THERE are few things more heartwarming than watching people rise out of poverty to a better life. When it is a whole nation in the process of doing so, it is especially inspiring. That is the theme of a marvelous new book titled "India Unbound" by Indian hi-tech entrepreneur Gurcharan Das.
In a well-blended combination of facts, history and personal experiences, the author spells out how and why India took so long after achieving independence from Britain in 1947 before its economy began to improve dramatically after the 1991 reforms that allowed more of a free market to operate. That was a decisive turning point, with businesses no longer being suffocated by some of the most pervasive and intrusive government controls in the world.
Before the reforms, Indian entrepreneurs could not make the most basic decisions about their own businesses without permission from an army of government bureaucrats. Decisions about hiring, firing (virtually impossible), expanding output or ordering raw material were all subject to the whims, the delays and the extortions of bribes by petty officials who knew little and cared less about the realities of business.
The Indian entrepreneur "has to bribe from twenty to forty functionaries if he is serious about doing business." Moreover, he must "grovel" before these petty tyrants who have been armed with the power to say "yea" or "nay" to a sweeping range of business plans. Even some of India's biggest and most distinguished enterprises, the Tata industries, had more than a hundred proposals to start new businesses or expand old ones end up "in the wastebaskets of the bureaucrats."
Another great Indian industrial empire, that of the Birla family, was likewise refused the government permissions needed to expand. The net result was that they bought pulp in Canada, had it converted to fiber in Thailand, had the fiber converted to yarn in Indonesia and then had the yarn made into carpets in Belgium. All the while, India remained a very poor country in need of economic growth and the jobs and incomes that these operations could have provided.
At one time, it was a violation of the law to produce more output than you were authorized to produce by the government. A manufacturer of cold medicines was fearful that his sales had overshot the mark during a flu epidemic and had to have a lawyer spend months preparing a legal defense, in case he was hauled before a government commission.
Gurcharan Das is careful to point out that these and many other economically disastrous policies grew out of good intentions. Indian leaders from Jawaharlal Nehru to his daughter Indira Gandhi put their faith in the government-planned economy and distrusted both businesses and the consuming public. What they lacked in any serious knowledge of business or markets they made up in socialist dogma and smug self-righteousness.
When the head of the Tata industries tried to explain some facts of life to Nehru, the prime minister's response was: "Never talk to me about profit, Jeh, it is a dirty word."
Though the Indian statist leaders thought of themselves as looking out for the poor, their policies have been estimated to have held back economic development to the point where the average Indian's income would have been hundreds of dollars a year greater without their restrictions. In a country with millions of very poor people, some suffering from malnutrition, the loss of a few hundred dollars in annual income meant far more than it would have meant to the average American.
Like so many socialistic policies around the world, those in India were not relaxed or ended because of better understanding but because of bitter experience. When these policies had the Indian government on the verge of bankruptcy, its leaders had no choice but to make fundamental changes in the economy, in order to qualify for help from the International Monetary Fund and the World Bank.
After the 1991 reforms freed Indian entrepreneurs from suffocating government controls, the economy took off. Growth rates reached new heights, Indian businesses expanded and foreign investments poured in. The kind of hi-tech success that Indians had achieved in Silicon Valley they now began to achieve in India.
Although this is a book about India, many of its lessons are universal -- and have not yet been learned by American political, intellectual and media