The Indian Economy Blog

April 30, 2008

The Evil That Manmohan Did Will Live After Him

He advocates a false morality to disguise his government’s failures

Dr Manmohan Singh the prime minister has routinely relied on platitudes (instead of on incentives) to motivate the UPA government’s policies. But he is getting even the platitudes wrong. In a country where the average annual per capita income hovers around an unacceptably low US$1000, he wants people to earn less. Why? Because, according to him, earning less, and expecting to earn less, is a national duty.

By equating a degree of self-sacrifice with national duty, the PM has tried to make a moral argument. He has said that this is what corporates and highly paid executives owed in the endeavour to contain prices and keep the overall growth momentum on track. While this has a populist touch and will appeal to an opinion that is ready to view corporates as “fat cats”, private employment is increasingly the preferred option for most educated persons.

Sectors characterised by “significant market power” in the hands of a few producers have a societal obligation to assist the government in moderating inflationary expectations, the PM rounded off. [TOI]

He has gotten it exactly wrong. The national duty of every citizen is to make as much money as legally possible. Anyone who suggests otherwise cannot have the best interests of the Indian people at heart. Oh, he’s only referring to the top executives, you say? Well, first, depressing wages at the top will cascade down and result in lower earnings for everyone in the pyramid (just as increasing wages at the top will increase wages for everyone). And as a matter of principle, just how does making the rich earn less help the nation? In fact, it does just the opposite. It would have been one thing for Dr Singh to call upon the rich to deepen the culture of philanthropy. But to equate “self-sacrifice” with “national duty” is dangerous nonsense.

Dr Singh shamelessly masks his government’s failure to ensure free, competitive markets—and prevent the build up of significant market power—by claiming that monopolists have societal obligations. That’s dangerous nonsense too. The solution to the build-up of market power is further liberalisation and effective regulatory oversight. Dr Singh’s admission that there are sectors where companies have significant market power calls for moving forward with the economic reform process. Just what happened to the privatisation (okay, disinvestment) agenda?

We have said this before, and we say again: Dr Manmohan Singh has done immense harm to India’s future. The evil that he has done will live long after him. The good was interr’d with P V Narasimha Rao’s bones. Corporate India would do well to ignore the shameless moral poseur. Yes, it’s late in the day for this government. But Dr Singh should go. [See previous calls.]

26 Comments »

  1. Don’t get excited its election season.Politicians have said stranger things besides what did you expect at times of high inflation and national elections,India shining?

    Comment by Shantanu Chatterjee — April 30, 2008 @ 5:15 pm

  2. Given Congress’ proclaimed aam aadmi focus, this only shows what the party thinks appeals to the aam aadmi’s mind. The aam aadmi wants more opportunities – to make more money – and not the same old socialist platitudes that effectively redistribute poverty instead of wealth.

    Comment by photonman — April 30, 2008 @ 9:05 pm

  3. Actually you got it all wrong as well.

    I must say the quality of posting in this Blog has deteriorated of late.

    The National Duty of every Indian is to be as productive as possible.

    Money does not equate to productivity.

    The Gulf states make a lot of money are they your ideal society?

    Making money is not a problem, ostentation is. The rich are rich because they are good at taking from everyone else. There is nothing wrong in this, but don’t turn it into a virtue Ala Latin America.

    Comment by Theo_Fidel — April 30, 2008 @ 10:16 pm

  4. Yes, Dr Singh go away. And welcome Ms Mayawati.

    Comment by GS — April 30, 2008 @ 11:31 pm

  5. ‘Money does not equate to productivity.’

    Define productivity.

    ‘Making money is not a problem, ostentation is.’

    Why?

    ‘The rich are rich because they are good at taking from everyone else.’

    Not necessarily. What about a hard-working employee who saves and invests wisely?

    Dude – it’s time you gave your brain some work.

    Comment by photonman — May 1, 2008 @ 12:20 am

  6. Dear Shantanu,

    I might curse your mother at a moment of anger. Would you be less offended? Because what else do you expect me to do when I’m angry, send you flowers?

    More seriously, if you agree that Manmohan Singh is spouting dangerous nonsense, then it is wrong to excuse him because he is saying it during election time. Perhaps it is even more important to condemn him for facing the electorate with a policy that hurts Indians. Then again, the entire attraction of MMS was that he was ‘different’ from an ordinary politician, father of reforms, His Sincereness and all that…

    Theo_Fidel,

    As photonman pointed out please examine the economic definition of productivity.

    If you then say that you were not referring to the economic definition, but merely using the phrase colloquially, then there’s no real fun in a man producing more widgets per day, when his pay remains the same or declines.

    Comment by Nitin — May 1, 2008 @ 6:05 am

  7. Nitin’s onto something here.

    Our netas either pretend or genuinely believe they’re echoing aam aadmi sentiments by spouting regressive nonsense of the sort MMS sprayed above. The angrezi media read in the corridors of power dutifully scratches sarkar’s back on this one.

