The pot-holed road

Thoughts about India, the United States, and occasionally, the world at large.

Inclusive growth and its necessary corollary “inclusive loot”

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Ranjan Sreedharan

Thrissur, December 20, 2010

I have always been suspicious of this whole idea of “inclusive growth”. In fact, in one of my essays titled “The fallacy of inclusive growth” I make the point that you only have a choice between fast growth and slow (or less fast) growth, that in practice inclusive growth can only imply slower growth compared to your potential. Recent events in India have added a new dimension to this debate; we now have to seriously consider whether “inclusive growth” is also a façade for “inclusive loot”.

Now that the evidence is out, the logical link that binds the two together is not hard to decipher. Inclusive growth is all about spending huge amounts of public money, ostensibly with the aim of doing good to the poor of the country. In reality, the higher the outlay on such schemes, the greater will be the pilferage and the money lost to “leakages”; the more the budgeted expenditure, the more the money that gets siphoned off.

However, this is not all. A little thought would suggest that when you double the expenditure, the scope for pilferage would more than double, simply because the level of oversight and control that can be exercised over the money spent is not (indeed, cannot be) simultaneously doubled. What this means is that when government spending on any particular scheme is doubled (and in these days of the Sonia raj, there is so much of doubling and tripling all around) it cannot be accompanied by a doubling of the monitoring mechanism or the systems and procedures in place to check corruption. Therefore, where an efficient set-up restricts pilferage to 10 percent out of a budget spend of, say, Rs.10 lakhs, the same set-up would likely see a 15 percent siphoning off when expenditure doubles to Rs.20 lakhs. In this example, in the journey from a Rs.10 lakh spend to a Rs.20 lakh spend, the “leakage” increases more than proportionately from one to three lakh rupees.

There’s another reason why, given time, this would indeed be the case. The fact is, no-one is born corrupt. We become corrupt for a variety of reasons, perhaps the most important of which would be the examples around us of people who are corrupt and who appear to be merrily getting away with it. Because this conveys the very seductive message that it is possible to be on the take without having to pay any penalty. Now, link it to the environment created by an activist government where spending on multiple “welfare” schemes is forever on the rise and which, in turn, generates ever more examples of people around you who are merrily “getting away” with it. Corruption now becomes a self-fulfilling prophecy. Sonia Gandhi was recently heard bemoaning the “shrinking of the moral space” in India’s political class today. Actually, a lot of it is intrinsic to the path she has laid out for the country and, therefore, is of her own making.

Finally, the real price is the country’s future that gets shorted. Despite the leakages, all the money spent does give rise to a sizable constituency of “freeloaders” who are privileged to live off the handouts from the government. Sooner than later, between the “freeloaders” and the “looters” (whose numbers are also substantial because loot takes place at the bottom of the pyramid as well), the numbers swell into a critical mass that becomes a powerful vested interest dedicated to maintaining the status quo, no matter what the larger costs are.

This then becomes a “reform” resistant country where the cracks (when they appear) are promptly papered over and bad policies keep piling up because any kind of course correction would involve making too many people unhappy. And since economics based on delusion has a strictly limited shelf life, matters cannot go on like this indefinitely. Typically then, reform-resistant economies “wake-up” into a nightmare with a full-fledged crisis on hand which now makes reforms imperative. All of a sudden, the political will to carry out reforms is also easier to muster. By this logic, India should soon be running into another “1991” moment, maybe not so severe, but serious enough to give rise to the next set of real reforms − as opposed to the tinkering that passes off for reforms these days.

I believe (and I am unable to resist this) I may have framed a new law about corruption in government circles. In my honour, let it be called Ranjan’s law of corruption in government.


Written by Ranjan Sreedharan

December 15, 2010 at 11:43 am

For a friendly EMI

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One of the reasons why ordinary people who survive on salaries have ended up borrowing so much from banks and financial institutions is the simplicity of the repayment mechanism that goes by the name “EMI”, i.e., Equated Monthly Instalment.

