Democracy Lab

Why India Is Overdue for Economic Reform

If Narendra Modi wins, India's leftists will have no one to blame but themselves.

From April 7 to May 12, India will conduct the most critical election in the 67 years since it gained independence from Britain. It is, in essence, a referendum on the development paradigm set by India's first prime minister, Jawaharlal Nehru, which offered India democratic political rights -- while sharply curtailing its economic freedoms.

Hindu nationalist Narendra Modi has taken a hefty lead in the polls by effectively reversing this formula and vowing not to let India's messy democracy stand in the way of a business- and infrastructure-focused economic liberalization. Modi is an authoritarian figure with no clear plan to back his pledges beyond his personal charisma. Should he win, India's leftist intellectuals, who've only offered failed socialist solutions to address the soaring economic aspiration of Indians, will bear much of the blame. (In the photo above, a supporter wears a Modi mask while handing out campaign fliers outside his apartment buliding.)

Nehru turned to Fabian socialism, which relies on central planning rather than the spontaneous activity of individual entrepreneurs, to achieve his development goals. This backfired. As economist Arvind Virmani notes, when India achieved independence in 1947, the real income of the average Indian was 25 percent that of the average inhabitant of the world. Three decades later, it had dropped to 14.5 percent. This gap only began to close around the 1990s when, confronted with a humiliating debt crisis, India jettisoned the more irrational aspects of Nehruvian socialism, especially its ridiculous "License Raj," which required businesses to obtain government permission before moving equipment within their own factories, changing their product mix, or even traveling abroad for a conference.

These reforms produced a decade of explosive growth, lifting 300 million from poverty. It also made India the IT hub of the world leading to heady talk about "Brand India," the notion that just as India had come to define the global standard in quality programming, so it would in other aspects of its culture.

Given such spectacular results, the next round of liberalization should haven been a no-brainer when India's economy took a nosedive about five years ago. In the West, there is a great deal of disagreement among technocrats about how best to jumpstart growth -- whether to use stimulus spending or resort to austerity measures. In India, however, there is near unanimous agreement because there are so many low-hanging policy reforms still to be plucked. One core reform would be eliminating India's rigid labor laws that forbid money-losing factories with more than 100 workers to shut down. This has asphyxiated India's manufacturing sector, forcing many of the 15 million Indians who enter the workforce every year into low-wage agricultural or menial jobs.

Instead, the ruling Congress Party, which has been controlled by the Nehru dynasty since its inception, has ignored the technocratic consensus for further reform. It has taken inspiration from the National Advisory Council that Sonia Gandhi, the Congress Party head and the Italian widow of former Prime Minister Rajiv Gandhi, has stacked with like-minded NGO activists (essentially community organizers) and leftist intellectuals. Most of them oppose India's turn to "neoliberalism" and privatization and believe that the old recipe of "social spending" and industry mandates is the answer to poverty. Congress has followed this advice with a vengeance for the last 10 years, granting massive new entitlements for subsidized grains in the name of "food security" to 67 percent of the population, and guaranteeing a minimum income to all rural families. It also implemented the Right to Education Act that requires private schools to set aside 25 percent of their seats for the poor and lower castes.

Rahul Gandhi, Sonia's blunderbuss son who is Congress's undeclared candidate for prime minister, has made such "rights," rather than reform, the cornerstone of his campaign. In the past, this would have generated a voting bonanza. Not this time. A recent Pew Research poll found that 70 percent Indians are dissatisfied with the direction of the country. And with good reason. Such schemes won't even offset the double-digit inflation that has been playing havoc with household budgets. More importantly, they betray a complete tin ear, offering a mere subsistence existence when, thanks to the brief experience of real growth, people want something approaching dignified living.

Narendra Modi, the chief minister of Gujarat who represents the opposition Bharatiya Janata Party, has achieved cult status by forging a rhetoric that shrewdly gives voice to such aspirations. His stump speeches promise growth or development and jobs, especially for young people. In every other way, he is a highly flawed candidate -- and not only because he is a megalomaniac who holds multiple, simultaneous rallies across the state, "attending" each one using 3-D holographic technology, as if to suggest his omnipotence.

For starters, there is the infamous 2002 pogrom in Gujarat that prompted the United States to blacklist him for a visa. For several days, his party goons roamed the streets freely, rampaging and killing close to 2,000 Muslims. Although the Supreme Court "exonerated" Modi, India's Human Rights commission characterized the response to the bloodletting as a "comprehensive failure" -- a damning charge for a man who is parading his bona fides as a "great administrator" who will improve law and order and root out corruption in India. What's more, far from apologizing and assuring Muslims that their right to practice their faith will be safe under him, when recently asked if he feels regret over the massacre, he said he did, just like he would if his driver ran over a puppy. Meanwhile, he repeatedly derides the constitution for its special accommodations for the religious minorities that some of the ardent Hindus in his base despise.

