What is the relationship between the Government and Adani indicates about Indian capitalism - The News Vivo

What is the relationship between the Government and Adani indicates about Indian capitalism

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By Chandra Kanta Dalai

The Adani issue necessitates a comparative and historical investigation for perspective. What do we know about the relationship between business and government during capitalism’s development? How does modern-day India vary or resemble the past?

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relationship between the Government and Adani,Adani

Government and Adani

In advanced capitalism, it is generally accepted that cost-cutting efforts and/or product innovation determine whether a company succeeds or fails. Has a company produced a product like an iPhone or an Apple computer that captures the imagination of millions of customers? Or have they piqued the interest of tens of thousands of other companies thanks to improved equipment or a new manufacturing method (such as a recently automated production system producing industrial gear or transport equipment)?

This may be described as a conventional textbook portrayal rather than a true representation of modern capitalism. That would be partially accurate. The invisible hand of the market, as described by Adam Smith, does not entirely determine the course of advanced capitalism. There are connections between business and government, most notably in the defence sector but also in sectors covered by industrial policy.

Joe Biden proposed incentives for the US advanced semiconductor sector last year, as well as for businesses that provide items that are better for the environment, including electric automobiles. Although it may exist under mature capitalism, complicity between the government and business is not widespread or pervasive. It is frequently discovered and punished. Additionally, rules are frequently industry-specific rather than firm- or family-specific.

Early capitalism, in comparison, is a totally different animal. Historically, the emergence of capitalism has been accompanied with corruption. Think about the years between 1865 and 1900, when a mostly rural America underwent its first significant capitalist change. Mark Twain was the first to see the core of the new economic shift thanks to his literary acumen and intellectual vision.

He referred to it as the “Gilded Age” in 1873. The Carnegies, Rockefellers, Vanderbilts, and Morgans were among the first American millionaires to make agreements with various levels of government. Railroad tycoon Jay Gould claimed that in order to build his railroad lines, “I required the legislatures of four states… thus I built them with my own money.” Governments and legislatures were merely “purchased” by the so-called robber barons.

President Theodore Roosevelt (1801–1899) started a cleaning up effort, and results started to emerge in part. In 1860, America lagged behind Western Europe in terms of development. The United States overtook Britain, which had been the world’s industrial powerhouse for more than a century, as the richest nation by 1910.

The phrase “Gilded Age,” coined by Mark Twain, refers to the simultaneous presence of decay and vitality. China’s Gilded Age (2021), a widely read book by Yuen Yuen Ang, is the most recent edition (University of Michigan, Ann Abor).

She separates corruption into four categories: (1) “Petty theft” refers to extortion by low-level bureaucrats and the misuse of public funds; (2) “Grand theft” refers to political elites embezzling large sums of money from the public; (3) “Speed money” refers to small bribes to get around bureaucratic barriers; and (4) “Access money” (benefits and compensation provided by businessmen to politicians and bureaucrats for contracts and projects that raise overall investment rate and thereby economic growth).

The first three types of corruption, according to her argument, hinder the growth of the country’s economy, but China has shifted more and more towards the fourth type of corruption, which boosts investment and, consequently, growth, while also benefiting Communist Party officials across the board. China’s investment/GDP ratio remained around 40% from 1995 to 2015, and its annual growth rate seldom fell below 9%.

One could find it appealing to claim that the Adani-BJP government connections fall into the fourth category. Despite any contributions he may have made to the BJP, Adani has made significant investments in cement, grain storage, energy, and infrastructure. In theory, they may be referred to be growth-enhancing.

However, that would be a crude comparison. South Korea, one of the first four “Asian tigers” following the Second World War, makes for the most intriguing comparison to Modi’s India rather than China. Early in the 1960s, South Korea’s per capita income was comparable to that of India. The World Bank estimates that in December 2021, South Korea’s per capita income was $34,758 while India’s was only $2,100.
(Incidentally, with a per capita income of $10,262, China is still not considered to be a high-income nation.)

South Korea is a better parallel because of its gilded period, which began around the middle of the 1960s, and its unique characteristic. It was a golden period, unlike China, with “national champions” like Samsung, Hyundai, LG, and Hanjin. These were the so-called “chaebols,” which were essentially multi-sector corporate organisations headed by families. Under government support, they prospered, and the South Korean economy thrived as well. However, corruption also grew along with them. Leading expert on South Korean political economics David Kang (University of Southern California) argues in Crony Capitalism (2002):

The trade of money for political influence has long been an open secret in Korean politics, and scandals are a recurring topic. Former presidents, staffers of the White House, military personnel, politicos, bureaucrats, bankers, businessmen, and tax collectors are among those who have either done time in prison or been exiled. Growth was so remarkable that corruption was not revealed in its true form.

The biggest distinction between the Adani group and Korean chaebols is the former’s strong emphasis on foreign trading. Despite government favouritism, Samsung, Hyundai, and LG have all operated in tradable fields. They battled with the global producers in the production of automobiles, computers, electronics, semiconductors, and cell phones. Thus, international competition has given their firms a disciplinary check, producing enormous efficiency.

The Adani group mostly operates in non-tradable industries. Airports, grain storage facilities, seaports, and energy production are not traded globally. They are both domestically focused and supported by the government. There are no efficiency benefits from international commerce. The Adani group is not Samsung; it has very limited global marketability without support from Delhi.

Additionally, it cannot compete with India’s information technology sector’s level of global competitiveness. The Adani-government alliance represents a very distinct national champions’ strategy from South Korea. Without international competitiveness, its effects on the wider economy simply cannot be as favourable.

The first disciplinary measure against the Adani group has, in fact, been taken using international financial instruments rather than through international trade. The group’s commercial activities are being penalised by international financial markets. The narrative is still not over. There’s a lot more to come.

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