Corruption and India’s 1 percent
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 ‚ÄĒ 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‚Äôs hunger strike became a national political event because it tapped into this anger of the urban bourgeoisie.
‚ÄúIndia has been overwhelmed by corruption scams,‚ÄĚ said Kiran Bedi, the first woman officer in India‚Äôs elite police service and one of Hazare‚Äôs chief lieutenants. ‚ÄúWhile 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.‚ÄĚ
Nor is it just the activists who say that alongside India‚Äôs remarkable economic surge the rot has been spreading, too.
‚ÄúCorruption is endemic,‚ÄĚ said Rajiv Lall, chief executive of the Infrastructure Development Finance Company, a partly state-owned financial institution. ‚ÄúI don‚Äôt think anybody here is pretending that there‚Äôs no corruption in the country. And corruption can take on a new dimension, especially in this time of great transformation.‚ÄĚ
Graft is just part of the story. One of the reasons to celebrate India‚Äôs 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‚Äôs transformation, India‚Äôs 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‚Äôs influential planning commission, is that India‚Äôs economic rise has had the least impact on the people who need it most.
‚ÄúMy thesis is that most people are not feeling included in the growth,‚ÄĚ Maira said. ‚ÄúThis has become a very loud voice which is saying ‚ÄėCome on guys, the economy is growing very fast now. You‚Äôre celebrating this 8, 9, 10 percent growth, but what about us?‚ÄĚ‚Äô
B.N. Kalyani, the chairman of Bharat Forge, India‚Äôs largest exporter of motor parts, sees the same inequitable growth.
‚ÄúIt 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,‚ÄĚ Kalyani said. ‚ÄúAll 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‚Äôt seem to travel too far beyond the urban setting of India.‚ÄĚ
But even many of these critics of India‚Äôs lopsided development think it is inevitable ‚ÄĒ one of the growing pains of the country‚Äôs swift economic rise.
Maira pointed to a commonly used measure of income inequality, the Gini coefficient, saying ‚Äúit always rises whenever growth takes off.‚ÄĚ
‚ÄúWhen 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,‚ÄĚ he said. ‚ÄúSo you will get the people with something becoming richer faster than those who don‚Äôt have access to education, to some capital and to the system.‚ÄĚ
As Maira points out, one of the most powerful advantages of the wealthiest 1 percent is ‚Äúaccess to people in power.‚ÄĚ Corrupt business deals are the most extreme use ‚ÄĒ and abuse ‚ÄĒ 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 ‚Äúthe tendency is that people who have access to power and access to governments, etc., tend to get a better deal.
‚ÄúThe policies, the roots, are framed because they are people who give inputs to those policies,‚ÄĚ 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 ‚Äúcognitive capture,‚ÄĚ 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 ‚Äúoligarchic‚ÄĚ capitalism will require more than correctly diagnosing the problem. Ashutosh Varshney, a professor of international studies at Brown University, likens India‚Äôs thriving and dirty capitalism to the United States‚Äô Gilded Age. That apt comparison suggests that India watchers should be on the lookout for a Hindu version of the Roosevelts ‚ÄĒ 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‚Äôs robber barons have emerged in the age of globalization and at a time when the United States, still the world‚Äôs 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.