Equally troubling, his tenure as chief minister has been marred with extra-judicial killings in staged encounters with alleged Muslim terrorists. His administration has also been trying to fend off "Stalk-Gate"-- a scandal involving the use of the state police to stalk a young woman. Also troubling for civil libertarians, he shows little compunction about banning books that irritate Hindus or harassing independent-minded writers. All of this has prompted India's pre-eminent historian, Ramachandra Guha, no hyperventilating left-winger, to condemn Modi's incipient "fascism."

But such accusations simply roll off the backs of fed up Indians who see Modi as a tough, smart, and incorruptible administrator with a track record of success in turning a resource-poor state like Gujarat into an economic powerhouse. Gujarat's record is, indeed, impressive. It contains only 5 percent of India's population but accounts for 25 percent of its exports. But there are arguably other states -- Harayana, Mahrastra, Andhra Pradesh -- with better growth records, suggesting that Modi's real gift is political marketing.

Such marketing can win elections. But transforming the national economy is another matter given the yawning gap between Modi's lofty rhetoric and his actual policy proposals. He pledges to make India an Asian Tiger like Hong Kong with a "minimal government but maximal governance" approach -- a revolutionary formulation in India. But Modi "strongly opposed" Congress's attempt to open India's primitive retail sector to big-box stores like Walmart. Why? Because mom-and-pop businesses, his core base, didn't want the competition. More remarkably, he supported Congress's entitlement schemes, even criticizing the Food Security Act for not offering large enough subsidies.

Most disappointing, however, is his economic plan, which, as an Economic Times writer declared, has "no new ideas." It included vague promises to slash or scrap income, sales, and excise taxes, although his party has since backtracked, and says nothing about reforming India's labor or other sectors. Instead, it is heavy on Big Government infrastructure projects. Some are sorely needed, but many -- such as building "smart cities" and "bullet trains going in four directions" -- are patently absurd and calculated mainly to appeal to India's chauvinistic desire to keep up with China. "The only thing one can say for certain about Modi is that he won't harass businesses as much as other contenders," says First Post's Dhiraj Nayyar, one of India's smartest young commentators.

That Indians seem ready to risk political repression for vague promises of an economic transformation shows just how desperate they are to improve their living standards. This suggests that Nobel laureate Milton Friedman was right that political freedom requires a foundation of wealth that only economic freedom can generate. (The Heritage Foundation ranks India 120th among 165 countries in its economic freedom index, putting it in the group of "mostly unfree" countries.) Political liberties are a luxury that people care about more when they have fuller bellies. Richer people have more means of resistance and become costlier to oppress.

Nehru's intellectual heirs have failed to comprehend this, and ultimately, this has paved the way for a demagogue like Modi. Amartaya Sen, the Nobel Prize winning economist and the darling of India's intellectual left, belatedly admitted as much, noting recently that India badly needs a "clear-headed, pro-market, pro-business party that does not depend on religious politics."

The challenge for India's leftist establishment will be to turn the Modi administration into such an entity should he be elected. This will mean allowing the technocratic consensus for reform to proceed unmolested. The left needs to do some soul searching and recognize that its remedies simply can't fulfill the economic aspirations of Indians. Modi is far less likely to act on his anti-pluralistic, socially regressive tendencies if he can actually deliver the growth he's been promising. Otherwise, he'll be tempted to play his Hindu nationalist card. Should that happen, India might end up with the worst of both worlds -- poverty and repression -- and Modi won't be the only one to blame.


Democracy Lab

Fighting for the Public Square

Countries around the world, both democratic and authoritarian, are cracking down on freedom of assembly. It's time to push back.

As citizens gather in city squares from Caracas to Kiev to Cairo, governments are showing symptoms of agoraphobia, which literally means fear of an agora or "place of assembly." In Swedish, this anxiety disorder is called torgskräck, or "fear of the square."

In cases of authoritarian agoraphobia, governments have simply destroyed public squares. For example, in Bahrain, the government bulldozed Pearl Square to stymie the country's 2011 reformist movement and prevent citizens from assembling there. In other countries, governments have erected physical barriers to restrict access to civic space. In Egypt, the military recently erected ten-foot iron gates to control access to Tahrir Square, which has become famous in recent years as a hub of protest activity. (In the photo above, an anti-Mubarak protester attaches an Egyptian flag to the barbed wire surrounding Tahrir Square in 2011.) Similarly, in Uganda, the police installed barbed wire to keep citizens out of Constitution Square, the only public square in Kampala. On March 20, 2014, the Turkish government blocked Twitter, restricting access to the digital agora.

