Crisis opportunity for India to build on economic gains

It would be tragic if recent events led Indians to think that earlier regime of economic nationalism was the best

The recent convulsions in the international financial markets have provoked an unseemly amount of gloating on the part of many in the developing world.

That Fidel Castro and Mohammed Ahmadinejad should pronounce themselves vindicated by the crisis in global capitalism is hardly surprising, since capitalism has over the years been so strongly identified with America that both see the problem through the lens of their own anti-Americanism.

A worrying number of people in India, though, are saying similar things. “See, we were right in opposing all this liberalisation,” one told me, stressing that India’s previously over-regulated system had saved it from a similar fate much earlier. Another approvingly quoted right-wing rants in the US about the dawning of a ‘Socialist Republic of America’ and added, “We should nationalise the banks again - after all, even the
Americans and Brits are doing it!”

They are wrong, but there’s a real danger that India’s political classes could find themselves persuaded by this lapse into historical amnesia.

In India, the debate between capitalist globalisation and self-reliance required a huge paradigm shift. Whereas, in the West, most people axiomatically associate capitalism with freedom, India’s nationalists associated capitalism with slavery - because the British East India Company had come to trade and stayed on to rule.

So from 1947, our nationalist leaders were suspicious of every foreigner with a briefcase, seeing him as the thin edge of a neoimperial wedge.

Instead of integrating India into the global capitalist system, as only a few developing countries like Singapore so effectively were to do, India’s leaders were convinced that the political independence they had fought for could only be guaranteed through economic independence.

Self-reliance became the slogan, the protectionist barriers went up and India spent 45 years with bureaucrats rather than businessmen on the ‘commanding heights’ of our economy, wasting the first four and a half decades after independence in subsidising unproductively, regulating stagnation and trying to distribute poverty.

For decades, the theory of development economics had suffered from two intertwined historical circumstances — the experience of the Great Depression in the 1930s, when only robust government intervention saved a number of economies, and the fight for freedom from colonial rule, which involved the overthrow of both foreign rulers and foreign capitalists (though few nationalists could tell the difference).

It is sadly impossible to quantify the economic losses inflicted on India over four decades of entrepreneurs frittering away their energies in queuing for licences rather than manufacturing products, paying bribes instead of hiring workers, wooing politicians instead of understanding consumers and “getting things done” through bureaucrats rather than doing things for themselves.

The disastrous inefficiencies of the system were masked by subsidies from the national exchequer and a combination of vested interests — socialist ideologues, political opportunists, bureaucratic managers, self-protective trade unions and captive markets — shielded it fiercely from economic reality, as millions of Indians languished in poverty.
The current financial crisis, far from prompting a retreat, is an opportunity to safeguard those gains and to build on them. For more than four decades India suffered from the economics of nationalism, which equated political independence with economic self-sufficiency and so relegated us to chronic poverty and mediocrity.

Let us not condemn Indians again to repeating the mistakes of that unlamented past. IHT

(Shashi Tharoor, chairman of Dubai-based Afras Ventures and former undersecretary-general of the United Nations)