Saturday, May 01, 2010

IPL and Capitalism

The recently concluded Indian Premier League (IPL) has been a non-stop party that lasted for six weeks to which everyone was invited provided you wanted to have fun. It brought magical nights to millions across India, a respite from their drab, desperate lives. It was filled to the brim with desire--for cricket and Bollywood, for chatter and glamour, for tomfoolery and unrequited sensuality, and for high rolling betting. (There was even satta market on the beleaguered Lalit Modi’s fate as the league commissioner, and the returns from every rupee on Mr Modi surviving were Rs 5.50 last Saturday.)

IPL is indeed a metaphor for a new India—crass, brash and razzmatazz--but it is in big trouble. What began as a trifling spat between Shashi Tharoor and Lalit Modi ended in the resignation of the minister and the suspension of the IPL commissioner. Everyone has had a say by now and some good suggestions have emerged for the reform of the IPL and the cricket board (BCCI). But in the chorus of remonstration there was a definite anti-capitalist refrain. Coming as this does on the heels of the global financial crisis and the recent troubles of Goldman Sachs, the legitimacy of the market is once again in question in a country where capitalism is still trying to find a comfortable home.

The most strident voices belonged to members of Parliament who demanded a probe by a Joint Parliamentary Committee. Some political parties called for nationalizing the IPL. Lalu Prasad (RJD), Mulayam Singh Yadav (SP) and Sharad Yadav (JD-U) insisted on banning it. The JD(U) member, Shivanand Tiwari, demanded that funds of the IPL and BCCI be confiscated. CPI leader Gurudas Dasgupta criticised the 20-20 game format, saying it was a ‘caricature’ of cricket in which players were bought like ‘vegetables’. The deputy leader of the Opposition, Gopinath Munde asked that if bar girls in Mumbai had been barred from performing, why should cheerleading girls be allowed in the IPL? Mulayam Singh called cricket a ‘foreign game’ and wanted it replaced by a desi one.

How does one begin to judge the IPL? When it comes to public policy, it is best to follow the advice of Vidura, the royal adviser in the Mahabharata, who looks to the general good. If an act benefits the vast majority then it is right. Cricket’s two main stakeholders are the players and the fans. It has given an opportunity to many talented cricketers to rise and showcase their talents. Going by television ratings and packed stadiums, more Indians have been entertained by the IPL than anything else. By Vidura’s criterion, IPL has performed brilliantly. Lalit Modi is undoubtedly a great entrepreneur who has also driven the IPL’s brand value to a staggering $4.13 billion in less than three years.

There are serious problems, however. Conclusive proof must be found for match-fixing, rigged auctions, tampering with roster selections and other allegations. We need full public disclosure of all the bids. Modi must be tried fairly based on evidence, not personal dislike. BCCI must also be overhauled. As the custodian of cricket, it runs like a cabal, exploiting its monopoly privileges. As to gambling, the best answer is to make sports betting legal—then it will open and fair. This will generate huge revenues for the government and cut the nexus with the underworld.
With regard to the competitive status of Indian cricket, our team has become world’s no. 1 in tests; it is clawing to the top in the one day version; and the 20/20 team did win the inaugural world cup. BCCI’s seems to have delivered far better performance than other sports associations, where government plays a bigger role.

A Rajya Sabha member complained that the evil in IPL was foreign and he traced it to the market. The honourable member did not realise that markets are natural to human beings. Banias and bazaars have been with us for thousand of years, ever since Indians first engaged in agriculture and there was a surplus. Our first towns in the Indus valley emerged as centres of exchange. But markets are not the same thing as the market system, which requires that moneymaking be regarded as respectable. Historically, commerce has had a bad odour in all societies. In India, the merchant was third in the cast hierarchy. Even though we have the wondrous spectacle of thousands of young Indians starting business ventures today, the idea that their struggle for personal gain might actually promote the common is too bizarre. This is behind the animus against the big sums in the IPL. Even sophisticated Indians distrust the market – perhaps, because no one is in charge. No wonder Samuel Johnson said, “There is nothing which requires more to be illustrated by philosophy than trade does.”

Besides politicians, journalists and academics have been the most vociferous in criticising IPL’s capitalist ideology. The philosopher, Robert Nozick explains in a classic essay why intellectuals everywhere dislike capitalism. They feel entitled to greater prestige, money and power, whereas the market rewards those who fulfil perceived demand in the marketplace. The wordsmith’s expectation is created early in school. In the classroom the brightest are rewarded with the highest marks and teachers’ smiles. Hence, they grow up expecting praise. When it does not come in later life, and when society values things other than verbal ability, they grow resentful and sullen, especially when they experience downward mobility.

