Capitalism has decisively won the battle. Responsible Capitalism works best for India compared to the cut throat version.
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]R[/dropcap]esponsible Capitalism came into being in the 30’s during the Depression days. It means adhering to certain socially accepted norms, and be accountable for it. In this video, Dr. Swamy exhorts the younger generation to embrace innovation. Below is a brief summary from the talk:
- Factory in a crowded place – May result in profits but it will make the society sick. There has to be checks and balances.
- Market economy – This is what the whole world is navigating towards… Give freedom of work for people to pursue their personal interests, subject to certain restrictions. For a long period, India adopted Soviet model of economic development. India dismantled the Soviet model in 1991.
- Disadvantages of Soviet model – There was no accountability at all. State was everthing. One of the great leaders of Marxist movement, E M S Namboodripad used to tell me that US is having employment issues but there is full employment in the Soviet Union, there is no inflation and there is no poverty. After the collapse of USSR in 1991, when I met E M S, I told him that now there is no Soviet Union!
- Capitalism concepts – Anyone is free to do what they wanted. During the Depression of the 30s, a laissez-faire model was adopted (meaning no intervention from the Government) and therefore only the fittest survived. During the Depression, the owners argued that in difficult times, the best way to avoid unemployment was to reduce the salaries. But reduced wages also reduce demand. A downward cycle begins, which will take the economy down quickly.
- Keynesian economics – John Maynard Keynes argued that the best way to grow an economy is to increase wages through public works which will get the country out of a depression.
- Irresponsible Capitalism after 9/11 – The Smart kids out of Ivy League schools invented a new financial instruments called a Subprime loans which did not do adequate checks on borrowers before giving them home mortgage loans. Consumer demand drove the housing bubble to all-time highs in the summer of 2005, which ultimately collapsed in August of 2006.
- Participatory Notes induced crisis in India – Black Money from India is getting round tripped using a financial derivative called Participatory Notes. If it had not been for this, India would have been much better off. Today India’s Stock Market is one of the most rigged markets. Unless this is fixed quickly, India will collapse in the middle of its growth.
- Asian crisis of 1997 – Asian Tigers collapsed when some short term loans were called in on Thailand by US because the bond rates went up there. Till this date, Japan is still licking its wounds.
- India of today – Despite all its inefficiencies, India’s banking system is a sound one. With some simple changes, Capitalism can be made to work well in India. Firstly, making money is good but it should not be done at the expense of the common man. For instance Futures trading in Agriculture leads to hoarding and creation of artificial scarcities. Despite being the cheapest producer of agricultural goods, India is still not utilizing its potential to be a leader in the world market. India is the only country that allows Futures trading in commodities. This must stop immediately.
- Growth from Innovation – All economic miracles of the West happened because of technological breakthroughs such as Bessemer Steel Process, Internet etc. which has enabled a person to stay connected from any corner of the earth. Likewise, India needs to innovate its way to growth. With an average population of 26 years, if we can educate the younger generation and create a passion in them for innovation, India will be the world leader before long.