The Billionaire Raj: A Journey Through India's New Gilded Age | James Crabtree | Talks at Google

[MUSIC PLAYING] ARUN VENKATARAMAN: Perfect Good afternoon Thank you all for being here My name is Arun Venkataraman I am a member of the News Lab at Google It’s our pleasure to have at Talks at Google here with us today, James Crabtree Mr. Crabtree is the former bureau chief of the “Financial Times” in Mumbai, currently a professor at the Lee Kuan Yew School of Public Policy at the National University of Singapore And he’s written this fantastic book, “The Billionaire Raj, a Journey Through India’s Gilded Age.” The book has received fantastic reviews from “Publisher Weekly.” “Washington Post” called it one of the seven business books that won’t put you to sleep at the beach this summer And having read it on vacation the last couple of weeks, I can certainly attest to that It’s a fantastic book, a fantastic look at India in this moment, as you call it, of where it faces its kind of national remaking I think we’ll jump straight into it And I kind of want to start off with you do this really great job of setting up the broader evolution of the Indian political economy, from the British Raj before 1947, the License Raj between ’47 and liberalization in ’91, and leading to the current moment, which is the rise of the billionaire Raj Would love for you to kind of talk through kind of the evolution of that Indian political economy and why we should think about the billionaire Raj as the defining characteristic of the current Indian economic moment JAMES CRABTREE: OK, so thank you Thank you very much for having me I moved to India in 2011 as a foreign correspondent for the “Financial Times.” And so I landed in Mumbai, the financial capital, one morning in November of that year And I was picked up by a driver, as often happens in India And so we wound our way through Mumbai, through the sort of past the slums outside of the airport fence, down through the city, which for those of you who don’t know it, is a very fast and exciting city, much like New York, the financial capital And as we came down into midtown, the driver sort of slowed the car down and started pointing excitedly out of the window up ahead And what he was pointing to was this building on the front cover of the book, which is called Antilia, which is the home of Mukesh Ambani, who is India’s richest man and now Asia’s richest man as well, with a fortune of $44 billion at last count And so this house is a family home for Mr. Ambani, his wife, and their three children It’s 170 meters tall It has 2/3 of the floor space of the Palace of Versailles, even though it’s set on a plot of not much more than an acre It has an extraordinary range of interior features– hanging gardens, an ice room, which is like a sauna in reverse, where apparently you can escape from the heat of Mumbai, has six floors of parking It has a sub-basement in which they have an indoor football pitch and a basketball court And beyond all of those things, it sort of has stood for the excess of what I call the billionaire Raj Because even in a world of galloping inequality here in California, this is a problem that people talk about It’s true in China But nowhere else in the world is there a house of this kind This is known as the Billion Dollar Home in India’s press And it’s particularly sort of galling, I suppose, in a city like Mumbai, where half of the population live in slums And so that in a sense, it has become the icon of what I call the billionaire Raj And there are three fault lines in India’s society that I identify as being associated with this, one of which is the rise of a new class of super wealthy that have risen up, partly since 1991, as you suggest, but actually really in the last 10 or 15 years And so the sort of story of India’s recent history is one of re-globalization Up until 1991, for the 40 years since independence, India closed itself off from the world and developed a not terribly successful socialist planned economy It tore that down in 1991 But it was really only in the middle of the 2000s, around the time of the long economic boom in this country and China’s rise, that India fully reintegrated with the global economy And that meant you had a large number

of people who became very rich for reasons that we can get into But in the middle of the 1990s, India had only two billionaires Now it has something like 120 It has created wealth at the very pinnacle of society more quickly than almost any other country in history You can compare what’s happened with Russia in the early 1990s And so while India has a pretty good record of lifting people out of poverty, and hundreds of millions of Indians have been lifted out of poverty over the last 10 or 15 years, nonetheless, it’s created an economic model where most of the proceeds of growth have gone shooting up to the very, very top And this remains a quite poor country Average income in India is still only $1,700 To enter the 1%, you only need an income of about $38,000, so not very much So what we’re talking about here is the real top, top, top, top, top of the tree But for those people like Mr. Ambani and the 0.0001%, they have wealth that is comparable to the very richest in the world and in a country that remains rather unequal Along with that have been two other problems that we could get into, one of which is the rise of crony capitalism, which again is wound up in India’s re-globalization, that as the economy became more valuable, then what had previously been an endemic but small-bore form of corruption developed into a really big form of corruption in the middle of the last decade And that has been a big battle in the Indian political and business system about how you deal with crony capitalism that is still being fought And then there’s a third fault line, which relates to the way India’s industrial economy works There was a huge boom around the same time that this building was being built before the global financial crisis That boom ended in a bit of a jarring crunch And India has since been trying to recover from the problems that were caused then, which are excessive debt taken on by its new tycoon class and over-leverage in the banking system And so these three fault lines are what I discuss in the book and what I say are the sort of challenges of the billionaire Raj This is an optimistic book, at least in theory Because I see no particular reason why India can’t overcome these challenges But I suppose the argument in the book is that it’s not going to happen by accident ARUN VENKATARAMAN: And you talk about, in fact, in the book I think, there’s a $150 billion in bad assets that the banks currently own from this tycoon class Getting to the dual reasons of this boom and bust cycle and then the crony