India’s Gilded Age: The Decay Underneath

The 1991 New Economic Policy was considered a harbinger of economic prosperity. India finally came out of the clutches of the unwieldy License Raj that stunted the economy with the infamous Hindu rate of growth. ‘Let the whole world hear it loud and clear.’ Thundered Dr Manmohan Singh, the then finance minister of India, ‘India is now wide-awake. We shall prevail. We shall overcome.’

With an upbeat economic policy, the animal spirit unleashed. But did the animals become man-eaters? Was it a clarion call of triumph or did it usher India into the era of robber barons? Was it the beginning of the Indian Gilded Age plagued with sky-rocketing cronyism? Was poverty guillotined or were the poor crumbled in the new era? With a long haul of almost three decades since the 1991 reforms, this article delves into the enquiries posed above with an attempt to raise pertinent questions on what lies ahead.

The objective of eradicating social and economic inequalities was at the heart of the newly independent nation. India’s founding fathers adopted a socialist model to curb this menace. But with upward of forty years of socialist efforts and abysmal economic growth, India set foot towards economic development in the last decade of the millennium, adopting globalization and liberalization as a panacea for all politico-economic ills.

Prima facie, opening the Indian economy had a roaring impact on growth, especially in the corporate sector.  In the decade 2004-2014, Tata, an Indian business conglomerate, took over British household names – Tetley and Jaguar to name a few; Mukesh Ambani, India’s richest man, made it to the top ten list of Forbes; foreign investments increased manifold. The rumours of India overtaking the Asian Tigers gained currency. Poverty rates fell and urbanization accelerated. For the first time, double-digit growth rates were recorded in Indian history. But this euphoria was merely superficial, as a deep dive would reveal that these reforms came at a dear cost.

The inequality gap has been yawning as incidental to a more vibrant economy. India’s inequality rate has far surpassed those of Canada, China, and the United States while its Gini index score stood at 47.90 in 2018. The richest one per cent owns around half of the total wealth whereas the bottom half owns a paltry five per cent.

The illusion painted by a distorted perception of prosperity has prevented India from bringing social deprivation into political focus. And therefore, Article 38 (2) of the Indian Constitution, which makes it incumbent upon the State to strive for the elimination of inequality in income, status, and opportunities, has been rendered infructuous.

Another constitutional remedy, the Fundamental right to free trade, is enshrined in Article 19(1)(g) for ensuring a level playing field. But some corporations have rampantly grown to become behemoths and raised monopoly empires in league with India’s crony capitalism. The 1991 reforms that seemed to have ended the license raj, have in reality forged a web of clearances and permits necessary for commencing certain endeavours. These permits are obtained by placing heavy reliance on graft and favouritism, giving the contemporary regime a sobriquet of neo-permit raj. This regime has a penchant for allotting vast tracts of land and mineral resources, licenses for regulated activities like telecom, port operations, etc. to the Bollygarchs – the Indian Oligarchs.

The apogee of the 1991 liberalization regime swelled fortunes of magnates and dwarfed GDP of peer nations, but it also built an ironclad wedge between the uber-rich and the downtrodden poor. As Mahatma Gandhi remarked in one of his last notes, ‘Whenever you’re in doubt …Recall the face of the poorest and the weakest man …Will he gain anything by it?’ But India, in the path to economic liberalization, failed to pay heed to Gandhi’s last words. What we needed, from the 1991 reforms, was a rain that would trickle down from mountains of the well-heeled to valleys and plains of the destitute, but what we got was the snowfall that stuck to the crest.[i]

These occurrences are historically substantiated. Seldom do the gilded ages in democracies (in India, post-2004 [ii]) come without rampant corruption and inequality. With the Industrial Revolution scene set up, the US kicked off this movement towards cronyism. India, and more recently, South Africa, followed her lead.  This robber baron culture is also endemic in Russia, which, after its recent history, can hardly be called a democracy. The embedding of cronyism can be ascribed as a reason why Russia is dubbed a nation of oligarchs. In a similar vein, Raghuram Rajan, former Governor of the Reserve Bank of India, once asked, “If Russia is an oligarchy, how long can we resist calling India one?” With the number of billionaires in India surpassing that of Russia’s, Rajan’s rhetoric was, perhaps, prescient.

Although, in India’s case, a more apt parallel may be drawn with America’s robber barons rather than the Russian oligarchs, as the socio-political trajectories of late-nineteenth-century America and early twenty-first-century India are eerily similar.

