5. INDIA RIDES SOCIALIST DONKEY
An Author and Two Books -5
ECONOMICS OR POLITICAL ECONOMY?
We talk of "Economics" today, as if it is an independent entity. The country's annual economic blueprint , the Budget, is as much political as economic. It requires a political majority in parliament to pass it.. And many of the programs included in it are political in origin and intent. It is mainly designed for political impact and gains , the outward justification being economic, which few understand.
An older generation knew better: they spoke of "political economy". The self-styled 'economists', to get counted as scientists, call their indefinite outpourings 'economic science'; but the best of them end up as advisor to some political leader; otherwise they cozy up, warming some chair in a university, which hurts (or helps) no one.. There is no economics without politics. As they used to say, "economics without politics has no fruits ". Every economic question or solution has a political angle, and a political price.
NEHRU'S SOCIALISM: BITTER FRUITS
Under Pundit Nehru, we had both economics and politics without fruit, or if you like, with bitter fruits! We became politically independent, and wanted to be economically self-reliant. Gandhi had given us a model, but Nehru did not take it. He had visited the Soviet Union in the 1920s and had fallen for their model of centralised planning.His mind was closed. He was not receptive to new ideas and insights. He stayed with Gandhi but his mind was elsewhere. As PM, he adopted the Soviet type planning.
He did not trust foreign capital, and discouraged imports. He formally announced his policy as "socialistic pattern of society" and made the Second Five Year Plan its implementing tool. The State captured the commanding heights of the economy. It inaugurated an era of import substitution, heavy industries, restraints on consumption, brutal taxation, heavy borrowing. This policy was later labelled by pundits as "import substitution industrialisation". It led to severe shortages, black marketing, tax evasion, black money, red tape, corruption, expansion of public sector without matching productivity, growth of bureaucracy, etc.The common man was asked to tighten his belt, till it snapped.
External trade was officially controlled. The exchange rate was fiercely guarded as sacred.
Independent economists like P.T.Bauer of the London School of Economics, Gandhians like Richard B.Gregg, Indian think tanks like the Forum of Free Enterprise had warned against such massive investments on long term projects without matching productivity.
The Reserve Bank of India, fiercely more independent then and more loyal to its purpose than to the political masters, warned of the danger of inflation it posed, and its unmanageability.
Sir Benegal Rama Rau, RBI governor even resigned, rather than support deficit financing on such (then ) massive scale. Nehru and his finance minister did not care.
All the dire predictions came true. We ate up our sterling balances, inflation crossed historical levels, country suffered from serious shortages and high prices. But the govt did not mind,or bend, nor did its buffalo bureaucrats care.
Multilateral world trade had started expanding fast after the Second World War, but India chose to be inward looking and so did not take advantage. Our share started shrinking, even as world trade was growing!
STIFLING INDIAN ENTERPRISE
In a way, distrust of foreign capital and capitalists could be justified as they had been instrumental in establishing the British rule. The British govt did not encourage Indian enterprise in a big way, in industry or manufacture. But Nehru's govt proved even worse: it stifled Indian initiative and enterprise at every level and opportunity. Tharoor writes:
The mantra of self -sufficiency might have made some sense if,behind these protectionist walls,Indian business had been encouraged to thrive. Despite the difficulties placed in their way by the British Raj, Indian corporate houses like those of the Birlas,Tatas and Kirloskars had built impressive business establishments by the time of independene, and could conceivably have taken on the world. Instead they found themselves being hobbled by regulations and restrictions,inspired by the socialist mistrust of the profit motive,on every conceivable aspect of economic activity.But there was more to it. While Nehru's economic wisdom would not allow him to think of economic life except via state planning and socialist control, these controls were actually administered by the army of bureaucrats at various levels. While the crony and crooked elements could always find a way through, it was only the honest elements which suffered. Even a petty official could thwart an enterprise. This provided the ground for the notorious politician-bureaucrat-businessman nexus which bred corruption.
R.M.Lala has described in his books on the Tatas how they were troubled by these silly controls and petty officials. He has also recorded that while Nehru was a personal friend of J.R.D. Tata, he would never, never listen to anything about the economy or economics. He would literally look the other way!
COLLAPSE OF THE BRETTON WOODS
Greater stupidity and consequential tragedy was in store. In August 1971, the international exchange system under IMF collapsed,when US President Nixon announced the suspension of dollar-gold standard. Countries adopted floating exchange rates. But India, under the influence of red comrades guiding Nehru's daughter, chose to defend the fixed exchange rate through a Foreign Exchange Regulation Act, revised in 1973, even as the fixed exchange system had collapsed worldwide! This was how distant our rulers were from economic reality. I always recall a dialogue from a Hindi movie in this connection:
Raat bhar anda pakaya, phir bhi woh kacha reh gaya;
mar gaye shayar, lekin ullo-ka-patha reh gaya
The cumulative result of nearly half a century of political dogmatism and economic foolishness , and insensitivity to world events and realities led to the collapse of 1991 when we became almost bankrupt on external account, with hardly enough reserves to finance two weeks' imports and the prospect of defaulting on our external debt. India had to borrow from IMF and like a Shylock, they wanted physical gold as security!
