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EDITORIALS

Zardari is weak
Will Kayani take on terrorism?

US
Secretary of State
Condoleezza Rice has spoken on expected lines during her visit to New Delhi and Islamabad. After meeting Pakistan President Asif Zardari and Prime Minister Yousaf Raza Gilani, she wants India to believe that Pakistan is “serious” about meeting the terrorist challenge. May be she is going by the public statements made by Islamabad since 26/11 and assurances given to her in private.

Sustaining democracy
Big turnout in J&K, other states

T
he
people of six states that went to elections — Jammu and Kashmir, Delhi, Madhya Pradesh, Chhattisgarh, Delhi and Rajasthan — have proved that they are politically conscious and highly mature in sustaining the world’s largest democracy. The audacious Mumbai terror strikes and the anti-politician tirade by some sections did not deter voters of these states from exercising their franchise.



EARLIER STORIES

It’s Pak responsibility
December 5, 2008
End blame-game
December 4, 2008
Act, Pakistan, act
December 3, 2008
Two more heads
December 2, 2008
End of siege
December 1, 2008
The threat of biological weapons
November 30, 2008
Attack on India
November 29, 2008
V. P. Singh
November 28, 2008

Servants, not masters
November 27, 2008

Confident PC
November 26, 2008
Times of terror
November 25, 2008
Limited impact
November 24, 2008
Criminals in elections
November 23, 2008


No escape from tight vigil
Tackle terror before it strikes

T
he
increase in security at airports and other vital installations is the least that the country can do in the face of growing terrorist threat. The days of leisurely laxity are gone and buried. In today’s hair-trigger situation, even a minute of carelessness is seen by the killers lurking in the shadow as an opportunity to be utilised.

ARTICLE

Slowdown is all around
At least admit there is big problem
by Jayshree Sengupta

W
e
have heard from the highest quarters of the government that India is not going through a recession and that our “fundamentals” are fine and that growth will be around 7 per cent, one of the highest growth rates in the world. The pundits also say that it is a matter of a few months only before the economy bounces back and it is a temporary glitch that is making the economy go slow.


MIDDLE

Quotable quote
by A.J. Philip
V
ISHWANATH PRATAP SINGH had just won a by-election from Allahabad and was at the height of his popularity. That was when a massacre of Dalits occurred at Nunhi-Nagma in Jehanabad district in Bihar. The upper castes did not like a Dalit giving his daughter the name of the granddaughter of a landlord.


OPED

Healing is more than just tests and surgery
by Amar Chandel

R
emember
Munnabhai MBBS, the iconic film in which Sunjay Dutt brings a comatose patient given up by medical fraternity to normal life through loving care? If you think that was only a cinematic exxageration, you need to think again, because that is very much in the realm of the possible.

Canadian Parliament suspended
by Geraldine Baum

C
anadian Prime Minister
Stephen Harper secured permission for a rare suspension of Parliament on Thursday, a move that allows him to avoid an imminent vote that would have toppled his Conservative government elected just two months ago.

Capitalism: the remix
By Sebastian Mallaby

T
he
nastier this recession gets, the more people will talk about the discrediting of markets and the failure of deregulation. So the next time the Dow dives off a cliff, splash your face with ice water and remember two things: This end-of-capitalism talk is bunk, and it distracts us from the debate we should be having.





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Zardari is weak
Will Kayani take on terrorism?

US Secretary of State Condoleezza Rice has spoken on expected lines during her visit to New Delhi and Islamabad. After meeting Pakistan President Asif Zardari and Prime Minister Yousaf Raza Gilani, she wants India to believe that Pakistan is “serious” about meeting the terrorist challenge. May be she is going by the public statements made by Islamabad since 26/11 and assurances given to her in private. It is difficult for Ms Rice to believe that the civilians in power in Pakistan like Zardari, who is himself a victim of terror, will ever approve of terrorist attacks against India. Zardari has blamed “non-state” actors responsible for the attack on Mumbai. What it implies is that the Pakistan Government has no control of the domestic situation. This not only shows the Zardari government in a poor light, it even causes grave concern in India.

