Who Needs Leaders?

I remember writing at that time in this column that whoever puts money in Russia (IMF and its ilk) will live to regret it. The time will soon come to prove this point. Whether Yeltsin retires before he becomes totally dysfunctional remains to be seen. But Chubais, Lebed, Shobchak not to speak of Zhirinovsky and any number of others, are preparing to fight out for succession. We may yet see an interim period of confusion in Russia before we see any consolidation. Yeltsin has failed to institute any law and order in Russia and nomenklatura capitalism is even worse than mafia capitalism. His removal alone will not help; had Zyuganov been elected we may have seen some attempt at a legal framework, but then he was a communist so he was undermined. Yeltsin's successors have a lot of work cut out for them.

 

There is a respectable counter-argument advanced by my colleague, Prof Richard Layard, in a recent book on Russia, that we should ignore politics altogether, that Russia has liberalised and is progressing very well indeed. It is the deep institutional reforms, privatisation, establishment of capital markets, habits of the market which matter and not who is in power. It is a seductive idea, but I still think it is not that these governments and leaders can do positive good, but that they can do a lot of harm, both by their acts of omission and by acts of commission. My bet is that Russia will go down before it comes up.

I wish the irrelevance of politics was true about India at least. The capacity of our governments and even opposition to do harm is immense. The government boldly tries to take a step forward and clear up the deficit on the petroleum revenue account. Then, just as suddenly, it withdraws. Petroleum is after all, not needed by our car owners as much as the poor and so a petroleum price hike is an anti-poor move. The burden of indirect taxes and underinvestment in rural areas and mounting debt burden which eats up vital resources and inflation are of course not anti-poor. Oh No, not at all. They are all sanctioned by long practice of Congress raj and, of course, Congress is never anti-poor by definition. Indeed, Congress loves the poor so much that by ensuring low growth, rising unemployment and growing ranks of landless labourers all the time it was in power, it made sure that the poor and lots of them were always with us.

So I read that Sitaram Kesri has decided that reforms are anti-poor and that Congress will, from now on be anti-reform. Of course, it is just a cynical ploy to get back into office by blackmailing the Deve Gowda government. Or at least I hope so. I do hope Congress is not seriously thinking of reversing reforms. Manmohan Singh tried his best for two years to reform the Indian economy. Then, by the end of 1993, Congress was fed up with all that rigour, and business as usual resumed, with deficits rising and subsidies mounting. The Deve Gowda government is, in the same vein, not serious about the deficit. We see that the growth rate of GDP will be below 6 per cent this year and the deficit target will not be attained. So the Indian tiger had a 7 per cent growth rate for one year and is now sliding back into its elephantine habits.

If there had been any proof that the old policies worked or that they were pro-poor, one would understand this great radical turn of Sitaram Kesri. But as everyone knows now, India's performance in measures like literacy, especially female literacy and life expectancy, are below Sub-Saharan Africa. Countries such as Malaysia and Indonesia have achieved spectacular progress in getting poverty down and they have done so by liberalising. India has been left behind by China, which has had double digit growth rates for 18 years now. Of course, Mr Kesri and the entire political establishment can afford to choose low growth and industrial stagnation. They don't pay the price. In the name of the poor they get their ministries back and there will be more business as usual. Behind all this is the party that steered India from the seventh place as industrial nation in 1947 to below 30 in 50 years.

And of course our big business will happily back them. As John Hicks once said, the best of monopoly profits is an easy life. All this liberalisation and foreign competition is bad for the delicate digestion of our business leaders. They want a level, i.e fenced off, playing field. Back to the good old days of the permit license raj; the small and medium-sized firms can go back to the uneven playfield they enjoyed in those glorious days when the big boys had all the perks of low interest rates and protection and import quotas.

Except, thank heavens, it is no longer so easy. We have after all signed the Gatt accord and as the ministerial conference of WTO at Singapore showed, there is no mileage in the old rhetoric any more. There is nothing for it but to face the competition and adapt and improve. Any messing about with the reform and the foreign fund holders will leave with their billions in droves. One only hopes Mr Kesri is just bluffing and using the poor, as usual, as an attack weapon to protect the rich Congress MPs starved of office for almost eight months now. Let us hope he is, for once in his long career, insincere. If he were really serious, the damage will be too great. The country cannot afford leaders like that; they are costly enough as it is. But let them not do any more damage than they have already done.