Opinion A capital crisis
If Indian capital does not do enough to make a case for itself,India does not stand a chance
The self-inflicted crisis of credibility of the Indian state is deepening. But this crisis is also accompanied by a crisis of legitimacy for Indian capital. Not since the reforms started has Indian capital been so delicately poised. The reduced growth forecast of the Prime Ministers Economic Advisory Council confirmed what everyone knows: we are paying a massive economic price for poor governance. India is becoming incredibly difficult even for Indian capital to invest in. But the disquieting thing is that no one seems to care about investment. This is because capital itself is now enveloped in a fog of opinion that questions both its necessity and legitimacy. The issue about the legitimacy of capital,as Schumpeter reminded us in the last century,is not about the facts. It is about perceptions. These perceptions have taken a turn for the worse. Capitals own branding has taken a beating.
There is a confluence of factors behind this. Some are generic. The global crisis of financial capitalism allowed private enterprise more generally to be painted in a demonic light. Finance proved for many to be the wedge through which to question the legitimacy of markets; capital once again became a source of danger. In India,the failure to consistently defend economic reform at the political level led to a cumulative myopia about the conditions necessary for growth. Growth is necessary for millions more to be lifted out of poverty. People began to think that wealth creation in an economy is sui generis; one does not have to worry about conditions that sustain enterprise and investment.
But many of the factors are local. It is time for Indian capital to introspect. The current scandals have tarred capital with a broad brush. There is no denying widespread complicity. Mining has quickly replaced IT as an icon of what new Indian capital is like. People are willing to grant some slack to capital. In a country where the state has made it nearly impossible to do business without compromising on integrity,capital will always be complicit with the state. Companies will have to lobby for discretionary favours; they often have to pay the state to do the right thing. But the recent scandals have put private capital beyond the pale of acceptability. Lobbying for favours and perhaps even bribing is one thing. Creating front companies,forging documents and brazenly subverting the law across a range of activity is quite another. In this respect,the unfolding 2G scam may be a decisive moment in the evolution of this perception in a tricky way. Right now,there is a growing perception that capital is still exercising power to subvert the system. Think of the delicate juncture we are at. Characters like Shahid Balwa and a few company executives are in jail. If they are exonerated,many,notwithstanding what the facts,will attribute this to the immense power of capital. Even if they are convicted,there are enough whispers that those more powerful businesses on whose behalf they acted are being allowed to go scot-free. In short,unless there is a clean,consistent and credible resolution of this issue,Indian capital will be seen as a subverter of justice.
The prominence of real estate and natural resources,including gas and minerals,has changed the public perception of capital. From being generators of wealth,they are now being branded as appropriators of public wealth. This is true not just of upstart miners like the Bellary brothers. The uncomfortable fact is that this perception is now shadowing even the exceptional Tatas,and the global powerhouse Reliance. The perception is widespread and real and will need to be addressed directly. It threatens to undo the real dynamism and achievement of Indian capital,working in difficult circumstances. All of this created the conditions where the old-style broad-brush attack on business once again looks credible; corruption is the wedge through which anti-capital sentiments can now legitimately take the upper hand.
Indian capital also has a lot to answer for in several respects. The blunt truth is that its interface with the state more than anything corroded its capacity for collective action. It has never been able to take a principled stand on pretty much any issue even those that concern its own long-term interest. Indian capital also overplayed its hand ideologically. Freeing up space for markets is one thing. But a whole-scale denigration of the state quite another. We all collusively created a climate which assumed that the state could not govern,and often did not need to. Just as civil society is overplaying its hand in delegitimising public institutions,we need to historically re-examine the ways in which private capital delegitimised the idea of the public altogether. The chickens are now coming home to roost,and taking capital down with it.
Capitals primary duty is generating profit for further investment and jobs. But as Adam Smith pointed out,capitals legitimacy depends upon instrumentalism being restrained,softened and cloaked in an aesthetic ambition. It is all about making those who inhabit your universe feel good. Capital has been good at this in the space of products. But its entry and dominance into other areas health,education,housing has often lacked just this ambition. One example is the sector through which millions of Indians will encounter the private sector: real estate. What is galling to most people about it is not just the background murkiness of deals in collusion with the state. It is the sheer brazenness,aesthetic abomination and ignorance of basic planning that most projects represent. The agenda of private capital in urban reconstruction,for example,has no conceptualisation of cities as shared public spaces,between the rich and the poor,between the small business and the big. There are some significant exceptions. But Indian capital is unable to counter the folk impression that it is interested in anything but squeezing the last rupee out of any activity. This is a serious obstacle to its ideological legitimacy.
Some entrepreneurs and philanthropists have become public icons. But these are few and far between. The sort of business leadership that can convincingly project the idea that capital is not about crude private interest,but that capital really is a form of trusteeship that is about generating private wealth for social gain has been singularly absent. There is absolutely no doubt that a vibrant India needs dynamic and innovative capital. Otherwise,India does not stand a chance. But capital is simply seceding; it is not doing enough to make a case for itself.
The writer is president,Centre for Policy Research,Delhi,express@expressindia.com
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