Teachers unions throughout the United States and indebted unions with enormous unfunded liabilities tried using Conservative arguments favoring States Rights to avoid having to recognize the supremacy of federal law regarding bankruptcy proceedings. The Constitution spoke of the supremacy of federal law leaving both Detroit and Sacramento having to arrogate union contracts. India’s democracy is currently trying to impose identical proceedings regarding bankruptcy, much to the consternation of its indigenous Trumps, local tycoons who for decades (if not longer) evaded taxation.
Ever since capitalism arrived on the heels of vacant socialism, India’s own class of tycoons have used India’s lame bankruptcy regime to fend off having to pay off debts or sell prized assets. All that is now changing.
The departing Central Banker Raghuram Rajan championed a regime of legal transparency forcing India’s Trumps to face realities they permanently evaded. This means banks have had to admit and write off failing loans, foreclose on insolvent firms while stiffening regulatory regimes in New Delhi to move against India’s own investment class. As of now, India’s one percent no longer has access to Narendra Modi’s office.
This new regime of transparency still meets official cultural opacity; we’re a long way from western procedure whereby over-indebted firms are swallowed by their lenders and then broken up and sold to new owners. Why? For one thing, India lacks buyers, it also lacks private equity firms that could smooth over transitions. Unmentioned is the tangled pathology of intermarriage running though India’s plutocracy.
To be fair, India’s unsustainable debt load is tied to cyclical industries like mining or steel, making it far easier to for India to recover. The U.S. has no such exit, our debt is tied to an entrenched political class beholden to rent-seeking, meaning even with Reaganite 9% GDP growth, Amerika begins to look a lot like Indira Gandhi’s political economy.
William Holland
William Holland 