Mr. Raghuram Rajan, professor of finance at the University of Chicago's Booth School of Business, is a much admired man. He has a broad bandwidth and is known to speak his mind.
Back in 2005 in a symposium held to honor the then Chairman of the US Federal Reserve, the much lauded Alan Greenspan, he had put out the thesis that financial development had made the world a much riskier place. It is reported that scorn was poured on his thesis by the other worthies participating in the symposium.
2008 and its aftermath has seen Mr. Rajan's stock rise while the stock of almost everything in the world fell.
Mr. Rajan remains as candid as ever. On the 14th of April this year, to a gathering in New Delhi of some of the most powerful people in India from the world's of business and politics, including the PM, Mr. Rajan said
“India’s star has dimmed in the last few months, as our governance is besmirched by corruption scandals and our macroeconomic health has deteriorated. Alarm bells should sound when domestic industry no longer wants to invest in India, even while eagerly investing abroad.”
Bravo. Mr. Rajan has been appointed to take over as the Chief Economic Advisor from Mr. Kaushik Basu. I for one look forward to more of Mr. Rajan's views on India and its economic policies. Which is not to say that everything he says is the gospel truth or even half-way there.
For example, recently Mr. Rajan wrote an article (
http://www.livemint.com/2012/08/08205612/What-money-can-buy.html?d=2) presenting his views on the book "What Money Can't Buy - The Moral Limits of Market" by Micheal J. Sandel, a Harvard philosopher(
http://www.amazon.com/What-Money-Cant-Buy-Markets/dp/0374203032/ref=sr_1_1?ie=UTF8&qid=1345111228&sr=8-1&keywords=what+money+can%27t+buy+sandel) which has me wondering.
I haven't read the book yet but Mr. Rajan's summation of the book's thrust an the thrust of his article on it is as follows
"Michael J. Sandel points to the range of things that money can buy in modern societies and gently tries to stoke our outrage at the market’s growing dominance. Is he right that we should be alarmed?."
Mr. Rajan analyzes some interesting examples of the use of money from Sandel's book including the rather emotive of sale of human organs.
The conclusion that Mr. Rajan comes to at the end of his article is that whatever that money buys is, by and large, fair and square as long as the guy who has the money has got it through hard work and deserves it. That is a point-of-view that I am sure many would disagree with but Mr. Rajan has the right to hold this ultra-conservative view.
But worse follows. The concluding lines of Mr. Rajan's article are as follows:
"But if people believe that the moneyed are primarily those who are well connected or crooked, their tolerance for monetary transactions falls. Rather than focusing on prohibiting monetary transactions, perhaps a more important lesson imparted by Sandel’s examples is that we should work continuously to improve the perceived legitimacy of money’s distribution."
Does Mr. Rajan seriously believe that the view-point that a large share of money in the world is in the hands of the well-connected or the crooked is not a reality to be addressed but a perception to be corrected? If yes than Mr. Rajan is better off in the shaded offices of a Wall Street bank than teaching and influencing generations of students or for that matter helping governments take policy decisions affecting millions.
2 comments:
While I admire Mr Rajan for his forthright views, I think the context of his remarks on the origins of money are that let us concentrate more on how the money is used rather than its origins.
For me, while I would be the first in decrying hoarding of money and using it for illicit means, I would rather that the usage be for laudable efforts (Gates, Buffet)even though the getting of such wealth may be murky.
Mr Rajan of course represents the the ultra-conservative, libertarian school of thought, and to deny that the distribution of money in the world is fair and legitimate would go against the almost religious belief in unfettered free markets which this school upholds. The belief is that the rich deserve to be rich, and the poor deserve to be poor, because they are either lazy or stupid. That equality of opportunity is enough and equality of outcome is not desirable (in India even equality of opportunity is a pipe dream). That markets conform to laws of nature and should not be tampered with lest efficiency is sacrificed(by that token, human diseases are also dictated by nature and we should not attempt to interfere by treating them medically).
Mr Rajan might have a different view on principles of distributive justice if he adopts philosopher John Rawls' "original position" approach - a thought experiment in which members of a society decide on principles of justice and fairness from behind a "veil of ignorance" i.e. without knowing what their position in society will be or even what natural assets (intelligence, strength) they will possess. So what would Mr. Rajan's views be if he did not know whether he was going to be a hot-shot economist or a lowly construction worker in life?
The views on the innate fairness of markets are also linked to the thought that all market exchanges are fine as long as none of the participants are coerced to enter into the exchange. So, for example, in the case of organ sales, as long as the seller is freely selling his organ, it is fine. But is the poor organ seller, driven by his desperate need for money, really free?
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