Milton Friedman once mentioned that both Japan and India imitated Britain when they embarked on their transitions. In 1868, after the Meiji revolution, Japan imitated Britain as it was in 1868—committed to free markets, vigorous global trade and laissez-faire market capitalism. Japan saw Britain in this incarnation as its role model. In 1947, free India noticed that Britain had a Labour government committed to socialism, nationalizing the coal and steel industries, restricting free markets, and India decided to imitate this version of Britain, one that was largely inspired by the Fabians. Laski and Attlee, the London School of Economics gurus, had an emphatic influence on free India’s leaders.
One could argue that it was indeed a pity that India did not get its freedom in 1868. The zeitgeist of the times would have ensured that India would have committed itself to a market-oriented growth option instead of one that was focused on redistributing wealth before it was created. Instead, even leading Indian businessmen approved of, and advocated, nationalizations and state interventions as enunciated in the well-known Bombay plan.
As the predations, restrictions and interventions of socialistic India got stronger, a point of view emerged which argued that not only was the infamous permit-licence raj crippling the Indian economy, it was becoming a menace to individual liberties. A baneful nexus was developing between the Indian elite and the Indian government, which was inimical to markets and supportive of a state which could all too easily slide into a fascist prototype.
What we today call crony capitalism was shown up by economist R.K. Hazari, who came up with data that influential Indian businessmen were cornering licences (a formal barrier to entry for less well-connected entrepreneurs) and frequently not setting up the businesses and factories that they were licensed to start. The era of shortages suited the business and political elite.
It was at this time that C. Rajagopalachari and Minoo Masani founded the Swatantra Party as a defender of private property rights, an opponent of the permit-licence raj (an expression coined by Rajagopalachari) and of the ever-growing Indian state. It is interesting to note that the Swatantra Party got its support from the disappearing princely order—the maharajas and nawabs of India, not from businessmen who preferred a Faustian bargain with state socialism rather than press for free markets.
By 1967, the Swatantra Party, with its emphasis on minimalism in government, gained ground and in at least a couple of states, it was on the verge of power. But the party never fully matured into an alternative to the socialism-obsessed Congress or to the numerous parties based on regional chauvinism, caste followings or religious ideology that have since developed on the Indian scene. After its ill-fated merger with the Janata Party and the fragmentation of that party, people even gave up the hope of campaigning on a quasi-libertarian platform. But the Swatantra Party ensured that India did not drift into the worst of socialist excesses such as collective farming. That remains one of its most enduring legacies.
With the possible exception of Narasimha Rao (and that, too, for a short period), no Indian leader or party seems to have a genuine sympathy for, or commitment to, market-friendly principles in a political sense. At best, they pay obeisance to the market when forced to. By upbringing and temperament it is an interventionist state that they are comfortable with. At the first chance, or under the slightest pressure, they revert to the tired socialist doctrines of envy and distribution of largesse. The BJP preferred not to privatize oil companies when it had the chance. The patronage associated with doling out petrol dealerships was too important to lose. The Congress seems to suffer from nostalgia for the “Hindoo” rate of growth because if no one gets wealthy, there is no one to envy!
That is why we are forced to ask ourselves: should we not have a political party that is a khullam-khulla defender of markets and an opponent of an intrusive state?
S.V. Raju of the Indian Liberal Group has been trying to register a political party that is expressly opposed to socialism. He is making very little headway. The broader question is whether, even if he did, would such a party have electoral success? The general view is that without the benefits of caste permutations, religious zeal, regional passions or dynastic PR, no political party can succeed in contemporary India. Does this mean that we concede the intellectual forum to leftists and obscurantists? Once we do this, as citizens of the republic we lose the right to complain as they perpetuate our poverty and ensure that we will never catch up with the Koreas and the Chinas. Whatever our decision, in the practical realm we must take heart from the Swatantra experience. The Party members did not become ministers—but by their very existence and by their bold articulation, they did influence the polity for the better. Herein lies an opportunity.
Even if it is not a formal party, only a society, it is important that the argument for economic and political freedoms (which are intertwined) must be made loudly, clearly and cogently. In this area, we can learn from the Fabian Society, not their ill-conceived ideas but their organizational methods. They kept talking, writing, communicating—and over time, their ideas became fashionable among politicians who may have never heard of the Fabians. The revived Swatantra should, at a minimum, aim to fulfil this role.
Jaithirth Rao is an entrepreneur and a writer.