In 1984, I visited a friend from College in Ranchi. He took me to meet about a dozen of his relatives all of whom wanted various sorts of licences from Delhi so as to set up industrial units of different types. I had previously worked for the SBI and was able to meet some Bank managers through this connection. Prima facie, as far as I could see, the various schemes were sound enough but, obviously, only two or three would be scalable. But the promoters understood this, and would all get behind what worked and started earning forex quickly (which would then allow the import of better equipment). My memory is that there were certain Central Government incentives available and there was a senior Bihari IAS officer in Delhi who could steer things through. The problem was with the Patna kleptocracy. Thankfully, at a later date, Bihar was split up and Jharkhand was separated.
Kaushik Basu must have had some College friends exactly like mine. Yet he writes-
In the early nineties I used to take a team of research students to a cluster of villages in one of the most anarchic and poor regions of India—now in the state of Jharkhand. Seeing the economic inefficiencies and lack of development in the region, it would be natural for a budding economist to proffer the popular advice that what is needed is for less government and for individuals to be left free to pursue their self-interest.
This was true. Basu is a Kayastha. My College friend was a Kayastha. Kayasthas and Banias in Jharkhand had schemes even for 'remote and anarchic' clusters of villages. But they needed licenses and permits from Patna and Delhi. Government regulations, based on a Socialist ideology, were preventing enterprise from creating better livelihoods.
But such an advice would be quite absurd in this case.--There was no trace of any government for ‘less government’ to be a feasible option.
But there was a District Commissioner who would shut down any enterprise which did not have the necessary licenses and permits and so forth. True, gangsters could operate such enterprises but they may prefer killing and looting to building up profitable businesses.
And there was no dearth of individually selfish behavior either. What was lacking was the fauna and flora of social values and the cooperative spirit that make economic efficiency and development possible.
Social values and cooperative spirit existed. But both militated for the heavy handed enforcement of the License-Permit Raj. The presumption was that any entrepreneur must be a blood-sucking capitalist. Also, he was probably raping Mother Nature and subjecting Dalits and Adivasis to suttee, thugee & agarbatti.
Contrary to what many textbooks teach us, the regions of the world which are economically the biggest disasters are often the ones which are models of the free market, with amoral individuals seeking nothing but their own self-aggrandizement.
My College buddy had made about 10,000 quid by running a Carnaby Street type market stall. Had he been allowed to invest it, he would have doubled his money in a couple of years and generated a thousand decent livelihoods. The Government ensured he could not do so. Returning to London, he partnered with a Sylheti and set up a unit in Dacca. Later, the two of them came to an arrangement with a Hong Kong based Sindhi and started manufacturing in Shenzen. My friend and his family are now very wealthy- though I believe their Indian wealth is based on real estate development not manufacturing. On the other hand, a guy from Kanpur I was with at the LSE with, made it big in oil & gas prospecting. He does have manufacturing interests as well but, my point is, the Indian Government failed to follow Ershad's or Deng's example of permitting the secondary sector to take off so as to raise productivity for the masses.
Vinobha & Jayprakash's 'Bhoodan' had once been active in some of the places I visited back in the early Eighties. I met plenty of good Gandhian- or, in Ranchi, Christian- people who overflowed with altruism and a concern for Social Justice. But, because, for moral reasons, they supported the paranoid Socialist policies of the ruling class, it must be said, they perpetuated poverty amongst a decent, industrious, people. By the time I revisited the place in the late Nineties, there was material progress but also a proliferation of NGOs which were even more puritanical and paranoid in their functioning. I believe my friend, for atavistic reasons, funds some of them himself. I've lost touch with the fellow but see on Facebook that he has a couple of kids with Ivy League credentials. No doubt, some Basu like Professor, took them to backward areas in Bihar so as to lecture them on the evils of Capitalism- i.e. the type of thrift and enterprise which pays the inflated fees of those Ivory Tower Colleges. This is what Polanyi- the Chemist, not his cretinous brother- called 'moral inversion'.
Still, it is extraordinary that Basu should have told his American students there was no Government in rural Bihar when he knew very well that the license-permit Raj had prevented development there on one 'Social Justice' excuse or another.
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