Blame Lefties if India Elects a Sham Free Marketer Hindu Extremist
The left's opposition to liberalization has made Indians desperate for an economic savior
India is in the midst of the most critical election in the 67 years since it gained independence from Britain. The election is, in essence, a referendum on the development paradigm set by India's first prime minister, Jawaharlal Nehru, which offered India democratic political rights — while sharply curtailing its economic freedoms.
Hindu nationalist Narendra Modi has taken a hefty lead in the polls by effectively reversing this formula and vowing not to let India's messy democracy stand in the way of a business- and infrastructure-focused economic liberalization. Modi is an authoritarian figure with no clear plan to back his pledges beyond his personal charisma. Should he win, India's leftist intellectuals, who've only offered failed socialist solutions to address the soaring economic aspiration of Indians, will bear much of the blame.
Nehru turned to Fabian socialism, which relies on central planning rather than the spontaneous activity of individual entrepreneurs, to achieve his development goals. This backfired. As economist Arvind Virmani notes, when India achieved independence in 1947, the real income of the average Indian was 25 percent that of the average inhabitant of the world. Three decades later, it had dropped to 14.5 percent. This gap only began to close around the 1990s when, confronted with a humiliating debt crisis, India jettisoned the more irrational aspects of Nehruvian socialism, especially its ridiculous "License Raj," which required businesses to obtain government permission before moving equipment within their own factories, changing their product mix, or even traveling abroad for a conference.
These reforms produced a decade of explosive growth, lifting 300 million from poverty. It also made India the IT hub of the world leading to heady talk about "Brand India," the notion that just as India had come to define the global standard in quality programming, so it would in other aspects of its culture.
Given such spectacular results, the next round of liberalization should haven been a no-brainer when India's economy took a nosedive about five years ago. In the West, there is a great deal of disagreement among technocrats about how best to jumpstart growth — whether to use stimulus spending or resort to austerity measures. In India, however, there is near unanimous agreement because there are so many low-hanging policy reforms still to be plucked. One core reform would be eliminating India's rigid labor laws that forbid money-losing factories with more than 100 workers to shut down. This has asphyxiated India's manufacturing sector, forcing many of the 15 million Indians who enter the workforce every year into low-wage agricultural or menial jobs.
Instead, the ruling Congress Party, which has been controlled by the Nehru dynasty since its inception, has ignored the technocratic consensus for further reform. It has taken inspiration from the National Advisory Council that Sonia Gandhi, the Congress Party head and the Italian widow of former Prime Minister Rajiv Gandhi, has stacked with like-minded NGO activists (essentially community organizers) and leftist intellectuals. Most of them oppose India's turn to "neoliberalism" and privatization and believe that the old recipe of "social spending" and industry mandates is the answer to poverty. Congress has followed this advice with a vengeance for the last 10 years, granting massive new entitlements for subsidized grains in the name of "food security" to 67 percent of the population, and guaranteeing a minimum income to all rural families. It also implemented the Right to Education Act that requires private schools to set aside 25 percent of their seats for the poor and lower castes.
Rahul Gandhi, Sonia's blunderbuss son who is Congress's undeclared candidate for prime minister, has made such "rights," rather than reform, the cornerstone of his campaign. In the past, this would have generated a voting bonanza. Not this time. A recent Pew Research poll found that 70 percent Indians are dissatisfied with the direction of the country. And with good reason. Such schemes won't even offset the double-digit inflation that has been playing havoc with household budgets. More importantly, they betray a complete tin ear, offering a mere subsistence existence when, thanks to the brief experience of real growth, people want something approaching dignified living.
Modi, the chief minister of Gujarat who represents the opposition Bharatiya Janata Party, has achieved cult status by forging a rhetoric that shrewdly gives voice to such aspirations. (In the photo above, a supporter wears a Modi mask while handing out campaign fliers outside his apartment buliding.) His stump speeches promise growth or development and jobs, especially for young people. In every other way, he is a highly flawed candidate — and not only because he is a megalomaniac who holds multiple, simultaneous rallies across the state, "attending" each one using 3-D holographic technology, as if to suggest his omnipotence.
