SPIRIT OF FREE ENTERPRISE

By RUSSI MODY

Summary

Russi Mody, then Chairman and Managing Director of the Tata Iron & Steel Co. Ltd., delivered this address on the ‘Spirit of Free Enterprise’ at a seminar of the Confederation of Engineering Industry (Northern Region) in New Delhi on 3 April 1991. The Forum of Free Enterprise reproduced it as a booklet on 14 December 1991. Mody opens by insisting it should no longer be necessary to debate free enterprise — its superiority has been demonstrated by every country, from Singapore and Korea to Britain and Germany, that has shed state controls. India’s poverty, he argues, is self-inflicted: the country is ‘literally and physically broke’ because successive governments since Independence have run an economy modelled on Russian planning instead of releasing the productive energies that Indians display so readily abroad.

The address moves through a brisk history of the modern world — the Industrial Revolution, the Fabian and Marxist reaction, the rise and collapse of the Soviet bloc — and lands on Adam Smith as the intellectual anchor of the case for self-interest disciplined by competition. Mody invokes Margaret Thatcher’s refusal to bail out loss-making state firms and Ronald Reagan’s 1982 tax cuts (which he credits with eighteen million American jobs by 1988) as practical proof that lower taxes raise revenue and that individual initiative is irreplaceable. He cites the figure that small enterprises employing fewer than twenty people generated two-thirds of US jobs from 1980 to 1986 to argue that India’s obsession with large-scale public-sector industrialisation, in the Nehruvian image, has been misguided.

The booklet’s sharpest passages target the Indian public sector and the regulatory apparatus around it. Mody calculates that Rs.110,000 crores have yielded essentially nothing to the exchequer — even a 10% return would erase the fiscal deficit — and blames parliamentary ‘question hour’ culture, secretarial micro-management from Delhi, and politicians who confuse ownership with the right to run industries they do not understand. He calls for the abolition of steel and coal controls, MRTP, most of FERA, STC and MMTC, and asks why airlines remain off-limits to privatisation. He closes by urging the business community to stop seeking personal privileges from government, to welcome multinational capital — citing Mexico’s costless expulsion of US oil firms as proof that openness does not compromise sovereignty — and to advocate openly for free enterprise rather than pay lip service in public while lobbying for favours in private.

Key points

• Mody frames India’s economic stagnation as self-inflicted by governments since Independence that imposed Russian-style planning instead of allowing free enterprise.

• He urges businesspeople to enter politics not as legislators but as advocates for raising the standard of living through enterprise rather than slogans.

• He marshals comparative evidence — Japan, Singapore, Korea, Taiwan, Thailand, the USA, UK, France and Germany — to argue that countries which ‘threw off the shackles of economic control’ prospered, and that Indians abroad consistently succeed.

• He defends Adam Smith’s account of self-interest channelled by competition as the mechanism by which private gains yield public goods.

• He invokes Reagan’s 1982 tax cut (which he credits with 18 million US jobs by 1988) and Thatcher’s refusal to bail out loss-making state firms as practical models for India to emulate.

• He argues the Indian public sector earns essentially nothing on Rs.110,000 crores invested; even a 10% return would erase the fiscal deficit then being reduced from Rs.8,000 to Rs.6,000 crores.

• He attacks bureaucratic and parliamentary interference — citing a steel-plant anecdote and a Minister’s ‘salaah dena’ to General Managers — as the reason public-sector firms cannot be efficient.

• He calls for dismantling MRTP, steel, coal, STC and MMTC controls and welcomes multinational investment, citing Mexico’s expulsion of US oil companies as proof that economic openness does not threaten sovereignty.

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