Between the Ayn Rand discussion Manish’s post kicked off a few days ago and the fisking of Dr. Patnaik cited on IndianEconomy.org, I figured I oughta finally commit to a post that’s been rattling in my head for a few months – the startling parallels between the fictional, dystopian economic world Ayn Rand outlined in Atlas Shrugged and real life Indian history.
Now although I’m one of those Desi dudes who cites Atlas Shrugged as an all-time favorite, I’m far from a Randroid. I readily recognize that getting too literal runs headlong into a more, uh, empirical assessment of the human condition. But, I’m also more than willing to give Rand credit – especially writing in the 1940s and 1950s – for being more right than wrong about some of the biggest issues of the day. Doubly so because, given the intellectual zeitgeist of the time, Rand was decidedly a contrarian. The example of the License Raj – India’s economic regime “progressively” enacted a scant few years after Atlas Shrugged was published (1957), and to some degree of Intellectual fanfare, gives us the latest, almost depressing example of how Indian fact can be more extreme than Western fiction.
In the novel, a key milestone as the world plummets into dysfunction and chaos is the passage of the innocuously titled Directive 10-289 by the government. It opens with a rather lofty goal –
“In the name of the general welfare to protect the people’s security, to achieve full equality and total stability…
Almost from the outset, it’s hard not to observe the obvious parallels between Rand’s fictional preamble and the opening lines of Dr. Patnaik’s polemic about the need for guarantees for less privileged rural folk. A few specific excerpts from Directive 10-289 carry this outsized focus on stability to a certain logical end –
Point One: All workers, wage earners, and employees of any kind whatsoever shall henceforth be attached to their jobs and shall not leave nor be dismissed nor change employment, under penalty of a term in jail…Point Two: All industrial, commercial, manufacturing, and business establishments of any nature whatsoever shall henceforth remain in operation, and the owners of such establishments shall not quit, nor leave, nor retire, nor close, sell or transfer their business, under penalty of the nationalization of their establishment and of any or all their property.
Point Three: All patents and copyrights, pertaining to any devices, inventions, formulas, processes, and works of any nature whatsoever, shall be turned over to the nation … the Unification Board shall then license the use of such patents and copyrights to all applicants, equally and without discrimination, for the purpose of elimination monopolistic practices, discarding obsolete products and making the best available to the whole nation…
…Point Eight: All cases arising from and rules not specifically provided for in this directive, shall be settled and determined by the Unification Board, whose decisions shall be final.
Abit too extreme? Perhaps, but not entirely. Memories – particularly economic and legal ones, and particularly when dealing with intentions many on the Left find admirable – run hazy. Depressingly, we don’t even need to go back too far into Desi economic history to find a situation where 10-289 played out almost exactly. First, a little background on the License Raj –
…Nehru chose the goal of economic self-sufficiency with economic development to be achieved by central planning modeled on that of the Soviet Union. By cutting off imports India gave a protected market to domestic producers.
…The planning and adminstration of the economic did not emerge full blown. The first five year plan, 1951-55, called for the planned development of only a few industries, the one that private industry had not developed for one reason or another. In the first five year plan the other industries were left to the market.
It’s in the second 5-yr plan where you start retreading chunks of 10-289 almost word for word –
The second five year plan (1956-1961), the product of P.C. Mahalanobis’ work, was more inteventionist. It tried to implemented the terms of British socialism and combine them with the tenets of Mahatma Gandhi. It tried to eliminate the importation of consumer goods, particularly luxuries, by means of high tariffs and low quotas or banning some items altogether. The large enterprises in seventeen industries were nationalized. License were required for starting new companies, for producing new products or expanding production capacities. This is when India got its License Raj, the bureaucratic control over the economy. Not only did the Indian Government require businesses get bureaucratic approval for expanding productive capacity businesses had to have bureaucratic approval for laying off workings and for shutting down. When a business was loosing money the Government would prevent them from shutting down and to keep the business going would provide assistance and subsidies. When a business was hopeless an owner might take away, illegally, all the equipment that could be moved and disappear themselves. In such cases the Government would try to keep the business functioning by means of subsidies to the employees.
… The Indian Economic Plans had to be financed and this often meant taking resources away from agriculture and giving them to favored industries that were not viable on there own. Ultimately this meant starving agriculture to feed inefficient industries the Government favored. Such a program was not likely to alleviate poverty and so in 1971, under Nehru’s daughter, Indira Gandhi, the Government tried to eliminate poverty by promoting small, labor intensive enterprises.
