Dalliance with Dismal Science

Dalliance means short term attraction or ‘passing fancy’.  It is a wrong word to describe my long term fascination for the subject of Economics. It is only there in the title as it rhymes with Dismal Science. So I would request readers to pardon me for a misleading title. It is all for euphony, you know.

My interest in “Economics” was jump started by a mere cursory reading of the text book prescribed to us in the Pre-University Course ( Maths-Economics-Commerce Group). The main reason was, when I come to think of it, it was the first subject in my entire 17 years of formal education, that made me “think”.  All textbooks and subjects before Economics was introduced to me were mere collection and presentation of facts that had to be learnt, mugged up or practiced. Of all subjects that were taught to us, most injustice was done to science, with drawing up the figure of “Physical Balance” and marking its parts was a question that carried 10 marks and a very likely question at that in the all-important final examination. There was no such thing as an independent inquiry and satisfying oneself with empiricism.  In can clearly recall the shape and size of the book, it was more like a Paper Back novel than a text book and if I remember right, was authored by the HOD of the Economics department himself. 

The first chapter was about the definition of Economics, the new science. How could money making, the crass subject matter of economics, be a subject worthy of study by honorable people. No wonder, Economics was given the name of “Dismal Science” by historian-philosopher Thomas Carlyle. It is pertinent to remember here that Thomas Carlyle was one of the authors who had a great influence on Mahatma Gandhi. Gandhi had his own reservations about laying stress on ” expanding the material means of well-being ” without any concern for the means of doing so.  There was something in the first chapter that was a bit startling- “If there are 10 economists there will be 11 opinions”. For a young mind, this was an eye opener. You are getting introduced to a “Science” where  2+2 can make  5 sometimes. I have to admit that I did not understand this assertion at that time.  Much discussion was centered around whether it was a normative science or a merely a positive science.

By “Normative Science”  the economists are expected to what is “good” and “right” and as a positive science, value judgements should not play any role and the subject must be discussed without any. The differing opinions contained in the first chapter was food for thought. I had never been exposed to this kind of uncertainties ever before.

The first lesson was about Law of Diminishing Marginal Utility, the second was the concept of Consumer Surplus and the third the Functions of Money and the fourth was the Quantity Theory of Money with the Fishers Equation. The law of Marginal Utility was simplicity itself;  that the money has functions four- a medium, a measure, a standard and a store, was a fascinating first understanding of money like no elder at home told you about. The discussions around “Gold Standard” and its discontinuation was read without any kind of clarity as neither the book nor our teacher explained what had replaced the “Gold Standard”, which on the surface looked like the sensible thing to do. If money could be printed without linkage to gold, how it was decided how much money is required in a country ? The Fishers equation, MV = VT , though very simple truism , gave an understanding of why prices go up year after year. That money has a velocity and since it is a constant it did not matter what assumptions you made as its value in the equation (yet, to this day, I have not seen any official statistics that talks about what the velocity of money in an economy is) was eye opening as to the way how assumptions are made in Economics.  Remember, those were days of 10% to 15% inflation and bank interests were 22% or above. With our own household economic condition teetering on privation, the need to understand this cruel demon of inflation devouring our lives was that much keener. The simple explanation for Inflation as “Too much money chasing too few goods” was good enough for me to challenge the seniors  in my family who used to talk nostalgically about “those days” when an Anna could buy “so much” of anything and everything.  When I explained to my mother that it was too much money in the system and too few goods, neither of us was fully convinced, though my mother would say “Panam peruthuthan pochu”. However, that was what my new book of wisdom said. As the Pre-University curriculum discussed only micro economics, they were too simplistic and looked like mere truisms of commonsense. Still you got a leg up to indulge in adult conversions like never before.  

The book also had a chapter on “Malthusian Theory” of Thomas Robert Malthus, who famously said that Food Production increased in arithmetic progression, but Population grew in geometric progression and finally nature would find a way thru famine and mass deaths to balance the two. This was disturbing to me. It is very plausible, if Thomas Malthus was alive now, he would be questioning growth theories of the present and seek a theoretical definition for “limit to economic growth” with Environmental protection, global warming etc. thrown in. Though simplistic, that a person, as early as 1799 saw limits to expansion of production of goods and their consumption is amazing erudition. That capitalistic growth is not self-limiting is undoubtedly a cause of concern now, considering the way resources of the planet are being used up.

