Money, Finance, Political Economy, Getting It Right;
By Deena Khatkhate; Academic Foundation;
Pages: 385; Price: Rs 995
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Deena Khatkhate began well and might have lived a comfortable and boring life as a financial bureaucrat. But he strayed into the gang of Young men Sachin Chaudhuri collected to fill up the pages of Economic Weekly in the ’60s, and developed an addiction to forthright writing that later cost him his job in the International Monetary Fund (IMF). With the job, he lost his inhibitions and became a public intellectual — someone who thinks about matters of public interest and expresses naughty thoughts on them. It was a wise decision; he has lived a long and interesting life, and shows no signs of wilting. This book is a collection of his writings from the ’60s to recent times. Two-thirds were published in Economic And Political Weekly, which gives considerable latitude to members of its inner circle; the rest are pieces written on a variety of occasions, including moments of inspiration.
The writings give an insight into Khatkhate’s intellectual development over four decades. The earliest piece is rather conventional for its time: it argues that Jawaharlal Nehru failed to turn his ideals into reality because of the inflexible administration he inherited. The next oldest piece, from 1971, exposes the liberal preconceptions for which the author would later become notorious. It argues that underdeveloped countries should allow their graduates to emigrate — an extremely unpopular position among nationalists, who used to argue that young people whom the nation had educated at its cost had a duty to serve it. Then there is an important article purported to be from EPW 1973, though it gives references from the ’80s. It argues that if the real interest rate cannot be observed in a developing country, it can be estimated by adding together the real interest rate from an industrial country and the rate of exchange rate depreciation.
Many developing countries hurtled into payments problems after the oil crises of 1973 and 1978. Then the surpluses earned by oil-producing countries were lent indirectly to developing countries, and they ended up bankrupt in the laps of the IMF and the World Bank; Khatkhate’s articles address their problems. The prime one discusses the reform of the international monetary system. This one presumably got Khatkhate into trouble with his employer. Today it is difficult to see why; it is written in such guarded and unspecific terms that the battle lines are quite obscured.
The concerns of the ’80s persisted into the ’90s. The Asian crisis made its appearance, and the question of how underdeveloped countries, stripped of foreign exchange reserves, should manage their exchange rates came to the fore. Monetary policy, payments policy and exchange-rate management became complexly intertwined. They provide the subject for some detailed and generally illuminating discussions. But generally, so many factors interact in so many ways that each country becomes a special case; fund-bank-type analyses which lump together many countries and try to find generally applicable conclusions achieve prolixity without illumination.
Deena Khatkhate is an alumnus of the University of Bombay and Manchester University. A reputed economist, he has held senior positions at the RBI and the IMF, and was a senior consultant at the World Bank, the UN and the Asian and African Development Banks. He wrote extensively on economics in leading academic journals. His earlier book Ruminations Of A Gadfly was published in 2008.
Although Khatkhate’s contributions are better than similar official tracts, they look rather dated 10 years after the Asian crisis. As long as there are rich and poor countries, there will be a market for tracts on how poor countries should manage their finances and how they should be baled out by rich countries. These are perpetually live issues in Washington, so Khatkhate will be asked repeatedly to contribute. But there is not much illumination on them to be reached beyond where he has got; and that is not much. What there is, can be gathered from Khatkhate’s painstaking article on sequencing of financial sector reforms.
Some of Khatkhate’s more interesting contributions are about India, in which he continues to take a distant but lively interest. Their frequency increases after the 1991 reforms; they excited Khatkhate, and a debate on them surfaced into which he plunged with enthusiasm. However, Khatkhate is less involved in these
Indian debates; he does not go much beyond what has been written by policy advisors and US-based India hands.
Khatkhate is unique: he analyses Indian economic problems with the objectivity of a distant bystander. What he writes gets buried in Economic and Political Weekly, which is no longer a forum of macroeconomic debate. Since no one reads him there, he puts together his writings and publishes them through the Academic Foundation. It does an extremely good job; its printing is excellent, and it gives a more durable form to many ephemeral contributions besides Khatkhate’s. But it is still not a forum. It is our tragedy that Khatkhate remains a prophet without an audience.
This review was published in the Businessworld Issue Dated 12-18 May 2009
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Money, Finance, Political Economy, Getting It Right;
Deena Khatkhate is an alumnus of the University of Bombay and Manchester University. A reputed economist, he has held senior positions at the RBI and the IMF, and was a senior consultant at the World Bank, the UN and the Asian and African Development Banks. He wrote extensively on economics in leading academic journals. His earlier book Ruminations Of A Gadfly was published in 2008.