capitalism that you kind of position as being the primary reasons for fueling the rise of this tycoon class or the billionaire Raj over the last 10, 12 years Why is that fundamentally problematic for India’s development writ large? Why is it an issue that you have crony capitalism as rampant as it is, a boom and bust cycle? And how does that hinder India’s ability to grow going forward? JAMES CRABTREE: Well, if you compare India to China– so China has executed a sort of once-in-a-lifetime trick over the last 30 years, which is it has grown pretty much unbroken over 7% for about two decades And that’s unprecedented in economic history Almost no country has ever done that And nonetheless, India is trying to do something similar The quicker you grow at a high rate uninterrupted, the more quickly you move out of poverty and become a middle income country As I say, what China has managed to do is very unusual Typically what happens is you can grow fast for a while And then you sort of, you get found out And you fall over And so in a sense, the problem with India’s boom and bust cycle is it impinges on its development But it raises a sort of more interesting question So there’s been a big change in the way India’s economy works The simplest way I can explain it is that before the reforms in 1991, and to some degree for the 10 years after that, you had a situation where capital was expensive, but politics was easy So it was hard to raise money You couldn’t get financing There were no international banks so you had to rely on a kind moldy state banking system, which was locked up in all sorts of ridiculous restrictions But if you were a businessman, you learned how to work the system, the good ones Some people call it crony socialism Your friends in politics helps you out You bend the rules a little bit The people who prospered were the ones who knew how to work the political system And what happened after the mid 2000,

and particularly after you had a range of corruption scandals, was that flipped on its head So capital became much cheaper, much easier to raise money And so the tycoons raised huge amounts of money, borrowed mostly from state bank banks But then suddenly, politics became very difficult Because in the aftermath of the corruption scandals of the mid 2000s, India is a democracy It has a free press It has an independent judiciary, which is at its upper levels, at least broadly impartial and not corrupt It has a vibrant civil society And all of these groups– and it has a growing, if still small, middle class All four of those groups became very attuned to corruption And so it became much more difficult for the tycoons to work the political system as they did in the past And that was especially true after the current prime minister, Narendra Modi, was elected in 2014 in a landslide election in which he stood on an anti-corruption platform And so this new environment that India finds itself in, in which capital is much easier to get than it was before, or at least has been, but the political system is much more difficult. What it means is the old system that India was using to build steel mills and mines and toll roads is now broken But there isn’t a new system And that’s a big problem if you’re a country in the early stages of industrialization Because while people look at India and they see its tech economy, for instance, the cities like Bangalore and Hyderabad, which have vibrant startups and big outsourcing companies, but in the end, you can’t develop with just that You need to have the basic infrastructural development in roads and sewerage and ports and railways that every other developing country that has moved from poverty to middle income status and onwards towards rich economy status has managed And so if India’s industrial engine is broken or problematic, then that’s a big issue ARUN VENKATARAMAN: That brings up, I think, a comparison that you draw between the moment that India is currently in and let’s say that the United States was in during the Gilded Age or England was in in the time of Dickens, where you kind of have this very interesting dynamic Because with two, three, sorry, primary stakeholders, the state institution or state apparatus fails to provide basic needs and basic services infrastructure to its people Opportunistic politicians kind of seize that kind of gap by providing patronage or providing those resources in exchange for votes And then those kind of politicians are being supported with resources from the moneyed class and kind of fueling this situation in which politicians in the moneyed class might continue to do well But the basic needs of people go on being unmet And it kind of speaks to some of the ways in which I think crony capitalism has manifested to make it difficult for India to develop in the ways that I think we’d all hope it would What does it take to break through that? What do you need to break this toxic web of interdependency between these three stakeholders in Indian political society? JAMES CRABTREE: I mean, that’s a great question So Francis Fukuyama, the social theorist and political scientist, writes a lot on corruption and trust and says that actually, the move from a society based on patronage to one that is based on neutral rules applied evenly between groups is much more complicated than moving from poverty to middle income status, that this is an incredibly difficult development challenge I mean, one of the reasons why I say this is an optimistic book is that, in a sense, if you were sitting not necessarily here in San Francisco, but if you were sitting in Manhattan in 1880 and you had looked at the situation of the United States at that time, you would have been pretty depressed This was a moment in which America had a venal billionaire class that had taken much of the wealth that had been generated after the Civil War and had pocketed it for itself and used that to build beautiful mansions in New York and on the cliff tops of Newport, Rhode Island And they were working hand-in-glove with machine politics at the city or local level that was rapacious and not interested in ordinary people And you might have been fairly depressed about America’s prospects But within 10 or 20, 30 years, you have the move that is commonly called the move from the Gilded Age to the Progressive Era, which is a complicated set of changes But the middle class began to assert control over politics