The dim view of future of mankind as propounded by Malthus disturbed quite a few philosophers those days. Such gloomy prognosis about marrying and producing children in a treatise on political economy ( as it was called then) led it to be dubbed as “Dismal Science”.

I have written in an earlier blogpost how my father was a fan of Oliver Goldsmith and how he used to read out “Deserted Village” to me. While reading out the “Vicar of Wakefield”, also by Oliver Goldsmith, the first sentence of which ran thus-“I was ever of opinion, that the honest man who married and brought up a large family, did more service than he who continued single, and only talked of population, I remember by father remarking  that Malthus had created such a furore those days and this sentence was a reflection of  it.

That price level is reached at the intersection of a downward sloping demand curve and an upward sloping supply curve was a revelation, to say the least.  But who draws this curve for my vegetable vendor and how do all vegetable vendors quote a same price for a vegetable on a given day? How this invisible communication and orchestration of prices for commodities happen over a large geographic area without a command center?  It is a pity that in our colleges, questions like the above are not thrown up to students in class and project work assigned the with the tools of data collection and analysis taught to them. In the absence of such imaginative teaching, Economics is made to appear a dreary subject where the marks you score is directly proportional to the number of pages you write your answers in! Later during a visit to Melbourne University, I came across a study by undergrad students on the competiveness of Australian Dairy Industry vis-à-vis New Zealand’s and an analysis if Coles, the supermarket chain was , by selling milk at a discount, acting against the interests of dairy farmers of Australia. ( Their campaign used to run with an attractive jingle…Down..Down.. Down…)

Only in the next your, the first year  of  my degree course, that I found our college had a wonderful library, ignored by both students and faculty alike. Many days, I would skip classes and go there only to read the Reader Digests year books.  It is here I laid my hands upon the thin volume of “An inquiry into the Nature and Causes of the Wealth of Nations” or “Wealth of Nations” for short, the first book of Economics and whose author Adam Smith is called the father of the science of economics.  The language was too heavy. I have to admit that my abilities with English those days was insufficient to digest such archaic prose. If you have kindle, you can download it for free from Amazon. You can’t help but admire how universities, public intellectuals and social historians shaped policy in England of those days. It is even said that Adam Smith’s Wealth of Nations created controversy over England’s policy of continuing warfare with Spain. Citing “Wealth of Nations”, arguments were raised against English government for destroying Spain which was deemed to be a good ‘Market’ products of British labour and which helped pay for rent, wages and profits of many a British enterprise. For the first time, economic arguments of international trade were made against a political act of warfare.

Though we have come too far from the days of Adam Smith ( 1720 to 1790) , reading this book even today is certain to inspire awe as to how ideas in economics took shape and the integrity of intellectual processes that made England and the western world the epicenters of liberal thought. Reading the first pages throws up that Adam Smith had nascent ideas about Gross National Product ( as a sum of all goods and services in an economy), Per Capita Income , fiscal deficit resulting in  debasement of currency etc. The concept of division of labour as a natural outcome of technological progress ( one man making one pin at a time vs many making pins by many with each  doing one operation in the process) , markets as the “invisible hand” helping resource allocation between competing factors of  production are refreshingly original thoughts of that time.  The most important of all is the important that Adam Smith attached to Trade, local and international.  Before his time, under principles of mercantilism- a kind of beggar-thy-neighbor-policy much like China’s of present era , it was thought that foreign trade was  only to bring gold and silver into the exporting country and no notice was taken to the mutual economic growth of nations through trade based on their own individual strengths and natural resources and abilities. Much Later JM Keynes expounded his ideas in the  Bretton Woods conference which lead to the creation of World Bank and IMF to help the world war ravaged nations resurrect themselves through trade between nations. He conceptualized a world currency called “bancor” which was given shape to in the form of “Special Drawing Rights” ( SDR) of the World Bank. We are now bound by international covenants of Trade, call it GATT or Doha round  of  discussions etc. etc. Their origins lie in this great book published in 1776, as some historians say, a more important a document than the American Declaration of Independence of the same year and the Bill of Rights subsequently.

