The recent anti-reform interventions on behalf of Ms Sonia Gandhi suggest that old-time anti-competition policies are back in political fashion.I don't know if the Bombay Club exists in theory, but it does exist in practice. And who is in this club? Members used to meet in smoke-filled rooms at the time Adam Smith wrote about them in the late eighteenth century; today, they have modernised and meet in wine-filled rooms or in cyberspace. But their intent and purpose remain the same""to fix the economy and prices for their own good, rather than the good of the nation, or the good of the aam aurat.The common perception that only men, and men industrialists, are members of this w(h)iney club is wrong. Times have changed, but even 200 years ago, policy makers were card-carrying members, if not leaders, of this pack. Just 60 years ago, as India embarked on being a "new" and different country, it did not manage to change the stranglehold of politicians (or industrialists). Indeed, Nehruvian policies accelerated the development of the Bombay Club by substantially increasing the role of government stupidities and thereby profits for Club members. The refrain of most politicians today is: "Thou shalt not do this, you will not do that. Well, yes you can, provided you supply me with funds to run this country. I do not need the money, I am doing it in service of the nation""but the party cannot exist on selfless individuals like myself".Thankfully, technology changed and the world became flat. Which meant that politicians, across the world, had less and less influence on the activities of individuals in the service of themselves (aam aurat is too aam to be selfless like the Gods). So the economies started to grow, and this further diminished the size, and the effectiveness, of the Bombay Club. But old habits die hard; most likely because people are loath to let go of "unearned" profits. It is in this context that some of the major initiatives of the UPA government have to be viewed. Let us start with the most blatant of them all""the recent missive by Ms Sonia Gandhi, the political leader of the government. She has been "reading in the media about Wal-Mart's proposed entry into India ... the desirability to first study the possible impact of 'transnational supermarkets' on the livelihood security of those engaged in small-scale retail operations ... you may consider having the relevant issues properly examined before further decisions are taken" (emphasis in the original Sonia Gandhi letter to the PM). This gentle reminder to the PM has put protection of the poor aam fruit- and vegetable-selling aurat as the top concern of this government. Economic reforms (globalisation) have only helped the rich. Time for aam aurat to have her day. Such a nice government you say. Let us elect them again (provided they have electorally correct sleeping partners). But wait a minute. Nowhere in this high command directive is mention made about big Indian businesses entering the retail trade of selling "fruits, vegetables and the like". Last I heard Reliance had entered the fruit- and vegetable-selling market, and even by international standards, Reliance is Big Time Big. So how does the Reliance entry into the retail trade not hurt your kirana shopkeeper but Wal-Mart does? Sorry, one never gained an answer by asking logical questions from our "in the name of the poor" politicians. Given the recent concern about inflation, and remedies for it, there is even more of the Bombay Club in Sonia Gandhi's directive. As noted by several commentators, the recent 6-7% inflation rate has been mostly caused by a surge in food prices, which in turn have been caused by supply shortages. In a flat world, there are no real supply shortages, certainly not in a medium-term sense (though 2006 did have a global cereal shortage). Competition is the only genuine force known to aurat to bring prices, and inflation, down. Scratch the hand of any individual, anywhere in the world, you find red blood. And red stands for greed, profits, and individual betterment. Which means that Reliance will not be true to its shareholders if it did not maximise its profits""which means that they should keep their retail prices as high as allowed by competition. And what the politician members of the Bombay Club are doing, by issuing a directive against the bad profit motivated foreigners, is prevent competition from happening, and inflation from decreasing. Perhaps the politicians are for the poor in name only. The recent SEZ intervention, again by Sonia Gandhi, is another instance of obfuscation, an intervention without regard to the facts. Land has been purchased from farmers, sometimes at very cheap prices. The impression is given that bad industrialists have exploited the poor yet again, hence the need for knights on white horses to help. If one looks at the details of the land acquisitions, one finds that several firms are paying a sizeable premium to acquire the land. So who's complaining? Those whose land has been forcibly acquired by the state, at significantly below average prices, and under the umbrella of "eminent domain". Throughout the world, there are clauses that allow the state to acquire land for the public good, e.g. a bridge, or dam, or highway. In most civilised countries, "eminent domain" is practised relatively infrequently and always with deep regard to the "market" price. In India (just ask Buddhadeb) the state and political party officials acquire the land by non-market methods. So what needs a review is not the SEZ policy but rather the policies and practices of the government and political parties. Some parts of the government are attacking the Bombay Club by advocating a reduction in import tariffs as a means of both helping India's growth momentum and in decreasing inflation. This is very sensible and deserves praise. But don't be surprised if there is another intervention disallowing such heresy. We must protect the aam industrialist""sorry, the aam aadmi. (ssbhalla@gmail.com)
