The Idea of India – In Defense of Capitalism

Why has India not again produced men of the same mettle as in the first half of 20th century? 

This is a question that has animated me for some time. Consider the quality of men that dotted the Indian landscape in the late nineteenth century and most definitively in the first half of twentieth century – Mohandas K.  Gandhi, C.V. Raman, S.N. Bose, Rabindranath Tagore, Srinivasa Ramanujan, Vivekananda – from politics to physics to literature to mathematics to spirituality. India produced men who would find place in any world history written on these subjects.

It is also not the case that these men were the only greats India produced. There were many more equally accomplished men who would forever find place in any Indian history – Jaishankar Prasad, Munshi Premchand, Meghnad Saha, Bhimrao Ambedkar, Vallabhbhai Patel, J.C. Bose, P.C. MahalanobisJamsetji Tata, Sri Aurobindo, and many more.

World history has shown that only those civilizations, and in modern context nations, that cross a particular “critical point” and then sustain, of what I term a “supply line” of historical greats, become the dominant civilization or nation of that era.  When the Greeks were dominating the Western Civilization, it was not basis military powers alone.  The foundation was laid by thinkers and philosophers and scientists and poets and astronomers and dramatists and mathematicians among others.  When this supply line of great men collapsed, the ancient Greek civilization collapsed too.

The same is true of the Golden Age of Gupta Empire in India. Some of the most well-known Indian works in astronomy and mathematics and literature took place during this period. From Aryabhata to Kalidasa to Vatsyayana to many others. Europe was able to dominate almost the entire world when the European nations crossed that critical point and then sustained the supply line.  Finally the turn came of United States to be that nation, from the start of the twentieth century and which continues till this date.

In each of these cases, there was a significant period, in some cases stretching up to hundreds of years, when the supply line of historical greats was sustained. Europe, which in many ways is like the Indian subcontinent with language being the basis of state boundaries, had almost a 300 year period during which it dominated the world. It was also the same period in which every new discovery and invention was taking place in Europe.  Sometimes post Copernicus, this critical point was reached and the Europeans, as if by some design, all worked together to keep that supply line going as long as they could – up to Bernard Shaw and Heisenberg.  United States reached that critical point at the start of twentieth century and has since then has been able to sustain it.

The question to be asked is this: Why was India, which did cross the critical point in early twentieth century, not able to sustain the supply?

The Background

India reached that critical point under the British rule. Several factors played a role. The British were a minuscule population in India. To be able to rule such a vast nation with such a large populace, they needed help of able Indians. Educated Indians, in Army or in courts or in bureaucracy or in various other institutions that ran the British Empire, became indispensable if the empire was to function. The British, therefore, recognized such people, rewarded them and helped the meritorious rise, as long as they did not challenge the British hegemony.  Indians on the other hand saw this as the only way to move out of their drudgery and destitution. They began competing among themselves to better exploit this opportunity since the benefits of success were immense – prestige, money, fame, title and the lifestyle like British.  They also realized that penalties of failure were severe too – confined to a life of third class citizenry where making ends meet was a daily struggle. There was huge gap between rewards and penalties. This was not a system of the classical nation-state promoting its best and the brightest in a fair and just manner but more a perverse system where motive was to control India through cooperation of Indians. The unintended consequence though was the same as what a system promoting fair competition between different merit levels would have achieved.

The British could not have done it any other way either. As Niall Ferguson argues in his book, “Civilization: The West and the Rest”,  out of the six killer applications that helped the West gain lead over the rest in the last 500 years, competition was the most important.   There was no defined economic system based on rules or laws that promoted it. Rather it started as a mad rush for spices and cotton and other goods of trade that fueled this competition.  There was a race to outdo the other for a share of the world market.  The prize of success was immense – not only economic spoils but increasingly colonies too.  All efforts were directed towards out doing the other nation, or even the other city. Gradually as the nations evolved, the economic system evolved too with passage of laws and practices instituted. What started as wisdom of natives evolved into a codified system which came to be identified loosely as capitalism. This evolution happened over many centuries. The British who ruled India had come from this evolution. They knew only this way and no other way. They implemented this way in India too – a variant yes, but in many ways the same system of rewards and penalties, at least at the individual level.

