It was Prime Minister Modi’s slogan of “Minimum Government and Maximum Governance” that got the Indian business community excited in the early years of the BJP rule after the 2014 general elections. They fancied this government to finally tear down the wall of state socialism that had frustrated the energies of private enterprise throughout India’s independent history. There was a sense of urgency on the part of the government to open the floodgates of private capital, minimise bureaucratic control and allow the currents of global finance to wash up on the Indian shores. It was seen as a government that was willing to relinquish control and reign in the bureaucracy to pave way for a completely liberalised economy—thus resuming the project of the early 1990s when India for the first time introduced the LPG (Liberalisation, Privatisation and Globalisation) reforms in response to her foreign exchange crisis.
However, these hopes were soon to be belied. Rather than pulling back government control, the state has further extended its beacons deeper into India’s socio-economic landscape. Much of this has been on account of the widespread unrest due to India’s cultural politics that necessitates empowerment of the police and administrative structures. Tax laws such as the GST symbolised the country’s increasingly centripetal tendencies and snap government decisions like demonetisation of old currency bills sent shockwaves throughout the economy. Business abhors both rigid tax regimes and economic unpredictability!
Today’s free-market global economy is an extremely competitive space, and presents a zero-sum game to its participants. India’s own historical experience is that of being on the receiving end of the vigorous and exploitative colonial forces that were essentially a spillover of private enterprise in Europe. It is worth remembering that the country’s original colonisers were private companies like the British East India Company, rather than any European government.
In fact, private enterprise has been the main propellent of progress (and dominance) since the Industrial Revolution in the West, and is now exhorting human societies to take the next leap into the future. For instance, the excitement of the space age that had dampened due to its mammoth costs and little tangible returns, has now been rekindled not by government agencies like NASA, but private corporations like SpaceX and Virgin Galactic.
State socialism has created massive sinkholes in the Indian economy that continue to devour its national wealth with characteristic inefficiency, corruption and red-tapism. Hollowed out government departments of education, healthcare and public works, are struggling to find relevance by cooking up statistics, and have instead become a serious burden on the exchequer. These issues emanate due to the absence of a competitive culture and the lack of incentive to strive towards excellence in the government sector.
There is little doubt that government is striving hard to channelise the energies of its private sector. The problem is that it wants to create the storm of free-market economy within the teacup of its government control. This is akin to pulling a wagon with two engines facing opposite directions. Many Indian professionals whose efforts would otherwise have been frustrated by India’s socialist relics are doing exceedingly well in the US and Europe. Many of them have in the last few decades made their mark as business leaders across those industries that are now reshaping our world.
The Artificial System of State Socialism
Human society is a superstructure established on the foundations of the natural world and therefore reflects the tendencies of the natural order. A sharp departure from the natural order will result in mutual conflict, causing damage to both humans as well as nature itself. Open competition is one of the most fundamental laws of the natural world as organisms across the biosphere engage in a perpetual struggle for existence. They do so on the basis of their genetic or anatomical features that help them adapt to their dynamic habitat or ecosystem.
Free-market economy is perfectly in line with this spirit of natural competition. State socialism on the other hand is an artificial mechanism to curb the universal tendencies of open competition at the pretext of benevolence and welfare. Rather than urging individuals to explore their full potential in the free-market setup, state socialism stunts their evolution and reduces them to eternal economic infants who are dependent on the state, even for their most basic needs.
Secondly, in terms of pricing, the free-market follows a penalty-like approach for commodities, say fossil fuels and minerals. As these commodities deplete, prices are automatically raised to penalise the consumers and keep a check on their consumption. However, state socialism with instruments like subsidies, removes this natural curb and encourages rampant consumption and degradation of environmental assets. Subsidising food grains, education and healthcare, supports human populations to artificially inflated levels that are beyond the real carrying capacity of a nation. No wonder, countries like China and India have long been struggling with the problem of population explosion and consequential challenges like low standard of living, poverty, disease and lack of sanitation.
India’s Education and Job Culture
Division of labour and work specialisation are the foundational values of a market-driven economy. Most of the value in such economies is created as a result of exchange amongst specialised individuals or institutions. However, in India the ‘generalist’ bureaucratic and clerical workforce continues to dominate the society. Rather than pursuing research or gaining specialisation in their respective fields, college graduates are motivated to spend years studying for general examinations for these government positions. For the youth, they offer a permanent risk-free employment, stable income and a convenient working life. But from the economic point of view, these youth can at best operate as good regulators within their professional strait-jacket, and are unable to offer pathbreaking excellence and innovation in any particular area of national life. On the contrary they are seen as the biggest roadblock to progress and have even exacerbated the problem of corruption in the country.
This educational culture is an extension of the socialist outlook and is a poor fit for a market-driven economy which demands technical expertise, innovation and work specialisation. Human feats of extraordinary greatness call for the outgoing adventure of enterprise, rather than the blanket of risk-free employment.
Looking Ahead
India’s socialist reluctance is the final barrier to its next level transformation towards a free-market economy. Socialism is full of inherent contradictions that lead to the implosion of a society, as has already been learnt from the Soviet experience. Besides, in the zero-sum competitive scenario of the global economy, an inefficient socio-economic system could once again be exploited by the aggressive market forces, much on the lines of the colonial era. An economy designed on the principles of free-market will be able to better resist and even amalgamate with the forces of the global economy.
Many economists are however apprehensive of the emergence of crony capitalism or monopoly in a fully privatised setup. Opening up the national borders to foreign investment will help keep a check on such tendencies, and easy flow of capital and labour will further integrate the country with the global economy. Nationalism and ethnocentrism must not be allowed to become a roadblock on this journey towards a better future. The only way forward is to shed the socialist shackles, fully embrace the winds of the global free-market, and proactively move towards the next level of national transformation.
[Photo by Soubhagya Maharana from Pexels]
The views and opinions expressed in this article are those of the author.
