Book review by Satya Narayan Misra
Title: Honest John – A Life of John Matthai
Author: Bakhtiar K Dadabhoy
Publisher: Penguin Random House
John Matthai’s name has little resonance for today’s generation, but he was one of the brightest stars in the firmament of his time, and even in retrospect. He cultivated many gardens, starting his life as a lawyer and later becoming a professor, administrator, banker, corporate leader, and Minister. In this delightful biography of Matthai, whom Nehru called “Honest John”, Bakhtiar K Dadabhoy tells us of the different hats worn by him. For his students in Madras, he was a shy professor who was one of the most lucid exponents of a dry subject like economics. JRD Tata would always turn to him for sagacious advice.
For Nehru, who greatly respected his ability and integrity, Matthai filled two cabinet posts, even though the parting was somewhat unpleasant when Matthai resigned as Finance Minister, as he feared that the newly created Planning Commission would be a ‘parallel cabinet’ and would be in perennial conflict with his department. CD Deshmukh, the redoubtable civil servant who succeeded him as FM in the Matthai Memorial Lecture said: “He was one of the most cultured products of India, having a perceptive and thoughtful mind, a sobriety of judgment of men and affairs, a rare concern for principles, scholarliness, with its flames kept lit by regular reading.”
He was the first Indian to get his DSc from LSE in 1916 and worked under Professor Sidney Webb, a Fabian socialist, who was at the height of his powers and fame. Though Webb was his guide, he was at no time a Leftist or socialist Professor of Economics. He had a thorough understanding of what free enterprise could do. He was one of the principal authors of the Bombay Plan, a memorandum submitted to the government in 1944 led by Tata, Birla and Thakurdas.
The Bombay Plan represented a search for a new style of capitalism that would chart a middle path between state-led planning and private enterprise. This was in the background of a fierce intellectual debate fought in England between two towering economists, Hayek and Keynes.
While Keynes advocated active state intervention and the desirability of state-funded programs, Hayek favored non-interventionism and free trade. It was to the credit of Matthai that the planners envisaged a mixed economy, in which the state and the private sector would play a complementary role, thus proposing a visionary compromise between two systems, free market and state control.
Ironically, he resigned as Finance Minister after failing to reconcile with Nehru on the setting up of the Planning Commission. According to historian Rakesh Ankit, it was an individual and an institution that made the widening differences unbridgeable. It was Trone, born to Jewish parents and an engineer with General Electric involved in an electrification drive in the USSR, who impressed Nehru with his All India Plan of a ‘managed mixed economy’ that was sufficiently controlled to ensure equity.
While Nehru was taken by Trone’s view that a Planning Commission would reflect regional aspirations and diversity, and his view that Indian capitalists were only out to make profits, Matthai did not share his enthusiasm. In a letter to Nehru, he wrote that the Indian economy was like a “damaged ship and our job is to repair it and not as naval architects but experienced, competent workmen.” Nehru responded by defending planning as ‘a positive active policy’, giving examples of planned progress made by England, Germany, Italy, the Soviet Union, and Japan since the war.
Unlike Patel, who was a hard-headed realist, Nehru loved the abstract argument and delighted in drawing generalised inferences from situations that offered the slightest provocation to his nimble mind. Speaking six years later, after the Planning Commission was formed, Matthai said that “the planning commission has become a body of amateurs, with whom, for all practical purposes, the final decision rests in matters of economic development.” Most of Matthai’s fears about the Planning Commission proved to be well-founded. Critics like Kripalini and Rajagopalachari openly showed their displeasure. Rajaji founded the anti-socialist party.
Dadabhoy also gives a glimpse of how Liaquat Ali Khan, as FM in the interim government, proposed a business profits tax, an increase in corporate tax, a dividend tax, capital gains tax and a high-powered tribunal to deal with tax evasion. Matthai was the only non-league cabinet minister to defend the budget in public. But Patel and Rajgopalchari, who made no secret of being pro-capitalist, saw the budget as a way of harassing businessmen.
Ventilating his frustration with the hegemony planning enjoyed, he wrote to Nehru: “I fear a church is growing around the God of Planning”. However, planning remained the master narrative, and the plans laid the foundation for infrastructure in sectors like steel, fertilizers, cement and chemicals, promoting agricultural self-sufficiency and focusing on inclusive growth and social justice.
Wavell noted in his diary on 5th March 1947, “Nehru, Patel & Bhabha find that the budget is not popular with their big business supporters and are trying to rat or hedge.”Matthai abolished the capital gains tax and reduced super taxes. Pandit Kunzru doubted, “If such reductions would lead to greater productivity. A time has come if free enterprise is to be given a free hand or the country should opt for a socialist economy.” It was only a decade ago that Prime Minister Modi abolished the Planning Commission without any discussion.
Matthai had an unconventional approach to budget presentation. He is the only railway minister to deliver a budget speech without a prepared text. In 1950, he chose to deliver his Union Budget speech extempore. Dadabhoy also brings out unknown facets of Matthai’s personality. He approached Nehru and Patel to bail out his son, who had run over someone while driving his car in Allahabad. Nehru was reluctant to help, but Patel intervened, and Matthai’s son was bailed out and quietly sent to England to escape the net of law. Matthai was known for his honesty and uprightness, but his fondness for his son blinded him to those values.
Matthai, despite his serious differences with Nehru on the issue of the Planning Commission, was a great admirer of Nehru. He wrote after his first meeting with him, “If he ever asked me to go to prison with him, I should find it difficult to refuse.” Mathai considered his long association with the Tatas to be the happiest period of his life. Sir Homi Mody, a Tata luminary later to become the governor of Uttar Pradesh was known for his wit. Homy contended, “Matthai had all the advantages of face, figure, manner, and voice and invested everything he said with an air of profundity. Matthai was a technocrat of different timber who did not mix personal respect with policy differences.”
Though trained under Fabian socialist, Sydney Webb, whom Nehru adored, he did not jump into the trap of socialism. He was a pragmatist who looked at India’s damaged ship, post-Partition, through the lens of competent workmen. Judging a visionary like Nehru and a pragmatist like Matthai can be a nightmare for any biographer. However, Dadabhoy skirts the issue with skill.
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Professor Satya Narayan Misra is a distinguished expert in Public Procurement & Contracts with over three decades of experience in the Indian Economic Service & Indian Defence Accounts Service. He has made significant contributions in drafting a manual for defence procurement and bolstering self-reliance in critical technology. He has authored seven influential books and published 127 research articles, including 18 in prestigious Scopus-indexed journals such as the Economic and Political Weekly (EPW) and Defence Studies (UK). He looks at macroeconomic issues through the lens of Constitutional expectations. He is a Professor Emeritus and a sought-after speaker on public policy, budget, development issues, and Constitutional Cases.
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