COVID Economic Recovery: India Needs More Trade, More Competition, More Liberalisation

A lot of people around the world will retweet you if you blame the coronavirus pandemic on ‘neoliberal capitalism’. In an excellent article in Boston Review, Alyssa Battistoni outlines the case. “(The) pandemic,” she argues “can hardly be understood as exogenous to capitalism: the virus itself is the outgrowth of the peri-urbanisation that has accompanied rapid development, the commodification of once-wild subsistence foods, new encounters between humans and nonhumans driven by industrial food production, and the global movement of both people and commodities.”As plausible as the accusation might appear, blaming neoliberal capitalism for the pandemic is merely pinning the blame on the folk devil. The progressive Left is not alone in using the crisis to confirm its biases. For a lot of people, across ideological, national and party lines, the usual ‘enemy’ is the cause of the crisis. No proof required. During the Black Death pandemic in the Middle Ages, they blamed Jews, sorcerers and witches, and massacred a lot of them. Hopefully, modern folk devils have less to fear.Will Modi’s 20 L Cr Package Boost Only Our Spirit Or Also Economy?If COVID Was a Product Of Neoliberal Capitalism, Why Did It Originate In China & Not the West?I have now seen neoliberal capitalism blamed for globalisation, the dot-com bust, 9/11, the US-led war in Iraq, SARS, the Global Financial Crisis, and now, COVID-19. Yet, beyond a general polemical complaint, few critiques offer evidence. Now job losses in Western countries in the 1990s due to globalisation, stock market bubbles, financial crises and income distribution patterns certainly can be attributed to specific economic policies, but making it about an ‘-ism’ is a political-ideological argument that often comes in moral wrappings. Take the case of the coronavirus. If it was indeed a product of neoliberal capitalism, why did it originate in China and not in its Western heartland? Could it be the case that pandemics originate in China and not in the West because the prevalence of the rule of law — and the risk of being sued — in the latter ensures that American animal farmers take food safety more seriously than their Chinese counterparts? Could it be arrogant incompetence than any ideological mooring that caused the US government to botch its response?Actually, one reason its opponents find it hard to prove the case against capitalism is because there is no such thing, at least in the form they imagine. As Rosenberg and Birdzell write in the 1985 book How the West Grew Rich, “the dominant fact about economic institutions that emerged in Europe after the decline of feudalism is their wholly pragmatic character and their lack of ideological commitment to any economic principle. The system that generated Western economic growth evolved before it was recognised as a system or advocated as an ideology.” In fact, they point out, the very word ‘capitalism’ was developed by Marx’s followers “as a term of opprobrium for the economic system they wished to overthrow... nevertheless, the defenders of Western economies found that the convenience of the word outweighed the rhetorical principle that one should never adopt one’s opponents’ terms.”Relaxing Lockdown, Restarting Economy: What PM and CMs SaidCronyism Yes, But How Can One Accuse India of Capitalism?Capitalism is thus a convenient shorthand for a number of ideas that have been found to work well together. Among them are individual liberty, economic freedom, free markets, free trade, competition, rules of law and the incentives created by the profit motive. Not all countries subscribe to even this small subset of ideas to the same extent at the same time. All so-called capitalist economies are actually mixed economies.Unlike communism, capitalism — I’m using the same shorthand now — is not an invented ‘system’ but a retrospectively understood one. Marx invented communism. Adam Smith merely explained how capitalism worked. It has continued to evolve, with trial and error, with people and governments adopting some ideas and rejecting others, changing minds according to their contexts. The United States introduced social security in the 1930s. Britain nationalised health in the late 1940s. Many countries have national airlines. Despite allowing a greater role for markets, after 1992, the Indian government still manufactures bathing soap. We have taken mindless regulations, inspectors and bribes as facts of nature and do not fight them.Cronyism yes, but how can you remotely accuse India of capitalism?Why Indian Economy Needs China Even If It’s a ‘Hostile’ Neighbour We Can’t Have a ‘Control Economy’ If We Are To Be Both Self-Reliant & ProsperousThe world’s economic policies have had some terrible effects — environmental degradation being the most serious one — and those must certainly change. But the answer is not another ‘system’ to replace the current one. It is far more useful to think of fixing particular problems, and cross the river by feeling the stones.We, in India, must be especially careful about ideas that can kick the ladder to prosperity from under our feet just as we have begun to climb it. Communism and full-on socialism are unaffordable, but fairly remote dangers. Our concerns come from increasing state controls over the economy as a result of the pandemic.Indeed, self-reliance, prosperity and control form a trilemma: you can have only two of the three. We cannot have a control economy if we are to be both self-reliant and prosperous. So the price controls, quotas and restrictions imposed as emergency measures must be lifted at the earliest. Prosperity will come from growth, just like it did for the past three decades.To rebound from the pandemic that has thrust hundreds of millions into poverty, India needs more liberalisation, more competition, more trade and much better rule of law.It is important to remember self-reliance is an outcome, and must not become an ideology. To see what can happen if it does, just look at North Korea. ‘Juche’, the country’s national ideology, described as “Kim Il-sung's original, brilliant and revolutionary contribution to national and international thought”, translates into self-reliance.(Nitin Pai is director of the Takshashila Institution, an independent centre for research and education in public policy. He tweets at @acorn. This is an opinion piece. The views expressed are the author’s own. The Quint neither endorses nor is responsible for them.)

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India Can’t Be Self-Reliant & Prosperous With Price Caps, Quotas

To recover from COVID, that has thrust millions into poverty, India needs more liberalisation, more trade.

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Topics: Indian Economy Trade Deficit Recession