Indian politics in the past two decades has been dominated by the Congress on the left and the Bharatiya Janata Party on the right - no different a configuration than one in Britain or America. The difference is the favours done to supporters: the Congress bribes poor voters with jobs and cheap foodgrains, while the BJP favours particular businessmen. This column on the theme was published in Business Standard of 13 March 2001.
Achtung, meine Landsmänner!
That is right; my countrymen, you are warned. Before
your eyes, the Bharatiya Janata Party and its allies are building a corporatist
state. A corporatist state is one that a set of rulers and industrialists run
together. Korea and Taiwan were corporatist states from the end of World War II
till the 1980s. So were fascist Italy and Nazi Germany. Do not seek parallels
between Syngman Rhee and Atal Behari Vajpayee, or L K Advani and Hermann
Göring, because there are none. I do not mean that the mental make-up of our
present rulers has any similarity to that of previous corporatist rulers; but
the system they are erecting has a similar structure and will behave in the
same way. Nor do I mean that our rulers will engulf us in anything as
disastrous as the World War – or bring us a dream run of economic growth like
their Korean or Taiwanese counterparts. But the capacity a democracy has of learning
from its own mistakes, of changing course when circumstances dictate it, is
being lost; and that loss will hurt us badly in the long run.
It happened once before in this country. Very
rapidly, in a space of three years from 1956 to 1959, the Congress under Nehru
created a straitjacket which held India back for 30 years. Equally surely, the
BJP is creating a straitjacket which will serve India ill for the next 30: it
too will keep India poor. Again, do not look for literal parallels. Vajpayee is
not a Nehru, nor is Advani a Patel. But the system they are putting in place
will thwart India’s genius just when an incipient liberalization was beginning
to give it a chance.
If you do not believe me, consider the following:
1. Read Admiral Vishnu
Bhagwat’s book. Read about Rear-Admiral Harinder Singh’s insubordination, and
how the defence minister, George Fernandes, protected and encouraged him. What
was the main charge against Harinder Singh? That he made and maintained
contacts with two persons who had left the Indian navy and settled down in
Moscow, and that these persons were agents in the sale of Russian equipment to
India. Fernandes went to the cabinet and got Bhagwat dismissed, in the name of
the supremacy of elected leaders over the armed forces. But it could equally
have been the supremacy of commission-takers over professional soldiers.
2. Read E A S Sarma’s interview
with Outlook, particularly his
allegation that big industrialists bend the government to their will through
Prime Minister’s Office. This is not fiction; I have myself heard
industrialists tell foreigners that if they have a problem, all they have to do
is to ring up the PMO. To them it seems that at last a pro-active PMO is making
an intransigent government move. But equally, it matters who the industrialists
are. EAS says they are Ambanis, Ruias and Hindujas: what he does not say is
that they are not Sundaram of Coimbatore, Akbar Ahmed of Bhiwandi or Gurwinder
Singh of Bhatinda. If the energies of the entire entrepreneurial class are to
be mobilized, the government must give equal encouragement to all; influence
must not go to those that have access. This is the point of laissez faire: that
if the government does not have power to discriminate, it cannot favour one
industrialist against another. And this government blatantly favours one
against another. Big industrialists – whether they produce steel, software or
fibres – have privileged access to the rulers; their customers do not.
Industrialists who belong to the Hindu joint family, whether rice millers or
ginners, are favoured. That is the crux
of corporatism.
3. E A Sarma thinks he was
removed because he did not favour those industrialists whom the PMO did. Maybe
he was wrong not to do so; maybe they deserved to get what they wanted. But he
was one of 14 that were transferred that day. The finance minister is on his
fourth team of bureaucrats in three years; the changeovers have been even
faster in other ministries. Who transfers these bureaucrats? A cabinet
committee of ministers. Why? Because every minister wants a pliable secretary.
And what does a pliable secretary do? He bends rules. A government of frequent
transfers is a government without rules; and without rules one cannot have
equal treatment of all before the law, which is the cornerstone of justice.
4. Why do rulers want pliable
secretaries? What rules do they want bent? Take the instance EAS gave: central
government guarantees for the Hindujas’ power plant. In other words, the
Hindujas want a guarantee that if they sell power to state electricity boards
and do not pay, the centre will pay the Hindujas enough to make a 16 per cent
return on whatever capital they invest in the plant. One of the sources of
their capital is likely to be government financial institutions like the
Industrial Development Bank of India; it will lend them money at something
below 16 per cent – say, 15 per cent. If it does not, they will go to EAS’s
current equivalent in the finance ministry and ask him to phone the chairman of
IDBI. If they borrow Rs 100 billion from IDBI, even at a 1 per cent spread they
will make Rs 1 billion a year without doing anything. Rules would not prevent
that, but bending rules is necessary for selective distribution of windfalls.
5. Of the games of mutual
benefit that industrialists and rulers are playing, the most pernicious is the
tariff game. Lobby after lobby has gone to the rulers in the past three years
and persuaded it to levy high import duties. The excuse fed to the people,
through the press, is “dumping”; but the evidence of dumping, that the goods
are being sold to India at a lower price than in their own country, is never
there. Often even dumping is not alleged; just the fact that the imports are
cheaper than the prices charged by Indian industrialists is enough. What is
left unsaid is that the favours showered upon industrialists lead to a
reciprocal shower of largesse on the rulers.
So much for the facts that you can see for
yourselves. What will be the end-result? The bulk of industry, protected by
high tariffs, will become quite incapable of exporting. Rampant protection from
the 1950s onwards shrank India’s export base to a handful of products –
textiles, gems, fish. The small export base meant that India could not sell
abroad or afford goods that were cheaper abroad; that was the road to poverty.
Now the export base will shrink to software, with the same result. With this
exception: that the only asset on which software exports are based, namely
engineers, are highly mobile and sought the world over. As they get depressed
living in the land of Bal Thackeray, Murli Manohar Joshi and Sushma Swaraj,
they will fly away, and we will not have even the software exports to live on.
The solution? License software engineers: only admit
those who have been to an RSS shakha for 30 years, who can write hymns to
Saraswati in Sanskrit and who certify that they have never watched Fashion TV.
