The World Bank’s new chief economist on redistribution, taxation, economists, climate change and, errm, multi-player sudoku
The World Bank’s new chief economist, Kaushik Basu (right), came through London last week and had a good initial exchange of views with some NGO wonks. I went to a similar exercise with his predecessor, Justin Lin (blogpost here), and the comparison was interesting. Whereas Justin focussed on industrial policy and structural upgrading, Kaushik talked a lot about governance, inequality, taxation and growth. Justin focussed more on the economics; Kaushik on the politics – how to get governments (and his World Bank colleagues) to do the right thing. That probably reflects their different backgrounds (China v India; Kaushik just crossing over from a period in the Indian Ministry of Finance where he learned to understand ‘the hierarchy of government’) more than any great change in public debate in the last four years.
Kaushik suggested a change of tone was needed among the Bank’s economists and researchers – paying as much attention to policy-makers’ need for narratives and big ideas as to demonstrating your mastery of whizzy maths. Damnit, not only have they nicked our killer facts techniques, but now they’re going to start telling good stories too! Throughout, he stressed the importance of the battle of ideas, ‘consciousness’ and ‘raising awareness’. Gramsci on 18th Street? He was also keen to push climate change and environmentalism, which he thinks is probably still insufficiently prominent at the Bank.
He received some good, pointed questions from the wonks. Peter Chowla from the Bretton Woods Project (the premier Bank watchdog in the UK, maybe anywhere) pushed him on the role of the Bank’s researchers in ‘paradigm maintenance’ – Peter argued that the Bank has a good varied set of research outputs (it probably allows a freer exchange of ideas than the UN, or for that matter, most NGOs and Kaushik is determined to protect that), but there’s some kind of institutional filter in place which squeezes out the heterodox fringe, and amplifies the neoclassical core, especially as ideas start to reach Bank country programmes. Everyone got a kick in on the Bank’s notorious Doing Business report, which Kaushik defended (he says it, along with the World Development Indicators, were the two documents he found most useful in government). He did however acknowledge that there might be some ideological ‘Trojan horse agendas’ being introduced.
Kaushik acknowledged that ‘if you begin in neoclassical economics and you don’t have enough imagination, you get locked into things like rational expectations’, but argued that lots of economists have quite sufficient imagination to think outside these reductionist stereotypes.
Where I started to get worried was on his apparent acceptance of the ‘race to the bottom’ on corporate taxation. This reflects his experience in his home state, West Bengal, where despite a Communist government committed to poverty eradication, the demands on industry were so severe that industry fled the state and poverty and unemployment remained high. But surely a key role for the Bank is to take up these kind of collective action problems?
However he does support redistribution. ‘I am not a trickle down believer, you need direct action on inequality’. He thinks that while we have to be mindful of the risk of capital and skill flight, there is scope for more efficient and redistributive forms of tax. There ought to be some inheritance tax, he believes, because to allow people to be born poor and destined to poverty as happens in today’s world is akin to a caste system. He reckons that with current levels of wealth ‘basic food should now be a fundamental right and access to healthcare is close to that.’
I think he could prove to be an interesting and innovative voice at the Bank, introducing an Indian sensibility on rights, human development and governance – he recently suggested an approach on bribery rather similar to decriminalizing cannabis: make it legal to pay bribes, but not to receive them, so that people forced to pay bribes would no longer be deterred from denouncing graft. You can follow him on twitter at @kaushikcbasu
One final revelation from the meeting – a diligent wonk had uncovered Kaushik’s true claim to fame, as inventor of a multiplayer version of Sudoku, clunkily named Duidoku (left). If that catches on, he may end up explaining to the Bank why he has single-handedly destroyed decades of global progress on productivity…….