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Sunday, June 15, 2014

Tough steps in the offing?

Good to hear that the new PM has announced/threatened early in his tenure that the people will have to put up with some ‘tough decisions’ if the economy is to be put back quickly on a high-growth track. I am all for tough decisions, only I remember Gunnar Myrdal writing two generations ago that the Indian state has always been tough with the have-nots, and treated the haves with kid gloves. Let’s see what being tough might mean:

Cut subsidies? By all means, but let it start with subsidies that pamper the upper middle class and the rich, such as those on cooking gas, and diesel fuel for fancy cars, and government-run universities, and near unlimited expense accounts for senior government officials and corporate honchos alike (remember, the rest of us not only have to earn our daily bread but pay taxes for it).

Raise taxes? Sure, but start with a special income-tax slab for those who earn, say, above a crore a year. And how about a luxury consumption tax of 50% on five-star dinners? The Indian rich have always been among the most lightly taxed in the world. Then listen to them scream: it will be music to the ears of at least half a billion other Indians who can  be given more bijli-sadak-paani-makaan with that kind of money.

How about really doing something to bring home the fabled hoard of black money that the super rich have stashed away in banks abroad? It is alleged that the amount involved could wipe out India’s entire foreign debt at one stroke!

I am sure that opening up many sectors of the economy to competition domestic and foreign would be on the whole a good thing – insurance and banking and retail and education and healthcare, for instance – but given the huge potential for ripping off the consumer if history is any guide, how about giving our consumer protection laws some real teeth? CEOs should know that spending half a lifetime in jail is always possible if they try any funny business. Surely we could do with fewer Ramalinga Rajus, Subrata Roys and Sudipto Sens? As of now, the system protects them too well, not least because there is so much public adulation and awe of anybody who has managed to make a big pile somehow. And by ‘public’ I don’t mean just the illiterate riff-raff: ‘journalists’ warn solemnly how arresting William Pinckney could seriously hurt the economy, drawing their wisdom from people who dine with Pinckney at the same clubs, or from economists in the pay of the same…

I can list offhand a dozen more tough measures that will do us good. I am sure Mr. Modi can think of many more. Question is, will he have the gumption to take those steps? He might do well to remember that when ‘experts’ say it is essential to turn the economy into a lean and mean machine, they take good care to ensure that their own dinner will not be affected. As John Kenneth Galbraith pointed out, Milton Friedman, the arch-doyen of laissez faire economists, never once in his life suggested that the salaries of university professors like himself should be subjected to the cruel vagaries of free market competition. It’s only those who are already lean if not mean who are always called upon to tighten their belts a little more for the ‘greater good’. That is not progress. There used to be a word for it: barbarism. Yes, that’s the way the world works by and large, but who said the world is a nice place?

P.S., June 22: I am delighted to see that the new government has implemented the long, long-delayed decision to hike railway fares, even if in a rather small way. Good beginning. First big public decision in a month, but way to go, Mr. Modi!

P.P.S., July 01: In this article, Professor Sukanta Chaudhuri has given a very timely and dire warning of what could be the shape of things to come. He deserves to be read with the closest attention.

3 comments:

akash ganguly said...

Dear Sir,

I agree that 'change' will enrage the 'rich', upper class and affect the rest, but at least Modi has declared the sour truth. Let's see if he can really bring about a change by applying this method. I also sense a fine similarity to Hitler's principles in this declaration. But other problems(like the Iraqi crossfire case) are also appearing now.

Regards,
Akash

Suvro Chatterjee said...

... and here's an article in today's issue of The Statesman on the vexed question of bringing back the black money stashed abroad:

http://www.thestatesman.net/news/63758-black-money-charade.html

Kaustav Som said...

Sir
This debate has bemused me for quite some time now and your brilliantly worded piece has left me even more confused on my stand on this issue. Nevertheless, your views strongly resonates mine in respect of strict regulation of competition and consumer protection.
And talking about consequences of unrestricted 'growth' measures, I want the readers to watch a brilliant (but slightly biased) documentary by Michael Moore called 'Capitalism: A Love Story'.
Regards,
Kaustav Som
(ICSE 2009 Batch)