humanity in a more efficient way, to ensure that democracy and the economic system have become mutually complementary and reinforcing. Economic reforms have to be effected with a ‘human face’ for the benefit of the common man.
Along with economic crisis, we are confronted with serious problems like terrorism, religious fundamentalism, environmental degradation, global warming, growing inequality and poverty, which have to be confronted with to enable the world as a whole to progress and for the people to survive.
Economics must serve the needs of humanity. Financial growth and development are meaningless if they cannot be sustained and their benefits do not reach the vulnerable sections of the society. It is said that crises are inherent in a capitalist system and markets will correct themselves on their own but the world’s experience is otherwise. Achieving all round sustainability, is thus, the biggest challenge to global capitalism today.
The growing menace of terrorism, no matter what its source is, is one of the biggest threats to national security and global peace in our times. Today their chief targets are open democratic societies. They seek to exploit the strengths of democracy, such as the freedom of movement, open access to public places, and relatively transparent sources of information in the public domain to execute their horrific designs. To deal with the menace, we need concerted efforts of the global community. Nations perceived to be aiding or abetting terrorist activities, by design or default, need to be identified and isolated and made to account for their complicity through the collective efforts of the global community.
Prof. Stiglitz is of the view that the kind of globalization taking place in the world is not resulting in the desired benefits for the poor people in developing countries like India, which is clearly our experience. The global community should respond appropriately to his profound perception, which calls upon the political institutions to monitor globalization effectively and democratically. His argument against ‘the one size fits all’ approach and the advocacy of the ‘third way’, reminds me of Pandit Jawaharlal Nehru under whose leadership and farsightedness, India adopted a mixed economy so that the extremes of both capitalism and socialism could be avoided. I am sure that any long-term solution to the present crises can be found only when we are able to build our economic and political systems on the principle of democracy, development with a human face, sustainability and social justice.
Before I conclude, I would like to thank the Chairman, the Director and other office-bearers of the Institute of Social Sciences for providing me an opportunity to be here today and to listen to the learned Professor, Joseph Stiglitz, and also to share my views, which are that of a common citizen, with this distinguished gathering on an issue that has aroused anxiety and concern all across the globe.