A lecture by Minoo Masani on organization of economic life was published in 1965 as a booklet. One chanced upon the same at an online archive of works of Indian liberals. The lecture is available online here. As one goes through the lecture published of course as a booklet, there are interesting facets of thoughts expressed by Minoo Masani on different angles of socialisation of economic life. His arguments unequivocally seem to suggest total nationalisation in economic life leads to an inevitable outcome of totalitarian state politically. In his words, state control of the economy leads to political control. There cannot exist a state run on collectives in economic life while simultaneously accompanied by the presence of political freedom. As India thinks about the next stage of privatisation invariably upsetting the omerta code of state involvement through substantial elements in the economic world, it would be prudent to revisit this lecture. His approach puts forth the unintended consequences of socialisation.
As one looks the same in historical retrospect, it is clear that there was a fundamental contradiction in the Nehruvian Congress. As he would point out, there was no lack of commitment to free speech and democracy. In fact, the Nehruvian Congress espoused the same. They were opposed to the state capitalism or state landlordism as developed in Russia and China of those days. Yet, they seemed desirous of socialisation of large scale enterprises along with collectivisation of agriculture. Masani even in those heady times of socialist thinking and land redistribution and abolition of zamindari was adamant on the linkages between destruction of peasant entrepreneurship and the antagonistic concerns on development and political freedom. He was convinced that absolutism in economic power would pervade into absolutism in state and political power. He was specifically concerned over nationalisation activities like nationalising the life insurance industry apart from imposing controls on cement and cloth and export restrictions on jute or iron ore or manganese among others. He could detect these not as a mere exceptions but perhaps a pattern for total nationalisation of economic life in the country.
To Masani, the controls on economic choices imposed a control on political choice. As he puts it, whether it was an employee or a peasant or an investor or a consumer, they were all impacted by the nationalisation of production whether it is industrial goods or agricultural goods or services. His articulation of the diffusion of this impact was profound. He posits in terms of lack of choices. To an employee, being in the service of the state would deprive him or her the choice of occupation or shifting of occupations or shifting of firms etc. They would be compelled to work for only one employer. The very choice of shifting employers or even attempting entrepreneurships is deprived. In the context of strike or being removed from service, they have no option for shifting to any alternative occupations. This implies they essentially are bound by the government. If one were to use a jargon borrowed from economics, total state control on industry would result in employee lock-in. This is not just true for the employees at the bottom but at every layer in the hierarchy. Thereby there exists an incentive albeit forced to support the government. Any anti-government activity would result in a death-knell for the employee.
The same perhaps holds good for the peasant or anyone engaged in the agricultural activity. To those peasants engaged in collective farming, there creates a lock-in maybe one might call it the farm lock-in. There is no escape from the collectives in which they have been locked. In the event of escape, they would hardly gain anything but have a lot to lose. There would be practically no land available even the share of land that is supposedly owned by them as a collective. This was singularly responsible for destruction of agriculture in both Russia and China. While it was not known much at that time, Russia was experiencing food shortages and had to import ironically from the US albeit in secret. The Indian policy makers had been enamoured of the Russian public claims of their success in agriculture despite it being a total failure in practice. Masani had the foresight to recognize the eventual outcome however tragic it might be in the agro sector underpinned by collectivism or co-operatives.
It is well known that savings translate into investment. The savings arise out of speculative motive to earn a return. In the absence of investors willing to lend their savings for a more productive purpose, the investment or capital creation would not happen. Yet in totalitarian economy, the only option would be a government bond. Given the sovereign nature of the bond, they might not get the returns they are desirous of. They have little or zero option of shifting to alternatives where they can get a return. Aside of the return, the government being the only channel of investment, would mean the opportunity cost would be high given the foregone investments in more productive areas. This is something brought about with great clarity by Masani something that resonates even more than half a century of the address.
Similarly, the consumer is starved of choices. The firm look towards the consumer as a determinant of the key choices of what to produce, how to produce and for whom to produce. In a centralized economy, the market forces of demand and supply are absent. Therefore, there is little guidance to the producer on the production decisions. If the number of bus service between two small towns in the remote North-East would have to be decided by some bureaucrat owing loyalty to the party in Delhi, one would imagine the allocative or distributive efficiency or rather lack of it. In fact, given the pervasive government control, it would be impossible for any opposition to build up. All their lives are under the control of the government. In such a state, it would easy to track and crack on potential dissenters. This was the modus operandi something perfected by both Stalin and Mao.
While Masani touches upon other issues, the core argument is the loss of economic freedom is the precursor to the loss of political freedom. The thinkers of that age while inspired by perhaps Fabian socialism or its various hues were unable to grasp this fundamental identity. While it might have been nearly sixty years since Masani delivered the address, the echoes and thoughts resonating from this lecture sound relevant and apt in today’s India which is of course far from the socialist control of the past.
Thoughts on Theory and Practice 