Governments the world over, rich and not-s-rich alike, have announced they will invest billions of dollar to prop up their economies. Money has become dearer and jobs everywhere are being brutally axed. Paranoid consumers are reluctant to make new purchases. Governments want to solve this situation by putting money in the hands of consumers. Keynesian economics is back in the reckoning after decades in the cold storage.
John Maynard Keynes (1883-1946) was a British economist who gained huge recognition after the Great Depression. Any government, he argued, needed to spend large sums of money to stimulate a slow-paced economy. The counter argument was that it ran the danger of crowding out private investment. It was also seen as interference in a perfect market economy – resources would be diverted from what the market forces needed to what the government thought was important.
But when he espoused his views in the mid-1930s, Keynes hit the popularity charts almost instantly. He gave mainstream economics its life breath back. Russia was making rapid strides with its planned economy when the Great Depression stuck. Because it had little contacts with the rest of the world economy, the meltdown left it totally untouched. Influential statesmen, including Jawaharlal Nehru, began to doubt the ability of free markets and private enterprise to sustain themselves. The answer was first provided by Keynes.
Or, was it? There is evidence that an Indian king used similar tools to rejuvenate a slowing economy almost 150 years before Keynes published his famous work, The General Theory of Emplyment, Interest and Money. Asaf-ud-Daula (1748-1797), the fourth Nawab Wazir of Awadh, moved his capital from Faizabad to Lucknow in 1775. Nine years later, in 1784, Awadh was visited by a devastating famine. It brought all economic activity in his kingdom to a standstill. All rural demand collapsed and consequently the factories in the kingdom too stopped.
It was then that Asaf-ud-Daula embarked on a huge initiative to build magnificent monuments and palaces in and around Lucknow. And for this he spent liberally from the royal treasury. All of a sudden, there was work for people and the Awadh economy soon came out of the slowdown. Till date, people in Lucknow say when they get help from unexpected quarters:
Jisko na de maula, usko de Asaf-ud-Daula
(Who is ignored by God, is taken care of by Asaf-ud-Daula)
So, who first thought of economic stimulus, Keynes or Asaf-ud-Daula?