The unexpected Congress election victory in May 2004 has placed the Indian Left in a cleft stick. The outcome offers genuine reprieve from the nearly two-decades long seemingly inexorable forward march of the authoritarian Hindu Right, which after six years in power has already vitiated the secular and democratic characteristics of Indian society and was poised to do even more damage. To deepen the Right’s current disarray the Left wants to avoid at all costs bringing down the governing Congress-led coalition before it completes its full five-year term. At the same time, the poll result expressed nationwide (particularly rural) unhappiness with the effects of the neoliberal turn—initiated in 1991 by Manmohan Singh, the new Congress Prime Minister, in his then capacity as Minister of Finance.
As before, Congress will continue to pursue what it now calls ‘reforms with a human face’. Resolutely opposing this trajectory has become more important than ever—especially since, with inequalities of income, wealth and power growing, high poverty levels persisting and employment absorption even of educated youth declining, India could, like South America, well face major social turbulence some years down the line. If the Left and other progressive forces have not established their prior credibility as capable opponents of this policy, willing and able to pursue alternatives, it is the communalist Right that will be poised to exploit such upheavals. We are still far from writing any epitaphs for political Hindutva. This uncertain context lends additional political value to Vivek Chibber’s outstanding study. For Locked in Place is a powerful assault on the intellectual assumptions, arguments and claims on which the prevailing neoliberal consensus in India rests.
Today’s dominant discourse goes like this: India was in the first rank of post-colonial countries for its belief in, and pursuit of, the state-interventionist policy of Import Substitution Industrialization. But the end result was a relative failure, both in meeting the earlier goals set by Indian planners and vis-à-vis the ‘miracle economies’ of East Asia. In the two decades after 1947, the Indian industrialist class broadly supported this state-led project of isi because it had an interest in a protected home market wherein businesses could grow; but also because it had no choice. The Congress had led one of the three great anti-colonial mass struggles (besides Vietnam and China) of the twentieth century. For all the party’s links with Indian capital (and undeniable bourgeois character), its key leaders retained a level of mass support and credibility that made the Congress-controlled post-colonial state highly autonomous from, and considerably stronger than, the industrialist class. Given Nehru’s socialist beliefs, the state basically had its way in carrying this project. Its weaknesses became evident even before Nehru’s death in 1964. Its long crisis of 1965–80 was marked, despite the success of the Green Revolution in securing self-sufficiency in food-grains production, by low growth rates, high and persistent poverty levels, low industrial productivity and major foreign-exchange imbalances. History itself has now given a definitive verdict: for this general developmental failure, the Indian state with its illusions about socialism (witness the collapse of Communism), is principally to blame. Lessons for the future are clear: scrap development planning; progressively reduce state intervention; allow the private sector maximum freedom to raise resources (reduce corporate and income taxes) and to invest where, and in what, it wants; steadily liberalize internally and externally. The path India set upon in the 1980s—especially since the turn represented by Singh’s 1991 ‘reforms’—is the best, indeed only, way forward.
It is this story that Chibber’s scholarly and scrupulously argued work effectively demolishes. Neoliberals believe there is only good and bad economic policy, where the former must be the establishment of real-life conditions that most closely approximate to the verities of textbook neoclassical economics. The state can help or hinder the creation of such conditions and also has some role in tackling the problem of externalities. But neoliberalism has no place whatsoever either for the view that there is a legitimate sub-discipline of ‘development economics’ or for the notion of a distinctive ‘development state’. Since the East Asian countries of Japan, Taiwan and South Korea are the outstandingly successful postwar examples of late capitalist industrialization, and owe their success to having just such states, neoliberalism can offer no historically grounded explanation for what must be the key question for all poor countries—why and how does late industrialization take place? Why do some development states succeed and others not? Chibber combines historical insights, institutional theories of the state, class analysis and empirical evidence to explain precisely this issue through the contrasting experiences of Korea and India in the two decades after World War Two.
The state played a crucial role in promoting the late nineteenth-century industrialization of France, Germany, us. But only after 1945 did development planning emerge in (at its weakest) a form of a conscious industrial policy aimed at controlling private investment—directing where it should go, and then making sure of its efficient use. This planning for development had to address two areas. It needed to improve the general ‘environment’ in which firms function—raising the national savings rate and carrying out major land reforms, thereby increasing production of raw materials, providing wage goods for industry and broadening the domestic market. Though Chibber registers the importance of this aspect (about which more will be said later) the book is overwhelmingly preoccupied with the development state’s second function: that of directly influencing the industrial sector through micro-management of its behaviour. This requires the formulation and implementation of a sound industrial policy.
Industrial policy has two dimensions. Firstly, it requires subsidizing industry through the provision of infrastructure: cheap inputs, easy credit and domestic-market protection, thereby ensuring good rates of return. Developing the structures and state-class collaboration necessary for achieving this is no problem since this is the ‘giveaway’ aspect of the policy. It is establishing the appropriate patterns of private investment and production that is highly problematic, requiring effective monitoring and regulatory mechanisms that are tantamount to institutionalizing (for business) the disciplinary state. There must be structures to acquire and share necessary information between firms and between them and the state, carry out inter-firm coordination and provide a smoothly functioning system of incentives and sanctions. An effective development state must succeed in disciplining business. One necessary, if not sufficient, condition for doing this is to have a capitalist state that is substantially autonomous of the industrial class whose interests it aims to serve and promote.
The Korean state, says Chibber, was able to be more autonomous of its industrial class than was the Indian state in the crucial early decades after decolonization. Indeed, Indian industrialists prevented their state from putting into place such disciplinary structures. Though both countries inherited strong and capable bureaucracies not colonized by economic elites, only Korea could take the two steps necessary to install a disciplinary state. It created a nodal agency, the Economic Planning Board (epb), which was a ‘factor of coherence’ amidst the administration’s multiple arms, functions, inclinations and vested interests, because it was sufficiently empowered to override the authority of other bodies as far as economic-industrial policy went. Moreover, the Korean state was ‘embedded’ in the business community. It had institutionalized a dense network of ties with business that served as a two-way street for co-operation and bargaining to create and then sustain a ‘shared project’ between state and class. This was the vital complement to the disciplinary powers of the state. Korea’s success sprung from this mutual ‘pact’ between state and class, not from the latter’s merely disciplinary capacities.