Economic policy has to be kept immune from sentimentalism.
Prime Minister Narendra Modi is keen on economic revival. In his Independence Day speech, he emphasised on wealth creation. Finance Minister Nirmala Sitharaman’s recent rollback of unpopular measures like surcharge on foreign portfolio investors and angel tax provisions for startups are also endeavours to boost the sagging growth and galvanise development. However, it would require more than announcements and piecemeal measures to take the economy out of the present morass. A lot has to change, beginning with attitude towards economic policy and wealth creation.
Various distortions in the economy can be better comprehended in the light of a success story and learning correct lessons from it. A look at the world’s most profitable company, Saudi Aramco, helps us understand what’s wrong with our policy framework. It also explains the prosperity of the Arab nation and the poverty of India (and of its political and thought leaders). Begun as an Anglo-Saudi partnership in the 1930s, Saudi Aramco is wholly owned by the Saudis, posting profit of $111 billion, which was more than those of top three global giants put together.
The company’s website informs us about its past, “Saudi Aramco traces its beginnings to 1933 when a Concession Agreement was signed between Saudi Arabia and the Standard Oil Company of California (SOCAL). A subsidiary company, the California Arabian Standard Oil Company (CASOC), was created to manage the agreement.” In 1938, commercial oil production commenced. Today, Saudi Aramco is wholly owned by the Saudis.
We in India, however, believed intellectuals and their outlandish theories about “exploitative”, “neo-imperial” MNCs (avatars of East India Company), but Saudi Arabia didn’t have any intellectuals. So, they followed common sense and reason. When the Westerners saw value in a natural resource in Arabia and expressed desire to exploit it for monetary gain, the locals agreed to it; both benefited. When the Arabs realised that they could handle their resources on their own, they bade adieu to the foreigners. So much for neo-imperialism.
This should teach every Indian—the politician, public intellectual, man in the street, everybody—three lessons. First, multinational corporations are not in league with the devil; they are not the instruments of economic exploitation or agents of imperialism. Second, socialism, with its fetish for distribution or redistribution, is inimical to wealth creation. Third, economic policy has to be kept immune from sentimentalism.
The Saudis weren’t infected with socialism, economic nationalism, or any debilitating sentimentalism, so they were able to transform their meagre resources into immense wealth. This was despite the fact that in the first half of the 20th century, the Arabs were a bunch of warring, marauding tribes. With civilisation in rudiments, the Arabian Peninsula couldn’t boast of science, technology, philosophy, arts, culture, literature; there wasn’t even any socio-religious reform movement of the kind that took place in India in the 19th century, preparing the ground for modern India.
In contrast, in the same period, India was blessed with a bountiful civilisational heritage, with universally acknowledged achievements in almost every field—arts, culture, literature, philosophy, science, technology, etc. It even had two Nobel Laureates before Independence. Plus a plucky business class that had the entrepreneurship to compete with the best in the world and the gumption to cross swords with the Raj. The country also had huge natural resources. Yet, the Arabs were aware of the virtue of wealth creation, and this made all the difference. Today, India’s per capita income is about 10% of that of Saudi Arabia’s.
The reason: India has always been hostile towards and suspicious of business in general and foreign investment in particular; earlier, it was the Left that waged a jihad against it, now it is the Swadeshi zealots. Common sense and reason have had few partisans in India.
Socialism is often blamed on the first Prime Minister, Jawaharlal Nehru, who infamously called profit “a dirty word”. But Nehru died 55 years ago. He can’t be blamed for the persistently entrenched anti-business attitudes and propensities that still affect the policy framework and the psyche of the political class. Such attitudes and propensities are the product and function of not just the discredited Marxian theories, but also the sentimentalist claptrap emanating from muddled economic thought of Mahatma Gandhi and the hodgepodge of homilies grandly called integral humanism. Bad ideas have calamitous consequences.
Can Prime Minister Modi help transform our natural and other resources into wealth? It will depend on his ability to discard the dangerous ideas and goad officialdom shrug off anti-business attitudes. It will be extremely difficult, for the deep pink state keeps striking back. An illustration: While the Finance Ministry was busy working on a package to instil confidence in India Inc, revive the auto sector, etc., another government arm was finalising the extension of price control—a patently anti-business practice—into sanitary napkins and hand-washes.
The more things change, the more they remain the same.
Ravi Shanker Kapoor is Editor, www.thehinduchronicle.com