It was not only from text books that you had economics education those days. The student wings of CPI were active in our area. Even in a mofussil town like Karaikudi in Tamil Nadu, though my college was no JNU or Jadavpur University, there were boys who were attracted by leftist movements. They were distinct from others, after all they now ‘knew’ the reasons of ills that the society was suffering from.  We had one in our class. He was a hosteller and I did not move in his circle. He was of slight build, with bright eyes and spindly legs affected by polio. Some of my classmates reading this blogpost will remember. He was a very intelligent boy and was drawn to Marxism as most intelligent boys were, those days. He used to distribute Marxist literature for 5 paise and 3 paise - booklets printed in paper that will last not more than one flip through. They were authored by Baladandayutham, a veteran CPI leader and they were in lucid Tamil. Though they were for purpose of propaganda, they taught me the “Labour Theory of Value” and others concepts like Marxist Dialectics ( porul mudal vadham, in Tamil) which were good food for thought. The booklet talked of the inevitability of Class Struggle as a result of contradictions inherent in a owner-worker relationship. That forward movement of human history in predictable lines will happen as a result of these contradiction was a little far-fetched and not convincing. Honestly, it went above my head, a mere 18-year old.

I very much wish to know where my Marxist friend now is. He was a good person and I hope his life was not laid waste chasing the Marxist chimera.

The most interesting year of in my graduation was in the first year, as you may have guessed, we had “Macro Economic Theory” and “Ïndian Economy” in the Syllabus and the text book of the former was one thick 900+ pages in cheap newsprint like paper bound in grey parchment coated board. The General Theory of Employment, Interest and Money” or merely the “The General Theory” was a fascinating document.  Concepts of aggregate demand and aggregate supply lifted my unease with simplistic explanations in the Pre-University Course and expanded the horizon of knowledge to a large measure. Deconstructing the economy as stream of Incomes and Expenditures, breaking down expenditure as consumption expenditure and investment expenditure, concepts like Marginal Propensity to Consume, Multiplier Effect were very thrilling. I would not say that it was easy to understand and I would safely put it that I would have understood just 20% to 30% of what was in that book; our teachers were not of the caliber who could even invite questions from students, let alone  answer them. It whetted the appetite of the curious mind nevertheless. There were even chapters on the great American depression of late 1920’s. Keynes was the foremost thinker those days and his theory on Business Cycles as an outcome of mismatch between Aggregate Demand and Aggregate Supply and depression as the outcome where the effective aggregate demand is not able to absorb the supply leading to closure  of firms , loss of employment, incomes and further erosion of demand. He had concluded that the curve of economic growth is bound to be have the pattern of a sine wave, but fiscal policies of govt ( and  to a very little extent the monetary policies) can repair any situation. Many decades later, when I was travelling in an American interstate highway from Atlanta to Memphis, I learnt that those broad roads were built much ahead of the demands of the time by Roosevelt, the American president in 1930s following the advice of JM Keynes-pumping govt. money using deficit financing into public works.  There were no interstate highways in America, it seems, before that time and Roosevelt took to Keynesian ideas to put more money in the hands of his people to push up Aggregate demand that had collapsed during The Great Depression. I saw the road to Memphis as a monument of economic history of 20^th century.

Monetary Economics or the study of money supply in an economy and the attendant outcomes gained ground in 70’s after the Nobel Laureate Milton Friedman established using statistical data that economic growth was a function of money supply in the short term while in the long term supply of money was the determinant of price levels.  This was a resurrection of the classical Quantity Theory of money, which merely stated that the nominal value of goods and services in the economy ( Price x Qty of goods and services) was equal to supply of money multiplied by its velocity of circulation ( Money x Velocity ) ( Rs. 100 changing hands 5 times does the work of Rs.500) . Since the velocity of money is expected to be constant over different periods, the price levels were largely the outcome of supply of  money , which was an exogenous element of the equation determined by the decisions of the Reserve Bank of the country. The more the money supply , lower the interest rate , lower the interest  higher return on capital,  higher the profits s higher the investments and higher the investments higher  the employment , higher the  employment higher are incomes and expenditure , till it reached full employment. You can see a confluence of Keynesian Income/Expenditure analysis and monetarism. Financial economics hit   headlines more in the business channels and Keynesian analysis seldom, if you watch clearly. At the time of writing this blog, there is clamour for a large cut in repo rates and boost to liquidity in the April-2019 monetary policy announcement of the Reserve bank of India. We saw when American Federal Reserve tightened liquidity and American bond prices went up and this led to the exodus of money from countries and this year , as a result of weakening economic growth in USA, the Fed is expected to loosen money supply and there is a reverse flow into Indian markets ( some 46000 crores in Feb-March 2019 itself) . So monetarism is not dead. One easy way of understanding if the economy is  doing well is to watch it is growth in money supply ( bank credit ) and long term inflation. If bank credit growth is high , but long term inflation is well targeted below 4% as RBI now is doing, we can conclude the economy is doing well.

