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It's better to nudge the existing political parties toward market ideas, than start from scratch.
As Finance Minister Palaniappan Chidambaram presents India’s annual budget today amidst the sharpest economic slowdown in a decade, you can’t blame pro-market voices from despairing about the country’s politics.
In a few short years, a combination of rampant populism, fiscal irresponsibility and capricious regulation has gutted business confidence and made India look less like an Asian tiger and more like the plodding elephant of old. With the International Monetary Fund projecting economic growth this year at less than half of its peak of 9.7% six years ago, it’s fair to ask if India’s politicians are up to the task of piloting Asia’s third largest economy toward prosperity.
Against this gloomy backdrop, the thoughts of Indian conservatives or classical liberals inevitably turn to the now-defunct Swatantra Party. In its heyday in the late 1960s, Swatantra offered a market-friendly alternative to the statist Congress Party. Helmed by the scholarly independence leader C. Rajagopalachari and the urbane Parsi intellectual Minoo Masani, Swatantra—which means freedom in Sanskrit—stood for individual rights, private enterprise, limited government and freedom of speech.
Though ahead of its time in a largely agrarian society, Swatantra enjoyed a brief shining moment as India’s principal opposition party in the late 1960s. It held more seats in Parliament than the Hindu-nationalist Bharatiya Jana Sangh—the precursor to today’s opposition Bharatiya Janata Party—before withering away in the mid-1970s following Rajagopalachari’s death. Now, the prominent pro-market intellectual Gurcharan Das argues in a new book that India’s rapidly growing middle class should resurrect Swatantra, or form a new party infused with its spirit.
It’s easy to see why some find the idea appealing. Though the ruling Congress is credited with piloting economic reforms two decades ago, the past nine years have shown that the party’s leadership never truly abandoned its statist core.
Even if Mr. Chidambaram manages to present a more fiscally responsible budget this year than in the past, the broader story of his party’s time in office can’t be rewritten overnight. Businessmen will remember it as defined by an expensive and inefficient rural employment guarantee scheme (2005 onward), giant loan write offs for farmers (2008), an environment ministry drunk with power (2009 onward), a reckless plan to provide subsidized grain to two-thirds of the population, and a grinding slowdown in infrastructure spending.
No wonder that some market-minded Indians hope for a Swatantra-type alternative to the current order. Except for one problem: India doesn’t have the luxury of building a new conservative party from scratch.
Swatantra hasn’t existed except on paper for nearly four decades, so there’s no name recognition or organization to speak of. Moreover, there’s scant evidence to suggest that even middle-class voters fed up with the status quo care enough about the invisible hand to make themselves visible on the streets and at the polling both. If anything, the backward all-businessmen-are-crooks economic vision of anti-corruption activist Arvind Kejriwal’s new Aam Aadmi (Common Man) party seems likely to attract a bigger following.
This makes it more practical to try to influence existing parties than to start something new. For the most part, regional outfits are simply caste-based patronage networks fronted by a charismatic leader with little time for ideas. That leaves the two big national parties—the BJP and Congress.
On the face of it, the BJP appears the only logical contender for Swatantra’s mantle. The party’s base of small traders is naturally suspicious of government meddling in business, and its mostly upper caste and middle-class supporters are more favorably disposed toward economic liberalization than any other segment of Indian society.
And the BJP has a pro-business record of sorts. In office between 1998 and 2004, the party privatized state-owned firms, reformed the telecom industry by expanding the role of private companies, and passed a fiscal responsibility act in a country that has not managed to run a budget surplus since independence. In Gujarat Chief Minister Narendra Modi, the BJP boasts India’s only major politician who publicly courts potential investors and speaks consistently of getting government out of business.
But on closer examination, the BJP too shows little fidelity to free-market principles. In opposition, it has led the charge against rationalizing fuel prices, greater foreign investment in retail and insurance, and a unified goods and services tax to replace an inefficient patchwork of state levies. Senior BJP leaders have applauded Congress’s morally corrupting and market-distorting rural employment guarantees and praised its proposed food security bill. Even Mr. Modi, the closest thing India has to a Ronald Reagan or Margaret Thatcher, has placed petty politics above principle in opposing foreign investment in retail.
The BJP also suffers from its association with a lunatic fringe more interested in rehashing medieval grudges against Islamic invaders than building a modern economy. Moreover, the party’s rank and file members often carry a certain suspicion of Western credentials.
Not surprisingly, high-achieving Indians such as former CEOs or top-flight economists tend to be squeamish about associating with crackpot nativist views on the economy. This has created a paradoxical situation where a place in the big Congress tent—where fealty to the Nehru-Gandhi dynasty trumps ideology—remains the default option even for those at odds with the party’s socialist creed.
In short, though India’s two major parties may be flawed, they also remain the only games in town. Those allergic to dynasty, sensitive to the damage done to India by socialism, and reassured that the fragmentation and essential pluralism of Hindu society prevents religious extremism from taking root, ought to try to shape the BJP’s economic vision in a more consistently market-friendly direction.
And for those innately suspicious of the BJP’s capacity to shed the baggage of identity politics, the only alternative is to hope that over time reformers edge out tax-and-spend traditionalists in Congress. Either way, it’s time India buried the Swatantra Party ghost for good.
Mr. Dhume is a resident fellow at the American Enterprise Institute and a columnist for WSJ.com. Follow him on Twitter @dhume01
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