Why Growth Matters by Jagdish Bhagwati Read Free Book Online

Age, Indian billionaires have tilted the playing field to their advantage through securing mining and land resources, seeking regulations favorable to them, and blocking foreign entry. But the similarity ends there. 7
    The conditions characterizing the American Gilded Age and current-day India are vastly different. At the beginning of the Gilded Age, the dominant economic philosophy in the United States was laissez-faire. There was virtually no effective regulatory, labor, or social legislation at the federal level. Two key pieces of regulatory legislation—the Interstate Commerce Act of 1887, which aimed to limit the monopoly power of the railways, and the Sherman Act of 1890, which provided for antitrustaction against businesses—were enacted during this period. Key laws providing protection to industrial labor, the poor, and the elderly came much later. With rare exceptions, only white males enjoyed voting rights.
    In contrast, post-reform India and its growth explosion have been preceded by several decades of a command-and-control system complemented by stringent legislation in favor of industrial workers so that it is impossible to have business tycoons breaking strikes the way the American robber barons did. India, it may be recalled, has had a long-standing national commitment to eradicating poverty and achieving universal adult suffrage since independence. The country has all elements of a liberal democracy with the poor and the underprivileged having access to effective politics at the ballot box.
    The economic reforms have allowed freer play to private entrepreneurs but can hardly be characterized as laissez-faire. Railways remain a public-sector monopoly and the government remains a major player in such key sectors as steel, coal, petroleum, and engineering goods. Despite private-sector entry in airlines, telecom, insurance, and electricity, the public-sector players have remained active. In banking, the role of domestic and foreign private players has been expanded but the public sector again remains dominant. And several sectoral regulatory agencies, topped by an all-encompassing Competition Commission, oversee business practices.
    Whereas during America’s Gilded Age major sectors such as steel, oil, sugar, meatpacking, and the manufacture of agriculture machinery came to be dominated by “trusts,” the opposite is true in India today. There are multiple domestic firms within many sectors, competing against one another as well as with imports and foreign investors. Increased competitive pressures have led to reduced prices and improved quality of products and services in such diverse sectors as airlines, telecommunications, automobiles, two-wheelers, refrigerators, and air conditioners.
    The treatment of industrial workers in India today stands in sharp contrast to that in late nineteenth-century America. During the Gilded Age, factory workers toiled sixty-hour weeks without pensions, compensation for job-related injuries, or insurance against layoffs. In contrast tothe strikebreaking actions of the robber barons at the Homestead Steel Mill in 1892 and George Pullman’s railroad in 1894, labor laws in India provide a high degree of protection to industrial workers.
    Finally, whereas the state provided no protection to those at the bottom of the income distribution, including farmers in the United States during its Gilded Age, the government in present-day India is sensitive to the fate of the poor. Indeed, growth and the social programs it has made feasible have helped bring down poverty significantly. The changes have also benefited the underprivileged groups, as we have already documented, and as we noted, there are now a handful of Dalit crorepatis .
    But what about the corruption? How does today’s India compare to America’s Gilded Age? Critics contend that the post-reform era has been driven by crony capitalism. This implies that Indian entrepreneurs have accumulated wealth