Since the 1990s, when the country liberalized its economy by reducing barriers to trade and the scope of state regulation, India's development pathway has generated an enormous literature. Contributors to this literature considered the nature of the reforms, what went right, and what went wrong for the country. Two details have shaped these discussions. First, whereas the state wanted industrialization in the early post-Independence decades (India attained independence from British colonial rule in 1947), industry was slow moving. And second, whereas government investment (or socialist policies) took the lead in driving industrial change in the thirty to thirty-five years after Independence, private investment (or capitalism) gradually recovered the ground it had lost around 1950 and led the process in the last twenty to twenty-five years.
Together, the two findings seem to suggest that socialism served development rather badly. How? A third finding suggests an answer: Indian industry struggled to improve its productivity and efficiency standards to catch up with international best practice. The country fell behind in the productivity race until the 1980s and did better since the wide-ranging economic reforms began, though the legacy of past inertia persists to some extent.
Lost Glory concentrates on the efficiency problem but does not attribute the problem readily to state failure. Excluding the introduction, the first four chapters present an overview of Indian economic history in recent decades. This part revisits ground that is familiar to most people with some knowledge of the India-bound scholarship. The book's claim to originality rests on several connected arguments about efficiency and productivity, which are developed over the subsequent three chapters (the concluding chapter follows these three).
“The core premise of the book,” author Sumit K. Majumdar claims, “is that productive efficiency matters in enhancing growth.” This is obvious enough. A further claim is less so: “efficiency would be impacted by the different types of organizational forms in capitalist systems” (p. 17). The most significant parts of the book show that, on the one hand, efficiency had a chronological history: “In the 1950s, productive efficiency was high. In the 1960s, average productive efficiency declined sharply. In the 1970s, productive efficiency further declined. . . . In the 1990s . . . productive efficiency rose” (p. 183). On the other hand, productive efficiency varied by organizational type in industry. The book makes a tripartite division of industrial organization into “molecular” or small-scale private firms, private corporate enterprise, and state enterprise. The small and state firms were more economical in managing their capital, human, and technological resources, whereas the private sector was “profligate” with capital and “wasteful” with human resources. Majumdar attributes the propensity to waste capital to “mercantile ways, and . . . maniacal speculative motives” (p. 249).
These, like most other propositions advanced in the book, are not backed up with reliable statistical and sociological data. Nor are these claims exactly original. In the early 1980s, economist Isher Ahluwalia published an influential study showing that the productivity performance in Indian industry was weak, setting off both a debate and a fierce backlash that played a role in initiating the economic reforms. Lost Glory seems unaware of an extensive debate among comparative historians about poor productivity in Indian industry. A paper by Susan Wolcott and Gregory Clark that set off the debate held that Indian laborers had a low-effort problem, not that the entrepreneurs had an attitude problem. Many other writers challenged the proposition and in the process explored the connection between institutional choices and efficiency outcomes. The preoccupation with productivity and its connection to institutional forms is not a new one.
The central claims of the book are not persuasive. If the private sector is inefficient compared with the other organizational types, why did aggregate measures of efficiency rise after private investment regained dominance? Perhaps global competition forced the private enterprise to shed its mercantile biases. At this level of abstraction, the discussion ceases to be evidence based.
Although a bold attempt and insightful in sections, Lost Glory does not deliver either a coherent or a convincing reinterpretation of the Indian developmental experience. The book reads like a disjointed collection of observations without a strong core. The student of comparative history may still find some of the material here to be thought-provoking.