If non-state characters operating from Pakistan act again like they did in Mumbai, the victims will be the people of this country. That is something which India cannot countenance. While hot pursuit of the terrorists operating from Pakistan is an option India retains, it has its dangerous implications and it can, therefore, be the last resort. In the meantime, mere statements of support and concern by the Pakistani leaders will not suffice. Time and again, leaders like former President General Pervez Musharraf have given commitments to India to come down heavily against terrorists operating from their territory. Yet, terrorists continue to infiltrate and cause mayhem in India.

There is ample evidence with India that the terrorist group that attacked Mumbai had links with the ISI and was even given training by the uniformed personnel. It is a pity if the civilian authorities in Pakistan are not even aware of this. A peculiar system prevails in Pakistan. The Army — certainly, the ISI — there is a law unto itself and would not like to subordinate itself to civilian authorities. In other words, the Army alone can act against the terrorist groups operating in Pakistan. The US can do a lot in putting pressure on the Pakistan Army to not only distance itself from terror but also crack down on various groups out to disturb peace in the sub-continent. Unless this happens, civilian Pakistani concerns about terror will be “sound and fury signifying nothing”. New Delhi, in designing its future strategy, has to take into account that the civilian government is incapable of dealing with terrorism and it is not certain whether the Pakistan Army is ready to take up the task.

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Sustaining democracy
Big turnout in J&K, other states

The people of six states that went to elections — Jammu and Kashmir, Delhi, Madhya Pradesh, Chhattisgarh, Delhi and Rajasthan — have proved that they are politically conscious and highly mature in sustaining the world’s largest democracy. The audacious Mumbai terror strikes and the anti-politician tirade by some sections did not deter voters of these states from exercising their franchise. Their turnout was impressive, strengthening their faith in the democratic system. The people of Jammu and Kashmir have particularly broken the previous records in all the phases of elections held so far. The people, especially women, have given a befitting reply to the separatists who had given a call for the boycott of elections. They turned out at the polling booths in large numbers without the fear of the gun. The turnout in J&K has been increasing in phase after phase — 63.75 per cent (first), 65.09 per cent (second) and 68.22 per cent (third). After the recent turmoil the state had witnessed, elections were the only best solution for Jammu and Kashmir. Apparently, the people want to decide who should govern them.

The people of Chhattisgarh, too, deserve a pat. Polling in the final phase was 68 per cent. The people of Bastar, Dantewada and Kanker districts, where the Naxalites are most active, rebuffed their call for boycott and voted without fear. The turnout in Madhya Pradesh was unprecedented with a record 69.31 per cent. In the 2003 Assembly elections, the voting percentage was 67.41 per cent. Rajasthan also witnessed a turnout of 68 per cent. In the northeast, Mizoram, with 71 per cent turnout, surpassed all the states.

The turnout in Delhi was low at 58 per cent. Still, it was 5 per cent more than in the 2003 elections. Does a higher voter turnout suggest people’s yearning for change or status quo? Wait till December 8, the date of counting. These elections assume significance for two reasons. One, these were fought on issues that confront the entire nation — terrorism, price rise and development. And two, the outcome will reflect the general mood of the electorate before the parliamentary polls early next year. To that extent, the Assembly elections can well be described as a dress rehearsal for the Lok Sabha elections.

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No escape from tight vigil
Tackle terror before it strikes

The increase in security at airports and other vital installations is the least that the country can do in the face of growing terrorist threat. The days of leisurely laxity are gone and buried. In today’s hair-trigger situation, even a minute of carelessness is seen by the killers lurking in the shadow as an opportunity to be utilised. Unarmed civilians have come to be seen as “soft targets”. At least the airports and other busy places should not be sitting ducks for those who have no qualms about shedding innocent blood. No voice of reason is heard by these heartless people. We have hence to make security so foolproof that they don’t dare to think of mounting an attack. The threat perception is particularly high following the official revelation that the terrorists are planning a 9/11 type aerial attack. The highest level of vigil will have to be kept forever instead of being over once the Babri demolition anniversary is over.

