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Unformatted text preview: THE ECONOMIC January 26, 1955 WEEKLY The Third Balraj Alternative Puri The assumption behind the controversy public sector vs private sector that capitalist undertakings and State undertakings are the only and exclusive alternatives, is unreal and false. There is a third alternative. No tear need be shed if capitalists, monopolists and exploiters arc eliminated. Let us not put exclusive reliance on bureaucrats as their substitutes. Let the capitalist system be replaced by a decentralised and cooperative economy which would assure the common man not only more bread but also greater freedom. T H E respective roles o f public: a n d p r i v a t e sectors i n I n d i a ' s e c o n o m y were discussed in the last week of 1954 by three l e a d i n g economists of the c o u n t r y at w h a t was supposed to be an academic level. Dr V K R V R a o . Prof C N V a k i l and Prof D R Gadgil, participating in the 3 7 t h conference o f the I n d i a n E c o n o m i c Association a t A g r a , selected, p r o b a b l y c o i n c i d e n t a l l y , i d e n t i c a l themes for t h e i r p u b lic lectures. N o t w i t h s t a n d i n g some u n a v o i d a b l e r e p e t i t i o n , h o w e v e r , the three lectures were, on the w h o l e , complementary to one another. This discussion at A g r a deserved better notice by the Press as it w o u l d have h e l p e d the public to u n d e r s t a n d the key question of I n d i a ' s f u t u r e set-up a n d also to realise some of t h e gaps in this discussion as also in s i m i l a r other discussions on the subject. SOCIALISM I N C O N S I S T E N T W I T H PRESENT C O N S T I T U T I O N I n i t i a t i n g the discussion, D r R a o dwelt at l e n g t h on the probable trends i n I n d i a ' s economy. Piling up evidence after evidence and q u o t i n g profusely f r o m the utterance o f the m e n i n a u t h o r i t y he drew the c o n c l u s i o n , w h i c h was r a t h e r o b v i o u s , t h a t the p u b l i c sector w o u l d go on expanding and the p r i v a t e sector w o u l d be a c c o r d ed a subordinate role in the national economy which will have t o f u n c t i o n u n d e r the c o n t r o l a n d guidance o f the State. Dr Rao then pointed out the i n c o m p a t i b i l i t y b e t w e e n the socialistic professions of the I n d i a n leaders a n d the provisions o f the C o n s t i t u t i o n . E v e n a mixed e c o n o m y , he suggested, c a n n o t f u n c t i o n u n d e r the existing C o n s t i t u t i o n . For a m i x e d e c o n o m y presumes the reservation of c e r t a i n fields f o r the p u b l i c sector which means t h a t p r i v a t e enterprise is not t o b e a l l o w e d t o f u n c t i o n i n those fields. But the Constitution not only grants the right to acquire, h o l d a n d dispose o f p r o p e r t y w i t h o u t any q u a l i f i c a t i o n b u t also guarantees t h e r i g h t t o a d o p t a n y p r o fession or business to a l l citizens. T h u s no area of economic a c t i v i t y t a n be declared, c o n s t i t u t i o n a l l y speaking, to be out of bounds for p r i v a t e enterprise; b u t this is cont r a r y to the conception of m i x e d economy. however, refused to be called a champion of private enterprise either. Whose champion, then, was he? I f p r i v a t e a n d p u b l i c sectors are b o t h evils a n d c a n n o t coexist, w h a t is the way o u t ? D r Rao thus i m p l i e d t h a t in order t o m a k e p l a n n i n g effective, the State w o u l d have to be a r m e d w i t h m o r e drastic powers a n d some of the f u n d a m e n t a l rights granted by the C o n s t i t u t i o n w o u l d have to be w i t h d r a w n . He also i m p l i e d that the relations between the States a n d the C e n t r e w o u l d have to be revised so as to make the g r i p of the latter over the f o r m e r somew h a t stronger. C o - o r d i n a t i o n , g u