I am greatly honored to deliver the Nani Palkhivala Memorial Lecture coinciding with the 75thanniversary of India’s independence. Nani Palkhivala was a champion of citizens’ rights, and one of India’s most illustrious constitutional lawyers. He won the landmark case of Kesavanda Bharti vs Government of Kerala in the Supreme Court. In this case, a thirteen-judge bench, the largest ever, ruled that Parliament did not have the unfettered right to amend the Constitution of India. It could amend parts of the Constitution, but it could not alter its basic structure.
I had the privilege of working with Nani Palkhivala when I was an officer of the Tata Administrative Service. Mr. Palkhivala was the Deputy Chairman of the Tata Engineering and Locomotive Company (or TELCO), which was later named Tata Motors. He oversaw legal and financial matters for the company. I was responsible for the company’s factories in Pune and was invited to join the Board of the company.
The year I joined the Board, I had a disagreement with Mr Palkhivala on a matter of human rights. The commercial vehicle industry, in which TELCO was the largest producer, had gone into a recession. Sales were low; profits negligible. Unsold vehicles piled up; cash flow was severely crimped. The company could not afford to pay workers their annual bonus. For them their annual bonus was a significant part of their income. However, they were persuaded that their fortunes were tied with the company’s. And that they would have to tighten their belts until better times.
I was dismayed to read in the board papers before the meeting that dividends to shareholders would be maintained, even though bonus to employees was being cut. How could the company not pay bonuses to workers if it would pay dividends to shareholders? It was neither the shareholders nor the workers’ fault, that the company could not keep up sales in the recession, and therefore was in a cash crunch. Why were workers being asked to tighten their belts, and not shareholders too? Should not both gain, or both suffer? In fact, in my mind, workers needed their full wages (including whatever parts of bonus should be considered wages) to keep their households running, more than shareholders might need dividends.
When I saw the proposed resolutions in the board papers, I appealed to the Chairman, Sumant Moolgaokar. He asked me to discuss my objections with Nani Palkhivala. I was pretty terrified by the prospect. Palkhivala was already a living legend in India in matters of justice and finance. The next day, I found myself, shivering a bit, before a very calm Nani Palkhivala.
“Sumant tells me you think we are taking the wrong decisions, Maira”, he said to open the discussion. “Explain to me why you think so”.
I said, the company owes more to workers, who work for the company every day, and all the year, than to shareholders, some of whom flit in and out of the company’s shares, watching stock market trends. Some shareholders may not even know what products the company produces, and probably don’t care, I said. When the company is not doing well, they will take their money out and put it in another one. The workers do not have such options. Our workers depend entirely on our company for their livelihoods.
Palkhivala appreciated what I said. He then patiently explained to me why it was important to maintain the dividend in spite of the decline in the company’s sales and profits. He gave me a little primer in the structure of financial markets from where the company needed more support in tough times.
“I do you see your point though”, he said. “We will be sending a wrong signal to workers, whose support we will need for many years. Sumant tells me that he is very happy with the way a culture of teamwork is developing in Pune and we must not harm it. We must find a solution.”
The dividend was maintained and, happily for me, a special, one-time, allowance was also sanctioned for workers. Which was greatly appreciated by them.
To commemorate Nani Palkhivala, I will speak today about the conflict between human values and financial valuations which is hampering India’s progress towards its tryst with destiny where all Indians must have “poorna swaraj” with freedoms from social, political, and economic poverty.
India’s Tryst with Destiny
What is India’s “tryst with destiny”?
Independent India was born at the midnight hour on 15th August 1947, 75 years ago, when India’s first Prime Minister, Jawaharlal Nehru, unfurled the country’s tricolor flag and announced to Parliament that India had made a “tryst with destiny”. India had won its independence after a long and remarkably peaceful struggle for freedom led by Mahatma Gandhi.
Gandhi had a vision of a country not divided into fragments by religious and communal walls. He envisioned a country in which every Indian, whether rich or poor, would hold their head high in dignity. India’s “tryst with destiny” was to provide “poorna swaraj” (i.e. full freedom) to all its citizens: political freedom, economic freedom, and social freedom.