That is the aim. The reality is different. Despite a nationwide alert, a suspicious vehicle at the Delhi airport reportedly managed to give the police a slip on Thursday night despite the CISF personnel chasing it for nearly a kilometre. That gives a lie to all the tall talk about special arrangements made in the wake of the November 26 Mumbai attack. Although the police has denied it, eyewitnesses have even alleged that the occupants of the vehicle indulged in firing. Whether it was a trial balloon by the terrorists or an ordinary crime, or whatever, it does not present the security apparatus in a favourable light.

It is necessary to demonstrate to the killers that the police is not there for ceremonial purposes but means business. While those on a suicide mission will carry on their deadly designs under any circumstances, a message must go out to all that they cannot escape the security dragnet. That is the only deterrent against their unholy agenda. It will be futile to blame the animals of prey for straying in if our own fences are weak. 

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Thought for the Day

Thought is the blossom; language the bud; action the fruit behind it. — Ralph Waldo Emerson

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Slowdown is all around
At least admit there is big problem
by Jayshree Sengupta

We have heard from the highest quarters of the government that India is not going through a recession and that our “fundamentals” are fine and that growth will be around 7 per cent, one of the highest growth rates in the world. The pundits also say that it is a matter of a few months only before the economy bounces back and it is a temporary glitch that is making the economy go slow.

But people who are doing actual business are not saying so. For media business, there are fewer advertisements, for manufacturers there are fewer orders, for service providers, there are fewer clients. Now there is the additional problem of terrorism that has to be tackled if the economy is to continue on its high growth path. The terrorist attack on Mumbai is going to be disastrous for business with foreigners because there is an additional perceived security threat for foreign nationals. Tourism industry for sure is also going to go belly up.

Many business barons are already seeing 2009 as a very difficult year. Each sector is today affected by the slowdown and an average consumer is stricken by the “thrift mania” and though many with excess cash can be seen in shopping malls buying luxury products, most ordinary citizens are not spending much on extras and “not needed” items. Added to it is the scare that one feels about the security situation of malls and crowded shopping centres.

And if one remembers that the slowdown of the economy is due to domestic factors also and not entirely because of the crisis in the western countries, the picture starts looking quite different. There are many important things that need to be corrected and not just the interest rate. Security concerns for instance, are on top of the agenda. Why Mumbai was attacked is clear -to ruin the prospects of investments coming in and to shatter business confidence.

Trouble in the business scene started not recently but more than a year ago when actually things looked pretty good except for inflation. We can recall the times when Sensex was above 20,000 mark and most stocks were going only up. Company results were good and no one bothered to see why the Sensex had become so buoyant. It was because the government actively encouraged Foreign Institutional Investors (FIIs). They came in droves in order to take advantage of the high interest rate that in turn had been the result of at least five repo rate revisions that pushed up interest rates to 8.5 per cent. USA’s interest rate was around 2 per cent that time. The government aimed at inflation control which was at the forefront of its economic agenda in the past few months specially because inflation was seen as politically disastrous.

Dollars also poured in because all controls on foreign borrowing were removed. The heavy dollar inflow led to the strengthening of the rupee against the dollar. Exports were affected because Indian products were losing their competitiveness and the government ended up giving various compensatory packages to exporters.

High Sensex and high rupee versus dollar led to high import growth which also hurt Indian industry. But India was shining according to official sources. Pundits spoke of higher growth in the future and then suddenly, the Subprime mortgage crisis surfaced in US. By January the effect was being felt in India when the Sensex collapsed by 1430 points. Then the massive withdrawal started by the FIIs due to the redemption pressure in the US and within a short span of time, the Sensex came down fast. Around $13 billions were withdrawn from the market. The rupee fell to a low against the dollar and the RBI started selling dollars ($63 billion) to fill in the gap.