The EMI is a fixed payment amount made by a borrower to a lender at a specified date each month. It is used to repay both the interest and the principal each month so that over a given time period, the loan is fully repaid. In practice, the early instalments repay more of the interest component with the later instalments taking care of the principal amount. The advantage with the EMI is that the borrower knows exactly how much is to be paid towards the loan each month and this makes the personal budget easier to manage. When you get your monthly pay-cheque, you also pay out the EMIs on all the loans you would typically have taken, from the now mandatory home and vehicle loans to the sundry personal loans.

However, as much as the EMI has simplified the business of borrowing and repaying, it also wields an unwelcome and unyielding hold over your finances. The cheques have to be paid on the dot, month after month, no matter what contingencies stare you in the face. If the cheques bounce, you pay more by way of charges and penalties. Salary earners get paid roughly the same amount each month. But, anyone who runs a household would know that expenses are just not the same over the months. It could be the start of a school year when so much extra fee is to be paid out, or a festival like Deepavali when money goes up in smoke, as it were. In the West, this could be the extravagance of the Christmas shopping season or the annual vacation.


Here, then, is a suggestion. Instead of insisting that EMIs be paid religiously every month, the banks can offer a “flexi-EMI” plan, where the borrower is allowed the right to default in one month of his choice every year. In return, the EMI amount will be proportionately increased so that the remaining 11 months will together amount to the annual repayment obligation. For instance, if your current EMI is Rs.1,100 a month, under the revised plan you will be required to pay Rs.1,200 a month for 11 months. The annual repayment in either case amounts to Rs.13,200, but the borrower will now be free not to pay anything during the one month — when you expect your finances to be under strain.

This is the basic plan, and from this starting point, variants can be devised. Thus, if for any reason someone wants a two-month default or “vacuum” option, it can also be worked out. Another version would be to offer the product in two options, one allowing a fixed month vacuum where the month in which the EMI is skipped is pre-defined and the other being a variable month vacuum option, where the borrower is free to choose when to skip repayment. Obviously, the second option will be priced a little higher because a beginning-of-the-period default has a higher interest burden.

Simplicity has a lot to do with why the EMI has become so popular. In that sense, the advantage with the changes I have suggested here is that even as the simplicity is retained, the customer is offered an additional convenience at no extra cost.


(This article was published in the open page of the Hindu on Nov.22, 2009. It is available at the link: )

Written by Ranjan Sreedharan

July 10, 2010 at 12:45 am

Posted in Uncategorized

India’s inflation problem and the elephant in the room

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There’s a lot of talk in the Indian media about why inflation should be so high and the general consensus seems to be that last year’s poor monsoon is the culprit.

Is there an elephant in the room here that we all refuse to see? I mean, isn’t there a link between the high inflation that we are seeing now (particularly food inflation) and the recent vastly increased outlays on social “welfare” schemes? Is it not best understood as the reverberations from that chest-thumping moment in parliament when finance minister Pranab Mukherjee got up to declare so grandiloquently that for the first time, India’s budgeted expenditure would cross Rs.100,000 crores.

Take the example of all that money going down the NREGA drain. This has the immediate effect of injecting a lot of extra purchasing power into the economy without doing much on the output side (neither the short nor the long term). Naturally, inflation follows and this should be a no-brainer. And if you look at the kind of activities financed by the NREGA, they are actually not very far from simply digging trenches only to have it filled up the next day (all in the name of “employment generation”).

A while back I read a news story purportedly about the “success” being achieved by the NREGA. It mentioned that farmers in Punjab were facing a shortage of labour to harvest their crops because of a slow-down in the hordes of seasonal migrants from U.P. and Bihar that earlier used to turn up for this kind of work. And this was because the NREGA, by providing them work near their villages, had made the trip to Punjab less worthwhile. Yes, this is heart-warming stuff.

