Reading K N Raj in the Age of Free Market Fundamentalism

This article tries to assess how K N Raj would have weighed in on some of the major contemporary issues like the trade policy, farm crisis and reprivatisation of public sector banks on the basis of his many writings. It also highlights his views on the fundamental orientation that an academic discipline like economics needs to have for contemporary social relevance.

This is an edited version of the inaugural K N Raj Memorial Lecture delivered (virtually) at the Centre for Development Studies, Thiruvananthapuram on 10 March 2021.
I am deeply grateful to Amit Bhaduri, Jinendra Jain, Anshul Maudar, R Nagaraj, Rammanohar Reddy and P S Vijayshankar for their comments on an earlier draft.

It may not be wrong to say that we are living in the age of free market fundamentalism. For at least the past four decades now, economic policy-making globally could be said to have been in the thrall of a blind and dogmatic adherence to the notion that a progressively reduced role of the state in the functioning of the economy would automatically—ipso facto—deliver greater economic growth and welfare to the people. Summed up as the Washington Consensus, it proposes reducing the role of government and moving towards greater privatisation, liberalisation and globalisation of economic activities. This “consensus” has now almost acquired the status of what the French sociologist, anthropologist, philosopher and public intellectual Pierre Bourdieu, in his classic work Outline of a Theory of Practice, called “doxa”—beliefs that are “taken for granted, self-evident and undisputed,” producing for the established social order “the naturalisation of its own arbitrariness” (Bourdieu 1972: 164). Little attention has been paid to the specific conditions within which or the particular sectors of the economy where reducing the presence of the state could help. My own recent work has focused on arguing that both in water and agriculture such a notion of “reform” is deeply misguided; if we are to resolve India’s interrelated water and agrarian crises, what we need instead is to improve the quality of state intervention, build state capacity and strengthen civil society action (Shah 2021a, 2021b; Shah and Vijayshankar 2021).

Since reform, by definition, is taken to mean only one thing, sector after sector is compulsively sought to be freed from what neoconservatives call “the dead hand of regulation” (Wilson 1971), even if overwhelming evidence, over many years, from all over the world, indicates that it is the state that has played the leading role in provisioning the most critical aspects of life: water, sanitation, education, health, food and nutrition. Indeed, it has even been argued by some that the rise of Donald Trump to the United States (US) presidency could have had something to do with what the Massachusetts Institute of Technology economist David Autor calls “guild orthodoxy: the key dictum was that policymakers should be told that trade was good for everyone in all places and times.”¹ Autor suggests that single-minded obsession with free trade and its beneficial impacts, led to a lack of focus on taxation of increasingly mobile capital, adequate safety nets and retraining policies for workers who were adversely affected by global competition. The overbearing preoccupation with cutting the deficit or “austerity,” another holy grail of free market fundamentalism, just did not allow for consideration of social security and welfare options, even under democratic administrations. The continued decimation of the “countervailing power” (Galbraith 1952) of the working class (again seen as inimical to “free markets”) has only intensified growing inequality and poverty.