…The net effect of the Government programs was to take away resources from agriculture in the countryside to give it to favored businesses in the cities. When the effects on agriculture and the countryside became significant the plan added programs to help the countryside (labor intensive small businesses) and programs to aid agriculture such as a fertilizer subsidy.
…In a nutshell, the Indian Railways Minister, a Mr Prasad, has refused permission to import railroad wheels into India, preferring to establish a factory in his home state of Bihar to make India self-sufficient in their production.
..Analysts predict that it will be many years before India can produce enough wheels to meet demand. The shortage has left 20,000 carriages awaiting wheels, and a similar number of old ones requiring replacements.
I strongly believe that India should have opened their economy long time ago, around the time China was. However, in early stages of India economic growth (1940-60s), it needed a strong guided, somewhat protected growth. Otherwise, it would have run over by the “wolves” again. Japan did same thing after WW II. You have to give yourself an incubation period. In India’s case it just went little too long. USA can be/ is very protective of itself when its wants to, for example, CNOOC and Unocal, Congress’s over-reaction.
NehruÂ’s five plans, visions for IITs, huge steel plants, space programÂ…Â…..they all laid the solid framework for what you are seeing as IndiaÂ’s slow, powerful, emergence.
That is why I get little miffed when everything from 1940-70s is written off just because of some “nutty” writer.
FYI – for those who can access McKinsey’s portal – here’s an interview with Dr Singh. If I get the chance I’ll summarize and contrast against the above post = but you’re welcome to do so.
Are you suggesting that Indian-Americans are the one’s who will “save” India? Not Indians living in India?
Thanks for directing us to Dr. Manmohan Singh’s interview. I am very impressed by his articulation, like “you have to be a politican long enough to be a statesman”, “greatest asset of India is IITs/IIMs”.
Me, and most of my childhood buddies are doing business/ science in India even though we live in States for deeply personal reasons (for some economic opportunities too) but none of us are the “heroes”
No, in the book, disappearing into Galt’s Gulch was about bailing to save themselves and live their ideal economy.
It’ll def. be Indians in India. But the principles / examples they are pushing the country down are rather directly embodied by the Indians in the US — markets, individualism, initiative, etc.
I have to get this off my chestÂ…Â…Â….
One of my Uncle (my mother’s brother) was in USA in 1940s at U. Minn as a visiting scientist and then went back to India. My parents were in States in 60s at one of the best schools here. I do not think they thought in “Ayn Randian” terms.
My uncle used to say, “America absorbs the best, worst, and lot of medicores too”. He was very true. Incredibly humble and a decent man. He had equal-footing friendship with at least 3 Nobel Laureates. He was one of the nominees for Henry Taube (1983 Nobel Prize in Chemistry) to the Swedish Academy.
To each its own.
I correct:
He (my Uncle) nominated Henry Taube for Nobel Prize. You have to be very respected in the field to even to do that.
I shan’t try an eloquent hand At fending off brewing lambastes. My sole words, as I take the stand Are, Vinod, this post KICKS ASS!
However, in early stages of India economic growth (1940-60s), it needed a strong guided, somewhat protected growth.
Did it hurt when you pulled that out of your arse?
The prev. comment was a reference to comment #1. The Nehru apologists just craze me up.
Interesting analogy to second renaissance Vinod. Though one could say, the whole license raj fiasco was the ‘original’ second renaissance borne out by Indians in India looking to the west and changing. Fashionable ideas in the west got transported to India (fabian socialism, meteoric rise of russia within a very short period post WWI). Time will tell whether this round of renaissance centered around free-markets, individualism etc. will work out.
Great post, V-unit.
This bit:
When a business was loosing money the Government would prevent them from shutting down and to keep the business going would provide assistance and subsidies.
Reminded me of Reagan’s comment on economic leftists:
The government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
That frightening dystopia is what India is finally escaping now. It is mystifying to me why people would think that India needed to be “protected” and held in stasis for 40 years. How exactly did 1947 to 1989 “prepare” India for the boom in 1990-the present? Singapore and the East Asian Tigers needed no such “preparation”.