Unfortunately, economics has very little time for warm hearts. What is actually happening is this. Instead of doing economically productive work (harvesting crops), labour is being diverted into unproductive work (digging trenches), and getting paid in the bargain. It pushes up the costs for Punjab farmers, which invariably finds its way to the government in the form of higher minimum support prices, and it does nothing to increase output in the economy which might otherwise have absorbed the extra purchasing power created. Costs have gone up, output is stagnant, and at the same time, people have more money in their hands.

And this is just so much about what has happened. What is in store for us is perhaps even worse. Wait till the Food Security Bill and its promise of food grains at Rs.2 (or Rs.3) a kilo becomes law. The government will then necessarily have to acquire a lot more rice and wheat from the market for supply to the “poor”. A lot of it will get pilfered or wasted in the logistics and in the hands of the end-user (knowing what happens to things given away for free), and importantly, it will also cut down on the supply available in the open market for purchase by our “aam aadmi”. At this point, it is simple demand and supply.

Anyone who has a doubt about what I have just said should feel free to look up the inflation rate in Venezuela where our Comrade Chavez has lately been into a lot of social “welfare”.

Written by Ranjan Sreedharan

July 9, 2010 at 12:26 am

Posted in Uncategorized


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With America in crisis, there is a lot of talk about the alternatives to the American way. Even within America, people have begun to sit up and take notice of the way things are done in Western Europe. And some look wistfully towards the more egalitarian model of the Scandinavian countries.

As an outsider, and as an Indian, here are my thoughts about the Scandinavian model being the sensible way forward, in preference to the “crisis-exposed” American way.

At the outset, I must confess to some prejudices in favour of America. The fact is, even as I live out my life thousands of miles away from both America and Scandinavia, not a day passes when I am not grateful to America (and to Americans) for some aspect of my life that is now infinitely better thanks to their talent and creativity. I really cannot say the same for Norway, Sweden, Denmark or even Finland. (Disclosure: I make use of a Nokia cell phone but not Ikea furniture; I do not drive a Volvo car and have never been the recipient of a Nobel Prize.)

To begin with, the Scandinavian model of a comprehensive “cradle-to-grave” welfare state is financed by high levels of taxation with a steeply progressive income tax regime.

In terms of ethnic composition, these are all very homogeneous societies and generally closed to immigrants, especially from the third world. Therefore, citizens who pay out large amounts of taxes always have the implicit assurance that the benefits are going to their own countrymen.  (Think of the reaction if India becomes a welfare state and word gets around that Bangladeshis are flocking in to claim benefits here.)

Besides, all these countries consistently rank as the top performers in the various surveys about levels of corruption, transparency and the efficiency of public services. Therefore, taxpayers in these countries have the further assurance that the money they pay is actually being put to good use, and not lost to waste and graft. In turn, this means there is far less resistance to the idea of paying more taxes.

It will now be obvious that the conditions existing as above are not those that can easily be replicated elsewhere. The model may therefore have less relevance for America and almost none for India.

From India’s point of view, there is the other issue that being an expensive model, it presumes the existence of a prosperous majority who can then pay for those who fall behind. In fact, any welfare state presupposes a minimum level of prosperity; you cannot go about building a welfare state on a foundation of unrelenting poverty. That should take India out of the picture (for the foreseeable future, at least) as far as following the Nordic footsteps go.

As for America, despite all the evidence of heartlessness in its workings, there is something special about this country I have only recently come around to appreciating. This is the idea that the idea of America is not just for the Americans, it is for every one of us.

In America, it’s called the “American Dream”. We know for a fact that this is not a carefully put up mirage meant to lull and buy peace with its underprivileged. Examples abound of people rising from the dirt and living the dream. And perhaps the most wonderful thing about the American dream is that it is open, in some degree or other, to just about everyone around the world.  We know of so many ordinary folks in our own midst, born into modest circumstances and now living the dream in America.