    Obviously, folks who’ve fought elections better represent the people and their aspirations than a coterie of old fogies (MMS, Arjun, Deora, Aiyar etc) surviving on dynasty handouts. Witness the brazen difference in both substance in style between the elected and the unelected in the commie parties to see what I’m talking about.

    The solution is more economic decentralization. Let better/luckier/ sdmarter states march ahead. Let the clamor for every state to be a Gujrat rather than a UP rise from the ground up. If such clamor can be silenced or overlooked then our much vainted democracy was never really effective anyways. But if such clamor forces real change in benchmarks, policy, tactics and yes, ideological stance – then alone we’ll have really gained something.

    I wholeheartedly applaud the panchayat level financial empowerment to award and execute projects. We need a string center in core areas of defense and foreign policy. Let the economics be devolved to the grassroots!

    JMTPs etc.
    /Have a nice day, all.

    Comment by sud — May 1, 2008 @ 7:17 am

  8. To Photonman,

    This is Dr. Manmohan Singh’s career in government prior to 1990/1991 Finance ministership (from Wikipedia)

    1. Economic Advisor, Ministry of Foreign Trade, India (1971-1972)
    2. Chief Economic Advisor, Ministry of Finance, India, (1972-1976)
    3. Honorary Professor, Jawaharlal Nehru University, New Delhi (1976)
    4. Director, Reserve Bank of India (1976-1980)
    5. Director, Industrial Development Bank of India (1976-1980)
    6. Secretary, Ministry of Finance (Department of Economic Affairs), Government of India, (1977-1980)
    7. Governor, Reserve Bank of India (1982-1985)
    8. Deputy Chairman, Planning Commission of India, (1985-1987)

    His career is in government of one of the economically least free countries in organizations that effectively dictated to the common citizens how to conduct their day-to-day economic lives. I expect only socialist platitudes from this man. Why do you expect anything else?

    Comment by Corporate Serf — May 1, 2008 @ 9:51 pm

  9. Well, if money becomes an end instead of means, ultimately people with money will decide what is legal and what is not. I have seen that plenty of times in US and i am sure that can happen everywhere.

    Comment by Tarang — May 2, 2008 @ 4:52 am

  10. @ Corporate Serf

    You forgot the *most* important assignment in his career – Union Finance Minister 1991-96. He (with Chidambaram who was Commerce Minister) was instrumental in bringing in free market reforms in India.
    Granted, Narasimha Rao gave them political backing – but ultimately it’s these guys who took crucial decisions.

    Well that’s the reason why I expect something much more from him.

    Comment by photonman — May 2, 2008 @ 9:09 am

  11. [...] IEB on Dr. Manmohan [...]

    Pingback by Assorted Links « Mostly Economics — May 2, 2008 @ 10:19 am

  12. Tarang,

    Well, if money becomes an end instead of means, ultimately people with money will decide what is legal and what is not. I have seen that plenty of times in US and i am sure that can happen everywhere.

    And what happens in places where money is not the end? Who decides what is legal and what is not? Usually, those in power. Like the Communist party or ZANU-PF.

    But the problem with your statement is fundamental: your premise is wrong and your argument is not borne out by empirical evidence. Why will people decide that and only that? Does plenty of times in the US equate to usually the case in the US? Or does plenty of cases in the US mean merely a deviation from the perfect?

    Comment by Nitin — May 2, 2008 @ 2:43 pm

  13. PhotonMan,

    I did not forget that. See the qualifier: “This is Dr. Manmohan Singh’s career in government prior to 1990/1991 Finance ministership …”

    His pre-FM career is not that well known; though it is hiding in plain sight.

    Also, the man’s intellectual formative years were spent in the “government of one of the economically least free countries in organizations that effectively dictated to the common citizens how to conduct their day-to-day economic lives”

    Do you think what he did under the dictates of the IMF and/or PVNR changed his essential way of thinking? People get more set as they grow older. Do you see any evidence that this is not the case for Dr. Singh?

    Comment by Corporate Serf — May 2, 2008 @ 6:07 pm

  14. Immorality of Inflation
    —————————-

    Monetary inflation is running at > 15% what this means is banks have “loaned” out 15% more money than actual production of goods and services.

    People who have taken these loans will buy 15% more goods and services than they can without this monetary inflation, and people who have not taken bank loans get to buy 15% less goods and services….. if this isn’t immoral what is?

    Comment by Krish — May 3, 2008 @ 7:59 am

  15. Krish,

    Your post is about immorality not economic reasoning, so let me address the immorality bit. At what point does the immorality end? When monetary inflation becomes zero? Or when it becomes negative? Do you think zero or negative inflation is moral? How do you conclude that morality requires an exact number, in percentage terms, for monetary inflation?