You had the development of a kind of free press that went on to become one of the world’s most admirable, a range of other developments that gradually meant that a political movement that busted up some of the monopolies that were held by the moneyed class at the top And so you had a range of different changes that changed America very fundamentally in this early stage of industrialization I see no particular reason why that can’t happen in India The sort of nexus that you’re talking, about, however, it is difficult to break You need to build up state services that are of reasonable quality so that people don’t have to rely on things that are provided through patronage networks You have to drain the swamp of the political funding system, which is– we can talk about this more if you like– sort of the original sin of the Indian system, that it has a very expensive political system, which is almost entirely funded under the table with illegal donations And you have to create a much more competitive market economy, so one that is a sort of rules-based economy rather than a– pro-market rather than pro-business is one of the ways people describe it, so not one where the political class is doing favors for particular businesses but by which everyone has to play by the same competitive rules But those things are not easy It’s sort of easier said than done ARUN VENKATARAMAN: It definitely gets to the idea, I think And it’s a quote that you mentioned in the book, that more than the type of government, the degree of government is what’s most important, I think It’s initially from Fukuyama also I guess in terms of things that could be done to supercharge or accelerate the degree of government– we are at Google, so I feel compelled to ask, what role do you feel technology companies could play or should play? Should they have a role in supercharging or accelerating the efforts of building out a more robust state apparatus that can meet the needs of its people? JAMES CRABTREE: I think there’s two ways of answering that question, both of which are reasons for optimism So the first thing is this book focuses mostly on what you might call bad guys But India is not Russia The reason why I’m much more optimistic about India in the medium to long term is that there are large parts of the Indian economy that are, broadly speaking, sort of market competitive and innovative And the tech sector, both its heritage outsourcing but also its newer startup culture, are part of that And they have produced a lot of rich people And there’s absolutely no problem with that The same is true with generic pharmaceuticals manufacturing, or bits of the automotive supply chain, or there’s a whole bunch of bits of finance The private sector finance economy banks are high quality, competitive institutions And to the extent that these guys have made an absolute fortune, as long as they pay their taxes and are sort of reasonably socially responsible, I don’t think any of us should have any problem with that And so one way in which the tech economy can kind of play a role here is by simply continuing to grow and crowding out the rest of the people in a different part of the economy That, however, is not a perfect answer Because you can’t simply create a prosperous middle income economy only by looking at the tech sector You know, you need growth that is broadly-based And ideally, you want all of your sectors, including extractive industries and property, the traditionally very corrupt sectors, you want them also to have high governance standards And so well, what can technology do? Partly one of the ways in which the government of Narendra Modi, the prime minister, has begun to tackle some of the corruption in India is by moving official processes online So literally in India, if you need to go and get a vehicle license, you have to go to some moldy old office in some distant part of the city And unless you are very lucky, someone’s going to ask you for a bribe There’s sort of the any individuals have lots of discretion And that’s true with all sorts of– they call them permissions in India, the sort of box tick you need to get if you need to do something And so if you’re trying to run a business, you often need thousands, tens of thousands, sometimes millions, of these things if you’re a very large enterprise, to do with property, the environment, air quality, whatever it might be The more of these you can move online and the more you take discretion away from individuals who can then use it as an opportunity to sort of extract money, and make this a kind of mutual rules-based system And there’s a lot of power in that And so India has already– and other countries in Asia as well– have already shown that that’s a quite effective corruption

reduction strategy And so that, I think, is one way in which technology can play a big part ARUN VENKATARAMAN: What is your sense of some of the more ambitious or kind of grander schemes, like Aadhaar, for example, that are kind of trying to use digitization or next-level technology to make state functions a little bit more efficient? JAMES CRABTREE: Yeah, so Aadhaar, which is a biometric identification system that was the idea and was pushed by a guy called Nandan Nilekani, who’s the founder of Infosys, one of the heritage outsourcing companies– and in a sense, he is an absolute emblem of what you might call the good billionaires as opposed to the bad I mean, he personally is as honest as the day is long He has a deep commitment to public service And the Aadhaar, which he helped to set up, has become a great success story It’s the sort of one of the layers in what they call the India stack, which is a range of technology applications which makes it much easier to connect individual users, particularly those who are very poor, into the banking and financial system and then onwards into products that require that, like mobile payments and that sort of thing And actually, I mean, it’s been very successful It’s now used by more than a billion people So it’s very difficult now in India to do anything without an Aadhaar card And so if you’re a startup and you want to do something which requires quick and easy identification, verification, and then access into banking and other sorts of financial products, it’s vastly easier than it was even two or three years ago You know, this system has its critics There are some people who worry not so much about Aadhaar itself, but about the security and data protection of the wider ecosystem of companies that are now building things off the back of it But typically, I think that’s a good example of what the Indian state can achieve if it puts its mind to it The problem is that that is a rather isolated example of success And there are whole swathes of other areas that are pretty much as hopeless as they used to be So in a sense, you need to take that rather inspirational example and then move it around much more broadly ARUN VENKATARAMAN: And apply it at scale– it strikes me that– I mean, I think the grand conclusion or recommendation from the book is doing what it takes to usher in this progressive era that might be able to move