For students of my generation, Dr. K.N. Raj, who passed
away recently, was a truly iconic figure. The earlier
generation of economists, V.K.R.V. Rao, Bhabatosh Datta
and A.K. Dasgupta were temporally distant from us; his
illustrious Bengali contemporaries were spatially distant
from us. Dr. Raj was centre stage, brilliant and inspiring.
His precise speech, his robust socialism, his thoughtful
writings and his absolute command over empirical data
left us spell-bound.
Within
days of my joining the Delhi University for an Economics
Honours degree, Dr. Raj came to my college for an after-dinner
talk on the Chinese Communes. His argument was that
it was essential for the means of production in society
to be collectivized, but not the means of consumption
(as the Chinese Communes were trying to do). Its impact
on a 16-year old (as I then was) was a lasting one.
We thronged to all his public lectures and we read every
word he wrote. The texts of his lectures used to be
available at the Delhi School library before they were
published; the queue of readers who signed up to read
them was so long that it would often take days to get
them. And Dr. Raj was absolutely prolific in the decade
of the sixties: his Nalanda lectures, his Cairo lectures
on employment and unemployment which were truly path-breaking,
and his work on growth models in Indian planning, culminating
in the famous Raj-Sen model, which carried the logic
of the Mahalanobis argument a step further, were products
of this period.
At the M.A. level he taught us Macroeconomics, and while
giving us bread-and-butter Keynesian economics, also
introduced us to Michael Kalecki, to Chapter 17 of Keynes's
General Theory, and to Oskar Lange's Price Flexibility
and Employment which had anticipated by more than a
decade the much-celebrated argument of Don Patinkin
in Money, Interest and Prices about the so-called ''real
balance effect''. He was fascinated by Keynes's suggestion
in Chapter 17 that in certain societies excessive land
preference could have played the same role as excessive
liquidity preference did in the advanced capitalist
societies, in keeping down productive investment. He
thought that this had been true in the case of India
and wanted to write a book on it. The book never materialized,
but the basic direction of his thought can be discerned
from an article he wrote where he argued, in opposition
to Kaldor and Reddaway who had denied the possibility
of land ever playing this role (since the rise in land
price they thought would always bring down the rate
of return on land sufficiently to eliminate excessive
land preference), that the ''subjective rate of return''
on land (arising from considerations such as safety
and prestige) was downward inflexible with respect to
changes in land price.
Even a brief and cursory discussion of Dr. Raj's intellectual
output, however, will require several specialized articles
and is beyond the scope of the present one. But one
particular shift in his overall trend of thought must
be mentioned here, both because it has gone largely
unremarked, and also because it underlies what I think
is one of his most outstanding, though little-known,
contributions. This shift relates to the fact that while
in his earlier writings on the Indian economy the problem
of demand scarcely makes an appearance, his later writings
on the subject are dominated by considerations of demand.
The fact that his earlier writings on India scarcely
mention the demand side, despite his being steeped in
the Keynesian tradition, should cause no surprise. Since
the Indian economy was a ''planned economy'', not exactly
comparable of course to the Soviet Union but with a
significant public sector nevertheless, it was taken
for granted that the question of the ''stimulus for investment''
that had so occupied economists from Rosa Luxemburg
to Michael Kalecki had little relevance for India. True,
there might be fluctuations in the level of activity
arising from fluctuations in the level of public investment,
caused for instance by harvest fluctuations, but these
happened even in centrally-planned socialist economies.
The question of the overall growth of demand setting
a limit of some kind on the growth rate of the economy
as a whole could never arise. After all, with Keynesian
demand management, it was a moot point if it could even
arise any longer in the advanced capitalist economies
(the Kaldor-Mirrlees growth model had argued it could
not). But where there was planning, with a substantial
public sector, it was certainly irrelevant.
Accordingly, one finds in Dr. Raj's writings through
the fifties, sixties and even the early seventies, an
emphasis on constraints on the supply side: the foreign
exchange constraint (as in the Raj-Sen model), or the
savings constraint (as in his numerous excellent writings
on the savings rate in the Indian economy), or the foodgrain
constraint (as in his statistical analysis of inflation
in India published in the mid-sixties). Starting from
the mid-seventies, however, there is a discernible shift.
His celebrated article in the Economic and Political
Weekly during the Emergency critiqued the devaluation-cum-import
liberalization package adopted by the Indian government
in 1966 under US pressure, on the grounds that, unlike
what the US-World Bank economists had been saying, the
unutilized industrial capacity at the time of devaluation
was caused by a shortage of demand and not of current
inputs (and hence not, indirectly, of foreign exchange);
from this it followed that the import liberalization
that accompanied devaluation was uncalled for.
