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January2017

India’sPoliticalEconomy:WhatCanbeLearntfromtheUSProgressiveEraResponsetotheGildedAge?

MichaelWalton1

Cornelius Vanderbilt’s Summer Home

Mukesh Ambani’s Mumbai Home

1HarvardKennedySchoolandCentreforPolicyResearch,NewDelhi.ThankstoPratapBhanuMehtaandAshutoshVarshneyandtoparticipantsinseminarsintheCentreforPolicyResearch,anduniversitiesofOxford,Brown,BerkeleyandtheHarvardKennedySchool.SpecialthankstoPranavSidhawiforresearchassistance,andtoMartinChorzempaandShreyaPandeyforspecificresearchinputs.

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ThisessayexploresIndia’spoliticaleconomyofdevelopment.Ithastwocounterpoints.Thefirstisvividlyillustratedbythesetwomansions.CorneliusVanderbilt’shouse(oneofmanybuiltbytheVanderbiltfamily)isaniconicproductoftheUSGildedAgeofthelate19thcentury.Thiswasaperiodfamousforits‘robberbarons’,manyofwhomsoughttopreservetheirfamethroughphilanthropicventures—extremeeconomicrentstransformedintoaresonantblendofprivatewealthandpublic-spiritedfoundations,whichtransformedthecollectiveassociationsoftheirnames.ThesecondisthemorerecenthouseofMukeshAmbani,India’srichestman,stillmainlyknownforhisconglomeratecompanyandprivatewealth,butalsomovingintothebusinessofsupportforuniversitiesandothermorepublicendeavours.

ThesecondcounterpointisPranabBardhan’sseminalbookonthepoliticaleconomyofIndia’sdevelopment(PEDI),writtenin1984,towhichthisvolumeisdedicated.AsBardhanhimselfwroteinthe1998epiloguetotheexpandededition:

IhaddescribedasystemofpoliticalgridlockinIndia,originatinginthecollectiveactionproblemsofalarge,heterogeneouscoalitionofdominantinterestgroupswithmultiplevetopowers,andwithnointerestgrouppowerfulenoughtohijackthestate...thesystemthussettledforshort-runparticularisticcompromisesintheformofsharingthespoilsthroughanelaboratenetworkofsubsidiesandpatronagedistribution,tothedetrimentoflong-runinvestmentandeconomicgrowth.(Bardhan,1998:130)

PEDI’scentralthesiswasthattherewerethree“dominantproprietaryclasses”—richerpeasantry,businessandthebureaucracy(withthebureaucracyaninterestgroupratherthananautonomousagentofthestate).Eachbenefitedfrom“particularist”deals,butwouldhavebenefitedmoreoverthelongerterm—aswouldthebroadersociety—withamoreautonomous,developmentalstate.Butthiswouldhaveinvolvedgivinguptheircurrent“spoils”.Thepoliticalleadersandvariousarmsofthestatelackedthecoordinatoryandenforcementcapacitytoeffectsucharestructuringofthecomplex“networkofsubsidiesandpatronagedistribution”,evenmoresoasmanypotentiallyfacedgenuineshort-termlosses.Evenifpoliticaleliteswantedtoeffectsystemicchangethestatelackedcredibility.

Atfirstsightthesetwoprismslooktobeinoppositionwitheachother.EvenasBardhanwaswriting,thebeginningsoftheshifttoapro-businesspolicyandpoliticalorientationwasstartingunderPrimeMinisterRajivGandhi,alongwithanassociatedgrowthacceleration(Kohli,2006;RodrikandSubramanian,2004).TheIndianstockmarketwasbecomingactive,spurredbythe1977IPOofReliance,byMukeshAmbani’sfather(McDonald,2010).DhirubhaiAmbanihadsuccessfully

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brokenintotheseeminglyresilientLicenseRajsystem—asystemthatseemedtobethepreservativeofestablishedbusinesses,andpartofthebroadergridlockPEDIdescribed.

Since themid-1980s the Indian economy has been transformed. National incomepercapitaisnow3.5timesthemid-1980slevelandtheofficialpovertymeasurehasfallenfrom45percentin1993/94to22percentin2011/12(NarayanandMurgai,2016).Privateinvestmentrosefromlessthan5percentofGDPintheearly1980sto14percent in2015andthenumberof IndianbillionairesreportedbyForbesrosefromtwoorthreeinthemid-1990stoalmost90in2015.

This doesn’t look like gridlock. In the domain of business—one of the threedominant proprietary classes (DPCs) at the core ofPEDI’s political economy—thetwo main themes of recent years have been India’s business dynamism and theincreasedinterminglingofpoliticalandbusinesselites.Itisalsotruethattherehasbeen a major countervailing movement in the expansion of social provisioning,especiallyunderthe2004-14governmentsoftheCongress-ledUPAcoalition.ItasifPolanyi’s sequential double movement is happening simultaneously in India(Polanyi,2001;Stewart,2010).While therearedifferentviewsonthedriversandimpactsofthis—rights-basedsocialdemocracyoropportunisticpopulism?—italsospeaks to substantial policy initiatives shapedby theunfoldingpolitical economy.(SeeWalton, 2013, other essays in Khilnani andMalhoutra, 2013, and Aiyar andWalton,2014.)

Therehas alsobeen striking action in electoral politics. The Indian electoratehasshownitsenthusiasmforkickingoutpoorlyperformingincumbents—inmanystateelections and in the national 2014 election—and increasingly in rewardingrelatively good performance, for example in Bihar, Madhya Pradesh andChhattisgarh in the past decade. The electoral victory ofNarendraModi,with theBJP,was,correctlyorincorrectly,seenasamarkingasharp,collectivedemandforchange,especiallyintherealmofgovernmentaction,spurredbytheblendofhigh-profilescamsundertheUPAandthedailyfrustrationsofdealingwithgovernment.Some characterized this in thewell-worn tropeof the riseof aspirations amongstthe Indian lower and middle classes, underpinned by the experience of risingincomesandincreasingstatepresence.

This essay argues that an updated version of PEDI’s original insights remainsrelevant.Itparticularlyexploresthefollowingideas:

• TheparallelbetweencontemporaryIndiaandtheUSGildedAgeofthelate19thcenturyisindeedstrikinganduseful,bothwithrespecttothemannerinwhichwealthconcentrationhasoftengonehandinhandwithextensive

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state-businessrelations,andinthe‘twofacesofcapitalism’—bothrent-extractingandformativeofinstitutionalchangeandproductivitydynamics.

