Is Too Much Democracy Bad for Business? Does Democracy Help or Hinder Growth?

Why the Statement about Democracy Sparked a Huge Debate among the Indian Elites

Recently, the Vice Chairperson of the NITI (National Institution for Transforming India), Rajiv Kumar, lamented that too much democracy was hampering economic reforms and hindering economic growth.

He went on as far as to say that Too Much Democracy is bad for Business.

The ostensible reasons for his outburst were the ongoing protests by Farmers and the Trade Unions against the various Farm and Labour Laws passed by the Central Government.

This statement of his was supported and backed up many Right Leaning Economists and Commentators such as Gurcharan Das, who seemed to agree with the statement that what India needed now was more power and authority to the Bureaucrats and the Powers That Be to ensure that pro business laws are passed without hindrance from Pesky Agitators and Civil Rights activists.

Indeed, Kumar was just echoing a sentiment that has a long history in the Indian Economic and Political Space what with leading business and political elites from the time of the Gandhi-Nehru years arguing that what India needed was a Chinese style Authoritarian Capitalism where businesses are unfettered by the need to be answerable to society.

The Success of the West Proves that Democracy is Needed for Economic Growth

So, does too much democracy hamper growth? While it is tempting to draw inspiration from the Chinese Miracle and proclaim that we do not need democracy, the evidence is otherwise when one looks at the examples of the Western Democracies that have become superpowers precisely because they followed Free Market Capitalism with the pursuit of Equality, Liberty, and Freedom.

In other words, a cursory look at the history of the United States and European nations would immediately disprove the notion that Democracy is bad for business as in all these cases, Free Market Economics went hand in hand with Democratic notions of governance.

Indeed, the Free in the Free Market Models refers to how Egalitarian Democracy is necessary and what more, a prerequisite for Economic Growth.

The idea behind this philosophy is that Markets flourish when there is healthy competition between businesses and where the Defence of Natural Rights of the People are taken as the Cornerstone of the Political Economy.

Therefore, to claim that Too Much Democracy is Bad for Business is Facile and entirely misses the point about why Capitalism thrived in the West and why the West Left the Rest Behind and Forged Ahead after the Renaissance.

Why the History of Indian Economic Reforms Supports the Topic Statement

Having said that, there are arguments that support Rajiv Kumar and other economists who lament excessive democracy as an impediment to economic growth.

For instance, apart from China, which is the Poster Boy for such arguments, the Indian experience with Reforms has been anything but smooth wherein each step forward was followed by two steps backward as reform measures met with stiff opposition from an assorted and medley group of stakeholders representing civil society who were too eager to stymie rather than support reforms.

Indeed, the statement must be seen in this context as ever since India started liberalising in the 1990s, successive governments, irrespective of the parties that were running them found themselves hobbled by repeated agitations and protests even in Parliament and the State Legislatures from the Left and other Opposition groups.

Moreover, the reason why India continues to lag behind despite reforms is the excessive bureaucracy and the Red Tape that make life difficult for Entrepreneurs and Businesspersons.

Indeed, as each year, the Ease of Doing Business Rankings are released, it is clear that what India needs now is a Disciplinarian approach that combines the Iron Fist of Decision Making with a Human Face of Economic Reforms.

Finding the Middle Path: Iron Fist of Decision Making with a Human Face Works in India

Therefore, Rajiv Kumar’s statement does have pro and con arguments and a balanced assessment would be to follow the European or rather the French model of Political Economy where each measure passed by the government is extensively debated, both inside and outside the legislatures.

In other words, what India needs is Democracy that is consultative and deliberative rather than confrontationist.

Of course, France and other European countries do face protests whenever Economic laws that are Pro Market are passed and hence, what India must do is to Pick and Choose between the available models from all countries.

We can use the Chinese method of Thinking Longer Term with the American model of Free Markets along with the European structures of governance that emphasize efficiency.

In this way, we would be following in the footsteps of the ideals of our Freedom Movement that drew upon the Winds of All Countries and Not Being Swept away and instead, choosing from the best.

It goes without saying that Democracy with its checks and balances is essential to prevent authoritarian capitalism that leaves society worse off and the same time, not discourage businesses from profitable activities due to excessive administrative paralysis.

Moving From Noisily Argumentative to Deliberatively Consultative

Last, it is a fact that Indian Democracy is Too Noisy and hence, instead of being Argumentative, what we need is to be businesslike in our approach.

There are no rights without Democracy and at the same time, there is no growth with too many protests.

The trick is to find the Middle Ground and the Indian History is replete with instances where we have found the Middle Path and evolved through the ages.

To conclude, we do not need to follow anyone blindly and at the same time, we do not need to shut ourselves away from the world.


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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.


Political Science