One can close the eyes and imagine thus: the economies of the world are caught in the swirling waters of liquidity unleashed by various national governments with individual currencies largely anchored to US Dollar as the common denominator. The individual economies of nations are buffeted like small ships in the gale and currents of this ocean of money supply, impacting societies, sometimes to their advantage and sometimes to their detriment.  No wonder, there are fewer Keynesians. Financial Economists like Raghuram Rajan have a rock star following.

Allow me a little digression here - Raghuram Rajan’s new book “The Third Pillar” deserves mention. I would do a separate blogpost reviewing this book which I am reading on my kindle these days. It is in some way the latest “Wealth of Nations”  as questions that considered once settled- trade liberalism vs protectionism , internationalism vs nationalism, state vs market are again analyzed.  There is  lot of turmoil across the  world,  China’s mercantilism, Brexit , French Yellow shirts protests,  Venezuela's bankruptcy, Trump’s trade war with China and everybody else  – all have roots in economics and call many of the assumptions of past 20 years to question. He is looking for answers beyond ‘State’ and ‘Market’ into “Community” as the third pillar that is required to step in when high winds buffet national economies.  There is never a dull day in Economics.

The book prescribed for “Indian Economy” was one written by professors Ruddar Dutt and KPM Sundaram. In contrast to the text books for “Macro Economic Theory”, this was in shining paper, but of the same thickness, about 1000 pages. The size of these books probably gave the impression to students that heavier your answer sheets in examinations, higher would be the marks!! This pedestrian book was filled with facts and fact and facts without any analysis. Major part of the book was devoted to 5 year  plans , I , II, III, IV …..  There were no policy discussions and if they were any they were all modelled on the stupid Nehruvian world view of Fabian Socialism. Small industry vs big industry, infant industry argument, green revolution etc. were touched upon, but it was more data than analysis and I doubt if any student had read once through the book. If the Indian Economy was analysed and interpreted in terms of the Macro Economic theories  of Keyes or Friedman , this would have helped understand the theory and its application. There was no such attempt in the curriculum, which showed the competencies of the Economics Department at the University level.  I doubt if even any of the teachers in our college perceived this, leave alone us students.

Indian economy since the days of Nehru has been a story of rank stupidities, missed opportunities and self-flagellation in the name of economic policy making. And it continues to this day. Nehru was enamoured of  economic planning of USSR.  The cabinet and the congress party ( barring a few exceptions like Rajagopalachari, Minoo Masani and Nani Palkivala ) and much of  Lutyens elites were more members of “Nehru Study Circle” than independent thinkers, banning any criticism of Nehruvian world view.   They were the original exponents of “intolerance” that is bandied about today. The idea of “Mixed Economy” (nobody hears this  term these days)  with the “commanding heights of the  economy being held by the public sector”  and some small crumbs thrown  to the private sector was  an article of faith of  Nehru and Indira administration and it continues to this day. It has  resulted in  a high cost low productivity economy which burdens  all its inefficiencies on the poorest of the  poor through transfer pricing ( more on this later)

The only good thing that happened those days, in retrospect, is the land reforms. The British administration had two systems for delivering governance in India. One was the Ryotwari system where they appointed “District Collectors” of land revenue and the other was through the “Zamindari System” where representatives were made to ensconce themselves in princely states to keep a watch on them and collect ‘protection money’.  In the former, they were directly responsible to the people and in the second, the representatives cared less what the princes and zamindars did to their subjects. Most of North India, Rajasthan, Bihar, Bengal ( outside Calcutta) was under Zamindari system. While South India and Western India received the benefits of Ryotwari system- schools, hospitals, legal system, colleges, libraries and a liberal English educated class which eventually proved to be nemesis of the British administration in the form of Congress party.  Land holdings were in tens and thousands of acres in Zamindari areas. Absentee landlordism, oppression of landless labourers were endemic and the low productivity of land resulted in famine like conditions that begged for action by the new governments in the state and centre.  Laws that gave ownership of land to the actual tillers of the soil were enacted right across India ( Land being a state subject ) .  Acharya Vinoba Bhave started the Boodhan movement.

However, when the 1961 Nagpur Congress resolution called for “Collective Farming” on the Russian model (which was eventually cited as one of the  reasons for the break up of USSR ) , Rajagopalachari had had enough. He castigated Nehru for his License-Permit Raj, left Congress and formed the Swatantra Party.

