A friend of mine--no Marxist he--attempts to rally the Indian business community at home and abroad. So this is part of the thread on the Gujarat. rb The Economic Times The Indian business elite and the illogic of collective silence [ TUESDAY, MAY 07, 2002 12:17:02 AM ] GUEST COLUMN / ASHOK DEO BARDHAN THE communal carnage in Gujarat has been met with a deafening silence on the part of the business leaders of the state. Notable exceptions apart, the Indian business elite at large has also chosen to keep mum. While the lack of an enlightened self-interest, national vision and social responsibility have long been the hallmarks of our business class, the present situation has thrown into stark relief the long term costs of this stance. The combustible combination of religion and real estate surrounding the Mandir-Masjid dispute has now set into motion a veritable chain of events that threaten to knock India off its long-term growth path. Both external as well as internal sources of future growth are bound to be negatively affected. The state’s abdication of its mandate to ensure and maintain law and order can only be seen by foreign investors as a major stumbling block for further foreign investments. Although votaries of free markets, let there be no doubt, foreign investors look for effective governments and functional states. The notion that there is more to an economy than economics alone is well understood in international financial circles. With the trinity of liberalisation, privatisation and globalisation having become the discourse of our times, country-level differences are more pronounced at the political and social levels, rather than in the heterogeneity of economic ideologies. International investors and country risk analysts appreciate this emerging dynamic, and it is increasingly reflected in their analysis of investment and business climate in countries around the world. Although a vast range of economic and financial variables go into the making of country risk assessment indicators, increasing weight is now given to critical socio-political factors such as ethnic tensions and social fragmentation in the country in question, the extent of organised religion in politics, bureaucratic effectiveness and the state’s ability to enforce laws. A proper appreciation of these issues will demystify the seemingly inexorable avalanche of investments that pour into Mainland China. Perhaps, more critically for our present purposes, it should also be understood that regions and provinces within countries that successfully attract foreign investments tend to compete with each other on the basis of sound and effective governance and not financial incentives alone. It might be argued by some that foreign investment is not critical to India’s economic growth. The real engine of growth will supposedly be chugging away at home on domestic fuel. On what rails, may one ask? Instead of a physical infrastructure and a supportive institutional framework, there is a growing infrastructure of intolerance and burgeoning institutions of bigotry; instead of the mobility of capital and labour we have mobility of murder and mayhem, and instead of a stable contracting environment we have a stable communal divide. There seems to a lot of wishful thinking to the effect that once the disturbances die out it will be back to business as usual; that the damage wrought is but short-term. However, the nature, duration and intensity of present events, the actors involved and the role of the governments, both at central and state levels, ensure that this will turn out to be a watershed development in the history of the country. The business community can turn a blind eye to its larger role in society only at its own peril. At the level of a rational, individual businessman it is no doubt clearly understood that in addition to purely economic reforms and measures, there are a host of political and social prerequisites necessary for economic development. The inability to translate this knowledge into a cohesive, well-formulated strategy reflecting the collective aspirations of the business classes for development and nation-building that also takes into account the well-being of other forces in the country has resulted in chronic myopia. Just like the price of liberty, the price of liberalisation too is eternal vigilance. Business circles need to take a firm and proactive stance in support of secularism, for it is critical to holding the country and the markets together. Since individual businessmen might find it risky under the present circumstances to stick their necks out, apex industry organisations and trade groupings can surmount this co-ordination problem. Ultimately, business must use its clout to restore and maintain communal harmony in the country for the sake of its own survival and growth. One of the lessons of the history of the developed industrialised world has been the strength and viability, not only of its market institutions, but more so of its non-market institutions, in the development of which the business community has played a vital role. On the other hand, we also have before us the recent disastrous experience of the few other countries with diverse populations where the authorities and the people could not manage and contain ethnic conflict. There is a clear choice to be made. (The author is with Haas School of Business, University of California, Berkeley)
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