When President Barak Obama won the 2008 Presidential election, it was a transformational event for America and the world. History was made in America because he was the first African-American to get elected to America’s highest office. An even greater story was his message of hope and change for the world. A world, tired of the Bush wars and his strength-based message, looked to Barak Obama as a messenger of peace and respect. This charismatic man was a great speaker and he had that unique ability to inspire people by his words.
At that time, we thought of another period when the entire world was fixated on one man. That period was 1947 and that man was Jawaharlal Nehru. India’s non-violent freedom movement had captured the world’s imagination, a world that had just experienced the brutal ravages of World War II. Jawaharlal Nehru, the Cambridge-educated, charismatic leader and great inspirational speaker, symbolized the non-violent movement based on peace and an unsurpassed hopeful vision of the future. Nehru was virtually idolized by the world and his jacket became a fashion symbol.
The more we think, the more convinced we become of this parallel between these two leaders. Both leaders went to expensive prep schools and then to prestigious universities, Obama to Columbia-Harvard and Nehru to Cambridge. Both became lawyers but neither really practiced law for a living. Both moved into politics and served their communities before running for national office. Both leaders were intensely idealistic and entered their executive offices with an agenda shaped by their ideals. Neither had ever run a business, managed a payroll or earned money in a commercial profession before becoming leaders of large, diverse countries.
The popularity of both leaders and the awe in which they were held in their own countries and the world muted protests by politicians who opposed their agenda. Both leaders professed to work with their opposition, but in reality both leaders had the ability to pass any bill or law they wanted to. Both leaders knew how to marshal popular appeal into legislative muscle and their agendas passed without any real struggle.
In sharp contrast to their public posture, both leaders became virtually dictatorial in private and concentrated virtually all executive decision-making in their personal offices – their political advisers and close confidants. The Cabinet Ministers in Nehru’s India virtually became nodding-heads and merely carried out their leader’s policies. The Secretaries in Obama’s America have virtually become nodding-heads and merely carry out their leader’s policies.
Nehru took the reigns of power more than sixty years ago. Today, we know the successes and failures of his policies as well as the impact they had on India.
Obama took the reigns of power six months ago in January 2009. During these six months, Obama has revealed his agenda and much of it has passed.
We think it would be instructive to use our Nehru-Obama analogy to look into the future.
Before Nehru, India was a bigger economy than other Asian economies, including China. India was blessed by substantial natural resources and fertile agricultural farmlands.The per capita income of India was greater than that of any other Asian economy. Before Nehru, the Indian economy was essentially a small-business economy. There were numerous large business houses like the Tatas, Birlas and others. But, small businesses across the vast land created most of the jobs and provided most of the income.
Nehru was an economic idealist as well as a social idealist. Having never run a business or worked in one, he was impatient with what he saw as a inefficient collection of small businesses that were run purely for profit of the owners.
Nehru’s core belief was that involvement of the Government was imperative to the success of an inclusive Indian economy, an economy that would work for the good of the country and for the benefit of the workers rather than purely for the profit of the owners. He was impatient with those who did not agree with him.
Nehru created various commissions to draw up plans for different sectors of the economy, plans that his Government would implement and monitor. To coordinate these various commissions, Nehru created a central Planning Commission and staffed it with the best and brightest economists, labor leaders, social activists who supported his vision.
These commissions set up large, centrally run companies in critical and labor-intensive industries such as Power, Steel, Oil, Airlines, Shipping to name a few. These were called Public Sector Enterprises (“PSUs”). The heads of these large PSUs were appointed by Nehru’s Government. The centralized Planning Commission would set goals and objectives for these PSUs including production quotas, executive compensation and labor policies. To protect the rights and interests of the workers, labor unions were set up and encouraged. Nehru and the ruling Congress Party knew that these labor unions would become reliable vote banks.
Nehru also expanded the Indian Administrative Service (“IAS”) and created other government agencies to monitor the economy and his reforms. These government agencies regulated formation, functioning and closing of new businesses. When a private entity wanted to set up a factory, they had to line up in the relevant government bureaucracy to get the necessary licenses and then that factory was given a quota which they could not exceed without the regulator’s permission. Imagine, telling a factory that it cannot produce more than its license allowed.
The results were predictable. The average Indian learned quickly that the path to a secure, prosperous and respected life was a government job. They would get a good salary, get pensions and get real respect from businessmen who had to come to their offices to beg for their permission. Corruption spread like wild fire in this “License Raj”. The unfortunate consequence was that the entrepreneurial driven of the Indian economy was put out.
The PSUs turned into bloated enterprises and became an enormous drain on India’s budget. Finally, when India became virtually bankrupt, Finance Minister Manmohan Singh launched his reforms to privatize or sell these PSUs.
This is not just history. This year, in June 2009, Air-India, a prominent PSU announced that they had run out money to pay salaries. The labor unions threatened to shut down the airline and the Singh Government intervened to provide a bailout. But, this reform-minded Singh Government refuses to privatize Air India or sell part of the Government’s stake to private investors.
