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Photo: Bloomberg

Photo: Bloomberg

The Haymarket warning

The Haymarket warning

Many years ago, during the month of May, there was a tense stand-off between law enforcement authorities and demonstrators. The incident ended when police fired upon the crowd and killed dozens of demonstrators. The incident was marked globally. Tiananmen Square, Beijing, 1989? No, Haymarket, Chicago, 1886. The Haymarket Massacre resulted in a commemoration on the first of May each year, a day we now call International Workers’ Day and celebrate in over 80 countries.

Like the demonstrators in Tiananmen Square, the workers at Haymarket were agitating for reforms. The Tiananmen protest started as dissatisfaction against rising inflation and lack of jobs, though it eventually morphed into a movement for greater political freedom. The original Haymarket protests were about an eight-hour workday and proper working conditions.

History is replete with examples of countries in social ferment when the general environment is characterized by hyperinflation particularly as it combines with corruption and poor job prospects. The Third Reich in Germany became a political force when it was elected to power in response to hyperinflation in the Weimar Republic. As a prelude to his rise, Mao Tse-Tung drew energy from the masses because of the corrupt and inflationary rule of the Guomindang. A good historical rule of thumb has been that as the economic misery index (inflation + unemployment + corruption) rises, society fumes.

Photo: Bloomberg

Rajan’s preamble to this talk is “by reducing controls and increasing competition and entry, those reforms unleashed the latent and suppressed energy of our people." I propose that this single sentence be the driving force behind the next generation of our reforms as well—with only one additional word before competition to read “fair competition". Undoubtedly this next-gen reform will be more difficult. It involves consensus building and difficult decisions. It will have to deal with issues such as land rights—that have been swept under the carpet because they pose knotty issues. It will likely alienate and be opposed by a group which is the beneficiary of economic rent today. But precisely for these reasons, they deserve to be tackled and freed from the clutches of a small group of people who “gatekeep" these resources.

The priority for important next-gen reforms is well understood though not viscerally accepted. We have not done a good enough job of showing that India’s evolving prosperity is directly related to the reforms that began 20 years ago, nor of categorically stating that our continuing prosperity depends on a sequential set of reforms. When in doubt, India’s politicians slip into a populist and entitlement mode. This is the lazy politician’s way of tackling time to the next elections and is cancerous to long-term national interest. The list of reforms is well known. What has been lacking is clarity of purpose in implementing them and the political will to back them in the face of cacophonic opposition.

We are in a lull before a potential storm. Growth is slowing, inflation is stubborn and the three major deficits in India—fiscal, current account and implementation—have risen to alarming levels. There is a dangerous complacency that Tiananmen and Haymarket will not happen in India—a belief that generally pacifist people will not rise in societal angst. Corruption alone may not have been enough—the Anna movement has indeed lost some energy. Add slow growth, no jobs and inflation to the mix and it could well turn out to be a deadly cocktail.

The message from history is clear, reform or risk social explosion.

PS: “Some people regard private enterprise as a predatory tiger to be shot. Others look on it as a cow they can milk. Not enough people see it as a healthy horse, pulling a sturdy wagon." —Winston Churchill

Narayan Ramachandran is an investor and entrepreneur based in Bangalore. He writes on the interaction between society, government and markets. Comments are welcome at

Also Read | Narayan Ramachandran’s previous columns

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