I think Nehru had much bigger fish to fry in the ’40s to ’64. The stability and continuity of the Indian union which was close to breaking apart on linguistic/religious issues, democratic and secular foundations etc. were laid during Nehru’s time. I think India was lucky to have someone like Nehru as a PM who was free of corruption, secular and could rally the country to stick together. The economic policies were unfortunate and with hindsight every amar, akbar and anthony can say should have been avoided. Indira gandhi (post 1966) on the other hand should take the entire blame for economic failures and undermining a lot of the democratic and secular principles her father stood for. At least Nehru and his finance guys was going on economic principles that had worked elsewhere and they had no previous data on Independent India to compare to.
Not to go into shouting matchesÂ…Â…Â…
I write NSF proposals with Indian organizations and getting permissions/ letters from them is still very, very difficult. At those times, I wish there was never a license raj. I am not a Nehru apologist. But still, you have to give credit to the vision.
A lot of East Asian economies (Japan, South Korea, Taiwan) were strongly supported by US through Marshall Plan and its derivative for decades. Singapore-UK connection. Most importantly, you have to admire their will, discipline to be the best in the world (Nothing to do with Ayn Rand). Confusianism, definitely yes.
One of my family member is Taiwanese-American and I strongly admire their work ethnic. Again, it has nothing to do with “Ayn Rand” (hint: the subject of this post).
Strangely, India had none of those.
PS: This is my last post on this subject.
Why slog when you can Cheat
Reminds me of the old woody allen joke. After taking a speed reading course, woody finished War and peace in 3 hours. Someone asked him, what he thought about the book. He says – ‘it’s something about russia’
Kush: I must apologize for my earlier crude comment; but many of your ideas (and those of babloo et al) follow the standard apologist line;
a. SouthEast Asian countries have more of a work-ethic. They have great discipline. They also have a large penis. (oh wait!)
I really shouldn’t comment on this, but I’ll just add that imputing the properties of a forced-upon system like our socialist state by your visionary Nehru onto the citizens does not make sense. Desis in other environments work as hard and have as much of a discipline.
b. Nehru was a great visionary, albeit not in hindsight.
hehe…
c. He had to deal with a fragmented nation.
Though I’m an atheist, I thank God for Sardar Patel. If we had had to make do with Nehru “dealing” in that too, then…
d. He established IITs, IIMs didn’t he?
Oooh, he established an institute which has become reputed because it enrolls in the top 1% of a country of a billion people, and also because it HAS NO GOVT CONTROL. The irony kills me.
Apology, accepted. No worries………..
Nehru visited MIT, and he wanted MITs in India. I do not believe in “personality cult worship” be it Ayn Rand or Nehru. So I will keep my mouth shut on Nehru. I will place Sarder Patel over Nehru for his hard-headed realism. Sarder Patel was a man of guts.
Rather, me going into the history of IITs, space programs in India, etc.. Why don’t you research yourself on the internet?
The reason I bought IIT is that India’s greatest strength is their “knowledge”. We do have oil like Middle East or discipline like East Asia and will never have it.
East Asia is a different ball game. All East Asian econimy have become “world leader” through government intervention. I do not think India will work that way. I think US model is more applicable to India.
Correction:
We do not have oil like Middle East or discipline like East Asia and will never have it.
Funny – this non-Randroid has also long thought that there’s a lot in common between post-Indepence India – particularly from 1947-1991 – and the statist dystopia depicted in Atlas Shrugged. That’s probably why Rand, in spite of her bombastic moralizing and subpar skills as a novelist, has a sizable following within the country. There’s even a large IT firm in Bangalore (mentioned in a recent NYT column) called Jaisim Fountainhead.
Btw, anyone who suggests that Nehru’s approach to economic development was the same as that of the Japanese – or the South Koreans or Taiwanese, for that matter – is speaking from a position of ignorance. To see what I mean, just compare the GDP growth rates of India and these countries during the Nehru years and afterwards. While the now-prosperous states of East Asia may have engaged in some protectionism and provided state support for favored businesses, they also had a respect for the private sector, low taxes, flexible labor laws, and (relatively speaking) limited regulation and free trade that Nehru, Indira, and the Marxist tools surrounding both of them clearly lacked. Not to mention that these countries preferred to spend government funds on building a modern public infrastructure than on populist social welfare boondoggles that mostly enriched corrupt politicians and bureaucrats.
