 Hello and welcome to NewsClick. I am Poranjoy Gohatapurtha with me all the way from Berkeley in California. I have with me Professor Pranop Kumar Barton. He recently retired as Professor of Economics at the University of California in Berkeley and Professor Barton was educated at Presidency College in Konkata and then at the Cambridge University in England and he served on the faculty of various educational institutions including the Massachusetts Institute of Technology, the Indian Statistical Institute, the Delhi School of Economics among others and he's author of 16 books. He's edited 14 volumes, numerous essays and articles in the media and in the first part of our discussion we looked at Bengal politics and in this part of our discussion we're going to look at the Indian economy specifically looking at inequality in India. We're going to look at crony capitalism and oligarchy in India and we're going to look at among other things the labor laws that which the current government wants to change and and revamp completely. So thank you once again Professor Barton for giving the viewers of New Slick your valuable time. I was listening to this lecture where which you had delivered at the Washington University recently where you touched on various issues relating to how to save Indian capitalism from the capitalists. So let's talk a little bit about some of the issues that you flagged in that talk and one of them is the issue of inequality. There have been several studies that in recent years the inequalities of income wealth and ownership of capital that is have widened in India. According to one report the world inequality report the top 1% of India's population holds 30% of their total wealth of the country while the bottom half the bottom 50% of the population own barely 6% of the total wealth and we know that these there are many other studies Oxfam has made a study others have made a study but all of them have shown that India's which was already a very unequal country very very unequal country has become even more unequal especially in the last recent past the anecdotal evidence also indicates that post COVID post lockdown and Professor Barton what are the economic social and political implications of the widening of inequalities of income and wealth in India. Yes thank you Paranjan. I think many people in India including many economists are not aware are not fully conscious that India for a long time not just in the last eight years for a long time has been one of the most unequal countries in the world. This by the way this the inequality from the world inequality report that you that you indicated it's actually not not the latest data but the usually in India first of all India data wise is a problem on inequality because India does not collect the officially does not collect income data so you cannot get income distribution. Consumption data. Yes India does collect wealth data and this world inequality report has taken the India there's not their data is the Indian national sample survey data. Now which tells us that Indian inequality of wealth has now reached the Latin American range Latin America is one of the worlds most unequal and Indian wealth inequality has now reached there. I mean we have to be on par with South Africa as well and the United States where you live. United States is in fact not as unequal as Latin America and South Africa South Africa and many parts of Latin America like Brazil Argentina Mexico Chile these are more unequal than than than United States and India is reaching the Latin American range in in in wealth inequality but let me add something to that which will tell you the inequalities actually is even higher than that is because these data as I told you the the world inequality report got it from national sample survey these are national sample survey data is from household survey they go they go to a household and ask them about their wealth now household surveys always underestimates wealth inequality why because various reasons one is that is that one major reason I could give you five other reasons but one major reason is that people's wealth takes different forms some wealth is land some is houses buildings some other kinds of real estate and some in jewelry and some in financial wealth investment in stock markets now land and buildings you can't really hide that much but financial wealth people under report and since the rich have the more financial wealth is there is tremendous under reporting and that's not just to in India everywhere household surveys under report wealth inequality so even the data that you mentioned is an understatement of inequality more than that this data about physical wealth I already gave you the example land buildings real estate in general jewelry and financial it does not count a very important part of our wealth which you and I have and many others have is what economists call human capital we carry in our brain human capital because we have been educated so education gives you some kind of human capital and it turns out we have data on this now it turns out in educational capital India's inequality educational wealth I'll tell you in a minute how are them crudely measure it but in educational wealth Indian inequality is even worse than Latin America because Latin America even the common people have more education than Indian common people so how do they measure it they go to a household and ask people about how many years of schooling you had as an adult and every adult they ask the question not the children but