India from the Gilded Age to higher levels of development It strikes me that one of the components of that you need is a kind of a fierce, independent kind of muckraking media class or journalism class And I’m putting on my News Lab hat a little bit here You have this really fascinating chapter in the book about of the rise of Arnab Goswami over the course of the last 10 years And I think it’s kind of a nuanced chapter where you suggest, is this newly activist media class emblematic of yellow journalism in the– not just the Pulitzer but the world model in the 1890s? Or is it like muckraking journalism, like Upton Sinclair’s “The Jungle.” I mean, what’s your sense of how it’s treading that line? And as you see journalism move increasingly to digital, is it more susceptible to being yellow journalism than the muckraking variety it needs? JAMES CRABTREE: Yeah, so it’s another great question And I could talk about this for hours Because obviously, I’m a journalist And so I love this question I mean, my starting position with the Indian media is I live in Singapore And I would much rather have the Indian media than the Singaporean or many other of the East Asian medias I admire the fearless, messy, often wholly inaccurate but spirited South Asian press more than the much more restrained, deferential East Asian press I think if you come from an Anglo-Saxon background, you take the Indian media over an East Asian media any day of the week That, however, is not to say that there are not very substantial issues And I think there has been a degradation in the Indian media ecosystem that is partly to do with what you might call the Fox Newsification of broadcast news So in the book, I focus on a gentleman called Arnab Goswami, who’s kind of the Sean Hannity or Bill O’Reilly of India He’s a very outspoken evening talk show host He’s quite right wing, although he initially found his feet as an anti-corruption campaigner And he claims, I think with some justification, that he is sort of personally liberal and sort of speaks out on things like women’s and gay rights

But increasingly, he is associated with something that would be quite similar to a sort of Fox News agenda, a right wing nationalism that is very supportive of Narendra Modi and spends its time beating up on Pakistan on the evening news and that sort of thing That’s one problem You then have a problem of social media I should watch my words carefully in this audience But increasingly, I view social media in India as a complete cesspit I mean, Twitter in particular, it’s a very tough environment and one where established norms of behavior that you would have in other forms of life increasingly don’t exist And I am increasingly troubled by that, as are many people And it’s unclear to me quite what you do about it But the social media genie has many positive sides But there’s clearly a lot of negatives in terms of what it does to public discourse in a country that has deep preexisting social divisions of particularly religion, but also caste and all sorts of other things And India, with the best will in the world, does not have the strongest existing media institutions So it does have a reasonable suite of broadcast newspapers, broadsheet newspapers But it doesn’t have a kind of “New York Times” or a BBC or a “Le Monde” or something like that And then you have a problem, which will be core to what you’re looking at in News Lab, which is a business model problem, which is at the moment I think it’s a trick of the light that the Indian press appears to be doing quite well You have a huge population it’s growing and learning to read for the first time Illiteracy rates are falling People are becoming wealthy And so the newspapers, on the surface, look like their business models are reasonably robust But I’m 100% convinced that that is a trick of the light And exactly the same tsunami that has washed over the media industry in the West is going to wash over the Indian media industry with almost twice the force, because it’s going to happen much more quickly The shift from people not having smartphones to having smartphones and using them for absolutely everything is happening with enormous speed, much more quickly than it did in the UK and the US And so I think a lot of these heritage media institutions are just going to get completely swamped unless they adapt even more nimbly than the best of the global institutions have managed So I think the Indian ecosystem is an interesting one But it raises a bigger question and a much bigger picture issue about why we should all care about India In this audience, you’re part of the Indian diaspora Many of you have connections to India But in a sense, look up from 50,000 feet China is clearly heading in the wrong direction China is sliding backwards into a form of neo-Leninist autocracy The notion that China is going to become even a country like Singapore in the next 10 or 20 years now seems to be almost beyond possibility Russia, Turkey, many of the most important developing economies in the world are slipping backwards into forms of– even the United States to some degree– into forms of nationalism that those of us who believe in a kind of liberal, multicultural worldview find rather regrettable India remains the swing superpower It is at the earliest stage of its development of any of these countries Its story is the one that is yet to be written And it remains a parliamentary democracy with a constitution that enshrines liberal rights of the sort that would be very familiar to people in the United Kingdom or United States It’s a multi-faith democracy And it’s perfectly possible that by the middle of this century, India will be a sort of upper middle income parliamentary democracy in which various faiths in a very complicated society live broadly in harmony with one another in a market economy And that would be not just a good thing for India in my view, but a good thing for the whole world, particularly our bit of it And so in that sense, one of the underlying arguments in this book– and it links to the point about having a democratic free press as opposed to China in particular and some other countries in Asia– we all have a huge stake in the success of the current Indian model and should be watching developments there very closely ARUN VENKATARAMAN: It strikes me, I think– and it’s a question that you position at the very beginning of the book– India is in a moment of national remaking And it can kind of double down on the liberal democratic values that you just highlighted are its strengths It seems to me that you also hear, as a part of the broader conversation, that India maybe should course correct and take on a more right wing, autocratic– kind of go the way of China, or to a lesser extent, Singapore

