In defence of reformed capitalism

The farm protest has acquired the character of a mass movement. Its staying power, its deep roots in the rural hinterland of Punjab, and to a lesser extent Haryana, and its organisation, need to be lauded. The protests have helped bring the issue of agriculture and its future to the national centre-stage. This newspaper has defended the agricultural reforms, is opposed to mechanisms of protests that disrupt the lives of citizens, and believes that the farm groups need to adopt a more flexible approach rather than call for the outright repeal of laws — but that does not take away from the real or perceived apprehensions that farmers have articulated about their income security in the wake of the new laws.

But there is one, somewhat disturbing, quality of the discourse at the protest site and in Punjab that merits more scrutiny. Reforms will enable greater interface between industry and agriculture, and will allow corporates to get more involved in the various elements of farming. But farm groups have opposed this — fearing they would be left at the mercy of market forces. In the process, they have adopted a rhetoric that is opposed to Indian capitalism in general, and specific corporate groups perceived to be close to the government and beneficiaries of the government’s approach in particular. This has even taken the form of calls for mass boycotts of corporate products and sporadic attacks on corporate assets.

The specific elements of how corporate capital should interact with private capital (agriculture, it is often forgotten, is the biggest capitalist enterprise in the country — it receives State support, but farming is private) and mechanisms by which the asymmetry between the two should be navigated need not detain us here. What is relevant, in the light of the blanket opposition to corporates, is the important role of capitalism.

There has been no democracy that has grown economically without corporate capitalism. It helps in modernising the economy and enabling the transition from rural to urban, and agriculture to industry and services, which are inevitable with growth. It generates jobs — and there is no other way to fix India’s unemployment challenge without a further impetus to private business. Large companies can operate on scale and become competitive both domestically and externally. A vibrant corporate capitalist base also leads to additional revenues for the State — which, in turn, can be used for greater welfare for the marginalised and creating a more level-playing field in terms of opportunities.

Contrary to what is often believed in India, corporate capitalism can even aid, rather than weaken, democracy. Take the United States (US). The authoritarian turn under President Donald Trump was fiercely resisted in the US not just because of its longer history of democratic institutions and stronger constitutional protection for free speech, but also because of the strength and resilience of American capitalism. Capital was not beholden to the State; key companies in the private sector (including some big tech firms) were able to resist Trump administration diktats and stood in favour of democratic restoration; the media could take a strong position because capital was autonomous of the State; and the right to work of those against the government did not get jeopardised. The role of capitalism in resisting the overreach of the State is often underestimated.

The problem in India is, of course, the practice of capitalism and the form it has taken. For one, an overbearing State has meant that the private sector needs the government at every turn in its operations. State discretion may have reduced since 1991, and regulation is, of course, essential. But given the role of corporate funding in elections, the political dispensation has an incentive in keeping a degree of control and has adopted a carrot-and-stick policy vis-a-vis capital.

The power of governments in shaping, enabling or blocking the growth of sectors, and within sectors, in shaping the performance of companies through regulatory tweaks and convenient policies is a reality, although this is often perceived to be exercised far more frequently than it actually is.

This tarnishes capitalism in general, for citizens then see a successful company not as a product of its excellence and service delivery, but as a beneficiary of government largesse. The other way in which the State can exercise power over private capital is through the use of its investigative agencies — wrongdoing and corporate misgovernance must be investigated of course but there can be selective application of this principle depending on whether a business is deemed friendly or not. Again, there is a perception that the State exercises this power more often that it really does. Corporate capital then is believed to be either aligned to the State or frightened of it.

But it is not just the State. Despite the reforms of 1991, and despite growing trust in businesses and businesspeople, there remains the impression that Indian corporate capital itself has skeletons in its closet, and is happy to have taken short cuts by managing the regulatory environment for benefits.

In this process, it has often been perceived as standing against citizen concerns on a range of concerns — from the environment to consumer rights. The fact that the private sector was associated, for a long time, in both popular culture and the country’s ideological make-up, as somehow unscrupulous hasn’t helped.

All of this has contributed to a culture of what former chief economic adviser Arvind Subramanian has termed as “stigmatised capitalism”. What we are witnessing today is a further stigmatisation of capitalism. This is unwise.

Yes, Indian capitalism needs reforms; the State must not be seen as favouring a set of companies over the others; capital itself must be accountable and follow the law in both letter and spirit. But by tarnishing capitalism itself, and thinking of all corporates as some kind of dark, evil force, the farmers’ movement is doing a disservice to India’s democracy and growth potential. India needs more, not less, of capitalism — clean, reformed capitalism.

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