adults they ask the question how many years of schooling you had so then they make a make a make a measure of inequality and that measure India is one of the worst in the world much worse than Latin America so if you take all kinds of wealth including educational wealth in my judgment India is one of the most unequal countries in the world all right then what we find professor Gordon I'm interrupting you is that over the years several policy initiatives or several taxation measures that we have contained or at least ensured that this country didn't become more unequal have been done away with recently we did away with the wealth tax on the ground that the government was not getting enough collection so what's the use having a tax where your cost of collection is perhaps higher than what you're collecting or the it's a negligible amount you are actually gathering earlier much earlier I think if I'm not mistaken about 40 years ago we had done away 40 or maybe even longer I forget when we did away with the inheritance tax but the point is whenever such initiatives are talked about the government says no what's the use of having these taxes because we're not able to collect what are your views my views I've studied that question by the way inheritance taxes was was abolished in Indira Gandhi's time in 1982 or 83 around that time wealth tax was done more recently 2015 for example the wealth tax and earlier inheritance but I have studied the wealth tax issue why wasn't the wealth tank generating revenue because if you study the law it exempts most kinds of wealth in fact if some wealth you can show it has a productive use that is not taxed so you can always show that this this land this building is coming to productive use so it's not counted so in general the way what they do is they put so many loopholes loopholes it's not a surprise that it does not take it does not gather so much revenue and this by the way is a problem all over the world so now there's since they are seriously considering they probably ultimately will not because of the republicans in the United States United States is seriously discussing issues of wealth tax and these issues are coming up there as well the loopholes in wealth measurement and so on let me now come to I was all along talking about individual or household wealth but a large part of wealth is corporate wealth and I think it's very important to understand the corporate wealth by the way it's just before the COVID hit us in 2019 2019 September in order to stimulate the economy finance minister reduced drastically the tax on corporate corporation tax so and and with that just one stroke of pen she what what was the total amount of gift she gave to the companies it about one lakh crore what one lakh crores was literally gifted to the large corporates they were hoping they will then invest it now today we know they didn't invest it because the the the constraint in the economy demand constraint is not because you know people don't have the money to invest so that was a completely wrong policy to do but anyway that was done what I wanted to emphasize is how concentrated corporate capital is so let me cite one piece of statistics to you it has been estimated that 20 most profitable firms in India generated in 1990 14 percent of total corporate profits in 2010 30 percent in 2019 the 20 most profitable firms generated 70 percent of all corporate profits so over time it shows the concentration of capital and most evidence suggests that these profits were not due to innovations or large productivity but mainly due to market power because of the monopoly power increasing profits went up it is because of this corporate concentration and inequality why you see such a large disjuncture today between our stock market which is booming and hundreds of millions of people and they pushed into destitution mess in fact even the government's data shows that in the first half of the period between April the first six months India was what we say technical recession for the first time in the history of GDP came down into successive quarters not merely that I would say this the decline in the economy has been going on since 2016 at least since that that extremely stupid and highly damaging measure of demonetization but not just that but in general the economy has been on decline and then of course COVID hit and lockdown again unnecessarily stringent lockdown in the beginning and then mismanaging the COVID that that made the reason why recent second wave made so much splash because now the middle class the earlier image was about migrant workers but this time it even made middle class households but anyway the economy has been declining for quite some time sharp decline during the lockdown and COVID and lockdown but what I wanted to mention why is it such a great disjuncture between booming stock market and hundreds of millions of people pushed into destitution and misery is disjuncture because the stock market doesn't care for other people is because this this small number of people's a corporate concentrated capital is having enormous amount of profits the other point to note here I told you gave you the figures for 1990 2010 and 2019 I think it's there's an important distinction between from 1990 the so-called liberalization since then and if you take the 30 years if you divide it into two parts 1990 to 2010 and then 2010 until today if you divide it into two parts there's a big difference and I think this difference is very important to see how the Indian capitalism is changing if you take 