Dec 02, 2024 08:15 PM IST
A growth path that is overly dependent on a few oligarchs may not answer the needs of a large and complex democracy
In the spring of 2014, the American pharma giant Pfizer offered to take over the British pharma company AstraZeneca, partly to take advantage of lower taxes in the United Kingdom (UK). The offer sent shock waves across the British establishment, which viewed AstraZeneca as an important scientific asset. The most vocal champions of globalisation discovered the virtues of protectionism at that time.
The “cost-crunching merger” would imperil the UK’s scientific base, the Financial Times warned in an editorial. “Britain is uncomfortable with the idea of national champions and state interventions,” the editorial said. “But as it considers the deal, AstraZeneca’s board must lift its eyes from tax returns and consider the long-term interests of the company and the industry of which it forms a part.”
Eventually, AstraZeneca’s board decided to reject Pfizer’s offer, and the firm went on to play a stellar role in coming up with an effective vaccine against Covid-19. Easy access to the Oxford-AstraZeneca vaccine (sold under the brand names Covishield and Vaxzevria) allowed the UK to vaccinate its citizens ahead of most parts of Europe. The national champion paid its debt to the nation.
The AstraZeneca example suggests that even in highly globalised economies, the economic policy establishment may treat some companies as national assets and be fiercely protective of their implicit nationality. But whether national champions should receive State subsidies, and under what terms and conditions, remain contentious issues.
The recent actions against the Adani Group by officials in countries as diverse as the United States (US), Bangladesh, and Kenya have ignited a fresh debate on the role of national champions in India’s growth story. Unlike AstraZeneca, the Adani Group is not known for world-beating innovation. But it has an impressive track record in running ports. The breathtaking pace at which it has acquired infrastructure assets in different parts of the world has led to an impression that it enjoys the implicit support of the Indian State. The fact that a State-owner insurer is among the handful of institutional investors in the group has only strengthened that impression.
On one side of the debate are those who worry that the concentration of economic power in the hands of a few State-backed industrialists would give them an unfair edge over their rivals. As their competitors wither away, the oligarchs would gain extraordinary pricing power, raising prices and hurting consumers over the long-run. Their wealth would help them manage the political process and prevent any backlash against their growing powers. They would find enough “influencers” cutting across political lines to justify their acts of omissions and commissions under the banner of “national interest”, the argument goes.
On the other side of the debate are those who find nothing wrong if Indian officials promote Adani’s cause, at home and abroad. They view Adani as India’s answer to China’s Belt and Road Initiative. Adani and other large conglomerates (such as Reliance and the Tata Group) can help India realise its geostrategic ambitions faster. So, they deserve special treatment, the argument goes. They point to the example of South Korea, where the State supported the rapid growth of conglomerates (or chaebols), which, in turn, helped raise Korea’s growth rates and geopolitical heft.
One must remember, however, that Korea’s conglomerate-led growth strategy was crafted by an extraordinary dictator who could arm-twist leading industrialists to do his bidding. Park Chung-hee rose to power promising to weed out cronyism from Korea’s economy in 1962. He promptly put leading Korean industrialists under house arrest, removing detention orders only after they agreed to invest in the industries he deemed important for Korea’s economic rejuvenation. Throughout his long tenure, Chung-hee used a combination of carrots (cheap loans and land) and sticks (State-mandated industrial and export targets) to discipline the Korean industry. He made it clear that any interference in politics would invite retribution, limiting the political influence of Korean oligarchs.
No democratically elected leader — however popular or authoritarian — can dictate to industrialists in the same manner. Hence the Chung-hee model won’t work in India, and if the Indian State must use industrial conglomerates to secure its long-term strategic goals, then these conglomerates must be subject to rules and oversight mechanisms that other quasi-State entities face, including not just regulatory but also parliamentary scrutiny.
India’s founding fathers worried that political equality in the country was accompanied by stark economic and social inequalities. Unless socioeconomic inequalities were reduced, political equality would be under constant threat, the economist-turned-lawyer BR Ambedkar warned in his final speech at the Constituent Assembly. Any policy initiative that increases the concentration of economic power and moves the country away from the ideals of our founding fathers must be viewed with caution. A growth path that is overly dependent on a few oligarchs may not answer the needs of a large and complex democracy. Unless all citizens and all businesses consider themselves equal stakeholders in the growth process, it may not be possible to sustain growth for very long.
Pramit Bhattacharya is a Chennai-based journalist. The views expressed are personal
Get Current Updates on…
See more
