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Monday, October 18, 2021

The truth in the mirror

Raju’s fall reveals the dangers of our willingness to suspend disbelief about success

Written by Pratap Bhanu Mehta |
January 15, 2009 11:11:48 pm

Even many of those who take the harshest view of Ramalinga Raju’s crimes cannot but feel a sense of sadness at the whole episode. This sense is not simply because of the implications of Satyam’s fall,which have yet to be fully fathomed: what will be its impact on projects in Andhra? How will it affect the signalling capabilities of Indian firms? What will happen to the fate of thousands of employees? For many people in the industry,there is a palpable sense of disbelief: it is difficult to reconcile all they knew about the man and his company with all that is now emerging. But there is something deeper in the sense of regret; something that comes close to implicating us all. While in no way taking away from the enormity of the crimes that have been committed,there is a sense in which Raju is seen by many as a victim of the system,a system that raises serious questions about the pattern of our economic growth.

For all the liberalisation of the Indian economy,there is still a palpable sense in which it remains a remarkably closed social system. Odd exceptions apart,modern India has produced very few rags-to-spectacular-riches stories,at least too few in comparison to the possibilities that should theoretically exist. The opening up of the economy did provide new possibilities to the middle class to leverage some of their knowledge base into entrepreneurship. This supplemented the old pattern of entrepreneurship based on inherited capital or social networks. But transitions from rural or small town India to the pinnacles of capitalism are still few and far between. Breaking open the path of opportunity has,as was the case with Dhirubhai Ambani or Subroto Roy,depended crucially upon brokering power relationships in a new and spectacular way,drawing large numbers of respectable people into webs of complicity. When it succeeds,the results are spectacular,but it is hard to shake off the feeling that the system can even now be prised open only by bending the rules. Raju took the enterprise too far,literally breaking every rule in the book. But it would be difficult not to fall into the trap of assuming that mobility depended upon brokering power,not on following the rules. Raju’s mistake seems to have been to assume that brokering power would allow him to get away with anything.

Second,the word “greed” is often used in this context. An analytically better word might be ambition. As Adam Smith,with his characteristic subtlety,pointed out,“those great objects of self-interest,of which the loss or acquisition,quite changes the rank of the person,are the objects of the passion properly called ambition.” Ambition is quite tied to the craving for recognition by power; it is about changing rank more than it is about money. But we created a system of ranks where there is a premium on being big in at least three respects. In a May Day speech in 2007 none other than Manmohan Singh warned that India’s development had three features. First,many of India’s spectacular companies were in sectors where a collusive relationship between the state and capital mattered a great deal. Second,capitalist development was being driven by a few large houses,and third,that small businesses and consumers weren’t protected enough from effects of “crony capitalism”.

In short,this is not a system of capitalism that rewards steady progression; it doesn’t adequately recognise the need to create a level playing field and create conditions propitious for small business. Consequently,it will redirect ambition towards a pathological obsession with scale. And,in a way,the recognition that political power grants to you can be intoxicating to the point of self-delusion. Again,this is a way to read the stories of Dhirubhai Ambani and Subroto Roy: your ambition in this system has no meaning if it is not big and relentlessly expansionary. Most will not try because it is too daunting,a very few will try and succeed within what come to be considered acceptable boundaries of conduct,but some will overreach and have spectacular falls.

None of this is to exonerate Raju. But it is simply to recognise that the form of capitalism we have will produce characters like this. Corporate India has many fine companies,but we would have to admit that many have probably engaged in practices which,to put it mildly,fall within the darker shades of grey. Is moralising about greed adequate,or are there systematic reasons that produce these kinds of practices? And how is it that we have become comfortable with these practices? One of the surprising things about the Indian media is this: the one virtually taboo subject is subjecting companies to critical scrutiny. When new names crop up,you often wonder how they made it,sometimes in the face of recalcitrant facts. But it is difficult to find any serious analytical reporting on companies. The point is not to treat companies suspiciously; the point is having an analytical base and discourse about companies that is asking the right questions.

We are living in a fool’s paradise if we do not understand the degree to which the state can still structure the form of capitalism in India. Capitalism at least has the virtue that you can fool all people some of the time,some people all of the time,but not all the people all the time. Companies that were running what were effectively large Ponzi schemes have been tripped over by the slowdown,unable to offset current liabilities with future returns. But the state can lurch from one set of collusive practices to the other,all in the name of reform and development. One success of reforms that has often been touted is the fact that capital is not supplicant to the state. Perhaps this measure of independence has been overestimated: the flip side of the coin,the extent to which the state has also become more supplicant to capital,has not figured in reform debates. Capital and State are not antithesis; they will rise and fall together.

Individuals have to bear responsibility. But equally,those individuals are also mirrors to what society values and permits; Raju’s tragedy is not simply that he lied; it is that in doing so he has exposed several of the lies we are living.

The writer is president,Centre for Policy Research,Delhi

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