Lalit Modi’s entrepreneurship necessarily involved assuming risks and valuing novelty, characteristics that are not common in a stable society. He was a brash new kid around the block, and he will admit that entrepreneurial success does not lead to social acceptance. Old money does not like new money. The economic historian, Jean Baechler, tells us that in sixth century BC firms in Babylon took in money deposits, issued cheques, made loans at interest, and invested in agricultural and industrial enterprises. Yet they were looked down upon. All agrarian civilizations have looked down upon merchant capitalists and commercial activities have been universally held in low esteem.

It was only in the High Middle Ages that this changed, and capitalists were finally given social acceptance and protection from the predation of the state, as Deepak Lal argues in Unintended Consequences. It was due to a legal revolution in the eleventh century when Pope Gregory VII in 1075 put the church above the state. The resulting church-state created the whole legal and administrative infrastructure required by a full fledged market economy. This led to the rise of the West and its divergence from the rest of the world.

India after 1991 has joined in this capitalist adventure, and with vigour. Because India got democracy before capitalism, the critique of capitalism began in the 1950s even before full blown capitalism arrived in 1990s. Hence, players in the capitalist game have a responsibility to behave with restraint until capitalism establishes a comfortable home. IPL’s irregularities have not helped. But having said that, it is impressive that the critique of IPL has been constructive by and large, and shows we have come a long way in our attitudes. The challenge before regulators remains—how to bring transparency in the market without killing the animal spirits of the likes of Lalit Modi.

Gurcharan Das is the author of ‘The Difficulty of Being Good: On the Subtle Art of Dharma’

16 comments:

Dev said...

I agree: The challenge before regulators remains—how to bring transparency in the market without killing the animal spirits of the likes of Lalit Modi.

One thing to be noted: The IPL was modelled after ICL, where the entrepreneurs were Subhash Chandra and Kapil Dev. Modi took advantage of the BCCI, which is an absolute monopoly which could force the ICC to ban not only Indian but also foreign national players who played in the ICL.

The IPL&BCCI should be autonomous but the accounts should be available for public inspection as it enjoys huge tax concessions from the Govt.

Anonymous said...

Excellent analysis:

As we read it in the historical perspective. However, if this betting is made legal, and sponsoring companies make huge profits, how will their gain trickle down to the society at large. How many jobs will this create, other than few players that you can count on your your fingers. Looking at India's urban/rural mix - and so many below poverty line, its nothing but large scale gambling, resulting in unproductive hours that will drastically impact young students and contibuting workers in all sectors. It's a big national waste of time, and nothing more.

Ramesh

Pushkar Raj Chandna said...

The present IPL saga after the recent past Satyam’s fraud has shown that the old devious pre-reform ways of doing business are alive and still kicking. The controversy of such magnitudes provides a good opportunity for introspection. These times also expose the shortcomings and vulnerabilities of the systems. Conflicts always have hidden solutions. There are lessons to be learnt from IPL’s nemesis too. It is one such great opportunity to reassess some of the existing framework on corporate governance, transparency and disclosures, systems for better and speed enforcements of regulations; effective roles and duties of governing councils/ directors, executives, regulators; ethics in businesses, separation of businesses and political alliances and empowerment of stakeholders.
One must, however, understand that no matter how strong a regulatory system is, it cannot always prevent frauds. Despite the enormous increase of disclosures and stringent risk management systems in US post the Sarbanes Oxley Act (SOX), inability of the system to read the early sign of impending recent Subprime crisis, Madoff's Ponzi scheme, Goldman Sachs, and willingness to take corrective action is one such example. Moreover, strong measures often lead to expensive regulations and defiance. There are limits to legislations as a lot depends on the integrity and ethical values of various corporate players such as directors, promoters, executives and shareholders. The key lies in management decisions and its commitment to establish and follow rigorous governance systems. The implementation must be in the letter and spirit, and one should recognize the responsibility of the organization towards its stakeholders.
We ought to refrain from taking quick-fix regulatory measures. It would be worthwhile to search for holistic solutions to these issues; which are relevant in the Indian context. The choice of changes in the regulatory frame work should be compatible with the country’s own values and legal system. The system adopted should be agile enough to forewarn the early signals of a brewing crisis and take corrective measures. The system should encourage “proactiveness” rather than be a "reactionary", otherwise status will not change. With the present day state of art computer technologies, this is not impossible.

