Soft State


India’s falling stock markets, rupee valuations and rising inflation are now spreading to South East Asia also. The Indian Stock Market is swooning and the rupee is in a free-fall; as global investors pull out cash, to invest in more developed economies; fearing the withdrawal of the U S stimulus policies. Indonesia’s market is the worst performer among the global indexes; as it has lost 8% in the last two days, and 10% since the start of July. Thailand once considered an Asian tiger is now officially in recession; with two quarters of declining GDP, as it is affected by China’s slowdown.
As a young MBA student in the US I had found little research on the Indian economy; and was delighted to find Gunnar Myrdal’s study as he had in 1974, received the Nobel Memorial Prize in Economic Sciences with Friedrich Hayek for “their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena.” After reading his work on India I came away puzzled by his description that because India is a “Soft State,” development had languished and would continue to languish, for the foreseeable future. I never really understood what it meant at that time; as I had not experienced the checks and balances and disciplined systems, developed in the western economies. All I knew was that things just worked when you switched on the light, turned on the tap, caught a plane, train or bus as they were on time; as opposed to what I had experienced back at home. Having spent countless hours in foul smelling train stations where people heaped their whole house hold into the compartments that were stuffy beyond measure in sweltering heat; the air conditioned\heated splendor of comfortable travel was pleasant, and readily accepted as the new normal.
It was not till many decades later during the current reign of Sonia’s congress and Dr. Manmohan Singh’s second term that the meaning of the soft state has become stark and clear. It is a state that cannot take decisions and act to protect its own institutions. Truth needs to be armed and given the weapons to defend itself. It should not be a timid whisper spoken apologetically from the ramparts of the red fort; but thundered and enforced by the legislative and judicial bodies. The third rail of the administration its IAS and PCS cadre; should be held to higher standards, and allowed to do their job. Labor reform, land reform, equal justice for all communities, education reform, and infrastructure development should be the focus and not an afterthought of political gains. The pandering to selective vote banks; ensures that power is maintained, at a cost to the growth of the economy and the general good suffers, and morale and commitment of good hard working honest men is looked down upon. To be successful is not looked up to or emulated; as it is understood to mean that one is either corrupt, politically connected or at worse a thug and a cheat.
I read recently the recommendations of a leading body “Looking ahead,” the BBVA team wrote, “bolder structural reforms, including greater fuel price liberalization, land acquisition reforms, and higher foreign investment limits in insurance, pension management and the pharmaceuticals industry are crucial to regain investor confidence and shore up the rupee.” I almost laughed to myself remembering the soft state argument; I had read so many years ago, and wondered who could possibly implement a fraction of the medicine that is being recommended. I am not saying that there are not brilliant and dedicated leaders in India, as otherwise the society would fall apart, I am just saying that the power is in the wrong hands. The state has gone into the hands of leaders in India and Thailand for example who have accumulated mountains of rice in their Government storage, while the poor starve outside. The political economy of the state has corroded to the point, where common sense and law are byproducts and goals are set for the wrong outcomes. The state gathers economic power into its institutions; and disbars its own citizens from taking the right economic actions, to better themselves and pursue their happiness.
The road ahead is murky and fraught with danger as continued fiscal deficits and unfinished projects and unproductive state enterprises will continue to eat away the countries valuable reserves. There is no bold leader here who can persuade the legislative body and administration into taking the right action. We deserve the leaders we appoint in a democracy, as the public is neither gullible nor foolish. They have just become used to living in a soft state; and accept the latest scandal and shenanigans with a shrug of their shoulders, as this is how life has always been. There will be no Arab Spring or revolution here, as the people are too preoccupied with the price of onions and finding a decent place to live. They do however expect miracles to transform their life; as that of course is the essence of the soft state, where expectations run high and actions run low. It is a beautiful but poignant tale like the full moon rising tonight; which reflects the brilliance of the sun, but has no power on its own.

3 thoughts on “Soft State

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