Great post. I don't see why it would have been naive to think of India pursuing some path other than brainless socialism in the 1960s. As I keep saying, no other civilization *worships* a goddess of wealth. Culturally, in my opinion, it's the most capitalist place on earth (a pundit took a call to negotiate a price on another funeral *while* conducting my mother's funeral, and no one thought it odd--business comes first). To me the real puzzle is why an entire country--historically open to the world and trading with everyone--would adopt idiotic Fabian Socialism and import substitution, seemingly born in the Harrow School in the 1920s.
I think you're half right & half romantic. I would distinguish between a culture of commerce and a culture of capitalism. India has always had great traders — but traders operate within caste-guild structures, community-regulated markets, and have a deep suspicion of concentrated economic power. That's not the same as embracing open markets and creative destruction.
On why Fabian socialism: I don't think it was brainless, even if it turned out to be dead wrong. Nehru's generation lived through two centuries of a demonstration of what unregulated foreign capital does to a colonised economy. The lessons they drew — protect domestic industry, control capital, build self-sufficiency — was incorrect in hindsight, but it wasn't irrational. It was a traumatised response to a real injury.
The deeper puzzle is why India couldn't course-correct faster once the limitations became obvious. Korea and Taiwan could enforce the stick because of state capacity rooted in specific cultural and political conditions. India's messy democracy made both the carrot and the stick harder to deploy with discipline. That's not a failure of culture — it's a different kind of culture producing a different kind of state, with different constraints on what industrial policy can actually do.
Which brings me back to Ashish's conclusion: state capacity is upstream of industrial policy, and culture is upstream of state capacity. I'd add one more layer — history is upstream of culture. India's state capacity constraints aren't a civilisational trait. They're the residue of specific choices made by leaders responding to specific traumas. That's the optimistic reading — what was shaped by history can be reshaped by it. Whether India's current institutional evolution (DPI, GST, UPI) amounts to a slow building of state capacity through the back door is, perhaps, the most interesting open question in Indian development right now.
Thank you, both, for the lovely and thoughtful comments :)
Samir: This line from Buchanan is my explanation for why India couldn't have done the kind of reforms that other countries were able to: "Economics is the study of the whole system of exchange relationships. Politics is the study of the whole system of coercive or potentially coercive relationships." Economic transactions are more than welcome in Indian society, but are subject to certain rules which are political in nature. These could be related to caste, religion, language or other things - but our trading is a function of the hierarchies that we live with (and per Ambedkar's point about relatively higher anonymity afforded in India's cities, we need much more urbanization, and fast).
Indian society is political first, and economic later, and that's one of the reasons why I think we couldn't have had the kind of market reforms that we so desperately needed.
Rajesh: And for the same reason, I fear that our state capacity constraints *are* by now a civilizational trait. State capacity will at best optimize for economic growth but subject to our hierarchical constraints. And that's because India's Hobbesian pact is conditional on our hierarchies being maintained (preferably implicitly, but if push comes to shove, even that can change). Re: DPI, UPI and GST - necessary but not sufficient, I would say. This plumbing is much needed and is very welcome, but much remains to be done.
I like both your comments because there is much truth in them. But overall I remain totally unconvinced. There were plenty of Indian leaders, Lal Bahadur Shastri for example, that would have done very different things. LBS in particular, had he lived, would have likely changed the trajectory of the country. And there were others of his ilk. The "foreign injury" argument doesn't hold for me and neither does trauma. Import substitution and brainless socialism are contrary even to the economic issues you are both describing above. If anything, hierarchy, caste, blah blah are even more inimical to this nonsense. So my point remains!
Fair enough. I'll accept "necessary but not sufficient" — that's more honest than my optimism warranted.
But I'll offer this as a closing thought: a country that has defied Churchill's contempt, Naipaul's despair, and so many others in between has to possess a certain civilisational talent — not for transformation, but for slow-motion muddling. Hirschman (who I'm reading per your suggestion) would recognise this: the hidden hand, where we stumble into solutions only because we underestimated the problems. India doesn't reform, it adjusts. It doesn't leap, it encroaches. The hierarchies are real and binding — but they've also somehow accommodated a Dalit president, a chai-wallah PM, and a payment system that lets a vegetable vendor in Dharavi settle accounts faster than a shopkeeper in Berlin.