P. R. CHANDNA

karan a said...

I think the regulators will be successful in cleaning the mess around the "brand IPL" but I am not hopeful in terms of transparency.

In business when you have monopoly, if you are making huge money and there is no stopping, you would not really look forward for disclosures and transparency. You will continue running the business the way it was, but more carefully this time, ensuring you are not caught again! Good habits die hard, bad ones never!

I dont think we should legalize betting in any form. It will churn huge revenue for government, but after all it is not everything. Our government already needs a good fund manager to spend all the revenue collected from tax and various other sources, properly.
I dont think legalising betting in developing country like India, would be a positive move... chances of youth resorting to shortcuts would be more and there would be several other repercussions...

Also last thing, a question to you Sir. Can we create demand for intellectuals in the marketplace, so that they can fulfill and get empowered with money, power and prestige...

RamG R said...

Come on......Gurucharan! Let's not use Lalit Modi as a beacon for all that is good about capitalism. It's only marketeers like you who lived in self-denial, probably being direct or indirect recepients of his largesse! All of us at ground zero knew that this was a crisis waiting to happen! For us, it was a matter of when it was going to come out in the open!

All of India's successful brand stories have been led by outstandingly credible men, be it JRD or GDB or Rahul Bajaj, Narayana Murthy or KV Kamath or even Dhirubhai Ambani!

Here you had Lalit Modi who came to the board using questionable means and used his political connections! When you have such origins, you are already on the backfoot. He had the instincts of an Ekta Kapoor and the wheeler-dealer instincts of an Amar Singh! He combined the two and came up with a product, with a brand value of $4.13 million! Btw, who came up with this figure, the world is beginning to wonder! What is even more shocking that everyone from celebrated social commentators, journalists, and others looked the other way!

Coming to the product, I only liken it to the mass hysteria that happened when Kyunki Saas.. or even Rakhi ka Swayamvar happened. These were shoddy products which were lapped up by people of all hues. This is the same segment which has lapped up the IPL! A terribly shoddy product, shorn of obvious class, in spite of the best players in the world coming and playing the league tells you the real picture! The problem with IPL would have been its staying power which would have been difficult for want of quality!

Therefore, let's accept that we erred or even over-reacted when we saw the IPL and even went and gave away the awards to Lalit Modi. There is no shame in admitting that! Btw, will we take away all the awards bestowed on him?

Aside, in the last fortnight, I read a piece from Gideon Haigh who quotes a line from Captain Renault in Casablanca: "I am shocked, shocked, to find gambling going on this establishment."

Laxman said...

You mention the wisdom of Bidur. You also seem to have a soft corner for Lalit Modi. Isn't it contaradictory. Markets does not need arrogant crooks like Modi to to justify itself. Capitalism will be ill served by people like Modi and you wil also be harming it defending people like him. Look at the fate of Duryodhan and learn from it;He was very capable but his ego and adharma undid him. Same as Lalit modi lost everything that he himself made becuase of his excessive arrogane. What started off as a small tweet devoured him as that twitter comment had the backing of his enormous ahamkar and adharma in decimating ICL.

Kunal Kapoor said...

well, so much for Capitalism .... the only references you make is with IPL, and Babylon. The entire country is a goner, and IPL Modi is just one of the 'brash' ones who got pulled up. How many 'khadi' politician kids/ corporate kids have been pulled out? None! So is it this - be corrupt, but look for a way to get immersed with 'old money'? Something like that, I think!

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L N Srinivasakrishnan said...

Wonderful analysis. I liked the part where the intellectuals' distaste for trade is described.

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Y Venkateswarlu said...

sir,
the article about the Andhra Govts new law and how the poor will be adversely affected is very forceful and relevant and the Schools predicament is sad and harmful for the poor people.
But with your experience and wisdom, can you not suggest how the society can stop the corrupt officials from holding the whole community to ransom in this manner.
And unless some urgent steps are initiated to stop these, we may only be continue to remain mute witness.

R Vimala's Blog said...

I agree with Gurcharan Das, one of my fears of RTE was the opportunity it provides to unscrupulous officials to use it as yet another means for extracting money. Rent seeking is an endemic problem in the education system and there is a parallel system that runs on and lubricated by bribes. We do need to bring such instances to light.
Vimala Ramachandran

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