• Whiletherehasindeedbeenlarge-scalechangeinthedomainsofeconomicformationandpublicprovisioning,toanimportantextentIndiacontinuestobestuckandresistanttosystemicinstitutionalchange.Howeverthenatureofthishaschanged:thecollectiveactionproblemholdingbackprivateinvestmentwastovaryingdegrees“solved”inthemarketreformera,atleastinmanystates.Buttoasignificantextentthisinvolvedrestructuringofthe“dealsspace”inrent-sharingrelations.Collectiveactionproblemsremainimportantbothforatransitiontoafullyrules-basedsystemandforbroaderissuesofgovernance.

• Anevenmoreinterestingparallel,orrathercontrast,iswiththeUSProgressiveEra(generallydatedfromthe1890stothe1920s).IntheUSaheterogeneouscoalitionofpoliticalandsocialmovements,linkedwithexecutiveandbureaucraticreforms,ledtoatransformationofUStowhatwouldnowbecalledafunctionalsocialdemocracy,a‘GrandBargain’thatsavedcapitalism.However,inIndia,thecontinuedprevalenceof‘particularistcompromises’renderssimilarcollectiveactionparticularlyhard.ThisisinspiteoftheapparentparadoxthatmostoftheProgressiveEra’s‘victories’arelegallyonthebooksinIndia.

• Indeed,theveryextentofthese‘victories’,andtheassociatedreachofthestate,hasbeenasourceofthechannellingofsocialenergiesintoparticulariststrategies,inwhichinterestgroupsseektonegotiatedabetterdealfromamorepresentandresource-richstate.

Therestofthepaperisorganizedasfollows.First,context isprovidedintermsofkeyfeaturesofIndiawiththeUScirca1900.Second,theGildedAgecomparisonisexplored, reviewing the comparative features of capitalism and the state. A thirdsectionturnstotheProgressiveEraresponse,incomparisonwiththecontemporaryIndia period. A fourthsection provides a sketch of the current political economyequilibrium—asuggestiveupdateofPEDI.AfinalsectionassessestherecentperiodinIndiainrelationtomovementstomakeimproved‘governance’politicallysalient.

1.Context:keyfactsinhistoricalUSandcontemporaryIndiacomparisonTosetthestageforourcomparison,wefirstcomparecontemporaryIndiawiththeUSattheturnofthelastcentury.Figure1indicatestheUnitedStateswasalreadysubstantiallyricherthancontemporaryIndia.Onlyin2012hadIndiacaughtupwiththe 1880 US income per capita. 40 percent of the US labor force still worked inagriculturein1900,comparedwith53percentinIndiain2009/10.2However,Indiahasbeengrowingfastersincethe1980sacceleration—andverymuchfasterinthe2000s(Figure2).Moreover, Indiangrowthhasbeenmuch lessvolatile: ithashad2DatafromLebergot(1966)andIndianNationalSampleSurvey(2009/10).

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very few—monsoon-induced—years of negative growth, whereas US experiencedsubstantialfluctuations,includingseveralyearsofsharpcontractions(Figure3).

Figure 1 Income per capita in the US (1880-2022) and India (1970-2012) US PPP$

Source: Maddison project and World Development Indicators Figure 2. Average annual growth in the US and India over four decades (in percent per annum)

Source: Maddison project and WDI.

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Figure 3. Annual growth of the US (1880-2022) and India (1970-2012) (in percent per annum)

Source: Maddison project and WDI. SofarthislooksgoodforIndia:enjoyingthepotentialforfastergrowththatcatch-upallows,withmuchgreaterstability.Butthereisashadow:veryfewdevelopingcountrieshavesucceededinsustainingrapidgrowth.Thetypicalpatternofgrowthin developing countries is characterized by brief growth spurts followed byeconomicslowdown(Hausmann,PritchettandRodrik,2005).Sustaininggrowthisadifferent challenge from achieving a growth spurt, requiring deeper institutionalchange(Rodrik,2003).Thisisrelevanttothethesisofthisessay:apotentialcauseofsuchfailurestosustaingrowth is thepoliticaleconomyofentrenchment,whichpreventsthecreationoftheinstitutionalbasesfordynamicandinclusivegrowth.

AmajorcontrastbetweentheUSofthisperiodandIndianowconcernsthereachofthe state. This has two dimensions relevant here. First, as we discuss below, theIndianstatehashadafullpanoplyofregulationsofbusinessactivitysincetheearlypost-independenceperiod.ThiswasvividlythecaseintheLicenseRajperioduptothe 1991 liberalization, but remains pervasive today. By contrast, many of thebusinessregulationsintheUScameinduringtheProgressiveErafollowingtheturnofthecentury.Thereisanapparentparadoxhere,discussedinSection4.

Second, with the exception of education, the Indian state also has much greaterreach in terms of social provisioning and associated interactions with citizens.Educationisanimportantexception,ofcourse.HeretheUSwasaleader,drivenbylocal education: by 1900, enrollment in public primary educationwas 88 percentwith a further 6 percent in non-public schools (Lindert, 2004). Literacy amongstwhiteadultswas92percentandrisingby1890(andevenamongstnon-whiteswas

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43percent,risingto70percentby1990).Bycontrast,India’sadultliteracywasstillless than 70 percent in 2011, and close to universal primary enrolmentwas onlyachieved in the early 2000s. However, the US had little or nothing in theway ofsocialinsuranceandtransferswhileIndiahasawholerangeofsocialprogrammes(oftenpoorlytargetedandoflowquality—butthat’sanotherstory).

2.Capitalistparallels:onIndianandUSGildedAgebusinesstycoonsComparisonswith theUSGildedAge started toemerge in Indianpublicdiscoursearound2011orso.InanopinionpiecefortheFinancialTimes,SinhaandVarshney(2011) said: ‘Both in its rot and heady dynamism, India is beginning to resembleAmerica’s Gilded Age.’ Corruption had long been a theme in India, both in theinteractionsbetweenstateactorsandcitizensandwithbusiness.Itwasafeatureofthe License Raj period, including in Dhirubhai Ambani’s successful incursion intothatsystem.Whatisdistinctiveofthemorerecentperiodistheemergenceoflargenumbersofsuper-wealthyindividuals,manyofwhombuilttheirwealthinactivitiesinvolvingconnectionswithpoliticiansandotherstateactors—in land,miningandconstructionforexample.

Here we update earlier work by Gandhi and Walton (2012) using the globaldatabase byForbes on billionaires as a proxy for the super-wealthy businessmen.Thisis,ofcourse,onlythetipoftheicebergofextremewealth,andundoubtedlyhasmeasurement problems. But the Forbes team at least tries to apply a consistentmethodinassessingthenetworthoftheworld’ssuper-rich,drawingonallpubliclyavailableinformation.Intuitivelythereismorelikelytobeaproblemofunder-thanover-reporting,especiallywhenwealthhasquestionablesources.

