What is So ‘Private’ about Private Property?
We in India have an exaggerated idea of how ‘private’ private property is, and base many of our perceptions and even actions on this delusion. This is ironic, because another delusion we have in this country is about our non-materialistic nature, leaning apparently more towards the spiritual. So, we imagine the West to be materialistic, more concerned about material objects, and consumerism, and other ‘selfish’ ends. On the other hand, we Indians are supposedly concerned more with the affairs of the mind and spirit, and less with consumer goods and materialism. We imagine we have more of an orientation towards the interests of the community and society, and that we have ‘family’ values that are simpler and superior to those of the West. Many of these delusions are probably harmless, and typical of the way people tend to see themselves, as opposed to the way others see them. And these delusions are probably best summed up in the memorable words of D D Kosambi: ‘the Indian mind has the infinite capacity to painlessly digest contradictions’!
But, the exaggerated notion of the pedestal on which the ‘private’ nature of private property is placed in India impinges on our actions in ways that have an impact on society and the community and hence, should be a matter of concern to us as citizens. I will attempt, in this jotting, to look at some of these that have a bearing on business and urban living, and will also try and see whether there are ways we could deal with these troubling perspectives.
In India, a citizen imagines that his ‘house’ is indeed his castle, something that is entirely ‘his’ own affair, and that, as a natural corollary, does not concern anyone else. How he chooses to design his house, and the colour of paint he decides to employ on the outside are, and whether he chooses to keep it clean or dirty are, he feels, entirely up to him, and not the concern of the community in which he lives. If he chooses to build his house to resemble the Taj Mahal or a Burmese Pagoda, he is fully free to decide, and if he selected bright incandescent pink as the colour of the outside, that too, was his to decide. It is astonishing for him to learn that, in most countries in the West, he would not be permitted to build his house to resemble the structures mentioned earlier, or to be painted in the hue he selects. The building plan he submits to the local Town Planning Authority, would be rejected, and he would be advised to revise his plan to be more in tune with the community in which he proposes to make his home.
One of the characteristics of urban settlements in the West is the space allocated for ‘public use’ in addition to roads, sidewalks, parking spaces etc. These include parks, public gardens, playing fields and courts, and wooded areas. These spaces account for a significant part of the total area of cities. In India, when we became an independent nation, our large cities and towns too had many such public spaces that were an important and attractive feature of those urban areas. Very soon, many of these large open public spaces or ‘commons’ had been enclosed and allotted to other uses, either for construction of government buildings, or assigned to private educational and other institutions, effectively removing their ‘public’ character, and making them private spaces. The shrinking of the ‘commons’ has been a terrible consequence of the advent of representative democracy in local government, responding to local pressures, leading to the choking of open spaces of many towns and cities, increasing the untidy urban sprawl and clutter in their place. My hometown Kollam (then known by its anglicised name Quilon) had huge open spaces at the Cantonment Maidan adjacent to the Railway Station and the Asramom Maidan near the Residency compound. Elected governments decided to carve up and allot the former to three educational institutions belonging to three powerful communities, where colleges have sprung up, completely covering the once open parkland. The obliteration of the open spaces and the commons was complete, when the government chose to also build on the few remaining open spaces, putting in their place a stadium, a large municipal office complex and an auditorium. The only tiny remaining parcel of public space is hired out every year to either a circus company or exhibition organiser, where all the cacophony of such entertainments are offered up to the uncomplaining public. The vanishing ‘commons’ is a feature of every urban area of India, and is something that has already had deleterious effects on the quality of urban life.
Another area where the exaggerated idea of ‘private property’ has serious implications is in business and industry. In any discussion about industry and the need to consider the needs of the community as represented by the laws and statutes governing industry, we hear the refrain that an entrepreneur is free to decide about the way he runs his business, as it his ‘private’ property, something that ‘belongs’ to him and his family. For example, if he chooses to relocate his factory from Kerala to another State, because he is displeased about something, or has been offered an inducement by the other State, he is free to do so, and this ‘freedom’ is untrammelled and unrestricted. I’m afraid this is also based on the notion that the owner of the enterprise is the only stakeholder with an interest in its future, and the way it is run and managed. That is an antediluvian view of private ownership that has been superseded even in the most ‘free’ economies of the world with a more nuanced view. The more balanced view is that ownership confers rights on the owners to enjoy the profits of enterprise, based on the laws of the land, but every aspect of functioning of the enterprise must conform to strict laws and rules. These laws and rules reflect the interest of the community and the country in terms of how they wish business and industry to be conducted, and define the boundaries within which such enterprises must function. While President Trump has been the most vocal and brutally frank in dealing with the subject of US companies moving their manufacturing overseas to take advantage of lower wages and tax inducements, successive US administrations, on both sides of the political divide there, have made it known that they take a dim view of the tendency of their biggest companies taking advantage of these factors, and moving their business (and employment and taxes!) overseas.
