Chrystia Freeland

The only important question in the West right now is how to restart stalled economic growth. So it is easy to be dazzled by India, where a 7 percent rise in gross domestic product is the nightmare scenario, and optimists are shooting for 9.

But Indians themselves are starting to worry about how that growth is being achieved — and who is benefiting. The headline complaint is corruption. That is nothing new here, of course. But the country now has a middle class self-confident enough to feel humiliated by paying quotidian bribes and resentful of the rise of baksheesh billionaires. Anna Hazare’s hunger strike became a national political event because it tapped into this anger of the urban bourgeoisie.

“India has been overwhelmed by corruption scams,” said Kiran Bedi, the first woman officer in India’s elite police service and one of Hazare’s chief lieutenants. “While it has been apparent that India is shining, India has also been declining in many ways in that there has been rampant exposure of corruption.”

Nor is it just the activists who say that alongside India’s remarkable economic surge the rot has been spreading, too.

“Corruption is endemic,” said Rajiv Lall, chief executive of the Infrastructure Development Finance Company, a partly state-owned financial institution. “I don’t think anybody here is pretending that there’s no corruption in the country. And corruption can take on a new dimension, especially in this time of great transformation.”

Graft is just part of the story. One of the reasons to celebrate India’s astonishing economic rise is that the subcontinent desperately needed to get richer. In 1991, when Manmohan Singh, then the finance minister and now the prime minister, began the liberalization program that underpins the country’s transformation, India’s 854 million citizens had an average annual per capita income of only $1,300. The problem, said Arun Maira, a former industrialist who is a member of the country’s influential planning commission, is that India’s economic rise has had the least impact on the people who need it most.

“My thesis is that most people are not feeling included in the growth,” Maira said. “This has become a very loud voice which is saying ‘Come on guys, the economy is growing very fast now. You’re celebrating this 8, 9, 10 percent growth, but what about us?”’

B.N. Kalyani, the chairman of Bharat Forge, India’s largest exporter of motor parts, sees the same inequitable growth.

“It saddened me a lot to see that even Bangladesh has a better social index, in terms of what it was in 1990 to what it is today, compared to India,” Kalyani said. “All this glitz and glamour and everything that we see about business, the high-rises in Mumbai and businesses moving ahead and the stock market and everything, don’t seem to travel too far beyond the urban setting of India.”

But even many of these critics of India’s lopsided development think it is inevitable — one of the growing pains of the country’s swift economic rise.

Maira pointed to a commonly used measure of income inequality, the Gini coefficient, saying “it always rises whenever growth takes off.”

“When you open more opportunity, like more free markets and the opportunity for people to do their own thing, those who already have some capital, or they have some education, or they have access to people in power so that they could help get access to the new opportunities more easily, they will first grow themselves, their own wealth,” he said. “So you will get the people with something becoming richer faster than those who don’t have access to education, to some capital and to the system.”

As Maira points out, one of the most powerful advantages of the wealthiest 1 percent is “access to people in power.” Corrupt business deals are the most extreme use — and abuse — of those relationships. But there is a more subtle reason the game is most effectively played by those who are already winning it. S. Gopalaskrishnan, the co-chairman of Infosys, the pioneering Indian technology company, said that “the tendency is that people who have access to power and access to governments, etc., tend to get a better deal.

“The policies, the roots, are framed because they are people who give inputs to those policies,” he said.

This is the Indian version of what Willem Buiter, the former London School of Economics professor who is now chief economist at Citigroup, calls “cognitive capture,” and which he blames in part for the regulatory and legislative lapses that helped create the 2008 financial crisis.

Just as that financial crisis and the more recent populist protests have shaken some of the certainties created by cognitive capture in the West, the unexpected success of the Anna Hazare movement has focused the Indian elite on the shortcomings of its own model.

But breaking out of what the economist Raghuram Rajan has warned risks becoming “oligarchic” capitalism will require more than correctly diagnosing the problem. Ashutosh Varshney, a professor of international studies at Brown University, likens India’s thriving and dirty capitalism to the United States’ Gilded Age. That apt comparison suggests that India watchers should be on the lookout for a Hindu version of the Roosevelts — a Teddy to break the grip of the robber barons and an F.D.R. to offer the 99 percent a New Deal.

There is, however, one important difference. India’s robber barons have emerged in the age of globalization and at a time when the United States, still the world’s dominant economy, is experiencing its own second Gilded Age. The wealthiest 1 percent is a global class, and cognitive capture is an international phenomenon. The world may need its own global Roosevelts, too.

My column last week on how a few members of the 1 percent are responding to Occupy Wall Street provoked some vehement responses, many of which appear in the comments to my post. One of the most interesting, though, was sent to me by email from a Canadian reader who thinks U.S. business elites are more sympathetic to OWS than my column suggested. I hope he is right — but I wonder whether his and his clients’ (he is a prominent art dealer) sympathy for OWS is partly a reflection of how much Canadian and U.S. political culture, particularly at the top, diverge. I’m publishing his comments below, and I hope you’ll tell me what you think.

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Chrystia Freeland, editor of Thomson Reuters Digital, has fumbled the ball again.

Thinking that Occupy Wall Street (OWS) is the left wing alternative to the corporately funded Tea Party Movement, she finds it paradoxical that former Canadian prime minister Paul Martin and former Mexican president Ernesto Zedillo would be supportive. After all, Martin is a “millionaire businessman,” and Zedillo “serves on the boards of blue chips Procter & Gamble and Alcoa.”

Recalling a recent interview with them, she writes:

Mr. Martin and Mr. Zedillo would be welcome at any corporate dining room on Wall Street or financiers’ dinner party, but it was striking how strongly their view of Occupy Wall Street differed from the conventional wisdom among U.S. business elites.