The consumer demand had already been affected by high interest rates and demand for houses/real estate and white goods fell. That is why the industrial growth for August 2008 was low at 1.3 per cent. Inventory clearance became slower and fresh production got staggered. Manufactur-ing growth sunk to 1.1 per cent in August. (In Q2 however (July to September), industrial growth was at 3.8 per cent and manufacturing growth at 4.7 per cent. But in October, it is expected to go down again.)

In addition, when the global crisis struck, it affected the inflow of FIIs further and export orders. The ensuing liquidity crisis was handled by the RBI by cuts in Cash Reserve Ratio and repo rates. There is plenty of liquidity in the market now yet it is not making a big difference to the small and medium enterprises’ needs. Banks are holding on to their cash and much of the additional liquidity is with the Reserve Bank. Expansion plans are still on hold for big companies. There is a lot of accumulation of raw materials bought at old high prices. Commodity prices, including oil prices, have since collapsed. But manufactured products cannot be sold at lower prices because already profit margins are thin.

High prices are affecting demand and that is why the Finance Minister has been exhorting industry and real estate dealers to reduce prices. The global fall in commodity prices is going to help many industries but it will also hurt iron and steel industry and many agricultural producers.

In this game today, there are both losers and gainers. Some industries are going to feel the pinch much more and are already retrenching people. Others are managing to do quite well despite the downturn at home and abroad. We may not call the present crisis a recession which is technically speaking, two consecutive quarterly contractions in GDP growth rate, but it is a serious situation. According to latest estimates, GDP increased by 7.6 per cent in Q2 but the next quarter may be much less robust.

We shall need at least 6 to 7 per cent growth rate to absorb the jobseekers. Otherwise a huge section of the population will be receding below the poverty line. The poorer states in the country, with many more people below the poverty line are already experiencing an increase in terrorist activities because the jobless youth are readily recruited by anti social groups.

Since we also do not have a monthly data on unemployment, unlike in the US, we cannot ascertain the exact number of jobless in the country. There are a large number of job losses in the services and manufacturing sectors and every day we are hearing of it in the newspapers. But only the affected families are feeling the pain.

Mostly it is the temporary and unempowered workers (without any safety net), who have no voice to complain, that are being fired. These people have to be retrained and relocated and it seems the government is thinking of allocating Rs 1000 crore for their welfare and training. Unless we admit that there is a big problem, there would be no concrete steps taken to bring relief to the vulnerable sections. Perhaps it is better to acknowledge the fact that India needs help. Even China has admitted that its problems are serious, so why not India? The pundits should stop giving false hopes.

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Quotable quote
by A.J. Philip

VISHWANATH PRATAP SINGH had just won a by-election from Allahabad and was at the height of his popularity. That was when a massacre of Dalits occurred at Nunhi-Nagma in Jehanabad district in Bihar. The upper castes did not like a Dalit giving his daughter the name of the granddaughter of a landlord.

Singh decided to politically cash in on the incident. He would surely have remembered Indira Gandhi’s famous visit to Belchi during the Janata Party regime when she mounted an elephant to reach the village where a mass killing had occurred. Thus began her return to the public consciousness and eventually to power in 1980.

When I heard about Singh’s proposed visit, I approached his Man Friday Acharya Rammoorthy for an interview. It was decided that I would accompany Singh from Patna to Gaya and interview him in the car.

But when I reached the venue, the crowd jostled me out. I also found to my utter surprise Rammoorthy sitting beside Singh. “Come to Gaya where you can do the interview,” he shouted from the car. Fortunately, I had a taxi at my disposal.

Willy-nilly we became a part of Singh’s convoy. It was heart-rending to visit the huts of the Dalits, where women and children wailed when they narrated how “they” came at night and shot sleeping men, women and children. Singh heard them stoically without uttering a word. He, perhaps, knew that any words of consolation were meaningless.

From there, we all went to another nearby village where a sumptuous lunch awaited us. There, too, I could not speak to Singh as people always crowded around him. Rammoorthy consoled me with the promise that I could travel in Singh’s car on the return journey.

