Does India need more Capitalism?
What do you mean by Capitalism?
Capitalism is an economic system characterized by the existence of a market and private property. According to this, India was a capitalist country before and after the 1991 reforms.
De-regulation and privatization are characteristic of a particular kind of Capitalism called a Neoliberal/Free-Market Capitalism, not Capitalism in general.
Infact, after World War 2, the most popular form of Capitalism was Keynesian Capitalism characterized by extensive public investment and regulation. This changed around the 1970s when US and UK shifted to neoliberal capitalism under the leadership of Ronald Reagan and Margaret Thatcher.
Is free-market capitalism better than keynesian capitalism?
No.
Does free-market capitalism lead to faster growth?
No.
Does free-market capitalism lead to better social mobility(poor people getting rich and vice-versa)?
No.
Is China's growth due to free-market capitalism?
No.
Does free-market capitalism lead to increased inequality?
Yes.
Does this mean that the benefits of economic growth don't reach poor people?
Yes.
Want more explanation? Visit Is “free market” capitalism the best way to reduce poverty?
Were the 1991 reforms responsible for India's increased growth rate?
As one expert notes, in the case of both India and China “the main trade reforms took place after the onset of high growth. Moreover, these countries’ trade restrictions remain among the highest in the world.” In India, its “trend growth rate increased substantially in the early 1980s” while “serious trade reform did not start until 1991–93 ... tariffs were actually higher in the rising growth period of the 1980s than in the low-growth 1970s.” Thus claims of “the beneficial effects of trade liberalisation on poverty have to be seen as statements based on faith rather than evidence.” [Dani Rodrik, Comments on ‘Trade, Growth, and Poverty' by D. Dollar and A. Kraay]
India's growth rate started to increase 10 years BEFORE the liberalization reforms.
Has the increased growth rate benefited everybody, especially India's poor?
Between 2004 and 2009 the National Commission on Enterprises in the Unorganised Sector (NCEUS) submitted its report.In its last report, submitted in 2009, the panel concluded that a large chunk of India’s informal workforce remained in deep poverty.The report pointed out that the neoliberal reforms of the early 1990s had not generated more regular jobs. The rise in employment that took place was nearly exclusively on a hire-fire basis within the informal economy. In addition, real wage rates had fallen rather than increased. Thus, these years of high economic growth had not resulted in higher average earnings.- Capitalism, Inequality and Labour in India byJan Breman
India's growth is not benefitting poor people.
Detailed Video:
What is the reality of China's growth story?
As Chomsky notes, there is a deliberate policy which “muddles export orientation with neo-liberalism, so that if a billion Chinese experience high growth under export-orientated policies that radically violate neo-liberal principles, the increase in average global growth rates can be hailed as a triumph of the principles that are violated.” [Op. Cit., p. 217] It should also be mentioned that both these states avoided the 1980s debt crisis by avoiding Western banks in the 1970s. They also maintain capital controls, so that hot money cannot flow freely in and out, and have large state sectors.
China started to grow NOT by de-regulation and privatization.
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