Dr. Manmohan Singh deserves our congratulations for becoming the first incumbent Prime Minister to be re-elected after completing a full five-year term since Nehru in 1962. (Indira Gandhi was re-elected in 1971, but she called an election one year early in 1971 to seek a mandate for abridging the Right to Property enshrined in the constitution). In fact, for the first time since the 1984 “sympathy vote” election, anti-incumbency played no role in determining outcomes in most of India’s states. I would attribute the declining importance of anti-incumbency to the fact that India is one of the few parts of the global economy that has not seen either a significant diminution in household wealth or any reduction in household incomes/employment in the past year -- having experienced the fastest 5-year period of economic growth in our history during the previous five years (2002-07).
Competence in governance and economic performance appears finally to be paying dividends. For the first time in 25 years, incumbent parties emerged with the majority of seats in most of the large states (including the UPA-ruled states of Delhi, Rajasthan, Andhra Pradesh, Tamil Nadu and Assam, the NDA-ruled states of Karnataka, Gujarat, Madhya Pradesh, Himachal Pradesh, Bihar and Chattisgarh, and the Third Front-ruled Orissa and Tripura). Naveen Patnaik’s experiment (gamble?) paid off – although his victory in the state assembly was narrower than the seeming clarity of the outcome for him in the Lok Sabha election. The residual presence of anti-incumbency decimated the Left Front in West Bengal and Kerala, and there was an anti-incumbent outcome in the smaller states of Uttarakhand (NDA-ruled) and Jharkhand (UPA-ruled, but with unstable coalitions); otherwise, anti-incumbency played little role in the 2009 election.
Most urban observers accept that Dr. Singh was a “weak” prime minister – in that all his cabinet appointments were ultimately decided by 10 Janpath, thus limiting his ability to lead the cabinet. But this factor clearly did not resonate with voters. The mechanics of top-level decision-making rarely have an impact on individual voters’ lives, and so had little resonance with the electorate. On the substance, there was little doubt that Dr. Singh did demonstrate genuine leadership on one issue – the India-US nuclear deal – on which he first persuaded 10 Janpath (by threatening quietly to resign in November 2007), then a reluctant parliamentary party, the whole of the Lok Sabha (by means fair or foul) and finally the 42-nation Nuclear Suppliers’ Group (NSG, set up in 1974 to deter our nation’s nuclear ambitions) to endorse the deal despite China’s attempts to scuttle NSG assent.
Surprisingly, the Opposition did not attempt to capitalize on the sharp increase in food prices over the past half-decade (and continuing high food inflation even this year), the emptying of our fiscal coffers as the Fiscal Responsibility and Budget Management (FRBM) Act was flagrantly contravened by the UPA, the repeated failures of security under the foppish Shivraj Patil (who was appointed Home Minister in 2004 precisely because he had lost his Lok Sabha seat from Latur -- and was thus not a serious rival to the emergence of the prince -- rather than because of any innate ability), and the growing threat to our national security as China encircles us strategically in Nepal and across the Maoist belt through the centre of India while strengthening its 45-year-old alliance with Pakistan and building deeper links with Sri Lanka.
While a significant part of the electorate comprises party loyalists, and basic trends in many states can be predicted in advance, ultimately electoral outcomes in India are determined by the quality of the campaign, and the ability of parties to focus on issues (and a vision) that resonate with voters. The Congress-I has, in the last two General Elections (2004 and 2009), regained ground it had lost in the years since 1991 by running superb campaigns based on the same theme -- “Congress ke haath, Aam Aadmi ke saath” – and variants of it. In the 2009 election, the three Congress parties (Cong-I, Trinamool Congress, Nationalist Congress Party) together won 233 seats – one more than the 232 that the Congress-I (which then included both Mamata Banerjee and Sharad Pawar) won in 1991. The Congress-I had been reduced to 197 seats in 1989, and was able to win no more than 145 seats in any election between 1991 and 2004 – but the 2009 election marks a genuine resurgence in the Congress vote.
The Congress-I delivered on most of its electoral promises from 2004, with the gradual widening of the National Rural Employment Guarantee Act (NREGA) to all districts, and the waiver of farm loans to small/marginal farmers last year – both popular measures that were financed by the stronger government revenues generated by five years of accelerated economic growth. But, as the outcome in Bihar, Orissa, Gujarat, Madhya Pradesh, Chattisgarh, etc. demonstrates, that alone would not have sufficed to deliver victory had the Opposition been able to mount a campaign that resonated with voters across the country, and especially with swing voters in urban centres like Delhi, Mumbai, Kolkata and Chennai – all of which the NDA lost resoundingly for the second consecutive election (which is especially noteworthy as the BJP’s urban base is traditionally thought to be particularly strong).
With a substantially stronger mandate (260 seats on its own, just 12 short of an absolute majority), the UPA now has the capacity to undertake significant economic reform. The economy cruised during the first four years of its last term – partly on account of the efficiencies generated by substantive economic reform (Privatization, recalibration of the Telecom sector, the Securitization act, Power sector reform) under the previous (1999-2004) NDA regime. But the global economy remains in the grip of its worst recession in half a century, and India can no longer grow through fiscal stimulus alone – as it has in the past 9 months, with the fiscal deficit widening from 1.9% of GDP (on a 12-month rolling-sum basis) in June 2008 to an estimated 6.5% by March 2009.
Unless the UPA lays out an agenda for accelerated economic reform – insurance, pensions, retail being areas of likely progress – it will be confronted with a more sluggish economy that makes it impossible to effectively finance its social-welfare agenda without a further fiscal blow-out. But with the Left no longer an Albatross around his neck, Dr. Singh will be empowered to pursue his reformist agenda with renewed vigour – which may be evident early on with the appointment of a reformer like Montek Ahluwalia as Minister of Finance, and someone like Shashi Tharoor as Foreign Minister. One marker of Dr. Singh’s enhanced stature (or lack thereof) will be the number of appointments of genuinely competent individuals (rather than Gandhi-family acolytes) to key ministries.
Some voices within the Congress-I are already attributing the electoral success to Rahul Gandhi rather than the Prime Minister in whose name the Congress-I and UPA sought the electorate’s mandate. Rahul’s electoral gamble of going-it-alone did indeed pay off quite handsomely in Uttar Pradesh and Uttarakhand, but failed even more spectacularly in Bihar and Jharkhand. Had Rahul Gandhi been the UPA/Cong-I candidate for Prime Minister, the outcome might well have been quite different. In fact, the Congress-I continues to be oblivious to the fact that the two seminal policy changes under Congress rule that altered the prospects of modern India most decisively in the past half century – the economic reforms of 1991, and the Indo-US nuclear deal of 2008 – were both accomplished by non-members of the Gandhi family (and perhaps despite it).
The Nehru family has given us abject defeat in the 1962 war, the near-destruction of the economy in the 1970s (when bank nationalization, inflation, FERA, MRTP, etc. nearly crippled industry, and led directly to the Emergency), the crises in Punjab (traceable to Indira’s propping up of Bhindranwale as a counter-weight to the Akali Dal), Assam and Kashmir (largely because of Indira’s ill-treatment of Farooq Abdullah in the early-1980s and the alleged rigging of the Kashmir assembly election of 1987). Yet, the fact that the electorate remains convinced that “Congress ke haath” is “Aam Aadmi ke saath” (and the Congress-I remains wedded to being led by the scions of the Nehru family) demonstrates both the ineptness of the Opposition’s response, and the effectiveness of the branding machine that the Congress-I has been for the Family since its creation in 1978. Rebuilding the old Janata coalition of 1977 has to be the natural course if the anti-monarchists of India are to ever be able to stop the inexorable tide towards the crowning of a new prince from the Family within a couple of years.
A broader coalition that appeals across India is the only way to seriously challenge a quintessentially centrist party that continues to prosper from an organization that was built to turn back Imperialism but was eventually turned into a machine for the electoral advancement of one family’s rule. Those of us who recognize that democracy is India’s greatest long-term strength, also know (and lament) that the dynastic principle is the greatest challenge to building the institutions that will enable Democracy to deliver the economic Transformation that the people of India deserve. The party that has, after ruling the country for 51 of the last 62 years, still left India with more poor people than any other nation on earth, with more than half our people still without basic sanitation, with literacy rates that lag Indonesia and Africa, surely must be held to account more effectively for its manifest failures over those long decades.
Nonetheless, for India’s long-term future, it is a solidly positive development that a National party with instincts that are centrist and unifying has gained at the expense of the many fissiparous forces that seek to divide our country into regional, ethnic, caste and other silos. For those of us who are dissatisfied with what that party has delivered over 51 years of national rule, the task is now to think about how best to develop alternatives that will be able to credibly challenge that “Grand Old Party” (and its Family monopoly), push that party to deliver more than crumbs (such as 100 days of non-productive employment to the rural poor, rather than a genuine extension of health, education, sanitation and housing benefits to all) during the next five years, and continue focusing on the effective delivery of improved services and prosperity in the non-Congress states so that genuine alternatives continue to emerge, and compete for the electorate’s favour at the next General Election with a substantive program of proven change for the better.
Monday, May 18, 2009
Thursday, April 16, 2009
Democracy and Capitalism: Reinforcing the complementary foundations of modern India
(first published on the now-defunct website, IndiaBanao!, on 2nd December 2008)
Democracy and Capitalism must reinforce each other in creating the bedrock of a robust Indian State. This might seem a trite truism, but our national commitment to Capitalism has been half-hearted at the best of times, while our commitment to Democracy is periodically questioned despite having been collectively reaffirmed after the traumatic challenge of the 1975-77 Emergency.
In fact, Capitalism and Democracy should be seen as complementary values that are strengthened only if both are robust. The global financial system now faces its most serious crisis of confidence in 80 years, partly because US democracy failed to play its role as an effective watch-dog and regulator of its capitalism. But the truly notable feature is that capitalism has delivered growing prosperity to a swelling proportion of the world without a systemic crisis during the intervening eight decades.
Only for a fifth of that 80-year period has India fully partaken of the fruits of that prosperity, while China has done so for about a third of that time. Those that embraced capitalism (and democracy) earlier – the US, Japan, Germany, and western Europe – were able to catch up with and surpass the originator of laisser-faire capitalism, Britain, by 1945. Even in pioneering Britain, however, capitalism and democracy had reinforced each other from the outset – in distinct contrast with Britain’s non-white colonies, where capitalism coexisted with autocracy, and so never developed the checks and balances that alone can allow capitalism to truly flower and deliver benefits to the broadest swathe of the populace.
Why capitalism’s foundations in India are shaky
From independence onwards, capitalism in India has been on shaky ground ideologically. History had a lot to do with this: having been colonized by one of the world’s first joint-stock companies (the British East India Co., which came to India ostensibly to trade but quickly built up huge armies and bureaucracies in order to reign over the country), our founding fathers had an ambivalent attitude, at best, to capitalism.
Over time, the Fabian Socialism of Nehru gained the ideological upper-hand over the pro-capitalist sentiments of such stalwarts of the right-wing of Congress as Sardar Patel and Rajaji. The ideological polarization globally at the end of World War II appeared to leave our leaders with two stark choices – either to pursue the Anglo-Saxon model of capitalism (then leavened by substantial public intervention in the heyday of Keynes in Britain and the New Deal in the US), or copy the model of the other victor of that war, the Soviet Union. In a rather muddled desire to pursue a “middle way”, Nehru welded a fundamentally Anglo-Saxon constitutional structure onto an essentially-Soviet model of economic planning with the “commanding heights” controlled by the government.
It should have been obvious that the constitutional arrangements would prove thoroughly incompatible with the economic objectives. The Independence generation was imbued with idealism and a sense of service, but they assumed away the importance of self-interest. While the constitution made the right to property a fundamental right (and the system of property rights is of course a bedrock of democratic capitalism), the Indian state kept chipping away at that right over time -- through land reforms in the 1950s that de-legitimized the property rights of agrarian landholders, and through bank nationalization in 1969 that made capital-allocation a hand-maiden of an intrusive state. An already-impoverished nation saw the gradual erosion of any motive for private capital to be harnessed for national development – as the State increasingly sought to “pre-empt” meager national savings for purposes of its choosing.
The ills of the resulting license-raj are too well-known to need recounting. Companies needed licenses to expand capacity, and even change their product mix – and a labyrinthine edifice of corruption emerged to regulate that process. The system rewarded rent-seeking rather than value-creation – and only a mighty balance of payments crisis (precipitated by the combination of a surge in oil prices and the loss in remittances from Kuwait and Iraq, plus the collapse of the Soviet ally that used to buy a fifth of India’s then-meagre exports) finally led Narasimha Rao to embrace an economic metamorphosis.
The apparatus of the license-raj, and the elaborate system of protection from imports (a peak import duty of 350%, plus outright bans on the import of 3000 consumer goods), were dismantled within a decade of the advent of the reform era in 1991. But the mental apparatus of “socialism” never quite left our political class – a substantial majority of which remains wedded to the “public sector”, of government-owned banks and lumbering, inefficient government-owned companies producing everything from bread and milk to steel, aluminium, electronic products and heavy machinery.
