The Unseen Consequences of Forcing ‘Equality’ in 1957

One instance where the government’s planning and intervention to protect certain industries led to disastrous outcomes for the country.

Ardeshir Darabshaw Shroff, commonly known as A. D. Shroff, was an eminent industrialist, banker and economist of India. In 1954, he co-founded ‘Forum of Free Enterprise’ , a think tank, to put forth prosperity-friendly policy views in front of Indians. The following excerpt is taken from his talk ‘Planning In India which he delivered at Vivekananda College, Madras in 1957. He highlights one instance where the government’s intervention in the textile industry, apparently to protect both the handloom workers and the large-scale industries led to disastrous outcomes for the country.

We are a country with a large population and 4th terrific amount of unemployment. More than 70% of the population lives on agriculture, and, agriculture, as you know, is a seasonal occupation. Apart from the fact that we have actual unemployment, there is a lot of seasonal unemployment also and for long countryside people apart from carrying on their agricultural avocation devote a part of their time to what we call the cottage industries, the main among which is handloom weaving.

There were large number of handloom weavers all over the country – a very large proportion in the South – and, therefore, in considering the question of providing sufficient cloth for the country the Government had to consider this question from two points of view. The Government could not leave it entirely to what is called the organised sector of the cotton textile industry to produce all the cloth required by the country. At the same time, the Government had also to think of the handloom weavers. If it was left entirely to the organised sector of the industry to produce all the cloth which the country wanted, possibly the organised sector could have done the job. But it might have meant distress in the countryside to the handloom weavers.
On the other hand, we are faced with another difficulty. The demand for cloth has been growing. The organised sector of the industry is not allowed to meet the increased demand. Our Government has ordered that the organised sector of the industry shall not produce more than 5,000 million square yards of cloth whatever be its capacity to produce. The balance of cloth required is to come through handloom weavers.

The difficulty is that the handloom weaver not being organised and not having the capital resources to buy the necessary equipment and raw materials to bring about an increased production, the country has been suffering from a shortage of cloth.

So, this is a very good illustration of showing that in bringing about planned development one has to maintain an objective balance between different sectors in the same industry and at the same time achieve the desired objective of making available sufficient quantity of product required by the country. I would point out by way of criticism of the government policy that it allows ideology to play a more important role than it should really be allowed to. The consequences of such an ideological bias might well be disastrous for the whole country.

The implied message is that we should always judge a policy or a government program by its results rather than the intentions of the lawmakers. What do you think? Please let us know in comments.

 

(You can read the complete original piecehere)

READ MORE – How Government Distorts Information, Incentives and Income of Farmers?