JD Vance & his New Right can’t be dismissed glibly—he appeals to something deep, necessary

File photo of Republican Vice President nomineee JD Vance | Reuters/Gaelen Morse

I listened closely to JD Vance’s speech at the Republican Convention. I was surprised, even gob-smacked. Vance sounded like a socialist. I am told that he represents what in America is called the “New Right”. Those of us who still suffer from the influence of Ronald Reagan and Margaret Thatcher, and our own PV Narasimha Rao, end up puzzled about what is Right about this New Right.

Vance does not like free trade. To hell with Adam Smith and David Ricardo; welcome French physiocrats. Those of us who have been taught about the disastrous 1930 interventions of Reed Smoot and Willis Hawley cannot but shudder a little bit. Vance articulates a passionate faith in industrial policy. Those of us who want investment decisions to be determined by entrepreneurs and markets find this approach quite puzzling and definitely not Right.

Vance wants government policy to favour what we in India in the old days would refer to as “backward areas”. We remember the days when our government forced factories to be set up in economically unviable spots in pursuit of this policy of favouring backward areas. Vance rants against Wall Street. It is not clear if he is entirely against all financial markets. But evidently, he is deeply suspicious of them. Would he prefer that capital be allocated by fiat instead of by anonymous auctions? That sounds a little bit like Xi Jinping.

I got really curious about Shri Vance. I surfed on YouTube and came across his speech in the United States Senate on the Ukraine issue. Clearly, there is an isolationist streak in Vance’s thought process. He thinks that the Iraq war was a mistake, not because of poor execution, but because its very premise was flawed from the start. On Ukraine, though, he seems more in the corner of dealing with the practical realities of an unwinnable war. He is also deeply critical of European countries, who, if they genuinely fear a Russian invasion, don’t seem to be doing much about it. Along the way, I picked up another fascinating nugget. Apparently, Vance’s leader, Shri Trump, is an admirer of 25th American President William McKinley. Clearly, old-fashioned American isolationism is now the new fashion.

Vance and his ‘New Right’

Vance is a very talented person. I enjoyed his book Hillbilly Elegy very much even if it was gut-wrenching in places. His reference in his speech to ancestral graves in Eastern Kentucky was really evocative. I immediately thought of Abraham Lincoln’s inaugural speech where he refers to “the mystic chords of memory stretching from every battlefield and patriot grave”. Vance is a brilliant rhetorician if he can remind you of Lincoln. Actually, it was at this point when Vance rejected the kitschy Left-wing notion that the US was only about ideas, that I suddenly warmed up to him and suspended my simmering Reagan-Thatcher-Rao judgement paradigm. And then it hit me that on the issue of patriotic nationalism, the Old Right was not that far off.

Reagan revived the metaphor of the ‘city on the hill’ to represent a starry-eyed nation. Thatcher went beyond nationalism and slipped into jingoism when she defended distant islanders with a British identity who refused to be Malvinised. Perhaps the Old Right and the New Right are siblings after all.

Vance and his “New Right” cannot and should not be dismissed glibly. He appeals to something that is both deep and necessary when one embarks on a project of national renaissance. The economic priors regarding free trade and free markets that people of my generation take for granted, need to be revisited when the “mystic chords” of the social fabric are at stake. Incidentally, to de-industrialise on a large scale as a result of free trade is not just a socially touchy issue in many regions. It can also be a strategic blunder from a risk management point of view.

The US has now discovered that it has only one factory that can make artillery shells and that too in paltry quantities. The US has a near-zero capability in the area of machine tools needed to make chips. The US has woefully inadequate shipbuilding capabilities. And this is from the country of Admiral Alfred Mahan. The dedication to the theory of comparative advantage and welfare gains from free trade can take a severe knock when confronted with national security issues like this.

It is true that much of Vance’s rhetorical appeal is focused on the displaced blue-collar workforce and their towns and neighbourhoods. And such rhetoric can be dangerous. It just might not be practical to reinstate lost livelihoods. But going beyond the rhetoric, a case can be made for industrial planning and import controls especially if you are the largest economy in the world and a price-maker, not a price-taker in global trade. Buying into Vance’s position has risks. But it is not wholly untenable. In the meantime, it might give the Republicans an electoral victory. And who are we to argue against winners?

