The rise of monopolists in India
John D Rockefeller once said, "Own nothing, control everything." This was the philosophy behind one of the richest men of the 19th century. He was the first to put modern monopoly principles into practice. Rockefeller was a staunch supporter of the collusion of big corporations against the competition.
Through a secret alliance of railroads and refineries and corrupted elected officials, he amassed huge wealth and power. He ruthlessly blocked any competition from individual businesses through massive monopolies and cartels. His company Standard Oil was eventually broken up, which gave birth to US antitrust law. But his thoughts have become an ideology, and he has become an ideal for many businessmen who think subverting laws into their favor is the easiest model for making money rather than focusing on innovation.
One businessman who is exactly following in the footsteps of Rockefeller is Mukesh Ambani.
In 2019, India added three new billionaires every month while most of the rest of the world was in an economic slowdown. The total number of billionaires reached 138, the highest after China and the US.
Without question, Mukesh Ambani is the richest person in India. And this year, he surpassed Europe's wealthiest man, Benard Arnault, to become the fourth-richest man in the world, with a net worth of US$80.2 billion, only trailing Jeff Bezos ($187 billion), Bill Gates ($121 billion), and Mark Zuckerberg ($102 billion).
What's interesting is that, in the top 10 list, he is the only businessman from BRICS (Brazil, Russia, India, China and South Africa) and from the developing world. Quite a feat. But in 2014 before the government of Prime Minister Narendra Modi came to power, he was only ranked by Forbes as the world's 40th-richest man, with a net worth of $18.6 billion.
That's a quantum leap in six years. What's amazing is that he added $22 billion to his fortune this year, despite the country facing a serious slowdown. While there is no doubt that Ambani's rise has been remarkable, the bigger question is, what's fueling his skyrocketing fortune? Innovation or crony capitalism? Over the past decades, if India's economy was not able to grow as fast as China's, it was mainly due to a lack of innovation and productivity. In fact, India ranks poorly on the global innovation indices. According to a recent report from the World Intellectual Property Organization (WIPO), its current position is No 48 in the global innovation index.
While India had a natural advantage of an Englishspeaking population, it shielded itself from a manufacturing-based economy for a long time. Lack of innovation and little focus on indigenization has resulted in poor productivity. India's share in the world economy is testimony to how much it lacks in terms of indigenization of technology and proper production lines compared with the US, China and Japan. Inefficiencies in India's infrastructure, logistics and supply chains, along with corrupt practices, also contribute significantly to low productivity.
But productivity is crucial for wealth creation. Productivity growth improves the overall quality of life for the whole country. An economy based on productivity results in strong, sustainable growth, which allows the country to prosper as a whole. Otherwise, the result is inequality and cronyism. According to recent data from the World Inequality Database, in India, the share of the bottom half of the population in total wealth is 6.4%, while the share of the top 1% is 30%. Apart from that, India is ranked in ninth position in crony capitalism, with crony-sector wealth accounting for 3.4% of gross domestic product, according to a study by The Economist.
There was a consensus among Indian policymakers at the time of 1991 economic reforms that economic liberalization would eliminate the nexus between the business elites and the politicians and thus free people to open and run independent production lines of goods and services to provide more opportunities and well-being in society.