Fortunately, during his brief tenure as “Disinvestment” Minister, Arun Shourie was able to demonstrate that every single public-sector company that he privatized was able to perform substantially better – both in terms of profitability (which benefited both the new shareholders, and the government as a minority shareholder) and in terms of worker-productivity and job-security, the combination of which delivered substantially better rewards to workers as well as owners, and ultimately to the nation (in the guise of better-functioning companies that were no longer a drain on the taxpayer, as they had been prior to privatization).
But merely the logic and rationality of raw evidence is never sufficient to convince our political class, and five years have since elapsed without an iota of progress on the path to privatization that Shourie had so clearly laid out. Politicians (and bureaucrats) have too much invested in the entitlements of the public sector (free seats on planes, trains; cars and drivers, and all the other petty services that government companies provide for ministers and babus, apart from the appurtenances of corruption). So our politicians continue to spout elaborate “ideological” justifications for the persistence of government ownership.
Had our founding fathers been a little more willing to consider other models, they may not have been so blinded by confusion. In Asia, Japan had demonstrated that a mixed-economy with a capitalist orientation could in fact deliver prosperity to a backward nation within a generation (although this was somewhat obscured by the ravages of war by 1945). Japan dismantled its own feudal structures in 1868-70, but compensated the old aristocracy in the form of government bonds (some of which were quickly devalued by high inflation in the subsequent decade) and stocks in the new government enterprises that kick-started Japan’s industrialization. Over time, these fungible stocks and bonds helped turn the old feudal caste of samurais and daimyos into the merchants of the sogo-sosha trading houses that came to dominate Asian commerce by the 1930s, and resumed doing so by 1955.
Unlike in Nehru’s India, Japan never abandoned the market-based allocation of resources and factors of production. Severe Soviet coercion could not adequately allocate capital, labour and resources – so it was hardly going to be possible for Nehru and Mahalanobis to do so in a non-coercive democratic era. Instead, India’s “socialism” led to the ossification of caste and class, the stultification of enterprise, and very modest economic growth between 1947 and 1980 (3.7% real GDP growth annually, albeit substantially better than under British rule, which saw 0.7% annual growth from 1900 to 1947). The reason we need to keep “reforming” parts of the economy even now is because the dead-weight of Soviet-style government-directed resource-allocation still afflicts important nooks and crannies of our system.
Demographics, and substantially-free resource allocation, have moved us to a much-faster growth path (6.7% annually for the past 10 years). But we still need to free up the vast public sector – NALCO, BHEL, NHPC, NTPC, SAIL, etc. plus SBI, LIC, UTI, etc. – that continues to distort the free market. Only then can the full promise of democratic capitalism be realized. Ironically, what Japan did in the 1880-1910 period – gradually shift most of its publicly-owned companies to private ownership – supposedly-communist China has done in the past two decades. Whether it is cars, steel, petrochemicals, semiconductors or consumer electronics, former state-owned companies are now in the vanguard of China’s capitalist transformation – and their embrace of capitalism is largely responsible for the consistently faster economic growth China has achieved than India. Ironically, democratic India’s tentative steps in the direction of unfettered industrial capitalism were nipped in the bud five years ago. In the agriculture sector, capitalism has never fully been allowed to exist, and our pension and provident fund systems remain in woeful need of private-sector efficiency in order to prepare us for the ageing of our population in thirty years time.
Reinforcing democracy as a handmaiden of capitalism
Unlike today’s Japan, however, China is not a democracy. Instead, China has achieved economic progress via a developmental state a la Japan and Germany before the Second World War – with the iron hand of autocracy committed to delivering steady prosperity that stifles the need for dissent. South Korea, Taiwan, Chile and Indonesia – among others – have demonstrated that this model ultimately faces a crisis of legitimacy when state-directed capitalism creates a large-enough middle class, or when a threshold level of per-capita income is achieved. Korea and Taiwan reached this limit in the late-1980s, Indonesia in 1998 – and China is about five years away from the threshold per-capita income levels of Korea and Taiwan in 1990.
India will never face the gigantic crisis of legitimacy that felled Suharto, Pinochet, or the successors of Park Chung-hee (Chun Doo-hwan) and Chiang Kai-shek (his son Chiang Ching-kuo). The daily aggravations of relatively slow democratic governance are infinitely preferable to the massive upheavals (thousands of deaths, massive repression, economic crises lasting several years) that usually accompany the fall of long-standing dictatorships. Smooth political transitions are a precious gift of our successful democracy that we should be very grateful for (and proud of).
Democracy confers other benefits in the long term, including creativity and enterprise far beyond what autocracies like China can achieve. In China (as in Japan before WWII), large formerly state-owned enterprises are typically at the vanguard of the economy – but rarely are they real fonts of entrepreneurship. In post-1991 India, by contrast, entrepreneurship has had a true flowering: not only did companies like Infosys, Wipro, Satyam, Suzlon, Biocon, etc., emerge from minuscule beginnings, but many of the grand old companies of India remade themselves from rent-seeking entities of the License era into enterprising risk-takers ready to take on massively heightened competition at home and also remake themselves into global players within specific niches.
Thus the Tata group made Tata Steel (which used to be dwarfed by SAIL in the Indian market) into the fifth largest steel manufacturer in the world (through acquisitions made possible by spectacular cost savings in the Indian operation, their expansion to Asia through Natsteel, and the eventual purchase of Corus), grew TCS into a world-class software producer, and Tata Motor into a successful maker of small cars and medium-size trucks (some of them made in Korea) as well as owner of a couple of luxury marques known around the world. The AV Birla group became a global player in key commodities like aluminium, carbon black, copper, cement and textiles – but faced Indian competition in the metals space from the enterprising upstart Vedanta / Sterlite (which capitalized on privatizations -- at home with Hindusthan Zinc and BALCO, and abroad through its superbly-timed purchase of the copper mines of Zambia).
All these corporate groups were beneficiaries of the freedom and creativity that is possible in a democracy. Ironically, however, the moral foundations of our democracy itself have increasingly been undermined over the past two decades. The quality of political leadership has deteriorated, our morality appears to have plunged as materialism merged smoothly with corruption, and the perception has grown that the political class is concerned merely with personal gain even at the expense of the broad national interest.
Middle-class Indians bemoan the limitations of democracy, and increasingly yearn for tougher governance.
Strong, effective rule and an unyielding commitment to the national interest, however, are not necessarily incompatible with democracy. In fact, in successful democracies like Japan, the US and the UK, democracy coexists with effective enforcement of the law (often unobtrusively, as with Japan’s police, which presides in the friendliest way over a virtually crime-free society). Our democracy increasingly gives more and more rights to criminals and terrorists – without understanding that the concomitant result is the abridgement of the rights of the vast majority. Sectional political interests increasingly interfere with – and thoroughly undermine – the autonomy of the Institutions of governance. Ultimately, this erosion of morality will begin to eat into the vitals of our vibrant economy – as the terrorists of 26/11 so vividly illustrated in Mumbai last week.
To truly make democracy the handmaiden of a more robust capitalism, we need to seize back our institutions and create an iron core of laws that assure the relative autonomy of key institutions. The Supreme Court and Election Commission have relative autonomy – partly because their tenure cannot really be interfered-with significantly by politicians. (There has recently been an attempt to inject partisanship into the Election Commission, which we must monitor and counter at all costs). Other key institutions must also be freed from political interference, including the Reserve Bank of India (by ensuring that the Governor appointment is undertaken via a more bipartisan process), and key national-security posts (including NSA and chiefs of IB and RAW, who must all be subject to closer parliamentary scrutiny – in camera, where necessary). From the top, this relative autonomy must also begin to filter down to the grassroots, with the police in particular given genuine relative autonomy (freedom from political interference) after their pay-scales and service conditions are improved dramatically to ensure that they inspire fear at least among the criminals and terrorists rather than being seen as simply harassing private citizens. Only with the restoration of the genuine autonomy of our institutions can we be sure that the gains of our capitalist revolution of the past two decades will not go up quickly in the smouldering smoke from the fires that consumed south Mumbai last week, and could spread much wider if we remain careless about our precious civilisational heritage of tolerance leavened with morality.
Democracy and Capitalism must reinforce each other in creating the bedrock of a robust Indian State. This might seem a trite truism, but our national commitment to Capitalism has been half-hearted at the best of times, while our commitment to Democracy is periodically questioned despite having been collectively reaffirmed after the traumatic challenge of the 1975-77 Emergency.
In fact, Capitalism and Democracy should be seen as complementary values that are strengthened only if both are robust. The global financial system now faces its most serious crisis of confidence in 80 years, partly because US democracy failed to play its role as an effective watch-dog and regulator of its capitalism. But the truly notable feature is that capitalism has delivered growing prosperity to a swelling proportion of the world without a systemic crisis during the intervening eight decades.
Only for a fifth of that 80-year period has India fully partaken of the fruits of that prosperity, while China has done so for about a third of that time. Those that embraced capitalism (and democracy) earlier – the US, Japan, Germany, and western Europe – were able to catch up with and surpass the originator of laisser-faire capitalism, Britain, by 1945. Even in pioneering Britain, however, capitalism and democracy had reinforced each other from the outset – in distinct contrast with Britain’s non-white colonies, where capitalism coexisted with autocracy, and so never developed the checks and balances that alone can allow capitalism to truly flower and deliver benefits to the broadest swathe of the populace.
Why capitalism’s foundations in India are shaky
From independence onwards, capitalism in India has been on shaky ground ideologically. History had a lot to do with this: having been colonized by one of the world’s first joint-stock companies (the British East India Co., which came to India ostensibly to trade but quickly built up huge armies and bureaucracies in order to reign over the country), our founding fathers had an ambivalent attitude, at best, to capitalism.
Over time, the Fabian Socialism of Nehru gained the ideological upper-hand over the pro-capitalist sentiments of such stalwarts of the right-wing of Congress as Sardar Patel and Rajaji. The ideological polarization globally at the end of World War II appeared to leave our leaders with two stark choices – either to pursue the Anglo-Saxon model of capitalism (then leavened by substantial public intervention in the heyday of Keynes in Britain and the New Deal in the US), or copy the model of the other victor of that war, the Soviet Union. In a rather muddled desire to pursue a “middle way”, Nehru welded a fundamentally Anglo-Saxon constitutional structure onto an essentially-Soviet model of economic planning with the “commanding heights” controlled by the government.
It should have been obvious that the constitutional arrangements would prove thoroughly incompatible with the economic objectives. The Independence generation was imbued with idealism and a sense of service, but they assumed away the importance of self-interest. While the constitution made the right to property a fundamental right (and the system of property rights is of course a bedrock of democratic capitalism), the Indian state kept chipping away at that right over time -- through land reforms in the 1950s that de-legitimized the property rights of agrarian landholders, and through bank nationalization in 1969 that made capital-allocation a hand-maiden of an intrusive state. An already-impoverished nation saw the gradual erosion of any motive for private capital to be harnessed for national development – as the State increasingly sought to “pre-empt” meager national savings for purposes of its choosing.
The ills of the resulting license-raj are too well-known to need recounting. Companies needed licenses to expand capacity, and even change their product mix – and a labyrinthine edifice of corruption emerged to regulate that process. The system rewarded rent-seeking rather than value-creation – and only a mighty balance of payments crisis (precipitated by the combination of a surge in oil prices and the loss in remittances from Kuwait and Iraq, plus the collapse of the Soviet ally that used to buy a fifth of India’s then-meagre exports) finally led Narasimha Rao to embrace an economic metamorphosis.
The apparatus of the license-raj, and the elaborate system of protection from imports (a peak import duty of 350%, plus outright bans on the import of 3000 consumer goods), were dismantled within a decade of the advent of the reform era in 1991. But the mental apparatus of “socialism” never quite left our political class – a substantial majority of which remains wedded to the “public sector”, of government-owned banks and lumbering, inefficient government-owned companies producing everything from bread and milk to steel, aluminium, electronic products and heavy machinery.
Fortunately, during his brief tenure as “Disinvestment” Minister, Arun Shourie was able to demonstrate that every single public-sector company that he privatized was able to perform substantially better – both in terms of profitability (which benefited both the new shareholders, and the government as a minority shareholder) and in terms of worker-productivity and job-security, the combination of which delivered substantially better rewards to workers as well as owners, and ultimately to the nation (in the guise of better-functioning companies that were no longer a drain on the taxpayer, as they had been prior to privatization).
But merely the logic and rationality of raw evidence is never sufficient to convince our political class, and five years have since elapsed without an iota of progress on the path to privatization that Shourie had so clearly laid out. Politicians (and bureaucrats) have too much invested in the entitlements of the public sector (free seats on planes, trains; cars and drivers, and all the other petty services that government companies provide for ministers and babus, apart from the appurtenances of corruption). So our politicians continue to spout elaborate “ideological” justifications for the persistence of government ownership.
Had our founding fathers been a little more willing to consider other models, they may not have been so blinded by confusion. In Asia, Japan had demonstrated that a mixed-economy with a capitalist orientation could in fact deliver prosperity to a backward nation within a generation (although this was somewhat obscured by the ravages of war by 1945). Japan dismantled its own feudal structures in 1868-70, but compensated the old aristocracy in the form of government bonds (some of which were quickly devalued by high inflation in the subsequent decade) and stocks in the new government enterprises that kick-started Japan’s industrialization. Over time, these fungible stocks and bonds helped turn the old feudal caste of samurais and daimyos into the merchants of the sogo-sosha trading houses that came to dominate Asian commerce by the 1930s, and resumed doing so by 1955.
