Did the government need to back Mittal?

DEBATE

Snubbing the French is one thing, but since Mittal doesn't pay taxes in India, the question is whether the government went overboard in supporting him.

RAJIV KUMAR,
Director and Chief Executive, ICRIER

"Governments in emerging markets must be seen to work towards ameliorating adjustment costs and not be seen as belligerent supporters of their respective corporations"

Great changes are taking place in the world economy. A new order is in the making with emerging economies accounting for an increasing share of global output and trade. Corporations from these countries are becoming more assertive and active in the mergers and acquisition business. Such changes have happened in the past as well when, for instance, Germany and Japan arrived on the world economic scene in the first decades of the previous century. The established order changed even then but clearly it took a lot of force (Marx called it as the midwife of change). Nation states took upon themselves to not only espouse the cause of their corporations but went far beyond that to aggressively capture markets and resources for their firms.

They were met with strong resistance and with what consequences? Two World Wars, birth of long-lasting dictatorships and human misery and deprivation at an unprecedented scale. Surely we do not for a moment want such an outcome this time round. And if we don't, we have to make sure that the business of global business and the business of politics and governance remain clearly separate. But quite often governments in their shortsightedness and compulsions of electoral politics choose to ignore this. Such defensive behaviour can be increasingly expected from governments who see their corporations, sometimes holding iconic status, being threatened either by closure or by take over by emerging market firms. Such behaviour is, of course, misplaced and avoidable.

But I think the greater responsibility for maintaining the separation between politics and business today falls on leaders and governments of emerging economies. Their firms and corporations, with their newly found dynamism, are to increasingly become agents of change in global markets requiring structural adjustments. Governments and leaders in emerging markets must be seen to work towards ameliorating these adjustment costs and not be seen as belligerent supporters of their respective corporations. There is hardly any advantage in arousing national emotions and make business takeovers and mergers a proxy for political contest. The Chinese pragmatism in quietly asking China National Offshore Oil Corporation (CNOOC) to move away from the take over of US oil firm Unocal is perhaps worth emulating because in the coming years takeovers like that of IBM's PC business by Lenovo or of Beta Pharma by Dr Reddy's Labs are going to happen anyway. History will take its course driven by inexorable forces of technology and demographics. Better to give more attention to reinforcing these trends to our advantage rather than to get into the business of calling names even when others may so provoke us. Quiet, efficient economic diplomacy that derives maximum leverage from our inherent strengths is the need of the hour and calls for a makeover in South Block's perceptions and practices.

TCA SIRNIVASA-RAGHAVAN,
Managing Editor, Margin

"The initial French and Luxembourg responses were because of racism. I think it's time we stopped being nice guys in such matters and talk in a language they understand"  For a country that has not won any decisive victory since Austerlitz 201 years ago in 1805 and lost more wars than any one cares to remember since then, France does carry on a bit. Or, as when I mentioned this to a friend, it is perhaps because of this that it carries on so.  The pattern is usually the same: growl, bluster and, when confronted, back down. Few know it but after all that huffing and puffing over the US decision to invade Iraq, hoping for some contracts, the French quietly offered to help.  So it is not surprising that when the Indian government growled back over the statements being made over Laksmi Mittal's bid for Arcelor, the French President has now said that his government is not going to get involved.  Well done, Jacques, you can now go and stand in the queue of those wanting to sell India nuclear power reactors and other goodies. That Airbus order is only a sampler.  Should the Indian government have got involved? Of course, it should have.  The initial French and Luxembourg responses were because of racism and I don't have any doubts about that whatsoever. Arcelor's chief executive, Guy Dolle, called it "monkey money" which, in colloquial French apparently means "worthless" money.  The truth is different. The money is European and not worthless. But, merde, the guy who has it is not. The imputation was clear. I don't need to spell it out.  The naïve and the nice will argue that it is a matter between the shareholders of Arcelor and Mittal. That is doubtless true in technical sense. But at a practical level, it has always been different.  Others have asked why the Indian government should help out a European company. Simple: because it is an Indian who owns it.  As far as I am concerned, it is the duty of the Indian government to help all Indians, never mind the nature of the help they need.  History is always instructive on such matters. In 1850, the Greeks beat up a Portugese-Maltese-Jewish shopkeeper called Don Pacifico, who was British subject because he had been born in Gibralter.  And guess what the British did? They sent in the British Navy and blockaded Greece for two months! We at least were less belligerent and only deployed Kamal Nath.  What has M'sieu Mittal ever done for India? Well, for starters, he is planning to invest Rs 44,000 crore here. If he doesn't need help, who does?  I think it is time we stopped being nice guys in such matters. Especially, with the Europeans and, most particularly, with the French. We need to talk in a language they understand.  In fact, we just did; and they understood.