When the state took flight

As the book says, the phrase itself was first used by Lenin in 1922, as he defended his New Economic Policy. In Lenin8217;s words, while markets would be allowed to function in a small way, the state would control the most important elements, the 8216;8216;commanding heights8217;8217;. This idea traveled via Britain and the Fabians to the newly independent India of Jawaharlal Nehru. This belief that the government must control the dominant means of production and infrastructure was the basis of India8217;s state planning and license-permit era. And even though the reform process of the last 15 years has helped in freeing India8217;s entrepreneurs and reduced the role of the state in our economic affairs, it has always been an uneasy situation, with the reformers themselves often unwilling to take credit, and explaining the steps taken as being forced by a financial crisis or international pressure rather than because it was the right thing to do. But now, with the successful decision to privatise the Mumbai and Delhi Airports, one can say that the era of the commanding heights in India is officially over. Like many seminal milestones in this epic struggle between the state and markets in the modern era, it was marked by a strike that did not succeed.

There was a similar turning point in the United States in the early eighties. In August 1981, at the busiest time of the year for air travel, 13,000 out of 17,500 air traffic controllers went on strike asking for better wages, a shorter work week and better retirement benefits. The newly elected President Reagan stood down the ATCs, carrying on the aviation system using supervisors and military controllers and reducing flights. The collapse of this strike, which did not have popular support, left an indelible imprint on labour relations in the US, and created the image of a strong president who would later take on the Soviet Union.

Similarly, in the early days of the Thatcher era, it was the famous miners8217; strike in 1984 that altered the course of history. It was an epic struggle against coal pit closures led by Arthur Scargill. By the end of the strike, labour relations in Britain had changed irrevocably. This episode laid the foundation for redefining the relationship between the state, markets, management and labour in the UK. Many ascribe the ascent of the New Labour of Blair and Brown to the changes in public mindset after this strike.

We, too, have entered a new era where strikes are concerned. The 24-hour news channels highlighting the woes of inconvenienced citizens have clearly shifted public sympathy away from employees of utility providers. Just like the Gulf War of 1991 was the first televised war that changed the way we looked at conflict, this strike was redefined by the mass media.

The other important aspect is that to a large swathe of the urban population, attention has shifted from private goods to public goods. There was a time not too long ago when one was in a waiting list for two years to get a two-wheeler. Hence the preoccupation was with procuring what we want. Similarly with airline travel being expensive and infrequent, the first priority for aspirants was to get an opportunity to go on an airplane. Today with such conveniences being available and accessible almost instantly for those who can afford it, the focus has shifted to the demand for better roads, airports and power.

Given the rapid urbanisation we are experiencing, there is a strong business case for attracting private capital to build better urban infrastructure, provided there are transparent rules. This in turn will allow the capital with the state to be used for rural and other infrastructural investments that cannot be justified on return alone.

It is becoming increasingly evident that we need good infrastructure, free but well regulated markets, dynamic entrepreneurs, flexible labour policies with a safety net, reasonably moderate levels of taxation and efficient use of our scarce capital to get the economic growth to create jobs for the hundreds of millions of young people who are going to join the workforce over the next decade. The reach of the state must be used to provide access to health care, education and jobs for every citizen and to lend a helping hand to the poorest, the weak and jobless. This leaves no room for the capture of public policy by tenured workers, protected businessman, pampered exporters and a subsidised middle class.

The strikes in the US and UK were bigger, more tense situations. During the 1981 ATC strike, Reagan issued an ultimatum that if they did not get back to work in 48 hours they would be fired. Eventually, 11,000 of them were given a pink slip, and banned for life from working in the profession. The 1984 coal miners strike was an equally traumatic and tumultuous period for the UK. It lasted a full year before it ended in March 1985. It involved close to a 100,000 miners going on strike and over 11,000 being arrested. Compared to that, the airport strike in India was a minor one. It lasted four days, there was no violence, an agreement was reached, the privatisation of Mumbai and Delhi airports went ahead, no jobs were lost, a committee was set up and all was forgiven.

Nevertheless, history will remember last week as a tipping point in the dismantling of India8217;s commanding heights!

The writer is CEO, president and managing director of Infosys Technologies