Again, Singh’s car was packed. That was the end of my interview, I thought. Then, an idea occurred. I got into my car and asked the driver to speed up and overtake Singh’s car. I got down from the car, stood in the middle of the road and waved at Singh’s car to stop.

It screeched to a halt. Rammoorthy vacated the car to accommodate me. He got into my car and I sat between Singh and Sharad Yadav. I began my interview with a question on what he felt after visiting the carnage site. He did not make any comment on the caste equations. Instead, he spoke philosophically about the “pauperisation of Indian villages”.

This did not make any sense to me. At one point, I asked him about his chances of becoming the Prime Minister and how the nation would fare under him. Then he made a startling observation: “It will be a national disaster if I become the Prime Minister”.

I noted down the quote in capital letters. Sharad Yadav, a child of Jayaprakash Narayan’s Total Revolution, and the first “Janata” MP from Jabalpur, told me not to use this quote in my report. Singh interjected: “Why stop him? He is free to use the quote”. I knew I had got a big story.

Back at the Hindustan Times office, I filed a report with this quote in the intro. While the Patna edition took it as the first lead, it appeared as the second lead in its New Delhi edition. A few days later, I saw the quote in the ‘quotable quotes’ column of Time newsmagazine.

The quote came in handy for Singh’s detractors in the next elections. And when as Prime Minister, he implemented the Mandal Commission report, many thought how prophetic he was when he made that honest statement. No one knew V.P. Singh better than he himself.

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Healing is more than just tests and surgery
by Amar Chandel

Remember Munnabhai MBBS, the iconic film in which Sunjay Dutt brings a comatose patient given up by medical fraternity to normal life through loving care? If you think that was only a cinematic exxageration, you need to think again, because that is very much in the realm of the possible. In fact, as prominent an authority as Nobel Peace Prize winner doctor Bernard Lown has been swearing by this method for decades now. What gives a new urgency to his pleading — that the doctors should think beyond just tests and surgery — is the release of the Indian edition of his path-breaking book, “The Lost Art of Healing”*, which calls for practicing compassion in medicine.

Bernard Lown is no ordinary cardiologist. He gained worldwide attention at a young age for his introduction of direct current for cardiac resuscitation and for the technique of cardioversion, which he invented for correcting runaway rapid heartbeats (techycardia). These discoveries saved many thousands of lives and paved the way for coronary care units. In 1985, he accepted the Nobel Peace Prize on behalf of the International Physicians for the Prevention of Nuclear War (IPPNW), of which he is a co-founder and co-president emeritus.

He is a firm believer that doctors have become automatons, who would rather go in for expensive tests and surgery, without any sense of compassion for the patient. The bond of trust between the doctor and the patient is broken and psychological factors behind the diseases are mostly ignored. Medicine has lost its way, if not its soul. In his view, listening is the most complex and difficult of all the tools in a doctor’s repertory. As he says, “tiny clues help weave an elegant diagnostic garment for threa

He is of the firm view that history-taking is the most important aspect of doctoring. Still, it is greatly ignored because it takes a good deal of time to elicit a full history. Instead, the doctors depend on sharp images provided by ultrasonography, magnetic resonance imaging, computerised tomography, endoscopy and angiography. Result? Healing is replaced with treating, caring is supplanted by managing, and the art of listening is taken over by technological procedures.

The Indian edition has been necessitated by the fact that there is growing incidence of heart disease here and the poverty of social resources for containing it. As the book points out, India spends only 0.9 per cent of its GDP on the health sector, whereas many other developing countries put in about 2.2 per cent. There is very little subsidy by the government. About 80 per cent of costs in India are borne privately.

India cannot afford to have doctors who blindly encourage invasive procedures as life prolonging, if not life saving. Such a type of medical practice shortchanges the individual patient by promoting unnecessary interventions. So, what Dr Lown wants all doctors to have is the feel and touch which make it possible for them to be in sympathetic communication with the patient’s spirit.

His group insists that unhurried listening is the most cost-effective measure available to promote better health. The more time invested by the doctor at the outset, the more satisfied is the patient and the more trusting is the emerging relationship. A doctor who takes a careful history reaches a correct diagnosis in 70 per cent of cases.