Unlike in Nehru’s India, Japan never abandoned the market-based allocation of resources and factors of production. Severe Soviet coercion could not adequately allocate capital, labour and resources – so it was hardly going to be possible for Nehru and Mahalanobis to do so in a non-coercive democratic era. Instead, India’s “socialism” led to the ossification of caste and class, the stultification of enterprise, and very modest economic growth between 1947 and 1980 (3.7% real GDP growth annually, albeit substantially better than under British rule, which saw 0.7% annual growth from 1900 to 1947). The reason we need to keep “reforming” parts of the economy even now is because the dead-weight of Soviet-style government-directed resource-allocation still afflicts important nooks and crannies of our system.
Demographics, and substantially-free resource allocation, have moved us to a much-faster growth path (6.7% annually for the past 10 years). But we still need to free up the vast public sector – NALCO, BHEL, NHPC, NTPC, SAIL, etc. plus SBI, LIC, UTI, etc. – that continues to distort the free market. Only then can the full promise of democratic capitalism be realized. Ironically, what Japan did in the 1880-1910 period – gradually shift most of its publicly-owned companies to private ownership – supposedly-communist China has done in the past two decades. Whether it is cars, steel, petrochemicals, semiconductors or consumer electronics, former state-owned companies are now in the vanguard of China’s capitalist transformation – and their embrace of capitalism is largely responsible for the consistently faster economic growth China has achieved than India. Ironically, democratic India’s tentative steps in the direction of unfettered industrial capitalism were nipped in the bud five years ago. In the agriculture sector, capitalism has never fully been allowed to exist, and our pension and provident fund systems remain in woeful need of private-sector efficiency in order to prepare us for the ageing of our population in thirty years time.
Reinforcing democracy as a handmaiden of capitalism
Unlike today’s Japan, however, China is not a democracy. Instead, China has achieved economic progress via a developmental state a la Japan and Germany before the Second World War – with the iron hand of autocracy committed to delivering steady prosperity that stifles the need for dissent. South Korea, Taiwan, Chile and Indonesia – among others – have demonstrated that this model ultimately faces a crisis of legitimacy when state-directed capitalism creates a large-enough middle class, or when a threshold level of per-capita income is achieved. Korea and Taiwan reached this limit in the late-1980s, Indonesia in 1998 – and China is about five years away from the threshold per-capita income levels of Korea and Taiwan in 1990.
India will never face the gigantic crisis of legitimacy that felled Suharto, Pinochet, or the successors of Park Chung-hee (Chun Doo-hwan) and Chiang Kai-shek (his son Chiang Ching-kuo). The daily aggravations of relatively slow democratic governance are infinitely preferable to the massive upheavals (thousands of deaths, massive repression, economic crises lasting several years) that usually accompany the fall of long-standing dictatorships. Smooth political transitions are a precious gift of our successful democracy that we should be very grateful for (and proud of).
Democracy confers other benefits in the long term, including creativity and enterprise far beyond what autocracies like China can achieve. In China (as in Japan before WWII), large formerly state-owned enterprises are typically at the vanguard of the economy – but rarely are they real fonts of entrepreneurship. In post-1991 India, by contrast, entrepreneurship has had a true flowering: not only did companies like Infosys, Wipro, Satyam, Suzlon, Biocon, etc., emerge from minuscule beginnings, but many of the grand old companies of India remade themselves from rent-seeking entities of the License era into enterprising risk-takers ready to take on massively heightened competition at home and also remake themselves into global players within specific niches.
Thus the Tata group made Tata Steel (which used to be dwarfed by SAIL in the Indian market) into the fifth largest steel manufacturer in the world (through acquisitions made possible by spectacular cost savings in the Indian operation, their expansion to Asia through Natsteel, and the eventual purchase of Corus), grew TCS into a world-class software producer, and Tata Motor into a successful maker of small cars and medium-size trucks (some of them made in Korea) as well as owner of a couple of luxury marques known around the world. The AV Birla group became a global player in key commodities like aluminium, carbon black, copper, cement and textiles – but faced Indian competition in the metals space from the enterprising upstart Vedanta / Sterlite (which capitalized on privatizations -- at home with Hindusthan Zinc and BALCO, and abroad through its superbly-timed purchase of the copper mines of Zambia).
All these corporate groups were beneficiaries of the freedom and creativity that is possible in a democracy. Ironically, however, the moral foundations of our democracy itself have increasingly been undermined over the past two decades. The quality of political leadership has deteriorated, our morality appears to have plunged as materialism merged smoothly with corruption, and the perception has grown that the political class is concerned merely with personal gain even at the expense of the broad national interest.
Middle-class Indians bemoan the limitations of democracy, and increasingly yearn for tougher governance.
Strong, effective rule and an unyielding commitment to the national interest, however, are not necessarily incompatible with democracy. In fact, in successful democracies like Japan, the US and the UK, democracy coexists with effective enforcement of the law (often unobtrusively, as with Japan’s police, which presides in the friendliest way over a virtually crime-free society). Our democracy increasingly gives more and more rights to criminals and terrorists – without understanding that the concomitant result is the abridgement of the rights of the vast majority. Sectional political interests increasingly interfere with – and thoroughly undermine – the autonomy of the Institutions of governance. Ultimately, this erosion of morality will begin to eat into the vitals of our vibrant economy – as the terrorists of 26/11 so vividly illustrated in Mumbai last week.
To truly make democracy the handmaiden of a more robust capitalism, we need to seize back our institutions and create an iron core of laws that assure the relative autonomy of key institutions. The Supreme Court and Election Commission have relative autonomy – partly because their tenure cannot really be interfered-with significantly by politicians. (There has recently been an attempt to inject partisanship into the Election Commission, which we must monitor and counter at all costs). Other key institutions must also be freed from political interference, including the Reserve Bank of India (by ensuring that the Governor appointment is undertaken via a more bipartisan process), and key national-security posts (including NSA and chiefs of IB and RAW, who must all be subject to closer parliamentary scrutiny – in camera, where necessary). From the top, this relative autonomy must also begin to filter down to the grassroots, with the police in particular given genuine relative autonomy (freedom from political interference) after their pay-scales and service conditions are improved dramatically to ensure that they inspire fear at least among the criminals and terrorists rather than being seen as simply harassing private citizens. Only with the restoration of the genuine autonomy of our institutions can we be sure that the gains of our capitalist revolution of the past two decades will not go up quickly in the smouldering smoke from the fires that consumed south Mumbai last week, and could spread much wider if we remain careless about our precious civilisational heritage of tolerance leavened with morality.
Leadership selection: The consistent failure at the heart of our politics
(first published on December 26th 2008 on the now-defunct website, India Banao!).
Leadership, and institutionalised mechanisms to choose those who will rise to the top, has been the bane of our politics. Thus we face the remarkable paradox of the world’s largest democracy having been ruled for 38 of our 61 years of independence by the members of one family, and for a further 10 years by leaders owing allegiance to a party named for and controlled directly by that family (the Congress-Indira).
During the other thirteen years, the longest rule has been by a septuagenarian whose supreme oratorical skills were waning (Atal Behari Vajpayee), an octogenarian past his administrative prime (Morarji Desai), and a succession of leaders who lasted less than two years (Lal Bahadur Shastri, VP Singh, HD Deve Gowda, IK Gujral, Chandrasekhar, Charan Singh).
In recent years, the world’s most powerful democracy (the US) has also seemingly succumbed to the dynastic principle. But the Bush father-son combine was only the second such pairing to rise to the top of the American political pole in 220 years. On both occasions, the son gained power in a disputed election several years after the father, and his term in office ended in ignominy. The dynastic principle is likely to die a quick death in America. By contrast, the American system has a remarkable capacity to renew (and often cleanse) itself every few years, as one set of principles are discarded for a new, often rebranded and reformed version of previously-discarded principles. One might object to the long-winded process of choosing a leader through innumerable primaries, but there is little doubt about the legitimacy – and consequent authority – of the new man who rises to the presidency at the end of that painstaking process.
In most mature democracies, the mechanisms to choose a party leader follow a well-laid path of internal democracy. Once elected through that process, the leader is normally in office until the next election (or until egregious lapses of ethics, propriety or leadership cause his/her premature overthrow). NONE of India’s political parties has yet achieved such a process of leadership (s)election, or indeed of any institutionalized process of talent recruitment. Instead, almost all our political parties have effectively been reduced to tools for the brand management of personality cults.
Perhaps the greatest missed opportunities for the non-Congress(I) opposition came immediately after their epic electoral triumphs in 1977 and 1989. On both occasions, the Prime Minister was not elected by the newly-elected legislators of the victorious coalition but chosen in an opaque process that left a bitter taste for the other contenders – sowing the seeds of the coalition’s eventual downfall. In 1977, a deep-seated bond had been formed among the leaders of the major opposition parties – Congress-O, Lok Dal, Jana Sangh, and the two Socialist parties – during their years of joint incarceration under Indira Gandhi’s Emergency (June 1975 to January 1977), but the leaders of the Congress for Democracy (Jagjivan Ram, HN Bahuguna and Nandini Satpathy) had also played a part in the electoral victory. Jayaprakash (JP) Narayan had been the undisputed leader of the pre-Emergency national upsurge, closely followed by Congress-O’s Morarji Desai, whose success in leading the Janata Front to victory in 1975 over the Indira Congress in Gujarat played a part in precipitating the Emergency.
JP had been a hero of the Quit India movement of 1942-43, had subsequently led the Praja Socialist party that sought to pursue the left-wing policies that Nehru professed (particularly on land reform) while retaining an independent stand on foreign policy (including meetings with the Israeli PM in the 1950s), had subsequently quit electoral politics to pursue the idealism of Sarvodaya until he came out of self-imposed political sanyas in 1974 to lead the movement for Sampurna Kranti from the corruption and authoritarianism of the post-1971 Indira Congress government.
Desai also had great moral authority as a former Deputy Prime Minister, and highly-regarded Finance Minister in the late-1950s and 1967-69 – albeit a decidedly “right-wing” one (opposed to the principles pursued by JP and the Socialists in the Janata Party). JP chose not to take the prime ministership on health grounds, but Desai was challenged for the leadership by Jagjivan Ram and Charan Singh (briefly a former CM of UP, a farmers’ champion and the leader of the Lok Dal, on whose electoral symbol all the Janata Party MPs had been elected).
The Janata Party had been hastily cobbled together before the election, and was seen by its elders as too fragile to outlast an open leadership contest. So JP and Acharya Kripalani (the Congress party president in 1947, and a prescient opposition MP in the 1950s on such key questions as India-China relations) were deputed to choose the leader – and settled on Morarji Desai, 81. Morarjibhai would almost certainly have won the job in an open contest – but probably on the second ballot, not a simple majority in the first ballot. The absence of any internal ballot, however, undermined the legitimacy of his prime ministership from the outset, and led to persistent intrigues and infighting, eventually leading Charan Singh to bring down the government 27 months after it had been formed.
Similarly, when Rajiv Gandhi’s Congress-I was defeated in a close general election in 1989, the Janata Dal chose Vishwanath Pratap (VP) Singh as Prime Minister in an opaque process (involving a backroom deal between Singh and former Lok Dal leader Devi Lal) at the expense of Chandrasekhar, the Janata Party president since 1977 whose nationwide padayatra in 1983 had galvanized the youth of the nation, but who had clearly fallen by the political wayside in the “sympathy wave” after Indira Gandhi’s assassination that wiped out much of the opposition in the December 1984 election. The 1989 government was formally a coalition called the National Front, comprising the Janata Dal’s 143 seats, BJP’s 85 and the Left Front’s 42 (plus some smaller parties) – but the BJP and Left supported the government from outside, so the Janata Dal chose the Prime Minister. While VP Singh had been the galvanizing force for the Janata Dal, his Jan Morcha faction (comprising those who had left Congress-I on grounds of principle) was smaller than the Janata Party and Lok Dal factions (owing allegiance to Chandrasekhar and Devi Lal).
The leaders’ unwillingness to institutionalize a process of leadership selection weakened both the Janata Dal and the National Front, eventually touching-off a period of bitter caste conflict that consumed Indian politics in the 1990s. Instead the Janata Dal has since splintered into several small offshoots – each a vehicle of a particular regional politician (Lalu Yadav, Mulayam Yadav, Naveen Patnaik) with only the Samata Party in Bihar having a modicum of institutionalized processes independent of an individual leader.
Of the many offshoots of the original Janata Party of 1977, only the Bharatiya Janata Party (BJP) has become a genuinely national party with an institutional structure that is closest to that of a modern political party in most mature democracies. The BJP was formed after the 1980 general election (in which the Janata Party was led by Jagjivan Ram, after the Congress-I had brought down Charan Singh’s government to precipitate a national election). While the core of the BJP came from the old Jana Sangh, it also included several prominent members of the Congress-O (such as Sikandar Bakht) and the old Swatantra Party (which had merged with the Lok Dal) such as Jaswant Singh. Subsequently, Yashwant Sinha (a former confidant of Chandrasekhar and finance minister in his short-lived cabinet) also joined the BJP in 1992. This diversity of leadership backgrounds gets little prominence in the media, as the BJP too has failed to develop a transparent process of electing its national and state-level leadership.