Great post. I don't see why it would have been naive to think of India pursuing some path other than brainless socialism in the 1960s. As I keep saying, no other civilization *worships* a goddess of wealth. Culturally, in my opinion, it's the most capitalist place on earth (a pundit took a call to negotiate a price on another funeral *while* conducting my mother's funeral, and no one thought it odd--business comes first). To me the real puzzle is why an entire country--historically open to the world and trading with everyone--would adopt idiotic Fabian Socialism and import substitution, seemingly born in the Harrow School in the 1920s.
I think you're half right & half romantic. I would distinguish between a culture of commerce and a culture of capitalism. India has always had great traders — but traders operate within caste-guild structures, community-regulated markets, and have a deep suspicion of concentrated economic power. That's not the same as embracing open markets and creative destruction.
On why Fabian socialism: I don't think it was brainless, even if it turned out to be dead wrong. Nehru's generation lived through two centuries of a demonstration of what unregulated foreign capital does to a colonised economy. The lessons they drew — protect domestic industry, control capital, build self-sufficiency — was incorrect in hindsight, but it wasn't irrational. It was a traumatised response to a real injury.
The deeper puzzle is why India couldn't course-correct faster once the limitations became obvious. Korea and Taiwan could enforce the stick because of state capacity rooted in specific cultural and political conditions. India's messy democracy made both the carrot and the stick harder to deploy with discipline. That's not a failure of culture — it's a different kind of culture producing a different kind of state, with different constraints on what industrial policy can actually do.
Which brings me back to Ashish's conclusion: state capacity is upstream of industrial policy, and culture is upstream of state capacity. I'd add one more layer — history is upstream of culture. India's state capacity constraints aren't a civilisational trait. They're the residue of specific choices made by leaders responding to specific traumas. That's the optimistic reading — what was shaped by history can be reshaped by it. Whether India's current institutional evolution (DPI, GST, UPI) amounts to a slow building of state capacity through the back door is, perhaps, the most interesting open question in Indian development right now.
Thank you, both, for the lovely and thoughtful comments :)
Samir: This line from Buchanan is my explanation for why India couldn't have done the kind of reforms that other countries were able to: "Economics is the study of the whole system of exchange relationships. Politics is the study of the whole system of coercive or potentially coercive relationships." Economic transactions are more than welcome in Indian society, but are subject to certain rules which are political in nature. These could be related to caste, religion, language or other things - but our trading is a function of the hierarchies that we live with (and per Ambedkar's point about relatively higher anonymity afforded in India's cities, we need much more urbanization, and fast).
Indian society is political first, and economic later, and that's one of the reasons why I think we couldn't have had the kind of market reforms that we so desperately needed.
Rajesh: And for the same reason, I fear that our state capacity constraints *are* by now a civilizational trait. State capacity will at best optimize for economic growth but subject to our hierarchical constraints. And that's because India's Hobbesian pact is conditional on our hierarchies being maintained (preferably implicitly, but if push comes to shove, even that can change). Re: DPI, UPI and GST - necessary but not sufficient, I would say. This plumbing is much needed and is very welcome, but much remains to be done.
I like both your comments because there is much truth in them. But overall I remain totally unconvinced. There were plenty of Indian leaders, Lal Bahadur Shastri for example, that would have done very different things. LBS in particular, had he lived, would have likely changed the trajectory of the country. And there were others of his ilk. The "foreign injury" argument doesn't hold for me and neither does trauma. Import substitution and brainless socialism are contrary even to the economic issues you are both describing above. If anything, hierarchy, caste, blah blah are even more inimical to this nonsense. So my point remains!
Fair enough. I'll accept "necessary but not sufficient" — that's more honest than my optimism warranted.
But I'll offer this as a closing thought: a country that has defied Churchill's contempt, Naipaul's despair, and so many others in between has to possess a certain civilisational talent — not for transformation, but for slow-motion muddling. Hirschman (who I'm reading per your suggestion) would recognise this: the hidden hand, where we stumble into solutions only because we underestimated the problems. India doesn't reform, it adjusts. It doesn't leap, it encroaches. The hierarchies are real and binding — but they've also somehow accommodated a Dalit president, a chai-wallah PM, and a payment system that lets a vegetable vendor in Dharavi settle accounts faster than a shopkeeper in Berlin.
We're like this only. The last word is yours.