Is Democracy A Tax On Economic Growth

Updated: Jun 29 2003, 05:30am hrs
The newspapers and magazines are full of reports of China rather of reports comparing China and India. And it seems the winner is China. I think a more balanced view must be taken. China and India were more or less at the same level of per capita income in the 1970s. Since Chinas population was about 300 million more, the size of its economy was larger. So was the size of its problems: China had 300 million people more to be lifted out of poverty.

China, thanks to Deng Xiao Peng, opened up its economy in 1978. That year, India was recovering from the aftermath of the Emergency and was restoring to health its Constitutional and political organs. During that exciting period, the missing factor was a review of the economic policies that had held sway for 30 years. After too much government under Indira Gandhi, Morarji Desais declaration of a plan holiday turned out to be a holiday from governance.

Three key players in the Morarji Desai government have, happily, survived to this day. Mr Vajpayee, Mr LK Advani and Mr George Fernandes are the three key players in the present government. Of the three, Mr Advani had a forgettable tenure in 1977-78. Mr Vajpayee alone exhibited farsightedness when he made a bold overture towards China.

As for Mr Fernandes, he was the villain of the economy. As an abrasive, adventurous and rabid socialist and minister of industry, he kicked out IBM, Coca-Cola and many others, and launched a public sector enterprise to make the soft drink christened 77. I will single him out as the person most responsible for India losing out on the great opportunities that were opening up in the areas of computers, software, telecommunications, information technology and services. If Mr Fernandes had had his way, India may have emerged as a soft drink giant rather than a software giant.

The next ten years, first under Indira Gandhi and then Rajiv Gandhi, were better, but not by much. Politics overshadowed economics. Communal strife replaced harmony. Sectarian demagoguery drowned saner voices. Still, it must be acknowledged that Rajiv Gandhi made Indians aware of the immense possibilities in the brave new world of computers and information technology. He also made a historical visit to China.

It is during the period between 1978 and 1990 that China pulled away from India in the race towards becoming the dominant economic power in Asia. Chinas share of international trade is higher, its foreign exchange reserves are larger and its ability to win friends and influence people using its economic clout is greater.

The excuse for Indias poorer performance is that India is a democracy. We say that we consciously opted for a model of government that will exact a price and if that price is a 2 to 3 per cent lesser growth of GDP, we say, so be it. We need to critically examine these facile assumptions.

Is democracy exacting a price of 2 to 3 per cent in terms of economic growth

And if it does, is that an inevitable tax on growth

Our notions of democracy have been shaped to a very large extent by the British and American models. Democracy means elections, an elected Parliament or legislature, an elected government, the rule of law, an independent judiciary, a free Press and Constitutionally-guaranteed freedoms for the citizen. India has these institutions, so India is a democracy. However, we fail to see that these are only the formal institutions of a democracy and the fact that they are there does not say anything about their quality or their effectiveness. We mistake the form for the substance.

Take elections. Elections are held in India periodically, but what kind of elections Criminals win elections, and sometimes even from behind prison bars. As I write this, there is at least one Member of Parliament who was elected in 1999 who will serve his entire term until 2004 as a prisoner. A rich businessman can buy a seat in the Rajya Sabha. In many states there is practically no distinction between the legislature and the government every legislator is made a minister or a quasi-minister. The few legislators who find themselves in the Opposition constantly make overtures to the government, especially if it is already a coalition government. Our governments especially Mr Vajpayees is our version of the coalition of the willing.

The rule of law is only in theory. In this aspect, we are more like China. There is rule by law, not rule of law. In rule of law, howsoever high you may be the law is above you. In rule by law, there is a set of laws and rules, but the lawmaker or the law giver is above the law. A home minister, accused of a grave crime by his own premier investigating agency, can continue as home minister. A chief minister can authorise expenditure of government money to celebrate her birthday. Another chief minister can dismiss cases filed against her for violation of income tax, foreign exchange and anti-corruption laws as of no consequence. MPs and MLAs can preside over co-operative banks and give themselves loans running into hundreds of millions of rupees. Sons of powerful ministers and bureaucrats can commit murder and the evidence against them will magically disappear.

While the judges will probe into the misconduct of everyone, no one may probe into the misconduct of judges. An independent judiciary that cannot punish the corrupt judges cannot boast of its independence. Nor is a judicial system that takes 20 years to resolve a dispute of much use to society. A free Press that sells editorial space, under whatever euphemistic scheme, is not really free. And the freedoms guaranteed to citizens have no meaning at all if they do not enjoy that most precious freedomfreedom from fear.

The next time you rue the lower rate of Indias economic growth, compared to Chinas, please do not blame democracy. It is rather the lack of democracy, in full and substantial measure, that may be the real reason for the uneven and lacklustre record of economic growth in India. A true democracy, with all its institutions in robust health, may actually accelerate growth and take India past China.

(The author is a former Union finance minister)