The country’s democratic Constitution granted political freedom to every Indian, man or woman, rich or poor, whatever their religions. It created the world’s largest democracy. Sadly, 75 years later, political liberties and freedoms of speech are being curbed in India.
Social equality amongst castes has not been achieved. Lower caste citizens continue to live in great indignity. Lower caste poor women live in abject poverty in India’s villages. They are amongst the most oppressed humans on the planet.
While the numbers of Indian billionaires increased during the Covid pandemic, the majority of Indian citizens suffered from increased economic insecurity. Hundreds of millions of Indians lost their incomes when the country locked down during the pandemic. They struggled to find shelter, food, and even drinking water for their families.
Clearly, to meet our tryst with destiny, we have “miles to go before we sleep”, in the poet Robert Frost’s words that Nehru kept on his desk after India’s independence.
A time to reflect and rethink
India@75 is a time to reflect. A time to reflect on what is going on in the world around us; what is going on within us; and what changes we must make in our ideas of progress to create a country in which all Indians’ minds are without fear: a country in which all Indians, whatever their caste or religion, will hold their heads high by 2047 when India will be 100.
The idea of a free democratic India was a beacon of hope for a shattered world in 1947. The so-called “enlightened” nations of Europe had plunged the world into two horrific world wars within fifty years. Into which they had dragged the countries they had colonised, who were “the white man’s burden” they had been enlightening, they said, while enslaving their people, and exploiting their lands and natural resources.
The first world war was a contest for territorial rights amongst the enlightened Europeans. After which new political forces rose within Europe that challenged ideas of liberalism and free markets: communist movements in Russia; and fascist movements in Italy and Germany. The second world war was described by the Allies as a defence of liberal democracy against forces of fascism and oppression. The war ended with the US showing off the power of its nuclear technology to exterminate hundreds of thousands of innocent civilians in Hiroshima and Nagasaki.
When the global hot war ended, it morphed into a long Cold War led by the US against communism. The West and the Soviet Union competed to develop weapons of mass destruction. The Cold War ended with the collapse of the Soviet Union. Now another cold war has begun. The US, and China and Russia, are racing against each other to develop digital weapons, and in applying financial and trade weapons to harm each other. The collateral damages of their war are harming the most vulnerable people in the world the most.
Sadly, the same leaders who must cooperate to solve global problems are once again dividing the world and arm-twisting other countries to take their sides. India finds itself, once again, in the difficult position of being a bridge between East and West, as it was after its Independence in 1947. And once again it hopes to be a source of a new Enlightenment. However, to be a light for the rest, India must first clear up the fogs within itself. This is the historic task India’s leaders must accomplish between India@75 and India@100.
A conflict between capitalism and democracy
When the Soviet Union collapsed in 1991, political scientist Francis Fukuyama prematurely declared the ‘end of history’. He believed that capitalism and democracy—the Washington Consensus—had finally prevailed over socialism and totalitarianism.
History has returned. Ideological conflict between democracy and capitalism has not ended. In fact the two ideologies are conflicting within the Western victors of the old Cold War. Civil society movements are speaking in the West on behalf of people left behind by the “free market” of private enterprise. Other voices on “the Left” demand a larger role for governments in providing public services and social security. And others speak for protection of the natural environment. Meanwhile the Right advocates for lower taxes, less regulation, and more freedom for capital to roam the world.
The fundamental conflict between the core principles of capitalism and democracy—i.e. between the rights of owners of capital on one hand, and the rights of all humans on the other—continues. It is a conflict between political conservatives and political progressives. Between conservatives, who want to retain their power to fix the rules of the game from which they have benefitted, and progressives who want to change the rules for the benefit of those left behind.
Democracy and capitalism are founded on different conceptions of fundamental rights. Capitalism’s foundation is property rights. Democracy’s is human rights. Capitalist institutions run on the principle that whosoever owns something has the right to use it as he wishes, and also that whosoever owns more of a shared resource must have a greater say in how that resource is used. Therefore, whoever owns more shares in a corporation has a larger vote than those who own fewer shares.
