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Business News/ Opinion / Moving beyond stigmatized capitalism

Moving beyond stigmatized capitalism

Hindi films show us that public perceptions of how capitalism works in the country matter

Illustration: Jayachandran/MintPremium
Illustration: Jayachandran/Mint

Capitalism rests on the bedrock of legitimacy. A lot depends on whether voters see businessmen as robber barons or men of enterprise. In a fascinating paper, which was first published in 2013 but has come into prominence more recently, economist Nimish Adhia has shown that the 1991 economic reforms were preceded by a shift in popular narratives about capitalism in Hindi films. His content analysis of the most popular Hindi films every year since 1955 is startling. Businessmen who were once habitually depicted as villains, gradually began to be shown in a more positive light. Movies that celebrated wealth did well at the box office.

All this matters at a time when there are growing concerns about the legitimacy of Indian capitalism. Is there a change in narrative on the cards? There is no general backlash as yet—but there has been ample reason for growing scepticism.

The recent events at ICICI Bank and Fortis Healthcare are a case in point. Neither the management groups nor the boards of these companies have emerged with flying colours. This was preceded by the rampant corruption when natural resources were allocated in the first years of this decade, as well as the massive loan defaults by infrastructure companies with political contacts. Nirav Modi and Vijay Mallya are already seen as examples of how the rich can escape Indian law. Arvind Subramanian has described the situation well—India has moved from crony socialism to stigmatized capitalism.

In 2009, Rafael Di Tella of the Harvard Business School and Robert Macculloch of Imperial College asked why capitalism does not flow to poor countries, despite the clear evidence that it is more successful than socialism in raising living standards. The two scholars linked it to the problem of corruption. The usual assumption is that heavy regulation promotes corruption. The causality runs in the opposite direction as well. There are popular demands for regulation when voters believe that wealth is created through corruption rather than competition. Di Tella and Macculloch argue that people vote for interventionist policies because they see them as a form of punishment for corruption.

A lot thus depends on whether citizens believe that wealth has been generated through political leverage or competitive excellence—and whether the rule of the law applies equally to all. The populist backlash in the West is at least partly because of the unchecked power of Wall Street, though the big tech companies of Silicon Valley are also feeling the heat now.

The populist wave has not yet reached Indian shores, but that may not be the case for long. The danger is either the sort of investigative pressure that bankers are facing right now or new regulations that choke off new enterprises. The result could very well be a general retreat from commercial risk.

Economic reforms need to break the grip of stigmatized capitalism through more competitive markets, a reinstated fundamental right to property, greater reliance on rules rather than discretion, and a change in the way government contracts are awarded. The new Insolvency and Bankruptcy Code is a case in point, because, for the first time, large borrowers who have defaulted on bank loans are losing control of their assets. The Real Estate (Regulation and Development) Act is another example of power shifting from developers to home buyers.

Nearly a decade ago, Raghuram Rajan had sent out a stark warning in a speech to Mumbai businessmen: “We are at a crossroad. With the right policies and some luck, we will become a middle income constitutional democracy in my lifetime. But inaction coupled with bad luck could make us an unequal oligarchy, or worse, perhaps far sooner than we think."

In the 1950s, as Adhia has argued, the rich had inherited wealth that was frittered away smoking (Jagriti), hunting (Madhumati) and drinking (Sahib Bibi Aur Ghulam). Only the poor worked. It has been a long journey since to films such as Dil Chahta Hai and Guru, which celebrate wealth as well as the quest for it.

The cinematic narrative has not turned as yet, perhaps because rapid economic growth still offers hope for upward mobility. But it would be a good idea to keep a close eye on the list of box-office hits in the coming years, to get an early sense of whether there is a coming backlash against stigmatized capitalism.

What are the consequences of delegitimization of capitalism in the eyes of citizens? Tell us at

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Published: 10 Jul 2018, 09:41 PM IST
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