Vantage point

Wednesday, November 05, 2003

The annual Liberty and Society Seminar (LSS) at IIML will be held on 22-23 November. This time the organisers are also trying to get some leftists for the open house so that we can have a juicy debate.

The need for more such seminars was driven home to me unknowingly by my friend Ravi during a 'Business Environment' class 2 days ago. The professor was telling us about the socialistic policies India adopted in the post-Independence-pre-1991 era and the problems that the system brought with it. Prof. Asit Banerjee is one of the most intelligent and articulate teachers at IIML and what he said can be paraphrased thus -

"The problem with the state-led industrialisation model we adopted was that the what ruled the economy was not the market forces, but a handful of people, namely politicians and bureaucrats. Now the only way that market forces can be "influenced" is by raising productivity, efficiency and profitability. There are no short cut approaches for that. However influencing people is very simple. Just throw enough money at them, and they will do your bidding. So the state-led industrialisation model created two problems. One, the government owned companies, being monopolies did not aim for productivity, efficiency and profitability, resulting in poor product/service quality, little or no technological innovation, and a huge fiscal deficit. Two, the handful of private players that the government allowed were not driven by the market forces, since they could influence politicians and bureaucreats to further their agenda. So Bajaj, which will deliver you a scooter in 2 hours today, used to take 2 years in those days, because through bribing officials, it was assured of a large piece of the pie. This created a bad image of the private sector in the minds of the people and most of the population viewed capitalism as some corrupt exploitative philosophy. However now that the state is getting out of industrialisation, you have market forces which drive technology, and quality, along with profitability. So while in those days you had the Ambassador car, whose 1960 model was almost the same as its 1980 model, now we have the Tatas designing cars from scratch in India, and selling them to British companies. Because in this system, greasing the palms of corrupt politicians and bureaucrats will not assure you of profits. Excellence in products and production methods will."

Now this is as lucid as a Prof can get about the pitfalls of socialism and the benefits of the free market model. Hence I was disappointed when my friend Ravi asked,

"Sir, don't you think that the state-led industrialisation in India failed because the people here are more corrupt? Don't you think it would succeed in a country which is not as corrupt?"

This statement almost says that Indians are corrupt the way Indians are brown, i.e. there is some gene of corruption within us. That is not so. What has caused such high levels of corruption is the very fact that there is too much power vested in the hands of the state. What is the state? A few people. As they say, power corrupts. And power without accountability and a guarantee of permanence of that power (government servants in India cant be fired) is a surefire recipe for corruption.

So we need more seminars like LSS to educate people.

There is something heartening as well. I was going through the comments on what Bidwai regurgitated on Rediff 2 weeks back against the privatisaion of PSU. (By the way, Yazad has torn apart the article on his blog). I saw that over 3/4th of the comments were in favour of privatisation. This means that the Indian public is getting over the philosophy of socialism. Great news! :)

The most pithy reaction of Prafool's blabbering on rediff was this -

Subject: so what?

how will privitazing OIC and HP change its profits??

Posted by sumeet saxena on 26-OCT-03