A Strike in India: Part III

When public sector employees in India go on strike, they create economic disruption on a scale proportional to the importance of the public sector. Consider the days when Indian Airlines, a public sector carrier, was the sole domestic airline. A strike by its workers would—just like that!—shut down all air transport in India. Even today, despite the presence of some private airlines, a strike at Indian Airlines cripples air transport within India. The same goes for banks, post offices, railways, land-line phones, colleges and universities, you name it. The price that India is paying for its socialist past—during which the “commanding heights” of the economy were brought under state control—is that it has been taken hostage by the public sector employees’ unions. The government remains keenly aware that there policies must never, never, never alienate the unions; otherwise, the unions would strike and bring the economy to its knees.

This is actually well understood by most Indians. I have known many Indians in my life but have not met even one who expressed any real sympathy for strikes by public sector employees. Most Indians seethe with anger at the indignity of having to deal with public sector employees who they see as underperforming, corrupt, and unaccountable people, living it up at taxpayers’ expense. To make matters worse, they are unable to see a way out of the situation; as long as the public sector remains dominant the government will remain vulnerable to threats by the unions, and as long as the government remains vulnerable to the unions’ threats it will be unable to privatize the public sector and cut the unions down to size.

The only way out of this vicious circle may be for economists to keep making the case that we are in a vicious circle and to highlight the indignity of a large and proud nation being held hostage by a tiny minority of its citizens. Another thing that economists could do—that no one else can—is to come up with a sound econometric estimate of the economic costs of having a humongous public sector, and to do whatever possible to make that rupee figure as much of a commonplace in India’s daily discourse as the GDP growth rate or the size of India’s foreign exchange reserves, two factoids that most educated Indians have at their fingertips.

Indians already know how awful a bind they are in with the public sector unions thanks to their socialist past. All that they need to win the fight against the unions is a vocabulary to express what they have known all along.

In the rest of today’s entry, I will talk about another aspect of the role of India’s public sector unions that has not been discussed much: the fact that they are an anti-democratic force.

Some Indians may see the Indian curse of periodic public sector strikes as an essential (or, at any rate, inevitable) part of the boisterous pageantry of democracy and may, as a result, look upon these strikes somewhat indulgently. I, on the other hand, have lately begun to see a darkly anti-democratic side to India’s public sector strikes.

In a democracy, government policies are supposed to be determined by—and only by—the popular will as expressed through the ballot box. Given that public sector strikes (and the threats thereof) surely do influence the Indian government’s policies (especially those regarding privatization of the public sector, the disciplining of underperforming or corrupt public sector employees, and the salaries of public sector employees), it follows that public sector strikes must necessarily be anti-democratic.

If one admits—as I believe most Indians would—that India’s democratically elected governments would (a) privatize the public sector faster, (b) try harder to punish underperforming and corrupt public sector employees, and (c) slow the rate of salary increases for public sector employees, were it not for the threat of strikes by public sector employees, then one would be admitting that public sector strikes do affect the decisions made by India’s governments. And that admission would be tantamount to an admission that public sector unions are an anti-democratic presence in Indian society.

It is abundantly clear that government policies in India on privatization, on the disciplining of underperforming or corrupt public sector employees, and on public sector salaries would have been significantly different were it not for the threat of strikes. In other words, the constant threat of strikes is pushing India off the course dictated by the ballot box. Moreover, this distortion is being brought about by a small minority—in the billion-strong Indian population—that happens to have the disproportionate power to cripple the economy through strikes.

Ideally, a government in a democracy should come to power by winning a majority of all votes. As long as it does not violate the Constitution, the new administration should be able to formulate its policies freely and govern freely during its term of office, at the end of which there would be another election in which the people would render their verdict on what the outgoing administration did while in power. Now, how can it be democratic if, say, ten thousand railway employees go on strike halfway through the government’s term of office, bring the economy to its knees by shutting down the entire rail network for a month, and compel the democratically elected government to abandon its privatization policies? And how would this be different from, say, a military coup?

I think it is high time for Indians to realize that the public sector is not just taking a bite out of the economy; it is handcuffing India’s precious democracy.