India\’s great escape from the socialist zoo

(This is an edited version of the author’s acceptance speech on receiving the Manavata Vikas Award of the IIPM on April 15)

I view myself as a freedom-fighter, who for 45 years has sought to promote every kind of freedom—economic, political and social. \”Escape from the Benevolent Zookeepers\”, a 2008 collection of Swaminomics columns, emphasized that the socialists who led our Independence movement, and then shackled us for decades through the licence-permit Raj, were not evil. Rather, they were golden-hearted leaders determined to banish the poverty they associated with British colonialism.

However, 200 years of colonial subjugation had given them a serious inferiority complex. Lacking confidence in India\’s ability to export its way to prosperity, Jawaharlal Nehru sought economic independence by retreating from international trade into a cocoon of self-sufficiency, forgetting completely that international trade had made India a world power for centuries before the British Raj.

Critics pointed out that other developing countries like Korea and Taiwan had opted for export-oriented growth rather than self-sufficiency, and been rewarded with 10% GDP growth, thrice as fast as the Hindu rate of growth in India. The socialists smiled condescendingly and said that these countries were neo-colonial puppets falling into an imperialist trap, and had no future. In fact, of course, the supposed puppets soon became richer in per capita income than their colonial master, Britain. India, alas, remained mired in poverty.

Apart from self-sufficiency, golden-hearted socialism sought to protect Indians from the rapacity of businessmen, and promote prosperity as in the Soviet Union through planning and government domination of the economy. So, they made India the land of a million controls. Everything was forbidden unless specifically allowed. Government bureaucrats with no business experience were supposed to know better than any businessmen what should be produced, where, and how. They were supposed to know better than consumers what was good for the consumers themselves. No citizen had free choice in buying anything: the government chose on his behalf the list of goods that could be produced or imported.

Entrepreneurs were forbidden to start a business without a licence, forbidden to import raw materials or machinery without a licence, and forbidden to close a business if it was unprofitable. If any businessman was innovative enough to produce more than the listed capacity of his machinery, he faced a jail sentence for the terrible sin of having dared be productive. Murthy of Infosys recalls that it took him almost two years to get a licence to import a computer and another two years to get a telephone when he was setting up Infosys in the 1980s. All in the public interest, you understand.

Insane though it sounds today, golden-hearted socialism held that prosperity would be best achieved when nobody had the freedom to do anything other than what they were told. Citizens were told that the world was a dangerous place full of predators. So, said the leaders, the licence-permit Raj does not really put you in cages, it puts you in protected enclosures for your own security. In these enclosures we will ensure your basic needs.

They failed even in this. Literacy, infant mortality, life expectancy, poverty and every other social indicator was always far worse in socialist India than in Asian miracle economies (and in even some poor African countries). Vast sums spent on health and education were wasted: teachers and health staff had an absenteeism rate of 18% to 58%, but were protected from disciplinary action by strong trade unions (supposedly the vanguard of socialism). So, the socialist cage gave Indians neither economic growth nor social justice. This remains an area of grave concern: opening the cages will not solve problems of basic education and health, so public-private partnerships may be needed.

The leaders themselves were not caged, of course. Indeed, many zookeepers became incredibly wealthy by using controls imposed in the holy name of socialism to line their pockets and create patronage networks.

RK Laxman had a brilliant cartoon showing a journalist interviewing a Minister in a palatial mansion. The politician says, \”Of course, socialism is applicable to us also. But we have promised it to the people and so must give it to them first.\”

Everybody agrees we need democracy. Why? Because democracy empowers citizens with the freedom to choose, and this remains invaluable even if it is constantly eroded or manipulated away by politicians. Democracy, warts and all, is far better than a system where supposedly benevolent dictators decide everything.

For the same reason, we need freedom of choice in the economic marketplace. The case for democracy and the case for liberal economic policies are the same: both are flawed systems that are nevertheless better than the alternatives. Both empower citizens through the freedom to choose. No matter how tattered at the edges, freedom to choose is nevertheless better than being put in cages by benevolent zookeepers.

After 20 years of economic reform, the cages have been opened and the enclosures have been destroyed one by one. Have Indians been swallowed by predators, as predicted by the socialists? Have our companies been killed by foreign multinationals or become neo-colonial slaves? Not at all. Indian companies have become multinationals in their own right.

Indian liberalistion has created more billionaires than exist in Japan or China. These are mainly people of middle class origins like Narayan Murthy and Nandan Nilekani of Infosys. Shiv Nadar of HCL was once an employee of DCM, but is now a hundred times bigger than DCM.

These self-made men have beaten hollow Indian business families and multinationals. Prime Minister Manmohan Singh once said, these newcomers are not the children of the wealthy; they are the children of economic liberalisation. Having escaped from the socialist zoo, they have proven that Indians can roam the global jungle proud and fearless. Let us celebrate that escape, that new freedom.