The Europeans were actually lucky in one way. When they reached the critical point, in early sixteenth century, there was no codified economic system to be followed. There was only battle of survival after the dark ages. There was no central authority telling the people to do something – rather, everyone was free to do what they felt capable of doing.   This is true of America too when it reached its critical point.  United States had learnt its practices from Europe, most notably England, and when it reached the critical point, the rules of capitalism and socialism were still being written. European in ethos, adopting a system which would smother the individual enterprise was anyways out of question for the United States.

When India became free however, in 1947, capitalism and socialism were already well defined. India did not have the luxury of either Europe or even United States to evolve a system – it had to simply choose. To sustain the “supply line”, India had to choose the economic system that encouraged unbridled competition and follow the path that other civilizations / nations had taken to sustain excellence. The only economic system that promotes unbridled competition is capitalism. Nehru however, chose socialism and not capitalism. Thereby he sealed the history of India.

In Defense of Capitalism

At the very core of capitalism is competition. While capitalism is primarily thought of as an economic policy and therefore having an effect on the economy, what effects does it have on society? More specifically, what effect does competition, the very heart of capitalism, have on society? Consider a passage published in New York Times in January 1887.  This is an extract from Prof W.G. Sumner‘s essay in Popular Science Magazine.

It is often affirmed, and it is true, that competition tends to disperse society over a wide range of unequal conditions. Competition develops all powers that exist according to their measure and degree. The more intense competition is the more thoroughly are all the forces developed. If, then, there is liberty the results cannot be equal; they must correspond to the forces.  Liberty of development and equality of result are therefore diametrically opposed to each other. If a group of men start on equal conditions and compete in a common enterprise the results which they attain must differ according to inherited powers, early advantages of training, personal courage, energy, enterprise, perseverance, good sense, & chance. Since these things differ through a wide range, and since their combination may vary through a wide range, it is possible that the results may vary through a wide range of degrees. Moreover, the more intense the competition, the greater are the prizes of success and heavier are the penalties of failure.

Let us revisit two sentences, in bold, in the above passage and read them again. Liberty of development and equality of result is what the first sentence talks about.  Which is the economic policy that India has followed since Independence – Socialism? What is at the core of socialism? The intention to achieve equality of result for the greatest number of people, if not all. Who implemented this policy? Jawaharlal Nehru, India’s first Prime Minister. It was not necessarily the policy of the wider Congress party then. In fact, there was a great divergence of views on the economic path that India ought to take post independence – a group led most notably by C. Rajagopalachari (Rajaji) was for free enterprise and trade. However, Nehru, because of his political closeness to Gandhi, eventually won the leadership battle and so did his economic ideas. Fabian socialism became India’s founding economic policy, where state controlled the ”commanding heights of the economy.”

Consider what Rajaji wrote in December 1959 on Nehru’s economic policy (excerpted from Ramachandra Guha’s Makers of Modern India):

The major fault of centralized, comprehensive planning is that it imposes a monolithic burden on a people composed of diverse elements at all levels and in all occupations. The achievements that it might show in a few selected areas are bought at the cost of freedom and enterprise of individual. The individual and his creative ability are smothered by a proliferating bureaucracy and innumerable rules and regulations…….Planning has proceeded in our country on the assumption that people do not know what is good for them and, therefore, they must be told what to do. It has proceeded on the basis that a few bright persons are omniscient and are capable of directing the destinies of the nation in an infallible manner.

This then was Nehru’s economic policy – a few bright persons directed the destinies of the nation at the cost of freedom and enterprise of individuals. Liberty of development was compromised for ensuring equality of result.  Individual merit was throttled for achieving a greater common good as determined by a few omniscient men.

The second sentence in bold from Prof. Sumner’s essay, which talks about the prizes and success and penalties of failure, is actually the effect that an economic policy has on society.  Competition, the keystone of a capitalistic economy, where liberty of development is ensured, offers differing incentives depending on success of failure. A socialist economy on the other hand, where equality of result is sought to be artificially achieved, smothers the individual and his creative abilities. There is simply no great prize for success neither is there a sufficient disincentive for failure. Everything is bulldozed into sameness for ensuring equality.  The effect of socialism is twofold – on the economy and on the societal mindset. It is that latter which is more detrimental since it eliminates all incentives for success and disincentives for failure. Why would anyone work extra if the end reward is same as for the one who does not work at all?

