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Building India Inc
One of the well-hidden facts about the current slowdown in industrial growth is that it is the direct result of blindly following a policy prescription dictated by the needs of international capital. The main reasons for the slowdown are two -- a fall in government investment, and an increase in competition from foreign companies. Yet it has not been fully appreciated that the reason why Chidambaram refused to acknowledge an industrial slowdown even when it was glaringly obvious was because he saw the economy through the ideological filter of Anglo-Saxon capitalism. That was why he refused to increase government investment, and reduced tariffs even below the levels needed by the WTO. It is becoming increasingly clear that, in our enthusiasm to get rid of the socialist straitjacket, we clutched at the first alternative offered, without trying to evolve a policy regime more suited to our needs.But why this penchant for the Anglo-Saxon model? Ideologies are weapons, and the single most important economicforce in the world today is that of international finance. Forged as a tool against the Keynesianism of the labour movement, the new ideology's main task was to tilt the balance in favour of capital and against labour in the advanced countries. The contradictions of western capitalism resulted in a flight of capital to the newly industrialising countries. At the same time, an explosion of credit was used to defer the problems of overaccummulation. The increasing divorce of capital from the contested terrain of production, illustrated by the fact that trade flows account for a mere two per cent of transactions in the forex markets, is another consequence. Once a country becomes part of the global financial system, it loses all independence. Consider the helplessness of the current French premier, elected on a mandate to remove unemployment. He can do nothing to boost his economy, because that would lead to international capital fleeing the country. Nor is it enough to put in place investor-friendly policies --the Asian meltdown was the mother of market failures, and economists such as James Tobin and Paul Krugman have acknowledged the need for controls on capital flows. There is no reason for us to either embrace the ideology of global financial capital, nor rush headlong into the global maelstrom. We must rather learn from China, and put our own house in order while building up our strengths. Markets are great when they work, but there can be market failure as well as government failure. The new government must re-examine some of the premises on which liberalisation has been based, and forge an ideology of economic nationalism and closer partnership between Indian industry and the state. Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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