Like the communists, the BJP takes refuge in being a cadre-based, disciplined party. But unlike parties in mature democracies (like the Democrats and Republicans in the US; Labour, Conservatives and LibDems in the UK; CDU and SPD in Germany; Socialists and Gaullists in France; GNP and Democrats in South Korea, or even UMNO, PAS and Parti Rakyat in Malaysia), the BJP has not created institutional mechanisms to elect its national or state-level leaders. This is a weakness that is likely to hurt the party in the longer-term, once the two “tallest leaders” (Vajpayee and Advani) have retired from the scene. Continuing perceptions that the BJP’s decision-making occurs through an opaque process of consultations with the Sangh Parivar, rather than internal democracy, detract from its modernisation and institutionalisation as a genuine centre-right party of robust nationalism in foreign policy, social conservatism and liberal economics. There is some airing of different views by prominent BJP stalwarts (Arun Shourie, Jaswant Singh, Yashwant Sinha, LK Advani) through their books and articles. But internal discussion of major questions of economic, security and social policy is still rather threadbare – and certainly not given sufficient airing – for a mature political party.
Nonetheless, the Congress-I’s gradual degeneration into a family fiefdom has been the greatest debacle of the last four decades of Indian political history. To a limited extent, the rot began with the Tripuri session of the Indian National Congress in 1939. With the tides of war lapping our shores, Mahatma Gandhi made it impossible for Netaji Subhas to function as Congress president after he had won re-election resoundingly. But this was an exception that proved the rule.
Despite having a “High Command” (mainly Mahatma Gandhi himself), the Congress was fundamentally a democratic party during the freedom movement, debating all major questions vigorously before coming to democratic conclusions. Occasionally, Gandhiji over-ruled the party’s decision – most prominently, when he chose Nehru as prime minister when the party leadership’s choice was Sardar Patel.
Note that original sin, however: even in its first major decision regarding the post of Prime Minister, the party of our freedom movement did not institute a process of democratic leadership election. At that time, however, backroom deal-making and opaque selection was still the norm in democracies around the world. But as the rest of the world became more democratic and institutionalised, the Congress (still easily the dominant party in India through the 1960s) became increasingly more opaque.
When India faced its greatest foreign policy debacle in 1962 (after Nehru’s carefully-constructed myth of “Hindi-Chini Bhai Bhai”, including implicit acceptance of Maoist China’s invasion of Tibet -- which no Han-Chinese dynasty had ever ruled or even exercised suzerainty over -- lay in tatters after the October 1962 Chinese invasion), the Congress president came up with his “Kamaraj Plan” to insulate the party from the impact of the debacle. The culpable defense minister Krishna Menon was immediately forced to resign, and was replaced by the dynamic chief minister of Maharashtra, YB Chavan.
But instead of Prime Minister Nehru resigning too, it was decided to sacrifice the #2 in the cabinet, Finance Minister Morarji Desai, and ask him to return to party-building activity. It was a transparent ploy by the Syndicate (comprising Kamaraj and other regional Congress satraps such as SK Patil in Bombay, Atulya Ghosh in Calcutta, Nijalingappa in Bangalore and Sanjeeva Reddy in Hyderabad) to push out the man who was likely to be the least malleable among the top leadership of the party. Backroom manoeuvres were thus used to ensure that Lalbahadur Shastri (rather than Morarji Desai) would succeed Nehru in May 1964. While Shastri was an honourable man, it was remarkable that India’s second prime minister had never ventured outside the country when he became PM, and otherwise had a narrowness of vision that derived naturally from his lack of experience – especially in economic, defence and foreign policy.
The Syndicate subsequently selected Indira Gandhi to succeed Shastri, again bypassing Desai on the assumption that the gungi gudiya would be much easier to control. After the 1967 general election (in which Congress lost numerous states for the first time), Indira did defeat Morarjibhai in a legislature election, but that was the first and last time a formal internal-party election was held to choose the PM. By 1969, Indira Gandhi decided to split the Congress, remove Desai as Finance Minister (and soon after as Deputy PM too) and force out the Syndicate.
Instead, she abolished the Right to Property, nationalized the banks and packed the Supreme Court with judges who were “committed” (to her, and to “socialism” as she defined it). The streak of authoritarianism was backed by a resounding electoral triumph in 1971 (when the Garibi Hatao slogan, based on her shift to socialist policies) was soon followed by the greatest Indian military triumph since the first Battle of Tarain – the Liberation of Bangladesh on December 16th, 1971. It was Indira’s finest hour – and a truly magnificent feat of leadership. Despite all that Indira Gandhi did to destroy our institutions (Supreme Court, the Congress party itself, the relative autonomy of the bureaucracy, transparency in political donations), she was a remarkable practitioner of the art of realpolitik.
At the start of 1972, Indira Gandhi was the mistress of all she surveyed in Indian politics. Having nationalized the banks and defeated Pakistan, however, she failed to use either effectively. The banks degenerated quickly into politically-influenced lending that decimated their asset quality, while the ambiguities of the Shimla agreement made it a diplomatic triumph for Zulfi Bhutto rather than for the military victor (India and Indira).
As soaring oil prices in 1973-74 caused inflation to surge and the current account to deteriorate, it was becoming increasingly clear that the promises of socialism were degenerating into corruption, inefficiency, ossified social structures and a dearth of employment opportunities for a new generation of youth. As industry stagnated in the 1970s, the JP Movement channelized the idealism of a new generation toward a new project of nation-building – and Indira Gandhi responded with extreme authoritarianism. The Emergency was a new low for Indian democracy, and a triumph for India’s opponents who had always said that democracy wouldn’t work in a poor country.
To her credit, Indira Gandhi did call an election in March 1977 -- fully expecting to win, based on IB inputs. The Janata Party’s sensational victory resulted in the effective renewal of many of the institutions and constitutional norms that Indira had destroyed since 1970, and most of the ills of the Emergency (including the abridgement of press and individual freedoms) were overturned. However, the manner of Morarjibhai’s selection as PM undermined his ability to reconcile the ideological contradictions between the right and left of the Janata Party. The party split in acrimony in July 1979, the Charan Singh interregnum proved short-lived, and the new election in December 1979 brought Indira Gandhi back to national power.
By then, however, the party she led was called Congress (Indira), and her 1980 cabinet included just one minister (ABA Ghani Khan Chowdhury) who had ever been a union cabinet minister before. The new finance minister (R Venkatraman) had been Industry minister of Tamil Nadu, the new Foreign Minister (Narasimha Rao) briefly the Chief Minister of Andhra Pradesh, but NONE of the stalwarts of the pre-1977 cabinet were deemed worthy of being in the new cabinet. Unswerving loyalty to Indira Gandhi (and the lack of any ability to challenge Sanjay Gandhi’s claim to be her political successor) was the only criterion determining suitability for a Union Cabinet berth.
Sadly, those qualities have increasingly become the prime ones in determining major ministerial appointments by the Congress-I. There was some infusion of new blood and ideas when Rajiv Gandhi became PM, although his inexperience (having never held a cabinet post before being sworn in hastily as PM upon his mother’s assassination) ultimately undermined his well-meaning initiatives – including the Punjab and Assam accords (to try ending two of the festering wounds of Indira’s 198-84 government), the introduction of computers into the public sector (which laid the seeds of the subsequent software revolution), and the beginnings of fiscal reform.
The accidental prime minister, PV Narasimha Rao, turned out to be one of our best PMs, bringing far-reaching economic reform, ending the Punjab problem, quietly burying the divisive Mandal reservation agenda, and reorienting our foreign policy toward greater engagement with East Asia and the US. But he was steadily undermined by the dowager empress of the Congress-I residing at 10 Janpath, and her coterie of loyalists. Tragically, when Narasimha Rao died, the Congress-I would not let his body enter the party headquarters in Delhi or be cremated along the banks of the Yamuna (where Nehru, Indira, Sanjay and Rajiv Gandhi all have elaborate memorials), instead forcing his family to fly his body to Hyderabad for a low-key cremation in virtual obscurity.
The progress toward modernity briefly achieved by the Congress-I under Rajiv Gandhi and Narasimha Rao has been rudely undermined during the decade that Sonia Maino Gandhi has led the party. The 2004 Union Cabinet betrayed the classic characteristics of Indira’s criteria for ministerial selection after 1980. The key positions of Prime Minister and Home Minister had to go to individuals who were not elected members of the Lok Sabha, undermining a key norm of India’s parliamentary system and ensuring that they would be pliable instruments in the hands of 10 Janpath.
Pranab Mukherjee (the Indira loyalist who had just won the first popular election of his long political career, by becoming a Lok Sabha MP for the first time) was deemed too potentially-independent to be given the Home Ministry, which instead went to Shivraj Patil (deemed “safe” precisely because he had lost his Lok Sabha seat in Latur, and thus would have no independent source of power). This was quite clearly Sonia’s decision (made not with the national interest in mind, but with that of the Gandhi-family’s future), and the nation paid the price of that decision most grievously on November 26th 2008 (and on innumerable other occasions when terrorists have struck across the length and breadth of the country in the past four years). Similarly, while the press revelled in the fact that several dynamic young MPs (mainly princelings of other Congress-I dynasties) had been elected to the Lok Sabha, none of them were taken into Cabinet in 2004 – as they might become rivals to the crown prince of the Congress-I.
Our current prime minister, Dr. Manmohan Singh, announced upon taking office that his prime goal would be to reform the bureaucracy to make it more capable of delivering services to citizens. However, not a single one of his ministerial colleagues owed any allegiance to him: with no right to appoint or dismiss any ministers, Dr. Singh was no more than the administrative head of the cabinet, not its political leader. Thus, despite life-long experience as a technocrat within government, Dr. Singh’s goals of administrative reform and governmental effectiveness have made no progress whatsoever.
Nonetheless, when he chose to lead on the issue of the India-US Civil Nuclear Cooperation agreement, he proved remarkably effective. Using his moral authority to the hilt (and an implicit threat of resignation), Prime Minister Singh was able to first oblige his Italian-born left-leaning party leader to fall in line, then get the rest of his cabinet to follow his lead, and eventually convince parliament (through fair means and foul) of the strategic importance of signing the deal. His leadership (and that of his superb diplomatic team) then shepherded the agreement through the rocky shoals of the Nuclear Suppliers Group (where China attempted to put a spoke in its wheel) and both houses of the US Congress before the US election cycle could scupper the deal. It was one of the greatest triumphs of leadership on a significant matter of national interest in modern Indian history.
The tragedy of Dr. Singh’s prime ministership is that he has not led (or been allowed to lead) on any other issue as he did on the India-US nuclear accord. Thus, he inherited an economy that was on the cusp of a sharp economic acceleration with the fiscal deficit in secular decline. Economic reform has made absolutely no progress under the current UPA government, and instead took a giant leap backward with this year’s Budget – which went one step further in irresponsibility than Charan Singh and Devi Lal by using taxpayer funds to encourage farmers to become loan-defaulters. The fiscal deficit (as a percent of GDP) will be larger this year than what the UPA inherited, despite an economic boom (fuelled partly by NDA economic policies and partly by favourable global conditions).
Our borders have been continually violated by China without any response from this UPA government, Bangladeshi infiltration has reignited socio-political turmoil across the North-East (undermining the progress toward permanent peace in that region during the previous NDA regime), and the peremptory abolition of POTA has undermined our ability to respond to terror. Were we to believe the PMO, Dr. Singh would have preferred to have taken a different stance on most of these issues (particularly on the economy, and national security), but has not been able to persuade Sonia and the cabinet.
As citizens, we need to ensure that our political parties are held to a higher standard of genuine democracy. We (and they) must realize that the nature of our political parties will determine the quality of leadership we receive. Some of our finest leaders (Chandrababu Naidu, Naveen Patnaik, Rajiv Gandhi) have emerged fortuitously from the dynastic cauldron, but a mature democracy cannot depend on accidents to give us the leaders we deserve. Institutionalizing a process of democratic leadership selection is essential if our political parties are to truly emerge as vehicles of national aspiration and effective governance.
Leadership, and institutionalised mechanisms to choose those who will rise to the top, has been the bane of our politics. Thus we face the remarkable paradox of the world’s largest democracy having been ruled for 38 of our 61 years of independence by the members of one family, and for a further 10 years by leaders owing allegiance to a party named for and controlled directly by that family (the Congress-Indira).
During the other thirteen years, the longest rule has been by a septuagenarian whose supreme oratorical skills were waning (Atal Behari Vajpayee), an octogenarian past his administrative prime (Morarji Desai), and a succession of leaders who lasted less than two years (Lal Bahadur Shastri, VP Singh, HD Deve Gowda, IK Gujral, Chandrasekhar, Charan Singh).
In recent years, the world’s most powerful democracy (the US) has also seemingly succumbed to the dynastic principle. But the Bush father-son combine was only the second such pairing to rise to the top of the American political pole in 220 years. On both occasions, the son gained power in a disputed election several years after the father, and his term in office ended in ignominy. The dynastic principle is likely to die a quick death in America. By contrast, the American system has a remarkable capacity to renew (and often cleanse) itself every few years, as one set of principles are discarded for a new, often rebranded and reformed version of previously-discarded principles. One might object to the long-winded process of choosing a leader through innumerable primaries, but there is little doubt about the legitimacy – and consequent authority – of the new man who rises to the presidency at the end of that painstaking process.