1990 to 2010 you could see in this period there was a rise of regional capital particularly in south and west of India and there was also quite a bit of competition among the new business groups so between 1990 and 2010 lot of new business groups came up which were not there earlier okay and politically this coincided with the rise of powerful regional political parties if you remember the 1990 to 2010 regional political parties had an assertive role in national political coalitions what happened today in the next 2010 to 2020 particularly since 2014 we now see a change now give a single party dominance regional parties are not that important and there is centralization of political power under a supreme leader so the political economy constellation has changed in fact the journalist Harish Damodaran has distinguished these two periods and I think I agree with him said he says the earlier period was one of entrepreneurial capitalism in the latter period he calls it conglomerate capitalism I didn't fully agree even in the earlier period as Paranjaya you have you have documented this some of it is Ranthir capital this mining mafia and all that even in the earlier period the the some of this was not entrepreneurial capital yeah I mean it was different forms of predatory capitalism crony capitalism yeah but now much more conglomerate capitalism and crony that I'm going to come come to that now before that let me note something else over time this why it become more like an oligarchy competition is shrinking earlier period there was a lot more competition among the regional businessman business capital competition has shrunk in most sectors there are only two or at most three players together having more than 50 percent market share and this you can see in the sectors like telecom airlines steel cement aluminium paints synthetic fibers cars drugs tires consumer electronics and so on if you count each of these sectors there are only two at most three players together having more than 50 percent market share so this is what I call oligarchic capitalism now the part of it it's oligarchy but it is a crony all because favors and special regulatory dispensations are available for only a select small number of large crony businesses and in some cases the rules and goalposts were changed midstream to help the cronies and I'll give you three or four examples story of the airport acquisition by one business house is now well known this is a business house which did not own any airports but within a few months became the largest owner of airports first came six airports smaller airports even there ministry of civil aviation had to change the rules that's what I mean changing the rules and goalposts had to change the rules because it had the one of the conditions was that whoever owns these airports should have some experience in running them but this particular business house did not have any experience so they made an exception and another rule was that the same business group could not have more than one airport if you remember whether I think there is a more than two two airports I think two two airports something but these are smaller airports this business house had in their site the big price which is Mumbai Mumbai international airport there there's an obstacle because already gvk owned much of the Mumbai airport so somehow the operators that they were the operator they were the operators and then that had to that obstacle this is an obstacle you know how that obstacle was changed was removed now central bureau of investigation the ministry of corporate affairs I remember that week when Mumbai airport was acquired by the business house gvk g yielded that beginning of the week because I read many Indian newspapers every day in one business newspaper I read ministry of finance quietly said some investigations against gvk are being started some some old problem but they started that week and gvk took the hint so they yielded so this is an example of rules and gold post chains another case of a business house has a coal based power plant in jharkhand was suddenly declared a special economic zone in 2019 to get tax benefits then you know about reliance geo in telecom lot of the rivals of reliance geo in the beginning were complaining about what they called what in economics is called predatory pricing you make the power price artificially low and that way you kill the competition okay except sir that both the competition commission of india as well as the telecom regulatory of authority of india exactly exactly exactly what is market concentration what is a dominant uh that's what i'm going to say all of that what peaked when those complaints came up trai the regulatory authority that you're talking about hastily amended the previous rules and changed the definition of quote unquote significant market power also been many stories uh a journalist named nithin shetty i don't know if you know him has done many investigative reports on how pre-existing environment regulations have been bent to accommodate the control market in fact there's been a lot that big human tribe in the manner in which the eia the environment impact assessments are taking place right you all you have claimed that democracy is dying in you have claimed that the capitalists of india have colluded in this project you have been it's not just a systematic hollowing out of institutions but tearing apart of the social fabric uh this is what you have said now what we see this process has been facilitated by not just ineffective and supine