Indian capitalism to grow faster!
It is market, market and more markets! This is the new economic mantra. Now modern day capitalism is so different from what we know from the past. Capitalism in a democracy! Even the MNCs have to function under democratic laws and regulations. In India, at the level of the common man there are yet much misconceptions about what capitalism means.This must change.
Capitalism is about market-driven economics. Economics is a powerful discipline. The birth of modern economics, why even the very idea of modern capitalism can be traced to Adam Smith’s famous Wealth of Nations. There is the maxim of private capitalism as set out in the book. “It is not the benevolence of the butcher or the baker, your meals are served : it is because of their self-interest”.
How insightful! Yes, everyone of us, as economic persons, we are driven by our self-interest, our selfishness, even, as Lord Keynes famously said, by our avarice, the economic drive originates. Mr.Arun Shourie, the Union Minister for Disinvestment, claims that India’s economic reform policies had encouraged market competition and the success in the market place is what marks India’s new economic dynamism. 44 Indian companies in the last few months acquired business abroad with an investment of 2 billion dollars. It is market, market and more markets! This is the new economic mantra. After having been brought up in the Nehru era of a planned economy, it is rather a new experience, a thrilling experience with the IT industries becoming India’s first global-level companies. Today, in Russia, the economy is controlled, owned by some 25 individuals who are called oligarhs. Two are most powerful, one lives in exile, another in jail because he funded political parties that contested against Putin. This is not strictly capitalism!
In China, after nearly 55 years of so much ideological postures, the latest Chinese Congress met for 10 days (in 2004) and amended the Constitution and made private property legal, owning private property earned through legal means as legally right. Also they added human rights as a basic right. But Russia and China are different societies. Their democracy, while in Russia a bit better, in China it is one party rule. Today’s economic growth is market-driven. Yes, this is the critical importance in modern economy. Market is a complicated world, it is an independent force altogether!
So, what is the market forces? Today the stock exchanges are so huge that when you have a company and want to raise funds, it is done in five minutes! When two companies, one private and one public (ONGC) went to the stock exchange, the stocks were subscribed within five minutes! Yes, there is so much investment funds floating all over the world! While Capitalism is now openly praised, there are also critics who see globalisation leading up to displacement of the poor, people in their traditional occupations, in farming and small scale sectors.
Capitalism today has taken many new dimensions. Globalisation is a new development. So too the international capital movements and the opening up of markets, WTO and much else. Free market mechanism also presupposes market regulation by sovereign government. There are market regulators, SEBI in India, to keep a watch on irregularities; free markets give opportunities for “market manipulators”. Even the governments as in the case of Disinvestment Ministry in the ONGC disinvestment! Stock market scandals is one side of a free market economy but stock markets are critical institutions to keep the market hot always! Market capitalism creates wealth and also inequality!
There are academic studies, IMF’s former deputy chief presented the findings to the American Economic Association in 2003, to show that the economic inequality among the people of India and China reduced during the 20 years of free market economy and the so-called “Global Capitalism”. (The Economist, March 13th, 2004). Indians must learn to think for themselves! We shouldn’t take the American view or the British view seriously! America only wants market for its goods and services. Because of the global capitalism, USA is losing jobs through “outsourcing” phenomenon, also an American innovation! But because it loses IT jobs to India, it has developed a paranoia about India. But India must learn to live with this global competition. UK is an undependable ally! Its colonial hangover would colour its view of India as a global player. However, UK is adjusting to accept Indian goods, Tatas sell their Indica in UK well and outsourcing is now accepted, though grudgingly! A 20-page survey on business in China, The Economist magazine (March 20th, 2004) has summed up China’s capitalism thus: “China’s developing capitalism is not solidly based on law, respect for property rights and free markets. It is unbalanced and potentially unstable… the business climate in China remains capricious and often corrupt”. The survey was done with extensive consultation with experts. There is much corruption in China. We find that most of the new rich entrepreneurs are in their 40s and many are dubbed as corrupt!
They may face jail terms or worse for corruptions and unpaid taxes. Much of the China’s new rich look like our politicians and criminals here, the new welath is earned in a tainted way! So, while Indian capitalism can claim more credibility than the Chinese, our new rich, at least among the businessmen, might have earned their wealth through legal means, while only a fraction of our new rich are the political types who gave Indian corruption wide publicity.
I see a Western bias against India being a democracy as well as a very strong liberalising economy based on well-defined laws and proving a competitor to the US high tech IT firms. This has earned India as much admiration as much jealousy! So, we don’t get the much favourable reporting as China gets! This is more out of fear of China’s unpredictability and as for India’s much known positions on international issues! What an irony!