Why we need to take the warning in Manmohan Singh's speech a bit more seriously
Yesterday, my doctor friends at Gangaram Hospital and AIIMS in Delhi told me that they are seeing fewer patients. Fewer new patients, fewer patients who used to seek treatment regularly, fewer patients opting for non-urgent or elective treatments, fewer surgeries are being done. And OPDs are surprisingly thin.
Why?
There's no cash in wallets. People are afraid to spend on health, unless absolutely necessary.
We are afraid to spend
The last time I had read this, the Great Recession of 2008-10 was raging and the Western media was talking about it. I just hadn't imagined how scared people may have become in India under demonetisation.
That similarity makes me scared. For, a tough economy doesn't just change people's health-seeking behaviour, it sends a shock wave through society - far beyond real-estate and gold markets - that plays out in terms of human cost and long-term impact on families.
The hidden human cost
The obvious ones are: frequent signs of depression, sleep difficulties and stress, along with severe toll on people's health, especially mental health issues. Suicide hotlines across UK had seen a spike of 30 per cent in calls between 2008-2010.
Did you know that conflicts with family members or friends rise in economic crises? There are fewer marriages, lower fertility rates among young women and, hence, fewer births (2.3 million fewer babies born in the US between 2008 and 2013).
Instead, domestic violence goes through the roof (the National Domestic Violence Hotline in the US had recorded a 50 per cent rise in calls during this time) yet divorce rates drop - just because couples can't afford to split assets.
Education is another field that is affected, with rising tuition rates, more drop-outs and less students enrolling for higher education. Teachers report that children of economically distressed parents show problematic behavioural issues. People who enter the job market earn less, while pension plans are slashed for many retirees.
Waiting for Keynes
I don't know what we are staring at: Former prime minister Manmohan Singh has just said, "I say so with all responsibilities, that we do not know what will be the final outcome."
He has also quoted that giant of finance, John Maynard Keynes (1883-1946), regarded as the founder of modern macroeconomics: "Even those who say that this measure will do harm or cause distress in the short term but be in the interests of the country in the long run should be reminded of what John Keynes said once, 'In the long run all of us are dead'."
The full quote is even more revealing. Keynes had written in his 1923 Tract on Monetary Reform: "The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again."
Bring on the "animal spirit"
It's important to remember here that Keynes had also coined the term "animal spirit" - a phrase Dr Singh had used during his tenure as PM under UPA II and was mocked for it (I wish he had explained it as lucidly then as he spoke in Parliament yesterday.)
"Animal spirit" refers to economy not just as quantifiable facts and data, but in terms of human psychology: how intuitive, irrational and emotional the mindsets of economists and policymakers often are; how confidence or lack of it can make or break growth; how stories of corruption and broken trust can lead to economic depressions. And much else.
Keynes is credited with a "revolution" in economic thinking at a time most of his peer group held that an economy eventually attains equilibrium, so long the government doesn't interfere and if we are only willing to wait.
Giving centrality to government intervention to stabilise the economy, he argued that a wait-and-watch approach can tip the economy into a different spin of equilibrium: of long-term underemployment.
Sounds eerily prescient
But with so many economists and finance scholars in Prime Minister Modi's premier think-tank, the NITI Aayog, not to mention the Reserve Bank of India, why did it take a former Prime Minister to come forward and call a spade a spade?