India and the tragedy of socialism

Today started with complete incredulity at an Owen Jones piece in the Guardian. I’ll admit, that’s quite regular, but this one really took the biscuit.

It wasn’t the way that OJ blithely glided over the 23 to 30 million killed in Mao’s Great Leap Forward policies (a low-end estimate by the way – most believe nearly 45 million died in those four years). But then, what is fifteen million extra dead but mere statistics to communists? The lives lost, the dreams dashed and futures foregone. Communists care not a jot, they’re to be swept under the carpet and minimised, not commemorated or mourned. 

No. What really stunned me was the way he decided to compare the increase in life expectancies of ‘communist China’ with ‘capitalist India’ between the end of the Second World War and 1979 as evidence that communism was being unfairly maligned in the British press. ‘Capitalist India,’ he charged, failed to increase life expectancy. Capitalism killed millions he surmised. 

If this jars, it is because it is meant to. And if it strikes you as complete bunkum, it is because it is. 

That ‘capitalist India’ that Owen Jones speaks of is one of pure fantasy. Owen’s ignorant analysis shows just how little he cares about history and just how little he cares about the impact of the policies that he now actively supports.

Let me spell it out for him: after independence, India was a socialist state. 

Jawaharlal Nehru, first leader of independent India, was an avowed socialist. He made no secret of the fact. 

Nehru acclaimed to the Lahore Congress in December 1929 that he was a ‘a socialist and republican’. In 1927, at the Brussels Congress he was made an honorary president of the openly marxist-leninist League Against Imperialism, and later that year visited Moscow for a four day visit to explore the practical application of socialism and communism. 

He said of his time in among the socialists and communists of Europe that: “My outlook was wider… without social freedom and a socialistic structure of society and the state neither the country nor the individual could develop much.”

His commitment to the creed, over the prosperity of his people, would lead to decades of growth delayed. It would lead to poverty for tens of millions. As Owen Jones says: it has meant death for hundreds of millions of Indians earlier than their counterparts in China.  

Just how socialist was Nehru and the rest of Congress? 

Well, in the 1950s they followed socialist creed and the state seized control of steel, mining, machine tools, water, telecommunications, insurance, and electrical plants, among other industries. The Indian government had seized the commanding heights of the economy.

But they had not finished. The Banks came next. 

In 1950 there were 430 commercial banks in India. In 1955 the Imperial Bank in India was nationalised and renamed the State Bank of India. In 1969 all commercial banks holding over Rs.50 crores (just over £200m in modern money) were nationalised. The 14 largest transferred 70 per cent of deposits into Indira Gandhi’s hands. In 1980 all remaining banks were nationalised. 

As ever the aim was to ensure more people had bank accounts, ‘fairer’ credit access, restriction of monopolies, a reduction in inequality and to ensure lending was prioritised according to political directives. Owen Jones might recognise this and even the terms used to push it internally within Congress. It was called ‘Social Control’ and Prime Minister Desai said it would mean India’s politicians could “regulate our social and economic life so as to attain the optimum growth rate for our economy and to prevent at the same time monopolistic trend, concentration of economic power and misdirection of resources."

The outcome was predictable: thinly spread and poor banking facilities, deposits never properly matching liabilities, efficiencies and profits so low and with huge mandated expenditures which dragged the public banks into deficits. 

And of course, political interference meant a huge spike in non-performing assets. Oddly, when something isn’t commercially viable enough to succeed as a private venture, it’s rarely commercially viable to succeed as a public one. 

Sadly it didn't end with Nehru. Unlike China, which developed a taste for neoliberal policies under Deng Xiaoping in the 1980s, India would reaffirm its commitment to socialism by enshrining it in its constitution in 1976 and pushing ahead with further nationalisations in the 1980s. 


But there was hope for India. In 1991, Congress took the collapsing Soviet Union as the warning sign it was. Communism and Socialism should be abandoned. Capital and coverage ratios were reduced, government intervention in commercial decisions was reduced, branch licensing was abolished, interest rates were to be determined not by politicians but by market forces. 

As privatisation of state owned companies began, and reductions on foreign capital and foreign direct investment took effect, growth took off – reaching 7% a year between 1997 and 2011. 

But India still has controls that are markedly socialist and which hamper development. The World Bank in 2017 ranked India a dismal 130th out of 190 countries by ease of doing business. 

Corruption, cronyism, nepotism, investment and divestment based on patronage and not profit. These are what have kept India down. They are the hallmark of socialist states everywhere that rely on perceptions of fairness and commitment to the cause, rather than the output that is achieved. It is evidenced, as Professor Ramesh Thakur puts is, by the fact that it is “easier for a person of Indian origin to reach high public office in Canada, Ireland, the United Kingdom and the U.S” than in India. If you’re of Indian descent in the UK you are far more likely to succeed in exams, far more likely to go to university, and far more highly paid, than the rest of the population. 

The development of an entrepreneurial Indian state was possible, it didn’t need to be left to those that found new lives in the capitalist countries of the West and capitalist city states of the East. Nehru was half right when he said “without social freedom and a socialistic structure of society and the state neither the country nor the individual could develop much.”

Half right because you need social freedom – that’s the beauty of our liberal democracies and the social revolution we’ve undergone. But you need economic freedom too, not socialist structures and plans. If India wants to develop to its full potential it has to open up to the world, bring down the remaining capital controls and socialist structures. It needs to free its citizens from the dead hand of the state. 

If Owen Jones wants to claim that India’s lack of development was a tragedy, then I’ll welcome him with open arms. It was a tragedy. It was a socialist tragedy.