Yes, Nehru does deserve credit for the IITs. Too bad that his economic policies, along with those of his equally idiotic daughter, guaranteed that many of the brightest products of these colleges would leave for greener pastures.
Looking at recent developments, with privatization and labor reforms being halted and the government committing itself to a massively wasteful rural employment scheme (passes with unanimous support in Parliament), it seems that the bad old days aren’t entirely over.
I think US model is more applicable to India.
There’s probably some truth to that. Central planning doesn’t seem to suit the culture very well, but the culture does seem to have a good knack for thriving in chaos. Just look at the IT/BPO industry. Or for a micro example, the way that traffic regulates itself on Indian roads. Now if only the government would learn to respect that cultural strength – building a decent infrastructure, providing a few basic services, and otherwise getting the hell out of the way.
I also apologize if I have been rude to anyone.
Definitely, chaos is our blood and we should use it to our advantage.
it has been 10 years since i read atlas shrugged.god knows how many more years it will take to understand that galt’s gulch is america.
I don’t think many thought in Randian terms explicitly but the immigrant “I will succeed on my terms” mentality certainly correlates.
One can participate in markets, capitalism, etc., for ex., without necessarily thinking of it in “Adam Smith” terms.
I do agree with that. I also believe unless a lot of pressure (internal and external) is put, India will not free itself of license raj that easily.
Peace.
Great blog entry vinod.. wish I had more time to read all the links and the article in detail…
In india there are so many corrupt politicians and politics that you see many trying to find a “galt gulch” to hide and survive… Most private companies in india do well than govt. institutions because these private companies have their own “galt Gulch”
But unfortunately govt. institutions get a first preference over most contracts when a job has to be done. If govt. organisations cannot do the job they go to private companies within india ( like bihar railways) and when they realise its mission impossible to handle the job then they look for foreign companies. This whole process goes in that order and thats why it takes a long time to get things done in india..wish they realise their limitations and outsource the job if they cannot manage it inhouse and save time and waste of money…
Two books I havent been able to finish for the obscenity – Evelyn Lau’s Runaway and Rand’s Atlas Shrugged
While I’m an all-out supporter of liberalization etc, I agree with Kush’s assessment of India needing some level of protection initially.
You really think the West would actually be fair to India in trade and liberalized economy and help it grow? Take a look at the post on using Indians guinea pigs for medicines. That’s all the Western business cares about India, if unchecked, as a dumping ground and as a lab for their dirty work.
No, I’m not a Nehru apologist and stuff. (and seven-six, any rude comments and you’re gonna start a flame war here :). But I think at this point we are at a better position to do business with the US and still hold our own.
My memories are only of 70s on. And there was one phrase of Rand that summed up India of 70s, 80s, & now Manmohan Singh’s regime; not sure it’s from Atlas or Fountainhead. Something to the effect: It’s very difficult to control honest people. If you are after power, you better turn honest into guilty. Have laws that cannot be lived with without breaking – so you get a lot of “criminals” to arm twist.
That’s what 70/80s & Mr Singh’s regimes are about.
Every single time you see a previously scarce commodity turning plentiful in these boom times, you notice this sector has had much less government than it used to. I don’t know how those seeking government “protection” reconcile with this observed fact.
There was a mention of Mahatma above as inspiration for our socialists. He was way too smart guys – he wanted decentralization, your socialists wanted centralization (hence power).
Someone quoted a Manmohan Singh homily above: “greatest asset of India is IITs/IIMs”. That’s why he wants them killed with more admissions on the basis of (OBC) birth rather than competence!
Get it right, Guys. Singh clicked last time because there was an N Rao who understood politics. No such protection now – & you see him helpless. Incidentally, Singh was also high official during our worst socialist days – including as RBI governor.
Another comment above: “You really think the West would actually be fair to India in trade and liberalized economy and help it grow?” Why the hell you expect them to – then or now? The booming sectors are there in spite of any help from either West or local govt.
A comment on Lalu above: “vanity of indigenously produced”. Friend, it’s nothing to do with vanity. May be a bit of incompetence. But mostly it’s about power & corrupt money. Our railways kill a half dozen people DAILY in B’by alone! You feel lucky to have got a ticket 2 months in advance – & railways get to enjoy your money for 2 months for free! You expect sane public spirited behavior from them?