    Comment by Nitin — May 3, 2008 @ 8:56 am

  16. Never posted here before, but will just chip in a few thoughts.
    Inflation is immoral. Period. Simply because it eats away on the purchasing power of the poorest strata of the society. And those on the fixed income. Watch any senior citizen without an indexed pension how they are coping with the inflation. Anyone who had savings of a few lacs a decade ago could have survived based on the derived fixed income from their savings. Ten years hence, that purchasing power has been greatly diminished.
    Inflation is stealth stealing. All fiat based regimes, steal money to fund their deficits and popular spending. Yes, zero inflation would be the world of no immorality.
    Go back and look at the history of US inflation before the formation of the Fed. And the purchasing power of the dollar in pretty much the entire period (except for during the civil war) in the 19th century. It was the same. That is a moral policy.

    Comment by Wondering — May 4, 2008 @ 6:46 am

  17. Dr. Singh along with the Finance Minister has exhorted ,in numerous public gatherings, the corporate (chiefly the steel and cement producers) sector not to go overboard in making profits just because there is an sudden opportunity today to make money and thereby fuel inflation further. Take a simple example like steel; global prices of raw materials like iron ore as well as finished products like steel have been on the rise. Local companies like TISCO , SAIL etc. have their own iron ore mines and therefore their cost of production is not affected significantly. However, for other midsize manufacturers of steel who “buy” iron ore have raised prices of their finished products. (Interestingly, over the years it has been observed that when cost of raw materials rise by X%, indian producers have raised their finished goods prices by (X+Y)%. Y has often been more than 2 times X). Since the demand of steel far outsrips the supply, these midsize companies are making “excessive” profits. This has nothing to do with productivity, quality and/or value addition. Dr. J.J. Irani of TISCO noted in a recent CNBC interview that he cannot afford to maintain his prices low because his competitors are selling at high prices (meaning that if the competitors prices were regulated , he doesn’t mind keeping his prices low and since he has his own iron ore mines, he can still make sizable profits for his shareholders).
    I guess, Dr. Manmohan Singh was exhorting the producers to moderate their desire of making as much money when the market is at their feet.

    One can take other examples too where suddenly producers have woken up to charge a price which the market can bear only becasue the market has no other choice. IIM fees is one such.

    It is true that India’s economy has matured to the extent that no longer we are in a cost-plus regime of pricing. But flogging the market for super-duper profits just because it can bear the same can be harmful for an economy such as in India because the hardest hit in case of a run-away inflation are always families who leave on a shoe-string budget of less than 1-5 dollars a day & constitue more than 70% of the populace. There is nothing socialistic in this argument. Any responsible government will like to protect majority of its citizens from hardships that arise out of “market-windfall” for a few of the producers.

    Comment by Salty — May 5, 2008 @ 12:35 am

  18. Majority of private business work for the interest of their shareholders who of course want to make as much money as they can. On occasions such as this when demand of goods far outstrips supply (for sectors like steel , cement etc),they give a damn about reining in the prices. Often the increase in price of finished goods in completely disproportionate to the increase in the cost of production. Inflation for them is a windfall which they are too eager to lap up. This has nothing to with “goody-goody” terms like productivity, quality and/or value addition.
    On the other hand, a democratically elected government works for the interest of majority of their citizens. On occasions such as this, a run-away inflation can bring irreversible hardships to families who live on a shoe-string budget of 1-5 dollars a day and who constitute more than 75% of the citizens. Any responsible government will like to do whatever it can to rein in the excessive profit-making motive of producers. There is nothing populist or socialist with such exhortations

    Comment by Salty — May 5, 2008 @ 1:40 pm

  19. My friends, if it wasn’t for this guy you would still be writing these blogs in magazines. Dr. Sing has invited other countries to invest in India because of which our country was, is and will be forced to move in direction of infrastructural, education, transportation and technological advancements. Let me tell you one thing. If it wasn’t for Dr. Singh most of MBA graduates would still be looking for jobs in foreign countries which is not the case now. And also, no one is sitting at their homes drinking tea, most citizens have jobs now. Let me tell you what the current economy situation is telling you, ‘Stop being lazy and go out their and open a business,’ its not my fault or Dr. Singh’s fault if you don’t have any ideas.

    You should be thanking him for the situation he created which made foreign countries invest in India. Don’t be so critical of every action. Compare the polls which were done by Headlines Today in which they asked how many citizens are living comfortable lifestyle in 2007, with the year when your favorite prime minister was in office. I agree that we have high inflation currently, but don’t blame him for this. Blame your goverment as a whole from 1947 to 2008 who ignored the cries of farmers from all over country.