And that might grease some of the inefficiencies of the Indian state Kind of taking a step back, it can go the progressive era mode Or it can take a more kind of like strongman, autocratic leadership that builds a very efficient state apparatus sort of direction Do you sense that that is the right way to frame the two directions that it could potentially go moving forward to address some of these broader issues? JAMES CRABTREE: I mean, I understand the impulse behind that suggestion, which comes from a place of frustration, which is that as recently as 1990, 1995, India and China were basically in the same place from a kind of economic size, GDP per capita sense And then China raced away and is now a vastly richer country than India and much more successful And so I can understand the impulse to say, well, if our political system was a little bit more like theirs, then if we weren’t a messy democracy and that meant that we didn’t have to put up with people, we could just bulldoze them out of the way like the Chinese did, then we could build more roads We’d get more done And that would make it easier And so I understand that impulse I’m not sure it is the best example to go for Many European and American countries have managed to build good infrastructure without requiring a dictatorship Equally, China is a much more homogeneous society than India is– not a very good model The Han Chinese make up the vast majority of China India is a stunningly diverse society in all of its ways It seemed much more like Europe than the heritage United States or China And the risks of, in a sense, a more majoritarian politics, which in a country that is 80% Hindu inevitably means a majoritarian Hindu politics, it comes with a number of risks I mean, in the end, social divisions are not always good for economic growth, not simply because– but the risk is you have periods of social unrest So anyway, I think India would be better advised to stick with a system that protects the rights of its minorities and simply tries to work on making its state work better There’s nothing really wound up in the world of democracy per se, which is limiting India from improving what people tend to call state capacity And state capacity, underneath all of this, is really the answer to India’s problems It has a weak state It’s poorly resourced It doesn’t have enough smart people It is corrupt And there’s nothing inherently about democracy which stops you from building high-quality state capacity It was done in many other countries And so I think this notion that India can only succeed if it sort of gradually cleaves towards a form of authoritarianism is risky ARUN VENKATARAMAN: You mentioned in the book that part of the difficulty with implementing grand change, despite even, for example, the ambitions of the Modi government over the course of the last five years, is the inherent kind of fractious nature of India’s political and cultural landscape The changes that you propose in the book or the changes that you propose India needs to make are huge, not insignificant by any stretch of the imagination And yet you remain optimistic that India can go in that direction Given how divided and fractious this political cultural environment is, what gives you, I guess, faith that India is going to retain its democratic roots and still find a way to strengthen its state capacity to ameliorate some of the broader issues that it faces? JAMES CRABTREE: Well, I think my optimism about India, as I say, is based on historical precedent from other countries that have managed to do this It’s also based on the stronger and more innovative parts of India’s economy I see examples of where the Indian state is very successful So you mentioned Aadhaar People point to its electoral system So Indian elections are a great miracle They’re, broadly-speaking– all sorts of problems with the Indian democratic system– but the elections themselves, these mass festivals of democracy that happen every four or five years, they’re always the largest election in human history They’re run fairly efficiently on a shoestring budget

People point to the Indian Space program, which has sent rockets into space at almost no cost So there are plenty of examples of when the Indian state puts its mind to it, that it can achieve extraordinary things at low cost And the talent of the Indian people is a remarkable thing to behold You only have to look at the strength of the diaspora population here in the United States Hinduism is America’s richest religion We’re here in Silicon Valley, where the Indian diaspora is overwhelmingly the most successful of immigrant groups If you look at immigrant-founded businesses, technology businesses, then it isn’t even close Indians found more successful technology businesses here than all of the rest of the immigrant groups put together, including the Chinese and the Taiwanese, who are the second and third most sort of impressive groupings And so I see no particular reason why this can’t happen But as I say, it’s not going to happen by accident And I don’t want to underestimate the challenge I suppose what I would say is that someone who lived in India for five years, my son was born there– my son, as we were talking about earlier, has an Indian middle name– and as with many people who visit India, I emerged in a sense very fond of the country I think that’s not always true of people who go to live in China, foreign correspondents who live there They find it a more challenging and frustrating experience because of the nature of the political system Again, that is not to downplay some of the rougher edges of Indian society But I think you come out sort of admiring the strengths of the Indian political system and wishing it well And in a sense, as an outsider who decided that I wanted to write a book about India because I thought I had some experiences there that were worth sharing, that’s the perspective that I come from, sort of a friend who’s tried to make a few contributions to a much broader debate about how India moves out of poverty and through middle income status and towards being a rich economy, as many other countries have done before ARUN VENKATARAMAN: No, I mean, it’s interesting Even though you were exposed certainly, I’m sure, to the darker underbelly of Indian society, that you’ve still sort of emerged out of the process feeling optimistic about its future, which I think is nice for those of us who are part of the Indian diaspora, and just like humanity writ large and recognize the stakes of bringing hundreds of millions of people, if not a 1.7 billion people’s potential to fruition I want to open it up to questions now Oh, sorry, there’s a mic in the back you guys can– AUDIENCE: Do you want me to walk over there? JAMES CRABTREE: Yeah, I