Donald Trump got one thing right. Working class people are hurting. Neoliberal, free market capitalists want financial capital to roam the world, unhampered by tariff and non-tariff barriers. They are unconcerned about the freedom of the world’s human capital—its citizens searching for work and incomes to live, who are being shut out to protect the ‘cultures’ of rich countries. Trump and his corporate friends are hammering on India’s doors again to open its borders to import US corporations’ manufactured and agricultural products, and its services. India’s leaders must rise above US pressures and reflect. What will be best for India’s workers and farmers?
History can be a good teacher. The Washington ‘ideology’ (or ‘consensus’, as it was called) was presumed to have won the ideological war, finally, with the collapse of the Soviet Union in 1991. Free market capitalism had defeated government regulated ‘socialism’. ‘Ease of doing business’ trumped the ‘ease of living’ of citizens.
Private markets were forced on Russia by the US, and its state sector was dismantled, with disastrous consequences. Russia’s GDP shrank by nearly 40% between 1991 and 1998; industrial output dropped; and poverty rose with 30% of the population living below the poverty line by the mid 1990s. Ironically, out of the shambles, Putin, who Western powers dislike, emerged in 1999 as the leader to ‘Make Russia Great Again’.
I give a brief history, with data, of global trade policies and industrial strategies, in my essay in India Forum. (https://www.theindiaforum.in/economy/reimagining-road-more-equitable-india). China and India took different paths in the 1990s. India toed closer to the US anti-socialist, free markets line. China did not succumb to US pressures. It continued the development of a centrally guided ‘socialist market economy’, and to build its industrial capabilities before joining the global game. India’s per capita GDP has grown 7.3 times since 1990. China’s has grown 42 times--six times faster. China’s manufacturing sector has grown nine times as large as India’s; its exports of high-tech goods are 48 times more. Trump wants to “Make America Great Again” by curbing China’s remarkable growth. He says the global trade regime—which the US itself put in place in the 1990s—is not fair to the US!
British economist Adair Turner, delivering the 2010 Lionel Robbins Memorial Lectures, said the time has come to reconstruct economics. Too much reality was being left out of economists’ models for them to explain the world. These flawed models are incapable of predicting the future condition of an economy. With a twist of Keynes’ famous statement, that ‘practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist’, Turner warned that ‘the great danger lies with reasonably intellectual men and women who are employed in policy-making departments of central banks, regulatory bodies, and governments, who are aware of intellectual influences, but who tend to gravitate to simplified versions of the dominant belief of economists who are very much alive’.
India’s economists have two challenges before them. One, to redesign, along with other nations, the structures of the global trade and financial systems to make them fair for all. The other, more important, to reimagine the structures of India’s own economy, and take a new road to create an equitable, democratic, society and achieve the vision of poorna swaraj—a country which provides equal political, social, and economic freedom to all its citizens. The ‘socialist’ model India followed until 1991 was too top-down and controlled by government. The ‘capitalist’ model of the economy it followed afterwards has turned out to be too much ‘trickle up’—inequalities have increased, and incomes are not growing sufficiently in the lower half of the pyramid. India needs a new model of economic growth to strengthen its economy and to make India a more equitable country.
Arun Maira, 28th April 2025
My book, Reimagining India’s Economy: The Road to a More Equitable Society, will be published by Speaking Tiger Books next month.