In most mature democracies, the mechanisms to choose a party leader follow a well-laid path of internal democracy. Once elected through that process, the leader is normally in office until the next election (or until egregious lapses of ethics, propriety or leadership cause his/her premature overthrow). NONE of India’s political parties has yet achieved such a process of leadership (s)election, or indeed of any institutionalized process of talent recruitment. Instead, almost all our political parties have effectively been reduced to tools for the brand management of personality cults.
Perhaps the greatest missed opportunities for the non-Congress(I) opposition came immediately after their epic electoral triumphs in 1977 and 1989. On both occasions, the Prime Minister was not elected by the newly-elected legislators of the victorious coalition but chosen in an opaque process that left a bitter taste for the other contenders – sowing the seeds of the coalition’s eventual downfall. In 1977, a deep-seated bond had been formed among the leaders of the major opposition parties – Congress-O, Lok Dal, Jana Sangh, and the two Socialist parties – during their years of joint incarceration under Indira Gandhi’s Emergency (June 1975 to January 1977), but the leaders of the Congress for Democracy (Jagjivan Ram, HN Bahuguna and Nandini Satpathy) had also played a part in the electoral victory. Jayaprakash (JP) Narayan had been the undisputed leader of the pre-Emergency national upsurge, closely followed by Congress-O’s Morarji Desai, whose success in leading the Janata Front to victory in 1975 over the Indira Congress in Gujarat played a part in precipitating the Emergency.
JP had been a hero of the Quit India movement of 1942-43, had subsequently led the Praja Socialist party that sought to pursue the left-wing policies that Nehru professed (particularly on land reform) while retaining an independent stand on foreign policy (including meetings with the Israeli PM in the 1950s), had subsequently quit electoral politics to pursue the idealism of Sarvodaya until he came out of self-imposed political sanyas in 1974 to lead the movement for Sampurna Kranti from the corruption and authoritarianism of the post-1971 Indira Congress government.
Desai also had great moral authority as a former Deputy Prime Minister, and highly-regarded Finance Minister in the late-1950s and 1967-69 – albeit a decidedly “right-wing” one (opposed to the principles pursued by JP and the Socialists in the Janata Party). JP chose not to take the prime ministership on health grounds, but Desai was challenged for the leadership by Jagjivan Ram and Charan Singh (briefly a former CM of UP, a farmers’ champion and the leader of the Lok Dal, on whose electoral symbol all the Janata Party MPs had been elected).
The Janata Party had been hastily cobbled together before the election, and was seen by its elders as too fragile to outlast an open leadership contest. So JP and Acharya Kripalani (the Congress party president in 1947, and a prescient opposition MP in the 1950s on such key questions as India-China relations) were deputed to choose the leader – and settled on Morarji Desai, 81. Morarjibhai would almost certainly have won the job in an open contest – but probably on the second ballot, not a simple majority in the first ballot. The absence of any internal ballot, however, undermined the legitimacy of his prime ministership from the outset, and led to persistent intrigues and infighting, eventually leading Charan Singh to bring down the government 27 months after it had been formed.
Similarly, when Rajiv Gandhi’s Congress-I was defeated in a close general election in 1989, the Janata Dal chose Vishwanath Pratap (VP) Singh as Prime Minister in an opaque process (involving a backroom deal between Singh and former Lok Dal leader Devi Lal) at the expense of Chandrasekhar, the Janata Party president since 1977 whose nationwide padayatra in 1983 had galvanized the youth of the nation, but who had clearly fallen by the political wayside in the “sympathy wave” after Indira Gandhi’s assassination that wiped out much of the opposition in the December 1984 election. The 1989 government was formally a coalition called the National Front, comprising the Janata Dal’s 143 seats, BJP’s 85 and the Left Front’s 42 (plus some smaller parties) – but the BJP and Left supported the government from outside, so the Janata Dal chose the Prime Minister. While VP Singh had been the galvanizing force for the Janata Dal, his Jan Morcha faction (comprising those who had left Congress-I on grounds of principle) was smaller than the Janata Party and Lok Dal factions (owing allegiance to Chandrasekhar and Devi Lal).
The leaders’ unwillingness to institutionalize a process of leadership selection weakened both the Janata Dal and the National Front, eventually touching-off a period of bitter caste conflict that consumed Indian politics in the 1990s. Instead the Janata Dal has since splintered into several small offshoots – each a vehicle of a particular regional politician (Lalu Yadav, Mulayam Yadav, Naveen Patnaik) with only the Samata Party in Bihar having a modicum of institutionalized processes independent of an individual leader.
Of the many offshoots of the original Janata Party of 1977, only the Bharatiya Janata Party (BJP) has become a genuinely national party with an institutional structure that is closest to that of a modern political party in most mature democracies. The BJP was formed after the 1980 general election (in which the Janata Party was led by Jagjivan Ram, after the Congress-I had brought down Charan Singh’s government to precipitate a national election). While the core of the BJP came from the old Jana Sangh, it also included several prominent members of the Congress-O (such as Sikandar Bakht) and the old Swatantra Party (which had merged with the Lok Dal) such as Jaswant Singh. Subsequently, Yashwant Sinha (a former confidant of Chandrasekhar and finance minister in his short-lived cabinet) also joined the BJP in 1992. This diversity of leadership backgrounds gets little prominence in the media, as the BJP too has failed to develop a transparent process of electing its national and state-level leadership.
Like the communists, the BJP takes refuge in being a cadre-based, disciplined party. But unlike parties in mature democracies (like the Democrats and Republicans in the US; Labour, Conservatives and LibDems in the UK; CDU and SPD in Germany; Socialists and Gaullists in France; GNP and Democrats in South Korea, or even UMNO, PAS and Parti Rakyat in Malaysia), the BJP has not created institutional mechanisms to elect its national or state-level leaders. This is a weakness that is likely to hurt the party in the longer-term, once the two “tallest leaders” (Vajpayee and Advani) have retired from the scene. Continuing perceptions that the BJP’s decision-making occurs through an opaque process of consultations with the Sangh Parivar, rather than internal democracy, detract from its modernisation and institutionalisation as a genuine centre-right party of robust nationalism in foreign policy, social conservatism and liberal economics. There is some airing of different views by prominent BJP stalwarts (Arun Shourie, Jaswant Singh, Yashwant Sinha, LK Advani) through their books and articles. But internal discussion of major questions of economic, security and social policy is still rather threadbare – and certainly not given sufficient airing – for a mature political party.
Nonetheless, the Congress-I’s gradual degeneration into a family fiefdom has been the greatest debacle of the last four decades of Indian political history. To a limited extent, the rot began with the Tripuri session of the Indian National Congress in 1939. With the tides of war lapping our shores, Mahatma Gandhi made it impossible for Netaji Subhas to function as Congress president after he had won re-election resoundingly. But this was an exception that proved the rule.
Despite having a “High Command” (mainly Mahatma Gandhi himself), the Congress was fundamentally a democratic party during the freedom movement, debating all major questions vigorously before coming to democratic conclusions. Occasionally, Gandhiji over-ruled the party’s decision – most prominently, when he chose Nehru as prime minister when the party leadership’s choice was Sardar Patel.
Note that original sin, however: even in its first major decision regarding the post of Prime Minister, the party of our freedom movement did not institute a process of democratic leadership election. At that time, however, backroom deal-making and opaque selection was still the norm in democracies around the world. But as the rest of the world became more democratic and institutionalised, the Congress (still easily the dominant party in India through the 1960s) became increasingly more opaque.
When India faced its greatest foreign policy debacle in 1962 (after Nehru’s carefully-constructed myth of “Hindi-Chini Bhai Bhai”, including implicit acceptance of Maoist China’s invasion of Tibet -- which no Han-Chinese dynasty had ever ruled or even exercised suzerainty over -- lay in tatters after the October 1962 Chinese invasion), the Congress president came up with his “Kamaraj Plan” to insulate the party from the impact of the debacle. The culpable defense minister Krishna Menon was immediately forced to resign, and was replaced by the dynamic chief minister of Maharashtra, YB Chavan.
But instead of Prime Minister Nehru resigning too, it was decided to sacrifice the #2 in the cabinet, Finance Minister Morarji Desai, and ask him to return to party-building activity. It was a transparent ploy by the Syndicate (comprising Kamaraj and other regional Congress satraps such as SK Patil in Bombay, Atulya Ghosh in Calcutta, Nijalingappa in Bangalore and Sanjeeva Reddy in Hyderabad) to push out the man who was likely to be the least malleable among the top leadership of the party. Backroom manoeuvres were thus used to ensure that Lalbahadur Shastri (rather than Morarji Desai) would succeed Nehru in May 1964. While Shastri was an honourable man, it was remarkable that India’s second prime minister had never ventured outside the country when he became PM, and otherwise had a narrowness of vision that derived naturally from his lack of experience – especially in economic, defence and foreign policy.
The Syndicate subsequently selected Indira Gandhi to succeed Shastri, again bypassing Desai on the assumption that the gungi gudiya would be much easier to control. After the 1967 general election (in which Congress lost numerous states for the first time), Indira did defeat Morarjibhai in a legislature election, but that was the first and last time a formal internal-party election was held to choose the PM. By 1969, Indira Gandhi decided to split the Congress, remove Desai as Finance Minister (and soon after as Deputy PM too) and force out the Syndicate.
Instead, she abolished the Right to Property, nationalized the banks and packed the Supreme Court with judges who were “committed” (to her, and to “socialism” as she defined it). The streak of authoritarianism was backed by a resounding electoral triumph in 1971 (when the Garibi Hatao slogan, based on her shift to socialist policies) was soon followed by the greatest Indian military triumph since the first Battle of Tarain – the Liberation of Bangladesh on December 16th, 1971. It was Indira’s finest hour – and a truly magnificent feat of leadership. Despite all that Indira Gandhi did to destroy our institutions (Supreme Court, the Congress party itself, the relative autonomy of the bureaucracy, transparency in political donations), she was a remarkable practitioner of the art of realpolitik.
At the start of 1972, Indira Gandhi was the mistress of all she surveyed in Indian politics. Having nationalized the banks and defeated Pakistan, however, she failed to use either effectively. The banks degenerated quickly into politically-influenced lending that decimated their asset quality, while the ambiguities of the Shimla agreement made it a diplomatic triumph for Zulfi Bhutto rather than for the military victor (India and Indira).
As soaring oil prices in 1973-74 caused inflation to surge and the current account to deteriorate, it was becoming increasingly clear that the promises of socialism were degenerating into corruption, inefficiency, ossified social structures and a dearth of employment opportunities for a new generation of youth. As industry stagnated in the 1970s, the JP Movement channelized the idealism of a new generation toward a new project of nation-building – and Indira Gandhi responded with extreme authoritarianism. The Emergency was a new low for Indian democracy, and a triumph for India’s opponents who had always said that democracy wouldn’t work in a poor country.
To her credit, Indira Gandhi did call an election in March 1977 -- fully expecting to win, based on IB inputs. The Janata Party’s sensational victory resulted in the effective renewal of many of the institutions and constitutional norms that Indira had destroyed since 1970, and most of the ills of the Emergency (including the abridgement of press and individual freedoms) were overturned. However, the manner of Morarjibhai’s selection as PM undermined his ability to reconcile the ideological contradictions between the right and left of the Janata Party. The party split in acrimony in July 1979, the Charan Singh interregnum proved short-lived, and the new election in December 1979 brought Indira Gandhi back to national power.
By then, however, the party she led was called Congress (Indira), and her 1980 cabinet included just one minister (ABA Ghani Khan Chowdhury) who had ever been a union cabinet minister before. The new finance minister (R Venkatraman) had been Industry minister of Tamil Nadu, the new Foreign Minister (Narasimha Rao) briefly the Chief Minister of Andhra Pradesh, but NONE of the stalwarts of the pre-1977 cabinet were deemed worthy of being in the new cabinet. Unswerving loyalty to Indira Gandhi (and the lack of any ability to challenge Sanjay Gandhi’s claim to be her political successor) was the only criterion determining suitability for a Union Cabinet berth.
Sadly, those qualities have increasingly become the prime ones in determining major ministerial appointments by the Congress-I. There was some infusion of new blood and ideas when Rajiv Gandhi became PM, although his inexperience (having never held a cabinet post before being sworn in hastily as PM upon his mother’s assassination) ultimately undermined his well-meaning initiatives – including the Punjab and Assam accords (to try ending two of the festering wounds of Indira’s 198-84 government), the introduction of computers into the public sector (which laid the seeds of the subsequent software revolution), and the beginnings of fiscal reform.
The accidental prime minister, PV Narasimha Rao, turned out to be one of our best PMs, bringing far-reaching economic reform, ending the Punjab problem, quietly burying the divisive Mandal reservation agenda, and reorienting our foreign policy toward greater engagement with East Asia and the US. But he was steadily undermined by the dowager empress of the Congress-I residing at 10 Janpath, and her coterie of loyalists. Tragically, when Narasimha Rao died, the Congress-I would not let his body enter the party headquarters in Delhi or be cremated along the banks of the Yamuna (where Nehru, Indira, Sanjay and Rajiv Gandhi all have elaborate memorials), instead forcing his family to fly his body to Hyderabad for a low-key cremation in virtual obscurity.
