What makes an economy tick? Hope. Hope that the future holds promise. Entrepreneurs embark on a venture investing their life's savings and borrowing by mortgaging their assets. A leap of faith, a blind optimism that there will be light at the end of the tunnel and that their venture will succeed — be it an Udupi hotel, an Uber cab or a tech startup — propels them to flight, on a wing and a prayer. And equity funds rush to invest if ideas are unique, scalable and a country holds promise.
In a vibrant economy, you buy a car availing a bank loan on your first job without a second thought. Small-time businessmen in rural areas buy second-hand cars as their businesses look up. There is optimism that if you lose one job there are others that beckon you. While still young you purchase a flat with a housing loan, without dwelling too much on the apprehensions of bank foreclosure.
This is far removed from an earlier era about 30 years ago when the salaried class built a house only closer to retirement and most didn't dream of owning a car. There's underlying confidence that you will somehow ride out the tough times should you get fired or the business takes a dip. We all feel as Emerson said, that "We shall not go far wrong; that things mend, ... that it warrants hope, the prolific mother of reforms."
How an economy runs on hope
If hopes are dashed, and you don't embark on a venture because of a gloomy outlook, you don't buy your new car or house or television because you are overcome by fear and feel insecure then the economy will collapse. A farmer who suffers from vicissitudes of nature and other frequent human induced calamities, in spite of crushing misfortunes time and again, day after day rises and heads to the fields. With stoic courage, shoulder to the plough, with a song in his heart, he sows his seeds never doubting that the sun will rise the next morning nor doubting the heavens will bring the seasonal rains and plods on buoyantly. If aspirations are extinguished and you do not seed your crops because of impending doom, the economy will go into a tailspin. Pessimism has a snowballing ripple effect inflicting collateral damage.
The above observations are on two basic premises — one, that an imperfect democracy is preferable to efficient autocratic, dictatorial regimes of either the Right or Left. Two, that there exists in such democracies, flawed though they may be, a reasonable framework of economic policies and institutions like an autonomous central bank that regulates the banking industry, fairly mature equity markets with regulatory measures and independent judiciary and free press and so forth. In such democracies, if the economy veers into a downward spiral, the first symptoms of economic distress are fear, anxiety and despair.
Napoleon Bonaparte said, "A leader is a dealer of hope." And today hope has evaporated in the country among large sections of the population. It's replaced by worry and doubt.
And ironically, the current government rode to power on that very element. The government, headed by Narendra Modi, gave hope to people who were sick of rampant corruption, scams and blatant crony capitalism during the UPA-II years. They longed for strong and purposeful leadership and good governance.
In the wake of arrests and prosecution of scores of senior bureaucrats and bankers along with high-profile businessmen following the scams, there set in paralysis in decision making at all levels of the government by the fag end of the UPA rule.
Modi breathed optimism and inspired a nation and rode triumphantly to power on that sentiment. He promised more governance with less government. Development for all.
Sab Ke Saath Sab Ka Vikas. A simple and inspiring vision statement. They went straight to the heart of the people. Not what one expected
It's apparent now that many things have not panned out in consonance with the vision. A great leader must set out a grand vision and that's what Modi did.
But howsoever noble a vision, it will only remain a pipe dream if it cannot be executed in letter and spirit. A vision to be realised has to be accompanied with matching bold administrative reforms across the government and along with measures to strengthen the autonomy of the major institutions both at the Centre and the state.
The government’s close advisers and ministers are stubbornly cautious against sweeping reforms, which were key to realise the vision. These are motherhood statements and may sound cliched but bears repetition because leaders once victorious easily develop an opaque vision.
They are vulnerable to hubris and can easily fall prey to courtiers and sycophants who surround them and screen them from realities and bad tidings. The make believe the slogans, the banners, the hype and lionising and deifying by the media create the aura and the facade is mistaken for 'the real' … until the enemy breaches the palace gates as we see in
Shatrang ke Khiladi by Satyajit Ray.
So what lies ahead? What's one to do when the leader is in real danger of becoming a prisoner of fantasy? First, the leader must shun or distance himself from 'Yes men', the fawning courtiers, be they dead-wood bureaucrats who have become paper tigers stuck in a time warp or half-baked economists who have wormed their way to the inner circle. It is not easy.
Only extraordinary and perceptive leaders can rise to that difficult task of weeding out those who are singing their praise. History is replete with kings and potentates who lost their throne because of this fatal failing.
A leader requires an honest feedback by bringing in the right professionals from eclectic backgrounds. The first step, a condition precedent to solve a problem, is to stop being in denial that a serious crisis exists or is in the making.
There is no need to be hesitant in admitting that mistakes were made. On the contrary, people admire honesty in a leader when he acknowledges that errors crept in and lapses occurred. This will pave the way for swift action. The leader will only rise in people's esteem.
