The recent convulsions in the international financial markets have provoked an unseemly amount of gloating on the part of many in the developing world. What worries me, though, is the number of people in India who are saying similar things. "See, we were right in opposing all this liberalisation," one told me.
That presidents Fidel Castro and Mohammed Ahmedinejad should pronounce themselves vindicated by the crisis in global capitalism is hardly surprising, since capitalism has over the years been so strongly identified with America that both see the problem through the lens of their own anti-Americanism.
What worries me, though, is the number of people in India who are saying similar things. "See, we were right in opposing all this liberalisation," one told me, stressing that our intrusive regulatory system had saved India from a similar fate much earlier. Another approvingly quoted right-wing rants in the US about the dawning of a "Socialist Republic of America" and added, "We should nationalise the banks again - after all, even the Americans and Brits are doing it!"
They are wrong, and it's important to say so before too many people in our political classes find themselves persuaded by this lapse into historical amnesia.
Instead of integrating India into the global capitalist system, as only a few developing countries like Singapore so effectively were to do, India's leaders were convinced that the political independence they had fought for could only be guaranteed through economic independence. So self-reliance became the slogan, the protectionist barriers went up, and India spent 45 years with bureaucrats rather than businessmen on the "commanding heights" of our economy, wasting the first four and a half decades after independence in subsidising unproductivity, regulating stagnation and trying to distribute poverty. This only goes to prove that one of the lessons you learn from history is that history sometimes teaches the wrong lessons. It would be tragic if recent events in the world of finance led us to learn the wrong lessons again.
The reactionaries today seem quickly to forget that it took a humiliating financial crisis in 1991 (one in which the nation had to physically ship its gold reserves to London as collateral for an IMF loan) to prompt India to change course. And change course we did, for the better. A measure of the extent to which the globalisation debate had turned came for me a few months ago in Kolkata when I heard the chief minister of West Bengal, Buddhadev Bhattacharya, say: "Some people say globalisation is bad for the poor and must be resisted. I tell them that is not possible. And" - the emphasis is mine - "even if it were possible, it would not be desirable." When a Communist chief minister speaks that way about global capitalism, one can argue that debate is largely over.
Our rulers, in turn, mistrusted what ordinary people could achieve for themselves when they were freed to pursue their own prosperity within a framework of government-supported structures that ensured a level playing field, fair regulation and social justice (the model that came to be adopted in the western democracies, though increasingly dismantled in Republican-ruled America). Instead, they created a license-permit quota raj that denied Indian businesses the opportunity to prosper and grow.
The result was what was derisively called the "Hindu rate of growth", at which India chugged along at three percent while much of the rest of Asia shot ahead. Resources that the state could have spent on infrastructure development, education, health and agricultural reform went instead to massively inefficient public-sector projects that employed many and produced little.
It is sadly impossible to quantify the economic losses inflicted on India over four decades of entrepreneurs frittering away their energies in queuing for licenses rather than manufacturing products, paying bribes instead of hiring workers, wooing politicians instead of understanding consumers, and "getting things done" through bureaucrats rather than doing things for themselves. The disastrous inefficiencies of the system were masked by subsidies from the national exchequer, and a combination of vested interests - socialist ideologues, political opportunists, bureaucratic managers, self-protective trade unions and captive markets - shielded it fiercely from economic reality, as millions of Indians languished in poverty. Is this really what we want to return to?
In the last 15 years, India has pulled more people out of poverty than in the previous 45 - averaging some 10 million people a year in the last decade. The country has visibly prospered, and despite population growth, per capita income has grown faster and higher in each of these years than ever before. The current financial crisis, far from prompting us to retreat, is an opportunity to safeguard those gains and to build on them. For more than four decades India suffered from the economics of nationalism, which equated political independence with economic self-sufficiency and so relegated us to chronic poverty and mediocrity. Let us not condemn Indians again to repeating the mistakes of that unlamented past.
For the full text, click on:
http://timesofindia.indiatimes.com/Columnists/S_Tharoor_Learn_from_past_mistakes/articleshow/3613576.cms
Plain melodious music as far as I am concerned. This is about the best essay that I have read in the recent past on the current economic scenario, and the lessons thereof for India. I generally bother to counter all Socialisic rhetoric myself. But, this one essay has now left me happily jobless. All I now need to do is to forward the link.
