‘Democracies have fought hard to force governments to keep some distance from private capital in general and big business in particular’ | Photo credit: Getty Images/iStockphoto
nothing, not even Hindenburg Research, seems to be stalling the progress of Indian big business. The Adani Group has continued its acquisitions, albeit at a slower pace, and has been able to persuade the financial markets to lend more money, despite assessments that it is heavily dependent on debt. Reliance Industries Ltd has announced the separation of its financial services arm to set up a new entity, in what media speculation sees as a bid by the conglomerate to establish a dominant presence in the financial services industry. The merger is being seen as an iteration of the strategy adopted by the conglomerate in sectors ranging from telecom and retail business to media and entertainment businesses. Other business conglomerates such as the Tata and Aditya Birla empires are also doing well. India’s biggest big businesses seem to be flourishing.
But this assessment is not true for all businesses in India. It is not that small and medium-scale companies, not to mention the vast majority of informal enterprises, are not doing well and are yet to recover from the damage caused by Covid-19. Many established big business names do not share the fortunes of the big few. A former deputy governor of the Reserve Bank of India and his co-authors report in a much-cited paper that the share of assets in the non-financial sector owned by the Big-5 business groups has risen from 10% in 1991 to nearly 18% Has been. In 2021, while the share of the next five has fallen from 18% to less than 9%. While his claim that increased concentration is contributing to inflation has been challenged, his evidence of significantly increased concentration has not been challenged.
Progress towards taking over the kingdom
The dangers of such a rapid increase in industrial intensity have been flagged around the world in the past. This process feeds itself by using market power to suppress competition. The result is profit inflation or profiteering through manipulation of costs and prices. In the process it promotes extreme wealth and income inequality. It promotes attempts to influence the institutions of democracy and, through means such as media capture, undermines the role that civil society can play as a countervailing force. Over time, this leads to undue corporate influence on political processes and policy making, with a tendency towards state capture.
These apprehensions were fueled by the recognition that these trends were not driven by competition in the ‘market’, but were the result of the functioning of markets. Given wealth and income inequality, and hence power differentials between economic agents, the functioning of the ‘market’, for a number of reasons, favors those who are asset-rich, leading to concentration and centralisation. That recognition has led to the argument that regulating markets is necessary not only to address the malign consequences that their functioning can lead to, but also to prevent or materially prevent the growth of dominant businesses and excessively large conglomerates. Even they need to be broken. Which are considered too large for comfort.
big business promotion
The difficulty is that while civil society voices can make the case for such action, in the final analysis it is the state that must implement the necessary policies. And the nature of the state is not independent of the influence that structures exert on society.
Democracies have fought hard to force governments to keep some distance from private capital in general and big business in particular. Those efforts have been partially successful in specific historical contexts, leading to crackdowns on monopolies and trusts, among other things. India saw similar efforts soon after independence, as the independence movement led to the emergence of a national state that was a broad coalition of different classes. But, over the years the distance between the state and private capital has narrowed drastically, leading to the current situation in which the state promotes rather than regulates or controls big business. The decision as to how many and which business groups to promote and to what extent within that framework is arbitrary.
Three trends indicate a narrowing of the political distance between the state and big business. First, the adoption of neoliberalism by powerful voices within and outside the state. This meant adopting the view that the role of the state was not to regulate private capital, but to facilitate its development as a means of all-round economic progress. In fact, proponents of neoliberalism have argued that the competition promoted by a liberalized regime will counter concentration. Despite early signs of increased competition in some areas, the reverse has been observed. Even in sectors such as telecommunications and civil aviation, the initial increase in the number of new players only triggered a process of churning, leading to associated social waste, which eventually left some, with signs of collusion among them, on the way. The consumer will be at loss.
The second is the promotion of the view that the state should help strengthen domestic big business not only to hold its own against giant global competitors, but also to grow beyond Indian shores. State policy, diplomacy and public resources, including those channeled through public banks, were to serve as instruments for this purpose. While liberalization opened up Indian markets, and subjected most Indian business to global competition, state intervention was modified to protect and promote sections of big business, at least through large-scale subsidies and transfers. not through.
wealth factor
The third is the refusal to reduce the influence of money in politics. In such a situation, the proximity of political parties (and hence the governments they lead) to big business has become a prerequisite for “managing” the elections and raising the necessary resources to garner electoral support. Over time, policy changes have been made to legalize corporate donations to political parties, including the infamous electoral bond scheme.
What is appalling in the present situation is that these trends have turned into a strategy where in the name of strengthening Indian business as part of promoting the national interest, very few business groups are actively supported by the state. Support has been given. Under normal circumstances, this should have led to widespread outrage and discontent. Not only those in the lower segments of the wealth and income pyramid, but also the more powerful sections closer to the top who are being ignored. This will create volatility and perhaps even be corrective. But this has not happened in New India, as once again the power of the state is being used to quell any such dissent in the name of national interest. The result is an almost perpetual march toward greater concentration of wealth and economic power.
CP Chandrasekhar is Senior Research Fellow at the Political Economy Research Institute, UMass Amherst