Tags: Das | Aiyar | India | savings

Cato Experts Conjure with the Indian Dream

By    |   Wednesday, 12 June 2013 02:05 PM

The Cato Institute hosted a book forum on June 11 titled "India Grows at Night: A Liberal Case for a Strong State," featuring a presentation by Gurcharan Das, former CEO of Procter & Gamble India who also worked for Wal-Mart and Mars. Das presented his book titled "India Grows at Night," followed by commentary from Swaminathan Aiyar, a research fellow at the Center for Global Liberty and Prosperity at Cato.

This article will outline the remarks of the presenters, both of whom appeared to me to share a similar pragmatic, optimistic, liberal/libertarian perspective, and will conclude with some observations by about the implications of their views for the United States, which, like India, achieved independence from the British Empire and sees itself as a liberal democracy.

The United States shares with Britain, but not with India, the opportunity to issue a reserve currency, an opportunity that America appears to be fumbling, much as the British did.

Das offered some "gee-whiz" facts to stimulate thought. He contrasted China as a society that has absorbed diverse groups into the dominant Han culture with India, whose society is fragmented into 2,200 sub-castes.

He also compared the extent of the development of the middle class in each country to the extent of a third of the country in India versus a half in China. He credited former Indian Prime Minister Jawaharlal Nehru, whom I recall as pro-Soviet, as a builder of the essential institutions needed for economic progress, based on an independent bureaucracy, police and judiciary.

On the other hand, Das blamed Nehru's daughter, Indira, who was also a prime minister of India, for destroying those institutions and setting back the progress toward a successful economy based on a healthy middle class. He asserted that India is rising upon the principles of economic and political liberty.

I was left unconvinced and wondering why he said this. Usually the reason for such claims can be traced to the optimistic, constructive outlook of a writer such as Das. A more concrete basis for that optimism might lie in the 27 to 28 percent savings rate in India.

The two experts agreed on the basic theme that the government should not be asleep, even at night. Rather, it should support the development of the institutions needed to support economic progress. Aiyar quoted Alexis de Tocqueville as saying that one of the ingredients is the dedication of an hour per work by each citizen to the affairs of their neighborhoods. (The cynical American view is that whenever Republicans try to do this, they place themselves in line for blame. Perhaps a more practical strategy would be to let the Party of Government, the Democratic Party, govern alone and take all of the blame.)

Aiyar developed the point that the growth rate in India has slowed to the neighborhood of 5 to 6 percent from the 9 percent rate he believes it could achieve. He attributed this in part to the effects of a global economic slowdown and in part to a breakdown in the country's "social contract." (Ironically, one of the witnesses at the Senate Banking Committee's hearing on the American Dream made a similar, albeit weaker, argument.)

Aiyar's point is that there has been some progress in making the government more transparent in response to a public outcry against corruption. The unfortunate result is that where the providers of capital used to know that if they bribed the right people, they could get the permits they needed, this is no longer true.

My admittedly pessimistic, cynical view of the U.S. experience begins with the story, perhaps apocryphal, about Benjamin Franklin emerging from the Constitutional Convention and being asked, "Mr. Franklin, what have you given us?" As the story goes, he responded, "A republic, if you can keep it."

Instead, as Tocqueville predicted, over time American democracy devolved into a tyranny, or as President George W. Bush would say it, "tie-ranny." We have constructed an authoritarian, bureaucratic, socialist state run by a junta run by law firms and public policy shops on behalf of their clients on Wall and other streets and avenues of New York.

The American experience illustrates, as has the experience of other countries before us, that a protracted period of bad government, such as we have endured over nearly a century, results in stagflation and a falling standard of living, accompanied by loss of personal freedom.

Thus, in the United States, the policy debate has resolved into a contest between the junta, as personified by JPMorgan Chase CEO Jamie Dimon, which has harnessed the system so that it throws off a stream of subsidies to sustain flawed and failed business models, and the junted, the disgruntled and disenfranchised citizens who unwillingly pay to support "too big to fail" banks as another episode in the ongoing financial crisis, which will lead to yet another bank bailout, looms just over the horizon.

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The Cato Institute hosted a book forum on June 11 titled "India Grows at Night: A Liberal Case for a Strong State," featuring a presentation by Gurcharan Das, former CEO of Procter & Gamble India who also worked for Wal-Mart and Mars.
Wednesday, 12 June 2013 02:05 PM
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