Friday, August 2, 2013

The futile search for quick-fixes

Most often the long-term economic health of nations is about getting several basic things right. But unfortunately, when in trouble, the search is invariably for innovative and big-bang solutions. James Surowiecki sums up this dilemma in the context of the criticism of President Obama's recent speech that laid out the challenges facing the US economy and what needs to be done. He writes,
Obama’s speech was, in a sense, the equivalent of saying that if you want to lose weight, you need to eat better and exercise more. And demanding that he offer up some “big, bold, and new” idea (as Milbank, for instance, did) is like asking for a fad diet—lose thirty pounds in thirty days while eating only muffins! If we’re really serious about the long-run performance of the economy, we need to abandon the quest for short-term fixes and radical solutions, all of which steal from, rather than enhance, the economy’s still-enormous strengths.
I could not agree more. This is also the problem with popular narratives on what needs to be done to get India out of its current economic weakness. There are no quick-fixes nor "big, bold, and new" solutions. It needs to get the boring basics right - sustainable growth happens when the consumption base expands, encouraging investors to lend capital and businesses to invest, thereby creating more jobs and increasing the base further, and this entire process is facilitated by macroeconomic and social stability, an enabling regulatory framework, and good quality human and physical infrastructure.   

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