i d ance a n d c o n t r o l by the C e n t r e are. a c c o r d i n g to h i m . necessary for the effective implementation of the Plan. Present provisions of the C o n s t i t u t i o n , he felt, do not give sufficient powers to the Centre. Due to a single p a r t y b e i n g in power in almost a l l the States at present, there is a singleness of objective that should make c o - o r d i nation and central control much easier. Hut in the event of different parties c o m i n g i n t o power i n different parts of I n d i a , w h i c h is not u n l i k e l y , the C e n t r e m i g h t become ineffective a n d p l a n n e d devel o p m e n t of the c o u n t r y w o u l d he seriously handicapped. Dr Rao, t o o . left some o f the i m p l i c a t i o n s of his analysis h a n g i n g loose. A r m i n g the G o v e r n m e n t w i t h absolute powers a n d m a k i n g the Centre stronger c e r t a i n l y have some totalitarian implications. T h e concentration of economic power in the hands of a h a n d f u l of capitalists is b a d : it is against the social i n t e rests a n d also t h a t of the e c o n o m i c g r o w t h o f the c o u n t r y . But even the c o n c e n t r a t i o n of the same p o w e r a l o n g w i t h absolute p o l i t i c a l p o w e r in the hands of a g r o u p of p o l i t i cians has some dangerous potentialities, A s t r o n g C e n t r e m i g h t enable economic p l a n n i n g to be more effective, administratively. But initiative from the bottom would disappear a n d b y shifting the responsibility f r o m local to central level, people's co-operation, even to the extent it is a v a i l a b l e at present, w o u l d not be f o r t h c o m i n g except t h r o u g h m e t h o d s of c o e r c i o n . E v e n f r o m the p o i n t of view of economic d e v e l o p m e n t , a r e g i m e n t ed set-up. m i g h t not p r o v e to be more effective, apart f r o m the c u l tural and political stagnation that it w o u l d generate. The fate of t o t a l itarian experiments in economic d e v e l o p m e n t is too w e l l k n o w n by now a n d there s h o u l d n o t be m u c h t e m p t a t i o n to a d o p t t h a t very p r o cedure i n this c o u n t r y . MISBEHAVIOUR OF PUBLIC ENTERPRISE Prof C N V a k i l p i c k i n g up the t h r e a d , dealt w i t h another aspect o f the question. If private enterprise is m i s b e h a v i n g , he p o i n t e d o u t , p u b l i c enterprise is capable of worse misbehaviour. He quoted many instances of errors of j u d g m e n t a n d m i s c a l c u l a t i o n s on the part of G o v e r n m e n t leaders. He also r i d i c u l e d the contention of the Finance M i n i s t e r t h a t there was n o i n c o m p a t i b i l i t y between the p r i v a t e a n d p u b l i c sectors a n d asserted t h a t t h e t a l k o f co-existence between the t w o was o n l y d i p l o m a t i c in character as the f o r m e r h a d already been served w i t h a q u i t notice a n d at the most, i t can o n l y m a r k t i m e . Prof V a k i l , 101 ROLE OF ECONOMISTS A discussion of o t h e r i m p l i c a t i o n s of a r e g i m e n t e d set-up w o u l d take us b e y o n d the field of economics a n d it m a y w e l l lie a r g u e d that economists are not c o n c e r n e d m u c h with non-economic values and social objectives. A s i m i l a r l i n e was, in fact, t a k e n by P r o f D R Gadgil. I n his speech a t A g r a , h e defined the role o f a n economist as a detached expert w h o w o u l d s i m p l y prescribe c e r t a i n courses to be followed in order to achieve THE ECONOMIC WEEKLY January 26, 1955 102 THE ECONOMIC WEEKLY c e r t a i n social objectives set by the statesmen, I n d i a has accepted a socialistic p a t t e r n of society as its g o a l . P r o f G a d g i l w o u l d n o t discuss the merits a n d demerits of this objective as he considered t h a t this was outside the scope of his subject. H e d i d , however, criticise the G o v e r n m e n