And as I examined Vance’s various positions, I concluded that he is not a complete isolationist. He does not like the Russia-Ukraine war. But he is quite ardent in his support for Israel. In fact, it seems to me that Vance is closer to General Colin Powell’s doctrine of pragmatism—the US should not commit forces to combat unless its vital interests are at stake. It should fight wholeheartedly to win or not fight at all. Support for Israel and indifference toward Ukraine may reflect a good understanding of the difference between vital strategic interests and peripheral ones. On balance, Vance and his positions need to be engaged with understanding and empathy. They cannot be dismissed with the voice of free market enthusiasts of the 1980s and 1990s speaking today in an ex-cathedra tone.

India’s tragicomic history

Are there any learnings for India? We live with the burden of a dismal history. The Avadi Congress session of 1955 and the industrial licensing laws of 1956 were the albatrosses of industrial policy that successfully impoverished our country. We are today poorer than our counterparts not only in South Korea and Taiwan, but also in Indonesia and Malaysia because of these choices we made as a country. We can also not forget our love affair with import restrictions. Today’s IT professionals may not even be aware that for long, India pretty much banned the import of computers. Import licenses were extremely difficult to obtain. And after years of begging and pleading, if we finally got to import one, we paid a 140 per cent import duty topped with a further eight per cent ad valorem octroi duty.

The comrades of our Socialist/Communist trade unions bitterly opposed the introduction of computers in banks. The Reserve Bank of India was so apprehensive that they used the comical euphemism ELPMs (Electronic Ledger Posting Machines) to describe the most rudimentary and primitive machines that banks were slowly allowed to use. Today’s banking customers who casually use phone banking and ATMs will find it difficult to believe these stories. But they are true. We lost decades as a country, and we are still not even at middle-income levels—forget about Korean or Taiwanese economic prosperity levels.

So, despite Vance’s well-modulated arguments, it is difficult for us to buy into import controls and industrial policy. Mind you the residual legacies of both these baneful ideas continue in our country. We are far from being free and market-driven. Having said that, I would make a case that the devil is in the details. One can argue that the real faults of Avadi and the 1956 policy were not restrictions or licensing. The real problem was a heavy anti-private sector bias. If we had combined our planning impulses with a cooperative encouraging environment for our own domestic private sector arguably, we could have had success. It was the disastrous decision to strangle the Indian private sector and to put our elegant netas and babus in charge of the “commanding heights” of our economy that ended up being the kiss of death.

The curious case of the Indian Iron and Steel Company comes to mind. It was an efficient private-sector steel producer. It was one of the earliest to obtain project finance from the newly established World Bank. Reckless and utterly unnecessary trade union violence brought this company to its knees. I have a feeling that the Bengali Communist comrades actually were gleeful that a fellow Bengali, Sir Biren Mookerjee, was financially overwhelmed and had his spirit destroyed.

Comrades have a bit of Moloch DNA in them. It is difficult to tell the story in today’s anarchic and directionless Bengal that there was a time when we had extremely competent and respected Bengali entrepreneurs. In the meantime, we continued to invest precious taxpayer resources in what was then called Hindustan Steel, a public sector behemoth that till today, under a different name, remains a relatively inefficient producer of steel.

The case of our glorious textile industry is even more tragic. Even in the 1930s, MK Gandhi had remarked to journalist and author William Shirer that the Ahmedabad textile mills were far more modern and efficient than the Lancashire ones. The Indian film industry of the 1950s was a conjoined twin of the Congress. Every movie pictured the mill owner as a greedy, unscrupulous evil capitalist exploiting the poor workers. Union leaders were invariably brave, selfless, and honest. No wonder the government at the time probably assumed that it was fulfilling the people’s desires or at least the desires of Indian film directors if they went ahead and destroyed the Indian textile industry. In 1945, India had a decent market share in the world textiles market. China had virtually zero market share. Today, China’s share is orders of magnitude higher than India’s.