Supplementing physical and electronic barriers, many governments are erecting legal barriers to civic space. In January 2014, Cambodia issued a blanket ban on all public gatherings. Days later, Viktor Yanukovych's Ukraine enacted legislation imposing five year prison sentences on protestors if they blocked government buildings, and allowing the authorities to seize the cars of people participating in "Automaidan" protests. Shortly after, the Venezuelan government brought criminal charges, including arson and conspiracy charges to imprison citizens engaged in peaceful assemblies. These are but a few recent examples of the global agoraphobia pandemic.

To a certain extent, this is nothing new. In Ancient Greece, Socrates was tried, convicted, and sentenced to death for his provocative discussions in the Athenian agora. But in the wake of the "Color Revolutions" in the former Soviet Union, the Arab Awakening, and the current wave of protests sweeping the world, an increasing number of governments are using the law to restrict peaceful assemblies. According to the International Center for Not-for-Profit Law, more than twenty countries have recently considered or enacted legal restrictions on the freedom of peaceful assembly.

This phenomenon is occurring in countries across the political spectrum. In 2012, autocratic Azerbaijan was criticized for adopting a law that imposes $10,000 fines on participants in unauthorized assemblies. In 2013, the democratic Spanish government proposed a bill that included fines up to $830,000 on participants of unauthorized protests near parliament. Yielding to popular pressure, the government backtracked slightly, lowering the proposed maximum fine to approximately $41,000. The imposition of fines on unauthorized protesters contradicts international best practices, whether or not the country is a long-standing democracy.

On the Capitol grounds in Washington, D.C., assemblies that exceed 24 consecutive hours or seven consecutive days are considered illegal. It is also unlawful to sleep or lie down between sunset and sunrise, or to set up or store sleeping bags, tents, or shelter of any kind. In 2011, a congressional committee launched an investigation of the National Park Service, claiming that it ignored federal law by allowing Occupy protestors to camp and kill "newly planted grass."

Autocratic governments are not the only ones use these precedents to avoid addressing constraints on civil society. In March 2014, Clare Short, a former U.K. cabinet official who chairs the Extractive Industries Transparency Initiative, dismissed concerns about legislation with devastating impact on the human rights community in Ethiopia. According to the Rt. Hon. Short, there is "a serious problem of double standards," noting that "removing the Occupy protesters from outside St Paul's Cathedral by force in my own country hardly raised a murmur." Ms. Short's response drew significant criticism, but it illustrates how restrictive practices by democratic nations reverberate internationally.

Agoraphobia is a global contagion, and no country is immune. To address this pandemic, international institutions, governments, and civil society must embrace a holistic treatment plan.

First, global and regional institutions must enhance norms protecting peaceful assembly. International norms on the freedom of assembly are just beginning to take shape. The U.N. Human Rights Council (UNHRC) recently established a U.N. special rapporteur on the freedom of assembly. He has written three pioneering thematic reports, but his reports are not binding international law.

To bolster international norms, the UNHRC has adopted several resolutions on peaceful assembly. These resolutions, however, are increasingly contested and limited in scope. Accordingly, the special rapporteur, the UNHRC, and other global bodies must continue to develop international norms governing freedom of assembly. But norm development cannot stop there. Regional bodies, such as the Organization for Security and Cooperation in Europe (OSCE) and the African Commission on Human and Peoples' Rights, must develop norms at the regional level. In addition, civil society in the Global South must press their governments to support civic space and civil society, noting that India and South Africa recently aligned themselves with countries including Cuba, Saudi Arabia, and Belarus on civil society issues.

Second, governments must reform their national laws and practices. International norms have little impact if they are not enshrined at the national level. Democratic nations must lead by example, revising their laws and practices to safeguard civic space and to avoid charges of hypocrisy. In addition, countries such as Ukraine have expressed interest in conforming their legislation to international standards. Donor and experts with comparative expertise must be prepared to respond to appeals from countries requesting assistance. In addition, like-minded governments must increase their political support for multilateral initiatives, such as the Community of Democracies Working Group, which plays a critical role in mobilizing diplomatic engagement when restrictive laws are proposed.

Third, the international community must focus on frontlines. In many countries, security personnel receive limited or no training on how to manage protests in a peaceful, democratic manner. Under the auspices of the special rapporteur or another international body, an initiative should be launched to compile and share good practices, complemented by in-person training programs.

The international community should also support the creation of a global network of independent, professionally trained protest monitors -- similar to the election monitors that already operate around the world. In addition, civil society should develop a toolkit on how the international community can help people on the frontlines when violations occur. Options could include "communications" by U.N. special rapporteurs, emergency support through the multilateral Lifeline initiative, diplomacy, and trial monitoring, while recognizing that the international community must follow the lead of in-country colleagues to determine what would be helpful in a particular context.

The teenage years of the 21st century have become an era of protest. Cornerstone concepts of civic space are being debated, developed, and, at times, violently contested. Citizens are demanding democracy, dignity, and development. In response, governments have come down with severe cases of agoraphobia. Through a holistic response encompassing international, national, and frontline actions, it is possible to contain this global pandemic.