Question: Lots of articles about India recently in the NY Times…
What do you think about this?http://www.nytimes.com/2011/07/27/world/asia/27tycoon.html
It’s tough to fight through the Indian bureaucracy…?
Mr. Gerard Colaco: I read with great interest, the NYT article you forwarded. If you read the history of India, you will realise that India is several countries rolled into one. The diversity of people, places, cultures, religions, outlooks and economic situations, is stunning. One recurrent underlying theme before the advent of the British, was that India had a vibrant, market-oriented, almost capitalist economy. The country was not very great at large-scale manufacturing, but was a world leader at trading, import and export.
Unfortunately, British rule not just exploited our natural resources, but subjugated our people in more ways than one. First, British rule divided the country along religious and caste lines. The British were experts at this “divide and rule” policy, the primary goal of which was to keep people weak and disunited, so that they would pose no threat to British rule. Second, the British imposed stifling restrictions on trade and commerce, and on the ownership and use of assets and resources, thereby destroying the natural spirit of entrepreneurship of our people. Third, the British destroyed a great and ancient system of education, replacing it with something designed to produce a vast army of loyal, barely literate, clerical grade employees. The power of our people to think critically and intelligently and act independently and courageously was largely destroyed, even though a few great leaders who saw through these colonial tactics managed to eventually cast off the shackles in 1947.
Unfortunately, during the freedom struggle, many of our leaders leaned towards the left, simply because the British were viewed as right-of-centre, to say the least. Our leaders thus turned a blind eye to the natural love affair that our people had with entrepreneurship. We therefore emerged from British rule to be victims of a new anti-business regime by a series of successive, left-leaning governments. These misguided new rulers brought in a huge public sector, a bloated bureaucracy, crushing controls and institutionalised corruption in India. The result of decades of such self-destructive economic behaviour was that India was pushed to the brink in 1990, when a serious balance of payments problem meant that we were within a whisker of defaulting in meeting international monetary commitments.
That is when the celebrated reforms process began. Can you see the irony? The whole reforms process was not because the political class and bureaucrats believed that economic reforms were good and necessary for the country, but simply because fire fighting measures were required not to default on the international scene, which would have been truly humiliating. The moment the first flood of reforms succeeded in improving the financial situation, everyone relaxed, and the much needed follow-up reforms were neglected or got mired down in the quicksand of a variety of convoluted politics. The bloated bureaucracy remains to this day, as does widespread corruption. In fact, over the last two or three years we have had a non-government in this country, not a government, so thoroughly has the ruling class been paralysed by one scam after another being exposed.
Fortunately for us, even the significant, though incomplete and unsatisfactory reforms that the government did actually bring about, were sufficient to reignite the entrepreneurial spirit of our people. The rest is history. Can you imagine what would have happened to India if the kind of encouragement given to business by say the Chinese government had seen the light of day here? We would be streets ahead of China, because we have superior human resources as well as at least a basic democracy. Perhaps in the light of these comments, the NYT article would make better sense to you.
One of the important things that the reforms era did for Indian businessman is that it gave them international exposure. And Indian business persons have given a good account of themselves on the international scene. Their focus is on doing business. It does not matter whether they do business in India or abroad. It does not matter from where they source their raw materials from and where they set up their manufacturing plants. If the Indian environment and bureaucratic/political setup enable them to carry on their particular business satisfactorily, they will operate in India. If not they will move elsewhere, without remorse. That is what is happening now.
For someone like you, born and brought up in the US, it may be hard to believe that no sane Indian ever expects the Indian government to help him whether in business or otherwise. Indians on the other hand would guard against the government harming them! We are more than happy if the various bandicoots in government just refrain from interfering, controlling and restricting us. In short all we want is that the government stops getting in the way. This implies that those businessmen, especially big businessmen, who want to operate or continue operating in India, must learn to “manage the environment” here. That means corruption and sucking up to multiple layers of corrupt politicians and bureaucrats. In the process, there will be allegations and counter-allegations and endless debates about the balance between development and safeguarding the environment. There will be sniping that the vast majority of jobs created are low-paying and menial, although these are perhaps better than unemployment.
What is many times forgotten is that the Indian population, literate nor not, is capable of constantly devising ways and means to better its lot, without direct government intervention. This has been repeatedly noticed in the rural sector, where we have a vibrant and growing rural economy in many parts of India today and substantial portions of the rural populace consume the kind of goods and services that were formerly the privilege of only urbanites.
Whichever way this country moves, its businessmen and natural entrepreneurial spirit will take the country forward, albeit slowly, and perhaps without intending it! Perhaps all of us should read and reflect upon this passage from “The Wealth of Nations” by Adam Smith, who in 1776 articulated a truth that we still see played out worldwide:
“Every individual endeavours to employ his capital so that its produce may be of greatest value. He generally neither intends to promote the public interest, nor knows how much he is promoting it. He intends only his own security, only his own gain. And he is in this led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interest, he frequently promotes that of society more effectually than when he really intends to promote it.”