Dr. Manmohan Singh, the time has come for you, your government, and India, to make a seminal contribution to the world. You have the mind and the heart to do this.
BusinessWeek asked the question, on its cover page, “Wall Street: How Corrupt Is It?” The Economist had a special report on “Capitalism and its Troubles”. Both journals raised their concerns seven years ago, in May 2002. Though the warning bells were rung then, the party became even wilder, and greed on Wall Street has contributed to a global economic crisis that has shaken up the capitalist system. The Economist had worried then that its warnings would not be heeded because ‘the will to reform may be lacking especially if the world economy continues to recover’. Which it did. Now it is in the doldrums because the reforms were not made.
Dr. Singh, now that you do not need the support of the Left parties, Indian business leaders are clamoring for you to implement their reform agenda. These are the same reforms—to reduce government involvement and open up more sectors for investment—that they had asked from your previous government. A hint that you may do so makes the stock market soar. However the philosophy from which these reforms spring—to increase corporate investments and profits, and GDP—is from the same school of economics that was driving economic policies in countries in the West that are now suffering its consequences. The medicine those countries are now taking to cure their economies is what their economists had so far described as poison, viz. government involvement in corporate affairs. Now 70% of US banks (in terms of pre-crisis capitalization) have some form of government investment; the largest US insurance company is in the government’s ICU; and the largest US auto company is being supervised by government.
Business must be free from national boundaries so that the global economy can grow again. Business must also be free from excessive government control so that it can innovate and expand. But business cannot be free from responsibility for the larger good of society. Dr. Singh, throughout the go-go years just passed, you have quietly and courageously reminded our business leaders of the responsibility that must be theirs along with their freedom. In 2006, you addressed CII’s Annual Meeting and asked our business leaders to voluntarily take up affirmative action. There was a hue and cry from them.. They thought the father of economic reforms had betrayed them. At CII’s 2007 Annual Meeting, you outlined a ten-point plan for business’ responsibility to society. There was more consternation. And in 2008’s Annual Meeting of CII, you laid out an agenda for inclusive growth of the country and invited business to come along.
President Obama has told American business leaders that they are being held accountable by the people, that economic growth in America must be more inclusive, and that a new philosophy is required for business management. That philosophy cannot be ‘first profits and then philanthropy’—a philosophy that Jack Welch, an icon of the era passing by, repeats in an article this month. Because it is how the profits are made that must change. There has to be more inclusion of community interests in business, and more care of the environment. Business’ performance must not be judged only by the profits it makes and the wealth it creates for shareholders. Its management must voluntarily hold itself accountable for environmental and societal measures, else regulations will be imposed.
Economists and business leaders struggle to reconcile the requirements for efficiency and equity. They do not have the models and tools for this. Michael Spence along with other Nobel Laureates on the Commission on Growth and Development end their thoughtful report on ways to increase GDP of countries with a deep concern for increasing inequality. They say it is a problem begging for an urgent solution. Because size and efficiency, which are simpler to quantify, have become central to economic models, whereas equity is a fuzzier concept. Therefore economists need new concepts and tools. Those who speak for business and efficiency must come together with those who speak for inclusion and equity. They do not because they dismiss each other as ‘Right’ and ‘Left’ and do not want to be even seen in each others’ company.
“Reforms must be pro-market, not pro-business, and governments should keep their distance from business and their bosses”. If the Indian Left, or Mamata Banerjee, had said this the thought would be dismissed as stale ideology. But when it comes from The Economist, the staunch defender of capitalism, in a cover story on ‘Capitalism and Democracy’ (in June 2003), even Indian business leaders and right-leaning economists must take note. The Economist says, “In democracies, governments have to be the arbitrators, the counterweights to powerful private groups. But if they allow, or even encourage, companies and wealthy individuals to manipulate them, they risk stretching public faith in democracy to breaking point.”
Dr. Singh, India needs a social and political consensus about the philosophy that will take it to its tryst with destiny. Reform policies must follow from this. Healthy democracies require not just elections. They also require platforms for dialogues to reconcile differences. The democrats of ancient Greece conducted such debates civilly and in public view in city plazas. In India, the Emperors Ashoka and Akbar created councils for dialogue between people with different beliefs. Institutions for public dialogue in the Indian democratic state are not functioning at this time. Parliament now meets less and less, and when it does, its proceedings degenerate into shouting matches and walk-outs. Discussions in our media are set up as ‘big fights’ for entertainment to attract advertisers. Political differences are being settled on the streets.
Fortunately, some seeds for a new dialogue have been sown during your previous government. One is the Indian Institute of Corporate Affairs promoted by the Ministry of Corporate Affairs. It is as an autonomous institution to bring together thought-leaders from business, government, civil society, and academia to evolve new frameworks and ideas for economics and business, and for the reform agenda India needs, and perhaps the world too. In the tradition of Ashoka and Akbar, such dialogues to open-mindedly seek consensus on a new philosophy must be high on your priorities and have your active encouragement.