Decades ago in a small town in the South, there was a hairdressing salon, the Nationals, whose grim-faced owner did not have too many customers. This was because when he had one, halfway through trimming the sideburns he would lay down the clippers and stand face to face with him and ask a question, ‘Is Netaji Bose alive.’ And if you shook your head he would order you out of his shop.
In the town at one time, there used to be a number of youngsters with half-trimmed sideburns. These were not members of the Spanish football team Athletico Madrid that had made these half-side burns fashionable; these were the unwitting Netaji deniers of that small town. An economist or sociologist would have spun an entire theory on sideburns from this quaint little town.
One of the favourites of economists is the theory of ‘haircuts’. According to the French economist Thomas Picketty, the Merkel-Sarkozy plan in 2010 to signal that sovereign public debts would not be fully paid back, which he called haircuts, was clearly not a good idea.
If we want to make the banks and financial asset holders pay for their mistakes, a highly desirable option, then it would be much better to have a ‘tax haircut’, (that is debts paid back but financial profits taxed via a European corporate levy) than an uncontrolled ‘haircut’ in which banks are sent into bankruptcy. This is an uncertain process where you do not know who will end up paying for the consequences.
Because big countries’ strategy will just recreate a whole set of disparate rates of interest rates for 27 different European sovereign debts, which will lead to speculation, this would undermine the whole logic of a single currency and the rationale of small countries to participate. So you end up with Greece the laggard having to bear the burden, more haircuts.
Prof Amartya Sen, who had done pioneering studies on the Bengal famine of 1943, has made another prescient observation and spun another theory. According to him, many professions are vulnerable to shifts in prices and sale deeds. In the case of haircutting, for instance, he had observed in Bengal during those depressing times, people find it quite easy to postpone having their haircut so that the demand for the product of the barber may fall sharply. He had also noticed that on top of that ‘quantity’ decline, there was also a sharp fall in relative price of haircutting.
During the famine, the rate of exchange between haircutting and staple food fell in some districts by as much as 70per cent. So the barbers, poor as they are, went to the wall as did many other dispensable professions.
The combination of greater purchasing power of the urban population that benefitted from the war boom and fearful speculative withdrawal of food from the market helped generate starvation through a sharp distributional change. He sums up the entire economic mechanism and hunger and starvation from this one modest activity of the roadside barber.
A former Reserve Bank governor has come up with an even more interesting observation. Since central bankers are so obsessed with interest rate cuts and have problems with the government over the issue, he found that when was having a haircut, the barber invariably asking him about interest cuts. He explained to him in a simple way so that he would understand the intricacies of the process.
The man again asked him about rate cuts a second time and he explained it in more detail. But when asked a third time he got agitated and asked why he was again and again asking the same question. The barber said that it made his job easier, that whenever he mentioned rate cuts the banker’s hair stood up and it was easier for him to clip it.
The same banker had also come up with another theory to link up inflation with haircut. When he was a young man and just out of college, he said, his haircut cost Rs.40, and twenty years later when this hair had started getting thin, he said, the hair cut cost double, Rs 100. Now, another 20 years later, when he had become almost bald the hair cut costs RS. 150.
Paul Theroux, the writer used to have his villain mention in at least three stories ask his adversary to go and have a haircut. When he was asked if there was any special significance or metaphor, he said when he was in indigent circumstances and living in Singapore with not even a telephone he used to teach in a university. Once he ran onto the vice chancellor in the street and he asked Theroux, who was dishevelled, to go and have a haircut. That was his revenge on that university head.
Decades ago when the now defunct Right to Information Act (RTI) was in its infancy, a frequent user of it had filed a petition; how many foreign visits did the Planning Commission chief make in two years. He also wanted know the cost of renovation of the official’s washroom on the fifth floor of the building.
It was disclosed that the chief planner had made 230 foreign trips in the two years in question. That would work out to almost a trip a week. And since these visits were mainly to Washington, a quick calculation would mean that the economist was airborne three days a week. And if you calculate the jet lag, flight delays, vagaries of the weather and flight diversions because of cloud cover, it would be worthwhile to compute the effort put in and the gains made. Since most of the economists and historians are most of the time airborne this might be a minor quibble.
It is not that during these flights economists are being idle, they are having encounters, making deductions, reading up on the latest date, like in the hairdresser’s chair, and coming up with interesting theories and solutions to even complex problems. One former finance minister, for instance, discovered that the tea served at airports, a cup of hot water and teabag and a sugar cube, cost Rs.180. He was shocked at this rip-off, only to be informed that tea at cheaper prices were available just down the aisle. The ambience and the decor had all to be factored into the cost.
The author is a senior journalist and writer
The opinions expressed in this article are those of the author and do not purport to reflect the opinions or views of THE WEEK.