Acentralanalyticalconcepthereconcernsthatofeconomicrents—thatis,returnstofactorsinexcessofwhatwouldbeobtainedinfullycompetitivemarkets.Especiallyforwealth from corporate sources, this is an important source of privatewealth.Economicrentscanflowfromdifferentsources.Weheuristicallydrawadistinctionbetween ‘extractive’ rents and ‘productivity-based’ rents. Extractive rents involvedistribution from the existing pie, achieved through favoured links with state-controlled resources, the exercise of monopolistic market power, exploitation ofminority shareholders and so on. Productivity-based rents involve returns toinnovation, to the creation or discovering new activities, before markets becomefullycompetitive—Schumpeterianrentsareaclassicexample.BothhavebeengoingoninIndia,ataheightenedscalesincethegrowthaccelerationsofthe1980s,and,especially,the2000s.Theycanoftenbecombinedinthesamebusinessactivity;wereturntothisideabelow.

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Let’slookattheIndiadatafirst.TheemergenceofIndianbillionairesisstrikingbothover time and in international context. Between 1996 and 2003, there werebetweenoneand fivebillionaires in thedatabase,andtheiraggregatewealthonlyexceededonepercentofGDPfrom1999.By2015and2016therearebetween82and88Indianbillionaires(withresidenceinIndia),andtotalbillionairewealthhasfluctuatedaround10percentofGDPsince2010(with2008anearlierhighoutlierofover20percent,Figure4).3Theupsanddownshavetendedtomirrorstockmarketvaluations, since billionaire wealth is closely linked to the valuations of listedcompanies.India’srelativebillionairewealthisunusuallyhighforarelativelypoorcountry—comparable as a share of GDP to Thailand, Malaysia and the US, andgreaterthanBrazilandMexico(Figure5).

Figure 4. Indian billionaire wealth in relation to GDP and Sensex, 1996-2016 (in percent)

Source: Forbes.com and WDI

3Thiscomparesastock(wealth)withaflow(GDP),intheabsenceofdirectmeasuresofaggregatewealthofIndiaandothercountries.Thecomparisonsovertimeandacrosscountriesshouldnotbeinterpretedasshares,butratherasindicatorsoftherelativesizeofbillionairewealth.

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Figure 5. India’s billionaire wealth in comparative context (inpercentofGDP)

Note: billionaire net worth reported in March 2016 as a ratio of nominal GDP in 2014—the latest year with actual numbers in the World Development Indicators. Source: Forbes.com and WDI We then use Forbes’ description of the primary source of wealth to categorizebillionaires as primarily in ‘rent-thick’ sectors (by which we mean sectors withlikelyhighlevelsofextractiverents,owingtodependenceonlinkstothestate),andotherswherewealth ismore likely to be dependent primarily on entrepreneurialactivity that generates productivity gains. This is the same methodology as TheEconomistusesforits ‘cronycapitalism’index.4WehereuseTheEconomist’slistofsuch sectors, including mining, commodities, finance, infrastructure, real estate,steel,utilitiesandtelecomsservices.Theindexhasaheuristicvalue,butcomeswithmany caveats. Many billionaires expanded their wealth from diversifiedconglomerates—MukeshAmbaniofRelianceandKumarBirlaoftheBirlagroupareexamples.AndinanIndiancontextallactivitiesinvolvesomedegreeofregulatoryor other interaction with the state. The IT industry is a good example ofproductivity-based rents, yet has depended on (legal) support from stategovernmentsinlandandtaxfavors,aswellashavingatleastoneinfamouscaseofcorporatecorruption in the formof theSatyamscandal. Still, forwhat it isworth,there isanintriguingpattern(Figure6).Untilaround2013overhalf,andinsomeyears amuch higher proportion, of billionairewealth comes from those based in‘rent-thick’ sectors. In 2014, and especially 2015, the balance has shifted, with

4Thiswasitselfbasedonourearlierwork,aswellasthatofRuchirSharma;seeTheEconomist(2014).

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extensive entry into the list of individuals in ‘other’ sectors, such aspharmaceuticals,IT/softwareandconsumergoods.

Figure 6. India’s billionaire wealth in “rent-thick” and other sectors

Source: Forbes.com and authors calculations. Whilethisisonlyillustrative,weseestrikingcontrastswhenlookingatindividuals.VijayMallya,inthelistfrom2006to2012,builthiswealthfromhisfather’sliquorbusiness,diversifiedintoairlines(amongstothersectors),succeededinrunningupimpressivedebts,becameapoliticianintheRajyaSabha(India’supperhouse),and,atthetimeofwriting,wasoutofthecountry,facingchargesoffinancialfraudandmoney laundering.By contrast, the ITbillionaires, suchasAzimPremji,NarayanaMurthy and Nandan Nilekani (all from the same state as Mallya, Karnataka),obtainedtheirwealthfromoneofIndia’smostdramatic,productivity-basedsuccessstories. A further contrast is the infrastructure billionaires. For example, GM Raoand GVK Reddy, both from Andhra Pradesh, built their wealth from the majorgrowthinpublicspendinginthissector,buttheircompaniesalsoranupsubstantialdebts,mainlyfromstatebanks,andbothdroppedoutofthebillionairelistinrecentyears. In the same sector GautamAdani built hiswealth (and high debts) on theback of Gujarat’s construction boom, as well as having close connections to thenChiefMinister(nowPrimeMinister)NarendraModi.

Let’snowlookatthebusinesstycoonsoftheUSGildedAge.Estimatedwealthofthetop 18 richest around 1900 or earlier is given in Table 1—this is adjusted forinflationbetween1900andthemid-2000s.Apartfromthefamiliarityofseveralofthe names (from their subsequent philanthropic incarnations) there are twostriking features of this list. First, there is the sheer size of the wealth—evencompared to the 2016 list. John D. Rockefeller of Standard Oil and CorneliusVanderbiltofrailroadfamedwarfBillGatesandCarlosSlim.Second,usingthesame

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categorization as above, the bulk of these tycoonswere in ‘rent-thick’ sectors, insharpcontrasttotoday’sgloballist,oreventhemorerecentIndianlist.