Interestingly, the method he recommends is pretty similar to the one being practised traditionally in India for millennia. This is far more efficient than all the currently available tests and technologies. But since this process is time consuming, it is ignored by modern medicine which has lost its human face.

There is a staggering 50-fold difference in cost between the two medical approaches. Billions of dollars are wasted annually in diagnostic overkill.

That is why patient dissatisfaction with doctors has been growing. Patients generally sue doctors or hospitals because of a perceived lack of caring.

The doctor should not only have expert knowledge of disease but also an appreciation of the intimate details of a patient’s emotional life. Only then can he fathom each patient’s uniqueness and to arrive at an individualised therapeutic prescription. The history-taking is always better when another member of the family, especially a spouse, is present.

A British study showed that 75 per cent of the information leading to a correct diagnosis comes from a detailed history, 10 per cent from the physical examination, 5 per cent from simple routine tests, 5 per cent from all the costly invasive tests; in 5 per cent no answer is forthcoming.

A doctor should also be aware that feelings of anxiety, tension, inadequacy, and depression are risk factors for illness, shaping the presentation of sickness, determining its progression and the speed of recovery.

A few kind, reassuring words of the doctor can lift a patient, and at the same time, discouraging words can hamper his recovery. Still, some doctors don’t think twice before uttering such horrors as “you are living on borrowed time”, “you are going downhill fast”, “the next heartbeat may be your last”, “you can have a heart attack or worse any minute” or “the angel of death is shadowing you”. They may be factually correct but do incalculable harm to a patient.

In short, he wants that every time a doctor sees a patient, the patient should feel better as a result. That is not very new either. Hippocrates, the father of medicine had said centuries ago: “Some patients, though conscious that their contentment is perilous, recover their health simply through their contentment with the physician”.

The Lost Art of Healing; by Bernard Lown, MD; Hay House India; Rs 295; Pp 342. 

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Canadian Parliament suspended
by Geraldine Baum

Canadian Prime Minister Stephen Harper secured permission for a rare suspension of Parliament on Thursday, a move that allows him to avoid an imminent vote that would have toppled his Conservative government elected just two months ago.

But the narrow escape from a crisis that was largely self-inflicted has badly scarred a prime minister already widely regarded as a bully, and reawakened a national unity crisis in a country where regional grievances are sometimes dormant but easily stirred.

Gov.-Gen. Michaelle Jean, the official head of state who normally has only a ceremonial role, allowed Harper to suspend Parliament until Jan. 26, saving his government from defeat by a coalition of opposition parties that included one dedicated to splitting the province of Quebec from Canada.

Emerging from the Gov.-Gen.’s residence, Harper said he would use the breathing space to focus on the country’s economic troubles.

Opposition leaders vowed to defeat his government at the first opportunity after Parliament returns.

That ended one of the most raucous political weeks in Canadian memory. It began when Harper, governing with only a minority of seats in Parliament, introduced an economic plan on Nov. 29 that ignored the global trend toward stimulating the economy with new public spending.

More provocatively, he used the occasion to tack on a highly partisan measure: cutting the public subsidy to political parties. With his own Conservative party flush with cash, it was widely seen as an underhanded strike at opposition parties far more dependent on public funds.

Harper’s moves were seen as cynical and out-of-touch at a time when Canada is feeling the sting of the global economic crisis. And it prompted opposition parties to form an unlikely coalition to vote out the Conservatives and assume power, a legitimate parliamentary tactic.

“The coalition smelled blood,” said political analyst Norman Spector. “He wanted to finish them off. And now they want to finish him off.”

But many Canadians are also uneasy about seeing a new government composed of a Liberal party whose leader, Stephane Dion, had already announced his decision to quit politics after being thoroughly trounced in October’s national elections, backed by the socialist New Democrats, perennial also-ran in national politics.

