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There is no incompatibility between socialism and Manmohanomics

Mani Shankar Aiyar, certainly India's most controversial columnist, resumes his column.

The Pachamarhi Declaration, the conclusions of the Congress conclave at the Madhya Pradesh hill-resort released earlier this week, does not contain the words "liberalisation" and "globalisation" but "reasserts" the Congress commitment to "socialism and the socialistic pattern of society spelled out at Avadi in 1955".

Does this constitute a U-turn? Have the party's Neanderthals oozed out of the woodwork to reclaim for a dead cause the fresh new departures that had won Dr Manmohan Singh the Euromoney Award for 'World's Best Finance Minister' several years in a row?

I answer the question as one of the unreconstructed Neanderthals. I am a socialist. I have always been one. Even through the years of the collapse of the Soviet Union and the rise of the Asia Pacific "miracle", I never wavered in holding to my socialism and describing myself as a socialist. And while doing so, I was among the most ardent advocates of the new vistas being charted by Manmohan Singh. Indeed, at the crucial Congress Parliamentary Party meeting of July 1991, called to endorse the first Manmohan budget, I was among the handful that unambiguously endorsed reforms. And avidly applauded the spectacular results of the reforms process. I, for one, never saw any incompatibility between Indian-style liberalisation and Indian-style socialism. The reforms seemed to me to be quintessentially socialist.

It has to be admitted, however, that the reformers themselves did not see it that way. The word "socialism" was virtually abolished from the Congress party's vocabulary, and in coining the term "new economic policy" there was an implied rejection of the old. The new policy was projected as an undoing of the errors of the past. The argument within the party was not over whether reforms were right or wrong -- they were self-evidently both right and required -- but over whether they should be construed as a confession of past failure or an imperative imposed by the alteration of the profile of the Indian economy wrought by the successes of the past.

The reformers were inclined to the former interpretation during much of the five years of Manmohan Singh's reforms (1991-96). They considered it politic to secure the approval of the Bretton Woods institutions, Wall Street and Threadneedle Street, by underplaying the idioms of the past and resorting instead to the phraseology of the West, which looked upon the collapse of the Soviet Union as the historic triumph of capitalism over socialism, "the end of history" as the overblown rhetoric of the Heritage Foundation claimed.

At Pachmarhi, the balance of articulation tilted towards those within the party who neither regret not reject the socialist path charted since Independence. This section of opinion has always viewed the reforms as the necessary unfolding of a process that was not alien to but actually built into the Indian version of socialism from its very genesis during the freedom struggle at the Karachi Congress of 1931.

The Soviet Union was, of course, much admired at the time for transforming a backward, agrarian economy into a major economic power -- not through the market mechanism but through state intervention and Five Year Plans, then an instrument of development without precedent in the experience of the developed capitalist economies. Moreover, the Soviet miracle occurred as Western capitalism appeared to be collapsing in the Great Depression of the 30s. This reinforced the appeal of socialism.

The Congress picked many lessons from the Soviet experience but rejected the most basic attribute of the Soviet system -- the dictatorship of the proletariat, indeed, dictatorship of any kind. India, from the very beginning, repudiated all forms of authoritarian government, socialist or fascist. Even if the economic model drew much from the Soviet socialist system, the political model drew its inspiration from the Westminster model of parliamentary democracy.

However, even as the Westminster model was adapted to Indian realities, the Soviet socialist model was also adapted to Indian imperatives. Agriculture was not collectivised as in the Soviet Union but left entirely in private hands (subject, of course, to land reforms). The state reserved to itself several sectors of enterprise but resorted to little nationalisation, in contrast to the wholesale take-over of all industries after the October revolution and the ban on any private enterprise in the Soviet socialist system.

The protection and promotion afforded to Indian private enterprise by Indian-style socialism is, of course, why every pre-Independence industrial house of significance -- Tata, Birla, Dalmia, Goenka -- have not only survived fifty years of freedom but are very, very much bigger now than in the hey-day of colonial capitalism. True, there was little emphasis at the time on foreign investment, but that was because, far from wanting to invest in the country, most British firms who had come into India behind the Union Jack were wanting to pull out when the flag was taken home.

Indian socialism was thus based not on a state-run economy, but a mixed economy allied to democratic political institutions. It was never imitative of the Soviet Union. Therefore, the collapse of the Soviet Union, hailed in the West as the collapse of socialism, had no lessons for an India whose indigenous versions of socialism had long rejected the very flaws in the Soviet system that eventually brought about its collapse.

As for the authoritarian, export-driven, foreign-investment-led, market-oriented model of the Asia Pacific rim, Pachmarhi took place in the shadow of such a devastating collapse of that model that Indians could only congratulate themselves on having had the caution to avoid the pitfalls of the "miracle" path. No democratic Indian government could have survived the astonishing drop in living standards that almost all of South-East and East Asia has experienced during the last year.

The totality of the global experience of the 90s has vindicated the Nehruvian model of aligning a mixed economy to a democratic political system, leaving the mix of the private and public sector, as well as the mix of the domestic and foreign sector, completely flexible, while keeping rigidly inflexible the commitment to democracy. It is this alignment of democracy to the mixed economy that we in India call "socialism", as just reaffirmed by the Congress at Pachmarhi.

Which is why there is no incompatibility between socialism and economic reforms of the Manmohan kind.

Mani Shankar Aiyar

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