Table 1. The wealth of the richest Gilded Age business tycoons circa 1900 (in2007US$)

Source: Klepper and Gunther (1996), updated by the New York Times, July 15, 2007 This view is not just in retrospect. Gilded Age tycoons were frequently seen aswealthy because of ‘extractive”’ rents, as superbly captured by contemporarycartoons. Figure 7 depicts the common view of Standard Oil as an octopus, withtentacles around all aspects of US life. And Figure 8 is a vivid representation ofWilliamVanderbilt(thesonofCornelius)dominatingrailroadtraffic.

"Rent&thick"+sectorsRockefeller Oil 192

Rogers Oil 39

Payne Oil 37

Subtotal 268Vanderbilt Railroads 143

Blair Railroads 43

Huntingdon Railroads 33

Subtotal 219Gould Finance 67

Sage Finance 43

Harriman Finance 39

Morgan Finance 38

Subtotal 187Weyerhauser LumberHandHland 68

Fair SilverHandHland 45

Frick Coke 36

Subtotal 149Carnegie Steel 75Widener UrbanHtransit 32

"Other"+sectorsField Retail 61

Ford Autos 54

Weightman Pharma 44

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Figure 7 A contemporary view of Standard Oil

Figure 8 …and of William Vanderbilt and railroad monopolies

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Whatisreallyinterestingisthecomparisonbetweentheprocessesatwork.FortheUS historywe particularly draw on thewonderful history of the transcontinentalrailroadsbyRichardWhite(2011).

Sources of wealth and economic efficiency. In both the US and India, there wasmassive private wealth accumulation on the back of corporate expansion. Whilemany—inthesecondgenerationofUStycoons,and in India—inheritedsignificantwealth, the real driver was corporate activity, not aristocratic landed wealth.Moreover, theywere often highly efficient at extracting privatewealth from theircorporations: in the US, railroad companies would suffer financial crises, but theindividualswhoowned them(mostly)protected theirprivatewealth. In India thetypically pyramidal family-controlled conglomerates have ‘tunnelled’ resources tocontrolling firms, implicitly expropriatingminority shareholders (Bertrand,MehtaandMullainathan,2000).Thesecompanieshavealsodoneverywellatgettingdebtfromthestatebankingsystem,evenifmost,unlikeMallya,havenotsoughttoavoidpaying. In the US, debt crises, and bondholders losing their shirts,were common(andrelatedtothevolatilityseeninFigure3).InIndiaconcernovernon-performingassets in the banking system has been high and rising in recent years. We havealready seen that much of the corporate activity has been in rent-thick sectors,whereconnectionsmatter.Thishasoftenbeenlinkedtosubstantialmarketpower.AndamajorthemeofWhite’sassessmentofthetranscontinentalsistheireconomicinefficiency, even more so if the environmental destruction and social costs areaccountedfor(notablyforthenativeAmericanpopulationandexploitationoflabor,especially Chinese). In India, there have been comparable concerns in manysectors—notablymining—overenvironmentalandsocialcosts.

Businessandpolitics.Relations between businessmen and politicians is central tobothstories.IntheUS,thiswasatthecoreoftheapprovalsthatrailroadcompaniesobtainedforrightsofway,withlanddealsalongtherailwaysanessentialpart.Thisinvolvedsystematictrustednetworks—therailroadtycoonsreferredto‘friends’asa technical term for the many politicians in the state who could be relied upon(White, 2011). Some businessmenmoved in and out of politics, including LelandStanford,whoreapedsubstantialprivatewealthfromhispartnershipinthePacificRailwaydespitebeingconsiderednottoobrightbyhispartners,andthen,ironically,was the initial source of Stanford University’s endowment! The railroads alsoeffectively created the lobby system. Connections pervaded many sectors. Forexample, Menes (2006) cites cases of city-level political bosses investing inconstruction firms, or channeling contracts to firms held by family members, inearly20th-centuryPhiladelphiaandNewYork.

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This is all too familiar from contemporary India. Dealings with state actors arecrucial to a whole range of business transactions. There are increasing overlaps,with businessmen going into politics (Mallya is just one example) and politiciansgoingintobusiness.Thiscamevividlyintothepublicdiscoursewithasequenceofhigh-level scams that unfolded in the latter years of the Congress-led UPAgovernment,intheallocationofthetelecomsspectrum,theCommonwealthGamesandcoalminingrights (wediscuss thesocialandpolitical reaction to these in thefinalsectionofthispaper).Politicalfinanceisanimportantpartofthisrelationship,especially as elections have become increasingly expensive. The tight legalrestrictionsonsuchfinanceonlyshiftsthechannelsoutsidethelaw.

Twofacesofcapitalism.Afurther intriguingparallelconcernswhatmightbecalledthe two faces of capitalism, in which rent extraction has been, to a substantialdegree, alignedwith productivity advances.While in both cases there has clearlybeen substantial rent creation and its private appropriation, there has also beensignificant asset creation. In the US, strategic infrastructure did get built, as thecountryconsolidated itspositionofglobal industrial leadership.Citiesbecamethemostdynamicpartoftheeconomyinspiteofentrenchedcorruption(Menes,2006).InIndia,rent-thickconnectedcapitalismhaslivedalongsideamajorriseinprivatecorporateinvestmentthathasfueledunprecedentedgrowth(albeitinthecontextofanunusual‘sweetspot’ininternationalanddomesticconditions;ModyandWalton,2012). In an analysis of overall private firm dynamics Mody, Nath and Walton(2011) found little evidence of concentration affecting the profit behaviour ofenterprisesinthepost-1990period.Howeverasurgeinfirmentryin1990stailedoff in the 2000s boom, especially inmanufacturing. Concentration then rose, andmajorfamily-controlledbusinesshousesandstateenterprisescontinuetodominatetheenterpriselandscape.

Theregulatorycontrast.ThereisoneimportantcontrastbetweenGildedAgeUSandcontemporaryIndia.InIndiatheregulatorystatehasbeenapervasivefeatureoftheinstitutionalcontextsince(andbefore)independence.Thiswasdramaticallytrueofthe License Raj period, and remains substantially true for many licenserequirements,despitethegenuineliberalizationandderegulationof1991andlater.This is a theme we pick up in the next section. Here we suggest that, while thespecific fields of interaction between politics and business are different, theunderlying structural relationship, of rent creation and systematic rent-sharingunderpinnedbypolitical-businessconnections,hasstrongparallels.Thisisnotleastbecause in India there isasignificantoverlapbetweenrulesand(informal)deals-based decision-making. (As a further parallel, which goesway beyond this essay,there are structural similarities over interpretations of the contemporary United

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States,withexplicitorimplicitsupportforeconomicrentcreation,underpinnedbypoliticalfinanceandthelobbysystem,insectorsrangingfromfinance,oilandgas,to agriculture.An important contrast is that these relationshipshavebeen largelyinstitutionalizedinformallyrules-basedprocesses.)

