The Black Swan of Indian
Reform
Mr. Nassim Nicholas
Taleb postulated the Theory of the Black Swan, initially to explain
unexpected financial market events in 2004, and then revised it in 2007, to
encompass life- changing phenomena such as the advent of the personal
computer, the internet, the dissolution
of the Soviet Union, 9/11 etc. His ideas were much praised after the implosion
of the financial markets and the real economies of the US and Europe in 2008.
Black Swan is a
metaphor for the outlier and unforeseen phenomenon that has a profound effect
on subsequent events and leads to considerable hindsight analysis later. The rear-view
mirror analysis too is often inaccurate, as it tries to resolve intellectual
and conceptual conflicts by blunting edges and forcing square pegs into round
holes. And by claiming the blind-sided events were anticipated after all!
The Black Swan of Reform in India, hiding in plain sight, is
the essential conflict between “big government”, and the empowerment of the private
sector. Now, big government is more or less embedded in our DNA, enshrined as
it was, into our economic thinking from the very commencement of the Republic
of India.
And empowerment of
the private sector, collaboration with it, with foreign entities/companies,
induction of superior technologies/methods, infusion of capital that we may not
have, or be able to allocate as a State, etc. lies at the heart of Liberalisation
and Reform. The implication is - shrink
big government which is not ideally suited to enterprise. But, the net effect of
Indian Government trying to author Reform is that it comes to the table with a
built-in urge to subvert the process, aided and abetted by a media and public
that agrees.
This plays out in many ways. Many State and Central
Government initiatives to disinvest are criticised for selling the assets for
less than their market value, with dark aspersions cast as to the motives. This is by political opposition, a media and a
public, weaned and fed on Socialism, protesting the devolution of wealth and
power to the privates - perceived as rapacious, immoral and anti-people. We fail
to realise that this attitude comes from long conditioning to be anti-elitist,
almost anti-prosperity, even for ourselves.
Similarly, when Industry is competitively attracted to a
region by offering sops and land on long lease/ sale on very advantageous
terms, there is a hue and cry. The thrust of which is that the State or Central
Government Agency concerned has betrayed the interests of the tax payer and
squandered public assets.
The fuss completely ignores the idea that Government needs
to promote business and industry and facilitate it to make money, generate employment
and extend prosperity to larger numbers of people on a viable and sustainable basis.
That the Government is not necessarily meant to regard all
enterprise with suspicion, and uphold the principle of social justice that any
form of unbridled capitalism is presumably bound to ignore. That it may be unfair
to deny, often without justification, that private enterprise has any ideals of
Trusteeship or Welfarism in its conduct of affairs.
Even as we ignore
much real evidence of excellent transformation in people’s lives, their
environment and possibilities, brought about by our leading business houses such
as the Tatas, and indeed many others in the top ten or twenty groupings, such
as Reliance, Godrej, Bharti, Mahindras, ITC, Birlas, Infosys, etc.
Is the Government then meant to conduct good business on its
own account or stimulate and catalyse other, essentially private enterprise, to
do so? Has the Government succeeded in conducting good business except in a
monopolistic context where its inefficiencies cannot sink it?
There are many countries clear in their policy direction in
this regard, including those in authoritarian regimes in the Middle East. They
are quite happy to mentor and spur the private sector. They offer help in
various forms, from soft loans to infrastructure, including land, electricity,
water, access roads and railhead connectivity, nearby airports, assistance with
finding export markets via bilateral agreements and trade treaties and so on.
India however, tends to revert to its “Command and Control”
or “Licence-Permit Raj” ways at the first opportunity. After all, most of our
top bureaucrats and senior politicians come from our earlier Socialist era. It
was a time when we were closely allied to the USSR and overlaid many of their centralised
planning and administrative methods on top of a liberal parliamentary framework
based on the Westminster model with US republican overtones.
So Reform promoting legislation still gets interpreted in a manner
so that very little of its original intent gets past the trawl-net in the
execution. And thus, we have the two-steps-forward-three–steps-back gait of
progression on most of our initiatives.
(785 words)
March 14th,
2013
Gautam Mukherjee
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