Archive for February, 2018

Prof. Mahalanobis and Soviet influence

February 20, 2018

David C Engerman of Brandeis University writes in EPW:

Prasanta Chandra Mahalanobis has long been accused of maintaining close ties with the Soviet Union. However, his communist links are mostly asserted without documentary evidence. Using new archival material, especially from the archives of Soviet institutions, this article discusses Mahalanobis’s desire for Indo–Soviet ties, especially in the economic realm, as well as the Soviet response to such alliances. 

 What is interesting to note is how Soviets tried to distance themselves from the Mahalonobis plans:

Western, and especially American, observers nervously watched these growing connections which bolstered their view of Mahalanobis as the eminence grise—perhaps the eminence rouge—of Indian economic policy. Starting in the early 1950s, United States (US) State Department records amassed an impressive catalogue of Mahalanobis’s supposed political trespasses: he was “extremely sympathetic to Communist Doctrine,” “far along the road to Communist theory,” “emotionally and intellectually very close to Moscow,” and hewed close to the Soviet line on matters both economic and political.17

Yet, for all the opponents Mahalanobis managed to attract, and for the criticism that he faced at home and in Washington, Soviet officials remained wary. Even as the Soviet Academy of Sciences agreed to send a delegation to consult with the ISI for formulating the Second Five Year Plan in 1955, Soviet bureaucrats issued clear warnings. “The task of Soviet economists,” Central Committee apparatchiks demanded, “should be limited to consultations, [and to] communicating our experience. We should not take responsibility for the formulation of a perspective ‘plan’ or become official advisors and experts working out this ‘plan.’” This order suggests a real determination to distance visiting Soviet economists from Mahalanobis’s activities in shaping the Second Plan.18 They likewise expressed their doubts about working with Mahalanobis; for all of his Soviet enthusiasms, one Soviet report noted, Mahalanobis exhibited “bourgeois limitations” in his “approach to socio-economic problems.”19

By the 1960s, as the Soviet economy slowed down and the excitement of India’s Second Five-Year Plan (1956–61) gave way to a troubled Third Plan (1961–66), Soviet observers evinced even more concerns about Indian planning, highlighting the differences between the Soviet version and what was happening in India. Purists in the Academy of Sciences denounced Indian planning as a crutch keeping Indian capitalism alive; others distanced themselves from the Indian Planning Commission by employing phrases like “so-called planning” (Clarkson 1978: 72–74; Lozovaia 1966: 104). Soviet observers, in sum, recognised that Mahalanobis’s aspirations (and his claims of Soviet inspiration) did not in and of themselves create central planning along Soviet lines; later on, it would come to be termed as the “administrative-command economy.”

Thus, even as Mahalanobis sought closer economic ties with the Soviet Union, his entreaties fell upon sceptical ears. While Soviet officials hoped to use Mahalanobis to expand their influence in Indian intellectual life, and expressed guarded hopes for Indian economic policy, they steered clear of any deeper connection with Mahalanobis. Their reasoning may have had as much to do with Mahalalanobis’s personality as his economic ideas or his politics; one official at the Soviet Academy of Sciences praised The Professor’s intellect but cast doubt on his motives: “Mahalanobis gave the impression of a very intelligent and cunning (khitrogo) person, his external frankness and good nature hiding his true intentions.”20

Energetic and ambitious, Mahalanobis sought Soviet support of all kinds to promote his vision of rapid industrialisation and central planning, willing to provoke fierce denunciations along the way. His fervent efforts, however, prompted a cautious Soviet response, both in the policy realm and in their dealings with him at a personal level. Ultimately, then, the more Mahalanobis invoked the Soviet Union (and provoked his critics), the less likely he was to win lasting Soviet support.

 

The History: This Is not The Punjab National Bank of pre-partition India

February 20, 2018

I so wish had written this piece. The founder of both the banks, Bank of Baroda and Punjab National Bank must be feeling miserable in their heavenly abodes.

This piece in Outlook goes to history of PNB (PNB’s website has some bit as well) and how it came from Pakistan to India (see this more general piece).  How the bank was a pride of Punjabis for much of its initial history:

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India’s elite institutions are facing a credibility crisis

February 20, 2018

Milan Vaishnav has a worrying piece:

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European Central Bank members have a fixed, non-renewable contract..

