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Journalism of Courage
Raghuram Rajan has acquired a reputation for seeing the future. In his new book,Fault Lines,Rajan,whos served as chief economist at the IMF and is currently professor of finance at Chicagos Booth School of Business and an advisor to the PM,revives his own considerable legend. He reminds us that he saw the financial crisis coming,and actually said so when there were few Cassandras around. Among the indicators that worried him then was the persistent inequality in the US.
But is inequality an altogether bad thing? Of course,the very mention of inequality puts the fear of voter backlash in every politician so it is interesting to note that Rajan does not consider it necessarily a bad thing. In an interview to The Financial Express on Monday,he says that in fact it could be seen as a fair system. What he refers to is the inequality of outcomes. He highlights the difference between inequality of income and inequality of opportunity. Societies can,economically and morally,live with the inequality of income that may come through a largely open system in terms of opportunity. In such a system,income inequality would derive from qualifications and performance. In the US,he argues,in a period of growing inequality of opportunity and the absence of avenues to upgrade skills,government used the delivery of easy loans to paper over some of the consequent inequality of incomes. This kind of quick-fix could not last,and the sub-prime crisis followed.
Indias and the USs financial systems are worlds apart. But the example is cautionary. Programmes like the NREGS should be seen as short-term solutions; they cannot be a substitute for inclusive education and skill upgrade programmes.