This is not an attempt to prescribe the various specific measures needed to turn around the economy and how to bring back hope and optimism but an endeavour to urge the leadership to have an open mind and listen to respected economists, professionals with track record and encourage dialogue and debate to find the right way forward.
Signs of stress and strain
There are clear signs of distress. Many sectors are in deep crisis. The CBI earned the unsavoury epithet ' Caged Parrot' first under UPA two.
Now similar echoes are being heard about not only the CBI, but also the Election Commission, the RBI and even courts. Eminent bipartisan, apolitical journalists and lawyers whose views are heard with respect, who were fierce in their attacks and who were unsparing critics of UPA-II are now expressing their displeasure and disappointment about the way of Supreme Court functioning and especially on the precedent set by recently retired CJI Ranjan Gogoi.
Lawyer Gautam Bhatia in an article speaks about judicial opacity and lack of transparency and laments the legacy under Gogoi who oversaw the 'drift from a Rights Court to Executive Court ... which speaks the language of the Executive and has become indistinguishable from the Executive" citing various judgements to validate his argument. Even retired justice Madan Lokur has warned in an article that if the new Supreme Court CJI does not restore the credibility and stature of the court, it will be the death knell of the Indian judiciary.
There's policy paralysis once again, the difference from the days of UPA is that this has pervaded the lower ranks of the bureaucracy. Worryingly, there's pervading fear of getting into the crosshairs of the government and its investigative arm.
Foreign investors and Indian industry leaders complain that rules and regulations are not stable and predictable. Foreign MNCs that were attracted by the government’s promise of business friendliness and made a beeline for India are now crying foul.
These are all ominous signs and do not portend well. When there are increasing reports and signs of weak or compromised institutions — free press, judiciary, the central bank, investigating agencies — it will impact the economy adversely and deter foreign direct investment which the government is trying to attract. The government is not realising that its actions on one front are at cross-purposes with its actions on other fronts.
Even if a leader is known for his uprightness and unimpeachable personal integrity in financial matters, he will not be able to solve the complex problems of a vast country of teeming millions, majority of whom are mired in poverty and illiteracy and suffer from hunger and malnutrition, unless he brings about sustained systemic and structural changes to be able to deliver on his promise and vision. That simple truth must become clear to any leader who has visions of ushering in development along with equity to its people.
Ways to solve a problem
'Hubris' can never and has never solved the problems of a country. Many authorities suffer from that dangerous delusion.
It may be pertinent to quote John F Kennedy who, young but perceptive, beset with innumerable problems and perils after he became president of the US, said: "Today every problem has several alternative solutions, and every answer raises several questions.”
I am more than ever convinced of the words once uttered by George Bernard Shaw: “If all economists were laid end to end, they still would not reach a conclusion.”
It is very evident from what Kennedy said and from writings of many other great leaders that even a phalanx of eminent economists may struggle to come up with the right answers let alone an able leader or his coterie of advisers chosen more for loyalty or political reasons.
Being cocksure has dangerous pitfalls. To find the right answers the leader has to surround himself with the right people. With the aid of apolitical professionals and experts and through vigorous analyses and debates, one must evaluate the data and facts available objectively with total unflinching honesty. This will enable timely action for course correction. The great Seneca said: "If one does not know to which port one is sailing, no wind is favourable."
Nobel laureate physicist Richard Feynman, when asked why the greatest of scientists of the world are not able to solve the problems of society, had this to say: "It seems to me that, … we know we don’t have any magic formula for solving social problems, that social problems are very much harder than scientific ones, and that we usually don’t get anywhere when we do think about them."
But science can help in pointing out the way to solve societal problems. Feynman added: " The scientist has a lot of experience with ignorance and doubt and uncertainty, and this experience is of very great importance, I think ... but, in admitting this, we have probably found the open channel.”
This is not a new idea — this is the philosophy that guided the men who made the democracy that we live under. The idea that no one really knew how to run a government led to the idea that we should arrange a system by which new ideas could be developed, tried out, and tossed out if necessary, with more new ideas brought in — a trial-and-error system. This method was a result of the fact that science was already showing itself to be a successful venture at the end of the eighteenth century.
Even then it was clear to socially minded people that the openness of possibilities was an opportunity, and that doubt and discussion were essential to progress into the unknown. If we want to solve a problem that we have never solved before, we must leave the door to the unknown ajar."
Strong modern leaders who are immensely popular and are catapulted to power by the cynical masses who have suffered under earlier regimes, are prone to think that they can transform society by wielding power through coercion and persistent indoctrination of their ideologies and pet theories by taking advantage of modern technology. It is well to remember again what Napolen, in a rare moment of reflection, confided to his generals and aides at the height of his reign: "There are only two forces in the in the world, the sword and the spirit. In the long run the sword will always be conquered by the spirit.”
GR Gopinath is the founder of Air Deccan.