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What Indians can learn from the perils of crony capitalism around the globe

As the experiences of early backers of Russia’s Putin and Hungary’s Orbán have shown, States with few checks on their power can make for capricious bedfellows

Russian President Vladimir Putin attends a meeting via video conference at the Novo-Ogaryovo residence outside Moscow, Russia, Monday, Aug. 31, 2020. (Mikhail Klimentyev, Sputnik, Kremlin Pool Photo via AP)
Russian President Vladimir Putin attends a meeting via video conference at the Novo-Ogaryovo residence outside Moscow, Russia, Monday, Aug. 31, 2020. (Mikhail Klimentyev, Sputnik, Kremlin Pool Photo via AP) (AP)

Having calculated that the BJP is the only political game in town for the foreseeable future, all kinds of institutions appear to have fallen in line with the priorities of the regime, be it the election commission, large sections of the press, or even the judiciary: as legal scholar Gautam Bhatia opined, even the Supreme Court has of late become ‘an institution that speaks the language of the executive, and has become indistinguishable from the executive.’

This has dramatically skewed incentives for corporations to promote the interests of those in power, resulting in moments where private corporations like Paytm and Jio used the prime minister’s photograph in full-page advertisements, or Facebook’s top Indian public policy official, Ankhi Das, reportedly opposed efforts by her own employees to block the BJP’s T. Raja Singh from spreading messages like calling for the shooting of Rohingya refugees. It also led to Bloomsbury commissioning a book on the Delhi riots endorsed by arguably its most visible agitator, Kapil Mishra. Bloomsbury later withdrew the book after a public outcry.

It would be a mistake to think corporations are merely responding to the rise of the BJP. After all, India Inc. played a big role in fuelling this rise. Frustrated with UPA II’s ‘policy paralysis’ and coalition politics, it was Mukesh Ambani, Ratan Tata, and Adi Godrej who profusely praised the then Gujarat Chief Minister, Narendra Modi, in 2011. Anil Ambani and Sunil Mittal hoped he’d become the next PM way back in 2009. They wanted a ‘decisive’ prime minister able to gain a majority in the parliament.

India Inc. put money where its mouth was. With political contributions, including from foreign sources, anonymized and limits on corporate contributions removed, never-seen-before sums of money swamped Indian politics. 60,000 crore rupees were spent on 2019’s Lok Sabha elections, according to estimates by the Center for Media Studies, double the amount spent in the next-most-expensive election, in 2014. The BJP accounted for 45–55% of this. #2 Congress only had 15–20%. The BJP emerged victorious in the political battle with the highest number of Lok Sabha seats won by any party since 1984 in 2014, and added to its tally in 2019.

The government of the day has used its power selectively. It stopped Flipkart and Amazon from providing deep discounts to consumers, deeming them anti-competitive, but watched as Reliance’s Jio ravaged the telecom industry with predatory pricing. In the face of the imminent collapse of key players, it did nothing to provide relief to Jio’s competitors, Vodafone and Airtel, when it came to back-taxes amounting to thousands of crores of rupees. As Mint reported in June, Vodafone will struggle to pay these sums even if they are charged over a period of twenty years. With the Supreme Court’s judgement due shortly, we will soon know whether or not India’s telecom sector will be reduced from a vibrant and competitive one to a duopoly.

The regime intervened swiftly in the aviation sector to save SpiceJet, especially when founder Ajay Singh, who coined the 2014 BJP campaign slogan ‘Ab ki baar, Modi Sarkar’, returned to buy the troubled airline. But when Jet Airways floundered, it did little to aid it, even prompting Jet’s CEO Vinay Dube to publicly say ‘If you remember the SpiceJet case a little while ago, the government interceded by providing help with fuel companies, providing help with deferment of airport fees … All we are saying is that we deserve the same.’ Eventually, many of Jet’s planes and pilots were taken over by SpiceJet—it happened to be the only airline that could benefit from Jet’s collapse since it was flying Boeing and not Airbus planes.

Senior journalist Paranjoy Guha Thakurta has doggedly followed crony capitalism in India despite numerous lawsuits. In my Zoom call with him, he wore a t-shirt that said ‘Don’t Let Companies Sue the Messenger’. His book, The Real Face of Facebook in India, co-authored with Cyril Sam, is now back in the news for its Facebook exposé long before The Wall Street Journal piece. Thakurta is scheduled to speak before the Parliamentary Standing Committee on Information Technology next week.

Thakurta said, “Crony capitalism has been thriving in India for several decades now, but in the last few years, we are moving from crony capitalism to oligarchy. Crony capitalism is when businessmen with friends in power get undue favours from government. Oligarchy is where even among capitalists there are some who get favoured more than others. It’s not enough to help one player. In the process, you also look to finish the competition."

This comes with its own dangers. When Vladimir Putin rose to power in Russia in 1999 promising to take on corrupt oligarchs, Bill Browder, one of the largest foreign investors in Russia, became one of his biggest cheerleaders in the West.

All that changed when, in 2005, Putin moved on Browder, with the Russian government blacklisting him and designating him a threat to national security. Raids and seizures on his corporation followed. Several employees were beaten and arrested. Browder went from praising Putin to self-confessedly becoming his ‘enemy no. 1’, traveling around the world to get governments to pass laws that allow sanctions, asset freezes, and travel bans for human rights offenders in Russia and across the world.

When Lajos Simicska backed the rise of Viktor Orbán, his school friend, to power in Hungary, he did not think the two would fall out. But shortly after Orbán’s 2014 return to power, they did. Despite a concerted campaign by Simicska to use his media empire to back the opposition in the 2018 election, Orbán won again. Within months, Simicska had sold all his businesses.

There are no guarantees of the upsides in offering support, perceived or otherwise. For instance, in spite of Facebook having in its ranks Ankhi Das, whose bias for the BJP has been openly expressed in private company forums according to the latest Wall Street Journal report, and Shivnath Thukral (who helped set up websites for the prime minister in 2013) as public policy director for WhatsApp, WhatsApp Pay has found itself unable to meet regulatory requirements for a full-scale launch for over two years.

In March, Harvard Business School endowed professor Rebecca Henderson made a ‘Business Case to Save Democracy’ in the Harvard Business Review. Noting that free markets cannot exist without an impartial judicial system, real competition as opposed to oligopolies, and freedom of opportunity to spur entrepreneurship, she argued that businesses and their leaders have a role to play in ensuring democracy survives. ‘Concentrated state power and the kind of crony capitalism that usually follows is very rarely good for business—and vigorous political competition is the best antidote we have to concentration,’ she wrote to me over email. One hopes India will keep this vital lesson in mind.

Partha P. Chakrabartty is an independent journalist based out of Philadelphia, USA. He tweets at @begentlemind

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