t for n o t p u r s u i n g eertain courses without which socialism c o u l d not be b u i l t . Social o w n e r s h i p of the means of p r o d u c t i o n a n d better d i s t r i b u t i o n are the sine quo non of Socialism a n d the I n d i a n G o v e r n m e n t b y n o t adopting these policies was not being true to its professions. T h i s d e l i m i t a t i o n o f the h e l d o f economics by Prof G a d g i l has, no d o u b t , certain virtues. I n developing his theoretical e q u i p m e n t an economist can usefully take an objective view of things. " Economics is n e u t r a l between ends," said Prof Robbins. But the same economist also suggested, " An economist is a poor economist if he is s i m p l y a n economist a n d nothing else." W h e n an economist suggests measures of p r a c t i c a l policy, he must needs be a bit of a slatesm a n , a sociologist, a c o n s t i t u t i o n a l expert a n d m a n y other things. A l l t h a t is r e q u i r e d of h i m is to be conscious of his other capacities. In the same way a statesman should also be a bit of an economist. For there cannot be any policy w h i c h is purely p o l i t i c a l or p u r e l y economic . Every public policy must be an i n t e g r a l whole having many aspects - e c o n o m i c , p o l i t i c a l , c u l t u r a l , etc. AD HOC M E A S U R E S W h a t we lack today is an i n t e g r a t e d policy an i n t e g r a t i o n of economic plans, social objectives a n d p o l i t i c a l aspirations. Somet h i n g m i g h t be said in favour of an e m p i r i c a l a p p r o a c h not based on any ' ism '. " We face the p r o b l e m s , " ' s a i d Pandit N e h r u , " a s they c o m e . " But this a p p r o a c h of ad hoc economic measures a n d ad hot socio-political experiments w i t h o u t any idea of the u l t i m a t e picture cannot c a r r y us far. The discussion about an i n d u s t r i a l system for I n d i a — Public vs Private Enterprise —should take place against some perspective, for like any discussion of p r a c t i c a l p o l i c y , it involves e x p l i c i t l y o r i m p l i c i t l y value j u d g m e n t s . We do w a n t a r a p i d rate of economic g r o w t h , but not at the cost of the people, ie, by further t i g h t e n i n g t h e i r bells a n d p r o l o n g ing the p e r i o d of suffering. In January 26, 1955 other words, we w a n t simultaneously a rise in l i v i n g standards a n d a better d i s t r i b u t i o n of the increased production. T h e period of init i a l c a p i t a l expansion always entails sacrifices w h i c h Soviet Russia extracts f r o m her people t h r o u g h a totalitarian and ruthless State m a c h i n e r y a n d w h i c h laissez faire E n g l a n d forced her w o r k i n g people to undergo, shifting part of the burden to her colonies. Since a totalitarian set-up a n d an imperialist p o l i c y are both r u l e d o u t . the economic g r o w t h of this c o u n t r y should have a new p a t t e r n . Let the economists a n d the statesmen of this c o u n t r y - - w h e t h e r as economists or statesmen or b o t h -keep these objectives a n d given conditions in v i e w in f o r m u l a t i n g a theory of d e v e l o p m e n t and suggesting an i n d u s t r i a l system for I n d i a . DIFFESION OF ECONOMIC POWER T h e capitalist system, characterized by c o n c e n t r a t i o n of wealth a n d means of p r o d u c t i o n in a few hands, stands in the way of achievement of o u r objectives in t w o ways. Econ o m i c a c t i v i t y being p r i m a r i l y det e r m i n e d by the profit considerations of the few, need not necessarily be in the best interests of the n a t i o n a n d the u t i l i s a t i o n of resources may not take place in a desirable a n d p l a n n e d manner. The second disadvantage of the c o n c e n t r a t i o n of w e a l t h is f r o m the point of view of d i s t r i b u t i o n w h i c h i n c i d e n t a l l y also affects the t e m p o of economic