It wasn’t the sort of conversation I expected to have with Pertie. To be honest, I had no idea he’d even thought about the subject. Yet it turned out that his views were not just well-considered but compelling.
“Have you worked out what the Prime Minister was talking about?” Pertie began. “What exactly lies behind this concern with profits, salaries, consumption and lifestyle?”
Something in his tone suggested this was not really a question. Pertie, I felt sure, knew the answer. It wasn’t long before he got to it.
“I suspect the real problem is the fact that India’s politics and India’s economics are in conflict with each other.”
“What do you mean?” I shot back, both perplexed and intrigued.
“Well, it’s like this,” Pertie sounded professorial. “Whilst it’s the norm for first world democracies to follow liberal economic policies and it’s not unusual for third world dictatorships to do so too, when a third world democracy pursues economic reforms the logic of its politics and the logic of its economics inevitably come into conflict. That was the PM’s point even if he didn’t put it this way."
“Go on,” I said. I was sure he hadn’t finished. What, I wanted to know, lay behind this conflict and why was it unavoidable.
“As a democracy, politics in India requires reaching out to the largest possible number. That includes the 21 per cent below the poverty line, the 52 per cent who are illiterate and the 200 million who go to bed hungry every night. After all, no one can win an election simply by appealing to the 250 million urban, aspiring and increasingly-westernised Indians. You need the other 750 million also. But the problem is that the benefits of economic reform — cheap imports, lower taxes, higher salaries — go to the minority. The majority is either overlooked or secondary. This is what Mani Aiyar means when he says there’s a divide between the classes and the masses.”
“Sure,” I interrupted. “But this is elementary stuff. What exactly are you getting at?”
“Take it step by step.” Pertie paused to catch his breath and I held my peace. “The problem arises if the lifestyle of a minority provokes the jealousy and, eventually, the anger of the majority. That’s bound to create disaffection but it could also cause conflict. Hence the PM’s moral advice. He’s trying to avoid a backlash.”
“Yes” I replied, still hesitant to speak.
“The catch is that if we follow the PM’s advice we could end up endangering the engine of growth necessary to lift the majority of Indians out of poverty. Consumption — conspicuous, tasteless or wasteful — fuels demand. Profits encourage investment. Higher salaries inspire performance and productivity. Curb all of this and you’ll slow down the engine. In fact when the brakes are applied it could altogether stop. Remember a spluttering engine often stalls. And then where will the government get the revenues to help the poor? This could be self-defeating.”
<b1>“So what are you saying?” I asked. “That whilst necessary the PM’s advice could also be damaging? Are we caught in a Catch 22? Damned if we do and damned if we don’t?”
“Could be,” Pertie replied, deftly avoiding this dilemma. “In every free society the rich will consume frivolously and much of it could be distasteful or, at times, provocative. But a lot is useful, necessary and should not be discouraged. On the other hand, it’s for the government to ensure that the masses are not overlooked. Their health and education, the electricity and water they need, the roads and welfare they require are its responsibility. Yet, that’s where the government is failing. It’s not delivering what it promised. And this failure ensures that 700 million don’t benefit from economic growth.”
“I’ve got it,” I said, a bit like Archimedes jumping out of the bath. “Don’t impede growth. In fact, let’s have more reforms to speed it up. But at the same time let the government devote all its energies and money to the welfare of the masses. Is that your argument?”
“As Shakespeare said, someone should tell the good Doc that the fault lies not in our businessmen but in our government. He’s got the malady spot on. But his prescription is wrong. The problem he needs to address is why the government is unable to help India’s masses. We remain a nation with 700 million poor, hungry, unfulfilled people because the government can’t reach them. But of that the PM had nothing to say.”