India faced this humiliation due to Nehruvian policies. But what wise counsel could not achieve, an economic shock achieved: reversal of the rules.
NARASIMHA RAO TO THE RESCUE
I salute the man. It will take another 20 years for us to realise the full extent of his rescue act, against the odds he faced.
Alas, the dynasty and its running dogs have tried to obliterate Rao's memory and his achievements.
SOCIALISTIC UNPRODUCTIVITY
Tharoor covers these years in chapter 7 of the book ( though I have furnished more inputs here.) It is rather easy to criticise post facto, and language helps a lot! Tharoor writes:
For most of the five decades since independence, India has pursued an economic policy of subsidizing unproductivity, regulating stagnation,and distributing poverty. We called this socialism.Tharoor provides many instances of such glaring unproductivity, stagnation and waste. For instance, the govt Hindustan Fertilizer Factory in Halda, set up in 1986,employing 1550 workers, had
"a canteen,a personnel department, and an accounts department. There are promotions, job changes, pay rises,audits, and in-house trade unions. Engineers, electricians, plumbers and painters maintain the equipment with a care that is almost surreal.."
[ Stephen Wagstyl, Report in Financial Times ]BUT IT HAD PRODUCED NO FERTILIZER UP TO 1994, 7 years after it was set up at a cost of $1.2 billion!
In 1986, SAIL paid 2,47,000 people to produce 6 million tons of finished steel, while 10,000 people employed by the Pohan Steel Company of South Korea produced 14 million tons! [ But then remember, India is also heavily populated, and people had to find work or jobs! The standard western notion of productivity need not be our yardstick!]
STUPID TAXATION, RECKLESS BORROWING
Tharoor writes with great feeling and wit:
India taxed its businesses into starvation, and its citizens into submission; at one point the cumulative taxes on some Indians totaled more than 100% of their income....
When it could not tax any more, the government borrowed money, piling up higher and higher deficits.
Taxation and borrowing, like the two blades of the scissors cut the pockets and throats of hardworking and harassed Indians, while bureaucrats, politicians, contractors, unscrupulous businessmen could flourish. No wonder corruption reached global levels!
Economic growth was slow, compared to some other countries in Asia during the same period and an economist Raj Krishna called it 'the Hindu rate of growth', though it had more to do with unIndian socialism than Hindu religion.
Tharoor surveys the economic scene, showing how successive govts failed,or revelled in folly, how even Rajiv Gandhi "left India's fundamental economic problems unaltered." The so called reform has not been thorough or really substantial.
WHAT TO DO?
When it comes to a prescription, one is not sure of what to do.There are so many conflicting theories and approaches. Ideas are floating that it is an interdependent world we live in, that we can be politically independent but have to be economically interdependent. Reform or liberalization has taken the form of Globalization. But what does it mean? Coca colonisation?One can summon up economists, Nobels and Harvards, and others in between, on both sides of the argument. But there is now a consensus among independent economists and observers that globalisation is not a universal panacea, that it has its discontents, that it does not help all countries. Surprisingly, even the US under Trump has found that globalisation hurts !
I believe conventional economics has become bankrupt.It is like a bottle of medicine, with the date of expiry long past. India's growth will not happen with more KFCs, McDonalds, Cokes and Pepsis, Fords and Toyotas or their Indian equivalents. It will happen only through the capital, enterprise and initiative of India Uninc, as Prof. Vaidyanathan has shown. Provided we do not neglect our agriculture and rural industries like handloom.
Published by Westland,2014. Cover shown for educational purposes,
But this is not what Tharoor covers. He is more on conventional lines, left v right, etc, and he is clueless! ( It was 20 years ago!) But his narrative is engaging.
DOES DEMOCRACY GUARANTEE BREAD?
CAN YOU EAT FREEDOM?
Tharoor writes quite a bit on the theme whether democracy in India does or can solve the problem of bread. Indira Gandhi answered it with a NO in the form of the Emergency in June,1975. It was not meant to solve the economic problem, but to end the political opposition to Indira Gandhi. It had its supporters among the educated, the middle class, the bureaucrats, many ordinary citizens who had been troubled by endless and directionless political strife and empty sloganeering. I remember even Girilal Jain, editor of The Times of India had welcomed it , as he did not want the destabilization of the establishment.But for the excesses of Sanjay Gandhi, the Emergency could have gone on.
As it happened, Indira Gandhi misjudged the mood, called an election and lost. But the Opposition, even with veteran Morarji at the helm, could not last in spite of a massive mandate. Indira Gandhi bounced back, and continued from where she had left off! But the question still is: does democracy solve the economic problem effectively? There is no definite answer. It depends on the quality of the leadership.
POLITICAL CLASS: GOOD AND BAD
Tharoor notes the changes that have occurred in the political class but the quality has fallen.
"...the poor quality of the country's political leadership offers less cause for celebration. Our rulers increasingly reflect the qualities required to acquire power,rather than the skills to wield it for the common good. The democratic process has attracted figures who can win elections but who have barely a nodding acquaintance with ethics or principles, and are untroubled by the need for either."