On the other hand, ownership of property does not matter while assigning voting rights in democratic institutions. Because, in democracy, every living person, whether she has a billion dollars of wealth, or no dollars at all, has an equal vote in the governance of the collective human enterprise.
The clash between capitalism and democracy is a clash of fundamental principles for good governance of societies. When appliances designed to run on AC power are plugged into sockets providing DC power, there will be blow-outs. Similarly, when institutions of governance designed to run on fundamentally different principles are plugged into each other something will blow up.
Fundamental contradictions between the principles of capitalism and democracy are causing violent conflicts amongst nations and within nations. To create an equitable, sustainable, and more harmonious world in the 21st century, institutions of democracy and capitalism must evolve, from the shape in which they have been locked in with the so-called “Washington Consensus”.
Humanity must find new solutions to many societal, economic, and environmental challenges in a hurry. They are listed in the 17 Sustainable Development Goals all governments have signed up for. Institutions are vehicles designed by humans to realise their collective aspirations. Institutions of capitalism, as well as institutions of democracy, must be reformed to solve the existential crises of increasing inequalities and rapid climate change that are threatening all humanity.
Reforming capitalism
I will speak first about capitalism.
Nani Palkhivala supported private enterprise for economic growth. He was also a great defender of the democratic rights of citizens. When Indira Gandhi declared an Emergency and suspended political freedoms, he withdrew from a case in which he was representing her. This caused consternation in Tatas. JRD Tata was naturally concerned about the effect Palkhivala’s uprightness would have on Tata’s businesses. But he supported Palkihivala nevertheless.
Designs of new forms of capitalist institutions, such as the limited liability company invented in the seventeenth century enabled capitalism to expand. With the evolution of institutions for governing international finance and international trade in the twentieth century, capitalist corporations have been able to spread across national borders. Capitalist institutions have enabled global and national GPDs to increase and have lifted millions of people out of economic poverty.
Economists promoting free markets gained more power within Anglo- Saxon governments from the 1970s onwards. Milton Freedman, who became famous for his dictum that ‘the business of business must be only business’, and Frederik Hayek, known for his thesis that more government was ‘the road to serfdom’, persuaded Margaret Thatcher in the UK and Ronald Reagan in the US to push back against governments in their countries and to privatize public services. Reagan even said that Government is not the solution; rather, Government is the problem.
This turn of ideology gave big capital greater power. Democratic governments, as mentioned before, must represent the interests of all people, rich and poor equally. Though the richest people within any society will always be numerically less than the numbers of poorer people (it is a mathematical distribution as the Italian economist Vilfred Pareto had pointed out in the 19th century). However, the rich few will acquire greater power in the governance of societies than the poorer many whenever the principle of property rights dominates.
The shift in the balance between democracy and capitalism towards capitalism in the last thirty years is made vivid by the creation of international tribunals who adjudicate in disputes between foreign investors in countries and the governments of those countries. Governments of countries represent the interests of millions, even billions, of people in their countries. On the other side in the dispute are a few investors of capital. Global institutions have become to pander too much to financial investors, making it easier for them to enter and exit countries whenever they will, while stopping human migrants searching for better opportunities across national borders
The rules of globalization have made life much easier for capital than for workers. The word ‘reform’ has taken on a one-sided connotation: reforms seem to imply removal of constraints on investors and businesses. This was starkly revealed in India, and other countries too, during the Covid pandemic. The poor lost incomes and homes while stock markets broke records making investors even richer. The Indian government’s move at that time, to ‘reform’ labor laws to attract more foreign investments, making it easier for employers to fire workers and curbing unions too, made clear that large investors had more political power than common people.
Western ideas of capitalism have prevailed since the end of the Cold War. Mahatma Gandhi was not a fan of the Soviet regime. When he was asked what he thought of Western civilization, he replied, tongue in cheek, “It would be a good idea”.
According to Gandhi both systems—the Soviet state system and the Western capitalist system—took power away from people on the ground to people up there, who are remote from the common people. In the Soviet model, power was in the hands of bureaucrats who ran so-called ‘public’ enterprises in which the people were merely workers doing what they were paid to and told to. In the Western model, the power was in the hands of owners of private enterprises, in which too the workers must do what they are paid to and told to. In the Soviet model, the surplus created by the people’s work moves upwards into the state’s coffers. In the capitalist model, the profits move to private owners. In both cases, control of wealth flows from the bottom to the top.