Outside of that, there was stifling of economic freedoms that no part of the world has seen under a liberal democratic dispensation, ( the present day Venezuela , however is an exception, it is Nehruvian stupidity on steroids ).   India which had a head start of all countries in Asia in 1947 missed the industrial bus.   IITs and IIMs were set up , but industrial licensing, restrictive economic  policies, quotas for anything from steel and cement to telephones meant that the students of all elite institutions went abroad as there was no application for their skills and knowledge.  All monopolies are inefficient and  Govt monopolies more so. The corruption and inefficiencies of  public sector steel plants, textile mills, telephone manufacturing units, air lines, cement corporations, cycle and scooter corporations left no space for growth. The famous Hindu Growth Rate of less than 3% was coined those days and was considered as normal,  along with stifling taxes ( upto 50% on select goods and Income Tax at peak rate of 98% ).  Besides this the industrial licensing created its own monopolies and oligopolies. When China went ahead in full steam with their economic reforms, our manufacturing companies, stymied by policies that favoured small industry and licensing, found themselves that they could  not meet the economies of scale of the Chinese units. Rupee was kept artificially high ( $1 = Rs. 7.50 ) and a rupee-rouble parity at ( 1 rouble = 70 rupees ) , price of aligning with the Soviet camp, caused for isolation from the world economy. India which was a trade power of the world for the past 5000 years was bound hand and foot by the foolish economic ideas of the congress elite, Nehru and the Fabian socialists of that era. This continued beyond Rajiv Gandhi years till 1990’s , when staring at a default on international payments ( india did not have dollars to  buy the next consignment of petroleum crude ) , Narashima Rao and Manmohan Singh brought Economic reforms overnight and saved the economy and the country from disintegration.    

Trade was looked down upon. It is a shame that the whole world starting from the days of Adam Smith , had started looking at Trade as the important tool of economic diversification and growth. Not so in India. Trade was equated with “Bania culture” and was associated with “Black Markets”.  Incidentally, Black Market is a term is used only in India.  The political class ranted and railed against black marketers, like Maduro is now doing in Venezuela. Congress politicians considered ‘progressive’ to talk ill of the trading community as they money out of shortages, without admitting that their policies have created the shortages in the first palace.  You can see Rahul Gandhi calling Ambani and Adani names as a legacy of this attitude.

Indira Gandhi had unleashed the “20 point economic program”  soon after she won the elections under the “Garibi Hatao” slogan. The fact was that much of the world by that time had come out of structural poverty. The once upon a time poor countries of Asia, like Korea, Japan , Taiwan , Thailand, Malaysia had become Asian Tigers, seeing double digit growth with massive reduction and eventual disappearance  of poverty. When TATAs built steel plant in 1911, there was no manufacturing steel outside Europe and  up to Japan. When Toyota started making cars, they saw Hindustan Motors as main competition as they were three years ahead of them !  Yet Tata’s were not even given license to manufacture cars or watches. Till they were given permission reluctantly, reluctantly because Titan Watches was allowed only in joint sector with TN Govt holding 51% shares, the watch market was catered to by Haji Mastan and other smugglers of Bombay.

As for cars, the market had already been bequeathed to Suzuki.  Lay people blame corruption for all ills of the economy, actually bad policies have played greater part in the problem that we are facing today after we missed all development goals that lesser countries reached decades back. We are even coming at the back of Bangladesh in some areas now.  By the way Bangladesh is an example of how ‘Trade’ had benefited a very poor country. They do not grow a bale of cotton, but export textiles for 30 billion dollars by importing cotton and polyester yarn.

No Policy foolishness can be  as stark as the policy on defence procurement.  We have had engineering giants in India like L & T, Tatas, Mahindras, Bharat Forge etc. Our policies never permitted them to make armaments for our defence as they belonged to the “private sector”, all the while allowing purchasing  from the private sector of western  countries, whether it was Bofors, Augusta Westland, Lockheed etc etc.  

We will not allow private sector to run banks, but when we allowed the likes of HDFC and ICICI, we  allowed foreigners by the back door, for 76% of the ownership of top banks like HDFC and ICICI is with  foreigners! Or we run loss making public sector with huge govt handouts in competition with private sector who go belly up unable to function without a level playing field.  The example  is Jet Airways and Kingfisher airlines vis-à-vis Air India. Tata Docomo was closed down with 26500 crore loss, but BSNL and MTNL will never close down.

