Has the global economic slowdown scripted the death of free market capitalism? Many western economists and rulers hold the view that capitalism should change its course if it wants to survive. But Guy Sorman, a renowned French economist and author of 20 books, believes the opposite. He says free market doesn’t have a successful alternative.
In an exclusive interview with Zeebiz.com’s Stanly Johny, Sorman defends the crisis-hit freemarketism and explains why India is a far more reliable and sustainable model of development than China.
Sorman’s latest book, “Economics Does Not Lie” was released in the capital city last week.
You appear to be strong defendant of free market economic policies. India is also undergoing fast-paced economic reforms. Though the country has become the second fastest growing economy in the world, the critics of India’s growth story say the rich are becoming richer and the poor are becoming poorer due to globalization. What do you say?
It’s not true. The gap between the poor and the rich is increasing. But it doesn’t mean that the poor in India are becoming poorer. The living conditions of the poor are improving as the emerging middle class is now a strong force. The trickle down effect is also working in India. When the people in the upper strata are making wealth, it will trickle down to the people living in the bottom. You look at India’s villages now. Where were they standing 20 years ago? There’s a remarkable improvement. Peasants are using new technologies to improve productivity and they are getting good prices for their produces.
How do you look at India’s future?
India is first a democratic country. In democracy, there is always a pressure on the government to improve the situations. In India, people are asking for improvement and they are getting it. If you look at the past 20 years of liberalization, you can see how innovation and entrepreneurship have unlocked progress in this country. The new economic dynamism has given hope to its people. I think Indians are aware of the new opportunities being created by the expanding market. There’s a vibrant civil society and people are committed to innovation and freedom. See, how many NGOs are working in India. These NGOs are empowering people and helping build an active civil society. Tamil Nadu is the best example for this.
But in the heartland of the country, a rebellion is taking roots. Naxalism is getting stronger at a time when corporate India is booming. What do you think?
Yeah, this is a big problem. I don’t have an answer to this. Land problems are there; poverty problem is there. The government has to address these issues seriously. I don’t know whether Maoism is a pure political rebellion. I think, India is a victim of its own success. If there is no growth, no development, there is no crisis. When the country is growing, expectations are also rising. And if the government cannot rise up to these expectations, crises emerge. So there’s an ambiguity.
Do you think India survived better the global economic crisis? The critics of free market policies in India say the country fared better because its financial industry was under state control.
No doubt, India survived better. But it’s not because the state was in control of everything. The prime reason is that India’s domestic market is very strong in comparison to other countries. India is not totally dependent on the global economy. So the government adopted policies to strengthen the domestic consumption during the crisis, which paid off. And the state, of course, played its role. I am not a radical free marketist. Economy is a trade off, you know? The states have an important role to play.
There’s always a comparison between India and China in terms of economic progress. But if you look at the figures, you can see India is far behind. What is the reason in your opinion?
India is not No 2 in comparison with China. It’s true that if India’s economic growth rate is slower than China. But if you bring in other parameters like democracy and freedom, development in human terms is much more promising in India than China. People in India are more respected.
But many writers now argue that China is on its way to becoming the next super power.
Economy is not a race. You have to look for what’s better for the people. The problem with China is that people don’t have any choice in there. It’s an authoritarian system. The government decides what’s to be done and they just do that. Nobody knows whether Chinese model is sustainable or not.
I have been to China many times. Though cities in China are better, rural China is far behind India. There are no schools and no employment. Wealth distribution in China is very narrow. I can’t compare Indian society and Chinese society. In India there’s more or less a consensus on what the people want. In China, there’s no consensus. It’s authoritarian. I was in Beijing a week ago. I went there for a specific reason. Most of my friends are in prison. They are known Chinese intellectuals. They want freedom and democracy and they wrote on that. For that they were imprisoned. Imagine, that kind of incident happening in India! It’s impossible. That’s why I said, Chinese model is less sustainable.
So you think free market is the future?
Yes it’s is. Free market gives people the possibility to choose the life they want. It’s the most efficient system and it’s good for the poor. If we build right institutions and if the people are given opportunities to work, they can progress. Given the current market crisis, economic fundamentals have become all the more crucial for us and its significance is evident in every sphere. Before pointing fingers at the free market revolution, policy makers need to keep in mind its benefits.