India needs less government, not more

The lifting of millions of Indians out of poverty after the country’s economic reforms in 1991 should have delivered a decisive blow to those who argue that capitalism exploits the poor. Thanks to deregulation, there has been a significant rise in India’s standard of living during the past 15 years. Unfortunately, the same arguments against the free-market persist. Yet the problem is government, not the market.

If governments faced the same discipline that private corporations face, the next election would result in all of India’s politicians being voted out. In spite of grandiose promises, hardly anyone doubts that India continues to remain near the top of the world in corruption and inefficiency. The sad reality is that India has fallen behind the East Asian nations. The subcontinent holds the dubious distinction of having the world’s largest number of poor people, despite the crores of rupees spent to “stimulate” development.

The reforms of 1991 allowed many a chance at life in the middle-class. For the average person, the relaxation of investment laws has meant access to a wider variety of goods and services at cheaper prices. In the past Indians faced restrictions on the importation of foreign cars, and were forced to buy inferior local models such as the Ambassador. Now they have the freedom to choose a Toyota, a Honda or even a BMW, if they so desire. The influx of new brands has meant more productive jobs, as foreign companies have set up factories locally.

Many people shrug their shoulders at the dismal living standards in India and resign themselves to thinking that’s “just the way things are”. This attitude, although understandable, is something to be discouraged. Especially now when the government-caused financial crisis has made Indians a great deal poorer, the urgent need is to examine why it is that – 60 years after independence – Bharat still remains a Third World nation.

The answer boils down to this: petty bureaucrats and gangster politicians have ruined India. They are the reason why this diverse nation of 1 billion isn’t yet an “Asian tiger”. Only if we honestly confront the problems India faces can we devise the proper solutions.

For sure, India’s economy is galloping along at about 8% per year. This is a significant improvement from the so-called “Hindu” rate of 3.5% before 1991. However, there is also much that the growth figures conceal.

Consider, for instance, the fact that no government in India has been able to guarantee a reliable supply of electricity, water or gas. Roads (including many national highways) are in a pitiful state. Ports constantly experience bottlenecks, and train stations and airports are run-down. Underneath the statistics lies a hot-bed of infrastructure and governance problems. Although economic growth is progressing, it is hardly based on sound foundations.

The train system is a good example. Indian Railways, a government company, owns and operates most of the rail network. Indian Railways holds a virtual monopoly, so there’s no incentive for it to improve the quality of its services. Competition is a wonderful thing: it can push businesses to serve the consumer better by lowering prices and improving quality. Yet when government restricts competition, as in the case of India’s railways, the result is inefficiency and a lack of concern for what the customer thinks.

The story is much the same across a whole range of industries in India. Whereas developed nations have privatised some of their utilities (for example, electricity) and opened up markets to competition, the governments of India remain wedded to power and refuse to give up control. But instead of everything being owned by the government, it’d make a lot more sense to let the people of India run their own businesses.

The mistake socialists make is to equate ownership by the government with ownership by “the people”. That is a fallacy. Government does not equal “the people”; to the contrary, it is made up of an elite group that often selfishly pursues its own interests. How many times have we heard of politicians lining their Swiss bank accounts with money illegally stolen from taxpayers? This pervasive corruption is an indictment on the theory that politicians care about those they govern – the reality is they couldn’t care less.

Private businesses, not governments, are the most direct representation of the community. This is because anyone, including you and me, can set up a business. More importantly, private enterprise is voluntary. No business can force you to buy their products. But government, by stripping away alternatives, can take away your freedom of choice. Therefore, we should be encouraging more private enterprise and less government.

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2 thoughts on “India needs less government, not more

  1. I think privatisation is a good thing. However I think cutting red tape and taxes and ensuring sound property rights are generally more important.

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