For much of our existence as an independent country, India has been a nation in collective denial.

For years we were in denial of the harsh truth that despite initial pains, India has a lot more to gain from more open markets and less intrusive government than the path it had set out on. This was the path of the compromise and the half-measure, of the mix and match, and of that quest for a position acceptable to one and all that ends too often at the lowest common denominator. This denial is at least partially an explanation for why, as a country, we seem to be in a perpetual quest for a compromise, in search of a middle ground between the perceived extremes of socialism and capitalism (wrongly perceived as extreme).

To be fair, it does appear as if the quest for the middle way has the backing of most Indians who, living in a diverse society, have come to develop an instinctive distrust for the extreme positions in any argument. However, this consensus has also given rise to a fallacy we have never truly come to grips with. When given a choice between the smart way and the dumb way, between the right way and the wrong way, between truth and falsehood, there really is no middle path. Between right and wrong, it has to be the right (certainly not the left); between smart and dumb, the semi-dumb is no choice, the vote must go to the smart.

Denial, in this context, is not just about shutting your eyes to the world outside. It also involves constructing an alternative reality with sufficient seductive pull to sway and win over the people around you. Three decades ago, when I was in school and growing up, this alternative vision was called the “mixed economy” that would allegedly combine the best of capitalism and socialism. In truth—and we are painfully aware of it—it gave us the worst. It succeeded too well in snuffing out the entrepreneurial impulses of our people and, because it came in tandem with a chaotic democracy, we never had the iron-clad discipline of totalitarian socialism to push through key national objectives.

There’s an interesting tale about a professor who once drew a diagram of a very strange bug; it had the head of an ant, the legs of cockroach, the body of a grasshopper, and the wings of a mosquito and so on. He calls on his students to identify the insect. Not surprisingly, no one could. However, the professor had no trouble giving a name to it. “This”, he said, “is humbug”.

These days, this alternative vision—part and parcel of that continuing exercise in denial—has a new name. It’s called “inclusive” growth. For close to a decade, we have laboured under the delusion that inclusive growth is a magic formula that would combine high growth rates with equity, simply because we wanted it to happen with all the might of our hearts. As I’ve argued in a couple of earlier posts on CRI (read here and here), the moment inclusion becomes an objective, growth will necessarily slow down the way night follows day. Once growth slows, the resources required to support inclusion are no longer forthcoming and a vicious cycle kicks in.

The big news today—or let’s say the good news—is that with our macro-economy on the verge of cracking up, many have woken to the connection between inclusive growth and its old-bottle avatar, populism. There’s growing realisation that inclusive growth is nothing but a fancy, feel-good name for mediocrity and performance well below potential, the kind that for close to four wasted decades was a habit with India.

Peddlers of delusion do not go out of business merely because the last delusion they had pushed with so much success turned out to be a dud. On the contrary you will see them reach into their bag of tricks and pull out yet another one. And this one is always billed as bigger and better, with all the flaws ironed out, but all the promises intact. It’s something of an enduring paradox that there is always a core market for their wares. This market, it may be noted, is made up as much of the gullible as of those in eternal quest for easy, sweat-free solutions to difficult problems.

Here’s another paradox. Among people who have experimented and failed with alternatives to capitalism, I believe there’s a fundamental human tendency at work that prevents a smooth transition to capitalism. This is the common human failing that when presented with a choice between a hard option and a soft option, our preference is invariably to try out the soft option first, because it involves less pain and bears promise of more immediate reward. Of course, it’s not long before the soft option turns out to be another disappointment. But, contrary to intuitive logic, the immediate reaction is not to revert to the hard option earlier left untried, but to search around for some other plausible soft option. The hard option gets taken up either when all other soft options have been exhausted, or because the country ends up in such dire straits that people are now ready for painful sacrifices.

Our natural affinity for the soft option has an interesting practical implication. When people are forced out of delusion, their instinctive reaction is not to reach out for and embrace the truth but to lurch around for some more time in search of a “delusion lite”. Now, delusion lite need not hold out all the promises as before but it must appear to avoid the pains. The bitter pill is always a last resort.

Applying this logic to the current political and economic realities in India, there’s no doubt that as a nation we too are going through a process of waking up from delusion. A simple example will suffice. How did a nation of 1.2 billion end up collectively believing that putting an army to work in digging trenches represents rural prosperity (or even employment generation)?

As we begin to unwind our own delusions, the first claimant to power would be the forces representing delusion lite. In that sense, the next elections may well go the way of a third front led by Nitish Kumar and propped up by the Congress and assorted parties acting to “protect” secularism. In theory, and depending on one’s propensity to delusion, Nitish Kumar is the perfect middle ground between a Modi perceived as a polariser and a Rahul Gandhi perceived as incompetent.

So, does that mean Modi’s way forward is blocked for good? Not at all because delusion lite offers no real solutions and is at best an intermediate halt. Modi would still be on course to a tryst with destiny, albeit delayed. As the psychologist Carl Gustav Jung said, “You meet your destiny on the road you take to avoid it”.

I’ll conclude with a passing reference to another quality true of all peddlers of delusions. In a way this is an acid test by which you can make out who is peddling delusions and who offers real solutions. When peddlers of delusions push their merchandise, you never come across words like pain, sacrifice, for that matter, hard work.

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Ranjan Sreedharan

Ranjan Sreedharan is an independent thinker (and occasional writer) on the economics underlying politics. Not being a professional economist, he believes in evaluating ideas for what they are worth, without waiting for the data (or the macro-economic numbers) to show up. Back in January 2011, he gave a call that India was headed towards an economic crisis and since then has not seen any reason to change his mind. He works in corporate communications and can be contacted at ranjan.sreedharan@gmail.com