Home / Opinion / Online-views /  The backlash against business

Over the past few years, Indian companies have manufactured cars, discovered new drugs, sold consumer goods, financed new homes, opened bank branches and built roads. There is nothing exceptional about these activities. That is what businesses—whether large corporations, state enterprises or entrepreneurial firms—do the world over. The only reason such prosaic facts are worth mentioning right now is the recent spate of corruption scandals that often give the impression that there is nothing in Indian business other than crooked miners, flashy airline owners, influential telecom czars and builders who game the system.

There is little data on whether the public mood in India has turned against businesses, but Hindi movies have an unerring ability to reflect the emotional climate of the country. The businessman was traditionally depicted as a villain—be it as a black marketer, as a thug who crushes the working class or even as the father-in-law who refuses to accept the poor boy as his damaad. Then the Hindi film industry had its Dil Chahta Hai moment, with the Farhan Akhtar movie capturing a new social ease about wealth, a change beautifully captured by Shekhar Gupta in one of his columns about a decade ago. So, one wonders whether the recent Chakravyuh controversy—with a song in the Prakash Jha film linking Tata, Birla, Ambani and (curiously) Bata with the problem of inflation—is perhaps an advance warning that the mood could be shifting.

The situation in India right now is quite similar to what happened in the US more than a hundred years ago. It was the era of the robber barons, businessmen who built fortunes in steel, railroads, finance and real estate. Many of them funded corrupt politicians.

The economist John Kenneth Galbraith once caustically wrote (in The Age of Uncertainty) about the robber barons: “The railroads got built. A great many honest men bent their efforts to their construction and operation; this should not be forgotten. But the business also attracted a legion of rascals. The latter were by far the best known, and they may well have been the most successful in enriching themselves… A railroad allowed for an interesting choice between two kinds of larceny—robbery of the customers and robbery of the stockholders."

The predatory fortunes of the era invited a public backlash. The populist movement had its roots in agrarian anger but it later built a coalition with organized labour in the cities. Its chief targets were the railroads and banks. American populism had anti-modern inclinations (think of the pastoral dreams of some members of the Anna Hazare group), and was later replaced by the more modernist movement called Progressivism, which inspired at least two US presidents of the era—Theodore Roosevelt and Woodrow Wilson. The three decades after robber baron capitalism saw monopolies being broken up and a concerted push for political reform.

India could well be at a similar crossroads. A lot depends on the response of the Indian business community, more specifically whether it will seek to engage with the public or stay on the sidelines in a huff.

Robert J. MacCulloch of The Imperial College in London and Rafael M. Di Tella of Harvard University have done fascinating research on why capitalism has not spread adequately to poor countries despite its economic success in the West. The main issue is corruption. It angers voters, who then prefer a system that constricts business through high taxation and regulation, even if that harms economic progress in the long run. The two economists also show that our understanding of corruption is often unidirectional. We often believe that more regulation creates opportunities for corruption; they argue that it works the other way as well, with corruption leading to more regulation.

A lot then depends on how the average citizen interprets the acquisition of great wealth. Is it a result of playing the system to advantage? Or has it emerged out of creativity? A good example comes from contemporary US. The protesters of the Occupy Wall Street movement took time off from their political theatrics against the 1% to pay homage to billionaire Steve Jobs on the day he died. Ironical perhaps, but a telling episode.

There is a growing risk that all of Indian business will get stuck with the crony capitalism tag, as if there is nothing there other than stories of loot. This damaging narrative can then undermine commerce. The economic ideas of the anti-corruption crusaders are weird, but their success could inspire the mainstream parties to offer similar ideas to voters. It is for this reason that the more sensible parts of the Indian business leadership should engage with the public debate on corruption. They should remember that even someone as sensible as Raghuram Rajan, now chief economic adviser to the government, has asked whether the licence raj has been replaced by a resource raj.

Is there nothing out there other than crony capitalism? One way to answer the question is to look at the list of the richest Indians published every year by Forbes magazine. There is no doubt that there continues to be great wealth in industries such as telecom, energy and real estate that can be described as oligopolistic and have strong links with government policies. But there is also no shortage of businessmen in the list who have built their wealth in competitive and consumer-focused industries. This is a world of manufacturing efficiency, brands, innovation and competition. What is even more significant is how
the pecking order has changed. The 2008 Forbes list had a greater skew towards oligopolies. Since 2009, stock market investors have also been punishing companies that have close links with governments.

Many decades ago, economist Ronald Coase explained why companies exist while management thinker Peter Drucker told us that corporations are a necessary social institution in modern society, along with more traditional institutions such as families, governments, schools and religious bodies. Neither of the two lessons has lost its validity.

Niranjan Rajadhyaksha is executive editor, Mint.

Write to Niranjan at

Also Read | Niranjan’s previous Lounge columns

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