The Nehru Heritage

Louis Fischer, in reviewing a book of tributes to Nehru published by John Day Company of New York mentions prominently a talk between Raja Rao (the Indian novelist settled down in France and Britain) and Jawaharlal Nehru. They met in Germany in 1930. Jawaharlalji’s wife was then ill and an inpatient in a sanatorium in Europe. Raja Rao talked of India and of life in general “with a touch of mysticism”. This, we are told, irritated Jawaharlal Nehru.

“Do you always speak like this ?“ exclaimed Nehru.

“You certainly believe in something, Panditji ?“ remonstrated Raja Rao. “In some form of Deity, in philosophy ?“

“Deity, what Deity?” Nehru exploded angrily. Three thousand years of that and where’s that got us — slavery, poverty”.

“East and East did not meet” observes Louis Fischer, commenting on this incident.

When I was at college seventy years ago, the Scotch professor who was in charge of our English studies used to ask us to put extracts from the text­books we read to logical tests and work them out. Let me try that exercise over this statement of the late illustrious Prime Minister of India. (A) Indians believed in the Deity and lived in more or less conformity with that belief for three thousand years. (B) They are a subject-nation and are poor. Does this prove that belief in the Deity and acting in conformity with that belief “got us” into political Subjection and poverty? I protest—with all respect and affection for my departed friend undiminished, the inference is illogical. It is a common enough fallacy which angry and excited men fall into. All that is proved is that belief in the Deity does not always serve to emancipate people from foreign rule and from poverty. It is not proved, as Jawaharlal Nehru thought, that giving up one’s belief in the Deity would restore people’s freedom or held a nation to become prosperous.

A change-over to atheism will not lift a poor nation to prosperity. It may by a fall in moral standards even make matters worse. Nor can atheism release nations from foreign rule “Russia is free and is prosperous; and the Russian rulers are atheists; therefore, atheism helps people to become free and prosperous”: this would not be a correct syllogism, any more than “Americans are Christians; they became free and are prosperous; therefore Christianity helps ,nations to emancipate themselves and become prosperous.

I remember what thrill Jawaharlalji felt when he was reading Sydney and Beatrice Webb denouncing capitalism and economic competition. He used often to refer to this in our Working Committee meetings, and Sardar Patel would be amused. In course of time when the British handed over to the Congress Party and Jawahailalji was, in deference to Gandhiji’s wishes, placed in charge, the fort was held against ruinous experiments— for some time. But after Vallabhbhai Patel’s death, began a slide to the commitment of India to extensive borrowing from abroad and to heavy expenditure for development plans. Finally India was by a party resolution ten years ago committed to socialism and central planning. The boycott of God also was adopted through the seductive and ambiguous phrase ‘Secular State’, which most people thought was a good answer to Pakistan’s adherence to the Koran and only meant impartial treatment of all religions, but which was in Nehru’s mind an approximation to the Soviet’s aggressively negative policy towards God and Religion. He felt that it was a strong and sound foundation for economic development as by implication he preached to Raja Rao in the Louis Fischer story. Central Planning and heavy investment in heavy industries, even if it had to be borrowed money, was put in motion along with the boycott of God. With, as we now see, disastrous results to democracy and to the national economy.

Prof. Jewkes has dealt with the inherent defects of Central Planning and the economic illusions of State enterprise in a very comprehensive manner in his three Lindsay Lectures which have been published in book form*. Prof. Jewkes has taken great pains to find the clearest language possible to explain what governments ought to do and in what fields of activity they ought to abstain from entering or at least put a time limit to their experimentations.

Professor Jewkes says:

De Tocqueville wrote - in 1830: Everywhere the State acquires more and more direct control over the humblest members of the community, and a more exclusive power of governing each of them in his smallest concerns . . . Diversity, as well as freedom, are disappearing day by day.

Forty and odd years later Cairnes wrote however: “We are all now familiar with such commonplaces as ‘individuals are the best judges of their own interests’; ‘monopolies should not be permitted in trade; contracts should be free’; ‘taxation should be ‘equal and should be directed towards the maintenance of the revenue and not to the guidance of commerce.

Even in 1926 Keynes referred to the strong bias in favour of laissez faire and of how State action to regulate the value of money, or the course of investment, or the population, provoked passionate suspicions in many upright breasts.

Since then there has been a great leaning to what De Tocqueville wrote. Prof. Gaibraith’s plea for a large shift in favour of public as against private spending is now well known.