In the same article he made a scathing critique of the
argument, articulated at the time by Union Cabinet Minister
Siddhartha Shankar Ray, that a ''liberal'' economic policy
which allowed the growth of output to cater to the demands
of the affluent consumers (who, though small relative
to population, were large in absolute numbers), would
both stimulate the growth-rate of the economy and keep
the ''middle class'' satisfied, even while having a ''trickle
down'' effect on the poor. In critiquing Siddhartha Ray's
position, Dr. Raj was in effect critiquing what was
later to become the official policy of the government
in the era of neoliberalism.
But what did he suggest in lieu of this ''liberalization''
strategy? This is an issue which he addressed in his
speech to a plenary session of the Golden Jubilee Conference
of the Indian Statistical Institute at Calcutta. He
was talking about both China and India. He saw the growth
process in these countries in the context of an exchange
of products between the agricultural and non-agricultural
(industrial) sectors. The rate of growth of the latter,
and hence by implication of the economy as a whole,
depended upon the rate of growth of the agricultural
sector, which provided the market for the latter. If
the growth of the economy was less than what the growth
rate of agriculture warranted, then the government could
step in to push it up to the ceiling; but it could not
raise it beyond the ceiling without causing inflation.
The growth process in economies like China and India
therefore had necessarily got to be agriculture-led.
Dr. Raj's argument here, arrived at on the basis of
his own understanding of the growth process in China
and India, echoed strongly the argument that Nicholas
Kaldor had been advancing in some of his later writings,
namely that while growth had to be ''export-led'', these
exports did not necessarily mean exports to other countries;
they could mean, and in the context of the world economy
as a whole they could only mean, exports to the agricultural
(primary commodity-producing) sector.
It followed from Dr. Raj's perception that the real
route to India's development was through stepping up
the rate of growth of agriculture, and for this it was
essential not just to make more inputs available to
agriculture, but, above all, to undertake land reforms.
The one consistent theme that ran through all his writings
was the necessity of land reforms. Right from the mid-fifties
when his support for the Mahalanobis strategy was predicated
upon the presumption that increasing investment allocation
in favour of the investment goods sector must be counterbalanced
through ''institutional changes'' in agriculture to ensure
that the availability of consumer goods did not suffer
as a consequence, until his ISI address, Dr. Raj remained
a consistent votary of land reforms.
Curiously, his argument that a more vigorous and broad-based
growth of the economy can be ensured only through the
implementation of land reforms, echoed the similar argument
advanced by Lenin in the context of Russia, which later
formed the basis of the demands of the Communist movement
all over the third world. This is ironical since Dr.
Raj, despite being influenced by Marxism, was a strong
critic of Lenin. His political position was perhaps
close to what he himself attributed to Nehru in the
special obituary issue of the Economic Weekly on Nehru,
namely that Nehru was a believer in the Marxist theory
of class and class struggle, but not in the Marxist
theory of the State.
To describe Dr. Raj as a ''Nehruvian'', however, would
also be an oversimplification. At the time of the First
Five Year Plan when Nehru wanted an ambitious Soviet-style
plan, Dr. Raj, all of twenty-six years old, who was
an architect of the plan, had opposed him on the grounds
that the high rate of investment required for his ambitious
plan would be incompatible with democracy, as it would
place too heavy a burden upon the people. On the other
hand, he remained a consistent votary of land reforms,
even though Nehru, after the mid-fifties, had perhaps
given up on them.
Dr. Raj's opposition to Lenin was reflected in his generally
critical attitude towards the organized Left. He had
close friendships with individuals within the organized
Left, including a warm and cordial relationship with
E.M.S. Namboodiripad. But towards the organized Left
movement as a whole his attitude was deeply sceptical.
I have myself faced his ire on many occasions for some
supposed transgression made by the CPI(M) in Kerala
which had angered him. After giving me a dressing down
for such transgressions (of which I would be completely
unaware), he would, however, give me a fond embrace
and say that he could take such liberties with me because
I was his student. Through all such admonitions and
disagreements, Dr. Raj always remained for me an iconic
figure, a giant of a person both in terms of intellect
and humanity.
The last word must lie with Joan Robinson, a close friend
of Dr. Raj. On what might have been her last visit to
India, she asked me, after we had talked for a while
about India's Extended Facility loan from the IMF, what
Dr. Raj thought about it, to which I replied that Dr.
Raj had not written about it and was perhaps not keeping
well at the time. She asked me with her customary directness,
''Oh, if Raj isn't well, then who is the moral voice
of the country at present?'' Dr. Raj was for long the
''moral voice'' of the country. He contributed much to
the making of modern India.
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