As for the Scandinavian model, the last time I checked, I did not come across a “Scandinavian Dream”. And if there is one I happened to miss, I know for sure it’s not meant for me, my family, or my friends.

Critics make the point that for a wealthy country America’s social indicators are well behind those of its peers. There is a reason. When you have been letting in millions of the dirt-poor from all around the world, and with many millions more having let themselves in, averages—and social indicators are, after all, averages—are bound to suffer. A classic example is Germany today. During much of the eighties, West Germany was among the top European countries in terms of GDP per person. These days, Germany figures behind Britain and pulls in behind even Ireland. So, did the German economic miracle run out of steam? Not quite. In 1989, Germany let in about 17 million of its poor cousins from the former East Germany and the average has been depressed since then.

This is not to deny that the Scandinavian model takes good care of its own citizens. The American model takes less good care of its own citizens, but it also cares for millions of poor from around the world who were allowed in with honour and dignity. Every year, nearly one million immigrants to the country are granted American citizenships. This is over and above the fact that all children born in America, even to foreigners and illegal immigrants, are ipso facto American citizens.

The choice then is a no-brainer. If you happen to belong to one of the Scandinavian countries, yes, yours is the way ahead. For the rest of the world, it is the American way that holds promise.

And then, when you think of a Swede, a Norwegian, a Dane or a Finn, you think blond, and you think blue eyes. Think of an American, and you suddenly realize you just cannot think along these lines. To me, that is the explanation why the American Dream has such a powerful resonance across the world.

Written by Ranjan Sreedharan

January 8, 2010 at 12:09 am

Posted in US and the world

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America’s Secret Competitive Advantage is a Dirty Secret

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(Note: What follows here is an executive summary of my article with the same title that is available as a working paper on RePEc (Research Papers in Economics). The full text is available at the following link


Michael E Porter, a leading management thinker, identifies seven uniquely American competitive advantages to explain the country’s pre-eminence. He points to America’s environment for entrepreneurship, its science, technology, and innovation machine, its institutions for higher learning, its strong commitment to competition and free markets, its efficient capital markets (especially for risk capital), and its fundamental dynamism and resilience that embraces a willingness to restructure and take losses.

In this paper, I argue there is another critical competitive advantage for America in relation to its other democratic peers. It is the fact that in American presidential and congressional elections, about half of the electorate never turns out to vote. And the unique competitive advantage arises from the fact that unlike in other Western democracies, the people who end up staying away from voting in the U.S. belong overwhelmingly to its poorest, least educated sections.

Before considering why this should amount to a competitive advantage, I look at reasons why the poor in America vote in far lesser proportions than their numbers. For instance, the rules governing voter-eligibility are determined by state, as well as, federal laws. Historically, many of the southern states have had a nasty record of officially and unofficially making it more difficult for blacks and poor whites to vote, a position that largely prevailed until the Voting Rights Act of 1965. Other reasons include the disenfranchisement of its prison population, which, at two million, is the largest in the world. Moreover, felony disenfranchisement laws in most states make it difficult for ex-felons to vote. As a result, about 5.4 million offenders and ex-offenders (about 2.5 percent of the electorate) were excluded from the voting rolls in the 2004 presidential election. Also, the fact that Election Day in the U.S. is not a national holiday makes it difficult for those holding low paying jobs (where wages are paid by the hour) to go out and vote.

The upshot of it all is that the average voter turnout in America has been historically lower compared to its peers, and the poor in America vote in far lesser proportions than their numbers. For instance, during the presidential elections of 2008, despite extraordinary efforts by the Obama campaign to mobilize poor and minority voters, a CNN exit poll found that only 18 percent of those who turned out to vote, earned an income of less than $30,000 per annum against the 34 percent of American households that belong to this category.

Why should this amount to a competitive advantage for the American economy?

