Indian capitalists have a reputation for being corrupt: Vivek Chibber

Published: May 6, 2013 - 17:21

Face to Face with Vivek Chibber, Associate Professor at New York University

Sanjay Kapoor and Sadiq Naqvi Delhi 

Best known for his highly acclaimed book, Locked in Place: State Building and Late Industrialisation in India, which critically evaluated the Indian capitalist class and its relationship with the State, Vivek Chibber is an associate professor at New York University. In this interview with Hardnews on the sidelines of the recent international Historical Materialism conference at JNU, New Delhi, Chibber talks of his new book which attacks the fundamental premises of Subaltern Studies, the need for public sector enterprises and State intervention on the side of the poor majority, and India’s journey to free market capitalism. Excerpts:


In your book Locked in Place you compared India’s planning experience with that of South Korea. Don’t you think that these were two different systems with different ideologies? Also, through the licence raj, the government controlled the direction of India’s industrialization quite like what you have stated worked in favour of South Korea.
The licence raj was extremely beneficial for big industrial houses. It allowed them to grow at an enormous rate without any effective competition. The Indian finance regime did not suffocate Indian capital. It was a massive transfer of public resources into private pockets. What differentiated South Korea was that the State not only gave their capital into industrial production, they not only gave them enormous subsidy, but they also forced them to continue to reinvest in latest technology and become dynamic in those protected sectors.

The first misconception is that the Koreans didn’t build indigenous capacity for their own people and didn’t have too much control for they were an open economy. This is completely untrue. They were as closed as the Indian economy for imports. The second misconception is that Korea succeeded because it had an authoritarian dictatorship and that aided effective planning. It is one of the greatest myths. It is the biggest myth among intellectuals that planning requires a dictatorship. Two of the most effective planning regimes, and, mind you, there were only a few effective planning regimes in the whole world, were democracies. One was Japan and the other was France. This idea, that you need a dictatorship to do it, is a legacy of Cold War anti-communism.

So, Korea’s success cannot be hung on an authoritarian political system. It hung on the fact that the partnership that the Korean industrialists had worked out with the State, that partnership was conducted on different terms than the partnership that Indian industrialists cobbled together with their State. In the Indian case, it was a partnership in which the Indian State was enjoined to give enormous assistance to industry but without the capacity to demand performance. In the Korean case, the State did give a lot of assistance to  industry, but had power to compel performance in return. Monitoring and enforcement was the key. In my book I call it the power to discipline.

In the punchline you could say that all policy regimes in the post-war era were expected to subsidize their industry so that industry could grow. Most policy regimes also tried to impose some discipline on them, so that industrialists wouldn’t just get a free lunch. In most cases the industrialists revolted against attempts to discipline them. In most cases, they succeeded. Korea and Taiwan were the only two places where they did not succeed and their planning worked. I wrote this book because I wanted to show that success or failure depends on political conditions, that is, the kind of partnership that is worked out between the State and private industry. 

What about the criticism that the public sector squeezed out the private sector?

Again, there was a misconception that the State enterprises were encroaching on the domain of private industry. In fact, in India, the State enterprises from the 1940s to the 1970s only went into those sectors where private industry never wanted to go. So, far from being a threat to private industry, they were simply taking the step in those sectors that were considered non-popular.

Private industry drew a map where it wanted to expand; those areas that it left empty, the State had to take up the burden. State enterprises not only went into the sectors that were considered unprofitable, but the way they were run it was almost an implicit subsidy to private enterprises by providing inputs at very low cost. By being an artificial source of demand, they were never run in such a way that would constitute a threat to the private sector. After Indira Gandhi’s term in the 1970s, even though the rhetoric was one of socialism, this philosophy of being subservient to the private sector was actually strengthened. Till the 1970s, the Indian public sector was quite efficient. But, after the 1970s and in the 1980s, Indira Gandhi, through her populism, refused to let private industry die a natural death for they were inefficient in order to avoid employment losses. And the State sector ended up expanding through the nationalization of failing industry. The private sector saw it as a great bet that they could run down their factories and, once they became inefficient, the State would come and take over. Once the State took them over, it got this awful reputation of having inefficient enterprises. But they were inefficient because the private sector had run them down. 

Public sector enterprises are now judged by the criterion of profitability. Do you think this is correct?

It is perfectly justified to excuse public sector enterprises from being judged on the criteria of normal profitability. There are a couple of reasons for this. Even in a private sector economy, it is perfectly legitimate to start up public enterprises on a less than normal profit basis. The reason for that is, private sector enterprises are started on the expectation of profits, but profits don’t reflect need, they reflect purchasing power. Many aspects of individual lives among the poor require the purchase of goods for which the poor don’t actually have the money to back them up. Every government faces a choice. If the poor don’t have the money to back up their needs, do we leave those needs unfulfilled? Or do we as a community step in and fulfil these needs even at a loss to the public exchequer?

If you believe that the payment of tax entitled you to certain rights for the broader community and if you believe that there are certain goods which the people should have as a right — for example, healthcare, childcare, a minimum standard of living — then the government not only has a right to set up enterprises which provide these goods cheaply, but an obligation to do so. So, if the private sector refuses to go into lines which are deemed necessary for a person’s well-being, than the government is under obligation to do one of two things. Either set up enterprises which may have to run on a loss or compel the private sector into those lines. This whole ideology that the public sector has to run on the same models of profitability as the private sector is a ruse to run them into the ground so that they can be bought up by the private sector.