Edmund Burke said that one of the most delicate problems in legislation was to determine what the State ought to take upon itself to direct by its wisdom and what it ought to leave with as little interference as possible to individual exertion. Prof. Jewkes- complains that social scientists, and particularly economists, do not perform their proper duties in a proper way but reconcile themselves to the idea that the main drift of the world is found to be determined by forces over which they have no influence. The role of the economist is increasingly limited as being only that of helping governments to operate more efficiently in their own direction. The economists abstain from raising fundamental issues and prefer to restrict themselves to “efforts to make the world run a little more smoothly along a track which they feel that society has in some mysterious way already chosen for itself’. In the debates and press comments which in democracies precede political decisions, “economic considerations get less than their proper weight and faulty economic reasoning too often ousts the sound one”.

In pushing forward schemes for replacing private effort by State ownership and official management, Prof. Jewkes refers to the tendency of governments to underestimate costs and exaggerate returns. It is no uncommon thing for governments to keep costs discreetly in the background or to dwarf their importance by assuming that they can be met out of some future hypothetical expansion of national income. In communities where the distribution of income is unequal and where taxation on income is highly progressive, it comes to be widely thought that the majority of people are benefiting and that a small minority are meeting the costs. Indirect taxation bears the brunt of the burden in India, and this affects the many and not the very few rich. Recent studies show that in Great Britain the great majority of people pay for their own social services in taxation, rates and social insurance.

So that in the tumult which accompanies the balancing of the less tangible with the more tangible items, the standard warning that you cannot have your cake and eat it or you cannot get more than a pint out of a pint pot, or the community can always afford anything, anything so long as it gives up something else: all these tend to get pushed to one side and the economist may understandably weary of the odium which he calls down upon himself by drawing attention to these truisms.

Prof. Jewkes calls particular attention to the consequences of the expansion in size of undertakings, which fail to be adequately anticipated by governments. It is a common place that every organization, as it increases in size, must face the danger that further growth will bring decreasing efficiency.

Every large private business, as it gets bigger, struggles, and ultimately without effect, to resist the inertia of size. The burden of size has been the outstanding difficulty of the nationalized industries. I have no doubt that the same is true of universities, churches, armed forces and so on. The evil day can be put off but not for ever. Highly relevant illustrations of this point have been provided for us recently by the industrial mergers, which have been so common in British industry.

It is easy to understand how seductive these mergers can be. One profitable firm thinks that by absorbing another profitable firm it will make two profits instead of one. What is often left out of this calculation, and indeed is extremely difficult to calculate, is that the increased administrative burden thrown on the directors of the acquiring film may stretch their powers to the point at which they perform their duties less adequately and the whole organization suffers in consequence.

“Cabinet Ministers, and even more so in the last resort Prime Ministers, have functions which only they can perform and which cannot be divided up or delegated. So that whilst it may seem that some new activity on the part of government has been successfully undertaken, it may be that in consequence there has been a loss of effectiveness elsewhere. Because of the total pressure upon him of Cabinet affairs”, says Prof. Jewkes, “a weary Foreign Secretary may miss a move in the search for peace, or a Chancellor of the Exchequer may be denied time to ponder over ways of improving methods of taxation or of preventing inflation. I wonder how many of the blunders made by politicians in our time have been made by men wearied beyond account or broken in health through prolonged overstrain.”

There is a dangerous fallacy which has, in this connection, been exposed by Prof. Jewkes. It is claimed that a government may take responsibility for some new public service but take the whole operation out of politics and thereby escape any increase in its own administrative burdens. “Experience in the past twenty years suggests that this view is naive. Nationalization has not taken industries out of the political arena. It has pushed them more firmly into it. Cabinets will always be tempted to court popularity by giving way to democratic pressures for the provision of goods and services on exceptionally favourable terms or to uneconomic ends”.

It has proved impossible to give any real meaning to the distinction between matters of national interest or major policy on the one hand and matters of day-to-day importance, on the other. The process of administration cannot be split up in this way. Wise policy on major matters can only be built up by careful scrutiny of day-to­day matters. No event, in the first instance, can be labelled as a minor or a major mailer. The manner in which a minor event is dealt with may determine whether it becomes a major one in the operation of the organization. The very choice of what is a major and what is a minor matter (which function must surely be regarded as part of major policy) can only be exercised through day-to-day attention to what would normally be regarded as detail.

Even if it seemed otherwise desirable that the Government should undertake some new task, it is not always able to collect the necessary knowledge and develop the techniques to do what it sets out to do.

