I was one of Narendra Modi’s biggest fans.
I supported his candidature as the prime minister of India years before he became the phenomenon during the 2014 general elections in India. I can honestly claim that to the extent that I could I even worked indirectly for the Modi campaign.
Sadly, I am no longer a supporter. My support was based on the promises that Modi had made about the policy changes he would make if he were to become the PM. Professionally as a development economist — right from the very inception of the discipline of economics my tribe seeks to understand the nature and causes of the wealth of nations — I am interested in India’s economic development. Not just professionally, personally I am moved by the pity I feel for the poor and impoverished of the world and naturally India, my native land. My support for Modi was contingent and instrumental. I believed Modi would do what was needed to transform India into a developed nation. I wrote a damn book on “Transforming India” in 2011.
The fact is that Modi had made many promises, most of which were pleasing to classical liberals like me. We believed those promises because they were consistent with our beliefs and ideologies — limited government, prohibiting the government from running commercial enterprises, non-discrimination, secularism, etc.
By ‘we’ I mean a large number of fellow travelers: committed, sincere, honest people who had no other agenda but to see that there was a real change of direction and substantive change in the relationship between the state and the people. We were promised a break from the past, a disruptive change that would liberate India. We believed that Modi was capable of breaking the chains that the governments of the past — especially those led by the Indian National Congress — had forged for decades, and that he would set India on a path to social peace, economic prosperity and global significance befitting a nation of over a billion people.
“When the facts change, I change my mind. What do you do, sir?”
I was wrong; we all were. We were misled, lied to, betrayed, let down. And that’s the most charitable way of putting it.
Modi the candidate for PM and Modi the PM are two entirely different beings. In numerous election rallies, candidate Modi thundered that “government has no business to be in business” and promised to reduce government interference in the market; as the PM, he did precisely the opposite. Here’s a small example.
Around 1951 you could count the number of central government public sector units (PSUs) on the fingers of one hand: there were five. Twenty-five years later by 1976, that number had ballooned to 155. By 1984, there were 220. The central government added 70 PSUs in the following 30 years — for grand total of 290 by 2014. That’s a rate of increase was a little over two per year.
With Modi as the prime minister — and the de facto autocrat of India — the rate of increase of public sector units shot up to over 12 per year. In the four years 2014 to 2018, about 50 additional PSUs were added. Modi promised one thing — “government has no business to be in business” — and delivered precisely the opposite.
It appears that to PM Modi, every problem has precisely one answer: more government, more bureaucracy, more taxes, more cesses and transfers, and more public spending. Candidate Modi had promised “minimum government, maximum governance.” It was a great line but in retrospect totally bogus. It’s all wag and no dog.
I generally abhor any state discriminating among citizens. I have absolute contempt for governments that discriminate along religious lines, as is routine in Islamic states. It is shameful that the Indian state has codified religious discrimination. Candidate Modi had stressed that he would end discrimination against Hindus, by repealing anti-Hindu legislation like the Right to Education Act, and get the state out of managing temples. It was like music to my ears because the “generality principle” — the idea that legislation should apply equally to all citizens and not be based on group and religious identity — makes it illegitimate for the government to favor one religion over another.
What’s missing is the equivalent of the First Amendment of the US Constitution, which states (in part) that “Congress shall make no law respecting an establishment of religion …” I had hoped that as the PM, Modi will amend the Indian constitution along those lines. Fracturing an already fractured polity along religious lines was not expected.
Modi was given an unprecedented opportunity to make radical — meaning “arising from or going to a root or source;” — but simple changes. He could have undone every policy that has kept India backward and poor. It is not rocket science: just stop doing all the bad stuff. But he continued and even intensified the stupidity and insanity of the past policies. He implemented failed policies more efficiently. The fact that government is generally inefficient is a saving grace because governments usually cause harm. Efficiency in doing what you should not be doing at all is not a matter of pride.
There are two fundamental problems with the Modi government. First is that it does not understand that structural problems cannot be solved by project-based solutions. No matter how expensive a project you implement to feed a dwarf, it will not grow up to be a giant. Farm loan waivers, for example, will not solve the structural issues that plague the agricultural sector. What is needed there are labor law reforms, education sector reforms, and land law reforms.
Why labor law reform? Because it directly impacts the number of non-farm jobs. Why education? Because without a vibrant education sector, farm labor cannot transition into manufacturing and services. Why land law reforms? Because small and marginal farmers cannot move out of agriculture.
The Modi government’s lack of understanding brings us to the second of the two fundamental problems: it lacks talent. It does not have people who understand. It lacks people with domain expertise. All institutions, public and private, depend on wise leadership, people who have spent decades understanding their domain, and have demonstrated ability and commitment. As the prime minister, Modi had the enviable position to command the services of the very best talent from home and abroad. He did not do that. The less said about the competence of people he put in charge of various institutions, the better. It remains a mystery why. Perhaps politicians aren’t wise enough to appreciate the importance of wisdom.
No sane economist would have ever recommended demonetization. But Modi was ill-advised and undertook the biggest assault on property undertaken by any democratic government. The ostensible goal was to eliminate black money. But demonetisation did not stop black money because it isn’t the fiat money that is at fault but rather the structure of the economy that generates the black money.
The goods and services tax (GST) is only a moderately bad idea. What makes it terrible is the level and variety of the taxes. It’s motivated by greed — get as much revenue as can be squeezed out of the people. Demonetization severely hurt the unorganized sector and the small enterprises. GST dealt a blow to the other parts of the economy. The loan waivers and increased public spending has damaged the entire economy. Basically, the Modi government machinery, like a giant vacuum cleaner, sucked up all the liquidity and left the economy dry of all vitality.
Nehru set India on the path to socialism, which inevitably leads to poverty and destitution. India has the world’s largest number of people in extreme poverty. Nehru’s daughter Indira sped up the journey along that socialist path through nationalization of various enterprises and banks. Father and daugher set India on the road to serfdom.
Perhaps at some time in the past Modi may have vaguely understood that they were the monsters that devoured hundreds of millions of innocent people. He may have vowed to destroy the legacy of those monsters, as it would seem from his election slogan of “Congress mukt Bharat.” But when the time came, he continued the same failed policies of the past. Indira’s emergency found its analog in Modi’s note-bandi. He became the people he apparently despised. Like them, he imposed more government, more discrimination, more meddling in the economy, reduced freedom.
That old curmudgeon Friedrich Nietzsche — one of the greatest philosophers of the Western tradition, the man who contemplated a world beyond the distinction of good and evil, the one who examined the morality of Christianity and found it wanting — had warned that the danger in fighting monsters lay in becoming one yourself.
“Whoever fights monsters should see to it that in the process he does not become a monster. And if you gaze long enough into an abyss, the abyss will gaze back into you.”
Perhaps Modi gazed into the abyss a bit too long. And that’s why India is staring at the abyss of insignificance and irrelevance.
It’s all karma, neh!
PS: Happy Republic Day. And enjoy the sickening spectacle they put up in Delhi every year.