The UN has issued charter after charter that healthcare is a right. The problem with India is that you have 60-70 per cent of the population living in dire poverty. They are not going to be able to pay the fees that private sector hospitals require for profits. The Indian State has implicitly said, okay, we are going to let you live in near-death conditions. We will give you the worst health conditions, which are as bad or worse than equatorial Africa. Is there any justification for this? Until we go beyond this ideology that everything has to make a profit, we are confining hundreds of millions of people to a miserable life. 

What is your view of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS)? Do you think this can help in increasing the purchasing power of the poor?

These programmes are probably not going to get very far. Even if you look at the fortunes of MGNREGS, it is pretty clear. It was implemented. It had a pretty good success rate, but now it’s dying slowly. The reason why it is dying is simple. These schemes, in order to be effective, require serious political backing. Because, once you get into rural areas, effectively, what you are giving rural proleterians, rural wage labour, is some degree of independence from the economic agents who exercised control over them. And they are not going to take that very lightly. The main criticism of these schemes is that they buckle under corruption. Because it has become such a haven for the upwardly mobile middle class, the removal of corruption as a malady of the Indian economic problems is highly exaggerated. The real barrier to MGNREGS or a free medicine scheme succeeding is not corruption but the complete lack of power and representation of the poor in the political system. Even if you do away with all the corruption in the system, as long as the poor do not have political backing, political power, political organization, these schemes will fail. 

We have political parties like the BSP that promise precisely what you want done... .

Absolutely. There are lots of parties which call themselves Dalit parties, OBC parties. The BSP is based on the Dalits, it has extended some schemes for the Dalits, but it’s mainly patronage. It’s top-down. It is not geared for self-mobilization or organization. It is a phenomenon which in many ways is positive. I don’t want to say it’s a step back and it certainly does represent a taking away of power from the traditional Brahmanical forces, but it has not led to what I would call a necessary component for the steady improvement in the conditions of Dalits, tribals and adivasis, which is that they have to have their own autonomous political and economic organization on the ground to fight for their rights. The parties representing them are ones in which they depend on largesse and patronage coming from their leaders and that is not an effective and viable strategy for long-term empowerment. 

There are studies that indicate that, during the BSP rule in Uttar Pradesh, the Dalit villages managed to gain a lot from government schemes. 

I think that is true. Relative to the upper-caste parties, there has been an improvement. But it’s limited because of the top-down structure of these parties. Mayawati and her party are not the answer. These are very top-down authoritarian parties, and we must face this. Caste is an organizing principle for politics in India. Caste, however, does not drive the Indian political economy. Political economy is a wider set of structures than politics. When we say caste is an organizing principle for politics, what we mean is this: parties and political organizations often rely on the caste system and caste organization in the electoral process and in mobilizing people. I do not think that the trajectory of the Indian economy or even the Indian political process, more generally, is driven by caste. It is driven by the logic of capitalism, by the encroachment of market into a greater and greater domain; the way in which the market has dissolved all the older forms of servitude and domination in some places strengthened them in others. Politics always has to respond to structural changes that the market economy brings into existence. It virtually never engineers those changes by itself. Caste is a way in which politics is organized in India, but that organisation is put into effect as a reaction to the changes being brought about by the market,
by capital. 

What is your new book, Post Colonial Theory and the Specter of Capital, all about?

My new book is on the shift in the intellectual firmament since the 1990s. It is related to my previous book. If you believe that, with liberalization and globalization in the past 20 years all around the world, the result has been an expansion of the market in rural areas, into new parts of the economy that used to be demonetized by the public sector, then you must acknowledge that what is happening is the universalization and generalization of capital everywhere. The dynamics of economic growth in India are being governed by the same forces and same logic as the dynamics of growth in England or the US. They are not identical, but the forces driving them are the same, which is the market economy, the industrial economy. This means that the categories of political economy which come out of Adam Smith, David Ricardo, Karl Marx, are increasingly applicable to India just the way they are in the US. In the past 20 years, the body of thought mainly written by Indian intellectuals stated that all these categories are Western categories and they have no real connection with the Indian reality. My book is a reaction to that.

I am trying to show that just because some ideas are Western doesn’t mean they are useless for studying non-Western countries. In constructing these arguments, what’s known as Subaltern Studies, they are actually resurrecting colonial and highly racist ideology saying that the East is so different from the West that it needs its own science and its own analytical framework. They claim that the notions of rights, democracy, liberalism, capitalism, profits, these are all Western notions. People like Ashis Nandy have been saying this for a very long time. My book is intended to show that their arguments are rubbish. They have been uncontested for 25 years. 

What is your take on the Indian capitalist class?

Capitalists are the same everywhere. They respond to opportunities. Indian capitalists have a reputation for being corrupt, for being nepotistic, for not taking risks, but that’s the same everywhere. The American and British capitalists are the same.   

Face to Face with Vivek Chibber, Associate Professor at New York University
Sanjay Kapoor and Sadiq Naqvi Delhi 

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