Saturday, October 19, 2013

Indian general elections battle: capitalist BJP vs socialist Congress?

The basic premise of capitalism is 'Invisible Hand': people pursuing their own interest frequently promote the interest of the society more effectually than when they really intend to promote it. Capitalism promotes competition because everybody is working for his/her own good. But the problem with laissez-fare economy(with no government intervention) based on capitalism is that it frequently leads to short term pains. A capitalist will probably not care for the environment,he will think of pains caused by unemployment before shutting down an unprofitable factory and he will not care for alleviation of education levels and poverty because he is there for profit not charity. But in the long term, the same drive for profits will lead to better technologies which are good for environment, more employment opportunities under better working conditions, better education facilities being setup because trained human resources are required for positions requiring skill and knowledge and all these factors will lead to alleviation of poverty.

The problem is nobody knows what short term is. it could be 10 years, 20 years, 30 years or more. If capitalists are given free reign, who cares for the worker who became unemployed because the factory in which he worked became unprofitable? Sure, the closing of factory led to free capital which was invested in say, a technology firm. But the unemployed worker doesn't know what's a computer and since he is uneducated and 50 years old, it's probably not possible for him to "up-skill" in computer technology. By the time capitalism completes a short-term cycle(of 20-30 years) he will probably die of starvation.

And here enters the Government. It "taxes" the capitalists for things that they don't care about such as environment, education, poverty and uses the tax proceeds for the betterment of the section of society "affected" by capitalism; leading to a welfare sate, a balance between capitalism and socialism. India is a welfare sate. As my friend explains in this post, we have had a historical inclination towards socialism(first stage of communism) with much of the economy controlled by and belonging to the state, almost tripped into it under Indira Gandhi but then embraced capitalism under Rajiv Gandhi after events of 1991(still remaining a welfare state).

Interestingly, as a nation, we continue to imagine a black-and-white difference capitalism and welfare. Because BJP continued "capitalisation" of the economy when it was at the center during 1998-2004, it's viewed as pro capitalist. Because Congress ruled the country for most of the time before 1991 and then formed a coalition government with left in 2004 and took other pro-social steps during 2004-2013, it's viewed as pro-socialist. But India cannot afford to be either a capitalist or a socialist nation. We must promote capitalism as well as we can, then tax the capitalists and use the money from taxes for social welfare.

So, India must provide facilitate and support capitalist entrepreneurs and then use the money from taxes to educate, nourish and care for less fortunate citizens trying to make them a part of the capitalist system.  Neglecting either capitalism or welfare would hurt the political party which does that(BJP was overthrown after 2004 and there is huge ant-incumbency sentiment in the country against present Congress government) but the bigger damage is done to the social fabric of the country.
Due to whatever historic policies and situations, there are two Indias: one would be better served by capitalism and the other by socialism. Whichever political party wins the coming general elections, it must balance the needs of two Indias unlike what has happened in the past.