For starters, there is the infamous 2002 pogrom in Gujarat that prompted the United States to blacklist him for a visa. For several days, his party goons roamed the streets freely, rampaging and killing close to 2,000 Muslims. Although the Supreme Court "exonerated" Modi, India's Human Rights commission characterized the response to the bloodletting as a "comprehensive failure" — a damning charge for a man who is parading his bona fides as a "great administrator" who will improve law and order and root out corruption in India. What's more, far from apologizing and assuring Muslims that their right to practice their faith will be safe under him, when recently asked if he feels regret over the massacre, he said he did, just like he would if his driver ran over a puppy. Meanwhile, he repeatedly derides the constitution for its special accommodations for the religious minorities that some of the ardent Hindus in his base despise.
Equally troubling, his tenure as chief minister has been marred with extra-judicial killings in staged encounters with alleged Muslim terrorists. His administration has also been trying to fend off "Stalk-Gate" — a scandal involving the use of the state police to stalk a young woman. Also troubling for civil libertarians, he shows little compunction about banning books that irritate Hindus or harassing independent-minded writers. All of this has prompted India's pre-eminent historian, Ramachandra Guha, no hyperventilating left-winger, to condemn Modi's incipient "fascism."
But such accusations simply roll off the backs of fed up Indians who see Modi as a tough, smart, and incorruptible administrator with a track record of success in turning a resource-poor state like Gujarat into an economic powerhouse. Gujarat's record is, indeed, impressive. It contains only 5 percent of India's population but accounts for 25 percent of its exports. But there are arguably other states — Harayana, Mahrastra, Andhra Pradesh — with better growth records, suggesting that Modi's real gift is political marketing.
Such marketing can win elections. But transforming the national economy is another matter given the yawning gap between Modi's lofty rhetoric and his actual policy proposals. He pledges to make India an Asian Tiger like Hong Kong with a "minimal government but maximal governance" approach — a revolutionary formulation in India. But Modi "strongly opposed" Congress's attempt to open India's primitive retail sector to big-box stores like Walmart. Why? Because mom-and-pop businesses, his core base, didn't want the competition. More remarkably, he supported Congress's entitlement schemes, even criticizing the Food Security Act for not offering large enough subsidies.
Most disappointing, however, is his economic plan, which, as an Economic Times writer declared, has "no new ideas." It included vague promises to slash or scrap income, sales, and excise taxes, although his party has since backtracked, and says nothing about reforming India's labor or other sectors. Instead, it is heavy on Big Government infrastructure projects. Some are sorely needed, but many — such as building "smart cities" and "bullet trains going in four directions" — are patently absurd and calculated mainly to appeal to India's chauvinistic desire to keep up with China. "The only thing one can say for certain about Modi is that he won't harass businesses as much as other contenders," says First Post's Dhiraj Nayyar, one of India's smartest young commentators.
That Indians seem ready to risk political repression for vague promises of an economic transformation shows just how desperate they are to improve their living standards. This suggests that Nobel laureate Milton Friedman was right that political freedom requires a foundation of wealth that only economic freedom can generate. (The Heritage Foundation ranks India 120th among 165 countries in its economic freedom index, putting it in the group of "mostly unfree" countries.) Political liberties are a luxury that people care about more when they have fuller bellies. Richer people have more means of resistance and become costlier to oppress.
Nehru's intellectual heirs have failed to comprehend this, and ultimately, this has paved the way for a demagogue like Modi. Amartaya Sen, the Nobel Prize winning economist and the darling of India's intellectual left, belatedly admitted as much, noting recently that India badly needs a "clear-headed, pro-market, pro-business party that does not depend on religious politics."
The challenge for India's leftist establishment will be to turn the Modi administration into such an entity should he be elected. This will mean allowing the technocratic consensus for reform to proceed unmolested. The left needs to do some soul searching and recognize that its remedies simply can't fulfill the economic aspirations of Indians. Modi is far less likely to act on his anti-pluralistic, socially regressive tendencies if he can actually deliver the growth he's been promising. Otherwise, he'll be tempted to play his Hindu nationalist card. Should that happen, India might end up with the worst of both worlds—poverty and repression — and Modi won't be the only one to blame.
This column was originally published in Foreign Policy