regulatory authorities but the way the banking system the public sector banks have written off loans and that's the next thing sir is the whole insolvency process we are seeing so so next next point my haircuts that are taking place my next point is exactly on that issue can i can i now go into that i think well not to speak of the earlier the top 50 willful defaulters there are now estimates how much they have robbed the public sector banks some say it's about one uh one lakh crores etc do that sir this should be much more estimates vary from one trillion almost one trillion dollars seven lakh crore to ten lakh crores i mean there all kinds of estimates right so i don't want to go into the estimate let me just say on this insolvency and bankruptcy code which a lot of people a lot of economists were very much optimistic about but when there's this corrupt nexus of public sector bankers businessmen and politicians as long as that nexus remains these changes are not going to make much difference already the government has undermined this insolvency and bankruptcy code to preserve its discretion in regulatory forbearance for promoters and let me give you two quotes that i read this week in again in business news papers i don't i don't have i don't follow twitter but this is a quote from a twitter sent by the well-known businessman harsh gwenka he's essentially saying how the insolvency and bankruptcy code is being gained by this crony oligarchies and i'm quoting the twitter says promoters stash away money on the side take the company to the cleaners get 80 to 90 percent haircut from bankers haircut if you don't know about these things that your audience doesn't know it is the amount of money that banks agree to forego of the total exactly you don't have to return 80 to 90 percent of the bank loan you don't have to repay loan and interest 80 to 90 percent haircut for banks and and banks and nclt which is national company and then harsh gwenka adds that is the new game in town and let me now read from another statement this week by nclt the national company tax national company law tribunal so even nclt this week expressed this week or last week expressed their surprise and they given they give several examples let me just quote one example they said they were surprised that vedanta's anil agarwal was paying about nothing to take over videocon industries videocon group of companies yes nclt is expressing surprise that they're getting it free now you might remember the urjit patel whom i know who used to be the reserve bank governor and the issue on which he resigned or at least implicitly that now it's explicit from his book that he has written since then he resigned on this issue of undermining the insolvency and bankruptcy code so this is again an example of how this is being used to essentially undermine any institution that causes problems for gaming the system more recently a trial balloon has been floated i know i think what you're talking about professor bordel is the paper that was floated by the reserve bank of india suggesting that large corporates be allowed to take over banks are you talking about that exactly exactly and of course they said if there's any hunky-punky the regulators will look after that but with our regulatory bodies which essentially quite often adjust bodies to give plush retirement job post retirement jobs for our bureaucrats you don't expect it's not very credible there if if there is any politically connected lending to crony oligarchs that the regulatory body is going to stop it it's not credible already and i don't know how many people know this already the business family of the hindujas have a significant stake in the bank called ind indus indus ind the kota group also has uh uh in in a bank kota mahindra bank yes kota family yes in 2017 the government allowed the state bank of india to have a joint venture with ambani's geo payments bank the former state bank of india chairperson who closed the deal soon after her retirement the following year joined the board of reliance industries as a non-executive director talking about mrs arun dhuti bhatachadji and and but she went through what is called the cooling period the cooling off period i think it's a one one year or something that's correct and and uh me and a colleague of mine abhidhash vukthu we've actually analyzed this problem and described it with the camel in the tent the famous analogy i mean why should india's biggest bank have a tie up with the payments bank which is not even in its infancy it's virtually uh it's about to be one kind of thing right now let's see the other side of the process this is all how crony business is helped by the government but it's not one way this business then helps the government let me guess what you're going to say you're going to talk about the electoral bonds the opiate bonds which you described as a con game you've used very strong language so i mean through electoral bonds the quid propo works am i correct yes i i think so but it's very difficult to prove the quid propo one side and state bank of india knows state bank of india knows and and in fact through state away bank of india the the government knows who has paid and who has not paid and and and today if you know there's enough evidence to say how the sections within the ministry of finance sections within the reserve bank of india all opposed this whole electoral bonds scheme but the government just pushed it through yes and when arun jaithli introduced his this um the act in uh bill in 2017 he called it electoral