Public enterprise relies to a much greater degree than private upon statistics and measurement as instruments of control. A small manufacturer, knows from long experience the details of his own business and will depend to a lesser degree upon figures than a government department which is operating a national industry and has to determine proper scales of output and correct regional and local distributions and so on. Some - eminent statisticians have for long been warning us of the rickety statistical structures upon which much ecoilomic, reasoning in these days is based. Quite recently, Professor Morgenstern has left us in no doubt as to the perils we run. He shows that even with American and British figures, which are perhaps the best in the world, critical statistics are being relied upon which have very wide margins of error.

According to Prof. Jewkes, the big error fostered by over-confidence in the accuracy of economic statistics is the belief that the economic future, can be predicted. “That way lies nothing but disenchantment” says the professor.

The odd thing is that economic soothsayers often believe that their long-term forecasts have greater reliability than their short; the further they are asked to probe into the future, the more confident they appear to feel that they can produce the right answer. “Perhaps”, observe the professor, “the fact that the day of reckoning, in these cases, is farther off has something to do with this attitude.”

Prof. Jewkes has not much difficulty in proving his point. He refers to Marx’s and Engels’s dismal predictions about capita-list countries which have become famous errors and to De Tocqueville’s prediction about the United State’s’ ship-­building and shipping industries, which also has proved famously erroneous. Experts have not learnt to avoid such mistakes made by their eminent predecessors in the past. Variable factors are even more numerous in the modern world.

Prof. Jewkes sums up what is as easy, as it is important, to remember, viz., that a government has nothing to distribute save what it first collects from the community, and that big organizations are not necessarily more efficient than smaller.

The professor would permit the State to undertake concerns displacing private ownership and management only when the following tests were passed by any such proposal:

1. Where a given expenditure would bring a larger economic return to the community but would not be undertaken by any private individual.
2. Where a given expenditure, although not necessarily yielding an economic return in the narrow sense, could nevertheless be shown to be really important to the general interest.
3. Where the individual in striving, in apparently rational fashion, for some benefit or the avoidance of some harm, would normally be led to take action which would frustrate his own purpose.

Size, far from being a virtue, constitutes the most persistent and troublesome problem in dealing with nationalized undertakings. This is a lesson which has been learnt in Great Britain. Nationalization has lost all its original attractions in Great Britain. But in India we have the experiment of the State Trading Corporation persisted in, notwithstanding the obvious handicaps arising out of size and heterogeneity incompatible with any effort at centralized management. That a State-managed monopoly can enable the Government to supply needy groups at low prices has proved to be an illusion. The plea is no longer heard now. The overhead charges arising out of bigness render such efforts futile. Even when a plan for improving the national level of economic prosperity has failed in respect of a near period, government expects to produce better results over a long period. “This is based on the extraordinary belief’, says Prof. Jewkes, “that the distant future can be more clearly seen and understood than the immediate.”

Prof. Jewkes is convinced that the deeper a government involves itself in the working of the economic system, the more likely it is that it will allow its so-called economic decisions to be vitally influenced by political expediency. Lastly, Prof. Jewkes poses the clinching question: The United States has a higher standard of living than other countries. To what can be attributed if not to private enterprise and a free market?

The Professor also makes a new claim that the free market is exercising a strong civilizing influence. The cocksure and dismal prediction of the Webbs that capitalism would lead to debasing of morals is not the way the world has gone. We have on the other hand, in India wide-scale debasement of morals, at all levels, as a result of the Permit-Licence-Quota raj replacing the free market. Positively, Prof. Jewkes claims, not without grounds, that “within the model of the free market lies one chance of smoothing the frictions which develop between men on the score of religion, race, colour or social values. The market is a great civilizer”.

Let us be warned, Prof. Jewke’s says:

The damage which is likely to follow when the attempted will be a function of the power possessed by those and their stubbornness in pursuing their aims. In the extreme when a government sets out to control from the centre all activity, success, of course, is unattainable. The government will be tempted to seize new powers over the individual and, confronted still with the inevitable failures, will look for scapegoats—citizens have not worked hard enough or have engaged in sabotage, or evil-intentioned foreigners. Some of the greatest tyrannies have origin in the frustrations of those who have sought to do good by methods which were doomed to failure.

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*   Public and Private Enterprise (1964). BY JOHN JEWKES, Routledge & Kegan Paul, London., Price: 12 sh. 6 d.