Freeman

OUR ECONOMIC PAST

A Family of Heroes

SEPTEMBER 23, 2009 by STEPHEN DAVIES

Filed Under : Free Trade, Regulation

In any major city, particularly a capital, the great majority of statues and memorials pay tribute to monarchs and presidents, priests, generals, and statesmen. This reflects the way history is commonly understood and taught: as the story of the achievements of those associated with political power, government, and war. Memorials to the historical figures associated with trade, science, and industry are much less common, although such people have played at least as significant a part in human history.

In a large park in the heart of the Indian city of Jamshedpur, however, stands an exception to this story: a statue of and public memorial to Jamsetji Tata. Jamsetji Tata was truly a hero and indeed the founder of what we may call a dynasty of heroic figures who have played a major part in the history of modern India and, increasingly, the world. Born into a Parsee family in 1839–when Britain still ruled India–young Tata came to live in Bombay (now Mumbai) when his family moved there and set up in the cotton trade. He worked in the firm and established trading links to Hong Kong and east Asia. In the 1860s the firm went bankrupt due to the disruption caused by the American Civil War. However, he refounded the company and went into manufacturing, setting up a large cotton mill at Nagpur.

Early Liberal and Visionary

As a successful businessman by the end of the 1870s, he became involved in public life in India and was associated with the early classical liberal elements of Indian nationalism as represented by people such as Dadabhai Naoroji and Pherozshah Mehta. He also came to have four great goals or visions. These were to build a truly world-class hotel in Bombay, to create a top educational institution, to set up hydroelectric power in India, and to create a profitable domestic steel industry. He devoted the rest of his life to realizing these, with the help of his cousin Ratanji Tata and his sons–particularly the elder, Dorabji.

In 1903 he opened the Taj Mahal hotel in Bombay, built at a cost of $250,000. In 1901 he and Dorabji hired American technical experts to search for sources of iron ore and coking coal in a suitable location for building a steelworks. The search began seriously in 1904 but Jamsetji died while visiting Germany that May. Dorabji carried on the search and in 1907 discovered an ideal site and a virtual hill of iron ore at the village of Sakchi, about 150 miles west of Calcutta. The Tata Iron and Steel Company was incorporated that year. Unable to raise capital on the London market but undaunted, Dorabji and Ratanji returned to India and raised what was needed by subscription from more than 8,000 domestic investors. The first steel ingots rolled out of the new plant in 1912. Meanwhile another of Jamsetji’s goals had been realized with the formation of the Tata Power Company in 1911 to provide the required power. The firm also had to construct its own railroad, locomotive, and railroad-engineering works.

Following this the Tata firms continued to grow and develop, although they only survived the 1930s economic slump because Dorabji and other family members pledged their entire wealth as security. Dorabji died in 1932. In 1938 Ratanji’s son J. R. D. Tata stepped in to run the firm. He would remain chairman until 1991. He was the first qualified Indian pilot and a pioneer of aviation. He founded India’s first airline in 1932. It became Air India in 1946 before being nationalized by the Nehru government in 1953. When J. R. D. took over, the Tata group contained 14 companies. It had grown to 95 by the time he retired, with expansion into areas such as chemicals, automobiles, and tea. In 1945 he realized the last of Jamsetji’s goals by creating the Tata Institute of Fundamental Research, now one of India’s leading universities. Unlike many of his contemporaries, who became hugely wealthy by exploiting the so-called “permit-raj”–the nightmare of regulations and permits created by the Nehru administration–J. R. D. refused to give bribes to politicians or use the black market. He insisted instead on high ethical standards, first-class performance and customer service, and concern for the welfare of employees.

Real Heroes of Indian Independence

The Tata group, now headed by J. R. D. Tata’s son Ratan Tata, is of course still very much with us. Tata Steel is now the world’s sixth largest steel company, while Tata Power is the largest private electric power producer in India. In fiscal year 2009 the group grossed $72.5 billion and it continues to expand and innovate. Thus in 1998 it launched Westside, a major retail chain, and in the same year launched the Nano, a car priced at just $2,200. The village of Sakchi, which became the site of the original steelworks, is now a small part of the city of Jamshedpur, which has a population of over one million. The company built the entire city from scratch and still runs it. Unlike other major Indian cities, it has reliable supplies of electricity and potable water. Politicians have moved to set up a municipality but have met resistance from the local population, which values the honesty and efficiency of the current administration. Jamshedpur is perhaps one of the largest examples in the world of the provision of a huge range of “public goods” by a private entity. Among other things, it is a model for environmental protection, despite still being the home to a huge steelworks and many other massive manufacturing plants.

In a sane world this family would receive the kind of kudos that scholars give to politicians and soldiers. The objection of course is that these are mere businessmen (and businesswomen–Simone Tata is the head of Westside, for example). In fact the stories of Jamsetji, Dorabji, and J. R. D. Tata show the qualities of classical virtue, which we traditionally associate with heroism. They had a vision that they pursued and realized in the face of seemingly insuperable difficulties, obstacles, and setbacks. They achieved their vision not through the use of force or fraud or by compelling people by threats, but by open, free exchange and agreement. It was done and continues to be done by providing products and services of high quality that people buy voluntarily. Throughout, there has been an emphasis on honesty and high standards.

Jonathan Swift famously observed that the man who made two blades of wheat grow where but one grew before did more for humanity than the entire tribe of philosophers and politicians. Who has done more for India over the last hundred years? The Tata family shows that we should never forget that commerce and business at their best are virtuous activities more worthy of respect than many kinds of activity that get far more attention.

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October 2009

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