February 20, 2018

European Council nominated Luis de Guindos (of Spain) as the vice-chairman of ECB.

The press release said:

The Eurogroup today gave its support to the candidacy of Luis de Guindos for the position of Vice President of the European Central Bank (ECB).

The recommendation to the European Council, composed of the heads of state and government, should be formally adopted by the Council on 20 February. On this basis, the European Council will request opinions from both the European Parliament and the Governing Council of the ECB. It is then expected to adopt its final decision at its meeting of 22-23 March.

The new Vice President will replace Vítor Constâncio as of 1 June 2018. He will serve a non-renewable 8-year term.

Interesting to note that there is a fixed non-renewable term. Not sure how many central banks have this arrangement. This ensures there are no political favors are sought to get reappointed. But still the problems of them joining the private sector, post their retirement remains.

ECB Act says all members to get similar term:

The Executive Board comprises the President, the Vice-President and four other members. They are appointed by the European Council by qualified majority on a recommendation from the Council after it has consulted the European Parliament and the Governing Council. The members’ term of office is eight years and is not renewable (Article 283(2) TFEU and Articles 11.1 and 11.2 of the ECB Statute). 

RBI’s Act on the other hand allows renewal of contract across positions:

8. Composition of the Central Board, and term of office of Directors.
(4) The Governor and a Deputy Governor shall hold office for such term not exceeding five years as the 5[Central Government] may fix when appointing them, and shall be eligible for re-appointment.

[A Director nominated under clause (c) of sub-section (1) shall  hold office for a period of four years and [shall be eligible for reappointment:

Provided that any such Director shall not be appointed for more than two terms, that is, for a maximum period of eight years either continuously or intermittently.]

7) A retiring Director shall be eligible for re-nomination.]

[9. Local Boards, their constitution and functions.
[(3) Every member of a Local Board shall hold office for a term of four years and thereafter until his successor shall have been appointed and shall be eligible for re-appointment.]

Provided that any such Director shall not be appointed for more than two terms, that is, for a maximum period of eight years either continuously or intermittently.

Auditors.
(1) Not less than two auditors shall be appointed, and their remuneration fixed, by the Central Government.
(2) The auditors shall hold office for such term not exceeding one year as the Central Government may fix while appointing them, and shall be eligible for re-ppointment.

Only in case of MPC members the contract is non-renewable:

45ZD. Terms and conditions of appointment of Members of Monetary Policy Committee.
(1) The Members of the Monetary Policy Committee appointed under clause (d) of subsection
(2) of section 45ZB shall hold office for a period of four years and shall not be eligible for re-appointment.

Need to figure the terms of appointments for other central banks too…

Indian cookbooks: The medieval editions

February 19, 2018

Superb narration by Farah Yameen.

Elaborate Indian recipes recorded nearly five centuries ago, today lie scattered in libraries and museums around the world. They may lack precise instructions or measurements, and their ingredients may break a bank or a few laws, but they can still rustle a mean royal repast or two.

This one sums it up:

Democracy may have its merits, but there’s something to be said for the decadent royal who can dedicate a lifetime exploring whether camphor, ambergris, or screwpine will best serve to fragrance a preparation of meat or a bottle of perfume. Ghiyas Shah certainly thought so. He was not compiling a book of recipes for the rice-cooker clan. It takes a retinue of servants to dig and line a pit with flowers, layer herbs in the correct order and watch over nightly fires, lest they go out. Even the Supa Shastra was written largely for rich housewives. Millet-eating aam aadmi almost never had access to these recipes. The cuisines we have inherited are the dummies’ version of what medieval Indian cooking looked like. Pressure cookers have replaced the slow overnight cooking of the shabdegh and the nahari. The smoky and earthy flavours of clay oven cooking must be simulated with pieces of smouldering coal placed within a sealed pot for a few minutes. It makes for good Instagram, for sure. But maybe it’s time to bring mango leaves, orange peels, and roasted mango kernels back into vogue. Nobody quotable has said this, but you eat with your nose before you even set eyes upon your food. And, once in a while, being decadent is not criminal. Just don’t shoot at musk deers.

🙂

When citizens set the budget: lessons from ancient Greece (and modern Australia)

February 19, 2018

An insightful piece which would gladden the Austrian school. It is written by David M. Pritchar and Lyn Carson. They question the idea that Budgets have to be set only by governments and its bureaucrats. 