believe so AUDIENCE: So it’s interesting that you called India kind of like a swing country when you compare it to countries like Turkey and China, which are more falling towards more authoritarian regimes Because it seems like Narendra Modi was elected with a landslide But he is stoking a little bit of a nationalistic India, like Hindus versus Muslim kind of tension in order to forward the BJP’s control over the country or the political system So could you talk more about your thoughts on Narendra Modi, what you think he signifies for India, and if there are pros and cons about what he’s done and what he represents? JAMES CRABTREE: Yeah So it’s a great question Narendra Modi is the dominant figure of the age in India And although I set out to write a book about the rise of the super rich, I very quickly discovered that it’s basically impossible to grapple with the state of modern India unless you have an account of Modi, who he is, and what he stands for He’s a remarkable figure in a number of ways For those of you who are less familiar with him, he was born in poverty He’s from the lower castes He’s famously a self-described son of a tea seller, a chaiwala And so in the book, I go and visit the village that he grew up in in the state of Gujarat He’s immensely controversial because he presided over an episode of ethnic violence in the early 2000s in which many thousands of Muslims died And his critics say that if he did not exacerbate this violence that he didn’t do nearly enough to stop it So he was banned for the best part of a decade from traveling to the United States He wasn’t welcome in most Western countries And then he’s a contradictory figure, as you say So on the one hand, he won election on an anti-corruption platform and is seen to be a pro-growth, pro-market, pro-jobs sort of leader He’s a technocrat He believes in building big infrastructure projects He’s obsessed with bullet trains and solar parks And he loves technology He has nearly as many Twitter followers as Donald Trump When Donald Trump met him, he rather graciously pointed out

that Narendra Modi had the second largest number of Twitter followers of anyone in the world And yet as you say, he is a Hindu nationalist In his younger days, he was, in a sense, a sort of proselytizing religious figure for a right wing, Hindu nationalist, civil society group called the RSS And he would– this was in the era before India’s economy opened up– and so he would walk or take a scooter from town to town This was in an era really before any Indians had televisions And so he would preach the good news He would go and have meetings with people, sit around kitchen tables, and tell them about what the Hindu nationalists thought was going on in the world And so he stands against the tradition that I talked about earlier, the values of secularism that are enshrined in India’s constitution And so that’s when I say that India is a swing superpower I suppose I mean that this is in play It doesn’t seem to me that India is sliding inevitably backwards into a form of populist nationalism along the lines that Turkey or certainly Russia has followed China is a different case but equally depressing Nonetheless, I think fair-minded people could agree that the secular tradition in India is in a pretty weakened position at the moment The Congress Party that was the standard bearer of that tradition for most of India’s existence has been reduced to a parliamentary rump of less than 50 seats Its leadership is not popular And so it’s sort of unclear where the future of that strand of India’s politics is made up from And then there are all sorts of other forms of nationalist identity– caste-based politics, religious politics in India It’s a very complicated and combustible society Nonetheless, I don’t think that there is as much reason for pessimism as there are in some of these other autocratic countries And so when I say that it’s a swing superpower, what I mean is that it could go, to some degree, one way or the other I don’t think India is going to become a new version of Russia, a kind of oligarchic kleptocracy I think there was a risk of that 10 years ago I think that risk has thankfully receded somewhat But there is a future in which India would remain, and it’s already probably the most unequal country in the world, right up there with South Africa and Brazil But it’s reached that point at a much earlier stage in its economic development And so the risk is if it continues to grow and the proceeds of that growth are taken overwhelmingly by people at the top, you have a potential future in which India becomes unprecedentedly unequal for a large economy And you can also get a situation in which Indian politics becomes much more combustible This is a country that has nearly 300 million Muslims And so if that substantial minority begins to feel that they have no protection within the political system, then that is a big problem And it’s not just that particular minority There are lots of other minority groups as well And so that, in a sense, is why many, I think, outsiders to India look at the values that were enshrined in the constitution and say, well, look, this is a pretty good place to start It’s not perfect But you don’t want to throw this away Because with a country as diverse as India, this is the sort of thing that you need to keep things relatively stable ARUN VENKATARAMAN: Yeah I think one of the interesting parts of the book, one of the parts that really jumped out to me, was when you talk about the ghettoization of the Muslim population in Ahmedabad in the aftermath of the Godhra riots in 2002 And I think it speaks to a kind of– when you say it’s a swing state, it could veer the opposite direction But it’s kind of a crucible moment for India JAMES CRABTREE: I mean, that’s a really good example of what– so if you go to– Narendra Modi grew up in the northwestern state of Gujarat And it’s a sort of interesting example of a theoretical question, which is, do economic growth and social harmony necessarily go hand in hand? In theory, people in this room and me, too, we like to think, let’s be nice to one another That will be good for growth We’ll all get along And then the economy will grow fine But actually, the Indian lesson of that is not necessarily the case So Gujarat has been one of India’s most successful states It’s the closest that India has to the Pearl River Delta in China It is industrialized It’s relatively corruption-free It attracts a lot of foreign investment You have huge factories Ford have a huge factory there, GE So it’s sort of an economic model for India And many people look at that and say, OK, well, if we could have that economy across all of India, India would be in a great position You know, India is already more like, in many parts of the country, so in that part of the country,