There is deep rooted corruption in all walks of life. Tharoor notes many individuals who fought the system but corruption has stayed.
POST-INDEPENDENCE GENERATION
Tharoor reflects on many things, light and serious, political, social, and economic. He makes many interesting observations on many things. But I would like to conclude this review with two of his interesting observations.
The independence generation, newly freed of the incubus of colonialism,was deeply mistrustful of the outside world. After all, the British had come to trade and stayed on to rule; foreign investors were therefore seen as the thin end of a neo-imperialist wedge. The result was stagnation and unemployment... India's youth have no colonial hang-ups to hobble them; they can look with confidence, not fear, at what the outside world has to offer them.
This is fair enough, written twenty years ago.. But the quality of our education is poor. The brighter ones go abroad, while over 60% of our college graduates are stated to be unemployable. And I fancy to think, if the quality of our education improves, even more will be found unemployable, for job comes with quota, not quality of education!
Today, we may not have objection to foreign investment on grounds of political dogma. But what about the economics? What are the ground realities? What do companies like Coke or Pepsi do? Exploit our ground water and sell it at unconscionably high prices, while the citizen lacks safe drinking water? What does KFC do? Sell stuff fried which the youth of America revolted against- that is why it changed the name to KFC- this is a case in Management text books! The American style departmental stores drives the local grocers out of business. Is this the kind of development we want for our youth in the name of reform or globalization?
SOFT POWER
Tharoor makes another interesting observation. It is about "soft power".
India must determine where its strength lies as it tries to make the twenty-first century its own.Much of the conventional analyses.... rely on the all- too -familiar indices of the GDP.... But if there is one attribute of independent India to which observers have not paid enough attention, it is a quality which India would do well to cherish and promote in today's world: its "soft power."
"Soft power" consists of those attributes that attract and persuade others to adopt the country's agenda, rather than relying purely on the dissuasive or coercive "hard power" of military force.He gives examples such as Bollywood cinema which is popular across the globe;our classical music,dance and art; work of our fashion designers;Indian cuisine; Indian film winning Oscar nomination or Indian book winning a foreign prize. These are all valid examples. Tharoor does not mention, but our family system, marriage rituals , our philosophy, and above all Yoga and Hare Krishna are also examples of our soft power!
Joseph Nye coined the term in a 1990 book, Bound to Lead: The Changing Nature of American Power. In this book, he wrote: “when one country gets other countries to want what it wants-might be called co-optive or soft power in contrast with the hard or command power of ordering others to do what it wants.”
He further developed the concept in his 2004 book, Soft Power: The Means to Success in World Politics. The term is now widely used in international affairs by analysts and statesmen.[ Published by KW Publishers Pvt.Ltd. Book cover shown here for educative purposes. The above extract is from Wikipedia ]
Come to think of it, this is not so novel. After all, the British made many of their things attractive here by indirect and gentle persuasion! How many of us read English literature in preference to our own, even now! We still sing of the Daffodils or the Brook. How many sing of our jasmine or Jamna now? The avowed objective of Macaulay's education system was to make Indians ape the Englishman- this without coercion, violence , but with the simple and single instrument of education, and linking it to employment! [ Linking it to job-was that not indirect coercion, still?]
Teddy Roosevelt quoted a West African proverb : talk softly, but carry a big stick. It has been so in many cases we have known. It will be interesting if India can be only soft and yet successful! Right now, India's soft power is nowhere near what the Western countries wield.
PLURALISM TARNISHED?
But when Tharoor says that our famed pluralism has been tarnished by the Gujarat incidents or Ayodhya, he is off the mark, talking without thinking. The pluralism of which he talks is the one obtained by bullying the majority by governments - foreign and Indian- which exalted minorityism for political gains, and just tolerated or suffered the majority. Hindus have run for a thousand years without unity and protection. Ayodhya and Gujarat are messages that Hindus will not run further. They will take no more insults. Hindus cannot be taken for granted anymore. Hindus do not want to take historical revenge, but they do not want perpetration or repetition of historical injustices and insults, either.
CONCLUSION
But for these few kinks, which arise from his need for political correctness, the book is interesting and makes engaging reading. Many parts are not so relevant now but we interact with a thinker, a rare breed among Indian politicians. Let us see how long he lasts in our politics, and in the party he has chosen to be with, given his critical and unflattering views on Gandhi, Nehru and the Gandhi family. He already lost his ministerial position.
For those who have followed our economic discourse and public affairs for 60 years, Tharoor's book is only a refresher of some of the elements;it provides no new insights. Its criticism of Nehruvian economics is rightist, but a pale echo of what Rajaji used to write from the mid 50s. While Tharoor has the benefit of hindsight, Rajaji was reacting as things were shaping up. Rajaji could also see the rising totalitarian trend, culminating in the Emergency though a kind providence had spared him the agony of actually witnessing it. The social criticism of Tharoor is standard left-pseudo secular stuff. But Tharoor excels in his assessment of the dynasty and its misdeeds and missed opportunities. The value of his book is that it provides a continuous narrative on the first half century of post-independence life, whose study would benefit the post-independence and post-1991 generation, provided the pseudo secular rant is moderated by a more balanced approach..
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