The progress toward modernity briefly achieved by the Congress-I under Rajiv Gandhi and Narasimha Rao has been rudely undermined during the decade that Sonia Maino Gandhi has led the party. The 2004 Union Cabinet betrayed the classic characteristics of Indira’s criteria for ministerial selection after 1980. The key positions of Prime Minister and Home Minister had to go to individuals who were not elected members of the Lok Sabha, undermining a key norm of India’s parliamentary system and ensuring that they would be pliable instruments in the hands of 10 Janpath.
Pranab Mukherjee (the Indira loyalist who had just won the first popular election of his long political career, by becoming a Lok Sabha MP for the first time) was deemed too potentially-independent to be given the Home Ministry, which instead went to Shivraj Patil (deemed “safe” precisely because he had lost his Lok Sabha seat in Latur, and thus would have no independent source of power). This was quite clearly Sonia’s decision (made not with the national interest in mind, but with that of the Gandhi-family’s future), and the nation paid the price of that decision most grievously on November 26th 2008 (and on innumerable other occasions when terrorists have struck across the length and breadth of the country in the past four years). Similarly, while the press revelled in the fact that several dynamic young MPs (mainly princelings of other Congress-I dynasties) had been elected to the Lok Sabha, none of them were taken into Cabinet in 2004 – as they might become rivals to the crown prince of the Congress-I.
Our current prime minister, Dr. Manmohan Singh, announced upon taking office that his prime goal would be to reform the bureaucracy to make it more capable of delivering services to citizens. However, not a single one of his ministerial colleagues owed any allegiance to him: with no right to appoint or dismiss any ministers, Dr. Singh was no more than the administrative head of the cabinet, not its political leader. Thus, despite life-long experience as a technocrat within government, Dr. Singh’s goals of administrative reform and governmental effectiveness have made no progress whatsoever.
Nonetheless, when he chose to lead on the issue of the India-US Civil Nuclear Cooperation agreement, he proved remarkably effective. Using his moral authority to the hilt (and an implicit threat of resignation), Prime Minister Singh was able to first oblige his Italian-born left-leaning party leader to fall in line, then get the rest of his cabinet to follow his lead, and eventually convince parliament (through fair means and foul) of the strategic importance of signing the deal. His leadership (and that of his superb diplomatic team) then shepherded the agreement through the rocky shoals of the Nuclear Suppliers Group (where China attempted to put a spoke in its wheel) and both houses of the US Congress before the US election cycle could scupper the deal. It was one of the greatest triumphs of leadership on a significant matter of national interest in modern Indian history.
The tragedy of Dr. Singh’s prime ministership is that he has not led (or been allowed to lead) on any other issue as he did on the India-US nuclear accord. Thus, he inherited an economy that was on the cusp of a sharp economic acceleration with the fiscal deficit in secular decline. Economic reform has made absolutely no progress under the current UPA government, and instead took a giant leap backward with this year’s Budget – which went one step further in irresponsibility than Charan Singh and Devi Lal by using taxpayer funds to encourage farmers to become loan-defaulters. The fiscal deficit (as a percent of GDP) will be larger this year than what the UPA inherited, despite an economic boom (fuelled partly by NDA economic policies and partly by favourable global conditions).
Our borders have been continually violated by China without any response from this UPA government, Bangladeshi infiltration has reignited socio-political turmoil across the North-East (undermining the progress toward permanent peace in that region during the previous NDA regime), and the peremptory abolition of POTA has undermined our ability to respond to terror. Were we to believe the PMO, Dr. Singh would have preferred to have taken a different stance on most of these issues (particularly on the economy, and national security), but has not been able to persuade Sonia and the cabinet.
As citizens, we need to ensure that our political parties are held to a higher standard of genuine democracy. We (and they) must realize that the nature of our political parties will determine the quality of leadership we receive. Some of our finest leaders (Chandrababu Naidu, Naveen Patnaik, Rajiv Gandhi) have emerged fortuitously from the dynastic cauldron, but a mature democracy cannot depend on accidents to give us the leaders we deserve. Institutionalizing a process of democratic leadership selection is essential if our political parties are to truly emerge as vehicles of national aspiration and effective governance.
Raju’s “Mithyam” and the implications for India’s business-politics nexus
(first published on 22nd January 2009 in the now-defunct website, India Banao!)
Capitalism’s weakest link the world over is the point at which business intersects with politics. Opacity invariably characterizes those interactions, leavened in some countries by a web of laws aimed at dignifying and constraining the process. When real estate is added to the mix, the brew turns decidedly more turgid.
Caught up in that deadly nexus of politics, business and land, Ramalinga Raju succumbed to temptation – committing fraud on a massive scale to ensure that his company’s earnings would continue to meet the market’s elevated expectations. Although his family owned less than 9% of his company’s stock, he appears to have treated the listed company as a cash cow to bankroll his family’s ventures into real-estate, while also evidently spreading his largesse to political parties of various hues.
Lionized in Hyderabad for creating from scratch a software powerhouse, Satyam Computers, which epitomized that city’s response to the fabled twosome from Bangalore (Infosys and Wipro), Raju made the fatal error that has undone so many Indian entrepreneurs: unrelated diversification. In order to finance that diversification he created a “Mithyam” (edifice of lies) about his company’s margins and cash balances. At a minimum, this was aimed at keeping his stock artificially high -- and enabling his family to use the inflated valuation to borrow heavily for investments in land and politics. At worst, he may have simply stolen the listed company’s cash.
The story of India’s economic rise over the past 17 years is best encapsulated in the idea that reform has unleashed the long-suppressed entrepreneurial energy of its private sector, the dynamism of which helps obscure the failures of India’s permanently dysfunctional government. The author and business consultant Gurcharan Das has a nifty phrase to describe this: “India’s economy grows at night, while the government sleeps”. This has been literally true about the fast-growing business-process outsourcing sector, which operates mostly at night for customers on the other side of the planet.
Foreign institutional investors are attracted to India’s stock-market (despite the poor quality of political governance, epitomized in crumbling physical infrastructure) particularly because of the quality of India’s corporate governance (ranked by one influential survey as third in Asia behind Hong Kong and Singapore, and far ahead of Korea, China and the rest of Asia). Satyam’s sorry saga puts much of that faith on test: suddenly investors can no longer trust India’s corporate governance, or even the integrity of audited financial data from its companies.
The poor quality of political governance is finally beginning to catch up with the dynamism of private business. The funding of political parties remains a closely guarded secret even as the Right to Information Act forces transparency on the government. A recent annual report from the Swiss Bankers’ Association states that Indians are the single largest partakers of super-secret Swiss bank accounts – totaling US$1.45tn (more than India’s annual GDP).
If any good is to come from Raju’s “Mithyam”, it must begin by compelling reform of the opaque nexus between politics and business that is now beginning to threaten the Indian economic miracle.
Opacity was introduced into political funding by Indira Gandhi in 1970, when she banned corporate political donations by cheque in order to starve the former Syndicate – which had gone to the Congress-O after Indira split the party in 1969 -- of its system of funding. The result was that “black money”, opaque real-estate deals and kickbacks from defense contracts became the primary means of political funding in India. By its very nature, most political funding in India encourages immoral, unethical practices – and this lies at the heart of what is wrong with our politics today.
As long as India’s “new economy” – software and business-process outsourcing, mobile telephony, pharmaceuticals, auto-components, R&D outsourcing and other knowledge-based industries – were able to grow without much interference from the government, there was little scope for the cancer of political funding to infect its dynamism. The Rajus’ attempt to diversify from the new economy into the murkiest parts of the rent-seeking economy – real-estate and infrastructure development – exposed their crown jewel to the worst of the muck that infests our political-funding system. Fortunately, very few of the other genuine leaders of new-economy companies are likely to have succumbed to the old-economy-politics temptation – although one (Ranbaxy) has seen its promoter-family cash out at the top to plunge openly into real-estate.
But if we are to secure the future of the Indian economic miracle, we as a nation need to quickly confront the cancer of amoral “black-money” financing that our political parties are obliged to indulge in. When major decisions like the auction of 3G spectrum are held hostage to the imperatives of electoral fund-raising, the future of the Indian economy is beginning to be threatened. As citizens, we need to begin seeking the answers to the tough questions of how our parties are funded, who is stashing away trillions in Swiss banks, and why there is no momentum whatsoever in electoral-funding reform in India.
Capitalism’s weakest link the world over is the point at which business intersects with politics. Opacity invariably characterizes those interactions, leavened in some countries by a web of laws aimed at dignifying and constraining the process. When real estate is added to the mix, the brew turns decidedly more turgid.
Caught up in that deadly nexus of politics, business and land, Ramalinga Raju succumbed to temptation – committing fraud on a massive scale to ensure that his company’s earnings would continue to meet the market’s elevated expectations. Although his family owned less than 9% of his company’s stock, he appears to have treated the listed company as a cash cow to bankroll his family’s ventures into real-estate, while also evidently spreading his largesse to political parties of various hues.
Lionized in Hyderabad for creating from scratch a software powerhouse, Satyam Computers, which epitomized that city’s response to the fabled twosome from Bangalore (Infosys and Wipro), Raju made the fatal error that has undone so many Indian entrepreneurs: unrelated diversification. In order to finance that diversification he created a “Mithyam” (edifice of lies) about his company’s margins and cash balances. At a minimum, this was aimed at keeping his stock artificially high -- and enabling his family to use the inflated valuation to borrow heavily for investments in land and politics. At worst, he may have simply stolen the listed company’s cash.
The story of India’s economic rise over the past 17 years is best encapsulated in the idea that reform has unleashed the long-suppressed entrepreneurial energy of its private sector, the dynamism of which helps obscure the failures of India’s permanently dysfunctional government. The author and business consultant Gurcharan Das has a nifty phrase to describe this: “India’s economy grows at night, while the government sleeps”. This has been literally true about the fast-growing business-process outsourcing sector, which operates mostly at night for customers on the other side of the planet.
Foreign institutional investors are attracted to India’s stock-market (despite the poor quality of political governance, epitomized in crumbling physical infrastructure) particularly because of the quality of India’s corporate governance (ranked by one influential survey as third in Asia behind Hong Kong and Singapore, and far ahead of Korea, China and the rest of Asia). Satyam’s sorry saga puts much of that faith on test: suddenly investors can no longer trust India’s corporate governance, or even the integrity of audited financial data from its companies.
The poor quality of political governance is finally beginning to catch up with the dynamism of private business. The funding of political parties remains a closely guarded secret even as the Right to Information Act forces transparency on the government. A recent annual report from the Swiss Bankers’ Association states that Indians are the single largest partakers of super-secret Swiss bank accounts – totaling US$1.45tn (more than India’s annual GDP).
If any good is to come from Raju’s “Mithyam”, it must begin by compelling reform of the opaque nexus between politics and business that is now beginning to threaten the Indian economic miracle.
Opacity was introduced into political funding by Indira Gandhi in 1970, when she banned corporate political donations by cheque in order to starve the former Syndicate – which had gone to the Congress-O after Indira split the party in 1969 -- of its system of funding. The result was that “black money”, opaque real-estate deals and kickbacks from defense contracts became the primary means of political funding in India. By its very nature, most political funding in India encourages immoral, unethical practices – and this lies at the heart of what is wrong with our politics today.
As long as India’s “new economy” – software and business-process outsourcing, mobile telephony, pharmaceuticals, auto-components, R&D outsourcing and other knowledge-based industries – were able to grow without much interference from the government, there was little scope for the cancer of political funding to infect its dynamism. The Rajus’ attempt to diversify from the new economy into the murkiest parts of the rent-seeking economy – real-estate and infrastructure development – exposed their crown jewel to the worst of the muck that infests our political-funding system. Fortunately, very few of the other genuine leaders of new-economy companies are likely to have succumbed to the old-economy-politics temptation – although one (Ranbaxy) has seen its promoter-family cash out at the top to plunge openly into real-estate.
But if we are to secure the future of the Indian economic miracle, we as a nation need to quickly confront the cancer of amoral “black-money” financing that our political parties are obliged to indulge in. When major decisions like the auction of 3G spectrum are held hostage to the imperatives of electoral fund-raising, the future of the Indian economy is beginning to be threatened. As citizens, we need to begin seeking the answers to the tough questions of how our parties are funded, who is stashing away trillions in Swiss banks, and why there is no momentum whatsoever in electoral-funding reform in India.
David Miliband, the Congress-I prince, and the fecklessness of UPA foreign policy
(first published on 7th April 2009 on the now-defunct website, India Banao!)
On March 10th, 1959, the Dalai Lama – leader of the Tibetan people, who had been under Chinese occupation since China’s invasion of Tibet in 1951 – decided to begin a dangerous journey from his Potala palace in his capital, Lhasa, to seek safety and refuge in India (Tibet’s traditional south-eastern and -western neighbour). He arrived on Indian soil by the end of that month, and the 50th anniversary of that perilous and epochal three-week journey was marked by all Tibetans around the world last month with profound sadness mixed with a growing anger.