Muralidhar Rao
Melodius Music
Very good points
Anantharam-sir,
You make an excellent point. people forget that children from well off families begin with a massive headstart. They go to (in general) better schools, their peer group is better informed, their parents are more educated (all in general). Comparing their 90% with a poor boy's 50% does not work. In villages I would think that children from lower castes might not even have decent access to the school.
I was chatting with a Swede last week and he was telling me that in Sweden no child will ever be denied an education or healthcare or a loan regardless of their economic or social background. The philosophy is that children are not responsible for their parents' sins. Of course it comes with a very heavy tax rate and other problems (not enough motivation to achieve). The balance is always hard to find. Singapore is a country which believes in Social Darwinism and there is no safety net except what you have saved.
For all the USA's tomtomming that they are the ultimate capitalists, the capitalists were the first to run for the bailout.
Srivathsa
Drive safe. It is not just the car maker which can recall its product.
The other side of the coin
Well, this article was discussed elsewhere and I am now having to reproduce my views again, not difficult given the joys of copy+pasting.
But before I do so, here is what a Psychiatrist has to say about Darwins theory of survival. Darwin was absolutely spot on, his observation that fittest survive however applies to animals more than humans. Animals do not have well developed frontal lobes and hence no capacity to think, thus they can't go beyond fight-or-flight survival mechanisms. In contrast humans have been bestowed with the frontal lobe and with its thinking ability a way of surpassing primitive instinctual mode of being (living). Socialist welfare states as pointed above by Srivathsa with a very lucid example of Nordic states is testimony to humans going beyond Darwin, its testimony to humans being ablole to be creative and co-exist.
Now I copy-paste some other views shared elsewhere -
Tharur will be first to agree that we need to learn from not just the mistakes of our first 40 years but all of 60, including the 20 years of economic liberation. Indeed he joins many others in rightly challenging the way the rehab of 550 acres of Dharavi slums is planned, click here
The 60 years that have gone by do not equate as failure of the model that proposes social welfare state to stand alongside capitalism. Its best described as a failed Nation thanks to corruption, selfishness and greed. The EU has enough number of countries that pove that socialism and social welfare states alongside capitalism can co-exist happily.
Todays SEZs are nothing different from the licnse raj and subsidy of years gone by. Todays Nizams are being given thousadns of acres and return the state gets almost nothing, in fact its 5 years of tax loss amounting as pointed above to money (177,000 crores) is 20 times more than today's infrastructure costs across all cities - the Nation could be transformed. Instead, the SEZ owners by virtue of their proximity to cities are not having to throw a dime towards roads, rail, shipping or air transport (all this is in place). And then, we will lose agricultural land - something so vital for food security of 1.5 billion (eventually) people. But how does one place value on agricultural lnd that can feed 4.5k crore people year after year after year (perpetually if its looked after), not to mention that it has fed 1000s for centuries already. And any one who argues that SEZs will bring lots of jobs is yet to study the impact of automation - to give an example - Bajaj produced 2.5 million vehicles with 10500 workers in 2005 as against 1 million in 1990s with 24000 workers. Agriculture in India today occupies 60% of the country, many very poor farm workers but its a sector that feeds every mouth in this country. Bajaj produced 2.4 million vehicles in 2005 with 10,500 workers. In 1990s they used to make 1 million vehicles using 24,000 workers.
At a time when the Govt should be raking in revenues via taxation and also starting a mandatory National Insurance scheme for providing health care for all free along with housing and subsistence, we are only ensuring that billions of Rupees are pocketed by select few.
Further, on the other thread, Murali Sir stimulated more use of frontal lobe -
Murali Sir suggested -
So, the economic liberalisation of the last 15 years has done a lot of good actually. Admittedly, there have been many distortions, and they need to be corrected, and that's where government's efforts needs to be concentrated. They should be framing policies whereby TATAs and TVS would be encouraged to operate efficient and affordable bus services, instead producing cars and mobikes; Mukesh Ambani gets into harnessing solar power and making it available to common man at affordable rates, rather than indulge in the vulgarity of his 'Antilla'; Anil Ambani builds a world-class football team from out of the boys playing at Cooperage in his backyard, instead of trying to buy out Aston Villa (or whatever), Nandan Nilekani makes India the knowledge capital of the world instead of having to worry about how to get the cars of his staff to reach office on time; Dr Devi Shetty leads a consortium to take over all the government hospitals to offer affordable healthcare to aam aadmi rather than saving just a child here or there; Hiranandani builds affordable housing for the Dharavi lot rather than just the fancy flats for the super rich in Powai; ITC transforms the agrarian economy rather than just operate a few e-chaupals here and there.I would like to believe that many of the Indian industry leaders would welcome such policy initiatives from the government, and the present economic melt-down I am sure will make the others also review their approaches. Now, it's for the government to get its act together, and fast.To quote Gurudev Tagore - to that heaven of freedom (and prosperity), my father, let my country awake.
