Govts don’t take hard decision at right time, says Fareed Zakaria

New Delhi, November 17 : Dismissing suggestions that the current financial crisis meant the failure of capitalism and reversal of globalisation, noted journalist and author Fareed Zakaria on Monday said the global meltdown was the result of the inability of the governments across the world to take hard decisions at the right time.

Delivering the 40th Jawaharlal Nehru Memorial Lecture here, the editor of Newsweek International said governments have always tended to defer hard decisions, while pampering their constituencies with unsustainable policies.

“The current problems we are experiencing have at root the problem that governments — and they are mostly democratic governments — have lost the ability to inflict short-term pain on their constituencies for long-term gains,” he said.

“When looking at the fiscal situation in most Western countries, the core problem remains that democratic governments find it very hard to cut subsidies, reform entitlements, and restructure welfare programmes. Instead, they defer costs to the future using a combination of debt and creative accounting.”

This tendency of the governments manifested in India in the form of what Prime Minister Manmohan Singh described as “competitive populism”, he said.

“It has been possible (in India) to go without enacting a major reform programme because the effects of the 1990s reforms were still working their way through the system. But that free ride is now over. Ultimately, Government policy matters, and good government policy will be rewarded,” he said.

Asking the people to guard against the tendency to over-hype India’s economic success, Zakaria said India was still a long way from becoming a superpower and many other developing countries were doing as well, if not better.

“Before counting on becoming a superpower, it would be worth doing the hard work that will make India one,” he said

“India has done exceedingly well compared to its past but not as well as some other developing countries. China’s economy is already three times the size of India’s and continues to grow at a substantially faster pace. Brazil has turned itself into an energy powerhouse. Turkey, a country of just 70 million, now gets more foreign direct investment than India and has a GDP that is only 20 per cent smaller,” he said.

Despite the current crisis being largely a making of governments, Zakaria said he had no doubt that in the end it was the governments that would prevail, though he did not know when or how.

“At the end of the day, governments are more powerful than the markets. They can close markets down, nationalise firms and write new rules. And the governments have already decided to put an end to the crisis.”...