After relative constancy for thousands of years, the Chinese economy drew away from India in the early eighties. Just two decades later, the gap with India is more akin to a canyon, especially in industry. Most, nay all, economists, policy makers and travelling journalists would have predicted that, with a large private industrial sector in India, and zilch in China, the result would have been the opposite i.e. a tradition of entrepreneurship, and experience with the capitalist ways of the world, should have led Indian industry to grow at double digit rates of 13 percent plus for twenty years and China should have grown at an average half that or 6.5 percent per annum. The abnormal picture is there for all to witness – industry in China accounts for 50 percent of GDP, in India, it accounts for half that, or 25 percent.

It has been almost two years since I started writing the “Looking for Logic” column. The theme was dictated by the observation that there were several policies in India whose logic was not obvious e.g. why was there no privatization taking place, why were interest rates on small savings so high, why did we have such high transaction costs for brokerage, or why badla was so favored by stock market operators. Today, second generation reforms have gathered enough pace (though several fault-lines remain) that one can begin to think about third-generation reforms. And what might they be? For starters, the removal of policies that defy logic, that are “Beyond Logic”. Hence, the new name for this column.

We need to recognize a few basic facts about Indians. First, there is zero difference between Hindu fundamentalists and Muslim fundamentalists, except that the latter look more washed. Second, the vast majority (defined as ones without religious ferocity) often interprets religious fundamentalism to mean fascism, and does so correctly. Third, a large proportion of Hindus misinterpret democracy to mean majority rule, when in fact it can only mean the preservation of minority rights. Fourth, and most unfortunately, we are not a democracy, at least according to the ideologues of the party that is presently ruling India; witness their latest edict that the minorities in India are dependent for their survival upon the ‘’goodwill” of the majority Hindus. The same fundamentalist Hindus who, with decade regularity, prove to themselves and the world that genocide not only survives, but flourishes in their version of “Hindu” India. This, these so-called Hindus brazenly, and shamelessly, call an ancient civilization.

Liberal policy wonks operate with so many moral buzz words these days that it is difficult to recognize the beginning, the origins. One is good governance. The second is institutions. The third is rule of law. If you are going to ask for governance, you might as well ask for good governance. It helps to start with no-brainers, and it even makes one look erudite. But how do you get good governance? Why, you need to set up the “rule of law”. But how can you implement the rule of law? By setting up institutions which deliver justice. And what are these institutions? Democracy, a police force, courts etc. – and good laws. You have seen this movie before ?

When a Nobel prize winner speaks, we listen. Actually we have been listening to him for some time now – first as a theoretician, then as chief economic adviser (CEA) to the most advanced country, the USA, and then as CEA at the World Bank. Given that the US economy is mostly on automatic pilot, the World Bank job was the ideal place for indulging in the power of policy making - and this is why Stiglitz’s latest book, Globalization and its Discontents, should be mandatory reading for all economists and policy makers in the developing world.