Jan 8, 2013, 04.41PM ISTJoseph Stiglitz will turn 70 next month, but age does not appear in any way to have diminished the mind that won the Nobel Prize for Economics in 2001. The Columbia University professor delighted a select media gathering in Bangalore on Monday, organized by the Azim Premji Foundation, with talk of Walmart’s expertise in bribery and how money given to fathers need not benefit children. Below are excerpts from that discussion:
India needs to focus on internal issues
The US is expected to slowdown this year and the global slowdown will have a short term impact on India. Good thing about India is it is less dependent on exports. India needs to focus more on its internal issues of inequality, lack of infrastructure, issues of education, agriculture, environment, water tables going down.
Resolve governance problem before privatizing coal mines
Just privatization will not solve the problem. You have to see how it can benefit local people, not merely have a corrupt transfer of access to these resources and increase inequality. You have to solve the governance problem before privatization.
Walmart brings greater capacity in bribery, little else
Don’t focus on FDI in the belief that it will solve all problems. There is no shortage of entrepreneurs in India. So look at what is foreign investment bringing that Indian entrepreneurs cannot bring. Walmart certainly brings greater capacity in bribery, it was their source of success in Mexico. You don’t want to bring that in, you already have enough of that. I have studied Walmart’s supply chain in other countries. They have not worked. Foreign investment may use their monopsony power (a large buyer controlling a large proportion of the market and driving prices down) to bring Chinese goods that reduce the prices that Indian suppliers can get and thereby increase inequality, or increase dependence on foreign goods.
Direct cash transfers must be designed well
Many subsidies, like in education, food and health, are targetted at children. Giving money to fathers does not mean it will go to their children. Money given to mothers have a greater chance of going to children. Brazil’s model is more thoughtful; they have electronic payment cards and mothers get money if the children are vaccinated or sent to school. These are not blind cheques. All systems are imperfect and have inefficiencies. One kind of subsidy that is definitely avoidable are the broad based ones. Fuel subsidies tend to be used more by those driving big cars.
Rising inequality in India a problem
Globalization is one source of inequality, and you cannot stop that. But there are more important sources, such as monopoly power, abuses of corporate governance, people getting access to natural resources and spectrum at below market prices. These are sources of inequality rising at the top, and makes the economy less efficient. At the bottom, you have issues like lack of investment in education, discrimination.
Shut down tax havens like Mauritius and Cayman Islands
The investment coming in from Mauritius into India is mostly Indian money doing a round trip to evade taxes. We need transparency in all these tax havens such as Mauritius and Cayman Islands. Actually, given that these tax havens bring no social benefit they should be shut down. The G20 can do it if they want.