The coalition’s public relations woes were compounded by relying on support from the Bloc Quebecois, a party favoring the separation of the province of Quebec from the rest of Canada. The prospect of a separatist party in power triggered outrage in the Conservative heartland of western Canada, which has long resented what it sees as Quebec’s disproportionate grip on federal power.

The cost to the country may be greater than to any one party. By demonizing the Bloc Quebecois and their supporters in Quebec, Harper has awakened Canada’s ghosts of regional grievance, reviving the national nightmare of a fracturing country.

By arrangement with LA Times-Washington Post

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Capitalism: the remix
By Sebastian Mallaby

The nastier this recession gets, the more people will talk about the discrediting of markets and the failure of deregulation. So the next time the Dow dives off a cliff, splash your face with ice water and remember two things: This end-of-capitalism talk is bunk, and it distracts us from the debate we should be having.

The real question is how to manage the necessary shift in the balance of our mixed economy. Outlandish though it may sound now, red-blooded capitalism must be part of the answer.

Even before the financial crisis, government was expanding. Public spending as a share of the economy jumped under President Bush, and regulation increased, too, notably in the form of the Sarbanes-Oxley law on corporate financial disclosure.

Commentators trumpeting the abrupt death of free-market, small-government Republicanism appear to have slept through the Bush years.

Yes, the financial crisis has triggered an added surge in government. But this has happened in every recession since 1980 and does not represent an intellectual U-turn.

Mainstream economists have always been pro-market, but they have also always recognized numerous qualifications and exceptions. The crisis has triggered two important ones.

The first is that, in an acute recession, government spending has to expand aggressively to make up for weak private spending. As a top adviser to Bill Clinton in the 1990s, Larry Summers supported reducing the deficit; as a top adviser to Barack Obama now, Summers supports massive deficit spending.

This is not a flip-flop. Summers favors crisis spending now because we are in a crisis. In five years, he will again preach budget discipline. There is no paradox, no tarnished ideology.

The second economists’ exception is that the financial sector is special. If a big financial institution goes bust, it threatens to sink others; if large parts of the financial sector get clogged, the entire economy goes down with them.

Because financial-sector failures can hurt millions of ordinary people, banks will usually be rescued when they get into trouble; because the banks will be rescued, regulators should prevent them from taking excessive risks for which taxpayers end up paying.

For decades we have had federal banking oversight, federal deposit insurance and federal bank rescues. No intellectual revolution is implied by the recent bailouts.

The point is that we have long been living in a mixed economy. Government is growing, but the shift is of degree, not kind. Moreover, there’s no plausible escape from this trajectory.

For now, government needs to stimulate the economy, but even after the recession ends, there will still be pressure for more government spending. People rightly want the things that government produces: security (from criminals and terrorists), clean air and water, food and medicine whose safety is guaranteed by regulators, public education, and so on.

As society grows more prosperous, such public goods probably matter more than private ones such as DVDs or fancier vacations, so the share of government spending in the economy tends to rise.

Conservatives want to deal with this trend toward larger government by pretending we can reverse it, but that is unlikely to happen. Liberals want to celebrate the collapse of “free-market ideology,” but free markets do a lot of jobs better than government.

What we should do is embrace growing government but also be ruthless about making government and markets more efficient. If your private-sector engine is shrinking relative to your public-sector vehicle, you need to root out every design flaw that threatens to slow you down.

This points to a broad reform agenda. Government can be rendered more efficient by cutting out unneeded spending, as Obama suggested when he announced his choice for budget chief. It can also be improved via competitive procurement of government services, which argues for school vouchers and a cleanup of the defense-purchasing practices that allow lobbyists to skew outcomes.

Market re-engineering is also in order. The government should stop distorting markets by subsidizing housing finance through Fannie Mae and Freddie Mac, clinging to trade barriers, or offering tax deductions that encourage overspending on homes and health care.

The growth of U.S. government need not be an economic disaster. Sweden and Denmark combine large public sectors with fast growth in GDP per capita. But to get away with big government, you must have smart government. Once the financial crisis is behind us, this should be the guiding principle of the Obama years.

— By arrangement with

LA Times-Washington Post

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