I suggest that the Chinese Communist Party should celebrate every year the anniversary of the Avadi Congress session. I would warn Vance to learn some things from our country’s sorry experience. It is easy to caricature the “vultures” of Wall Street. The American financial industry remains a world-class one and with all its faults – which are many (Think Lehman Brothers; think 2008; think Silicon Valley Bank) – it remains a great national asset. Vance should be careful that he does not fall victim to his own propaganda. Wall Street is not so much a vulture as a goose that lays golden eggs. The goose may play truant sometimes. But it is an asset. Let Trump and Vance not do with Wall Street what India did with its textile industry.

And now for an anecdote about a great textile company from South India – the Buckingham and Carnatic Mills, known throughout the country as Binnys. Binnys made Poplins, Gabardines, Drip-Dries, and Drills. It was rumoured that during World War II, the uniforms of Indian, British, Australian, and even American soldiers were all made from Binny drills. Even as late as the mid-sixties, I remember meeting a small retailer in Khar in Bombay telling us that it was a privilege and an honour to be a Binny retailer. Such was the company’s reputation. The same old formula of government meddling and unreasonable unions took the stage.

The management and the shareholders checked out and let the company go to seed. Once more, a fine national institution disappeared. Incidentally, the feather-bedded labour unions rarely paid a price, for the government came to their rescue by creating the NTC (National Textile Corporation), which took over most sick mills, increased the salaries of workers, hired more un-needed workers, and produced very little cloth. As an aside, if the union leaders were associated with the Congress front, the INTUC (Indian National Trade Union Congress), they got additional patronage goodies. That more or less was the industrial policy for our unhappy country.

Lessons from Vance’s New Right

Given India’s tragicomic history, does it mean that we have nothing to learn from Vance and the New Right? I do not believe that is the case. I replayed Vance’s acceptance speech. He promised to support “American companies, American corporations, American factories”. He did not mention government entities. Methinks therein lies the kernel of an opportunity. Our Niti Ayog with its Production-Linked Incentive (PLI) programmes and our defence minister with his imaginative approach to involving the private sector in the manufacture of defence equipment have shown the way. In fact, it is almost as if their thoughts overlap with Vance’s views.

In today’s world, even ideologues like me have to concede that industrial policy cannot be wished away. We do need to be very careful on tariffs and import restrictions. We are a pygmy in the arena of world trade, and we are price-takers everywhere. We do not have the luxury of American researchers who can spend time contrasting the elasticity of American demand curves with the inelasticity of Chinese supply curves. India, thanks to its Avadi legacy, is pretty inelastic all the way.

We can maintain a dialogue with the American New Right. I think they will understand our support of two-syllable hoary national conglomerate champions as well as our support of efficient refinery and port operators. They might welcome our emerging defence industrial complex as a complement to their efforts. On security matters, we might actually have a better position. They are unlikely to be upset with our so-called neutrality apropos of Ukraine. They certainly will understand it. It is fascinating to take note of what Donald Trump said when he was asked about Narendra Modi hugging Vladimir Putin.

Unlike the childish Leftist noisemakers, Trump said “Modi must have had his reasons for it”. This is evidence of the ultimate commonsensical pragmatism of this American New Right. If we continue with our guarded support for Israel against terrorist attacks, I think that we will find Trump, Vance, and the entire New Right on our side. We need to remind them that one of the principal targets on 26/11 was the Chabad House in Mumbai and that one of the victims of torture and death was a pregnant Israeli woman. Contrast this with Bene Israelites and Cochin Jews living peacefully and prospering in India for millennia.

In any event, Vance’s speech forced me to start researching the New Right, an exercise which I think will be useful for our own think tanks to take up. This movement, these ideas are a tad strange for us Reagan-Thatcher-Narasimha Rao acolytes. But these instincts are not entirely alien to us. (Remember industrial planning does not automatically mean state sector growth; it can involve the championing of the domestic private sector). Indian conservatives should open up their minds and carefully parse the speeches and papers of the New Right. In the short and long term, this exercise can only be helpful. Remember Benjamin Disraeli’s advice to us in his 1844 novel Coningsby: “Conservatives should change in order to conserve”.

Jaithirth Rao is an entrepreneur and an investor. Views are personal.

(Edited by Zoya Bhatti)