The Billionaire Raj

by James Crabtree

  A New Gilded Age

  Speaking in 1916, Mohandas Gandhi warned that India faced a pernicious new kind of commercialism. “Western nations are groaning today under the heel of the monster god materialism,” he told students at a college in the heartland state of Uttar Pradesh. “Many of our countrymen say that we will gain American wealth, but avoid its methods. I venture to suggest that such an attempt, if it were made, is foredoomed to failure.”22 Gandhi’s views were rooted in his own era, chiming with the theories of anti-colonialism and nonviolent protest that earned him the title “Mahatma,” or “great soul” in Sanskrit. Almost a century later, his warnings seemed prescient.

  From the Colosseum in Rome and the church steeples of medieval Europe to the gleaming modern skyscrapers of New York or London, the spirit of an age is often captured in its grandest buildings. Rising high above Mumbai, it was hard not to view Antilia as a symbol of the country India was becoming. Although conspicuously modern, by turns it also harked back to earlier eras when India had been more familiar with lavish fortunes. “Bombay has always had a history of ostentatious homes of the very rich,” I was once told by Mustansir Dalvi, a professor at the city’s JJ School of Architecture.23 The building reminded him of the mansions of this merchant class, and the maharajas’ palaces before them. “In the nineteenth century, several of the wealthiest, like Sir Jamsetjee Jeejeebhoy and the Tata family, built large town houses, heavily ornamented and very well appointed. They were also the great philanthropists of the city and are now remembered as city fathers. Mr. Ambani’s efforts are simply the latest example.”

  Antilia’s excess also carried echoes of an earlier era in America, and another celebrated business dynasty: the Vanderbilts. Like Dhirubhai Ambani, Cornelius Vanderbilt grew up modestly. The son of poor Dutch immigrants, he was born in a wooden house on Staten Island in 1794, working on his father’s boat as a boy and learning to take goods over the bay to New York. In his teens he pestered his mother to lend him $100 to buy a vessel of his own, earning the nickname “Commodore” for his fearlessness on the water.24 He went on to build a small fleet, only to find his expansion plans blocked by local rivals whose businesses were protected by exclusive government licenses and charters, which were controlled in turn by pliant politicians. “When Vanderbilt became a steamboat operator in 1817, the mercantile economy was controlled by an elite circle,” according to historian Steve Fraser.25

  As in socialist-era India, this patrician commercial class dominated America’s preindustrial economy. They were especially powerful in river transport, handing out valuable monopolies for ferry routes to their own members. The Commodore took them on, cramming his fleet with more boats than the rules allowed and pushing them to their limits, risking workers and passengers alike. Some competitors were taken out with ruthless price wars, others via aggressive legal suits. Vanderbilt styled himself as a populist, penning rabble-rousing articles against his rivals and christening his Hudson ferry service “The People’s Line.” He expanded first into shipping and then into rail. As the first true railroad tycoon his style embodied America’s new, bare-knuckle capitalism. In 1871 Vanderbilt built the original Grand Central station, New York’s most prominent public building. When he died six years later he was America’s wealthiest citizen, passing on an unheard-of fortune of more than $100 million.

  For all of his wealth, Vanderbilt lived frugally, hoarding money and keeping modest houses. After his death his children found themselves cut adrift from the city’s elite, unable to shake their father’s ruffian image. Just as Ambani did more than a century later, they crafted an answer to these delicate social problems in concrete and steel, beginning a series of fabulous residences just south of the city’s new Central Park. William Henry, Cornelius’s eldest son, spent a good portion of his inheritance on a “triple palace”—a trio of adjoining sandstone mansions on Fifth Avenue. The Commodore’s grandson William Kissam Vanderbilt, along with his wife, Alva, commissioned an even grander project: a Renaissance-style castle known as the Petit Chateau, complete with fairy-tale turrets and gables. “Alva wasn’t interested in another home,” as one account put it. “She wanted a weapon: a house she could use as a battering ram to crash through the gates of society.”26 In the spring of 1883 the couple celebrated its completion by throwing a lavish costume party, welcoming more than a thousand guests into the grandest private ballroom New York had ever seen.

  Vanderbilt’s legacy divided America just as the Ambanis’ divided India. His admirers saw in the Commodore a new kind of American promise: a low-born scrapper whose guile and cunning had pushed him to the very top. To his detractors Vanderbilt was an unprincipled figure, with a weakness for fistfights and infidelity. As his empire grew, newspapers compared him to the historic robber barons of Europe, so called because they extorted payments from travelers crossing their lands. One family descendant wrote a memoir recalling the patriarch’s worst habits: a man who spat “tobacco juice on his hostess’s rugs and pinched the bottoms of which[ever] of the pretty maids caught his fancy.”27 Vanderbilt was even less popular among the liberal elite, those East Coast Brahmins who worried about the growing power of their nation’s new industrial giants. Mark Twain, perhaps the most famous public figure of the age, once wrote him an open letter, mocking what he described as Vanderbilt’s ceaselessly acquisitive instincts, even as he stood unchallenged “upon the pinnacle of moneyed magnificence in America.”28