In the British era there was no unified aspiration for an educated person. Lawyers or scientists or poets or mathematicians, irrespective age or formal qualifications, were all welcome as long as they had an idea. In Nehruvian India, the best and brightest aspired to be IAS. That was the ultimate goal. A young scientist, even with a breakthrough idea, would get no additional incentive than another who was a plodder. Equality of result was to be achieved.  So scientific genius stopped being the criteria of advancement in the universities – rather it came to be strictly decided on numbers of years of service and with other inflexible rules and regulations.  A plodder would get preference over a bright young mind that perhaps did not fulfill the criteria in triplicate.  Many such young people left India in the 1950s and 1960s and settled in the United States. One became a Nobel laureate while another came back to India forty years later to operate on the knees of the then Prime Minister.

As the generation changed, and people born after independence started becoming adults – two things happened. One, the socialism of Nehru became the state authoritarianism of Indira Gandhi. Individual enterprise was now almost a criminal offense. The sameness sought to be imposed became even more intense. Whether one worked extra or did not work at all hardly mattered. The result would be same for both. There was neither penalty for no work nor incentive for brilliant work. Second, this generation’s mindset was shaped by their parents who saw a stable government job as the be all and end all of all aspirations. This is where millions of free exploring minds, like Ramanujan, would have been killed in childhood itself.  A few outliers that would beat this mindset would be taken care by the system. A few, who would still not be satisfied, engineers from IITs, started settling in the US and UK. There they would set up world-class companies or become Professors in the best universities in the world. India, which could educate them, simply did not have the economy to employ them. As the generation changed again, the mindsets got reinforced again. There was no incentive in being a poet or a writer or a scientist or a dramatist. It would mean living a life of hardship at best. Socialism had by now done its work. Prof Sumner, in his essay argues further:

We can take prizes away from the successful and give them to the unsuccessful.  It seems clear that there would soon be no prizes at all…..competition does not guarantee results corresponding with merit , because hereditary conditions and good and bad fortune are always intermingled with merit, but competition secures to merit  all the chances it can enjoy under circumstances for which none of one’s fellow-men are to blame.

Nehruvian socialism took away all the prizes from the successful to distribute it equally among the deserving and the undeserving. Soon enough there were indeed no prizes at all. That was the economic effect. The social effect of Nehruvian socialism was that it killed individual enterprise and perhaps killed, or at least substantially delayed, India’s rightful destiny.

As the battle rages for Idea of India in the 21st century, there is only one man, THAT MAN from Western India, who is talking of conclusively dismantling Nehruvian socialism and bringing in capitalism. THAT MAN may be our only chance to start that supply chain again.


Updates :

1. This piece was first published on Centre Right India (CRI) website on 19th March 2013. Here is the link .

2. The same article has been republished on Friends of BJP website. Here is the link .


6 thoughts on “The Idea of India – In Defense of Capitalism

  1. Anant says:

    Brilliant argument. I have also wondered the sudden drying of talent pool in 2nd half of 20th century in India and the critical pt-supply chain theory provides a very cogent argument. However, the last para spoils it. Some restraint would have allowed the reader to think for him/herself the way out of the economic morass. Probably you were just trying to be true to the title of your blog. 🙂


  2. Tushar Pandey says:

    A fair analysis… justifying capitalism Ayn Rand style is always appealing. However, crediting the brilliance of Gandhi, Tagore and Vivekanand to the perverse competition created by the British seems bit of a stretch.
    India, as we know it today, is a fairly young entity. Looking for the remnants of the past glory in the present day India is futile since 200 years of colonialism resulted in almost a clean break from our illustrious past and we are back to starting from a scratch. With that in mind, it would perhaps be worth pondering if modern India is yet to reach it’s ‘critical point’. And we might still get there in due time in spite of the false start that socialism gave us.
    Burdening ‘THAT MAN’ with the onerous task of starting a supply chain is a little premature since the jury is still out on whether he himself constitutes a part of that supply chain.
    Lastly, the political overtone at the end tends to convert a thought provoking piece into one-sided sloganeering with definite bias. It’s worth reconsidering that approach.


  3. editorofrcak says:

    Sub – Republishing “The Idea of India – In Defense of Capitalism”


    I am the Editor of “Spark” which is an online blog run by the Rotaract Club of Athena’s Knights (Rotaract is the youth wing of Rotary). Our Blog can be found at

    We would really want to republish your piece on “The Idea of India – In Defense of Capitalism”. I must say. it is an excellent analysis.

    It is our object to inform and educate the national conscience of our people, in whatever small way we can. This piece is potent enough to allow for a rethink on the way our people perceive India’s future.

    Kindly allow us to republish the piece



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