The authors say that in Ancient Greece, people set the budget:

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Retired politicians in demand in New Zealand..

February 19, 2018

Michael Reddell posts about the topic. 

He says  we need to restrict appointment of politicians/central bankers to take up other jobs post retirement:

Until just over a year ago, Bill English had been Minister of Finance for eight years.  In that role he had responsibility for the framework of legislation (primary and secondary) governing the prudential regulation of banks,  non-banks, and insurers.  He was minister responsible for the Reserve Bank of New Zealand, the prudential supervisory agency (including for banks).  He appointed the people who appointed the new Governor (and – single decisionmaking – supervisor). His department –  The Treasury –  was a key participant in the trans-Tasman banking council.  Even in his year as Prime Minister, there was no sign that he had lost interest in matters economic and financial.

It would be a dreadful look if a retiring former Minister of Finance went (more or less) straight from politics onto the board of a Bank.   It would be almost as bad as if a retiring Governor of the Reserve Bank made a similar move.   The issue –  especially for the Minister of Finance case –  isn’t about inside information; ministers aren’t usually privy to much individual institution data, and the broad intended sweep of policy (a) usually isn’t that secret, and (b) is somewhat specific to particular governments.    It is about incentives, appearances, and our ability to be reasonably confident that our governors are governing in the public interest and not in their own interests.

Probably few people go into politics initially for the post-politics opportunities.  Nonetheless, people need to feed their families, and fill their days, and even if you eventually get to the very top, even being Prime Minister doesn’t last forever.   Bill English is only 56, and the current Prime Minister –  even if consistently successful –  is likely to be out of Parliament by the time she is 50.   And –  even in New Zealand –  private sector directorships can pay pretty well (it was suggested that John Key might be getting $200,000 per annum for chairing the ANZ –  a big bank to be sure, but an unlisted 100 per cent subsidiary of an Australian parent, pretty substantially controlled by that parent).

Whatever the sector, a Cabinet minister who legislates/regulates in ways which are welcomed by the regulated industry are much more likely to find the post-politics doors open than one who regulates in a way the industry finds costly or inconvenient.  It isn’t just an issue in banking – it could be telecoms, or electricity, or transport, export education or whatever.   I’m no great fan of most business regulation, but it exists –  and the community as a whole has made a decision that such regulation is necessary or desirable.  If so, it is easy to envisage cases of a conflict between the public interest and the private interests of the regulated entities.

I’m not suggesting that Bill English (or John Key) made any decisions during their terms in office for reasons other than some mix of their view of the best thing for the country, and their view of how best to get re-elected.     But the incentives, and risks around them. are things that need managing.  It would set a dreadful example if Bill English shortly turns up on the board of a bank (in John Key’s case, the concern might be more about his membership of the Air New Zealand board –  a majority state-owned company, with ownership sold down by Key’s government, and where Key himself had until quite recently been Minister of Tourism).

Hmm..

A rare peek into the 1857 revolt, one of the first wars to be caught on camera in the world…

February 19, 2018

Didn’t know that 1857 revolt was photographed this well.

Historian Rosie Llewellyn Jones talks about it:

The book, The Alkazi Collection of Photography: The Uprising of 1857, edited by London-based historian Rosie Llewellyn Jones, examines the infamous “sepoy revolt”, which was the second war – after the Crimean war – to be fully photographed anywhere in the world. It examines the upheaval from multiple perspectives.

In an interview conducted via email, the historian talks about the fascinating images..

Amazing..

The Chinese banking system: Much more than a domestic giant

February 19, 2018

Eugenio Cerutti and Haonan Zhou of IMF on Chinese banking system:

Train PhD students to be (critical) thinkers not just (narrow) specialists..

February 19, 2018

Prof. Gundula Bosch directs the PhD program at Johns Hopkins Bloomberg School of Public Health.

In this piece (HT: Naveen Bharathi) she writes on how they are trying to differentiate their PhD program to build thinkers. This fits amazingly well on economics too. She says get Ph or Philosophy back into PhD:

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How The 11,400 cr. Import Ponzi Scam at PNB Unfolded

February 16, 2018

Deepak Shenoy of Capital Mind simplifies what otherwise reads like a fairly complicated crisis.

