Central Banker Of The Year: Raghuram Rajan

Trigger

On 10/29/2013, I read following article in the Neue Zuericher Zeitung titled “Was Bernanke von Indien lernen kann” (German language; translated: What Bernanke could learn from India).

This article is indeed very critical of the Fed chief’s irresponsible policies in contrast with India’s central bank. The Swiss as having two major global financial centers and a notoriously long-term stable economy may know a thing or two about finance and economics.

Bankers From India

The current co-CEO of the German Deutsche Bank is a Jain. The former CEO of City Bank was from India.

Economist From Chicago University

Got to watch out for these alums! Mr. Rajan was a professor at this university. He was also a previous chief economist of the IMF. Before that he studied at the Indian Institute of Technology, Delhi, India.

Raising Key Interest Rates And Economic Reform

In contrast to the reckless and irresponsible Fed chief, the colleague from India raises key interest rates despite potential risk of food riots etc.

Mr. Rajan is being reported as demanding significant structural reforms and more competition as well as fiscal discipline for India. this contrasts favorably with the Western approach of printing more and more money to finance large fiscal deficits.

A Savior Of Capitalism from the Capitalists?

This a paraphrase of a book title authored by Mr. Rajan and Mr. Zingales published in 2003. The full title is “Saving Capitalism from the Capitalists: Unleashing the Power of Financial Markets to Create Wealth and Spread Opportunity”.

Here is an excerpt from Wikipedia about this book (emphasis added):

“The book is neither a defense of pure laissez-faire capitalism, nor is it an anti-capitalist polemic. Instead, the authors develop the following arguments in the book:

[1)] The free market is the form of economic organization most beneficial to human society and for improving the human condition.

[2)] Free markets can flourish over the long run only when government plays a visible role in determining the rules that govern the market and supporting it with the proper infrastructure.

[3)] Government, however, is subject to influence by organized private interests

[4)] Incumbent private interests, therefore, may be able to leverage the power of governmental regulation to protect their own economic position at the expense of the public interest by repressing the same free market through which they originally achieved success.

[5)] Thus, society must act to "save capitalism from the capitalists" -- i.e. take appropriate steps to protect the free market from powerful private interests who would seek to impede the efficient function of free markets, entrench themselves, and thereby reduce the overall level of economic opportunity in society.

The authors offer the following recommendations:

[1)] Reduce incumbent capitalists' incentives to oppose markets, especially by limiting the concentration of ownership of productive assets.

[2)] Provide a social safety net for the economically distressed to help maintain broad political support for free markets.

[3)] Keep the borders of the economy open to support free trade and maintain a high level of competitive pressure on incumbent firms.

[4)] Educate the public regarding the benefits of free markets to build political support for free market policies, or more specifically, oppose governmental interventions in the market designed to protect incumbents at the expense of overall economic opportunity.”

Kudos

We honestly wish Mr. Rajan lots of success! Set the Indian people free!