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Did President Obama Turn Full Circle in India?

8:01 AM, Nov 12, 2010 • By ANDREW B. WILSON
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Barack Obama traveled halfway around the world, traveling to Mumbai and New Delhi last week. He also executed a remarkable 179-degree turn in his political and economic thinking. In India, he declared himself to be a proponent of free trade, globalization and deregulation. 

Did President Obama Turn Full Circle in India?

Now that is an amazing change for this president. Whether it is a cause for hope, however, is a different matter. 

Seeking, as he said, to dismiss the “old stereotypes,” Obama laughed at the idea that “There still exists [in the U.S.] a caricature of India as a land of call centers and back offices” used by U.S. companies to “ship jobs and profits abroad.” Now that might seem a little strange, as he and his union friends have been promoting those very “stereotypes” ever since the beginning of the 2008 presidential campaign. 

But so it went. Within hours of his arrival, Obama declared that fast-growing India was actually helping to create jobs back in the U.S. Obama told the U.S.-India Business Council in Mumbai that the growing economic relationship between the two countries is “creating jobs, growth and higher living standards in both our countries.  And that’s the truth.”

Two days later, addressing India’s parliament in New Delhi, Obama congratulated India for doing away with a vast panoply of regulations – which had meant that private companies had to satisfy up to 80 government agencies before they were allowed to set up a new plant or produce anything. Said Obama in New Delhi:  “Instead of resisting the global economy, you became one of its engines – reforming the licensing raj and unleashing an economic marvel.”

As it happens, the president got this one right. India did do away with the License Raj in 1991 – and it has been growing rapidly ever since. 

When India gained her independence from Britain two years after the end of World War II, Jawaharlal Nehru, an avowed socialist and the country’s first prime minister, adopted the Soviet Union as the nation’s economic model. He instituted economic development through five-year plans and rigid controls over all facets of production that remained in the private sector.

In a book entitled Great Speeches of Modern India that I purchased on a recent trip to India, there are several speeches by Nehru that seem almost comical in their naïve belief in the power of the state to order up economic miracles. One of them is entitled “Temples of a New Age” – with the temples that Nehru had in mind being large public works projects such as the damming of rivers or the construction of state-owned steel mills. Here is a snippet from a speech that Nehru gave in 1955, which is overflowing with the socialist / Keynesian malarkey that was popularized by Gunnar Myrdal, John Kenneth Galbraith and others in the post-World War II era:

Mass production inevitably involves mass consumption, which in turn involves many other factors, chiefly the purchasing power of the consumer.  Therefore planning must take note of the need to provide more purchasing power by way of wages, salaries and so on.  Enough money should be thrown in to provide this purchasing power and to complete the circle of production and consumption.

Fast-forward from 1955 to 1991 – when India finally got rid of the License Raj that had been established under Nehru. By the early 1990s, the Soviet Union was falling apart and everyone – with the exception of a few centers of die-hard liberalism, such as Harvard University, the so-called “Kremlin on the Charles” – could see that the socialist /Communist economic model had proved to be an unmitigated disaster.

It was, in fact, Manmohan Singh, who has been India’s prime minister since 2004, who put the torch to the License Raj back in 1991. At that time, Singh was India’s finance minister. One can only wonder what he thought when he heard Barack Obama – who normally sounds like the second coming of Jawaharlal Nehru – singing the praises of deregulation and free enterprise.

So what happened to the Obama who put the “buy America” clause in the stimulus bill, who campaigns ceaselessly for greater government regulation across the entire spectrum of banking and finance, health care and health insurance, energy and the environment, and who constantly touts the advantages of “government investment” in ventures that win little or no support from private enterprise, including windmills, solar energy and electric cars? What happened to this License Raj Obama who constantly seeks to increase the power and scope of government at the expense of the free play of individual choice and economic competition?

Of course, it is not uncommon for a politician to speak out of both sides of his mouth. Politicians fall easily into the habit of telling people what they want to hear.  But in this instance, there was at least one telling omission – one thing Obama could not quite bring himself to say in praising India for following a set of policies that are diametrically opposed to those that he has pursued in the United States.

He could not bring himself to say: “Good for you, India.  You have done well in abandoning the dirty and blood-soaked banner from your socialist past – the banner of class warfare. Good for you for celebrating the success of your entrepreneurs and for letting your people know that they will be able to enjoy the fruits of their own success.”

That, truly, would have been a bridge too far for this president, who continues to harp on the idea that the “rich” in our country – defined by him to mean someone who makes at least $200,000 and who may have two children in college who cost half that amount on a pretax basis – are not “paying their fair share” in taxes. Upon leaving the United States for India, Obama appeared to be firmly resolved to raise taxes on everyone he broadly defines as “rich,” which includes many entrepreneurs and small business owners. And let us leave aside the little fact that top two percent of taxpayers in the U.S. are responsible for roughly 40 percent of all income tax revenues, while nearly half of all people pay no income tax at all.

If Obama has paid any attention to what has happened in India, he would know that today’s India is famous, among other things, for its growing number of billionaires. As Forbes noted in its annual survey of the world’s richest people:

India was one of the world’s poorest economies when it won its independence from Britain in 1947. Incredibly, 60 years later, the country’s emerging economic clout has made it Asia’s top spot for billionaires. This year, for the first time in two decades of wealth tracking, we counted more Indian than Japanese billionaires in our annual tracking of the world’s wealthiest people. 

India produced 36 people with 10-figure fortunes, worth a total of $191 billion, versus Japan’s 24, who are worth a total of $64 billion. Three Indians even made it to the list of the top 20 of the world’s richest.

It was a vastly different story in 1987 when we began tracking fortunes around the world. That year the only Indian family to make the cut was the Birla family, with a net worth of close to $2 billion.

You cannot travel around today’s India without being acutely aware of the fact that ordinary people have been inspired by the extraordinary success of its richest citizens. One finds the same kind of the-sky-is-the-limit attitude that characterized Silicon Valley (itself filled with a good many people of Indian descent) during the 1980s and 90s.       

Without a doubt, that is a great attitude to have. It is an attitude of people wanting to work hard and wanting to succeed – as opposed to an attitude of looking to the government to protect a marginal or unneeded job, or looking to the government to compensate people for being unable or unwilling to find a job.

Will President Obama become a convert to this way of thinking?

Not a chance, I would say.

Andrew B. Wilson is a writer and business consultant.

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