It is a matter of record that India’s economy under Nehru became inefficient, bloated and fell behind its peers in Asia. Despite the high growth rate of the past 5 years, India ranks far behind China, Korea, Thailand and other Asean countries in every measure of economic prosperity.
When we look at Obama’s economic agenda, we feel we have seen this movie before. We have – in Nehru’s India.
Obama has concentrated all economic decision making in his various task forces and czars who report to him and his White House staff. He firmly believes that Government needs to get involved in policy making and actual running of large private companies. He believes that private companies should not be merely run for profits but for the inclusive good of labor. He believes that unions need to be instrumental in policy making of private companies and their participation can be a positive agent. He believes that shareholder or owner interests come after public interests and labor interests.
Obama firmly believes that compensation policies for large private companies should be set by the Government and he has appointe
d a compensation czar to establish and implement policies where ever he can.
We can see this agenda at work in the case of GM and Chrysler. The most vivid pointer comes this week from the reports that Congress is going to prevent the New GM & the New Chrysler from closing the large dealer organizations, a key part of the pre-packaged bankruptcy plan.
Obama’s social agenda is vividly visible in the Cap & Trade Energy legislation, a program that has been described as a job-killer. While we support the need for a comprehensive portable health care insurance plan for all Americans, Obama’s plan scares us. We are afraid that these two programs will severely damage the small businesses that create most of the jobs in America and form the basis of American prosperity.
We all know that the American Economy was the most productive and dominant economy in the world when Obama took office. Clearly, the world economy was in a deep recession created by the excesses of the Global Credit Bubble. But, in our opinion, America’s free-market, competitive, entrepreneurial economic system was the best suited to emerge from this recession.
But, like Nehru, Obama is a European socialist at heart and he is determined to change the nature of the American economy. His words are pleasing and noble. After all, who can argue against an inclusive economy that should work for all Americans. We get swayed by Obama’s rhetoric. Then we remember that Nehru had the same dream and used similar words. That wakes us up.
Having seen what Nehru’s vision, idealism and complete lack of business experience did to India’s economy, we become very worried for America’s economy.
Military & Strategic Agenda
The British-led Indian Military was the most potent and best military in Asia and Middle East. China’s fledgling military was no match for India’s veteran battle-tested military. The reach of the Indian Military extended from the Persian Gulf in the west and the borders of Iran to Tibet in the north to Myanmar, Thailand, Indonesia in the East.
Nehru inherited this large, battle-tested military force. Remember Nehru was idolized all over the world as “Shanti-Doot” or “The Messenger of Peace”. A strong military simply did not fit in Nehru’s vision. He neglected Indian Military and deprived it of the necessary funds.
Besides being a messenger of peace, Nehru was an ardent anti-imperialist. He could not tolerate the thought that the military of “his India” would occupy another sovereign country, even as a protector. So he announced publicly that “his India” is not imperialist and he unilaterally withdrew the Indian Military from Tibet in 1950.
The capabilities and the arsenal of the Indian Army withered over the 15 years of Nehru’s tenure and, by 1962, it had become an inferior fighting force. This depleted Indian army was dealt a humiliating defeat by the Chinese Military in the short but brutal war in 1962. The Indian Air Force then was more powerful than the Chinese and the Chinese knew that. So the war was limited to land conflict by the Chinese Military.
Even to this day, Nehru’s vision lives on. During the past few years, the strength of the Indian Force has been allowed to dwindle to such a low level that India may be in danger of losing its air superiority even over Pakistan. But not to worry, Defense Minister Antony told the Indian Force last year. He would restore the number of air force squadrons by 2022 (yes, 13 years from today).
Obama inherited the most dominant and the most sophisticated military force in the world, a force that spans all the oceans and can impose America’s will in any corner of the world. In addition, the American Military proved in Iraq that it is highly adaptable and can win an urban, low-intensity war as well as in a massive shock & awe invasion.
But, like Nehru, Obama seems to have little use for this global military machine. He does seem to believe that American Forces should lower their profile in the world and that America should be more of listener than in its relations with the world.
But, like Nehru, Obama only wishes to listen to what he wants to hear. Obama is determined to remove the American Military from Iraq. That was his campaign goal and, like Nehru, Obama seems to feel that his personal image is more important than the strategic needs of America. Media reports and experts have stated publicly that America should NOT withdraw from Iraq at this time. Many Iraqis express the same sentiments. Washington Post has reported that the Kurdish part of Iraq is virtually on the brink of war with the Iraqi Army. Tom Friedman of the New York Times has publicly asked for a Bosnia-type arrangement to be created in Iraq before American forces pull out.
But this is not what Obama wants to listen just as Nehru did not want to listen to his military and Indian analysts about Tibet. So, Obama will withdraw from Iraq just as Nehru withdrew from Tibet. A few years after Nehru’s withdrawal from Tibet, the Chinese Army marched in and occupied Tibet. It continues to occupy Tibet to this day and has now made greater claims on India based on its possession of Tibet.
