Economy after corona: Let Keynes rest in peace

<p style="font-weight: 400;">Even as India fights COVID-19, quite successfully by all accounts, post-corona it will have to combat more viruses—those of fiscal profligacy, price controls, and statist measures. Unrestrained, they will further devastate the economy.</p>
<p style="font-weight: 400;">Unfortunately, dirigisme is in the air. In an article for a news portal, Bharatiya Janata Party MP and former junior finance minister Jayant Sinha wrote, “We are all Keynesians now. The coronavirus pandemic requires abandoning fiscal rectitude since we are facing a textbook Keynesian aggregate demand slump. Across the world, countries have thrown away the fiscal rulebook and are spending money to prevent their economies from stalling.”</p>
<p style="font-weight: 400;">He went on to buttress his case by arguing that the US is spending about 10 per cent of its GDP, the UK and Germany the double of that percentage. France, Spain, and Japan are doing the same. “Under these circumstances, India’s difficult debt dynamics need not constrain us.”</p>
<p style="font-weight: 400;">This is a dangerous argument; just because other countries are behaving irresponsibly doesn’t mean that we should follow suit. And, by the way, do we also do everything that the developed nations do? For instance, do we have flexible labor laws? Do we have politicians committed to free economy? Do we have bureaucrats who facilitate rather than throttle industry? And do we have the kind of resources that the rich countries have at their disposal to spend it on welfare schemes?</p>
<p style="font-weight: 400;">The answers to all these questions are in the negative. Therefore, it makes no sense to strain the public exchequer to, as Sinha put it, “to provide food and income support to vulnerable populations.” There are a plenty of welfare schemes; it is time to make them more efficient so that the intended beneficiaries get succor. Besides, there are enough publicly spirited corporations and individuals doing helping the poor.</p>
<p style="font-weight: 400;">More freebies anyway don’t help revive the economy. Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.</p>
<p style="font-weight: 400;">Thankfully, government need not even let the needy to fish; it just has to let them fish or do whatever they want to for a livelihood. The powers-that-be only have to give up the control mindset and allow wealth creators—the poor and the rich, the farmer and industrialist, the start-up entrepreneur and the business tycoon—to do what they want to do so long as they don’t violate the law. Let them be free from the clutches of bureaucrats and inspectors, unshackled from obsolete rules and regulations. Let them be free, let them be alone. <em>Laissez faire</em>.</p>
<p style="font-weight: 400;">This is what our political masters don’t want the people to do. This is despite the fact that Prime Minister Narendra Modi himself emphasizing the importance of wealth creation. In his last Independence Day speech, he said, “Those who create wealth for the country, those who contribute in the nation’s wealth creation are all serving the country. We should not doubt our wealth creators. The need of the hour is to recognize and encourage the wealth creators of our nation. They should receive more honor.”</p>
<p style="font-weight: 400;">The need of the hour is encouragement to wealth creation. When the economy grows, jobs are created, thus boosting demand, further propelling economic expansion and generating more employment. This is the virtuous circle the government must aim at. Increasing expenditure instead and playing havoc with the fiscal situation is a very bad idea whose time, one hopes, doesn’t come.</p>
<p style="font-weight: 400;">Keynes is dead; there is no point in resurrecting him.</p>.