| Not persuasive enough
Mamata Banerjee's tamasha yesterday was a little less ridiculous, at least in personal terms, than the spectacle of two pleasantly spoken and amiable young men and a smart young woman, all three indisputably upper middle class, holding India to ransom in the name of the dictatorship of the proletariat. Dictatorship it certainly looks like, but proletariat Prakash and Brinda Karat and Sitaram Yechury certainly are not. For all their thunder in the columns of People's Democracy about 'the working class and other sections of the working people in their struggle for a better life' they are the Page Three stars of politics who have stolen the tactical thunder of Bengali parlour pinks.
If the Left Front ' 62 communist parliamentarians ' is a phony bogey despite terrorizing the United Progressive Alliance, competition between growth and development is also spurious. There can be no development without growth. And no growth without investment. The most damaging feature of this cynical shadow-boxing is that it exaggerates the importance of the 21st century catchword of privatization. What matters is not who holds the shares but whether management and labour are efficient and operations profitable. Though Singapore Inc is the envy of the developed world, it has long been my contention that there is no such thing as a private sector there.
It would make no real difference to control or performance if 10 per cent of Bharat Heavy Electricals Limited equity were sold. That goes for the other Navaratnas too. But P. Chidambaram explicitly ruled this out last year, declaring that blue chip companies were 'sacrosanct'. It didn't matter what they did 'so long as government is the owner'. Why then the fuss' Only for reasons of politics. Sonia Gandhi's intervention was a reminder of who calls the shots in the UPA.
Government leaders lament their inability to 'move forward in a big way' because there is no consensus on liberalization. If the Left Front does prevent reform, it is a classic case of the tail wagging the dog. But why does the government then not call the bluff' What will the Left Front do if BHEL shares are sold' It can again boycott the coordination committee. It can organize more hartals, conscious that disruptive tactics are subject to the law of diminishing returns. Or, it might take the extreme step of voting against the government. Where would that leave Karat and Co' In the wilderness. Clinging to the UPA's coattails has given them a salience and a voice they would never have had otherwise.
The privatization controversy is a myth that serves both parties. It sustains the UPA posture of being the most reformist government this country has ever had without obliging it to do anything to educate thinking in the Congress ranks. And it enables fashionable fellow travellers ostentatiously to espouse the supposed interests of the 'common man'. The faith is dead even in West Bengal. The state government's good work in rural reform notwithstanding, the Communist Party of India (Marxist) is a local outfit. It survives on the loyalty of innocents who still aspire to the crock of gold at the end of the revolutionary rainbow and, at the other end of the spectrum, on the patronage of businessmen who need government support. Whether or not the party is as rich as Mamata Banerjee says, there is no doubting the link between some Marxist leaders and India's wealthiest tycoons.
The rhetoric of working class struggle helps to retain that leverage, with sophisticated Left Front leaders wielding it more skilfully than any working class activist could. They can also afford the luxury of being more ideological than Buddhadeb Bhattacharjee who is responsible for the wellbeing of West Bengal's 81 million people. But they don't parrot the old Soviet argument that public sector enterprises are instruments of state capitalism to provide raw materials and services to private enterprise. Instead, they have chosen to play to the nationalist gallery.
All this is irrelevant to privatization. As in Malaysia or France, many of our nearly 250 central public sector units are highly profitable. But more than 100 lost an awesome Rs 12,839 crore in 2000-2001, nearly Rs 9,000 crore more than a decade earlier. But, then, the private sector too has more than 100,000 loss-making units. They cannot be closed down because of the Industrial Relations Act.
The contrast between private opulence and public squalor in John Kenneth Galbraith's The Affluent Society is misleading. Public servants can be as plutocratic as private entrepreneurs. The official description of some public sector chiefs as maharajahs took me back to my early reporting in northeast England where coal mining had already been nationalized. The miners saw no difference between the old owners' agents and the new National Coal Board managers. 'They live in the same bluidy houses, drive the same bluidy cars and give us the same bluidy orders!' grumbled a County Durham miner.
Whatever its merits in the West, the political argument against the growth of government can lead to dangerous anarchy in India. Privatization is not the only alternative to the bureaucratic stranglehold that passes for socialism. Nor, as the chaos of British Railways illustrates, is it the unfailing panacea for state bungling. Even if disinvestment were accepted policy, there would be no need to get rid of blue chip companies. But would any investor want to be burdened with crippled enterprises' Would privatization, even if possible, help these undertakings, their workers or the economy' Unless stopped by law, buyers might simply liquidate the physical assets, following the asset-stripping precedent of many Indian businessmen who bought out Calcutta's stately British firms.
India's special conditions call for discernment. The market should be the only determinant in many areas of activity; similarly, the supervision of an honest, benign and firm state is essential in others. Privatization should not be the means of enriching the favoured few, as, one suspects, it often is in India. It can be community empowerment, redivision of resources, relocation of economic functions, reassignment of property rights or reduction of government overload, like baking bread.
Healthy privatization demands an absolutely transparent valuation procedure, sale method and timing. Only rational factors should determine whether an undertaking should be allowed to raise resources for its own use by issuing shares in the primary market or whether the owners ' meaning the government ' should sell shares in the secondary market. It should be known clearly in advance how the disinvestment proceeds would be used. It has been claimed that acceptance of the recommendation of the 1997 Disinvestment Commission would have provided enough funds to create 40 lakh houses, 10 lakh schools and Rs 5,000 crore for voluntary retirement schemes to restructure public sector units before they are sold. As it is, the proceeds helped to reduce the fiscal deficit by a negligible 0.002 per cent.
The rationale of privatization, always and everywhere, is that only owners who have sunk their own money into a venture will nurse it carefully. That is a persuasive argument. Singapore proves, however, that it is not conclusive. Government-linked companies contribute 60 per cent of Singapore's economy according to American sources, though Singaporeans themselves admit to only 13 per cent, for reasons that may not have anything to do with economics. Whatever the share, the success of GLCs demonstrates that private entrepreneurs do not have a monopoly of professional management. Governments can also run businesses, providing ministers and senior bureaucrats do not treat the public sector as their private zamindari and its chief executives like their naibs.
The Karats and Yechury would have deserved respect by demanding sound management instead of obstructing disinvestment on doctrinaire grounds. But, then, the primary blame is the government's for not seizing upon good management as the alternative to privatization.