3.Reaction:theProgressiveEraresponseandtheIndianparadoxFor India, evenmore interesting than theGildedAge comparison is thatwith theProgressiveEraand itssequel in theNewDeal.Thiswasamulti-decadeperiodofreform, which can be seen as an important manifestation of the second part ofPolanyi’s ‘double movement.’ While Polanyi characterized this as a response to‘unregulated capitalism’ we have seen that the preceding period was morecomplicated, especially with respect to the tight links between the state andbusiness.Theoutcomewastheformationofacombinationofregulatedcapitalismandthecoretrappingsofa20th-centurysocialstate.

ThisisespeciallyinterestingforIndiasinceitoccurredinthecontextofavigorousdemocracy,whichhad in turnemerged froma ‘clientelistic’polity,withapoliticaleconomydependentonreciprocalfavours,whetherwithrespecttosocialgroupsorbusiness. Fukuyama (2014)has recently argued that this is aparticularlydifficultpoliticaltransition,withtheUSarareexception.HereweoutlineaninterpretationoftheUStransition,andthenturntodescribingandexplaininganapparentIndianparadox.

TheUStransition.Howcouldchangeoccur?Asimplecontemporaryviewiscapturedin Figure 9: that electoral processes would bemore powerful against the ‘trusts’(monopolies) than the ‘old’ method of strikes. The Australian (secret) ballot wasintroduced soon after the presidential election of 1884. However, of equalimportance was an effective alliance between a heterogeneous range of popularmovements and political parties—Grangers, Populists, Progressives, the reformmovementincities—thatprovidedimpetustoactionbytheexecutive(fromTeddyRoosevelt on), the legislature and judiciary.5This was underpinned by the‘muckraking’ journalism that brought out the dark side of the system. Robinson(2009)arguesthatthelinktopoliticalmovementswascentraltotheeffectivenessof state action. A particular strand of interest was the confluence of moralmovementswithreformistaction(Morone,2003),whichinlaterdecadestendedto

5SeeKazin(1995)ontheevolutionofpopulismintheUSinthisperiod.

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split, reducing the effectiveness with respect to political economic reforms.6Theroleof‘morality’insocialmovementsishighlyrelevanttocontemporaryIndia.

Figure 9. The vote against the monopolies—a contemporary view

Source: historical carton via Robinson (2009) Theresultinstateactionwasaseriesofmeasuresthatpreservedcapitalismwhilstmanagingitsexcesses—oftenconceptuallycorrectingmarketfailuresinthesystem.Somemajorexamplesare:

• ShermanAntitrustAct(1890)• ClaytonAntitrustAct(1914)• PureFoodandDrugAct(1906)• State-levelminimumwages(from1912)

The sources of public action were typically heterogeneous. For example, in afascinatinganalysisofthePureFoodandDrugAct,LawandLibecap(2009)arguethatactionflowedfromthreesources:reformistmotivestocorrectmarketfailures;6Anearlysplit—withaparallelwithcontemporaryIndia—wasthefocusontheprohibitionofalcohol.Inmorerecentdecades,therehavebeenmoralmovementsofa‘progressive’character(civilrights,women’srights),aswellas‘conservative’(moralmajority,culturewars).

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rent-seeking and regulatory influence frombusiness groupswhowould relativelygain; and rent-seeking (for work, not bribes) from bureaucrats interested inextending their regulatory reach. The role of the bureaucracy is of particularinterest tocontemporaryIndia.Thekey legalchangewas in the federalPendletonActCivilServiceReformAct,of1883,whichoverturnedthe‘spoilssystem’inwhichwinning political parties awarded government jobs to its supporters, insteadrequiringthatgovernmentjobsbeawardedonmerit.Whileanecessarycondition,Carpenter(2001)arguesthatgenuinebureaucraticautonomyevolvedinsome,butnot all, agencies as aproductof agency leadership, internalorganizational changeand,crucially,thedevelopmentofsupportfromexternalinterestgroupsthatgaveadegreeofcountervailingpowertopoliticians.

The second reform phase occurred in the New Deal in response to the GreatDepression and its underlying distributive fights. This can again be seen ascapitalism-preserving resolution, in a form of social democracy, parallelingdevelopments in Scandinavia and the UK, as an alternative political resolution toEuropeanfascism(seeWalton,2013).Keyactionsincluded:

• TheGlass-SteagallAct(1933)• NationalLaborRelationsAct(1935)• Unemploymentinsurance(1935)• SocialSecurity(1935)

It is interesting that theUSwasaheadof Scandinavia in important respects—andalso that some of themore established capitalists were an important part of thesupportforsocialdemocratictransitioninboththeUSandSweden,asthisprovidedprotectionfromentryofcompetingfirmswhocouldundercutthemthroughweakerprovisioningforlabour(Swenson,2004).

The Indian paradox. As we turn to India, there is a striking contrast. Sinceindependence,therehasbeenanapparentleapfroggingcomparedwiththehistoryof now-rich countries. This, indeed, looks like a Polanyian double movementoccurring simultaneously, as capitalist changeoccurs inparallelwith the rangeofregulatoryandsocialprovisioningmeasuresthatwereinstitutional‘victories’oftheProgressivemovement.Thisincludes:

• Abureaucracythatisformallymeritocratic,vividlysointheeliteIndianAdministrativeService(IAS)andothernationalservices,butalso,inprinciple,instate-levelservices.

• Awiderangeofbusinessregulation,includinganti-monopoly/competitioncommissions,and,especiallysince1991,theinstitutionofarangeofcapitalism-supportingregulatorystructures,notablytheSecuritiesandExchangeBoard(SEBI).

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• Substantiallygreatersocialprovisioningthaninlate19th-orearly20th-centuryUnitedStates(withtheimportantexceptionofbasiceducationnotedabove),withawiderangeofpovertyprograms,unionrights,and,morerecently,rightstowork,foodandeducation.

• Last,butnotleast,electoratesmorethanwillingto‘throwtherascalsout’eversincethedominanceoftheCongresspartydisappearedaftertheearlypost-independencedecades.

Yet we have argued that despite the more extensive range of state action andassociated rights, India still has many of the characteristics of the Gilded Agebusiness-statelinks,hasweakprotectionsformanygroups,andanoftenineffectiveandproblematic state.While thismay seem familiar to students of contemporarydeveloping countries—the Indian paradox surely has parallels elsewhere—thepointofthisessayistostepback.HerearefourIndia-specificreasonsastowhy.

