Kolkata club

It is of course obligatory for Communists to take the side of workers when it comes to a confrontation with capitalists. But what is the choice the Left makes when the trade-off is between consumers on the one hand and producers on the other (the workers, bear in mind, are both producers and consumers)?

Recent weeks have given a clear answer in favour: the Left will stand by the producers. So one of the ironies of recent times is that the Communist parties are increasingly beginning to sound like the Bombay Club of old, or the Swadeshi Jagran Manch, which explains why they’re rapidly becoming the new darling of the non-reformed sections of India Inc.

While one chamber of commerce has already invited Left leaders to talk to its members, other chambers are following suit. Ostensibly, this is being done to engage the Left, to show them the error of their ways even, but what’s striking is the similarity of views between the otherwise derided capitalists and the representatives of the proletariat.

The Left parties, for instance, are against any dilution of Press Note 18, which would allow foreign partners to start new ventures without the permission of an existing local partner—this is India Inc’s view as well.

The Left parties don’t want public sector units to be privatised and, their public protestations notwithstanding, India Inc is quite happy with such a situation since more often than not, PSU privatisation means other private firms, especially those from abroad, could end up getting stronger after taking over the PSU firm.

In the same way that Tata Iron enjoyed a market situation where all it had to compete against was SAIL, Reliance Petroleum will be happy if all it has to compete with is today’s public sector oil marketing firms.

If any of them is sold to an international player like Shell or BP, then life would get tougher. Ditto for several such industries. So why not clap silently from the sidelines as the Left opposes privatisation? India Inc, similarly, is quite happy with the Left view that FDI limits shouldn’t be hiked further; and both believe that reducing import duties is a bad idea.

The list goes on. It is a metamorphosis by which the erstwhile Bombay Club has been reborn as the Kolkata Club.

What’s unfortunate is that the government is accepting these arguments, knowing that they don’t hold water. The profitability of most PSUs (and you need to exclude the oil monopolists for a meaningful comparison) is barely half that of the private sector, and lower also than the government’s cost of borrowing.

Similarly, given that India is signing up free trade agreements, foreigners can set up shop in Thailand, say, and export into India—in which case, Press Note 18 only serves to divert investment away from India.

Economic policies tend to be rational if the focus stays on competition and giving consumers the best value, so that producers are kept on their toes. Since this delivers the maximum good for the greatest number, it is an argument that the Left should be making, not fighting.