    Comment by Gary — May 6, 2008 @ 7:10 pm

  20. To ask the private sector to reign in price is simply outrageous and completely unfitting of a man who claims to be a reformer and an advocate of market economy. If I have acquired control of precious resources such as steel or cement, why should I sacrafice my profit for the public good? It’s totally unfair. I should have every right to make as much profit as possible. This is a lesson we should have learned from the 50 years of stagnation. All the robinhood policies of previous governments have gotten us nowhere. If everyone in the country is working hard to make as much money as possible, we would be alright. The problem is too many people are lazy and only want to get handouts. If we continue to encourage the poor to be lazy and the rich to stop maximizing their profit, we will have more and more apathy and poverty. If we keep chopping the legs off of the brightest people and make it criminal for people to become rich, the only thing we will get is perpetual poverty for everyone and an exodus of the best minds. If we still don’t glorify the rich, this country is going into the dustbin. So what if the price is raising? Stop crying and deal with it like a man and work twice as hard for twice as long as before and you will be fine.

    Comment by Alex — May 6, 2008 @ 11:56 pm

  21. You got my attention Alex. Totally Right. Stop being lazy and do something. Stop demanding quota people. Gotta work if you wanna be someone.

    Comment by Gary — May 7, 2008 @ 12:26 am

  22. Why should MMS ask corporates to tighten their belts? Haven’t seen any news reports of him telling his Cabinet colleagues, government staff to tighten their belts. On corruption in fact, there is not a word from him. Prof CK Prahalad says India is losing trillions because of corruption, which he terms as a crime against the nation. At least corporates make money and reinvest it, as can be seen from the growing proportion of corporate contribution to investment and taxes. Salaries are rising across the board because of government’s inaction on higher education, not because of greed. This is the second year that MMS has asked corporates for restraint in a manner reminiscent of socialist days – see his 10-point agenda speech to CII last year. But there has been little action from this government on the reform agenda in the last four years. I live in Kuala Lumpur, where government routinely announces new measures without apparently having set up tedious committees and task forces to examine them in advance. Our committees and task forces live on and on….and do we have a GoM committee on inflation yet??

    Comment by dealer — May 12, 2008 @ 12:06 pm

  23. Indian senior politicians all have some fundamental deficits: they are tired old men, intellectual lightweights and lack leadership qualities, diplomatic flair, communication skills, NOTHING NEW OR INTERESTING TO SAY. After all, most have paased out from third rate institutions (comparing internationally).

    They lack style, vitality, charisma; their expression is wooden or vacuous, their discourse sluggish & humourless;
    they are heavy on banalities, poor on concrete solutions.
    They know their place and defer to western leaders, will never criticise or censure them for historical injustices or loot.

    Manmohan Singh has acted as apologist for the Empire
    At Oxford university, Manmohan Singh thanked the British for everything India is today including he bureaucracy, the judiciary, the police, Rule of Law.

    He then went on to express gratitude for the gift of the English language—the language that separates India’s elite from its fellow countrymen and binds its imagination to the western world. Macaulay couldn’t have asked for a more dedicated disciple.

    Comment by Edsa — May 17, 2008 @ 12:01 am

  24. And while we are on the subject of utter mismanagement of the economy in the last four – forty – years, could we please also have a leader article on subsidies? Oil subsidies of 200,000 crores, fertiliser subsidies, food subsidies, and the impact of the Sixth Pay Commission have all not been accounted for in the recent Budget. Can we discuss this in more detail on a separate page?

    Comment by dealer — May 21, 2008 @ 6:05 am

  25. “You forgot the *most* important assignment in his career – Union Finance Minister 1991-96. He (with Chidambaram who was Commerce Minister) was instrumental in bringing in free market reforms in India.
    Granted, Narasimha Rao gave them political backing – but ultimately it’s these guys who took crucial decisions.”

    Political backing was the most important factor in these reforms. Narsimha Rao staked his entire political capital on making a bloated bureaucratic socialist juggernaut make a 180 degree turn on a dime.

    It wasn’t ‘these guys’ who took the crucial decisions. The decisions were mandated by the world bank et al. As anyone who has worked in an organisation in managerial capacity knows, coming up with ideas is really easy. Implementing the damned ideas by navigating through the organisation’s power centres is really really difficult.

    Personally, I think MMS and PC got far too much credit. It was PV Narsimha Rao who deserved the lion’s share of credit for the reforms (and therefore our thanks). The media hyped MMS and PC while PVNR got dumped into history’s lost and found because he didn’t courtsey enough at the throne of the Gandhis.

    Comment by Shaunak — June 13, 2008 @ 11:02 am

  26. However, what Manmohan did for the indian sub-contineent in terms of economic reforms can never be forgetted and what he has done has pulled india far up than would have resulted from any acts of leaders having other policies.

    Comment by Shubhash Kandel — December 15, 2008 @ 9:00 am

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