reform i mean what can be this is the most ridiculous and that's why i'm calling it it's an ingenious con game and of course you cannot directly prove how much of these bonds have gone to the ruling party but from most accounts that i have seen um the the amount that going to the ruling party is many times what has gone to the other parties combined there's no doubt is that the we already have evidence that well over nine percent well over nine percent of these electoral bonds as per the official returns of the political parties given to the election commission of india have gone to one recipient and that is the bhakti janata party right and and the beauty of it such bonds are tax deductible so in the taxpayers are also contributing to the ruling party because it's it's tax deductible uh so you you are subsidizing the taxpayers are subsidizing these electoral bonds okay so you know i i want to just uh just move on a little bit from here but what do you see and i'm linking this with the earlier uh point that you made about the concentration of wealth in india uh mr mukesh ambani uh who was in 2020 2014 the 40th richest man in the world is supposed to be today the fourth richest man in the world and this is all thanks to market capitalization going up and the stock market's booming exactly and we see the and the other thing as a result what these people these favored business houses even when they're heavily debt strapped have very little difficulty in raising domestic or foreign money in fact mukesh ambani geo platforms has raised money from facebook from microsoft from google so you name it from qualcomm so these these foreign companies know which side of the bread is buttered so that these business favored business houses enjoy a kind of implicit sovereign guarantee both in raising finance and in navigating the marquis waters of regulatory approvals okay and yes go ahead you went to ask me please complete yourself i have one last point on one last issue i want you to discuss and given the paucity of time you know please conclude what you were saying on this whole issue of the crony the only thing i i want to tell you about this quick quick go the my electoral bond etc so no longer does the ruling party need as the regional parties earlier did remember the earlier period of capital regional parties were important the regional parties they needed money too but they raised money from an odd assortment of smaller fish one liquor baron here one sugar baron there one real local real estate tycoon here pwd contractors there now big national capital funnels ample money to the big national party and is suitably rewarded in a crony capitalist oligarchic system now one thing that i wanted to mention even if you say we don't care as long as economy does well as a result but the economy is not doing well the economy is not really is not doing well people of course would blame the covid but even independently of covid or anything crony oligarchy may be good for shorter and profits for some select group of capitalists but not for a healthy development of capitalism okay if i rise in any nor is the rise in inequality can do much for capitalism in the long run because it exacerbates demand efficiency oh because for them demand is for the masses of people and they don't have money so the then capitalism cannot thrive and not to speak of and brazen dilution of environmental regulation that poisons and uproots community life and hearts long run develop so let me say you have a question yes you know this whole thing what you say and i was listening to your talk at the washington university he's if you argue that if india's capitalists were more prudent they would have lobbied for a higher health budget india spends a minister amount of its uh you know uh total budget for india's health but health part mostly health expenditure jdp ratio is not just lower than um rich countries is lower than most poor countries in fact even some get about china forget about vietnam vietnam spends much as india but the corporate sector is not lobbying for such a higher health budget it is not lobbying that's what my point is you know you know reduction in inequality uh greater entitlement of workers to these kinds of benefits to have a better education system including at the at the primary level so you are saying that this shows the myopic nature of india's capitalism that that you don't realize that having a terrible health care system a very bad education system in growing inequalities is bad for the corporate sector its own profitability it's all that's why the title of my talk the title of my talk in george washington is saving capitalism in india from india's capitalists because india's capital is a show myopic it's actually not going to save capitalism because it's going to ultimately hurt them just just imagine um the and this is a problem that the united states also faces because they have also a horrible health uh public health system but so when united states capitalists compete with say a capitalist even say neighboring country canada canada has a much better public health system so when united states capitalists are competing with countries in scandinavian countries or or or canada they are hurting themselves because first of all health expenditure improves worker productivity so your own workers will be more productive if your workers have health care secondly whatever health in the united states and and and this is this is less true in india is the private health insurance which in india is also they're going india is