Wednesday, August 22, 2007

Socialism lays the foundation of capitalism!

This is what Mr. Narayan Madhavan seems to be saying in this article -

But I ask myself a simple question: Had India followed its liberalisation policies in the 1950s instead of the 1990s, what would have happened? I have no easy answers, but it is clear that India would have had to export agricultural commodities in exchange for modern industries and foreign capital, or done something approximating to that. However, there was not much to export from here. Maybe a bit more of garments would have been exported. With foreign capital, India could have stolen some of the Chinese and Taiwanese thunder in electronics or labour-intensive manufacturing. On the other hand, there might have been no IITs (Indian Institute of Technology), no Steel Authority of India Ltd, no Indian Oil Corp. Dozens of public sector undertakings may not have come into being.

What no IIT's? No Indian Oil Corporation? No Steel Authority of India Ltd? And no other public sector companies?

But in their place we might have had the standard of living of Taiwan, with it's per capita income of (purchasing power parity) $27600 (2005 est.) compared to India's $4,031( at PPP) and $885 at nominal (2007 estimate) (even after more than 15 years reforms).

Seems to me to be a pretty good swap. I would prefer that India be 5-6 times richer than to have all those wonderful public sector monsters. If the price of having IIT's is the grinding poverty of the tens of millions, then why have them?

But what makes Mr. Narayan Madhavan think that there would be no institutions comparable to the IIT's if India had turned to capitalism right at the time of independence? Are there no good institutions in the more capitalistic nations of the west? I wonder where do all those IITians migrate to? To the socialist Cuba perhaps.

Now for the next big question: If there were no controls on industries, what would we have liberalised in the first place? Actually, a force has to be created before it is unleashed. The creation of a Nehruvian public sector, and subsequent neo-Nehruvian policies like Indira Gandhi’s nationalisation of banks, laid the ground for an industrial and financial structure. This structure, for all its shortcomings, had the potential to generate both human resources, knowledge base and the domestic economy that eventual liberalisation make use of.

This is so f***ingly crazy that I hate even to fisk it. But what the heck, here goes-
"If there were no controls on industries, what would we have liberalised in the first place?"
The gent actually seems to be saying - for the freedom to have meaning, you have to be enslaved first. Or, for liberalisation to work, a country first has to be shackled for over four decades in a bureaucratic socialist death-grip that has kept our masses in poverty and misery.

----------- Socialism, viewed through the rear-view mirror of liberalisation, appears different. Nehruvian policies also look dismal in many ways, but perhaps it would be fair to say that while many of his policies were flawed, they also laid the groundwork for the forces that gained from liberalisation and free market opportunities.

At least 25 Nasdaq-listed technology companies today owe their origins to people nurtured by Nehru’s policies that subsidized their education at the cost of primary schools or farmers. It is an irony that many of the biggest beneficiaries of Nehruvian largesse are among the most fashionable critics of socialist policies. As we raise a toast to their achievements and 60 years of Independent India, I only wish Nehru had created centres of excellence called Indian Institutes of History (IIHs) the way he had created the IITs. That might have helped us get a better sense of history.

Maybe those "biggest beneficiaries" understand that those Nehruvian policies kept most of the Indians from making a decent living, not just a select or privileged few. Maybe they would have been pleased to see India flower and prosper right from the time of independence, and not stagnate for 45 years under the crushing yoke of the Nehruvian state. Hey, we are humans, we need freedom to thrive. We don't need to be bottled up and stored to mature like wine.

(emphasis mine)