And I wondered what is stopping the capital flow and investments from reaching the rural -
UN changed the norms for poverty line recently in keeping with cost of living, effectively nulling any gains and pushiing those below poverty in India to 48% - so much for poverty eradication.
You are right, when you wonder why they indulge in the vulgarity of 'Antilla'; Anil Ambani builds a world-class football team from out of the boys playing at Cooperage in his backyard, instead of trying to buy out Aston Villa (or whatever), Nandan Nilekani makes India the knowledge capital of the world instead of having to worry about how to get the cars of his staff to reach office on time; Dr Devi Shetty leads a consortium to take over all the government hospitals to offer affordable healthcare to aam aadmi rather than saving just a child here or there; Hiranandani builds affordable housing for the Dharavi lot rather than just the fancy flats for the super rich in Powai; ITC transforms the agrarian economy rather than just operate a few e-chaupals here and there.
But I disagree when you place the onus solely on the Govt because as far as I know there is nothing stopping the FDI and SEZs going to BIMARU states. In fact Bihar gets about 1% of the FDI - why? Who is stopping Tata's from going to barren lands of Rajasthan and building the Nano plant there?
To add to your Tagore quote, I quote Gandhi who said 'when everyone does what they can do, this would be a different country'.
So let the Ratanbhai, Anilbhai, et al start cuffing up the taxes rather that shop for tax free resorts.
Now here are some facts from http://www.un.org/rights/poverty/poverty1.htm
The resources needed to eradicate extreme poverty are "a mere fraction of the resources available, globally and in most countries", says Mr. Jolly. "The cost of accelerated action must be measured against the cost of allowing poverty to grow ‹ that is, against continuing political conflicts and instability, against continuing poverty and disease in large parts of the world, and against affronts to humanity and human sensibilities."
The additional costs of providing basic social services for all indeveloping countries is estimated at about US $40 billion a year over the next 10 years. This amount is less than 0.2 per cent of the world income of US$ 25 trillion. The sum needed to close the gap between the annual income of poor people and the minimum income at which they would no longer be poor is estimated at another US$ 40 billion a year. Thus, to provide universal access to basic social services and transfers to alleviate income poverty would cost roughly US$ 80 billion, or less than the combined net worth of the seven richest people in the world.
Every developed nation has found a way of distributing wealth and creating level playing arena, capitalism and socialist welfare states are known to co-habit very successfully all over EU and North Americas (and down under) - so what is stopping us from arriving at the right balance. It means heavy taxation, but it means more prosperity and freedome from being influenced by Darwin's rule - make no mistake, every uprising in the past has been against the chosen few who amassed wealth at cost of others - if people think that survival of fittest applies to humans and those who earn a living are more entitled to worldly pleasures than those who can't then like the balance of how 'fittest' is defined can be titled in no time - The Tsar's in Russia, the French Revolt, the history of introduction of Poor man's law leading to National Insurance scheme, the Bevereidge report and finally the NHS in UK - they all suggest one thing, that when a chosen few think they are above the rest of the human race, the rest will revolt
Perhaps India needs a revolution of a kind.
ASJ
PS: I make my case on the background of urban/rural inequality as well as blatant flaws in the SEZ model shared here http://praja.in/print/1255
BTW - Castro's Cuba may not be perfect, but Cuba's health care model shames even US and many privatised healthcare models(even when US spends 15 % of its GDP against Cuba's 3%).
www.driving-india.blogspot.com
government's job
A job for every citizen
www.driving-india.blogspot.com
exactly
Excellent piece by Prof. Dipankar Gupta
Drive safe. It is not just the car maker which can recall its product.
you beat me to it
Ready for more taxes?
We pay substantial taxes ourselves
Drive safe. It is not just the car maker which can recall its product.
value for taxes
The point was not really about high taxes
Drive safe. It is not just the car maker which can recall its product.
Well put: of the elite, by the elite and for the elite
www.driving-india.blogspot.com
Advantage of social security
Growth rate and ministries
IDS, spot on again
www.driving-india.blogspot.com