Now is an apt time, therefore, for us Indians to pause to consider the disaster that the Nehru family has wrought in our Tibet policy -- to which the latest generation has unwittingly added another unseemly chapter recently. Communist China claims that Tibet has always been part of China, although this claim has absolutely no historical validity. It is widely known that India had been ruled by foreign dynasties for most of the thousand years until 1947, but it is less well-appreciated that almost exactly the same thing is true about China.
No Han Chinese dynasty (before the Communists) ever had even suzerainty over Tibet
Over the seventeen centuries between the fall of the Han dynasty in 220AD and the establishment of the modern Chinese republic in 1912, China was ruled by Han Chinese dynasties for just 218 years (from 618 to 755AD by the Tang dynasty, and from 1368 to 1449 by the Ming; the official period of dynastic rule for the Tang extends to 906AD, but after 755 the Tang’s political control was actually confined to just Shaanxi province; and while the Ming continued to control Beijing intermittently until 1638, the Ming emperor was taken prisoner by the Mongols in 1449, and much of western China proper was under renewed Mongol rule after 1449, with Beijing and its suburbs subjected to periodic Mongol raids that eventually paved the way for the non-Han Manchu people to conquer China in 1644 – and continue ruling it until 1911). The “China” ruled by the Tang and Ming (even during those 218 years of their most extensive control) did not encompass for a single day Tibet, Mongolia, Nei Mongol (Inner Mongolia) or East Turkestan (Xinjiang).
The Manchu were certainly not a Han Chinese dynasty, and they reminded the Chinese of this every day of their 267-year reign by insisting that all Han Chinese men shave the front of their heads and wear pony-tails as symbols of their servitude. In the first couple of centuries of Manchu rule, their court in Beijing was dominated by Mongol and Manchu noblemen, with the Han in a clearly subordinated role.
The Manchus established a form of suzerainty over Tibet, continuing a relationship established between the Mongols and Tibetans that went back almost a millennium (and the Manchus also had a similar relationship of suzerainty with East Turkestan, Mongolia and Korea). The only previous Beijing-based dynasty that had strong ties (but most likely of mutual respect rather than suzerainty) with Tibet were the Mongol (“Yuan”) dynasty, which had united much of what constitutes today’s China. But their capital (in what is today called Beijing) was called Khanbaliq, and their court-language was Mongol (rather than Mandarin Chinese).
For modern China to claim “sovereignty” over nations with which the Manchus and Mongols had a tenuous relationship of “suzerainty” (such as Korea, Tibet and Mongolia) is about as ludicrous as India seeking sovereignty over Afghanistan, Pakistan, and parts of Uzbekistan and Tajikistan because the Mughals ruled over them in the past, or Greece to claim Pakistan on the basis of the Macedonian Alexander’s rule. Tibet was invaded by Mao’s People’s Liberation Army in 1951, but Mao sought legitimacy not through military conquest alone but by bolstering his case by referring to history – and the alleged political control that “China” had traditionally enjoyed over Tibet. The simple fact is that, if China enjoyed suzerainty over Tibet because of certain rights exercised by the Manchus, India also had substantial residual rights in Tibet granted by the legitimate Tibetan government (led by the Dalai Lama of the time) to British India. The British were foreign rulers of India, but so were the Manchus a foreign dynasty ruling over China.
Nehru lets China’s invasion stand
Jawaharlal Nehru abdicated his responsibility as modern India’s first prime minister by failing to even protest (let alone take military action) to safeguard India’s interests in Tibet, and roll-back the illegitimate Chinese conquest of Tibet in 1951. When Japan marched into Manchuria in 1931, the world protested vehemently, but Mao’s China was oblivious to any protests (although there was even less historical ground for China’s claim over Tibet than for Japan in Manchuria). The virtual silence of Nehru in the face of such naked aggression, however, was especially vital to China – as India had residual rights in Tibet, deep cultural and linguistic affinity (both Tibetan and the eastern Indian languages – Bengali, Oriya, Assamese – are direct descendants of Pali, and Tibetan is completely unrelated to any Chinese language), and a religious tradition (Mahayana) that was very similar to Hinduism.
By moving the India-China border several thousand miles inland, China was able to transform Tibet from a peaceful buffer state (a la Switzerland) to a base for missiles (possibly even nuclear-tipped ones) directed at India. The US in the 1950s was keen to act in concert with India to de-legitimize the Chinese invasion, but Nehru refused to go along. The eventual consequence was the humiliating 1962 war, which was followed by China’s half-century-long strategic encirclement of India (with close Sino-Pakistan ties, attempts to cultivate the Bangladesh military, the Maoist take-over in Nepal, and the deep-seated military-cultural relationship with Burma completing the circle).
In October 2008, the foreign minister of the United Kingdom, David Miliband, quietly changed history in a manner calculated to grievously harm India’s (and especially Tibet’s) interests, and promote China’s instead. Miliband quietly changed Britain’s long-standing policy of merely recognizing China’s suzerainty over Tibet – to actually recognizing China’s sovereignty over it. This was very much in keeping with his family’s vocation: David’s father Roy Miliband was a well-known Marxist historian, so the son’s soft-spot for Communist China is understandable. What is not so understandable is the fact that India’s establishment – far from declaring him persona non grata – accorded him numerous platforms in India, which he naturally used to berate us.
Miliband’s change of nomenclature is of transformative diplomatic importance. It crucially undermines India’s stand that the McMahon Line is the legitimate border between India and Tibet (and, therefore, with China, as long as China is ruling Tibet). A treaty signed by Tibet (clearly independent of China at that time, after the ouster of the Manchu Qing dynasty in 1912) with British India at Simla in 1913 asserted that the McMahon Line would be the border between Tibet and India. A subsidiary note to this treaty recognized that China had suzerainty over Tibet, but China later refuted the treaty (thereby effectively repudiating even its rights as a suzerain, since Tibet had expelled all Chinese official representatives after 1912, and none returned until after Communist China’s 1951 invasion).
Until October 29th, 2008, Britain had continued to hold that China only had suzerainty (not sovereignty) over Tibet. David Miliband’s changed formulation, however, significantly weakens India’s bargaining position – particularly because India has never properly framed the question. Mao and Zhou en-lai asserted that Nehru’s India (with its socialist and anti-colonial pretensions) surely couldn’t base its arguments on a colonial-era treaty. But India has never properly retorted that China itself was making an imperialist argument – on the basis of claims by non-Chinese dynasties (like the Mongols and Manchus) who alone had ever claimed any suzerainty over Tibet (which had never been claimed by any Han Chinese dynasty).
Given the way India has framed the question, however, David Miliband’s gratuitous decision to retrospectively change history grievously harms India. A self-respecting nation would have immediately declared such a man persona non grata -- or at a minimum, treated him with cold disdain when next he came visiting the Indian capital. Instead, David Miliband was given a full opportunity to meet the Prime Minister and Foreign Minister (whom the 43-year-old imperial mandarin casually called “Manmohan” and “Pranab” respectively) on his January 2009 visit. It was his nonchalant manner of addressing our ageing ministers that seemed to make the news, rather than any reference to his retrospective alteration of history to India’s detriment.
Instead the latest Nehruvian prince, Rahul Gandhi, took him along to visit Amethi the following day. Insulting the ministers is perfectly alright when you are the prince’s friends after all – and the national interest be damned. The heir-apparent of the Congress-I (whose portrait adorns billboards all across the land, flanked by his mother and the prime minister – showing clearly that he is the anointed leader now) also clearly seemed utterly oblivious to the symbolism of his action. In effect, he was legitimizing Miliband’s treachery towards India by treating him like an old chum – and circumventing the ministers who, under the constitution, still make and implement our nation’s policies.
The following day, David Miliband addressed a business gathering in Mumbai, and came up with this nugget of gratuitousness: “"Resolution of the dispute over Kashmir would help deny extremists in the region one of their main calls to arms and allow Pakistani authorities to focus more effectively on tackling the threat on their western borders." In effect, he was saying in Mumbai (less than two months after the dastardly 26/11 terror strikes on the city) that India’s failure to resolve the Kashmir “dispute” was responsible for 26/11 (and perhaps even justified the attack). There was a cacophony of justifiable outrage over Miliband’s silliness.
Remarkably, however, the Congress-I scion’s Teflon-coated political career was completely unharmed: his Himalayan blunder of gratuitously befriending a man who had demonstrated he was an enemy of India was bad enough. To have circumvented and undermined the ministers of a government led by the party of which he is officially a middling member compounded Rahul Gandhi’s error. But then, for Miliband (this man who Rahul Gandhi had gratuitously befriended against his nation’s interests) to then turn around and slap India even harder the following day was truly abominable. As a nation, our inability to hold the Nehru-Gandhi family to account for its repeated faux pas of Himalayan proportions is what ultimately boggles the mind.
On March 10th, 1959, the Dalai Lama – leader of the Tibetan people, who had been under Chinese occupation since China’s invasion of Tibet in 1951 – decided to begin a dangerous journey from his Potala palace in his capital, Lhasa, to seek safety and refuge in India (Tibet’s traditional south-eastern and -western neighbour). He arrived on Indian soil by the end of that month, and the 50th anniversary of that perilous and epochal three-week journey was marked by all Tibetans around the world last month with profound sadness mixed with a growing anger.
Now is an apt time, therefore, for us Indians to pause to consider the disaster that the Nehru family has wrought in our Tibet policy -- to which the latest generation has unwittingly added another unseemly chapter recently. Communist China claims that Tibet has always been part of China, although this claim has absolutely no historical validity. It is widely known that India had been ruled by foreign dynasties for most of the thousand years until 1947, but it is less well-appreciated that almost exactly the same thing is true about China.
No Han Chinese dynasty (before the Communists) ever had even suzerainty over Tibet
Over the seventeen centuries between the fall of the Han dynasty in 220AD and the establishment of the modern Chinese republic in 1912, China was ruled by Han Chinese dynasties for just 218 years (from 618 to 755AD by the Tang dynasty, and from 1368 to 1449 by the Ming; the official period of dynastic rule for the Tang extends to 906AD, but after 755 the Tang’s political control was actually confined to just Shaanxi province; and while the Ming continued to control Beijing intermittently until 1638, the Ming emperor was taken prisoner by the Mongols in 1449, and much of western China proper was under renewed Mongol rule after 1449, with Beijing and its suburbs subjected to periodic Mongol raids that eventually paved the way for the non-Han Manchu people to conquer China in 1644 – and continue ruling it until 1911). The “China” ruled by the Tang and Ming (even during those 218 years of their most extensive control) did not encompass for a single day Tibet, Mongolia, Nei Mongol (Inner Mongolia) or East Turkestan (Xinjiang).
The Manchu were certainly not a Han Chinese dynasty, and they reminded the Chinese of this every day of their 267-year reign by insisting that all Han Chinese men shave the front of their heads and wear pony-tails as symbols of their servitude. In the first couple of centuries of Manchu rule, their court in Beijing was dominated by Mongol and Manchu noblemen, with the Han in a clearly subordinated role.
The Manchus established a form of suzerainty over Tibet, continuing a relationship established between the Mongols and Tibetans that went back almost a millennium (and the Manchus also had a similar relationship of suzerainty with East Turkestan, Mongolia and Korea). The only previous Beijing-based dynasty that had strong ties (but most likely of mutual respect rather than suzerainty) with Tibet were the Mongol (“Yuan”) dynasty, which had united much of what constitutes today’s China. But their capital (in what is today called Beijing) was called Khanbaliq, and their court-language was Mongol (rather than Mandarin Chinese).
For modern China to claim “sovereignty” over nations with which the Manchus and Mongols had a tenuous relationship of “suzerainty” (such as Korea, Tibet and Mongolia) is about as ludicrous as India seeking sovereignty over Afghanistan, Pakistan, and parts of Uzbekistan and Tajikistan because the Mughals ruled over them in the past, or Greece to claim Pakistan on the basis of the Macedonian Alexander’s rule. Tibet was invaded by Mao’s People’s Liberation Army in 1951, but Mao sought legitimacy not through military conquest alone but by bolstering his case by referring to history – and the alleged political control that “China” had traditionally enjoyed over Tibet. The simple fact is that, if China enjoyed suzerainty over Tibet because of certain rights exercised by the Manchus, India also had substantial residual rights in Tibet granted by the legitimate Tibetan government (led by the Dalai Lama of the time) to British India. The British were foreign rulers of India, but so were the Manchus a foreign dynasty ruling over China.
Nehru lets China’s invasion stand
Jawaharlal Nehru abdicated his responsibility as modern India’s first prime minister by failing to even protest (let alone take military action) to safeguard India’s interests in Tibet, and roll-back the illegitimate Chinese conquest of Tibet in 1951. When Japan marched into Manchuria in 1931, the world protested vehemently, but Mao’s China was oblivious to any protests (although there was even less historical ground for China’s claim over Tibet than for Japan in Manchuria). The virtual silence of Nehru in the face of such naked aggression, however, was especially vital to China – as India had residual rights in Tibet, deep cultural and linguistic affinity (both Tibetan and the eastern Indian languages – Bengali, Oriya, Assamese – are direct descendants of Pali, and Tibetan is completely unrelated to any Chinese language), and a religious tradition (Mahayana) that was very similar to Hinduism.