Throughout the entire history of last 71 years, inflation has been generally near or above 10%, except for the past 5 to 6 years when RBI inflation targeting has kept it close to 4% and below. However, for the first 65 years,  the bank savings account interest rates were kept at 2%, while the bank lending rates have been anything above 9% till 25%.  Poor people who saved Rs1000/- and  kept it in their bank account would get back only 900 in real value the next year and got Rs20/- as bank interest to compensate for their forbearance.  This was a racket that nobody questioned. Now there are private sector banks who give 6% to you while the inflation rate is well below 4%. All banks give a minimum of 4% after the Savings Interest rates were decontrolled.

I was just two months into my first job as a typist in a Tata Company. I was attached to the purchase department and was typing out purchase orders. The company wanted suppliers of aluminum bottles and drums made of CRC sheets. Both Aluminum and CRC sheets were in short supply and rationed to actual users, the manufacturers of Aluminum bottles and Drums.  In the absence of Aluminum bottles, the liquid pesticides were packed in Tins (Metal Box Co Ltd ) which had to be packed in deal-wood cases which were by basically nailing wooden planks into box shape. Often the nails pierced through and cause the toxic pesticides to leak in transit. However, procuring Aluminum bottle from a standard manufacturers for all your requirements was impossible. Most of the good ones who had automatic Japanese machinery could not meet our orders for want of allocation of aluminum sheets of 99% purity. There was thriving black marketing by those registered small units who had low precision semi-automatic bottle extrusion machinery but sold their allocated quota illegally and made money. We had to spread our orders to small and big manufacturers. As a result, there was no dimensional uniformity and accuracy in those bottles. When those bottles were used in the packing line, the PP Nose of the bottling machine could not be set to one height as the same 1 Litre bottle was of different heights ( fraction of millimeter differences) and  this meant the capping was prone  to leakages in the rough  and tumble  of their transit. We had 4% to 5% leakage in Aluminium bottle packing when the world was counting them in Parts per Million ( PPM). Did the company suffer ? No. It was all built into price. I saw for the first time, how policy imperfections are allowing the strong to transfer their inefficiencies to the less powerful in the pecking order. The farmer and the landless labourer paid for the systemic inefficiencies,  and this Tata Company , having got the license to produce the chemical had no threat of closure, it was thriving.

I was studying for Cost Accountancy those days. I saw that Indian industries gave a damn for cost efficiencies as they were protected by this licensing regime and very soon stopped my studies further. My company had a turnover of Rs.400 crores those days, out of which I estimated 200 crores was inefficiency cost. The Aggregate Supply was shorting changing Aggregate Demand  by 200 crores, as my young mind thought at that time. Industrialists started multiple entities just to avail of quotas and be within ‘small scale limits’.  The same textile yarn spinning machine was shown as belonging to multiple companies with point 1 to point 4 belonging to one company and point 5 to point 9 belonging to another company and so on.  You under invoiced imports and over invoiced exports and spirited money away in foreign bank accounts. I remember reading one interview of JRD Tata where he had bemoaned that the RBI gave him only Rs.25 dollars a day and he had to request his foreign business associates or suppliers to bear the cost of his stay , travel and boarding when he went abroad. After all Foreign Exchange was supposed to be ‘scarce’.

In the early 80’s getting cement for constructing anything was a nightmare. Cement was a controlled commodity. Cement manufacturers had to give a good percentage of their production to Govt. This was called levy cement. Whatever was left was to be sold at a  controlled  price as  per quotas issued by the Controller  of Cement in each state.  Cement controller office was the hot bed of corruption, needless to say. Antulay, the Chief Minister of Maharashtra was indicted by justice Lentin for his ‘services’ in the noble cause of cement, to quote the judge verbatim.  Corruption and adulteration of cement was unbelievable.

