TAKING STOCK: Socialism’s failure Nehru, India’s first prime minister, once said, “Of course, we want to socialize. But we are not opposed to private enterprise. We want to encourage in every way private enterprise. We want to promise the entrepreneurs, who invest in our country, that we will not expropriate them nor socialize them for ten years, perhaps even for a longer time.” Wow! What a great assurance from a PM – we will not steal what is yours for ten years! This was Nehru’s way to encourage foreign and domestic companies to invest in India. He could not have been more wrong. How could India attract foreign and domestic investment under such a scenario? The private sector was blamed for not investing in long gestation infrastructure projects; this when Nehru, and, later Indira Gandhi held the sword of damocles — nationalisation — over the heads of businessmen. As if this was not enough socialist India shackled every private company with laws, rules, licensing requirements, regulation, controls. An army of corrupt inspectors, officials, bureaucrats, and ministers harassed businessmen and looted the public at every turn. In socialist India, you were penalised for producing more than your licensed capacity. If you were allowed to produce 20,000 cars you dare not manufacture 20,001. In this capital starved country you were severely punished for higher efficiency in your factory, if it resulted in greater than your sanctioned production. While the nation suffered a severe cement shortage — black markets were a norm — government would not allow cement to be manufactured without an entrepreneur going through a stringent regulatory process. Oftentimes more effort was spent on pleasing politicians and bureaucrats than on setting up a plant. As you would expect, corruption became endemic. Foreign exchange was impossible to obtain legitimately, and taxation under Indira Gandhi reached absurd levels of — in certain cases — over 100 per cent of your income. In such an environment, it was a wonder that the private sector still functioned. How can one blame private companies for not investing, when, in most instances, they faced outright prohibitions. To say that the government had resources while private investors did not, is ridiculous. Where did the government get its resources from? From you and me. The same resources could easily have been channeled through the stock exchanges into productive factories and businesses. What was the result of India’s socialism? It failed. India’s share of world trade under the, much maligned and socialist, British was a mere 2.5 per cent. Under Nehru and Indira Gandhi — both pursued even more socialistic policies — India share kept declining and went below 0.5 per cent. India with a sixth of the world’s population contributed less than 1/200th to the world’s trade. The world ignored India — it was just another poor starving third world country. Nepal should have done the same — ignored India. Unfortunately it too embarked on a socialist course with equally disastrous results. India and Nepal were not the only countries, which became socialist. Many countries followed the example of Nehru: Argentina and Peru in Latin America, Hungary and Poland in Eastern Europe, Cambodia and Vietnam in Asia, and most nations of Africa. The results were identical. The higher the degree of government intervention in economy and business, the more was the degree of underdevelopment. Relatively free countries — the US, Japan, Taiwan, West Germany — forged ahead. Some of my friends misunderstand me and say that I am against government and want a government free world. Not so. Without a government there would be anarchy. If I say you must not drink kerosene, does that mean I am against kerosene? I merely mean that the kerosene must be used only for what it is meant — as a fuel for our cooking. Similarly not wanting the government to run airports, airlines, post offices, banks, insurance companies, condom factories does not mean I am against governments. No. It only means that I want government to do its job, which is to give a legal system, provide us with secure property rights and protect us from criminals and terrorists. Not much else. (The writer can be contacted at: everest@mos.com.np)