Political, historical and technological factors. International scenario. These only help or hinder the economic progress of a nation. We need a more openly-debated economic policy too! Now, policy is drawn up by faceless bureaucrats and pro-establishment experts. There is no feedback from the grass roots. The minds of the people are not freed. They are more fed by outdated policies.
There is a superficial belief that Dr.Manmohan Singh is an economic expert. He is! Also there is this belief that economic experts can promote econmic growth. This belief is not proved. More so now, under Manmohan Singh.
A writer in the London Financial Times writes of the atmosphere in Delhi thus: “Despite the fact that India’s president and prime minister are among the most well-intentioned of the political class anywhere, there is a fin de siecle, “let them eat cake” quality that hangs over Lutyen’s/License Raj Delhi still”. Bureaucrats, diplomats openly refuse to talk of problems but only talk of the best of India, says the same writer. In plain language, there is this unbridgeable growing gulf between the rulers and the ruled. That is a grim reality of politics in India to day.
Economists can explain some economic factors. But to bring about the economic progress we need bold leaders, visionaries, leaders with peoples mandate. Even here we can see China is different from Russia. China is fast growing. Russia is struggling. India is progressing ,no doubt. But it is not doing things as it should. In a sense, a light-weight Prime Minister is a handicap. Any leader must believe in some visionary set of beliefs.
Socialism for too long? Yes, it looks like that. Bureaucracy-driven economic management? Yes, we have been doing it, more slowly now! Entrepreneurs, those who made it ,did so because of various negative causes. We don’t openly ask people to become entrepreneurs. Our Delhi-officialdom is IT-illiterate! So, whatever had happened in IT revolution took place without anyone in Delhi knowing it happening! Communism is out. Socialism is not. Capitalism is an economic growth model that is now universally accepted. But a vision is what is missing in today’s India. Even such mature countries like France, Germany and Spain stand by openly a Socialist, democratic government. Those who don’t want to be seen as too doctrinaire or too pro-American cant but admire how France stands out as a uniquely independent country with independent foreign policy perspectives. The French President ,Jacques Chirac, now as President for 10 years talks and articulates boldly, as Centre-Left, France has a large public sector, a sensitive working class trade unionism, very much like India. Yet, the country is seen as a technological leader in some sectors. Its economic growth, like all economic growths in other developed countries is poor, though France is seen as a civilized society caring much for Third World poverty and taking many initiatives.
Here we see in India we have a Prime Minister who is seen as quite weak and ineffective to lead the country and accelerate growth by some bold initiatives. Even Vajpayee, his immediate predecessor, is seen more as a visionary and bold initiator of development projects like National Highways Authority. It will remain as NDA’s showpiece development initiative. Under Manmohan Singh, all the UPA, after one year had achieved is to fight back the NDA ministers like George Fernandes and Arun Shourie, perhaps two of the most successful Ministers. In contrast, the UPA is seen as clueless to development initiatives.
One of the disabilities of the economics discipline is that while it has given us some of the brilliant minds, economists as a set of people have never gone about promoting economic growth. Economic growth in the sense of helping to create wealth. Wealth of the Nations is the first and still the best description of economics, its theory and since them how the practitioners of economics had gone about interpreting the field of economic activities. The major reason why economists didn’t help to produce wealth can be explained in terms of how the art and science of economics developed in the major countries where this particular discipline took some shape and maturity. British economists Indians know more about. What Indians, I think, don’t know much or as much as they should and the time has come to know this side of the development of economics is the fact that wherever the economies grew to some maturity there also grew the science and art of interpreting this economic growth. Thus, outside the UK and USA, the great growth of the economies took place under the Austro-Hungarian monarchy, in the Nordic countries of Sweden and Norway and of course Germany, there have also grown the science and art of economics. We have had great Swedish economists, the one popularly known is Gunner Myrdal, the author of Asian Drama and who also won a Nobel Prize for economics. The first winner is of course the legendary Afred Von Hayek, the finest flower of the Austro-Hungarian school of economics. The author of the Road to Serfdom, The Constitution of Liberty etc. Hayek had this unique claim for a prominent place in the history of economics : he held to his firm basic beliefs that no economic growth can take place under any control or state planning as it came to be known under Communism. Market is the very heart and soul of economics. It is market, the free market that only can decide and promote the economic “values”, the (unhindered) price mechanism only can create the “economic value” of any activity etc. I am putting things rather crudely, I know. My purpose here is to convey to the general readers what economics is all about. So, Hayek was attacked (rather mercilessly) and almost “boycotted” by the rather, as we can say now, the” fashions” of economics of the day. Though he lived for long in England, recognition to his theories didnt come in his prime. But the fact remains, he lived to see his theories succeed before his own eyes! Communism collapsed, after 70 long years! He got the first Nobel Prize for economics when it was instituted, rather morally it was his own claim, when we look at the long sweep of the history of economics. The blood and tears that the fashionable Marxist, Leninist and Stalinist interpretations of economics all went on to face a sudden collapse. I was the other day surprised to see a big tome on “Leninism”. As I turned the page inside I found the author was none other than the great dictator, Stalin himself! Readers should note that the recently held CPI(M) Congress in Delhi that elected the next generation leaders, Prakash Karat as the new General Secretary and others, prominently displayed a portrait of Stalin on the dais! While in his own country he is reviled! The visiting Chinese Prime Minister didnt mention in India the name of Mao, while he pronounced prominently the capitalist path promotor and leader ,Deng! The irony is that while professional economic experts talk of exotic theories, the respective politicians in their countries talk of totally different economic beliefs.