A critical factor which determines the economic success of a country is how well it strikes a balance between its short term needs and long term requirements. The short term interests veer towards more spending and consumption, while the long term interests lie in greater investment for the future and in shaping an environment conducive to creation of wealth.Essentially, the poor and the disadvantaged within a country would tend to have a short term outlook. Their interest would lie in having the government spend more on generous social security benefits and subsidies and in laws that protect labour. They would be far less enthused by the investments and sacrifice required to further the economic well-being of the country over the long term, or in promoting the entrepreneurial class. I argue that it is the short term considerations that hold sway in democracies where the poor vote in large numbers. I cite the example of India where populist policies have always pulled in the votes, with negative long term economic consequences.

America’s overriding economic success has much to do with its “national consensus”, built around old-fashioned virtues like respect for property rights, free trade and free markets, lower taxes, flexible labour laws, and a culture that fosters individual responsibility and celebrates individual success. I contend that this consensus has been kept alive in large measure by keeping its poor away from voting.

In contrast, Western Europe and Canada have seen an alternative consensus emerge which emphasises more frequent state intervention in economic matters, a comprehensive social security net, and a tax regime with a higher burden on the rich—in the cause of a more equitable society. Arguably, this alternative consensus could emerge in Europe because the national elections in these countries do not effectively (and insidiously) keep out the poor as they do in the U.S.

In the concluding parts, I look at some of the recent trends in the voting patterns in U.S. national elections and predict a swing towards the more liberal values of the Democratic Party. I argue that the current “Republican revolution” that began with Reagan in 1980 may have come to an end for now.

I conclude with the contention that America is headed towards a future where it becomes more equitable (like Europe) but at likely cost to its hitherto extraordinary competitive edge. ***

Written by Ranjan Sreedharan

December 10, 2009 at 12:59 am

Posted in US and the world


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Predictably, the Geithner plan has evoked a mixed response among economists. Even liberal economists are a divided lot. Paul Krugman is very clear that it will not work (he called it “cash for trash”) while Brad DeLong (of UC Berkeley) is convinced it is a good bet. Without getting into the specifics of the arguments on either side, I believe there is a simple way in which the plan can be improved and made more effective.


As things stand, the plan would provide huge sums of taxpayer money to the private sector (in the form of equity, and, more substantially, debt) to enable them to purchase distressed assets (ultimately mortgages) from the banks through a process of competitive bidding among themselves. Implicit in this is the idea that once the distressed assets are acquired, the buyers would have the staying power (arising from the fact that much of funds laid out would come from the government at next-to-no cost) to bide their time till such time property prices have recovered. At this point, so the idea goes, they would be able to sell at a decent profit.


Here is a suggested modification to the plan. Instead of the idea of holding on to the property till a market turnaround being implicit, I suggest that the plan should incorporate a specific legal moratorium on the resale of such properties. This would be a statutory provision that would bar the resale of properties acquired under the plan for a minimum period of one year or more, the exact moratorium depending upon the location. In places where the supply of foreclosed properties is high and where real estate prices have fallen sharply (Florida, for instance), the moratorium period can be kept much longer, say as long as three years and more.


The advantage in putting in a legal bar on the sale or re-sale of such property is that it will immediately serve to choke the supply of foreclosed properties that have contributed so much to the downward spiral in real estate prices. I also believe the psychological impact on the market from supply being choked by a legal requirement (even as there is a stock available) would be far greater than when the market believes that some suppliers are merely waiting for a good price. Therefore, if the idea is to give a shot-in-the-arm to the real estate market, then obviously a situation where a certain portion of available stock cannot be legally sold would do a lot more than when some suppliers are known to be merely holding out for a “good” price.


This would, of course, impose an additional holding cost on the agencies vested with the authority to buy such assets from the banks. However, with the bulk of the funds coming from the federal government, the cost to the private partners would be negligible, though it might delay the eventual payout. Moreover, as against the delayed payout, there is also the prospect of better profits. And then, one way to minimise the holding cost, would be to have these properties (carrying a moratorium on their resale) rented out, in which case the rental income might substantially offset the interest/carrying cost.