Expansion of railroads propelled the American economy after 1871 under the administration of President Ulysses S. Grant. The United States was soon known as the world’s leading industrial power. It was the era of plutocrats, such as the Rockefellers, the Morgans, and the Vanderbilts. Unsurprisingly, it was also the era of venality and kickbacks. Those atop the economic echelons amassed astronomical fortunes. The nation’s 4000 millionaires held one-fifth of the nations’ wealth.

Similarly, in India, the turn of the twenty-first century witnessed a stupendous boom for the business strata. But alongside the economic boom, India’s kickback system also went from retail to wholesale. Astute business prowess was not the sole reason for the ballooning fortunes of Bollygarchs. It was coupled with the ability to work the system, and not chafe at its limitations. This today, has culminated in the wealth of top nine billionaires equaling the wealth of bottom fifty per cent population.

The ambitious ventures undertaken by the corporate bigwigs were swamped with wild risks that would easily intimidate conventional-minded entrepreneurs. The ventures of the Vanderbilts, Rockefellers, and Morgans (in late nineteenth-century America) were just as outlandish. For men distanced by oceans and centuries, the result has been preternaturally the same. With high risks came high rewards. And the robber barons went on to assert supreme dominance.

But in a country like America, with her history of dynamism, it is always possible to imagine a constructive reinvention. And that is what happened towards the end of nineteenth-century.

In the 1896 election, William McKinley, a pro-business Republican, was “bought” and brought to power.[iii] But then came a tragic shock for the corporations. He was assassinated in the first year of his second term, and his successor, Theodore Roosevelt, did not “stay bought”.[iv] Roosevelt became the nemesis of monopolies and monolithic corporations. He fashioned himself as a populist. The turn of the century, under Roosevelt’s administration, put a period to America’s venal Gilded Age, and the progressive era of reforms ensued, leading to a clean-up of politics, breakdown of monopolies, and an expansion of the middle class.

With India engulfed in uninhibited corruption — grafts and kickbacks being the norm rather than an exception — and the anti-corruption ambassador, Prime Minister Narendra Modi, at the helm, the time might be ripe for putting a tight leash on the Indian robber barons. Many claims that the crusading efforts of Modi have stunted the worst of cronyism. ‘The prime minister is doing for India what Teddy Roosevelt did for America, moving us away from the Gilded Age and towards a new Progressive Era,’ remarked Jayant Sinha, Member of Parliament (affiliated to BJP), in 2015.[v] 

Although Modi is often painted as a hardliner against cronyism and corruption, his predilection towards the political right often leads to accusations of saffronization of the Indian economy; incidentally, stalling the pace of reformation. Further the criticism of his major economic policies – Demonetization and GST – has somewhat cast a shadow on Sinha’s laudatory remark.

Nonetheless, with a substantial part of NDA government’s second term ahead of us and the scales well tilted in favour of a 3^rd consecutive NDA walkover, will Prime Minister Modi, eschewing his gingerly instincts, be progressive and populist in the same breath? Will India’s progressive era ensue? Will Modi become India’s Teddy or will the apparent saffron tinged regime resurface the Hindu rate of growth? Only time will tell!

_______________________________________________________________________

REFERENCES

[i] Montek Singh Ahluwalia, Backstage: The Story Behind India’s High Growth Years (Rupa Publications India 2020), p. 105.

[ii] James Crabtree, The Billionaire Raj: A Journey Through India’s Gilded Age (Tim Duggan Books 2018), p. 74.

[iii] On the funds raised for McKinley’s Presidential Campaign, see Adam Winkler, We The Corporations: How American Businesses Won Their Civil Rights (Liveright Publishing Corporation 2018), p. 225.

[iv] On Frick’s reaction to Roosevelt, see Sean Dennis Cashman, America Ascendant: From Theodore Roosevelt to FDR in the Century of American Power, 1901–1945 (1998), p. 15.

[v] James Crabtree, Op. Cit, p. 319.

ABOUT  THE AUTHOR(S)

Mr. Divesh Sawhney is reading law from Faculty of Law, University of Delhi.

Mr. Sanyam Aggarwal is reading law from Faculty of Law, University of Delhi.

In Content Picture Credit: The Financial Express

Kindly note that the views or opinions expressed are of the author(s) and not of the Indian Journal of Law and Public Policy.