It’s disgusting how educated folk don’t understand whether India should have socialist leanings or not- private or state controlled-enterprises. Of course, the government doesn’t. But shouldn’t you?
The matter has re-surfaced this season.
Recently, the privatization of the railways became a moot point in election-bound districts in Bengal, when the Chief Minister addressed hundreds of daily-wage earners of the railways-make, asking them ‘Where will you go? What will you eat?” in reference to a situation where the private sector took over the railways. The mass-scale unemployment feared when efficiency via the private player is valued over welfare by the government is a useless binary- the fond topic of discussion of superficial scholars of the issue.
The NITI Aayog has declared that two PSU banks are set to be privatized, and a trillions of dollars plan for disinvestment was declared by the govt. But where indeed will the wage earner go? But most notably, the principle of the govt can be summed up in a single, non-reductive, powerful phrase the PM coined, “we are not in the business of doing business”, explaining why IAS officers are ill-equipped to be business leaders. We agree. And don’t.
Why the socialists are wrong
We live in a world where the ‘socialism’, like a Chinese whisper game, has lost its true meaning. Nobody remembers what it was set to achieve. To most people, it’s a way to come up with election slogans, and a rhetoric for a polarized campaign that can bring them some credibility. Socialism is morphed when you use state ownership only as a means to an end. The public sector is said to be a safe incubation- to set up key industries till such time the people’s own initiative and resource (private sector) can take up it’s mantle. It does not mean the public sector has to result in public good, or that the private sector has to cause private gain.
State ownership is just a kernel, a shell, till the inner private sector can grow, and people can take charge themselves, in a mixed economy. A blind advocacy of state control forgets, as Bertrand Russell said, “If socialism is to permit freedom, powerful officials must be somehow curbed, for, if not, they will inherit all the power of capitalists.” There is far greater danger to liberty by a bureaucracy that controls the economy’s key resources, than a largely privatized economy.
To keep banking, energy, transport, including railways, railway stations’ upgradation and other sectors in government hands is to forever restrict the infrastructural upgradation- in a country as plagued by politics, propensity to moodily change economic thought and administrative capability, and zealous devotion to disguised unemployment for the lower-wage earners, infrastructural upgradation is impossible. Even because such infrastructural work that doesn’t impact social policy needs administrative vision that is unfettered by the constant need for feedback from a divergent public, and Yechury and Gadkari both concerning themselves with short-term upgradation projects means the economists and columnists shall have a field day, and the industry a wet one.
Bureaucrats are not good businessmen- even if just because they have lesser autonomy than is needed to upgrade infrastructure.
Moreover, it is illogical to assume that prices for what are essentially public goods and mass products like railway services can be priced by the private sector some day at high prices. India is a market where unit economics is terrible, as opposed the West, and every businessman worth his Tata salt will cater to larger volumes.
You cant just send the rich on railway rides- that’s a formula for losses. Even an Adani express, shall have to cater to the masses. “By the rich” may be correct, but the false perception of “for the rich” must break. Remember-The rich get rich by selling their products to the poor.
It is undeniable that a better railways and better living and travelling conditions, better energy sources and more banking efficiency, given that the state keeps consumer prices in check without interfering with the operations of the private sector, bears immediate good news for every rung of the social ladder- that’s a better country for everybody.
But what about the hard questions- the immediate unemployment, food and sanitation and skill set upgradation?
Why the privatization lobby is wrong
For it’s part, the government has done a DeMo again. Privatization is here in the wrong way, too quickly, and with the wrong people. Let’s take these up individually.
Privatization cannot come in a world where nothing has been planned to take care and offset the immediate adverse results. The government should’ve begun with efficient models of PPP or managerial competence enhancement in Skill India projects, vocational training projects, the MGNREGA, ensured faith in the ability to relocate and upskill those that are directly affected, for instance, the railway workers. If you lose your job tomorrow- there must be an accessible, helpful social welfare scheme with a future, that skills you, employs you, and in the interim takes care of you. It is a notable difference between the evolved democracies in Germany and the US, and the South East Asian nations.
If privatization has to happen, it has to happen on smaller scales, with consumer goods like airlines (Air India), trading, partly in the post system, textiles- areas where lay-offs will be less probable, and employment generated with good management will be greater, for it can expand operations. Where Coal employees may be laid off, Air India and Textile shall recruit. Hand-in-hand with a growing upskill project with good management, it makes a case for efficiency pan-economy.
It needs to happen slower. The private sector is stronger than it looks. First, because it is not subject to scrutiny- it owns and manages, or donates to, the organizations (media, political parties) that have the ability to organize and push for scrutiny. Second, because it is in the business of looking good, even if it isn’t managing it’s scales well (look at Adar Poonawalla). An overtly ambitious railway tender or Air India handler that fails to take off can wreck havoc. Public faith in the economy at the time of corona and staggered growth cannot be fickler- and to change ownership around town will make confidence wane, spending reduce, and private sector less interested.
Exit strategies for private players need to be clear for large-scale enterprises, and the certainty that scrutiny is done- there must be government comptrollers that make sure the enterprise has funds to last once it’s in business, or that the government can step in profitably. If not, the government can slack off, and a red balance sheet will be less of a damage to their credibility.
Finally, the people that disinvested properties go to shall make a huge difference- both in optics and in real. If Adani gets railway stations to modernize, trains to staff and operate, and Reliance gets coal mines, there will be lesser public faith, crippling monopolization, but worse still, the perpetuation of certain management styles- and that can rarely be outdone, and rarely do good.
It shall also result in giant, difficult-to-manage, unduly powerful, scarily stretched out-in-funding-and-leadership economics for certain large players- from Tata to Spicejet, Wipro, etc.
It might bring true the old adage- “All the world’s a stadium, and there’s an Adani and a Reliance end.”
So who’s right?
The government claims “it is not in the business to be in business.” Yet, it behaves like a businessman. It’s ok to be a government that supports business. It’s not ok to be one that thinks like one. One must make sure the public have no short-term harm. The ‘long run will be better/ country will look better’ argument is applicable to businessmen with no caretaking role for the people. It cannot be an argument for a government.
It is not enough to blindly “welcome” the privatization move on wealth and economy columns. The acceptability of a private-run enterprise shall take a hit with greater private control, and in a politically motivated public and diverse country, the fear of bad acceptance is a quick discouragement to investment. A privatized unit with no ground support has been troublesome- from Singur to ITC factories- spells trouble.
The difference should not be within public and private business, but rather between honest and efficient, and unscrupulous business, and apply standards of managerial competence, without restriction, to all such sectors.
The privatization move must be pondered upon. The people must feel that business coming in will help them- and money is spent in more ways than one for their sake- in welfare, as well as quality product making. The greatest flaw in the current establishments’ argument for capitalism, is that it believes in a non-humanistic capitalism, whereas a humane business can do wonders.
A realistic socialism needs four ingredients- GNP, fair work opportunities, fair income distribution and quality of life.
As Palkhiwala said, had we chosen the “old economics”, we would’ve been content with greater GNP. Had we chosen “New Economics”, we would’ve been content with growth with social equality. But we have chosen “no economics”, where “ideology matters most”, and scarcities multiply because we produce as per profit need, and sell as per welfare.
India’s shift to efficient management can do well only if we bring about this debate in it’s naked form- sans ideology, sans politics, sans favoritism, sans everything.