May 12, 2005Economy

Waiting for the free-market Mahatma

An article that first appeared in Nirantar

This is an archived blog post from The Acorn.

Over a century ago, the idea of political freedom in India was the matter of debate in the parlours of the educated elite. It was more a matter of intellectual exertion among the few, rather than a popular movement among the many. It was not as if colonial Indians lacked the aspiration for political freedom; it was just that the concept was too abstract for the masses. It was the genius of Mahatma Gandhi that converted elitist objectives and popular aspirations into a simple mantra that everyone could understand. He also armed every single person with a simple, inexpensive weapon—non-violent civil disobedience—that could be used to further the objective of attaining freedom.

A century later, India is in a similar situation—this time it is economic freedom that it seeks. Though it attained political independence in 1947, India to this date, and even after the reforms of the 1990s, is generally unfree from an economic point of view. Vestiges of the socialistic mindset, well-exploited by populist politicians forms a powerful political constituency, not least because the alternative free-market capitalism” has not been packaged into a form that is acceptable to the several hundred millions who actually desire it.

India has never lacked entrepreneurial talent. While many businesses in independent India came to rely on the socialist crutches that were put in place since Nehru, the most enduring ones were successful in spite of the government’s best attempts to stifle them. Like India’s largest IT companies, some succeeded due to the government’s inability to regulate them. And then there are others that used their skills to game the socialist system to stay successful. While socialism did succeed in making Indian firms less competitive internationally, it failed to prevail over India’s entrepreneurial base. The big listed firms form only a tip of the ice-berg. There are hundreds of thousands of small businesses who fit this pattern: stifled by inflexible labour laws and industrial licensing but retaining their highly entrepreneurial instincts.

While there are a number of advocates of free market capitalism in India, none have been able to translate their ideology into a form that can be sold to India’s myriad political constituencies that are cut along ugly lines based on geography, religion, community or language. Economic freedom has the potential to cut across these retrogressive divisions only if it is espoused in a form that is readily understood by the masses. It also has the potential to directly change the destinies of one fifth of the world’s population forever. And when that happens, the remaining four-fifths of the world will not remain untouched (thanks Deepak).

I began my career in the telecommunications industry inspired by the ITUs observation that a one-percent jump in tele-density results in a 3% increase in economic growth. I had the satisfaction of seeing this played out in front of me. First, in Singapore where broadband deployment ensured the competitiveness of an economy that is making the transition from manufacturing to services; and also in India, where the privatisation of telecommunications resulted in the explosion of the IT-enabled service economy. If a small change in tele-density (or broadband penetration) can bring about such profound changes in economy and society, then surely, a small increase in economic-freedom-density” can bring about a much greater change in people’s lives.

If Gandhi could crystallize the idea of political freedom and simplify its practice, then surely, the same could be done for the idea of economic freedom. But with many parts of India suffering from a socialist hangover (and indeed renewal) can it find one in time?

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