First,theextensivestatehasbecomeafertiledomainofbothcaptureandeffectiverent-creationandrent-sharing.Thishasrisenasthestakesfromaccesstothestatehaveincreasedinthepost-liberalizationandhigh-growthperiod.Thisisevidentinthe rising price of elections at all levels, the associated importance of politicalfinance,thecentralityoflanddealsinthecurrencyofbusiness-politicianexchanges,and the increasing movement of businessmen into politics, and politicians intobusiness—with criminals in politics an extreme manifestation of this (Vaishnav,2014).

Second,while formallyWeberian, thebureaucracyhas largely failed tobecomeanautonomous, social-welfare maximizing instrument of the state. Bureaucrats areoften subservient or complicit with the deals of politicians, with the power ofpoliticianstomoveobstructivebureaucratsaroundakeypartoftheequation.Morebroadly, few parts of the bureaucracy have experienced the US transition tobureaucratic autonomy documented by Carpenter (2001). Pritchett (2009)characterized India as a “flailing” state—with extensive state presence, butineffectivecapacitytorespondtotheintentionsofitstopechelons.Exceptions,suchastheElectionCommission,theComptrollerandAuditorGeneral,theReserveBankofIndia,onlyprovideavividcontrasttothemorecommonpracticeandcultureofthe Indian state. More profoundly the development of a bureaucratic culture ofsolving societal or citizen problems is rare, withmost services being rule-bound,withanadmixtureofdailyadministrativecorruption.7Finally,thereisasheerlack

7SeeAkshayMangla’sfascinatingaccountofthecontrastbetweenHimachalPradesh’‘deliberative’problemsolvinginHimachalPradesh,withthemuchmoretypicalcasesofUttarakhandandUttarPradesh(Mangla,2014).

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ofcapacity—Indiaactuallyhasanextensivestate intermsofcitizencontact,butarelativelysmallcivilservice.

Third,socialandpoliticalmobilizationinIndiahasbeendominatedbyparticularistinterests, in contrast to the admittedly complex set of alliances in the US. This isevident in farmermovements seeking the sustainingofmultiple subsidiesor loanforgiveness,andtheresistancetoevictionsorspecificareasofexploitation,whetherinforestsorslums.Itisparticularlymanifestinthedeeplyinstitutionalizeddemandforvarious formsofgroup-basedreservations—originallyconceivedbyAmbedkaras a temporary measure for Dalits and Scheduled Tribes—but extended toincreasing identity-based groups in the wake of the Mandal Commission.Somanathan(2010)termedthisthe‘demandfordisadvantage’.Addtothisthefactthat the most effective ‘moral’ movement has been that of Hindutva, or Hindunationalism.Meanwhile themedia is largely ownedby business. The result is theabsenceofacoordinatedalliancetoreconstructthestate.The2011and2012anti-corruptionmovement looks like an exception, but this was a product of a highlycontingent middle-class alliance, in which ‘neo-Gandhians conferred legitimacy;IndiaShiningprovidedenergyandfinances;andLegalActivistshelpednavigatethelegislativepath’(Sitapati,2011).Thisisnoteasytoreplicate.

Fourth, andverymucha reflectionof theseother factors, electoral strategies thatemphasize populist or clientelistic approaches are both dominant and largelysuccessful--within a competitive political environment—provided governmentshavesufficientcredibilitytodeliver,anddonotcommitegregiousactsofcorruption.

Thesefactorsinteract,andtendtosupportaself-enforcingpoliticalequilibrium.Thenextsectionsketchesthis.

4.UpdatingthepoliticaleconomyequilibriumPEDI argued in1984 that Indiawas stuck in apolitical economyequilibrium thatresisted the systemic change necessary for dynamic growth. There has sincebetweendramaticallymoredynamismthanthenanticipated,albeitadynamismthatcreatedGildedAge-styleprivatewealthaccumulationandhigh-levelcorruption.Yetwe have argued that the reaction has not coalesced into Progressive Era-stylesystemicreformforasetofstructuralreasons.HerewesuggestanupdateofPEDIinthe form of a sketch of a self-enforcing political economy equilibrium that isconsistentbothwithepisodesofdynamismandresiliencetosystemicchange.

First, we need a re-interpretation of PEDI in light of the private investmentacceleration, from the 1980s through the 2000s. As noted in the introduction, isinconsistentwithacentralpartofthePEDI’sthesis.Wewouldarguethattherewas

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indeed a restructuring of state-business relations, initially as a new overall deal:withbusinessgainingfromdomesticderegulation,and(tovaryingdegrees)havingto face increased foreign competition.Howdid the shift from the old equilibriumoccur? At a systemic level there was an important shift in dominant narrativesaroundeconomicgrowth favoringgreater relianceonmarkets—bothgloballyandinsomedomesticarenas.Thiscoincidedwiththeemergenceofnewbusinesselitesat a subnational level, allied with local political elites. Then an unfoldingmacroeconomiccrisis(centredon1991)providedamomentofstateautonomytoagroupthatembracedoratleasttoleratedthemarket–orientednarrative.Arguably,the collective action problems that had prevented a systemic shift earlier nowimpededcoordinatedresistance(seealsodiscussioninMcCartney,2009).

Whiletherewasarealshiftinthiscorerelationship,the“new”setofstate-businessrelationsremainedahybridofrulesanddeals,withrent-sharingbetweenpoliticalelitesandbusinessacentralfeature.Businesshasindeedconsolidateditspositionasa “dominantproprietaryclass”,while thestate’srelationshipwithothergroupsremainedoneofcomplexparticularistmeasures.However,intermsofthebroadersocietythemajorrisein livingconditions,hasledtotherisingpoliticalsalienceofadditional groups, from lower caster mobilization to an emergent, urban middleclass.

Toextendtheanalysis,itisusefultofocusonthesubnationalstate.Thesystemcanbe conceptualized as an interlocking set of rent creating and rent-sharingmechanisms. A sketch is presented diagrammatically in Figure 10. This wasdevelopedwith aparticular state inmind—AndhraPradesh.8This is of particularinterest both because India’s subnational states are the core locus of politicaleconomy, andbecauseAndhraPradeshhasbeenoneof themoredynamic Indianstates. It is suggested that similar structures prevail in other states and at thenationallevel.

Two sets of relationship are central: between political and economic elites andbetweenpoliticiansandtheelectorate.Bureaucratsintermediateboth.

8ThiswasoriginallydevelopedforpresentationsonthepoliticaleconomyofAndhraPradeshinKingsCollege,LondonandtheCentreforPolicyResearch,onthebasisofdiscussionwithinformedobserversofthestate.