also going for primary which is a model i think they should go for universal health insurance and my point is not a leftist point of view my point it hurts the capitalist's own interest so so we are not even getting into whether capitalism is good or capitalism is bad exactly we were just talking that this is bad for capitalism itself and therefore the position adopted by our business class is rather short sighted uh professor about them you know uh i want to ask you a last uh i mean this is the last theme on which i'd like you to talk a little bit about the government is talking has is changing the rules pertaining to labor benefits to workers and these are workers largely in the organized sector and and you know we know that 90 percent of india's working class is in the informal or unorganized sector right but and i quote you here egged on by myopic business and their media supporters the government's labor protect i mean instead of protecting labor uh it's done exactly the opposite it is created more distrust more unrest among laborers and stagnation in worker productive please elaborate and explain why you have these comments in fact since i gave that lecture in george washington university i think within a month something happened which is an example of this and this thing happened near bangalore i'm trying i'm trying to remember the name of that factory where iphone's are produced and this is uh it's an apple subsidiary um it's an associate of apple that's correct associate what happened they're not just retrenched they first of all don't allow any union okay then they arbitrarily change rules like suddenly they change the eight hour day work into a 12 hour day then they also change rules about night hours for women's work because women's safety issues that they should their labor laws usually restrict women women's hours at night they also ignore that so as a result what happened this caused so much distrust and unrest then the workers became violent and started damaging property and now this company i think said the apple subsidiary is a taiwanese company i think it's fox con if i remember right the in this near bangalore i think the name of the factory in bangalore is wiskon or some such name you can check it um so they have now admitted their mistake but they can go ahead do they can go get away with doing this i mean they recognize their mistake after the outburst of workers now you can expect workers to become this kind of these things don't come suddenly i mean these things don't come in overnight long period of exploitation of oppression and unjust labor laws ultimately burst forth just as for example in the earlier in hariana maniser the in the maruti factory there was also an outburst of that kind now some of these labor laws may not be bad but what what they have done in this new labor code which by the way was passed through parliament without any discussion so that any points just like the farm laws the new farm laws many many other laws this team because the government government does not believe in discussion and for your information new information technology rules there were no parliamentary right no parliamentary discussion so in fact the farm laws case shows that you know sometimes people rebel when you go on doing that is the process if you did it through a proper process many changes you could have done compromise so you could have avoided a lot of misery on both sides um so one of the but one of the new labor courts labor new labor code i think they are called one of them is that now they're introducing a fixed term contract but because they don't want everybody to be a permanent worker and i understand that but this fixed term contract fixed term is not defined so whether it's 11 months or whether it's 11 years it could be five months it could be five years so it's entirely up to arbitrary left to the employer okay so the employer will you know juggle and and also there are all kinds of provisions that it is um the government reserves the right oh the government does not allow these things to be adjudicated by the courts so if a worker is not happy with how the employer is uh is implementing this labor code there's nowhere to go to you cannot complain to anybody they try to do the same thing with the farm laws and then they back to us exactly exactly the government yeah it's again farm laws for example i support part of them not all of it there are a lot of problems in farm laws but supple bit i i understand the motivation for this reform but i object to the process and i object to this kind of no discussion and i object to that there is no recourse to arbitration tribunal judicial no recourse to judiciary so these are things which make it particularly unfair all right thank you so much professor from the border for giving us your views on a wide range of issues from the new labor code to why large sections of the Indian economy in the private sector have become less competitive leading to no crony capitalists early large keys getting retrenched you also talked about why stock markets are booming while the economy is in pretty bad shape and about the corrupt nexus between bankers capitalists and of course the government thank you once again for speaking with newslink and thank you now the viewers of newslink will know that this is the second and the final segment of my conversation with Professor Pranab Bondhan who recently retired as professor of economics at the University of California at Berkeley thank you so much for being with us thank you for watching newslink