Of course, in practice it would also be necessary to ensure that properties emerging from the moratorium are staggered out. Otherwise, if they all hit the market in a bunch, it would depress prices all over again. Also, the way things are now (thanks to securitisation), figuring out who actually owns a particular mortgage would be no easy task. But then, this is a different aspect to the problem which will have to be looked at separately.


As I put it in the title of this article, it is a simple idea, but one which might just be worth a shot. ◄►


Written by Ranjan Sreedharan

April 1, 2009 at 6:13 pm

Posted in US and the world


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(The global financial meltdown may be a failure of the system but does it not make more sense to see it as a failure of the people who were responsible for running it? Also, some thoughts about the way Indian communists have gone about claiming they have saved the country)

These are clearly not good times for global capitalism and for folks like me who happen to be ardent votaries of the free market economy. Every passing day brings more of bad news. In fact, it’s a bit like waking up every day to a bad hair day.

And, much as the times are bad for ‘us’ folks, equally, these are good times for ‘them’ folks; the unrepentant communists and socialists who have not forgotten any of their dogmas and (consequently?) have not learnt anything from history. Besides, there are the social democrats, progressives and all the others who place themselves on the left hand side of the ideological divide. Many among this lot are aware of and accept the greater efficiency of the market mechanism but could never reconcile to its inherent amorality.

Global capitalism is in trouble, deep trouble. The crisis it finds itself in is widely acknowledged to be the worst ever since the Great Depression. The scale of the troubles afflicting the banking and financial services sector, the very heart of a modern free market economy, is unprecedented. There is a nervous realisation that this is not just another cyclical downturn characteristic of free markets. Not surprisingly, questions are being asked, doubts raised, even about the fundamental viability of the system.

Okay, granted that things look bleak, but does that mean the doomsayers have a point about capitalism being in such a fundamental crisis, that it can emerge from it only by altering itself beyond recognition from its former self.

I don’t think so.

I believe that rather than the system being at fault, it was the people in charge of it who are more to blame. Here is an analogy that should make it clear. Imagine you have an expensive car and have hired a chauffeur to drive it. One day, there is an accident. Initially, you have no way of knowing whether it was the fault of the driver or whether something was critically defective in the car. Later on, you come to know that at the time of the collision, your driver was quite drunk. Now, would you blame the car manufacturer any more?

For the last eight years, George Bush was at the helm in America. It is like having a driver short on competence and very high on an alcohol-like cocktail of bluff, arrogance and ignorance. The NY Times columnist Thomas Friedman wrote recently, “I have always thought the American political system was devised by geniuses so it could be run by idiots. Now I know I was wrong”. He speaks of the political system. Well, it was the same folks who ran the economy.

The point therefore is, just as we do not find fault with our car manufacturer when we know our driver was incompetent, maybe we need to think twice before concluding that the system is at fault.

And then, even as we talk of a crisis, remember that ‘crisis’, and also terms like recession and depression, are actually relative terms. During the past few decades, capitalism has delivered unprecedented prosperity to millions of ordinary people across the western world and beyond, and more recently to people in China and India. What is now at stake here is the loss of a portion, a fraction of that extra prosperity achieved over the years. It does not mean that people in America, Europe and elsewhere where economic freedom prevails, get pushed back to the stone ages.

And so it is that even as many in these countries are put to real hardship, a North Korean plucked from his country and magically transported to America, would still exclaim “Hey, this is paradise”. And a Cuban citizen, given an assurance of even a half chance of survival, would still happily plunge into the shark-infested waters of the Straits of Florida to escape from the unrelenting desperation of his crisis-free socialist ‘paradise’.

Okay, there is no denying the crisis. But then, this is the crisis of a system that has consistently delivered results. Now, a part of what has been achieved over the years is at risk. With this perspective in mind, it becomes clear why now is not the time to go looking for alternatives that have never delivered anything and therefore, where nothing is at risk.

