India's new robber-baron capitalists
By Praful Bidwai (The writer, a former newspaper editor, is a researcher and peace and human-rights activist based in Delhi )
If growing income and regional disparities are one characteristic of the rapid economic growth that South Asia has recently seen, another is sleaze, especially in the corporate world. Both features are particularly pronounced in India, as are rising shares of salaries of directors' remuneration in corporate incomes and profits .
Thus, Prime Minister Manmohan Singh's admonition to the Confederation of Indian Industry against sky-high corporate salaries and the need to keep "profit maximisation within the bounds of decency" didn't come a day too soon. Nor did his warning that "vulgar display (of wealth) insults the less privileged" and causes despair and unrest.
Eleven Vidarbha farmers committed suicide the very week Singh said this, taking the number of suicides this year to an astounding 400. This sadly underscored the extreme polarity between the world of CEOs, with their multi-crore rupee incomes and glitzy lifestyles, and the peasant-farmer's grim debt-laden reality. This polarity is a terrible fact of India's post-1991 growth. It should shame the government into corrective action.
Singh told CII industrialists that the growing number of Indian billionaires, Indian companies buying multinationals, and soaring CEO compensation, all mean "you have benefited from growth…" But he exhorted them to "work in a harmonious environment." He quoted Keynes to extol austerity and thrift, and said the "better-off" must make growth "more inclusive".
This advice was based on a frank acknowledgement of the skewed nature of India's growth. Singh proposed a "Ten-Point Social Charter". He exhorted industry to develop "healthy respect for your workers", go beyond "tax planning" in defining "corporate social responsibility", "discourage conspicuous consumption", invest in R&D, employ the underprivileged, and adopt environment-friendly technologies, etc.
Some of the exhortations might sound naïve or "goody-goody". They ignore the Indian corporate sector's less-than-enlightened notion of self-interest. But the emphasis on obscenely high salaries is necessary in a country where 40 per cent of people survive on less than $ one a day. Today, there are some 1 lakh super-rich Indians with wealth of $1 million-plus (not counting immovable property). Some 100 corporate CEOs earn Rs 1 crore-plus. Several take away more than $1 million (Rs4 crores). CEO salaries have been annually growing at 30 to 40 per cent--as against 9 per cent GDP growth.
At least 194 Indian corporate employees are sitting on stock options of Rs1 crore-plus. Some have options worth Rs100 crore--Tech Mahindra's Vineet Nayyar (Rs216 crores), L&T's A M Naik (Rs165 crores), and Infosys' Mohandas Pai (Rs134 crores). There's a gross disproportion between these figures and the subsistence-level incomes of most Indians. But Singh's ideas have been savaged by India's mainstream media. Many editorials have treated his warnings against growing inequalities as economic heresy. He's going "back to the past", and endangering "prosperity", they said. Capping CEO salaries will "shackle private enterprise" and kill the goose that lays the golden egg.
Some commentators trivialise Singh's warning about inequalities by saying that buying Mercedes-Benz cars doesn't cause backwardness in Bihar! Yet others say his concern about "conspicuous consumption" is a new-fangled obsession which sits ill with his earlier emphasis on "growth", "individual initiative and enterprise" which "will enable us to eradicate the ancient scourges of mass poverty, ignorance and disease."
Another writer tendentiously claims, with supreme arrogance, that the poor just "don't have the mind-space" to bother about how much the "haves" get. Such media reactions are inspired by a standpoint that's worse than ultra-conservative. It's explicitly, vulgarly libertarian: it holds that it's wrong in principle to limit the freedom of enterprise; it's absolute; the market is fundamentally democratic and must never be curbed.
Libertarianism celebrates greed and castigates all concerns with equity and justice as "the politics of material want, where poverty is ascribed a moral glow". Let's leave aside for a moment the unbridgeable moral chasm between this, and the Gandhian view of the poor as Daridra Narayan, or the respect many fine economists have for the ecologically sound, community-based "moral economy of the poor".
The point is, libertarianism totally misrepresents the market. The market equates unequal agents (e.g. starving workers and rich employers) despite their vastly asymmetrical bargaining power. Markets don't work spontaneously. They have to be organised and made to follow certain ground-rules. In classical capitalism, the state and society laid these down. They legislated the minimum wage and length of the working day, set taxation levels, regulated profits, and encouraged or banned certain activities. In neoliberal capitalism, that role is appropriated by private corporations. This undermines democratic decision-making and triggers a "race to the bottom" in working conditions.
Libertarians take a morally monstrous position by contending that those with vastly different starting-points (e.g. in access to property) will end up in equal places because the market is "free". This is complete nonsense. Markets are normally unfree, and competition is often imperfect. Unequal information is available to different actors, there's unfair pricing, poor demand-supply adjustment, and other distortions.
In India (and Pakistan), the argument for changing the direction of growth is overwhelmingly persuasive. India's post-1991 growth has produced disparities worse that those during the Victorian period of mass impoverishment that Charles Dickens so movingly described. Economists quantify inequality by a measure devised by Corrado Gini. If the Gini coefficient is 0, it means a society is totally equal. If it 1, it's completely unequal. India's Gini coefficient is estimated at between 0.32 and 0.48, but there is unanimity that it has sharply risen over the past decade. In China, an even smaller rise set off an alarm. India should be even more alert to distress signals: the suicide of 100,000 farmers in a decade, declining organised-sector employment, unbalanced growth, and growing social disaffection, public anger and restlessness.
There are three strong reasons for correction. First, regional disparities are becoming explosive. We have not one but at least three Indias: prosperous, rapidly growing pockets in the South and West; stagnation in much of the Centre, North and East; and regression in the BIMARU states (with Assam added to them). This will have disastrous political consequences.
Second, growing crime and lawlessness have come back to haunt the elite which alone benefits from neoliberalism. Crime is rooted in rising inequalities, absence of social opportunity, and collapse of the credibility of the powerful. High walls and barbed wire won't protect the rich against crime beyond a limit. The only long-term solution is justice and social cohesion.
Third, the disproportionate power wielded by the corporate elite has permeated politics, government and the media. It's distorting democracy. Democracy, India's greatest achievement, can only be rescued if the elite's power is tamed. This can only happen if the rich, especially corporate CEOs, are heavily taxed, and there is serious redistribution of the fruits of growth.
This can be best achieved through a comprehensive incomes policy, which doubles or triples minimum wages and imposes the same level of taxes (e.g. 80 per cent-plus) on the rich which they pay in Scandinavia or Japan (and until recently paid in most western countries.)
Singh said many sensible things. Will he now muster the courage to legislate them? He unleashed the neoliberal genie. He must put it back into the bottle--for democracy's sake.
Email:
prafulbidwai1@yahoo.co.in