Are There Monopolies and Concentration of Economic Power in India?

Summary

Are There Monopolies and Concentration of Economic Power in India? is a short Forum of Free Enterprise booklet, published in Bombay in July 1964 and printed by M. R. Pai. The Forum frames the booklet as a dispassionate intervention against what it calls ‘ill-informed talk’ on monopolies and concentration of economic power, and reproduces two newspaper articles already published earlier in 1964 — H. Venkatasubbiah’s ‘A Naive Analysis of Economic Power’ (from The Hindu, 9 May 1964) and Arvind Narottam Lalbhai’s ‘Government’s Obsession with “Monopolies” — A Threat to Economic Progress’ (from The Economic Times, 15 April 1964) — together with an Appendix of selected quotations from Wilhelm Roepke’s Economics of the Free Society.

The argumentative centre is a sceptical reading of the Mahalanobis Committee on Distribution of Income and Levels of Living: Venkatasubbiah’s piece dissects what he treats as the Committee’s conceptual confusions between wealth, economic power and decision-making power, and argues that a politicised concentration of economic power in the State is no remedy. Lalbhai goes further, arguing that the ‘monopolies’ under attack do not in fact exist, that the Government’s anti-concentration policy itself produces sellers’ markets and inflation, and that ‘if capitalism is bad, State capitalism is worse’. The Roepke appendix and the closing A. D. Shroff and Eugene Black aphorisms tie the booklet’s particular Indian arguments into the Forum’s broader classical-liberal frame of free enterprise as an ‘affirmative good’.

Essays

A Naive Analysis of Economic Power

By H. Venkatasubbiah

Venkatasubbiah’s article — reproduced from The Hindu of 9 May 1964 — is a close, sceptical reading of the Mahalanobis Committee’s third term of reference, which asked the Committee to ascertain how far the operation of the economic system had concentrated wealth and the means of production. He argues that the Committee elides three distinct things — wealth, economic power, and decision-making power over the disposition of capital — and that the Indian situation is in fact ‘much more complicated’ than the equation of wealth with power allows: small capitalists with access to ministerial cells may wield more economic power than big ones, caste matters, and workers’ organisations may exert as much productive influence as employers’.

From this analytical base he attacks the Committee’s preferred remedy of building ‘countervailing economic power’ through enlargement of the public sector. He contends that the answer to one form of concentration cannot be another form of concentration; that public-sector personnel, once given economic power, are not freed from the political pathologies the Committee fears; and that the Vivian Bose Commission’s enquiries into the Dalmia-Jain group show that the real problem is not the existence of decision-making power but policing it. He closes by noting that the Committee has done no appreciable original work, and warns that planning that cannot reconcile growth with social justice will leave India with ‘a distribution of poverty’.

• Argues that the Mahalanobis Committee on Distribution of Income and Levels of Living conflates wealth, economic power and decision-making power, producing a ‘naive’ analysis.
• Holds that in Indian conditions small capitalists with access to ‘cells of Ministerial power’ may be more powerful than big ones, and that caste is itself a factor in economic power.
• Rejects the Committee’s prescription of enlarging the public sector as ‘countervailing’ power, calling it the answer of one form of concentration by another.
• Concedes industrialisation has ‘its own logic’ — economies of scale and use of scarce talent cannot be sacrificed to fears of concentration.
• Reads the Committee’s posture as recommending restriction of the private sector’s scope relative to the public sector in the Fourth and subsequent Plans, while doing little original data work.
• Closes with the warning that an Indian socialism that fails to reconcile growth with social justice will deliver only ‘a distribution of poverty’.

Government’s Obsession with “Monopolies” — A Threat to Economic Progress

By Arvind Narottam Lalbhai

Lalbhai’s article — reproduced from The Economic Times of 15 April 1964 — is a polemic against what he calls the ‘Governmental obsession’ with monopolies, arguing that the alleged Indian monopolies ‘simply do not exist’ and that the Government’s anti-monopoly policy is itself the cause of the sellers’ markets, scarcity and inflation it claims to fight. He treats the textile industry as the prime victim, hamstrung by restrictions on capacity expansion ‘for the protection of the handloom and power-loom industries’ and by ‘misplaced fears of concentration of economic power’.

He defends profit as ‘an index of efficiency’ and ‘a must for the continuance and growth of all economic activities’, distinguishes it sharply from profiteering, and argues that small re-invested concentrations of capital in the hands of a few entrepreneurs are precisely what an early-industrialising economy needs. Citing Fortune magazine’s 1963 list of the 500 largest U.S. corporations — reproduced on p.13 as a data exhibit comparing General Motors and the 500th-ranked Interlake Iron — he contends that Indian firms are ‘only a dwarf’ before American counterparts, and that the United States’ anti-monopoly framework operates through courts to prevent collusion rather than to prevent diversification. The article culminates in the claim that bureaucrats armed with both political and economic power are a worse danger than private monopoly: ‘If capitalism is bad, State capitalism is worse and here lies the greatest danger even for the future of democracy in India.’

• Argues monopolies in the strict sense — single firms able to manipulate price and supply — ‘do not really exist’ in India; what exists is Government-induced scarcity.
• Holds that the controls-and-fair-price-shops mentality treats symptoms not diseases, and that competitive markets are the only true antidote to monopoly.
• Defends profit as a legitimate return and the only sustainable basis for industrial growth, sharply distinguishing it from profiteering.
• Praises diversification of company funds across activities as ‘the libido of prosperity’ and attacks Company Law restrictions on inter-company investment.
• Uses Fortune magazine’s 1963 league table to argue Indian firms are ‘a dwarf’ beside U.S. corporations and that concentration in early industrialisation is desirable.
• Concludes that public-sector accumulation of both political and economic power is more dangerous to Indian democracy than private monopoly: ‘State capitalism is worse’.