In India too we see so many ironies and so many distortions. Gandhi talked an economics that don’t find any takers today. Nehru talked of a socialist planned economy that still is strong in India with all our PSUs in place and also contributing to wealth creation and giving Indian economy a self-reliant and self-sustaining strength and vibrancy. It is nice to see foreign observers who now hail India’s new strengths in IT and biotech and also the new believers of private sector economic growth, choose however conveniently forget the public sector base of most of our economic strengths. Our basic infrastructure, iron and steel, oil and natural gas, power, the many PSU labs, not to speak of the science-driven Green Revolution had all given the current Indian economic boom the needed foundations.
The social sector, education, the many rights enshrined in our Constitution, our vigorous judiciary at the higher levels, even in a significant sense, our Parliamentary democracy, with all its current inner tensions, have all added to the economic momentum.
Yes, economic growth of nations is very much conditioned by the political system that prevails. Every one ,more so the businessmen and the visiting experts, talk of China’s economic fast-paced growth. I remain unimpressed. There is no democracy in China, no private entrepreneurship, as we have in India. Unless the common man is a free citizen to participate in the economic activity and to benefit from that, there is no basically sustainable economic growth possible.
That is why American economic engine is very much the economic engine of the world. Economoic growth takes place both in the short and the long-run. The short run is all what most of us are talking about when we talk of economoic growth or wealth creation or investments, FDI flows etc.
Technological innovations is one key element in economic growth and wealth creation. In the olden days economists used to talk of business cycles. The great German/Austrian economist Joseph Schumpeter came near to capturing the very essentials of economic growth when he talked of Capitalism, Socialism and Democracy. Now business cycles is forgotten as most of the time the State is very much a partner with private sector economic growth. This was partly owing to the great economist, Lord Keynes. There is no state that doesn’t “intervene” in economic activity.
In the long run, it is not just economic factors, some historic factors also contribute to the growth and prosperity (and on the contrary to the decline) of economies.
The world for the last 600 years was dominated by Western economies. Starting from the Portuguese discovering the trade route to India. Since then it was, in the inimitable phrase of a book title by the late K.M.Panikkar “Asia and the Western Dominance” all the modern history! International trade today is dominated by the US economic interests. WTO could do little, if at all. Six hundred years ago, China and India (Asia) accounted for 75 per cent of the global GDP. Europe was insignificant. America still lay undiscovered! It was technology, a new technology discovered by the Portuguese Prince Henry the Navigator, superior ships and nautical technology that opened the sea routes and thereby the trade routes as well. The sea roues overcame the then obstacles of the overland caravan tracks controlled by Arab/Venetian “international” commerce. At the dawn of the 20th century, Europe and the USA controlled the bulk of the world GDP! That is history of economics for you!
Now we talk of globalisation and much else. IT had changed India’s face in the new century. It is again the Americanisation of globalisation! Vasco da Gama in 1497. Mao Zedong died in 1976. Communist collapse in 1989. China was already under Deng Xiaoping overtaking Russia in economic growth. 1989 brought out 500 million former Communist countries to the Capitalist economic development path.