Why ongoing controversy over Kerala CM's advisor Gita Gopinath is bogus

It’s been a week since Kerala Chief Minister Pinarayi Vijayan appointed Harvard economist Gita Gopinath as his financial adviser, but the controversy over her post refuses to go away with the senior-most CPM leader VS Achuthanandan also joining the chorus in opposing her.

Interestingly, the attack on Gita, or rather Vijayan, comes from two quarters: one, the opposition and the CPM-critics who find the decision - a Marxist-Leninist party appointing a “neo-liberal” economist as its advisor - the epitome of CPM’s double standards; and two, the hardliners within the CPM, who find her economic philosophy highly objectionable.

Despite their criticism, the Congress doesn’t have a problem with her because it’s during their rule that Gita made her first public appearance in the state - at a global investment meet - but doesn’t want to lose the opportunity to ridicule the Marxists for their alleged duplicity. For the party critics, it’s yet another convenient handle to hit at Pinarayi and company. For Achuthanandan, ideologically it’s odious.

The controversy is not surprising because Kerala is a state where everything and anything tends to be tendentious and this too is no exception. Gita, on her part, has made it very clear in a statement that she would not interact with the media on a regular basis and that her job is only to advise the chief minister. She added that her role would also be to connect different departments of the government to knowledge leaders from across the world and that she herself has no decision-making powers. It’s up to Vijayan and the departments to pay heed to her advice or not.

In this context, let me explain why the controversy is bogus.

Historically, the socio-economic affairs of the state are mostly driven by the planning board, which is now handled by (deputy chairman) a hardcore left-wing economist VK Ramachandran, and the finance ministry headed by another left-wing economist Thomas Issac. It’s hard to imagine a supervisory role for Gita within this space. Neither she nor Vijayan claims one for her. So, the whole idea of a super advisor is not reconcilable with an established, formal and accountable arrangement.

As she herself has clarified, her role is “confined” to advising the chief minster and connecting various departments to knowledge leaders. This is classic international development speak that donor agencies and multi-laterals indulge in.

The premise is that the country that they advise, on whatever issues, are inadequate in their knowledge and capacity and it’s incumbent upon the internationalists to help them. For donor agencies, it’s an ideal route to influence national policies because they also give financial aid, while for multi-laterals such as the UN, it’s an opportunity to both help the countries, say in times of disasters and constitutional crises, as well as make them compliant to a certain rights-sensitive and social-democratic world order. It’s usually small countries that take such help.

Moreover, Gita’s domain expertise has nothing to do with Kerala’s requirements. The real crisis in the state is its inability to generate wealth locally, the decline of the welfare state that was built on the early reformist movements, and the successive governments’ failure to stem the privatisation of sectors such as education and health. With her training and expertise in international finance and market economics, will she be able to help?

Clearly not. But she says she will connect Vijayan and his various departments to specific experts. Here’s the second problem. All the departments are not handled by the CPM although Vijayan has kept a lot of portfolios, including planning and economic affairs, with himself. If her experts were to advise revenue and agriculture - two important departments in terms of socio-economic policies - will the CPI ministers or their officers listen? Very unlikely. The CPI ministers are not hardliners, but they are tough.

It’s also hard to maintain long-distance consultancies. Even if the ministers and their department secretaries oblige Pinarayi, the process is likely to peter out sooner than later because the latter will be resistant while the former will get busy with their other commitments. Moreover, it’s hard to imagine economists trained in free-market capitalism suggesting innovations for sustainable welfare and pro-poor policies that many of the ministers have vowed to.

Probably, Pinarayi’s expectations from Gita, despite the apparently bigger knowledge-based scheme of things, is that she would help him achieve economic growth although it’s not her domain expertise at all. Even if she was equipped, she won’t be able to do much, because in terms of wealth-generation, Kerala is gridlocked. It can’t have even mid-sized industries, it doesn’t have an entrepreneurial culture and most of its services sector, which accounts for about 70 percent of the state’s gross domestic product, serves the local consumerist appetite. The bulk cash that the state generates are remittances which for the time being plug the production gap.

Can Gita turn this around? Most probably not. The chances of the IT industry growing faster is unlikely and sectors such as garments (e.g. Sri Lanka and Bangladesh), electronics (Taiwan, Thailand, Malaysia), and pharmaceuticals (rest of India and Bangladesh) that are suitable for Kerala require a certain legacy and several years to develop. Tourism? Sri Lanka’s cleaner beaches and better behaviour have already begun poaching our overseas travellers.

So, where exactly is Gita’s operational space? And is all the hullabaloo worth it? Not at all.

Now, the most critical part.

Even if Pinarayi is bent upon economic growth by developing electronics parks, wider highways and all that his government has promised, does he really need a capitalist economist to get it done? Probably he should take a look at chapter 23 of Cambridge development economist Ha Joong Chang’s book 23 Things They Don’t Tell You About Capitalism. As Chang systematically argues, “good economic policy doesn’t require good economists”.

“Good economists are not required to run good economic policies. The economic bureaucrats that have been most successful are usually not economists. During their ‘miracle’ years, economic policies in Japan and (to a lesser extent) Korea were run by lawyers. In Taiwan and China, economic policies have been run by engineers. This demonstrates that economic success does not need people well trained,” he says. In the old industrial countries such as Germany and France too, it’s the quality of engineers and designers, not economists. On the contrary, it’s the international economists that created the financial crisis and experts from IMF and the World Bank who wrecked havoc with many developing countries.

Kerala’s urgent need is not just economic growth - it still has some breathing space because the remittances will keep it afloat for some time - but also welfare. It does need additional wealth, but it also needs measures to address widening inequality. Since land has become a major determinant of assets and wealth and has contributed to massive inequality, as researchers C R Yadu and Satheesha B of the Centre for Development Studies in Thiruvananthapuram argue, Kerala urgently needs is a fresh round of land reforms.

Its education and health sectors are in absolute ruins with massive private hospitals luring both patients and doctors away, and the booming low-quality private education trapping thousands of families in debt (Kerala has the highest educational loan disbursements by banks in India). Extremely poor access to cashless health services and the skewing of the once stable socio-economic determinants of health have landed scores of people in catastrophic situations.

Can Vijayan do something to reverse this trend?

If Pinarayi Vijayan is looking up to Gita as what Milton Friedman was to Chile and Jeffrey Sachs (who by the way was once a Tamil Nadu mascot and Padma Bhushan awardee) to Latin America and post-communist eastern Europe, he is hallucinating because Kerala is not Bolivia or Poland and cannot get more capitalist than this. The “shock therapy” that the state requires is to make its people ashamed of their parasitic life of preaching communism that’s financed by the remittances from global capitalism.

Don’t worry about Gita. She will get tired sooner than later because behaviour change is not listed on her CV as a domain of expertise.