No fan of Soviet socialism or Western capitalism, Gandhi advocated new models of enterprises in which the workers, the real wealth-creators, would earn wealth for themselves. He advocated reforms of economic institutions whereby producers would not have to pass on all wealth to people above them with the vain hope that it will trickle down to them some time in the future, somehow.
Gandhi understood very well that political freedom, with only the right to elect one’s own government, is an incomplete freedom. All citizens must also have economic and social freedoms, he insisted. They must have access to opportunities to earn more, and in a dignified manner, and to accumulate more wealth for themselves.
Liberalism in crisis
Liberalism is in a crisis.
Individual freedom is the core of liberal philosophy. Liberals on both sides—Left and Right—say that in the political sphere, all persons must have liberty to stand up, speak up, and form associations to represent their interests. Thus, in the political sphere, they stand united against authoritarian governments who suppress civil liberties.
However, where left liberals and right liberals substantially differ are:
Firstly, regarding the role of the government in the economy. Leftward liberals say the government must play a large role in the economy. It must ensure social security and public services for all; it must regulate big business enterprises. Rightward liberals want government out of the economy as much as possible.
Secondly, they also differ on the protection of the rights of individuals within business institutions. Rightward liberals want “flexibility” for business in labor practices. They would rather there were minimum labor regulations and no unions. Leftward liberals, on the other hand, insist that it is the government’s duty to ensure the safety of workers and their fair treatment by employers.
When the Soviet Union collapsed, an advocate for workers’ rights in the US observed that the last remaining totalitarian state was the Western, capitalist, business corporation.
Societal tendencies towards fascism, and crony capitalism, strengthen whenever there is a convergence of the interests of capitalists and anti-democratic political forces. History reveals that capitalists have not opposed, and have usually supported, fascist forces and authoritarian dictators against communist and socialist movements.
New governance institutions must be evolved at many levels to solve the complex problems besetting humanity in the 21st century. New designs require a restoration of the balance between the principles of capitalism and democracy.
· Multi-lateral institutions like the WTO need fundamental reforms to become more democratic in their operations by applying Gandhi’s principle of “anantodaya”. Trade policy makers must listen much more to the views of the most vulnerable people rather than the views of lobbyists for large corporations
· At the national level, local people’s voices must be heard by national governments over the voices of large corporations and international experts
· On the ground, new forms of “social enterprises” must be designed that will enable workers and small producers to become wealth-creators too
Reforming democracy
I turn from the need to reform capitalist institutions to an urgent need to reform democratic institutions at the same time.
President Biden declared at the Quad summit this year that the U.S. and India, the world’s largest democracies, must lead the spreading of democracy around the world, to contain threats from China’s and Russia’s authoritarian governments. Sadly, both India and the U.S. need to put their own democracies in order.
Pew Research Center surveys, and the Global State of Democracy Report, 2021, reveal that two-thirds of citizens in democratic countries do not trust institutions such as elected assemblies and courts to represent their will. They include the U.S. which is ostensibly leading a global fight for democracy.
Several mass killings of school children and civilians in the U.S. in the last three months, have caused the U.S. President to throw up his hands. The U.S. Senate is divided, and the Supreme Court continues to refer to the Second Amendment of the Constitution to disallow any dilution of a fundamental right of citizens to bear arms. The U.S. Supreme Court has denied women their rights to reproductive health which they have enjoyed following a landmark judgement of the Court fifty years ago. The new conservative Court says that liberal judgements of the US Supreme Court in the past did not conform with the principles of the US Constitution. In India too, laws regarding citizenship and sedition which are based on colonial era concepts are yet being contested in the courts.
The U.S. and India are democracies founded on written Constitutions, which state the democratic principles adopted by ‘We, the People’ living within the geographical boundaries of our countries. The Constitutions define the institutions which are required to maintain democracy — principally elected assemblies and independent courts.
