Crony Capitalism - Indian style

The Wikipedia defines crony capitalism as “Crony capitalism is a term describing an economy in which success in business depends on close relationships between business people and government officials. It may be exhibited by favoritism in the distribution of legal permits, government grants, special tax breaks, or other forms of state interventionism.[1][2] Crony capitalism is believed to arise when business cronyism and related self-serving behavior by businesses or businesspeople spills over into politics and government,[3] or when self-serving friendships and family ties between businessmen and the government influence the economy and society to the extent that it corrupts public-serving economic and political ideals.”

With the pages in my passport having been exhausted and with still 6 years of validity left I had to obtain a new passport. It is still considered a new passport (fine), I still had to submit an application like a new passport with all details (OK it is online) BUT I still have to get a police verification done albeit post issuance of passport. Pray what is the logic????

With experience if one wishes to start a small proprietary concern like a consultant, trader etc the individual has to make a number of applications, get approvals and a government official will visit your place of business with a GPS enabled device to confirm your existence and location and interrogate you on your business plans and you have to submit all sorts of returns every month.

It is rightly said that death and taxes are the only constants and to my mind if the government is getting its taxes it has no business to create employment for thousands whose job is to monitor my every action. To me the government must be like the weather – it can be sunny, rainy, snowing and I will equip myself appropriately and go about doing my work. It cannot become like they, the government decides whether the next day will be sunny, rainy or foggy and my work depends upon their announcement. In such a situation I will naturally try to get advance information on what the pronouncement is likely to be so I have a head start over others.

So in short the point here is that in India, our lives are closely intertwined with the government for our day to day living. Nowhere in the developed world will you see the captains of business, petty traders, housewives and even daily labourers watching TV to hear what the finance minister is going to say on 28 Feb every year. HE decides how our life will be in the coming year – akin to what I mentioned above on the weather analogy.

So when people cry hoarse about crony capitalism in India including stalwarts from the communist party who’s ideology itself is 100% government control I find it irritating and rather immature. Given the overarching control of the government in every citizen’s daily life (it has reduced in some ways, increased in some ways) crony capitalism India must be redefined as follows.

“Crony capitalism as described in Indian society, that, existence, activities, progress & success of citizens in day to day life depends on close relationships with government in various forms. It may be exhibited by favoritism in the distribution of legal permits, government grants, special tax breaks, access to healthcare, police protection/action, conducting community functions, access to water, electricity including repairs when needed and other forms of state interventionism. Self-serving friendships and family ties between people and the government influence our day to day lives, the economy and society in general in an all pervasive manner to the extent that it corrupts citizens, public-serving officials and politicians.”

If each of us look deep into our own lives on a day to day basis we will see this as an inevitable part of Indian life and no amount of angst or protest will make it go away unless our life becomes so free that we rarely remember or care who the local Corporator, MLA & MP or Collector, Constable & Inspector are and who influence our living.

Yet the media, politicians and the aam aadmi has been waxing eloquent about this issue in India in a limited manner, from a business standpoint. To me they miss the real point and I say this from experience.

Whether you are a businessman, an intelligent entrepreneur or just a smart wheeler dealer agent it is INFORMATION that is the most powerful tool for success. If in the course of our life we are privy to information that others don’t have, we can leverage it and use it to achieve success/money. While some instances are considered corrupt others are considered as entrepreneurial genius. Let us say that I know about company X investing in a location. If I buy land at dirt cheap prices and then sell it once company X invests, it is considered corruption. If knowing that company X needs a large transportation logistic support, I buy vehicles and have a solution ready, I am considered entrepreneurial. But both were due to my having insider information. In the latter case my competitor will have to be a follower and the challenges he will have are far more since I set the benchmarks.

In India however the real problem lies not in a person taking a leap of faith leveraging the insider information and thus creating assets, wealth, overall development and success. It is in that many of the bizmen spend time, effort and money in devising strategies as to how they can derail their competitors, make them fail, stop them, if possible delay them and so on instead of focusing on their own success and growth.

Attending a meeting I heard the CEO of a large global MNC say that the Chairman of his competitor Indian company had leveraged his standing in the country to be on a high level body that decided policy and created policies that were designed to delay, derail & divert the resources of his competitor. I know of cases where committees set up to decide what technology and standards India needs are influenced by the limitations of the powerful local bizman and not by what the country needs. Each of these form cozy clubs and together spend more time plotting against a so called common “enemy” than on their own success. The famous Lutyens club as it is called cuts across parties, ideologies to come together to make a perfect crony club. The Indian frog story is not apocryphal at least in Indian business life. Companies big or small indulge in it.

While corruption is a common factor in most cases there are many cases where the powers that be are not corrupt, but in their effort to take the moral high ground they don’t take a stand on issues or demand what is justifiable. They are afraid of being tarnished in some way and turn a blind eye by refusing to oppose decisions with a “why should I get involved?”. In either case the result is the same – the system colludes against somebody and not for the nation. The negativity is overbearing. You find yourself constantly playing “Spy v/s Spy” kind of games which only expends energy. I keep saying that the effort to reward ratio in India is one of the worst globally.

The consequence of this is that in tender driven purchases like say in defense industry, the whole system is invariably rigged whether for ensuring your favorite gets the business or to ensure that the best solution gets the business. In either case the system is being compromised and from there it’s always a downhill ride.

A lot of this is also due to our attitude of “guilty until proven innocent” and a TRP driven media who’s interest to know and speak the truth is not very strong. A lie gets an 8 column headline, TRPs and trends on social media and the truth when known later gets a 2 line bye-line in a corner “Error is regretted-Ed” which nobody notices anyway. The lie remains in public memory.

When you read the book “Accidental PM” by Mr. Sanjaya Baru you will see how even the government led by a PM with unimpeachable integrity also used the media and friends to manipulate decisions. As I said above honest or corrupt, BOTH play the same games of “adjusting the system” to do their bidding. In my book BOTH are equally wrong since in the latter case those who helped you adjust will leverage their insider information to “blackmail” the system for favours. It’s a never ending vicious circle.

A part of the problem stems from our price fixation that lowest is cheapest and best and ensures honesty. It doesn’t. It only encourages dishonesty to make your pre-determined decision the cheapest.

Lastly unlike when I compare anecdotes I heard from my father, uncles or even in media the honest folk’s today lack courage of conviction and they hope their silence will keep them safe and protected. If they speak up, stand up to be counted, this country can go places. For them to make a difference they need to be not just outspoken but also a bit “arrogant”. Only then can we see the change we want in India. Till then we are doomed to stay in a crony capitalism, crony socialism, crony secularism society and we will continue to vent our impotent anger in social media – I just did.