To me this is the main thing:

  • The main culprits here are the top management of the bank and the auditors. How they could NOT have caught this is simply beyond rational imagination – and therefore points to people knowing it but letting it continue.

 

Even in France, money rules politics

February 16, 2018

Well the title should hardly be surprising. It will be a surprise if we see in some country, money power not leading to election results.

Julia Cagé has a piece on money power in French elections:

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Banks continue to refuse acceptance of small denomination coins

February 16, 2018

Experts disagree on impact of demonetisation citing all kinds of growth figures to suggest there was no or limited impact.

This is obviously their “eat cheese moment”. They fail to understand how the decision has shaken the belief in what is the crux of economy: payment system. There is continuous news of people not having faith in Rs 10 coin. There is a wide belief amidst people that Rs 2000 note could be denotified anytime. Thus, people want to shake off Rs 2o00 note right away.

Infact banks have been refusing to accept small denomination coins. RBI issued a warning against the same:

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The great Indian history wars

February 16, 2018

India’s political parties are out claiming their own versions of history.

This Mint edit quotes John Rawls and V.D. Savarkar. It argues history should be taught for informing and not for misinforming.

Rawls:

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The role of euro banknotes as legal tender..

February 15, 2018

Another speech from Yves Mersch of ECB who defends role of cash.

This speech is different as he looks at legal aspects of cash usage in Euroarea, what makes cash legal tender etc.:

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The Link between Jews and money is no longer taboo…

February 15, 2018

Interesting piece. The author starts with an anecdote linking money to Jews.

He then says: (more…)

City of Thrissur’s tryst with gold..

February 15, 2018

I had written a piece on forgotten history of banking in Thrissur.

Live History India portal has a video on history of gold and finance in the region.

Hawks and doves, Deeds and words: Economics and politics of monetary policymaking

February 15, 2018

A new voxeu e-book which looks like a useful read:

The financialization of everything: How finance is reshaping the ‘rules of the game’?

February 15, 2018

A long post by Servaas Storm. But we know this narrative of how finance controls pretty much everything we do today.

The shift in financial intermediation from banks to financial markets, and the introduction of financial market logic into areas and domains where it was previously absent, have not just led to negative developmental impacts, but also changed the ‘rules of the game’, conduct and outcomes—to the detriment of ‘inclusive’ economic development and in ways that have helped to legitimize—what Palma (2009) has appositely called—a ‘rentiers’ delight’, a financialized mode of social regulation which facilitated rent-seeking practices of a self-serving global financial elite and at the same time enabled a sickening rise in inequality. Establishment (financial) economics has helped to de-politicize and legitimize this financialized mode of social regulation by invoking Hayek’s epistemological claim that (financial) markets are the only legitimate, reliably welfare-enhancing foundation for a stable social order and economic progress.

….

Rather than letting financial markets discipline the rest of the economy and the whole of society, finance itself has to be disciplined by a countervailing social authority which governs it to act in socially desirable directions. One famous account in the Talmud tells about Rabbi Hillel, a great sage, who when he was asked to explain the Torah in the time that he could stand on one foot, replied: “Do not do unto others that which is repugnant to you. Everything else is commentary.” If there is a one-foot summary of the literature reviewed in this introduction, it is this: “Finance is a terrible ‘ephor’, but, if and when domesticated, can be turned into a useful servant. Everything else is commentary.”

I don’t think this was the vision of markets which Hayek gave us. The markets are heavily regulated with numerous conflicts of interest present across the entire chain.

Past, Present and Future of Economics: An interview project

February 14, 2018

A superb series of interviews of leading economists on state of economics education and the need for pluralism.

Economics education has been discussed in the public domain for a long time,  but since the Global Financial Crisis it has come under renewed scrutiny. This interview project aims to provide material for new generations of economics students and scholars, as well as the general public, to get acquainted with different schools of economic thought and their bearing on economics thinking.

Distinguished economists speak on how the plurality of analytical traditions within economics has influenced their work. The interviews range from long-standing debates to current issues, and provide first-hand access to the thought of key contemporary economists.

This video series intends to promote pluralism by presenting schools of economic thought as viable methodological, theoretical and policy alternatives.

We have interviews of Profs Charles Goodhart, Sheila Dow, Geoff Harcourt, Tony Lawson Julie Nelson and Ha-Joon Chang…


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