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Figure 10 A stylized view of the Indian political economy equilibrium

Source: author. Thefirstsetofrelationsarefamiliar fromthediscussionabove.Thepast25yearshasbeenaperiodofmajorrentcreationinIndia—bothextractiveandproductivity-based rents. These rents were shared systematically between politicians andbusinessfamilies—withanimportantsubplotofpoliticalsupportforemergingnewregional business elites (Damodaran, 2008). In the case of Andhra Pradesh, a bigstorywasthedevelopmentofthelocalconstructionindustry,initiallyonthebasisofstate-level infrastructure, for example in irrigation and then in major nationalprograms,often inpublic-privatepartnerships.Thisnurturedgenuinecapabilities,inmajorfirmssuchasGVKandGMRthathavesincebecomeinternationalplayers.(Thisformedthebasisofthewealthoftheirowners,whobecamebillionairesforawhile,asnotedabove)There isalsoarangeofsmallerconstructionfirmsthatarelinkedintothemorelocalpoliticalhierarchy.

This relationship is supportedbyawidenetworkor relationsbetweenpoliticiansand businessmen, with the growing phenomenon of overlapping activities. Forexample, in the case ofAndhraPradesh, 14 of the state’s 61MPs (in thenationalparliament)were rich individualswhosewealthwas based on infrastructure and

Businessfamilies Politicians

BureaucratsCitizens/voters

ACTORS

FIELDS

Construction/PPPs

Landdeals

Mininglicenses

Liquorlicenses

Privatecolleges

Privatehospitals

Rentextractionandrent-sharing

Blackandwhitemoney

Rentcreationanddevelopmentdynamics

Politicalfinance

Populistprogrammes

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construction contracts. For local construction contracts, the overlapwas typicallywithstatelevelMembersoftheLegislativeAssembly(MLAs).

Bureaucratsareanimportantpartoftheimplementationofanygovernment-relatedaction. Indiaremainshighlyrule-andprocedure-bound,sowithout the implicitorexplicit complicity of bureaucrats the exercise of influencewouldnotwork. Somebureaucratsarehonestandsomedishonest.The fact thatpowerfulpoliticianscantransferthemmeansthispartofthesystemcanbemadetoworkintheinterestsofrent-sharingdeals,formostofthetime.

Politiciansthenhavetobere-electedinIndia’svigorousdemocracy,andthereareoftenchangesinthepartyinpower.Twomechanismsareparticularlyimportantforobtaining support: populist programs and political finance. Both are usedcompetitivelybyallparties.Indiaisrifewithpopulistprograms—somegood,somebad, in terms of their development impact. Particularly inventive from a politicaleconomyperspectiveweretwoprogramsdevelopedinAndhraPradeshfortertiaryhealth care (Aarogyasri) and college education. These have a common overallstructure. The state provides bursaries for individuals with Below Poverty Linecertificates tomakeuse of (mainlyprivate) hospitals and colleges, for example inengineeringandmedicine.Sofarsogood.Thisishighlyeffectivepoliticallybecausemany of these organizations have links to politicians, and, even better, some 80percent of the state’s households have been granted a BPL certificate. (This issubstantially higher than the poverty rate as measured by the National SampleSurvey). So this nicely closes the loop, creating a highly popular programme thatgeneratesrentsforconnectedindividuals,andisfinancedbythestatebudget.

The secondmechanism concerns political finance. Legal limits to political financeare very low in India, whichmeans that virtually all the finance is illegal. Indianelectionsarebecomingmoreexpensiveatalllevels,sofinanceiscriticaltoelectoralsuccess.Therearemanymechanisms.9Onethathelpssolvethelegalitychallengeissaidtoworkthroughliquorlicenses:sincethereisgreatscopeforoverchargingforliquorandappropriatingthesurplus,suchlicensescanbecomeanexcellentsourceof black (illegal) money. Unlike the usual challenge of converting black to whitemoney,theelectoralchallengeinIndiaistohavestashesofblackmoney.(Thiswasalleged to be one of the reasons behind Prime Minister Modi’s 2016demonetization—seeModyandWalton,2017.)

There is of course much greater complexity to such a system. The point of thissketchistotakethespiritofPEDI’sseminalabstractionandupdate it. It isalsoto9Forexample,KapurandVaishnav(2011)suggestalinkwiththeconstructionindustry,withevidenceofapoliticalcementcycle.

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outlineasystemthatisgoodatextractingandsharingrents,isself-enforcingand,atleast for certain periods, can also generate particular types of economic anddevelopmentdynamism.

5.Recentpro-governancesocialandpoliticalaction:not(yet)acriticaljuncture?TheaccountsofarhasexploredwhytheIndianpoliticaleconomyislikelytoresistthekindofsystemicchangesthattypifiedtheProgressiveEra.Andyetmovementsto improve governancehave a longstandinghistory in India. The ‘anti-corruption’theme has been periodically used by politicians for decades, just as the ‘anti-monopoly’ theme was so present in the Progressive Era United States. In recentyears there have been a variety of social movements, state action and electoralsuccessesthathaveseemed,at least fromsomeangles, toheraldamoreprofoundshift. We interpret three categories here: the response to scams and the anti-corruption movement; the right to public service; and the election and initialperformanceofNarendraModi’sBJP,includingthe2016demonetization.

FromscamstoauctionsConsiderfirstthefalloutfromtheanti-corruptionmobilizationof2011and2012.Asdiscussed above, this was an unusual coalition of disparate social groupings, asopposed to a qualitative shift from India’s largely particularist and group-basedsocialaction.However,itdidhaveconsequences.Majorscamswereoneofthespurstosocialaction.Whatisinterestingisthatinsomedomainsofgovernmentresourceallocation therewas then focused institutionalreform,specifically inshifting fromadministrative to auction-based allocations of telecoms spectrumand coalminingblocks. The sequence is schematically illustrated in Figure 11. The publicdocumentationofscamsbytheComptrollerandAuditorGeneral(CAG)helpedfuelthe anti-corruption movement (along with many other factors). This made thescamsandassociatedquestionsofinstitutionaldesignsalientwithintheexecutive,legislative and judiciary. Individuals were convicted, and in due course auctionsbecamedesignatedastherequiredmethodforsellingthespectrumandcoalminingblocks toprivateactors.Thedetailsarenot the issuehere,somuchas theoverallshape of this change: of interactions between autonomous checks-and-balanceinstitutions,socialmovementsandactionbydifferentpartsofthestate.ThisechoesthemixofchangesintheProgressiveEra.