We wanted to build a new production and storage facilities for a pesticide based on the deadly Pottasium-Iso-Cynide. The storage facility had to be distinctly different  for this chemical with very high walls and powerful air blowers at the top. The architect gave the drawings and  they were to be approved by the Ambattur Township as our factory was located in the Ambattur Industrial Estate, Madras. I remember one sneaky building inspector making occasional visits to our factory where we were humouring him by giving him bribe money- Rs.100 or Rs.150 per visit. Our plans were not getting approved for a long time. I was commuting to work in my cycle and crossing the Ambattur Township office where the honourable Building  Inspector had his offices. Our factory manager asked to follow up with the Building Inspector for the approval of the plan. Very soon I became the SPOC ( Single Point of Contact ) for the cement requirements of the  factory.  I had senior managers coming to me and asking  me if  there was any way of jacking up the cement requirement and if I could use by contacts with the Building Inspector to do it. They said they wanted cement for their personal purposes and since what was available in open market was heavily adulterated, they could take from the company’s quota,  of course by paying its cost to the company! After probably a year, I got the plans sanctioned by the Building Inspector finally. But the real ordeal started thereafter. Next was the process of applying for approval to the Deputy Controller of Cement. Our file was not moving there at all as our requirement was ranked too low as per their criteria. Besides, they wanted approval of TIDCO, from whom we had leased factory land and also a No Objection Certificate from the Urban Land Tax office as our land was coming under that Urban Land regulations. Our file had moved to the Controller of Cements, in the meantime. He was famous for corruption and in hushed tones, I heard a lot about how starlets from Numgambakkam were supplied to him to get him approve cement quotas. He was reputedly very close to one Sathyashree of Kollywood with whom he used to play tennis daily. I was told that it would be useful if I approached her to get the job done!  As we were manufacturing pesticides, we were told to get recommendations from Director of Agriculture of Tamil Nadu Govt and also from Under secretary , Department of Agriculture , Govt of India. We did all this, except for dealing with Sathyashree and her ilk. My cement file had become thick with correspondence and replies and reminders with all these authorities.

I started to collect data on the state of cement industry in India from the newspapers received in our workers and staff restroom and the Hindu Year Book of Indian Industry.  We had just around 22-23 million tonnes of installed capacity while the actual production was just 16-17 million tonnes. Actually, the factory owners were not showing full production and were selling it on black market and the resulting black money from cement trade was going unproductively into Gold and Real Estate.

World wide there was a technology change in cement industry. 3000 MT/day plants were becoming the norm. Technology was changing to what was called as “Dry Process” as against the “Wet Process” previously. Huge investments were required for this change and there was no investment forthcoming as  it was a total play in  black money ( with 80% income tax , why not ?).    Govt of India’s response was as usual- setting up the Cement Corporation of India which never produced quantities close to its installed capacity. It went defunct in late eighties , but I will not be surprised if some people are still paid salaries and annual bonus just like people in National Textile Corporation, ITI and HMT are. Adulteration was rampant and controlled cement was sold at Rs25 per bag where in the open market the bag could be bought for anything between Rs70 and Rs,140/- depending upon the adulteration you can tolerate. ACC, a Tata Company then, was fighting with the Govt and got some relaxation on levy cement. Indira Gandhi was imperious and castigated the evil ways of market and trade as the reasons for the state of affairs.

In the meantime, three years had passed. We had received the quota. Cement supply was nowhere near demand. Andhra had no cement plants though it was full of gypsum and limestone. It is another matter that now Andhra produces largest quantity of cement at 37 million tonnes , some 17% of India’s production which is second only to China. We got cement from Korea, in Paper bags. It was so gratifying to see cement bags reach our factory. We gave our market for cement to Korea and created employment, not to speak of wasting ‘scarce foreign exchange’’. 

The labour scene in Chennai was tumultuous in late 70’s – with Kuchelar Union ( Datta Samant of Chennai ) , CITU, AITUC etc etc.  Strikes were frequent, but with better salaries, “Permanent  Workers” in our industrial belt  were moving into middle class and by 1985 were reluctant  to go on strike like  in 70s. They had started practicing family planning ( I know as I kept the register for the Rs.200/- the company gave for the FP Operation). They had started buying milk and newspapers at home. Workers used to come to seek advice from office staff for the choice of names of their children as they wanted modern better sounding names. This was called as Sanskritisation by our sociologists.  Garment Units were coming up and their women, who otherwise would only get to work as maids in middle class households, got industrial jobs in these Export Garment Units. There were many in Ambattur Industrial Estate, the biggest one , Coromandal Garments, belonged to Tatas.  At the start they would be asked only to stich button-holes , but slowly moved to higher responsibilities. It made a world to difference to their families.

I used to cycle my way near a slum where many women working in the Garment Units lived. They used to get Rs.8 to Rs.15 per day depending on their skills and seniority. The first change I noticed was on their children. Children earlier had matted brown hair that had not seen oil, water or comb. After Garment Units came in Ambattur Estate, the children’s hair was cleanly parted, oiled and combed. I could see many of them in proper school uniforms. For an amateur self-styled economist ( which I always consider myself to be ) , it was empirical evidence of what employment of women does to families. These women used to walk in a beeline to the Ambattur Estate, some 6 km away, saving  on bus fare. They used to be clad in nylon sarees and walked at steady speed holding a small tiffin box in their hand.  I had to change my own assumptions on the hierarchy of human wants-grooming came first. When I see cheap fashion being the biggest draw in our towns and  cities now and the thriving fashion garments industry from Pantaloon and big bazaar to Patanjali Paridan, I know what I see.  

