Atanu Dey On India's Development

How much did the Congress Cost India?

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We all know that politicians by and large are corrupt. They steal from the public by a variety of means, ranging from kickbacks on purchases (defense equipment is a favorite) to allocation of scarce resources (radio spectrum and land are examples.) But as I have argued before on this blog, public corruption is a consequence of government control of the economy which is mandated by Nehruvian socialism. Being in control of the economy is hugely privately profitable. The profits from public office are well publicized. That’s one side of the equation of profit and loss. What about the loss?


I think we have to be more mindful of the loss.

If A were to steal $10 from B, then B’s loss is A’s gain. That’s a zero-sum transfer. But if A’s gain of $10 were to impose a loss of $100 on B, then that’s a negative-sum transfer.

In the case of public corruption brought about by government control of the economy, the loss is negative-sum. The loss to the economy is orders of magnitude greater than the gain that the corrupt politicians make.

I have done an order of magnitude calculation of how much India has lost over the last 60-odd years. It comes to a staggering $120 trillion ($120 million million).

India’s actual rate of economic growth averaged over 60 years is around 2.1 percent per year, what I call the “Nehru rate of growth” because Nehru was the principal author of India’s socialist development policy. As I argue below, it is one of the greatest man-made disasters in the world. It was totally flawed, and the misery that it caused (and still causes) was entirely avoidable. Considering the present state of India is distressing but it is useful if considered side by side with an alternative that was possible. The counterfactual has to help move us to take a different path. Later on in the series, we will discuss what we have to do.

In the alternative scenario, I used a 6 percent long-run average annual per capita growth rate. Is that reasonable? Yes it was easily possible, and what is more, it still is. India is large, just like China. In 1978, they were both at the bottom of the economic heap, neck and neck in most measures of economic development. China got lucky and its leader Deng Xiaoping (1904 – 1997) steered China out of the socialist trap and made it into a market economy open to foreign investment. China’s economic growth was impressive, to say the least. Over a period of 30 years, it grew at an average around 8 percent annual growth rate. Today China’s economy is at least four times larger than India’s.

India could have easily become a market-oriented, open economy by 1950, and had an average 6 percent annual growth rate for 60 years to become at present a middle-income country. India’s per capita annual income could have been around $10,000, ten times of what it actually is. Its GDP could have been $11 trillion, and India, instead of China, would be the largest economy in the world second to the US.

Economic growth at 6 percent annual rate works marvels. India would have eradicated poverty by 1970. Around 1950, India had around 250 million below the poverty line (out of a total population of less than 400 million.) Today it has 700 to 800 million below the poverty line. That’s what Nehruvian socialism has achieved – a tripling of the absolute number of poor people. Had India followed the alternative model, mass scale poverty would have been history in less than a generation. Today the problem of poverty is much harder to solve because the solution has been delayed so long.

Mass scale poverty has its fellow travellers. India has the largest number of illiterates in the world. India has the largest number of malnourished people in the world. Reports indicate that around half of India’s children below the age of five are malnourished. The overwhelming number of Indians do not have clean drinking water, access to toilets, access to schools, health care, . . . the list is long and heartbreaking. Rural Indians eke out a Hobbesian existence: “solitary, poor, nasty, brutish and short.” Indian farmers are a distressed lot, and one famous journalist has made his entire career solely by reporting on farmer suicides.

The above is from this post. It is worth reading, even if I say so myself.

So to answer the question posed in the title of this post “How much did the Congress cost India?”: The Nehru-Gandhi-Maino-Vadra government has cost India $120 trillion and counting.