in Tamil Nadu where your parents are from, much more like a middle income Southeast Asian country than they are a sub-Saharan African country In fact, the bits of India that look like sub-Saharan Africa are really shrinking And pretty soon, extreme poverty of that sort is going to be purely an African phenomenon You’re not going to see very much of it even in South Asia But the problem is that Gujarat has really terrible politics, very caste-based politics, but particularly brutal for the Muslim minority And you see that in Ahmedabad, where Muslims in Ahmedabad live in a literal ghetto, so not a ghetto like you get in American cities, which is somewhere that only poor people live It’s a ghetto like you got in 19th century European cities, where everybody of that particular faith lives– so the Jews in the Prague ghetto In Ahmedabad, every Muslim in the city pretty much lives in one area And they all moved there It was already a sort of heritage Muslim area But people flocked together for strength in numbers after the events in 2002 because they just didn’t believe that the state was going to protect their rights And so from the poorest chaiwala to the guy who owns the BMW dealership, they all live in this area, which is a couple of kilometers square And that’s a real indictment of Modi’s record as a chief minister and those who have come after him, that minorities feel so unsafe, both in the capacity of the state, the police and other forces, to protect them in instances of violence but also their suspicion of the motivations of the ruling majority And so that sort of thing is potentially very damaging in the medium term But it doesn’t necessarily stop you building factories and export-focused manufacturing So this is one of the tensions I think that India has to deal with ARUN VENKATARAMAN: You, go ahead Looks like we have another question AUDIENCE: Hey Thanks for coming here today So I actually moved here five years ago And the questions that you raise here right now, I kind of asked myself this while growing up back in India And what was clear to me was that, while the state itself promises a lot of benefits to close the gap of income inequality and have a lot of benefits for the farmers, for the poor, but somewhere in the line of a lot of bureaucrats, these benefits get lost And they never even reach farmers or poor people who they were intended for basically And so there’s this cycle, which I think hasn’t been broken yet– or I don’t even know if it can be broken– of the state being corrupt, like people not getting economic mobility, not having literacy, and hence again backing up politicians who exploit them based on caste or religion And so the cycle keeps on continuing So I don’t see an end in sight as to how this cycle can be broken Do you have any thoughts on this matter as to how economic mobility can actually happen and break this chain of caste-based and religion-based politics? I think that’s the only way forward for India to move in a scalable, progressive way But I don’t see an end in sight right now– just wanted your thoughts on that JAMES CRABTREE: Well, so I think, again, my bias is to try and look for reasons for optimism And I think you can find them Where are you from in India? AUDIENCE: New Delhi JAMES CRABTREE: Right So there we are So if you’re from the north, things always look bleaker But if you go to Southern India, Southern India is by no means perfect But it’s much better than the north in terms of economic development, in terms of the way the state works Southern India, Southern and Western India look much more like Thailand than, I don’t know, Congo The problems are very North Indian issues So there are parts of the country that perform much better than others And so that suggests that if you have different institutional arrangements, things can improve I mean, there are just things about the way the Indian political system works, which are quite hard to grasp You will understand them, but it took me a while as an outsider One thing which surprises you as soon as you go there is, in Britain or America, the upper middle classes vote in great numbers But the poor, those who have less advantage, often vote much less because they see the system doesn’t deliver for them In India, it’s precisely the other way around Some of the lowest voting figures come from the richest constituencies in the country, in South Mumbai and Central Delhi, whereas if you’re a slum dweller, you vote as a ritual act Absolutely everybody votes And that actually, in some ways, entrenches the cycle that you’re talking about Because people attach themselves to particular politicians

Equally, tensions in India, caste tensions, religious tensions, do not cause tensions in politics It’s typically the other way around It’s the cycle of elections which cause these tensions Politicians whip up fervor amongst their base This is not unknown amongst politicians in this country to sort of manipulate and whip up fervor amongst their base for political mobilization purposes That happens a lot in India I think in the end, technocratic fixes can begin to improve this So Arun, you mentioned Aadhaar and what technology can do to help I mean, in the end, in the administration of the beginnings of the Indian social welfare state– so giving money to people who need it to feed their children or subsidies for fuel to cook or free school meals– the administration of these things is often hopelessly corrupt But if you can move to a system of, let’s say, direct cash transfers using a combination of these identity systems, mobile phones, and bank accounts, you could wipe out almost at a stroke all of the graft that goes into those systems and begin to create the beginnings of a much more supportive welfare state Now we’re already halfway down that road Now that won’t make it perfect, but it’s an example of what can be achieved But again, that’s not to underplay the distance that India still has to go I mean, it’s very hard to do what a country like Singapore did But even in Singapore, it took 50 years And so in a sense, you’re talking about kind of generational-long effort to introduce the systems and the governance reforms, to invest in public administration, to think about how technology can help, but not just technology Technology isn’t going to solve this on its own You need to pay public officials good salaries so that they don’t feel they need to take things under the table, all sort of things But other countries have done this South Korea was endemically corrupt So was Singapore when Lee Kuan Yew took over Other countries have managed gradually to break this cycle, as America did before it So again, with wise public policy, it ought to be possible to do it