The Chinese and Indian Corporate Economies by Raj Brown

Author:Raj Brown [Brown, Raj]
Language: eng
Format: epub
Tags: Social Science, Ethnic Studies, General, Regional Studies
ISBN: 9781317398325
Google: IEUlDwAAQBAJ
Publisher: Taylor & Francis
Published: 2017-02-03T04:31:17+00:00

The state, inertia and legal uncertainties after 1980

The dominant narrative of the 1950s to the 1980s is state domination, nationalization and the emergence of state-owned enterprises, together with the renaissance of Indian family business. The pre-independence Indian capitalist class, the Birlas and the Tatas, benefitted from the ambiguities surrounding state intervention and non-intervention. Apart from moving decisively into associated operations with nationalized industries after independence, these powerful family groups were locked in internal value chains of industrial production, despite falling competitiveness. The explanation of decline is in the rise of Japanese competition in textiles in intra-Asian trade, and even here the Indian state maintained import restrictions that ensured the absence of competition. In automobiles, tariff protection was another advantage for these family entrepreneurs. Mass production techniques applied by the Japanese would have been a serious challenge to Indian corporations.

There was also loss of competitiveness arising from foreign exchange controls right through the 1950s to the 1990s. Important here was an inability to improve capital stock within manufacturing through the scrapping of old equipment. We have no consistent figures on output, employment and labour. However, the recession of 1980–83 exposed the productivity of specific corporations. India’s priority in state allocated funding reveals the distortion of the market, particularly in agriculture and in rapid industrialization. The cosiness of the interventionist state undermined the pressure for structural change in coal, steel, iron, textiles and automobiles. Inflation was high. The large budget deficit and huge foreign debt in the 1980s, aggravated by recession, forced the state into economic liberalization and increased FDI inflows into strategic industries, such as electronics and the high technology sector, the motor industry and chemicals. The collapse of the Soviet Union and rise of China added to India’s tribulations. The core concerns were increasing exports and reducing the budget deficit.

The high dependence of the Indian firm on the stock market as early as the mid-19th century did not always divorce shareholder ownership from managerial control. Indian private firms, the Tatas and Birlas, were not Schumpeterian but oligopolists, with close links to the state in both the colonial and independent eras. It can be argued that intervention by the state in industry contributed to India’s poor economic performance compared to Japan’s in the post-war decades. Japan’s government supported Japanese firms and prevented foreign acquisitions of their companies. Japanese industrial corporations grew from the Meiji Restoration to the present because of state policies, but also because of long-established institutions, attitudes to borrowing new technology and, above all, economic patriotism. Japanese success in electronics and automobiles was due to state assistance and skilled labour but also to the existence of subcontracting institutions within the sogo shosha. The Indian imposition in the post-war decades of protective tariffs, exchange controls and other barriers to competition, only worsened the institutional defects of slowness and inertia in applying science to industry. The Indian government appeared ignorant of the importance of structure and the organization of industry. All it did was expand its interventionist, crony-capitalist, role until the

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