I concede that Freeland has better access to the “U.S. business elites” than me, but I don’t think their hostility to OWS is nearly as deep as she believes. OWS has received lots of sympathetic coverage in the business press, and most of the red meat capitalists that I periodically cite feel the same.

As an art dealer, I enjoy good relations with a signify number of Canada’s “elite” (as defined by money), and have only heard sneering, disparaging remarks about OWS from a couple of them.

Most share Martin and Zedillo’s views. They are deeply concerned by the toxic mess that the borrow and spend, deregulating, tax cutting, trickle down, private wealth and public poverty oligarchs have created in the States. They value a social contract of shared rights and responsibilities, for they know that their own interests are best served by social stability. They believe that this is better sustained through education and general prosperity than by the coercion of a corporate police state. Like me, they favor equal opportunities over equal outcomes, and have no problems with financial, professional, and social rewards based on merit.

Freeland thinks that there’s a natural linkage between “crony capitalism” and a “meritocratic democracy.”  Where the only value is money, that’s probably true; but real democracies are built on much broader bases.  Money is only one of many measures of a man’s worth.  To make it the only measure — and to defer to its power — is a recipe for societal collapse.

–Christopher Varley

Paul Martin and Ernesto Zedillo are members in good standing of the global elite. Martin is a former Canadian prime minister, finance minister, deficit hawk and, in his life before politics, multimillionaire businessman. Zedillo is a former president of Mexico, holds a doctorate in economics, directs Yale University’s Center for the Study of Globalization, and serves on the boards of the blue chips Procter & Gamble and Alcoa.

Yet when I interviewed the two of them in a wide-ranging public conversation last week, hosted by the Center for International Governance Innovation, an independent, nonpartisan Canadian research organization, they sounded an awful lot like the people camped out in Zuccotti Park in New York.

Neither Zedillo nor Martin had sympathy for the complaint that Occupy Wall Street lacked a clear agenda. As Zedillo put it: “These criticisms — ‘Oh, they don’t have an agenda, they only pose problems and provide no solutions’ — well, they are citizens and they have earned the right to express a very serious, real problem.”

The truth, the two statesmen agreed, was that the protesters were articulating a real, important and global concern.

“I have yet to talk to anyone who says they aren’t reflecting a disquiet that they themselves feel,” Martin said. “I think really the powerful thing is that Occupy Wall Street has hit a chord that really is touching the middle class — the middle class in Canada, the middle class in the United States, the middle class right around the world — and I think that makes it actually very, very powerful.”

In fact, Zedillo thought the Occupy group should widen its sights — “I could argue as an economist it’s not only about Wall Street. They should have an Occupy G-20” — a possibility his successors at the Group of 20 table are sufficiently worried about that protesters are being confined to Nice while the heads of state meet in Cannes this weekend.

Martin and Zedillo would be welcome at any corporate dining room on Wall Street or financiers’ dinner party, but it was striking how strongly their view of Occupy Wall Street differed from the conventional wisdom among American business elites.

That dissonance was not lost on Martin. He started out diplomatically — “I think that most people have basically given them a fair amount of credit” he said of the protesters — but then could not resist adding: “I don’t want to pick on U.S. bankers, but the reaction, the one that really got me was the banker who basically said, ‘You know, these are just a bunch of welfare bums. What we’ve got to do is cut welfare.’ A New York banker saying we’ve got to cut welfare is staggering to me. Why doesn’t he just look in the mirror? I think that actually what’s happened is that the inability of some people to defend their position has become so manifest that it’s actually added to the power of Occupy Wall Street.”

The welfare bums critique is a familiar elite response to populist rage, particularly from the left, and it is not confined to the United States. Some of the German reaction to protesting southern Europeans had a similar flavor, as did some of the British push-back against the riots there in the summer.

What is interesting about the United States is that the first burst of grass-roots anger came from the right. Although the policy prescriptions of the Tea Party could not differ more radically from those of Occupy Wall Street, the movements share an anti-elite sentiment. That may be why some agenda-setting thinkers on the right are putting forward an analysis of America’s ills that deftly combines the anti-welfare-bums riff of the country’s beleaguered upper crust with conservative grass-roots anger against many of those same elites.

This was the elegant pivot of Representative Paul D. Ryan, the Wisconsin Republican, speaking at the Heritage Foundation last week. The “true sources of inequity in our country,” Ryan argued, were “corporate welfare that enriches the powerful and empty promises that betray the powerless.” In Ryan’s analysis, the problem with America’s political economy is “a class of bureaucrats and connected crony capitalists trying to rise above the rest of us, call the shots, rig the rules and preserve their place atop society.”

What is striking is how similar that dyspeptic vision is to the Occupy Wall Street consensus that the U.S. economy has been hijacked by bankers and the lobbyists and politicians they bankroll.

There is a reason “crony capitalism” is the common target of political movements that differ over nearly everything else. At a time when governments have spent billions bailing out banks even as they cut pensions and social services, and when income inequality is soaring worldwide, it is hard to deny that the 1 percent are getting a pretty terrific deal.

But taking the diagnosis of crony capitalism as the first step toward a cure for the Western world’s ills is a little more complicated.

Economic growth is the most pressing problem for everyone today, and no matter how fierce your animosity toward the 1 percent, it is hard to see how reining them in more effectively right now will goose the gross domestic product (indeed, in many countries the rise of the 1 percent has coincided with strong economic growth).

The second complication is that your crony capitalism may well be my meritocratic democracy. A general charge of crony capitalism is easy to make. But dividing the “bad” crony capitalists from the “good” innovative entrepreneurs is much harder to do. And sorting them out without creating a new group of crony capitalists may be the hardest thing of all.

Editor’s note: Due to a technical error crediting an earlier version of this article to the wrong author, it has been republished, without changes, to this URL.