Friday, Oct 31, 2014

The pragmatic PM?

Modi is market-strategic, not market-ideological. Modi is market-strategic, not market-ideological.
Written by Ashutosh Varshney | Posted: August 22, 2014 12:43 am | Updated: August 22, 2014 4:35 am

As in art and literature, in politics, a leader is defined by tropes, not details. A variety of themes ran through the novels of the late Gabriel Garcia Marquez, but magic realism came to distinguish his craft. A raga allows the artist flights of musical imagination, but she too must return to the basic structure of the raga.

Prime Minister Narendra Modi has spoken on a host of matters since coming to power three months back. Have the tropes of his vision and strategy started emerging? Let me suggest that pragmatism, as opposed to ideological correctness, is the clearest emerging trope.

Consider two critical examples. The first is economic. Is Modi’s vision an instance of free-market economics, or what in all non-economic circles is known as neoliberalism? Many had predicted that Modi would unshackle entrepreneurs and unleash “animal spirits”, the metaphor that best captures a neoliberal embrace of markets. Modi’s critics, especially on the left, also feared such a denouement. Both the right and left are wrong.

Just what is neoliberalism? It entails freeing entrepreneurs of state controls, privatisation of public-sector firms, reliance on the price mechanism, celebration of the profit motive, government provision of a legal framework that facilitates competition between firms, and government’s direct economic role confined to a conservative monetary and fiscal policy and to public provision of goods and services that private entrepreneurs would not find profitable to supply: for example, rural and urban roads (not highways), schools for the poor, sanitation, environment protection, defence. To paraphrase Adam Smith for India, it is not from the benevolence of the sellers of grain, salt and spices that we get our meal. We need to eat, so we pay for the grain, salt and spices; the sellers need to make money, so they sell us what we need for a profit. In this vision, self-seeking, via the invisible hand of the market, benefits all.

How does Modi fit in? His Independence Day speech scrapped the Planning Commission, laid out a “make in India” manufacturing paradigm and emphasised sanitation as a national mission.

The end of the Planning Commission certainly goes in the neoliberal direction. But “make in India”? Though aimed at enthusiastically attracting foreign investment, foreign investors are not promised a free hand. A red carpet will be laid out if they export. But they are less welcome if their aim is to capture domestic Indian markets.

This is not a neoliberal vision, but one that is part South Korean and part Chinese, two of the leading recent examples of rapid industrial transformation. After Park Chung Hee’s rise to power in 1961, South Korea’s government provided its industrialists, especially the so-called chaebols, all kinds of support so long as they exported feverishly. This strategy, combining government’s strategic control and markets, turned South Korea into an industrial powerhouse. In 1961, South Korea’s per capita income was the same as India’s. South Korea is now a continued…

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