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Leontief
Prize
Program
from GDAE Leontief Prize Event
March 27, 2000
"Economics
and Development in the Twenty-first Century"
Summary
of an address by Amartya Sen on the occasion of his
receipt of the Leontief Prize at Tufts University,
on March 27, 2000
The Global
Development And Environment Institute presented the
Leontief Prize for Advancing the Frontiers of Economic
Thought to John Kenneth Galbraith and Amartya Sen.
Katherine Galbraith accepted the prize on behalf of
her husband, who was not able to be present, and Bill
Moomaw, of the Fletcher School, read remarks prepared
by Professor Galbraith. The floor was then turned
over to Amartya Sen.
Professor
Sen opened his talk by referring to Wassily Leontief
and Ken Galbraith as "two of the greatest figures
in my own thinking life." He noted the excellent work
being done by the Global Development And Environment
Institute, which had presented the Leontief Prize
to him and to Galbraith, and emphasized his pleasure
that this occasion also coincides with the publication
of GDAE's The Political Economy of Inequality, the
fifth in "a wonderful series which is making a major
impact."
He talked about
Wassily Leontief in the context of the placement of
economics among other disciplines. Citing his own
pride in the contributions of economics, and its disciplinary
rigor, nevertheless, Sen said, the great glories of
economics have come in conjunction with other areas
of learning. Leontief was the definitive champion
for recognizing the evolving connections between economics
and the world of physical relations, including science
and technology. Modern expressions of these connections
have included, for example, industrial economics,
the aggregate connections between different sectors
of the economy, and an interest in what have come
to be known as backward and forward linkages out of
different industries. While Leontief was directly
involved in only some of these, he laid the groundwork
for modern economic thinking on such topics. The general
interest he excited among economists, to take science
and technology seriously, is bearing plentiful fruit.
Just as the
physical relations are an important part of economics,
so are the human relations. From that point of view,
economics needs to be linked with other social and
human sciences: to be connected with politics, sociology,
anthropology, values, ethics, and philosophy. As economists
who outstandingly made these connections, Galbraith
had figured importantly in Sen's own life well before
he came to the United States.
Sen shared
with the audience at Tufts a vivid image of himself
as a student in Calcutta, sitting in a cafe in College
Street, missing class after class as he read to the
end of Galbraith's American Capitalism. It
was a challenge to make one cup of coffee last for
the whole book, and to persuade a determined waiter
that, as he hadn't yet finished the coffee, he had
the right to remain in that comfortable chair!
In American
Capitalism Sen was struck by the idea of countervailing
powers; that one type of power may require other kinds
of power to keep it in check and in a position of
balance. This major insight was especially important
for him, as a left-wing student who was tempted by
the shortcuts of simplifying institutional realities.
The Soviet Union had tried out one kind of simplification:
namely, to get rid of all institutions other than
a few, such as planning institutions and industries,
but doing without political parties, parliament, or
free newspapers. It is now evident that a lot of the
problems of Soviet economics, as of Soviet society
and politics, arose from the failure to permit countervailing
powers.
This is a way
of understanding the nature of tyranny. It is not
just that the government is powerful, but that it
can act as a single unit. If one employer dislikes
a particular employee, the doors of every institution
in the country will be closed to that individual.
The multiplicity of options and of views is a major
feature of democracy. Majority rule could, in some
contexts, be very authoritarian; it, alone, is not
enough. The importance of plurality as a basic feature
of democracy was memorably recognized by the young
student reading Galbraith in a cafe in Calcutta.
Russia, in
its experience since the breaking up of the Soviet
Union, has had problems which can be traced back to
the urge to institutional simplicity -- the simplicity
of doing just one grand thing. The original grand
thing was central planning. Now the new grand thing
is the market mechanism. All the state institutions
disappeared, and privatization took place before there
were civil institutions to support the market. The
same mindset had carried over from Soviet times, assuming
that none of these things were necessary. But the
hope that the market mechanism alone can bring into
being the necessary institutions and values overlooks
all the things that Galbraith had emphasized: not
just the general theory of countervailing powers,
not just the connection between economics and politics,
economics and value formation, economics and social
sciences generally, economics and the different institutions
that give it life, but also history; how long it took
for different countries in the world to develop these
institutions. If one looks even to an institution
like banking, it took four or five hundred years for
it gradually to develop. Similarly, the value system
on which the economy operates developed very slowly.
All of this
is relevant to the contemporary debates about global
development. Sen's latest book, Development as
Freedom, takes development to be not only a problem
of developing countries, but an ongoing issue for
the whole world. Looking at all the countries in the
world, there is none that serves as a perfect model
for development; indeed, each has major failures.
We all know
about the failures of sub-Saharan Africa, with its
record of apartheid in South Africa, famines, lack
of democracy, and military rule. We are also familiar
with both the problems and the achievements of South
Asia; especially since Clinton's visit we are aware
of India's successes in software production. Already
it produces more than any other country except the
United States. But the fact remains that 60% of the
women are illiterate, and nearly half of the population
overall is illiterate.