The U.S. Supreme Court’s judgement denying women’s rights to abortion explains some fundamental problems of democratic governance in all constitutional democracies, including India. It points to basic changes necessary in democratic processes in the 21st century.
The U.S. Supreme Court’s judgement raises fundamental questions about conceptions of human rights. How are concepts of human rights formed? Which institutions have the constitutional rights to enforce them?
Justice Alito, who drafted the judgement, says the fundamental question before the court must be answered in steps, systematically. The first step is, whether the reference to ‘liberty’’ in the Fourteenth Amendment of the U.S. Constitution protects a particular right. The second, whether the right at issue in this case is rooted in the nation’s history and tradition. And third, whether it is an essential component of ‘ordered liberty’.
Conceptions of ‘freedom’, ‘liberty’ and ‘human rights’ are not cast in stone. They are always works in progress. All citizens were not granted equal rights in the U.S. Constitution in 1787: women and coloured people obtained these rights later; and people of various genders have begun to be treated equally only in this century. These new rights, not explicitly mentioned in the U.S. Constitution, have emerged from an ongoing civilisational debate peppered with struggles—some peaceful, some violent.
Justice Alito explains why courts and elected assemblies find it difficult to determine the will of the people. Abraham Lincoln said in 1864, “We all declare for liberty; but in using the same word, we do not mean the same thing”. Written constitutions, which courts must follow, state what the will of the people was at some prior time in history. The will of the people changes as ideas of human rights and liberties evolve. Therefore, good democratic governance requires a robust process for those who govern the people to continuously listen to the people. Because people, not courts, shape the norms—the “unwritten rules”—of their societies.
Citizens want many things and may not agree about everything. The Arrow Impossibility Theorem, propounded by the economist Kenneth Arrow, is a fundamental dilemma in social choice theory. The Impossibility Theorem proves that there is no voting method in which voters, by merely expressing their votes as ‘yes’ or ‘no’, can produce a unanimous outcome, no matter how many rounds of votes there are. The mathematical problem here is that individual voters’ preferences cannot be sliced and diced; nor can the choices before them be made too simply as ‘this’ or ‘that’ to enable easy voting and counting (as done in referendums such as Brexit).
Human beings’ preferences are formed by combinations of many factors in their histories and their present circumstances; also, by what they value most, which may not be the same as other citizens. Therefore, their preference for a candidate in an election to represent them cannot reveal their consensus about fundamental needs. Outcomes of elections in first-past-the-post systems make the reading of the tea leaves even harder, when candidates, who do not even represent an electoral majority, win.
Consensus on what ‘We, the People’ want, which is the foundation of all democracies, will come about only when people listen to each other. It is imperative for democracy that “People ‘Like Us’ listen to ‘People Not Like Us’.
Democracy is a process of ‘ordered liberty’. It requires institutions to enable the will of the people to be implemented with checks and balances amongst the institutions. Elected assemblies and independent courts are institutions for governance of the people. Constitutions lay down their powers. Neither must usurp the other’s powers. The U.S. Supreme Court now says that the earlier, landmark, Roe v. Wade judgment granting abortion rights to women was unconstitutional because it transgressed the role of elected state assemblies.
The Indian Supreme Court is also criticised some times that it is transgressing into the role of the elected legislature and even the executive when it is spurred to act by public interest litigations.
Institutions are the means with which societies realise their aspirations Institutions, Nobel Laureate Douglass North explained, are not merely constitutionally designed organisations. Social norms are the fundamental drivers of institutions, he said.
Constitutions, courts, elections, and assemblies are not all that a democracy needs to function. Genuine democracy is government of the people by the people. People, not courts, shape the norms. Democracies live outside courts and elected assemblies. People who belong to different political factions, who practice different religions, and who have different histories within the history of their nation, must listen to each other and learn to live together democratically. Therefore, what healthy democracies need most of all are ongoing processes of democratic deliberations among citizens.
The right to freedom of speech is cited as a fundamental right in a democracy. Therefore, no one, not even the government, should curb the right of anyone else to say what they wish to. Technology was expected to provide solutions by enabling everyone to participate in debates about what matters to all. However, social media has resulted in a cacophony of voices and more divisions. Governments and courts in democracies are struggling to rein in social media democratically.