The reaction in India, particularly of the Left

And then there is the reaction of the Indian communists who, for the past four years, have been a part of the federal government playing the role of a millstone around its neck. They have really done much to block all attempts at further reforms in the economy.

Now, the communists have gone to town proclaiming that thanks to their role in stonewalling reforms, the country has been saved from a major disaster. This is a claim that, like so many other things about them, can only be described as bogus. And yet, quite a few in the country seem to be giving credence to it. A leading Indian news magazine made the question (Did the Left save India?) its cover story, conceding an element of respectability to what is patently a spurious claim.

Why do I say that?

Let’s begin by putting things in perspective. Ten years ago, the world economy was rocked by the Asian financial crisis. Almost all the major economies in Asia were affected, particularly those that were part of the elite club known as the “Asian economic miracle”. South Korea, Thailand, Malaysia, Indonesia, Philippines, Taiwan and Singapore were all affected. Yet, India was relatively unscathed. Now the left cannot (and does not) claim credit for that because in those days, they did not have a say in the corridors of power. Indeed, for much of the period of the crisis, India was ruled by the bête noire of the left, the BJP, so if anyone should take credit, it is the BJP.

What then is the story behind the communists and their tall claims?

It would be helpful to use the automobile analogy again. The western countries and some of the Asian countries like Japan, South Korea, Singapore, Taiwan etc. are relatively advanced and mature capitalist economies where people enjoy a high standard of living. Think of these countries as smooth, expensive cars moving at a high speed of, say, 80 mph. The other side of the freeway belongs to countries like China, India etc. which are now broadly ‘free market’ but are still weighed down with a host of residual command economy controls and restrictions on free movement of goods, services and capital. The people here have enjoyed modest gains in the standard of living. Importantly, in the more recent years, with economic liberalisation, there has been a marked quickening of the pace at which living standards have risen. Think of these countries then as cheaper cars that for a long time moved along at a slow speed of 20 mph, and now have begun to accelerate and touch a speed of 30 mph.

Of course, the cars that travel faster reach their destinations quicker. But yes, they also run the risk of meeting with an odd collision, maybe a fender-bender, or perhaps even something serious. And sometimes, it can even be a fatal accident. And so it has come to pass with the US and the leading western economies. Their cars have crashed and while the extent of the damage is not fully determined, it is expected to be substantial and serious.

Here is my problem with the communists and their boast. To begin with, the accident happened to those cars moving at 80 mph and more. It is just not likely that an economy moving far slower and incapable of approaching anywhere near those speeds would crash with the same extent of damage.

Secondly, there is the role of the left in successfully stalling reforms about which there is no dispute. But I would contend that this ‘success’ was the equivalent of preventing our car now moving at a modest speed of 30 mph from increasing any further, say, to 40 mph. After all, the reforms that the left takes so much pride in blocking were incremental rather than revolutionary in nature. They were measures like allowing greater foreign investment in the insurance sector, allowing voting rights to foreign investors in our private banks above the present ceiling of 10%, consolidation of state-owned banks, permitting the state owned pension funds to invest a fraction of their corpus in the stock market etc. It may be said then, that these measures were designed to increase the speed of our car marginally, from 30 mph to say, 40 mph. They were never designed to take us to 80 mph.

By stalling reforms, the left has not saved us; instead they have made our journey on the road leading away from poverty (and towards prosperity) a little more slow and a lot more troublesome. Therefore, they deserve not praise but condemnation (as usual).

I began this article with a reference to a bad hair day. Well, here is a revelation of particular interest to all those left behind communists and socialists around the world who imagine that what they see now is the beginning of the end of capitalism.

Even on a bad hair day, capitalism looks far better than socialism.

Written by Ranjan Sreedharan

December 5, 2008 at 7:36 pm