ARUN VENKATARAMAN: Do we have time for one more question? AUDIENCE: Yeah, I think we have time just for maybe the two of us I have a quick question from the Dory, from Ramesh up in San Bruno Ramesh says, you had mentioned, quote, “radical options have been ignored, notably the privatization of struggling public sector lenders.” This is often discussed in the media as the only option to save public sector lenders, which are the backbone of rural India Why not other approaches? JAMES CRABTREE: Well, so what we’re talking about here is the nature of India’s financial system, which is fairly state-dominated 3/4 of assets in the financial system are held by state-backed banks A quarter are held by private sector banks Broadly speaking, the private sector banks are pretty good– not all of them They have their flaws But some of them are very good And they’re the darling of Western investors Broadly speaking, the state-backed banks are pretty hopeless And so well, what are your options? You don’t necessarily have to privatize these things In fact, there are theoretical risks from doing mass privatization programs And I wouldn’t actually recommend that per se But some of them can be sold off Some of them can simply be reformed You introduce better management, different You make the governance independent You can sell down the stake that the state holds to below 50% So Singapore still has substantial state holdings of many of its formerly state-run assets You have a sort of golden share But you don’t need to control and run the whole thing by bureaucrats You can hand it over to people who actually know how to run banks So I don’t think privatization is the only answer I’m not a kind of mad libertarian who believes that you only need to go down that route Nonetheless, India does have a very unusual banking system now Only really China and maybe Vietnam have a banking system that is as state-dominated as India Across the rest of the emerging world and the rich world, typically you have a different balance between the state and the market And the strategy that India is following to reform its banking system at the moment is clearly the worst of all worlds, which is they’ve sort of given up on the state-backed banks But they can’t summon the political will to reform them And they’re just sort of waiting for them to die And then the private sector gradually, by a sort of attritional process, will win market share, as it has been over the last 10 years So it’s sort of creeping up from a fifth to a quarter to a third That’s a terrible way to reform your banking system, because it takes an awfully long time

And in the end, the wastage, as opposed to the alternative strategy, which is taking the state-backed banks and either aggressively reform them or move some of them into private ownership, something– introduce new forms of banking that have a heavy technological component as well– India is about to go through the same sort of payments revolution that China has been through– then there’s much quicker and more optimistic set of reforms But at the moment, I have to say the Indian government has not covered itself in glory on banking reform It’s one of the weaker areas of its reform agenda And so I think hopefully whoever wins the next election, that will be a big priority Because it seems like a very– it’s a potential quick win to unleash investment in the economy AUDIENCE: Hi Thanks for coming One thing I’d like to talk about is patrimonialism I mean, Mukesh Ambani, who you mentioned, his father was a big businessman And there are large sections of the political class who are there thanks to the family connections or whatever And even in Bollywood, it’s the same So do you see that as being something typical of economies that are in this stage of development, or is that unique to– what are your thoughts on that? JAMES CRABTREE: Yeah, it’s interesting, isn’t it? You’re right that in politics, the lock hold of dynastic politics in India has actually in some ways got stronger over the last 10 or 20 years So you have the Nehru-Gandhi dynasty, which is famously the kind of dynasty of the Congress Party One of the reasons why Narendra Modi is so interesting is he’s not a dynasty He doesn’t have any children And so he’s not trying to build a dynasty But for various sort of sociological reasons, many of which are wound up in corruption, having these dynastic regimes in politics has become more common And it’s certainly a feature of Indian capitalism that the family-owned conglomerate remains the dominant form of business ownership And predictions of the decline of the family-owned conglomerate are often made by outsiders And they very rarely come to pass In actual fact, it seems in many ways as if that– and its true across Asia– that the conglomerate as a form of business remains as dominant as ever it was And so you mentioned Mr. Mukesh Ambani His company has become more conglomeratish over the last five or 10 years It’s got broader And he’s moved into more areas I tend to think that in the medium term– again, some of these factors will decline a little bit Part of the reasons why conglomerates and family-owned conglomerates are so dominant in India are because you need to keep functions within the business that typically would be done outside in other areas So you need to recycle capital within the business You don’t trust the legal system to guarantee trade with other companies So you keep them within your own company As India moves towards a more neutrally-administered sort of pro-market, well-regulated economy, some of that will dissipate And again, if you can fix parts of the funding of the political system, then some of the reasons for keeping all of the money in the financial system, within the political system, within different families, will dissipate as well But I don’t think India is going to, in a sense, end up where America and Britain are The notion that the form of modernity that India is moving towards, this sort of Francis Fukuyama model that we’re all going to kind of end up with a form of Western politics and capitalism, I think that’s pretty clearly not going to happen And so wherever India ends up is going to be its own form of these things And so I suspect some form of dynastic politics and conglomerate-based business is going to be with us for a long time to come ARUN VENKATARAMAN: Amazing The book is called “The Billionaire Raj.” I’d highly, highly recommend it I think you do a phenomenal job in just a series of portraits of the billionaire Raj, kind of this class, really getting at a lot of the thorny issues that are central to India’s development over the course of the next half century Thanks, James, for being here JAMES CRABTREE: Excellent Thanks a lot It’s a great thrill to be here [APPLAUSE]