There is another aspect of a business enterprise that becomes important, in a country like India, where sections of the people whose voices have been long suppressed due to various factors, are now beginning to be heard. As politics matures and develops, these voices will haveto be heard, and will grow louder, and they demand a role in the affairs of society, in the legislatures, and even within business enterprises. There has been a remorseless movement towards openness and transparency in the management of all manner of organisations in the West, especially in government, universities, research institutions, but most notably in business and industry. Once closely controlled and opaque management structures have been forced open and the light of public scrutiny enabled to shine on their murky interiors, the effect has been positive in terms of better management and accountability. In the case of business and industry, this accountability and openness has mostly reflected in stricter and more onerous compliance and disclosure requirements that are enforced effectively through government oversight mechanisms with severe penalties. But, the movement is also reflected in greater labour awareness of their rights and interests, leading to the need for more openness in the way enterprises are managed. There has, of course, been a push back from conservative sections of the ‘free enterprise’ lobby, terming many of the disclosure and compliance requirements as needless interference in the working of free enterprise. But, in Germany, for instance, there is a statute making it necessary for companies to have elected labour representatives on their Board of Directors. That would be considered an intolerable and unnecessary requirement in the US, but the experience in Germany is that it has not prevented the companies there from becoming among the most competitive in the world, leaders in many segments of industry.
If one looks at the experience in industry and business in India, I would argue that the jury is still out about whether the private sector is better managed than the public sector. The main distinction between the public sector and private sector ought to be only in the ownership, as otherwise they should be subject to the same set of compliance requirements. However, in many cases, especially where the State Government-owned PSUs are concerned, they are constrained by crude political interference, and are run as milch cows of the political party in power. Where a PSU is allowed to function independently, we can see in many cases that they are as competitive as their peers in the private sector, and often go on to become market leaders. Examples such as NTPC, BHEL, Indian Oil, CSL, SAIL, Konkan Railway, Delhi Metro etc. illustrate this point. Many global Indian businesses have drawn their top talent from PSUs, which is a clear vote for the competence and professionalism of PSU managers. On the other side of the coin, there are many private companies that are milked in every way conceivable by the ‘owners’ to squirrel away money they are not legally entitled to, into private accounts, usually in numbered accounts in tax havens. Where such ‘private’ companies function using liberal bank credit and shareholders funds, such actions are even more pronounced.
PSUs are compelled by the nature of their ownership and mandate, to strictly comply with all statutes and rules, and especially those relating to labour welfare. That has not prevented many of them from performing well, and often better than their often less public spirited private sector peers. But, I know from personal experience that while setting up and growing my company to global scale, full compliance has never come in the way of achieving very good results.
The interests of other stakeholders in any enterprise, whether labour or the local community or the banking sector or the government, cannot be held to be an obstacle in the way to good performance, measured in terms of good returns to the shareholders. Statutes and rules represent the interests of these various stakeholders, and compliance to them is not a difficulty. They are stakeholder interests that must be taken into account while managing and running a business enterprise. Even though you are the 100 per cent owner of your business, you still have to run your enterprise in such a way that all these stakeholder interests are satisfied. Only then will you be in a position to enjoy the fruits of your efforts.
Therefore, the ‘freedom’ to enjoy your ‘private property’ or your ‘private business’ is constrained by the interests of other stakeholders also being served. Every decision you take must always take these interests into account. You should never fall into the trap of thinking that this is your ‘private’ business, for you to do with as you choose. Once that view is adopted, your decline as a business will start, and outcomes in terms of returns to shareholder equity, returns on assets employed, and other business metrics will fall. Business has to be run on a sustainable model, with the interests of all stakeholders taken into account, and that is the true measure of a business-friendly model.
Singapore did not become #1 in the EODB ratings by being lax on compliance or taxation or environmental protection. In fact, Singapore is probably the strictest in the world when it comes to enforcing these laws. But the rules are transparent and easy to understand, and implemented without corruption. Speed and fairness, coupled with superb infrastructure, create what is rated to be the ‘best in class’ when it comes to ease of doing business. Your money and your property are well protected in Singapore, with the caveat that you should abide by the rules and laws of that country. That is a non-negotiable point, and one that our business community and citizens in India would do well to understand and appreciate.