TCS Daily

Freedom at Midnight

By Val MacQueen - January 20, 2006 12:00 AM

On August 14, 1947 -- the night before India was to celebrate its independence -- the country's first Prime Minister, Jarwaharlal Nehru, made one of the most dramatic speeches of the 20th Century.

"Long years ago we made a tryst with destiny, and now the time comes when we shall redeemour pledge ... At the stroke of the midnight hour, when the world sleeps, India will awake to life and freedom. A moment comes, which comes but rarely in history, when we step out from the old to the new, when an age ends, and when the soul of a nation, long suppressed, finds utterance."

For the intervening 50 years, that tryst with destiny was like a train that never came. India got stuck on the sidings by crippling inefficiency and wrong-headed socialist theory.

This was partly due to Nehru having been a disciple of the Mahatama Gandhi (who had never wanted India to enter the modern world at all) and partly because -- as Singapore's ex-Prime Minister Lee Kuan Yew noted in New Delhi:

"Nehru's ideal of democratic socialism was bureaucratised by Indian officials who were influenced by the Soviet model of central planning. That eventually led to the 'Licence Raj,' corruption, and slow growth."

As you may know, Minister Lee Kuan Yew was the founder and first Prime Minister of Singapore after it left what was then Malaya. Like many of his subcontinental counterparts, he too studied, and took a brilliant degree, from a university in England. He too guided his country through Independence from the British. He too had been influenced by the Fabian Society (high falutin' socialism from a patrician point-of-view) at university. And he, too, was interested in wealth distribution. But Lee has always had a sharp, perceptive mind. At some point, he abandoned wealth distribution as unworkable.

"I soon realized that before distributing the pie I had first to bake it. So I departed from welfarism because it sapped a people's self-reliance and their desire to excel and succeed."

Singapore galloped ahead. And India stood at the starter's gate clad in that glow of self-righteous self-denial ingrained by decades of listening to the Mahatama. Lee astutely stayed friendly with the British. Meanwhile Nehru was attracted to the Soviet model of centralization and a command economy. Indian ministers and bureaucrats churned out five-year plans. There was little competition because businesses needed a license for everything, and licenses were issued at a snail's pace by corrupt civil servants for a fee. The first time I went to India as a journalist, all the buses and all the trucks were manufactured by the mighty Tata works. You had a choice of one car and one color. The Ambassador. And it was black -- with a top speed of 35 mph.

I once asked Nehru's daughter, Indira Gandhi, who had succeeded Nehru as prime minister, why India had chosen what was coyly called "non-aligned" (meaning, "an acolyte and major client of the USSR") status rather than establishing friendly relations with Britain, with whom it had a mutual heritage, and the United States, with whom a large segment of India's population shared a language. She replied huffily, "We decided to be non-aligned because we didn't see why India should get mixed up in their quarrel" -- referring to the free world's fight against global communism.

Instead of throwing this vigorous country into capitalism and manufacturing, Nehru embarked on perhaps the most dull-witted, negative program any democracy has ever embraced: import substitution. I asked Mrs Gandhi, who, in her turn, also embraced this backward program, why? She shrugged. She didn't see why India should spend money on Western products when they could make their own.

But she only had to look around her to see that they couldn't.

I was friendly with a high-ranking civil servant who had been helpful in getting me the interview with Mrs Gandhi, and on one of my trips to India, I took a cheap plug-in phone, smuggled it through Customs and presented him with it. He almost burst into tears of gratitude. At the time, the early Eighties, phones were, like the Ambassador, black and came with a heavy cord that plugged immovably into the wall. He put it proudly on his desk, the envy of his colleagues, although he didn't have anything to plug it into.

Ironically, if Indira Gandhi had encouraged a domestic car industry, when she was shot by her Sikh bodyguards, she would not have had to be crammed onto the back seat of a black Ambassador to be driven to hospital at a top speed of 35 mph.

By contrast, at a time, as Minister Mentor Lee said, when the developing world was deeply suspicious of being exploited by first world multinationals, Singapore invited them in. Said Lee, "They helped us grow, brought in technology and know-how, and raised productivity levels faster than any alternative strategy could." He thinks that India's failure to live up to its vast potential is because it did not develop a manufacturing sector, which is the major creator of jobs.

By contrast, he noted that China has invested heavily in infrastructure and has vigorously pursued development of advanced manufacturing. He adds, "India has superior private sector companies. China has the more efficient and decisive administrative system. ... . India has a stronger banking system and capital markets than China. India has stronger institutions, in particular, a well developed legal system which should provide a better environment for the creation and protection of Intellectual Property." However, again, bureaucracy has created a justice system which makes Jarndyce & Jarndyce look young and peppy, with a backlog of 26 million cases.

Yet now -- free of the Gandhis -- India is moving fast.

Almost half of the largest global corporations now do at least some of their back office work in India. Indian R&D centers of American technology firms are reported to file more patents than Bell Labs. This year, India announced more than 1,300 applications for drug patents, second only to the US and 25 percent more than Germany.

In Asia 2005, there were 721 IPOs, raising $40bn, fuelled by Chinese growth. Chinese companies often partook in foreign transactions, particularly in Hong Kong, the US and Singapore. India saw a 638% increase in total capital raised compared to the previous year.

India also made the grade as far as business economics goes as the Indian operations of most international brokerages became either their most profitable in Asia or right up there ranking just after Korea. In 2005, our old friend Tata did overseas acquisitions of over US$1bn. This, until recently, would have been larger than that accomplished by the country's entire corporate sector.

Due to the fluency in English of the educated classes, India is the largest call center in the world.

Lee wants to see India and China working together, rather than against one another. And he notes that Indian high tech companies are now expanding into China and training thousands of Chinese IT technicians. In Dalian, Singapore is helping to develop an IT park which will be specifically marketed to Indian software companies interested in the Northeast Asian market.

India, with an English-speaking middle class of around 400m is well placed to join the Anglosphere. It has a large, disciplined, uncorrupt and well-regarded military. It is a nuclear power. Like the US and the rest of the Anglosphere, its law is English Common Law. The Indian diaspora in the US and Britain is well-respected. Not everything is rosy. China may be headed for some choppy waters with large problems looming in the banking sector. But together, the two countries already account for 40 per cent of the world's working-age population. Mentor Minister Lee predicts that in 20 years, their share of the global economy will match this population percentage. Both are destined for superpower status, and their presence will change the world's balance over the next 50 years.

Val MacQueen is a TCS contributor who divides her time between France and Mexico.


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