debate on central planning

debate on central planning - Up for Debate: Scientific...

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Up for Debate: Scientific Planning: India's Experience Page 1 Up for Debate: Scientific Planning: India's Experience P. Chidambaram The Legacy of Soviet Central Planning INTERVIEWER: How important was Soviet-style central planning to the old Indian economy? P. CHIDAMBARAM: The government of the day was greatly influenced by Soviet central planning. It appeared to be an alternative model. We were fascinated by the idea that everybody can share in the prosperity and wealth, and that poverty would be abolished, and that the state can provide virtually everything to all the people. This was an idea that seemed to have fascinated that generation. INTERVIEWER: And you're implying that it failed? P. CHIDAMBARAM: Obviously. It failed miserably in India. For the first 30 years the average growth rate of our GDP was barely 3.5 percent, and if you account for a population rise of about 2.3 percent or so, the per capita growth rate was barely 1.2 percent, and that is why there was such massive poverty in India. Corruption and Self-Defeat Under the Permit Raj INTERVIEWER: Would it be fair to say that the inevitable consequence of central planning was the Permit Raj? P. CHIDAMBARAM: Yes. Once it was decided that the government will allocate resources, or at least control allocation of resources, the license Permit Raj was inevitable, because capacities had to be limited, growth had to be limited, and a system of rationing had to be adopted in terms of both bank funds as well as permissions. INTERVIEWER: You had direct experience in the license Permit Raj. What did you actually come across? P. CHIDAMBARAM: When I came back to India after Harvard Business School, I started as a lawyer and as a trade union leader. Now, I had a very special advantage -- I was looking at the way government worked as a lawyer, challenging government action in courts. I was also looking at the working of Indian companies from a trade union point of view. And I found that enterprise was stifled, [there was] rampant corruption, efficiency was penalized, growth was crippled and because of this protective market, the Indian people were being given shoddy goods and services at very high prices. Only rent-seekers flourished. The system simply was not creating enough jobs. There was not a sharp rise in incomes as we thought it would have, and the most disillusioning aspect of it was the rampant corruption in government. Every license, every permit, every amendment was procured by corrupt means.
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Up for Debate: Scientific Planning: India's Experience Page 2 INTERVIEWER: A bribe? P. CHIDAMBARAM: Well, bribe is the simpler word, I suppose. INTERVIEWER: Can you give me some kind of specific examples of the way in which the Permit Raj would interfere in businesses? P. CHIDAMBARAM: Oh, yes. If your capacity was limited, say, to producing 100,000
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debate on central planning - Up for Debate: Scientific...

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