As I said, the Chennai labour scene started reforming in 80’s. Not so much luck for Kerala and Calcutta where I had my initial brush with unbelievably self-destructive behavior of workers at the behest of their communist unions.  I was still a clerical staff when I went to our unit in Pampampallam, Kanjikode, Palghat, Kerala. Our company had set up a big factory there, as industrial license those days, decided what you manufactured where and how much.  The factory could employ 500 ‘’permanent” labour and another  good number of ‘temporary” labour. However, in spite of, 5 years having passed since the factory started, there were only 65 workers and some 6 or 7 staff members. The reason was there were three unions – CITU for CPM , AITUC for CPI and INTUC representing the congress. Not a day passed without one labour problem or the other. The factory manager would come to some agreement with one union leader or the other, before the others and his own union members will rise in revolt and there would be new set of negotiations. Most of the machines of the factory was unused. Kerala which was surplus in power when the factory was built had power cuts in 1983-84. The management was running minimum packing operations of liquid and powder lines with these workers with the bulk material manufactured in Madras or Bombay.  There was this issue of stopping drawing electricity from a 400 KVA generator which consumed humungous amounts of Diesel and running these packing lines with a  mere 35 KVA generator. This was simply unacceptable to the Unions. They accused the company of slowly downgrading this factory, stripping off its machines and shutting it down. They knew the industrial licensing did not permit the company to shift production elsewhere. Besides, this they wanted the unloading coolies in that area to be treated as industrial labour as per Industrial Disputes Act ( as they did work in relation to the manufacturing process of the factory!) and be given bonus etc. I was on a visit to the factory for some reason. There was the dreaded Gherao of factory manager and staff and I was caught in it as a representative of Madras factory whose manager was holding over all charge!

Needless to say, this factory was closed down by the company, but slowly over the next 3 years at high cost to the company. The entire Kanjikode became an industrial wasteland eventually.

The next negative encounter was in Calcutta, another 4 or 5 years later. I had moved to North India by then.  Our office was in Hare Street, Calcutta. Calcutta had many factories and a large Regional Office. My work was in the Regional Office.  When I went there the first day, most of the seats were empty at office time. Even 2 hours later there was no improvement but people were slowly strolling in. I asked the Regional Manager, if they would not loose attendance if they come late , as this was the practice for non-management staff those days in offices. What he told me startled me. He said that most people came by train and after getting down from the station took the tram. The train invariably came late and as per agreement with the unions, there could be no loss of attendance if the train was late. This appeared fair to me. But he added that it was not that simple, even if the train was late by say 30 minutes, there were counters in the Railway station where they would stand in long queues to get it endorsed that their train was late. This took anything between one or two hours. Thereafter, they will sit on the tram and not get down from it till it reached the front of the office, no getting down from it even 25 meters ahead of office and walk towards it in case there was a traffic jam blocking the movement of the tram. Our Calcutta operations were severely curtailed, the Pharma Unit, Sea Food Unit, Pesticide formulation units were shut down. The Regional Office was shrunk over the years beyond recognition.

In the name of progressivism, we empowered the most anti-national and venal forces in our trade union movement. Even to this day, they work for the foreign policy goals of their Communist masters worshipping mass murderers like Stalin ( 30 million murders) and Mao ( 50 million ).   It required just 7 workers support to start a union and actual bargaining strength of the unions could never be checked as the company was not allowed to use a checkout system to establish the actual numbers supporting a Union.

As a country we have paid very dearly for the hypocrisies of socialism and leftism. Nehru-Indira policies and leftist dogma were and are still believed to be progressive in some uninformed sections of populace. I have several more anecdotes from my personal experience of those days and later to establish the policies perpetrated by this family and their leftist cahoots were the main reasons why we are still a poor country today with poverty which is nowhere found in the world except in 

sub-saharan countries like Chad or Somalia; some 500 million earning less than 1 or 2 US dollars per day. With the latest scion of the family talking of giving them dole of Rs72,000 , I can’t but pray to god when we will get rid of these charlatans and their garibi hatao slogans.

However, as JM Keynes had put it , “The Theory of Economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions.”.

This is the best definition I have for economics and it keeps me interested day in and day out.

 

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 [RV1]