activity. If we do not want the few to e x p l o i t a n d d o m i n a t e the rest, we should devise a system in w h i c h economic a n d p o l i t i c a l power is shared by the m a x i m u m n u m b e r of people. The transfer of the concentrated w e a l t h a n d ownership f r o m some capitalists to some ' representatives ' of the people alone w o u l d not enable the c o m m o n m a n to share the economic a n d p o l i t i c a l p o w e r w h i c h w o u l d still be exercised by others a n d not by h i m w i t h the difference t h a t it w o u l d now be done on his behalf. But democracy w o u l d r e m a i n i n complete t i l l it is not o n l y for h i m but also by h i m . T h i s can only be done by m a x i m u m diffusion o f economic a n d p o l i t i c a l power a n d m a k i n g the u n i t of economic a n d p o l i t i c a l a c t i v i t y as s m a l l as possible so that an i n d i v i d u a l behaves at a level at w h i c h he can have a significant say in the matter. L e t every m e m b e r o f the b i g c o m m u n i t y o f 360 m i l l i o n I n dians behave as a d i s t i n c t e n t i t y a n d as an end in himself a n d not as an 103 insignificant p a r t of the mass, just one m o r e i n a c r o w d , j u s t a n i n s t r u m e n t i n the service o f the m y t h i cal interests of the n a t i o n or the class. T H E CRUCIAL I S S U E I t w e have this objective i n m i n d , the controversy of p u b l i c vs p r i v a t e sectors seems less i m p o r t a n t t h a n t h a t o f bigness a n d smallness o f i n dustries a n d o f a n a p p r o p r i a t e p o l i t i c a l frame w o r k . T h e r e has been n o lack o f t a l l t a l k i n this c o u n t r y a b o u t cottage a n d small-scale industries. Rut p r o b a b l y in no other case the gap between the professions a n d the policies of the Government, is so w i d e . It is n o t a question of e n c o u r a g i n g o r p r o t e c t i n g this i n dustry or t h a t , it is a question of o r g a n i s i n g o u r e n t i r e i n d u s t r i a l syst e m on a b i g or s m a l l level. A p a r t from the confession of the F i n a n c e M i n i s t e r t h a t his G o v e r n m e n t m i g h t be b l a m e d for the neglect of cottage industries, some c o m m o n p l a c e facts speak louder. If we h a d even a small preference for a smaller size of industries, c o u l d we not i m p o r t small m a c h i n e r y w o r t h a few crores f r o m J a p a n or some other c o u n t r y or set up a small m a c h i n e r y p r o d u c i n g factory ourselves, instead of or i n a d d i t i o n t o the one p r o d u c i n g machine tools for b i g i n d u s t r y at Bangalore? The net result of o u r seven-year i n d u s t r i a l policy is t h a t not even a single a d d i t i o n a l i n d u s t r y has been organised on small scale. The net result of out scientific policy is that no new i n v e n t i o n or technical i m p r o v e m e n t has been made in the o r g a n i s a t i o n of a n y small i n d u s t r y , The d i r e c t i o n of o u r financial policy too is not d i f f e r e n t . The G o v e r n m e n t has n o d o u b t p r o v i d e d assistance of a few crores of rupees to s m a l l enterprises for t h e i r subsistence. But does t h a t stand any comparison w i t h the hundreds a n d thousands of crores given to encourage and help b i g industrialists w h o have also the advantage of r a i s i n g credit in the m a r k e t a n d get accomm o d a t i o n f r o m the banks a n d insurance companies? The s m a l l p r o d u cer in I n d i a h a r d l y gets a n y c r e d i t f r o m non-official organised f i n a n c i a l i n s t i t u t i o n s , whereas i n Sweden, w e are t o l d , loans g r a n t e d to s m a l l enterprises constitute 35 per cent of the loans f r o m c o m m e r c i a l banks to industries a n d service trades. A r a d i c a l l y different a p p r o a c h is t h u s called for on the p a r t of the economists, G o v e r n m e n t