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Figure 11 From scams to auctions of telecoms spectrum and coal mining blocks: a Progressive Era type response

Source: author Inprinciplethiswasagoodchangeininstitutionaldesign.Butitisnotclearthatitheralds a broader systemic shift. Rent extraction and sharing remain central inmany other domains, even assuming the auctions are genuinely run as fullycompetitiveandefficientaffairs.

TheRighttoPublicServiceFrom within the executive, and this especially at the level of states, has come asequence of so-calledRight to Public Services (RTS) legislations.MadhyaPradeshwasthefirsttointroducesuchalawin2010,followedbyBiharin2011,andsome10 other states since. The pattern is to guarantee delivery of particular serviceswithinaspecifictime,withfailureleadingtopunishmentof,usuallyfrontline,civilservants.Atonelevel,itisanachievementofthebroaderaccountabilitymovementthat such RTS acts are becoming an increasingly common, indeed politicallyrequired,partofstatelevelbureaucracies.However,theyonlymakesenseforaveryspecificclassofmeasurabledeliverablesofanadministration,andarguablydivertattention from the administrative failures that caused problems in the first place(Aiyar andWalton, 2015). Robinson (2012) finds from field studies that fears ofpenaltiescausebureaucratstoprioritizetheaffectedactivitiesoverothersthatmaybeofequalimportance,whileHassanandNarayana(2013)suggestthatofficialsinKarnatakaadjusttherulessuchthatthereis‘legal’butnotsubstantivedelivery.This

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approach is the opposite of the shift to amore problem-solving bureaucracy thatwillrespondtotherealproblemsthatcitizensface.

GovernanceunderModiGovernance has been an important theme in recent electoral politics, both in aseriesofstateelectionsanddramatically inthe2014nationalelectionwonbytheNarendraModi-ledBJP party. After less than three years in power, at the time ofwriting, it remains too early to assess the Modi government. Alongside the goodgovernanceanddevelopmentdiscourse,therehasbeensignificantactivisminDelhi,there appear to beboundaries onhigh-level corruption at thenational level (thatwas revealed to be politically toxic), and there is a popular discourse amongsttechnicalelitesonreformingpovertyandsocialprograms,withshiftstoacash-plus-universal ID-based approaches. But the overall strategy appears to be politicallyconstrained,with limitedmajor reforms, for examplewithonly selective shiftsonsubsidyregimesandthecontinuedcentralityofstatebanksinthelendingdomain.Indeed, a symptom of the history of favoured relations between the state andbusiness is thesubstantial levelsofnon-performingassets in thestatebanks. (notleastformajorbusinesses).

The government also has the shadow of its close links to Hindu nationalistorganizations, that mobilize around a national Hindu identity. While Modicampaignedonadevelopmentplatform,theBJPperiodicallymobilizesonsectarianlines,and“patriotism”aroundHindu(andimplicitlyanti-Muslim)themeshasbeenafrequent dimension of government action. This both reinforces particularistformations,and,unlikeUSmoralmovementsintheProgressiveEra, isnotalignedwithcleaningupthesystem.

One area of emphasis has been of ‘cooperative federalism’ with greater fiscaldecentralization to states, implementing a recommendation of the 14th FinanceCommission. However, this only shiftsmore of the action to the domain of state-business rent-sharing, patronage and populistmeasures that lie in the states—asschematizedinSection4.AndunliketheUnitedStates,Indiancitiesarenotdomainsfor effective political and social movements and contestation, as they are largelysubservient to thestates.10While citygovernmentsand localurbanpoliticiansareoftendispensersofpatronage,theyhavenotevengonethroughaphaseofmachinepoliticsthatprecededthecityreformmovementsintheUnitedStates.

A final example concerns the Modi’s remarkable decision to “demonetize” theeconomyinNovember2016,taking500and1000rupeenotes—accountingfor8610FordiscussionofIndia’surbanregimeasarent-sharing“cabal”seeHeller,MukhopadhyayandWalton,2016.

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percent of the totalmoney supply. Thiswas portrayed (byModi) variously as anattackonblackmoney,aspurtocashlesstransactions,andaspartofastrategytotake from theundeserving rich andgive todeservinggroups.Thiswas an absurdmoveineconomicterms,andcausedmajoreconomicandsocialdamage—atleastinthe short run. We interpret it as essentially political, and as part of a populiststrategythat,ifsuccessful,willundermineratherthandeependemocracy(seeModyand Walton, 2017). If it strengthens a narrative of direct political connectionbetween a strongman leader andmiddle and poorer groups that could lead to afurtherrestructuring in thepoliticalprocesseswithrespect to “dominantclasses”.Butthisisfartooearlytoassess.

6.ConclusionThis essay sought to bring a comparison with the United States Gilded Age andProgressive Era to bear on contemporary India.We have argued that Gilded Agedynamicsare indeedatworkinstate-businessrelationsin21st-centuryIndia.Thisoccursinthemoreextensivedomainsofstateregulatoryactioncomparedwiththehistorical US, but with structural similarities around rent creation, rent-sharing,political finance and networks of relations between businessmen and politicians.This has also been consistent with much greater dynamism—and specificallyinvestment—thananticipatedinPEDI’s1984account.Howevertheoverallpoliticalequilibrium, including the state’s relations with other social groups, can beconceptualizedinwaysthatparallelPEDI’sassessment.

Wealsoreviewedthepotentialforchange,andinparticularforthekindofallianceof political and socialmovements andparts of the state that generated themulti-decade sets of reforms that built a system of regulated capitalism and thebeginnings of a social state in theUS.Here therewas an apparent paradox: IndiaalreadyhasmanyofthelegislativevictoriesthatcharacterizedtheProgressiveEraandNewDeal.Butthepoliticaleconomyremainsstuck,owingtothepredominanceofparticularistsocialdemandsandassociatedpoliticalandbureaucraticstrategies.Theelectorateoftenappearstobeseekinganalternativeequilibrium,andthereareanumberof ‘pro-governance’ initiatives.Butneithersocialmovementsorpoliticaleliteshavethebroadcoalitionandcognitivemapstoeffectsystemicchange.Theremaywell be short-run growth surges and expanded service delivery, when rent-sharing is aligned with private investment or public action, but longer-termdevelopmentremainsproblematic.Atthetimeofwriting,thereisconcernthatIndiaunderModiissharinginwhatseemstobewidespreadglobalmovetoauthoritarianpopulism.YetinademocracyascompetitiveandvigorousasIndia’sthereisalwayshope that there will be an eventual coalescence around a Progressive Era-stylepoliticalcoalition,evenifthepathsforgettingthereareunclear.

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