Raghuram Rajan, professor of finance at the University of Chicago, is the new Governor of the Reserve Bank of India. He has good credentials: a former Chief Economist at the IMF, he warned about the dangers of the US financial bubble as early as 2005. He also described the failings of India’s financial sector in 2008 and the country’s credit bubble in 2012.
The Financial Times reports that he has long called for an end to ‘cronyism’, which he says has led to an unfair distribution of gains from land and property sales in India, causing a severe political backlash.
Last year the NDTV website reproduced an article on this subject from the New York Times, describing “a brazen style of crony capitalism that has enabled politicians and their friends to reap huge profits by gaining control of vast swaths of the country’s natural resources . . . “ Adding a case study, it continues:
“A recent study of contributions to India’s political parties offered a telling insight into the nexus between politics and money. Companies in technology and other service businesses – industries that require few government licenses or permissions – contributed almost nothing. The biggest donors were involved in mining, power and other sectors dependent on the government to obtain rights to natural resources”.
Though acknowledging Mr Rajan’s record as a critic of cronyism, the Economist believes that he will “have his work cut out to prevent licences going to well-connected tycoons”.
Rampant also in Britain and the United States, there is little hope for a decent life for the ‘man in the street’ in these three countries unless people like Mr Rajan combine to eliminate this ‘brazen style of crony capitalism’.