the crash in indian politics

History seems to show that big crashes teach big lessons – and many of the new rules born out of panic and chaos remain both in law and common sense. So the humbling of Wall Street and the City of London has ended the idea that the market rules and financial capital is king.

Instead the state has returned with a vengeance – nationalising and regulating its way back into the public’s mind. Government is back in the United States, Japan and the European Union and is busy attempting to stave off “a meltdown”. Meanwhile the world is kept afloat by China and India.

Neither Asian giant will be untouched by the crisis – and growth will slow in both countries. The International Monetary Fund sees China growing at 9.3 per cent this year down from 11.9 per cent last year. India will manage 7.9 per cent, off from 9.3 per cent.

Economic developments have political consequences. But they are not the ones you might expect. The question here is not about growth but about the model of government - what works best after the crash?

India’s government would like to take the credit for running the world’s second fastest growing major economy over the last five years. It would also like electors to believe it had nothing to do with the half a trillion pounds that evaporated from the country’s stock markets since January.

The fact is none of this is relevant to Indian democracy. Most governments in India are thrown out of office – because voters do not believe they have done anything deserving to remain.

Paradoxically the lack of democracy in China has meant that performance is a necessity. Beijing’s Communist Party has to deliver public goods such as education and electricity to remain in power.

India’s democrats remain in power because the public had to vote for someone. When the polls arrive, eighty per cent of the time Indian politicians are booted out of office. Little wonder communists in Beijing think elections are bourgeois diversions.

India has built its economy without the tools of an autocratic state. The country has a legal opposition and channels for protest. But it has not had a revolutionary break with the past. There is no need for the elite to overthrow the Indian state because they benefit hugely from it. After all why would they get rid of a social structure that maintains their privileges?

Indian democracy appears a squabble for spoils rather than an urge to improve. What the west cannot see is that India’s democracy is largely built around competition by different groups, who vie to control parts of the economy. They have a shared interest in growing the economy but only to seize a larger chunk for themselves.

That’s why caste remains such a big issue – especially when government jobs and university places can be got on the basis of your ancestor’s alleged persecution. India is also a rural, unindustrialised giant so issues of class are a much smaller factor than in the west.

This is kind of talk does not sit well with the western narrative that the development of individual reason lead to capitalism and more individualistic societies. That’s because it’s wrong. The west got rich first and then got democratic.

Because the poor did not have rights, the transformation from agriculture to industry was a violent one. In England, peasants in the 18th-century were simply thrown off the land. Parliamentary acts, pushed through by a landed upper class, cut down the amount of common pastureland. The result was to create a rootless labour force that fuelled the industrial revolution. China’s modern day version is just on a bigger, perhaps bloodier, scale.

If India is to take advantage of its newfound economic might and create an industrial base for deploying mass production and employing its teeming millions, then it will need to reconcile politics with history. If India cannot industrialise, it will never be rich. But Indian democracy has shied away from the conflict that development brings – preferring talking to doing.

Although no one wants violence, Indian democracy is failing to deliver the step change it needs and instead is planting the seeds of its own demise. The fate of the world’s cheapest production car – the Tata Nano – is symbolic of problems inaction will bring.

The administration of West Bengal could not manage to negotiate with a few thousands farmers for a 1,000 acre plot of land to build a factory for the Nano. Instead the car plant will now be in Gujarat – boosting the profile of Narendra Modi, the right-wing Hindu leader of the state whose administration has been accused of orchestrating mobs to kill Muslims in 2002.

Mr Modi is a populist leader with a demagogic style. He is revered and feared. The United States has twice refused him a visa on state department advice. Yet in taking up the Tata project he is seen as a man who gets things done when others cannot. Mr Modi is a religious conservative who promises a reactionary revolution from above.

Mr Modi is also a clever politician, building a nationwide reputation as an economic reformer who has cracked down on corruption. He appears to recognise that the globe is at a turning point and portrays himself as seeking office by accident, swept into power by circumstance. If that were to happen India would regret it. So would the rest of the world.