India’s beauty is its diversity. Democracy’s essence is the right of diverse people to live as equals. Citizens have rights in democracies. They have responsibilities too. While democracies must give every citizen the right to speak, democratic citizens have responsibilities to listen to others’ views too.
The design of democratic institutions has so far concentrated on its vertical structures, for upward representation and downward governance. To preserve democracy in this century, reformers should focus on designing lateral processes for democratic deliberation amongst citizens, founded on the discipline of listening to ‘People Not Like Us’.
I will now summarise the two core ideas for institutional reform in two pictures.
One core idea is that the world must urgently evolve better institutions of both capitalism and democracy founded on a new Enlightenment. I hope India will take the lead in developing new ideas and not be dragged further into gloom by the widening darkness within the old European Enlightenment.
My discussion with Nani Palkhiwala forty years ago, about the rights of workers vis-à-vis shareholders of Tata enterprises, set me off on learning a journey in the evolution of institutions, which continues. From the world of business when I was with Tatas and management consultancies, the scope of my learning widened to the world of national governance when I was with the Planning Commission of India, and then onto matters of global governance, with the UN Global Compact and the Global Solutions Initiative.
Institutions of both, capitalism and democracy, must evolve together. The principle of property rights, that “possession is nine-tenths of the law”, which is the power principle of capitalism, has been embedded into systems of governance on all continents for thousands of years. The principle of human rights, that every beating heart has an equal right to freedom, is very recent. In fact, equal rights under the law for all humans have not yet been granted even in all constitutionally democratic countries.
The democratic principle of equal human rights must be vigorously applied at all levels of economic institutions to correct the imbalance between capitalist rights and democratic rights. This is the 21stcentury’s agenda for further evolution of institutions.
· The principle of human rights must apply in redesigning the governance of business institutions.
· It must also be applied in framing national economic policies.
· And it must be applied to make international governance institutions more democratic, and make the rules of trade, global finance, intellectual property rights, more equitable and just.
The second core idea is that democratic Constitutions, whether of nations or of international institutions, must ultimately be the will of “We the People”: the words with which the constitutions of both the US and India, the world’s largest democracies begin.
Institutions incorporated in Constitutions—which are elected assemblies and courts—are institutions for governance OF the people from above. Genuinely democratic government is not just government OF the people. It is government BY the people too.
The US Supreme Court has ruled that it cannot over-rule the Constitution: only an elected assembly can. The Indian Supreme Court had gone even further, in the landmark case that Nani Palkhivala had argued before it, to rule that even an elected Parliament cannot change the basic structure of the Constitution.
Constitutions are expressions of what we the people want and the principles by which we will govern ourselves. Even basic concepts like liberty, and secularism, and socialism, continue to evolve.
The US Supreme Court, while overturning women’s rights to abortion, said that: “The permissibility of abortion, and the limitations upon it, are to be resolved like most important questions in our democracy: by citizens trying to persuade one another and then voting.” I repeat: “The most important questions in our democracy must be resolved by citizens trying to persuade each other, and then voting”.
Democracy begins before the ballot box; and democracy lives outside election cycles and elected assemblies. Democracy comes to life when citizens with different beliefs and different needs listen to each other; and when they understand each other’s views and realise others’ fears and needs.
Finally, I end with my poem, titled “Listen to the World”, which is a plea to listen rather than speak.
LISTEN TO THE WORLD
It is time to press the pause button; put our smartphones on silent;
Shut out the tweets, trolls, and sound-bites;
And stop the windmills in our minds.
It is time to listen.
To listen to the whisper in the trees; the caring in our hearts;
And most of all, to the voices of people not like us.
Then we will learn and find solutions for living together on this earth.
Thank you for so patiently listening to my aspirations for the quality of my country by India@100.
Arun Maira
15th August 2022
(Text of Nani Palkhivala Memorial Lecture delivered on the 75th anniversary of India's Independence, hosted by Nani Palkhivala Memorial Trust).