p o l i c y - m a k e r s , scientists a n d f i n a n c i a l concerns t o m a k e i n d u s t r i a l u n i t s smaller. THE ECONOMIC WEEKLY January 26, 1955 T H E NEGLECTED SECTOR T r u e , some industries c a n n o t be o f s m a l l size, t i l l technology develops i n t h a t d i r e c t i o n . I n such cases, steps s h o u l d be t a k e n to reduce the u n i t o f o w n e r s h i p . M o r e a n d more of our economy is c o m i n g u n d e r t h e d o m i n a t i o n of a f e w business houses. W h a t we need, f r o m the p o i n t o f v i e w o f b o t h d e v e l o p m e n t as w e l l as d i s t r i b u t i o n , is an a r r a n g e m e n t to enable s m a l l investors to p o o l t h e i r resources a n d set u p b i g u n d e r t a k i n g s . The ind u s t r i a l p o l i c y statement of 1948, d i d accept i n d u s t r i a l co-operatives as one of the m a j o r objectives of the GovernmentT h e record o f t h e first f o u r years of the F i v e - Y e a r P l a n is very d i s c o u r a g i n g as far as this o b j e c t i v e i s concerned. I n the t w o pages devoted to the co-operative m o v e m e n t i n the b u l k y Progress R e p o r t o f the P l a n , i n d u s t r i a l cooperatives are not m e n t i o n e d at a l l . I t i s the S h r o f f C o m m i t t e e , h o w ever, w h i c h gives us some figures of i n d u s t r i a l co-operatives. There are o n l y 1,652 societies, it tells us, w i t h a w o r k i n g c a p i t a l of Rs 8-65 crores. O u t o f this c a p i t a l , m o r e t h a n t w o t h i r d s is concerned w i t h h a n d l o o m s , most of w h i c h was in existence before the Plan started. A p a l t r y sum o f R s 1 0 lakhs p r o v i d e d i n t h e P l a n for t r a i n i n g o f personnel i n a l l types o f co-operatives s t i l l remains u n u t i l i z e d . I f w e v i e w co-operation a s a f o r m of economic system—as an alternative to capitalism and comm u n i s m w e c a n n o t h e l p the feeling of despair at so i n d i f f e r e n t an a t t i t u d e towards i t o n the p a r t o f o u r planners. T h e i n d u s t r i a l p o l i c y o f o u r G o v e r n m e n t , o n the whole,, makes i t a b u n d a n t l y clear t h a t w h a t ever be its objective, it c e r t a i n l y does n o t a i m at establishing the econom i c system on the basis of small i n d u s t r i a l a n d o w n e r s h i p units. Y e t , some b o l d steps i n this d i r e c t i o n alone can secure m a x i m u m e m p l o y ment, equality and freedom, W h a t o t h e r ingredients of socialism are m o r e i m p o r t a n t t h a n these? T h i s c o u l d be a p a r t i a l answer to t h e controversy a b o u t public versus p r i v a t e enterprise. P a r t i a l , as it has n o t dealt w i t h m a n y aspects o f the controversy. ters . is e l i m i n a t e d . B u t let us n o t p u t a n exclusive reliance o n b u r e a u crats a n d G o v e r n m e n t leaders as t h e i r substitutes. L e t the c a p i t a l i s t system be replaced by a d e c e n t r a l ised and co-operative economy w h i c h w o u l d assure the c o m m o n m a n n o t o n l y m o r e b r e a d b u t also greater freedom. T h e activities o f petty producers, co-operative u n d e r t a k i n g s a n d State enterprises w o u l d need c o - o r d i n a t i o n . A n effective system o f coo r d i n a t i o n between these sectors, as also between States a n d C e n t r e , can d o a w a y w i t h the necessity o f r i g i d controls a n d centralised power. T h i s can best be a t t a i n e d by t a k i n g the economic activities of the State o u t of the o r b i t of p a r t y p o l i t i c i a n s , as far as practicable. An a l l - I n d i a economic service or a m a n a g e r i a l cadre c o u l d be t r a i n e d to u n d e r t a k e the responsibility of economic developm e n t so t h a t w h i c h e v e r p o l i t i c a l g r o u p comes i n t o p o w e r the co- C O - ...
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