By moving the India-China border several thousand miles inland, China was able to transform Tibet from a peaceful buffer state (a la Switzerland) to a base for missiles (possibly even nuclear-tipped ones) directed at India. The US in the 1950s was keen to act in concert with India to de-legitimize the Chinese invasion, but Nehru refused to go along. The eventual consequence was the humiliating 1962 war, which was followed by China’s half-century-long strategic encirclement of India (with close Sino-Pakistan ties, attempts to cultivate the Bangladesh military, the Maoist take-over in Nepal, and the deep-seated military-cultural relationship with Burma completing the circle).
In October 2008, the foreign minister of the United Kingdom, David Miliband, quietly changed history in a manner calculated to grievously harm India’s (and especially Tibet’s) interests, and promote China’s instead. Miliband quietly changed Britain’s long-standing policy of merely recognizing China’s suzerainty over Tibet – to actually recognizing China’s sovereignty over it. This was very much in keeping with his family’s vocation: David’s father Roy Miliband was a well-known Marxist historian, so the son’s soft-spot for Communist China is understandable. What is not so understandable is the fact that India’s establishment – far from declaring him persona non grata – accorded him numerous platforms in India, which he naturally used to berate us.
Miliband’s change of nomenclature is of transformative diplomatic importance. It crucially undermines India’s stand that the McMahon Line is the legitimate border between India and Tibet (and, therefore, with China, as long as China is ruling Tibet). A treaty signed by Tibet (clearly independent of China at that time, after the ouster of the Manchu Qing dynasty in 1912) with British India at Simla in 1913 asserted that the McMahon Line would be the border between Tibet and India. A subsidiary note to this treaty recognized that China had suzerainty over Tibet, but China later refuted the treaty (thereby effectively repudiating even its rights as a suzerain, since Tibet had expelled all Chinese official representatives after 1912, and none returned until after Communist China’s 1951 invasion).
Until October 29th, 2008, Britain had continued to hold that China only had suzerainty (not sovereignty) over Tibet. David Miliband’s changed formulation, however, significantly weakens India’s bargaining position – particularly because India has never properly framed the question. Mao and Zhou en-lai asserted that Nehru’s India (with its socialist and anti-colonial pretensions) surely couldn’t base its arguments on a colonial-era treaty. But India has never properly retorted that China itself was making an imperialist argument – on the basis of claims by non-Chinese dynasties (like the Mongols and Manchus) who alone had ever claimed any suzerainty over Tibet (which had never been claimed by any Han Chinese dynasty).
Given the way India has framed the question, however, David Miliband’s gratuitous decision to retrospectively change history grievously harms India. A self-respecting nation would have immediately declared such a man persona non grata -- or at a minimum, treated him with cold disdain when next he came visiting the Indian capital. Instead, David Miliband was given a full opportunity to meet the Prime Minister and Foreign Minister (whom the 43-year-old imperial mandarin casually called “Manmohan” and “Pranab” respectively) on his January 2009 visit. It was his nonchalant manner of addressing our ageing ministers that seemed to make the news, rather than any reference to his retrospective alteration of history to India’s detriment.
Instead the latest Nehruvian prince, Rahul Gandhi, took him along to visit Amethi the following day. Insulting the ministers is perfectly alright when you are the prince’s friends after all – and the national interest be damned. The heir-apparent of the Congress-I (whose portrait adorns billboards all across the land, flanked by his mother and the prime minister – showing clearly that he is the anointed leader now) also clearly seemed utterly oblivious to the symbolism of his action. In effect, he was legitimizing Miliband’s treachery towards India by treating him like an old chum – and circumventing the ministers who, under the constitution, still make and implement our nation’s policies.
The following day, David Miliband addressed a business gathering in Mumbai, and came up with this nugget of gratuitousness: “"Resolution of the dispute over Kashmir would help deny extremists in the region one of their main calls to arms and allow Pakistani authorities to focus more effectively on tackling the threat on their western borders." In effect, he was saying in Mumbai (less than two months after the dastardly 26/11 terror strikes on the city) that India’s failure to resolve the Kashmir “dispute” was responsible for 26/11 (and perhaps even justified the attack). There was a cacophony of justifiable outrage over Miliband’s silliness.
Remarkably, however, the Congress-I scion’s Teflon-coated political career was completely unharmed: his Himalayan blunder of gratuitously befriending a man who had demonstrated he was an enemy of India was bad enough. To have circumvented and undermined the ministers of a government led by the party of which he is officially a middling member compounded Rahul Gandhi’s error. But then, for Miliband (this man who Rahul Gandhi had gratuitously befriended against his nation’s interests) to then turn around and slap India even harder the following day was truly abominable. As a nation, our inability to hold the Nehru-Gandhi family to account for its repeated faux pas of Himalayan proportions is what ultimately boggles the mind.
Statement of Intent
As India goes to the polls to elect its 15th Lok Sabha, we are again confronted with a slew of political parties making wildly irresponsible fiscal promises, with atleast a third of all candidates having criminal records, and with a quality of discourse that is a disgrace to the high ideals that animated those who brought us our Independence 62 years ago.
This site is aimed at becoming the first building-block for an alternative political party committed to the high ideals of our struggle for freedom, and to the common-sense economic reforms that will unleash the untapped potential of India's people.
A note on the name: I have chosen to call this party "Subhashbadi Swatantriya Dal" to signify the twin aims of an unshakeable commitment to India's security in determining the nature of our foreign relations ("Subhashbadi"), and liberalism (minimal government intervention and rent-seeking) in economic policy ("Swatantriya"). In other words, the party will be animated by the spirit of Netaji Subhas Chandra Bose in foreign relations and internal security, and the ideals of Rajaji Chakravarti Rajagopalachari in economic policy.
To me, Netaji Subhas Chandra Bose represents the highest ideal of patriotism in our Independence struggle. By creating the Indian National Army (INA) from among 30,000 PoWs of the British Indian Army and atleast another 40,000 volunteer patriots from Malaysia, Singapore, Burma, Thailand and Indonesia, he dealt the fundamental death blow that ended the British Empire. When the INA took control of Nagaland, parts of Manipur and the Andaman & Nicobar (Swaraj & Shaheed) islands in April-May 1944, the flag of free India was first planted in our nation by the Arzi Hukumat-e Azad Hind. Although subsequently defeated in Imphal and forced to retreat across Burma to Thailand, the INA won the peace: the INA trials from November 1945 to February 16th 1946 set off a nationalist upsurge (reinvigorating the Congress party that had been moribund since the crushing of the Quit India movement by February 1943, and uniting it in a national cause with the Muslim League) that culminated in the Royal Indian Navy (RIN) mutiny -- which began on February 18th 1946, and encompassed 88 of the 98 ships of the RIN. This first mutiny of the British Indian armed forces since 1857-8 soon spread to half of the Royal Indian Air Force, and the Jabalpore and Madras regiments of the Indian army -- leading Auchinleck and Wavell to inform Attlee by the end of February 1946 that it would be impossible to hold onto India as the loyalty of the sword arm of Empire was no longer clear. Churchill had promised another thousand years of Empire in 1942, and the British had no intention of "transferring" power to India. It was the INA (created by Netaji Subhas) that fundamentally weakened the British hold on India's armed forces (and their implicit loyalty to the Raj), as acknowledged in a book by the former British spy Hugh Toye in 1958. This is one of the untold stories of our freedom movement. We in the Subhashbadi Swatantriya Dal will never forget: we will stay committed to doing whatever is necessary to always secure India's internal and external security. Subhashbadi patriotism is our first pledge.
Rajaji's Swatantra Party laid out an alternative vision of a liberal economic order in the 1950s that, unfortunately, has been forgotten by our political class in the last three decades. "Socialism" under the Nehru/Gandhi dynasty basically amounted to policies that ossified our social structure, by blocking all routes to upward (or downward!) mobility, while also increasing opportunities for rent-seeking on a grand scale by those who participated in politics and milked the mammaries of the licence-control-quota raj. While licenses and quotas have been partly dismantled under pressure since 1991, our national discourse remains coloured by a commitment to a Socialism that debilitates us. Labour-market rigidities protect a tiny "labour aristocracy" (of less than a tenth of our work-force) with the full panoply of late-1940s legislation akin to Old Labourite Britain -- while keeping nine-tenths of our people from gaining the higher-productivity jobs in labour-intensive industry that have lifted millions from poverty in every developing society since the Industrial Revolution (from Britain to America to Germany to Japan, Korea, Singapore and China). Rajaji and the Swatantra Party were a forlorn voice in the wilderness excoriating the stupidity of the Nehru/Mahalanobis model that destroyed the textile and other labour-intensive industries that could have been the quickest ticket out of poverty for Indians in the 1950s. Before the Luddite vision of perpetual "Reservations" of jobs in stagnant government companies eats further into the vitals of the private-sector-driven Indian economic miracle, we need a re-assertion of the efficacy of the Swatantra Party's brilliant insight: that entrepreneurship was India's genius, and must be unleashed if India is to prosper anew. The Subhashbadi Swatantriya Dal will be unswerving in its commitment to unshackling the entrepreneurial drive of all our people, from farmers to share-croppers, mazdoors to banias, businessmen, bankers, scientists, leaders, managers. Let India's genius flourish anew!
This site is aimed at becoming the first building-block for an alternative political party committed to the high ideals of our struggle for freedom, and to the common-sense economic reforms that will unleash the untapped potential of India's people.
A note on the name: I have chosen to call this party "Subhashbadi Swatantriya Dal" to signify the twin aims of an unshakeable commitment to India's security in determining the nature of our foreign relations ("Subhashbadi"), and liberalism (minimal government intervention and rent-seeking) in economic policy ("Swatantriya"). In other words, the party will be animated by the spirit of Netaji Subhas Chandra Bose in foreign relations and internal security, and the ideals of Rajaji Chakravarti Rajagopalachari in economic policy.
To me, Netaji Subhas Chandra Bose represents the highest ideal of patriotism in our Independence struggle. By creating the Indian National Army (INA) from among 30,000 PoWs of the British Indian Army and atleast another 40,000 volunteer patriots from Malaysia, Singapore, Burma, Thailand and Indonesia, he dealt the fundamental death blow that ended the British Empire. When the INA took control of Nagaland, parts of Manipur and the Andaman & Nicobar (Swaraj & Shaheed) islands in April-May 1944, the flag of free India was first planted in our nation by the Arzi Hukumat-e Azad Hind. Although subsequently defeated in Imphal and forced to retreat across Burma to Thailand, the INA won the peace: the INA trials from November 1945 to February 16th 1946 set off a nationalist upsurge (reinvigorating the Congress party that had been moribund since the crushing of the Quit India movement by February 1943, and uniting it in a national cause with the Muslim League) that culminated in the Royal Indian Navy (RIN) mutiny -- which began on February 18th 1946, and encompassed 88 of the 98 ships of the RIN. This first mutiny of the British Indian armed forces since 1857-8 soon spread to half of the Royal Indian Air Force, and the Jabalpore and Madras regiments of the Indian army -- leading Auchinleck and Wavell to inform Attlee by the end of February 1946 that it would be impossible to hold onto India as the loyalty of the sword arm of Empire was no longer clear. Churchill had promised another thousand years of Empire in 1942, and the British had no intention of "transferring" power to India. It was the INA (created by Netaji Subhas) that fundamentally weakened the British hold on India's armed forces (and their implicit loyalty to the Raj), as acknowledged in a book by the former British spy Hugh Toye in 1958. This is one of the untold stories of our freedom movement. We in the Subhashbadi Swatantriya Dal will never forget: we will stay committed to doing whatever is necessary to always secure India's internal and external security. Subhashbadi patriotism is our first pledge.
Rajaji's Swatantra Party laid out an alternative vision of a liberal economic order in the 1950s that, unfortunately, has been forgotten by our political class in the last three decades. "Socialism" under the Nehru/Gandhi dynasty basically amounted to policies that ossified our social structure, by blocking all routes to upward (or downward!) mobility, while also increasing opportunities for rent-seeking on a grand scale by those who participated in politics and milked the mammaries of the licence-control-quota raj. While licenses and quotas have been partly dismantled under pressure since 1991, our national discourse remains coloured by a commitment to a Socialism that debilitates us. Labour-market rigidities protect a tiny "labour aristocracy" (of less than a tenth of our work-force) with the full panoply of late-1940s legislation akin to Old Labourite Britain -- while keeping nine-tenths of our people from gaining the higher-productivity jobs in labour-intensive industry that have lifted millions from poverty in every developing society since the Industrial Revolution (from Britain to America to Germany to Japan, Korea, Singapore and China). Rajaji and the Swatantra Party were a forlorn voice in the wilderness excoriating the stupidity of the Nehru/Mahalanobis model that destroyed the textile and other labour-intensive industries that could have been the quickest ticket out of poverty for Indians in the 1950s. Before the Luddite vision of perpetual "Reservations" of jobs in stagnant government companies eats further into the vitals of the private-sector-driven Indian economic miracle, we need a re-assertion of the efficacy of the Swatantra Party's brilliant insight: that entrepreneurship was India's genius, and must be unleashed if India is to prosper anew. The Subhashbadi Swatantriya Dal will be unswerving in its commitment to unshackling the entrepreneurial drive of all our people, from farmers to share-croppers, mazdoors to banias, businessmen, bankers, scientists, leaders, managers. Let India's genius flourish anew!
Subscribe to:
Posts (Atom)
