Economic goals cannot disavow Constitutional vision: Anand Teltumbde writes from prison

Security personnel stand guard at the International Airport in Calcutta, in February 2006, amid a nationwide strike by airport employees against the privatisation of the Delhi and Mumbai airports. Bikas Das/AP Photo
10 March, 2021

Anand Teltumbde, a professor and writer, is currently incarcerated in the Taloja prison in Maharashtra, under the Unlawful Activities (Prevention) Act. He is awaiting trial in what is broadly termed the Bhima Koregaon case. 

The ongoing debate on the Narendra Modi government’s programme to privatise public sector enterprises, or PSEs, has a certain ring of déjà vu. The proponents of privatisation argue, in support of the government, that private sector has always been more efficient than the public sector. Unbeknownst to them, this argument in its logical extension might lead to a preposterous but valid question: Why not privatise the government itself?

Exemplifying their point, they often say that the United States, which strongly favoured the private sector, grew into a global economic power, whereas the United Kingdom, which favoured the public sector, was driven to bankruptcy by the late 1980s. They conveniently forget that capitalism (read: private capitalism), pushed to its death bed by the great depression of 1929, was rescued by the Keynesian prescription of public investment. This prescription has been largely instrumental for the genesis and spread of public sector across the world. This was brought into disrepute by neoliberal economists only beginning in the 1980s.

Likewise, it is a fact India’s Nehruvian tryst with socialism emphasised the commanding role of the public sector in the mixed economy and the licence raj that thrived in its wake. And so, when India began to liberalise in 1980s, the private sector simply zoomed and overtook the public sector in performance. But even in this bland reading of history, one needs to remember that it was not as much Nehru, as it was the Bombay Plan of 1944, prepared by the eight leading capitalists of the country at the time, which proposed huge public investment in basic industries. Politically, the workings of this plan served as a socialist rhetoric for the then government. When one reads about economies of Russia and China “taking off” after they privatised their PSEs, one should remember that their privatisation success was also due to the infrastructure created by their PSEs. Therefore, such superficial presentation of historical data sans analysis may win the argument but would not help us grasp its true import.

It may be said as an axiom, that an enterprise, if left unencumbered from every regulation and control, will surely be more efficient than the one shackled by them. This would explain the seemingly higher efficiency of the private sector than that of the public sector. But when one reels off selective data on performance to show the purported superiority of the private sector, then one must also account for various tax and non-tax exemptions routinely granted to it, not to mention the huge Non-Performing Assets of the PSU banks, created in large part by private debtors.

In 1995, as a member of the study group for deregulation of India’s Oil Industry, I studied the long-term comparative performance of Oil and Natural Gas Corporation, a quintessential PSE, vis-à-vis global oil majors. To the discomfort of the government, our team did not find any significant difference. Again, in the post-liberalisation euphoria, when the government gave more power to the boards of the cash-rich PSEs, the oil companies rushed to form dozens of joint ventures with private partners in the private sector (the PSE equity was restricted to 50 percent). Within a few years, all of these ventures, barring a few, ended up needing huge write-offs. Therefore, there is no conclusive evidence that the private enterprise is intrinsically more efficient than the PSE.

The most important factor, however, is not efficiency but effectiveness—a term conspicuous by its absence in this debate. Even in conventional business management, efficiency is not singularly valorised, without its conjoint parameter effectiveness, which is a measure of fulfilment of the enterprise’s goal. The enterprise that makes money in short term but falters on its strategic directions is no good. Likewise, the economy that makes huge leaps in its GDP, may not be good if it fails to provide basic liberties and amenities—health, education and livelihood securities—to its citizens.

Hypothetically, if we hand over the economy to a corporate entity of some repute, to maximise GDP, it would likely take it to unimagined levels. But would this serve our purpose as a nation?

The goal of the economy cannot be divorced from the Constitutional vision as spelt out in its preamble and articles, and most importantly, in the directive principles of state policy. These command the state to “strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political, shall inform all the institutions of the national life.” This social order is based on liberty, equality and fraternity and justice, as Babasaheb BR Ambedkar explicated in the Preamble.

While there is no conclusive proof that private sector is more efficient than the public sector, there is no doubt that it can never meet the effectiveness criterion of the economic development of India.