[OPE-L:7253] The Indian business elite and the illogic of collective silence

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Fri May 24 2002 - 12:52:35 EDT

A friend of mine--no Marxist he--attempts to rally the Indian 
business community at home and abroad. So this is part of the thread 
on the Gujarat. rb

The Economic Times
The Indian business elite and the illogic of collective silence

  [ TUESDAY, MAY 07, 2002  12:17:02 AM ]

THE communal carnage in Gujarat has been met with a deafening silence on
the part of the business leaders of the state. Notable exceptions apart,
the Indian business elite at large has also chosen to keep mum.
While the lack of an enlightened self-interest, national vision and social
responsibility have long been the hallmarks of our business class, the
present situation has thrown into stark relief the long term costs of this
The combustible combination of religion and real estate surrounding the
Mandir-Masjid dispute has now set into motion a veritable chain of events
that threaten to knock India off its long-term growth path.
Both external as well as internal sources of future growth are bound to be
negatively affected.
The state’s abdication of its mandate to ensure and maintain law and order
can only be seen by foreign investors as a major stumbling block for
further foreign investments.
Although votaries of free markets, let there be no doubt, foreign
investors look for effective governments and functional states.
The notion that there is more to an economy than economics alone is well
understood in international financial circles.
With the trinity of liberalisation, privatisation and globalisation having
become the discourse of our times, country-level differences are more
pronounced at the political and social levels, rather than in the
heterogeneity of economic ideologies.
International investors and country risk analysts appreciate this emerging
dynamic, and it is increasingly reflected in their analysis of investment
and business climate in countries around the world.
Although a vast range of economic and financial variables go into the
making of country risk assessment indicators, increasing weight is now
given to critical socio-political factors such as ethnic tensions and
social fragmentation in the country in question, the extent of organised
religion in politics, bureaucratic effectiveness and the state’s ability
to enforce laws.
A proper appreciation of these issues will demystify the seemingly
inexorable avalanche of investments that pour into Mainland China.
Perhaps, more critically for our present purposes, it should also be
understood that regions and provinces within countries that successfully
attract foreign investments tend to compete with each other on the basis
of sound and effective governance and not financial incentives alone.
It might be argued by some that foreign investment is not critical to
India’s economic growth. The real engine of growth will supposedly be
chugging away at home on domestic fuel.
On what rails, may one ask? Instead of a physical infrastructure and a
supportive institutional framework, there is a growing infrastructure of
intolerance and burgeoning institutions of bigotry; instead of the
mobility of capital and labour we have mobility of murder and mayhem, and
instead of a stable contracting environment we have a stable communal
There seems to a lot of wishful thinking to the effect that once the
disturbances die out it will be back to business as usual; that the damage
wrought is but short-term.
However, the nature, duration and intensity of present events, the actors
involved and the role of the governments, both at central and state
levels, ensure that this will turn out to be a watershed development in
the history of the country.
The business community can turn a blind eye to its larger role in society
only at its own peril.
At the level of a rational, individual businessman it is no doubt clearly
understood that in addition to purely economic reforms and measures, there
are a host of political and social prerequisites necessary for economic
The inability to translate this knowledge into a cohesive, well-formulated
strategy reflecting the collective aspirations of the business classes for
development and nation-building that also takes into account the
well-being of other forces in the country has resulted in chronic myopia.
Just like the price of liberty, the price of liberalisation too is eternal
vigilance. Business circles need to take a firm and proactive stance in
support of secularism, for it is critical to holding the country and the
markets together.
Since individual businessmen might find it risky under the present
circumstances to stick their necks out, apex industry organisations and
trade groupings can surmount this co-ordination problem.
Ultimately, business must use its clout to restore and maintain communal
harmony in the country for the sake of its own survival and growth.
One of the lessons of the history of the developed industrialised world
has been the strength and viability, not only of its market institutions,
but more so of its non-market institutions, in the development of which
the business community has played a vital role.
On the other hand, we also have before us the recent disastrous experience
of the few other countries with diverse populations where the authorities
and the people could not manage and contain ethnic conflict. There is a
clear choice to be made.
(The author is with Haas School of Business, University of California,

This archive was generated by hypermail 2b30 : Sun Jun 02 2002 - 00:00:07 EDT