Democracy should
have had more of a role here, in making illiteracy
a major issue. We can see the power of democracy in
the fact that India no longer has famines. You cannot
face an election after a famine. That is guaranteed
by the presence of opposition parties, no matter how
inefficient they are. In a democracy the possibility
of failure may come, not just from the inefficiency
of planning, but also from the inefficiency of the
opposition. A military dictatorship, however, risks
the kind of disaster that occurred with the Soviet
famines of the 1930's, or the Chinese famine of the
1958-61, in which 30 million people died (the largest
recorded famine in history). Similarly with the military
dictatorships in sub-Saharan Africa. Even now, the
two countries having major famines are Sudan and North
Korea, both dictatorships.
Sen pointed
out that one of the great things about democracy is
that there is the possibility of change; and, indeed,
illiteracy is beginning to be more of a political
issue in the sub-continent, as is the question of
gender inequality. On the latter subject he noted
that, with all of its problems, sub-Saharan Africa
nevertheless does much better than India. In fact,
when he was calculating the number of missing women
in India, China, Pakistan, etc, he compared the proportion
of women in the total population, not to the European
standard, but to the sub-Saharan standard of the gender
mortality differential. That comparison indicated
that something like 50 million women were missing
in China, and 40 million in India who, if not relatively
neglected, would have lived on.
Next, considering
East Asia, Sen noted the region's high rate of growth,
and fairly low inequality of income distribution.
For a time everything was going up together, but that's
a characteristic of many situations; when things go
up, they often go together. When they fall the divisions
appear, as happened in the 1997 crisis.
Development
as Freedom was based on lectures given in 1996, in
which Sen expressed his fears about the consequences
of not having democracy in East Asia if the economic
growth were to fail -- though at the time he was writing
he did not anticipate such a turn-around actually
occurring by the next year. He observed that people
sometimes ask why a ten per cent drop in GNP in one
year matters so much, after 20 or 30 years in which
annual GNP has grown five to ten per cent every year.
Indeed, it would not be so bad if the reversal were
shared evenly. But this is where there has been a
tremendous division, with some portions of the society
relatively unaffected, while most of the ten per cent
drop fell on the bottom fifth of the population, causing
the massive decline that has been seen in Korea, Indonesia,
Thailand, and others.
This is the
kind of situation where institutions like democracy
and politics come into the story. The voices of the
poor were not missed when everything was going up
together, because there was not so much to protest.
But the absence of those voices was seen as an important
reason for the unfair division of the pain when growth
was reversed. Not surprisingly, as recession spread,
democracy became a major issue in country after country.
As discussed
in Democracy as Freedom, these issues take
a different form in the United States. They show up
when you look at inequality in living conditions rather
than in income. It is sometimes said that the African-American
population may be poor in comparison to American whites,
but they are very rich in comparison with Third World
countries. Indeed, as far as income is concerned,
they are 20 to 30 times richer. But if you are looking
at survival to mature ages, the situation for African-American
women and men is much worse than in many of the poorer
countries including Sri Lanka, or parts of India,
which have better health care systems. The survival
results in China are better than for African-American
men, and neck-and-neck for African-American women.
The lack of health facilities, of what is sometimes
here dismissively called socialized health care, extracts
a very real penalty. These results are also connected
with the nature of schooling in inner cities, and
with a lot of other social failures.
The bad side
of the self-help culture of the U.S. shows up in suspicion
of national health care. The good side is the great
emphasis placed on employment. Indeed, the U.S. federal
reserve system, right from the beginning, has had
two objectives: lower unemployment and lower inflation.
In contrast, the European Central Bank has one defined
objective: lower inflation, or monetary stability,
and nothing about unemployment. This is related to
the major development problems of the Western European
countries -- Germany, France, Italy -- with their
unsupportable levels of unemployment.
Sen mentioned
unions as another kind of institution that is part
of the totality of countervailing powers, with different
roles to play in each country, depending on whether
they represent the rich workers or the poor, or what
kinds of rights they press for. In his broad view,
development problems are present everywhere; and each
country has things to learn from the others, including
a better understanding of how different institutions
are linked with each other. That is a possibility
which requires that we take a more integrated view,
which can build on the work of Ken Galbraith and Wassily
Leontief.
Sen recalled
a time, in 1968, when he was a visiting lecturer at
Harvard, co-teaching a course on social choice and
justice with Kenneth Arrow and John Rawls. A man he
met on a plane asked him, "what are your interests?"
On being told that he was interested in the theory
of justice, the stranger said, "You should know that
at Harvard there is a very interesting course on social
justice; it's taught by this famous economist Arrow
and famous philosopher, Rawls, and some other chap
from somewhere."
Sen concluded,
"I was very deeply flattered to be in such company.
So, as some other chap from somewhere, in the company
of Ken Galbraith and Wassily Leontief, I am very honored
indeed."
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