Who will enter Iraq after America withdraws and when? Will it be Iran or will it be Turkey? Will Arab Iraq and Kurdistan go to war like India and Pakistan? China is already in Iraq to develop Iraq’s oil fields. Will China ask for a military base in Iraq? Pakistan has already given China permission to build a naval base at Gwador, a strategic harbor that sits at the entrance of the Persian Gulf. China is helping Iran commercially and protecting Iran politically from America at the UN. Is it so far fetched to imagine China making a strategic entry in to Iraq?
India has realized that Nehru made a enormous strategic error by withdrawing his dominant military from Tibet. The loss of Tibet to China allowed China to get a land border into Pakistan and the Persian Gulf. China has based a fleet of nuclear missiles in Tibet that cover all of India. It is too late for India to reverse the damage from Nehru’s mistake.
Will America realize that Obama might be making an enormous strategic blunder by withdrawing from Iraq? Will it be too late by then?
Nehru & Obama – Their Common Competitor
Nehru came to power in 1947 and Obama in 2009. It is amazing that these two leaders should face the same competitor. This single fact demonstrates the astonishing rise of China.
In 1947, China was weaker than India economically, militarily and strategically. Today, China has left India so far behind that comparison between these countries is a joke. The most important factor behind this reversal of fortune is Nehru’s vision which was dutifully followed by his daughter Indira Gandhi, his grandson Rajeev Gandhi and his grand-daughter-in-law Sonia Gandhi, today’s undisputed leader of India.
In 2009, Obama faces,
This is a China that Obama needs to understand and counter economically, politically and militarily. But, we fear Obama’s vision does not include such machinations, however necessary they might be for America.
Obama’s vision is that “his America” will listen to its opponents, to people who desire to cause America harm,. His vision is that by listening to them and with patient dialog, Obama will be able to induce a behavior change. This is why Obama insists on a dialog with Iran, even after its crushing of its own citizens in Tehran and on a dialog with Hamas despite their virulent enmity with Israel. This is why Obama insists on tripling aid to Pakistan despite Pakistan’s support of terrorists.
Yet, Obama has been very harsh with Israel and Obama is getting ready to be very harsh with India. Obama thinks these countries are America’s friends and he is intolerant of friends who don’t toe his line. This is exactly how Nehru behaved with small countries in India’s neighborhood. If they did not concur with the great man’s vision, then they would suffer his neglect and wrath. Obama seems to have a similar vision-based ego.
Nehru believed in dialog with India’s enemies. He fervently believed that if he could just speak with them, he would be able to persuade then to come around to his point of view. It never occurred to Nehru that countries have their own strategic interests and countries with competing strategic interests are guaranteed to be competitors.
Nehru believed that he could get China to be India’s friend and share his vision. So he did everything wrong, everything against India’s strategic interests to please China. It was India that fought for Communist China’s entry into the UN; it was India that fought for China to get Taiwan’s seat and veto in the UN Security Council. The Chinese Prime Minister, the great Zhou Enlai, must have had utter contempt for Nehru. Yet, he kept praising Nehru’s greatness while building up China’s military superiority over India. Then, when he was ready, he attacked India and dealt a humiliating defeat to the Indian Army. Historians tell us that this came as a total shock to Nehru and destroyed him.
We sense the same ego in Obama, the utter personal conviction that he can persuade anybody including his enemies to come over to his ways of thinking. This is why he gets enraged with friends like Israel and India who differ with him. This is why he is trying so hard to build a dialog with Ahmadinejad, Hamas and Pakistan. An ego like Nehru’s or Obama’s cannot understand the nature of evil. That requires a simpler mind and a lack of immense ego-based confidence in oneself.
We are deeply concerned at Obama’s lack of understanding at the economic and military competition posed by China. America’s prosperity is based to a large extent on the status of the US Dollar as the Reserve Currency of the World. Since historical times, a globally dominant military is a prerequisite for a country to get its currency accepted as the world’s reserve currency. At one time, the British Pound was the reserve currency of the world when the Britannia ruled the oceans. When England lost its military status, the Pound lost its reserve status. Today, the world’s dominant military is American and today the US Dollar is the world’s reserve currency.
We hope that Obama understands this but we are not sanguine. We know Nehru never understood this. Obama’s economic agenda has resulted in an explosive increase in America’s deficit. This meteoric increase has worried most global investors and created problems for the US Dollar. If in addition, the world feels that America is likely to lose its military dominance, then it will be a permanent goodbye to the dollar’s reserve currency status. That would also be the end of the Obama agenda, both social and economic.
We used to think that America has ample time to increase its military might. But articles in Foreign Affairs and The Wall Street Journal have disabused us of this complacency*.
Nehru never understood the challenge posed by China. He paid a heavy personal price for this mistake but his country, India, has paid a far greater price and is still paying an enormous price for that mistake.
Obama’s great fortune is that today’s America is not as complacent or weak as India was in 1947. Obama merely has to listen to America’s experts and change his agenda. The trillion dollar question is Will He?
* See our July 18 article America & China Military Competition – Read these WSJ and Foreign Affairs Articles
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