  The idea that India’s problems of crony capitalism echoed those of America’s was one I heard later from economist Raghuram Rajan, by then the head of the country’s central bank. Rajan was a man known for questioning orthodoxies. Back in 2005, during his time as chief economist at the International Monetary Fund, he gave a speech predicting important elements of the coming financial crisis, earning him a reputation as a minor prophet of the calamities of global capitalism. Born in southern India, he spent most of his adult life as an academic in the US, teaching economics at the University of Chicago. But in 2012 he moved home to take a position as a government economic adviser, and a year later he was appointed as governor of the Reserve Bank of India (RBI). It was a position traditionally held by cautious technocrats. At first Rajan looked the part, with his circumspect manner and professorial habit of arguing both sides of a point. Soon enough it became clear he had bigger ideas, however, not just about India’s problems of inflation but also about the troubling ties that had grown up between its tycoons and politicians.

  Rajan’s intellectual curiosity shone through in speeches that strayed far outside the normal remit of his job, including one delivered about a year after he joined the RBI, laying out “a hypothesis on the persistence of crony capitalism.”29 India’s public services were threadbare, he argued. Social welfare programs meant to help the poor worked badly. State schools and hospitals were typically dismal, while the state failed to provide basic services like running water and reliable power. “This is where the crooked but savvy politician fits in,” Rajan said. “While the poor do not have the money to ‘purchase’ public services that are their right, they have a vote that the politician wants.” In return the politician developed systems of patronage, helping constituents to find government jobs or receive welfare payments, or simply handing out cash. And to get the money to do this, as well as to fund election campaigns, the politicians needed the kind of cash that only very wealthy businesspeople possessed.

  A few months later Rajan explained the theory to me in more detail, as we sat on the eighteenth floor of the RBI’s headquarters, a boxy white concrete tower close to the southern tip of Mumbai. The meeting room had large windows offering sweeping views down over the narrow streets of the old city and the pink dome of the Taj hotel beyond. Dozens of container ships idled in gray harbor waters on the far side of the Gateway of India. Rajan was dressed in a dark suit, with wire-framed glasses and thick black hair graying slightly around the temples. Portraits of old RBI governors covered th
e wall behind him. On the left were serious-looking British men in old-fashioned suits. Towards the right the tableau turned Indian, their somber faces set off by blue turbans or high-collared Nehru jackets. Rajan often pressed his fingers together as he talked, as if to emphasize the precision of each point. He had a reputation as an orthodox economist, with expertise in the intricacies of finance and a moral belief in the fairness of free markets. He tried to be balanced but it was obvious enough as we spoke that he disdained the extravagances of India’s rapacious new Bollygarchs and the style of business they represented.

  Rajan’s inspiration on cronyism came from The Age of Reform, a book by the liberal historian Richard Hofstadter explaining how the US overcame its own robber baron era. In the early stages of America’s Gilded Age, as in India’s, an alliance grew up between tycoons and politicians, with the former funding patronage controlled by the latter. “Obviously, to do some of this, some of these guys need resources,” he told me. “And where do you get resources from? You get resources from business.” Breaking this system of collusion was hard. In America it took a generation or more, beginning with new populist movements at the end of the nineteenth century, which gave birth in turn to the political and social reform of the Progressive Era. But it culminated only in the New Deal of the 1930s, when improvements in state welfare broke the system of clientelism that kept America’s urban political machines in power. “It’s sort of an unholy nexus,” Rajan said of India’s situation. “Poor public services? Politician fills the gap; politician gets the resources from the businessman; politician gets reelected by the electorate for whom he’s filling the gap; and electorate turns a blind eye to the deals done with the businessman.”

  Tens of thousands of middle-class protestors began to take to the streets as evidence of these relationships became ever more brazen during 2011. Although egged on by campaigning television news anchors, these anti-corruption movements were shepherded mostly by a new wave of activists: Anna Hazare, the aging ascetic who led the movement at first, then Arvind Kejriwal, an irascible tax inspector turned graft crusader who founded the Aam Aadmi party a few years later. Much of their ire was directed at the failings of the Congress, the once-proud party of India’s liberation struggle, whose illustrious Nehru-Gandhi family dynasty had ruled India for most of its independent history.

  The season of scams took hold as a succession of corruption scandals hit the then Congress-led government, denting the reputation of party president Sonia Gandhi, the Italian-born widow of Rajiv Gandhi. Rajiv was Nehru’s grandson and the third family member to become prime minister, following his mother Indira Gandhi, who first took the position in 1966 and went on to dominate Indian politics for the best part of two decades. Although Sonia Gandhi chose not to be prime minister herself, handing the role to Manmohan Singh, she was understood to control his government behind the scenes, making her in effect the fourth member of the dynasty to rule India since 1947. (The Gandhi family are not related to Mohandas Gandhi.) At times during her tenure the Congress seemed to have ditched entirely its socialist heritage and become instead a tawdry, scandal-plagued machine. The same basic problems of political funding identified by Rajan were also true of every other major political party, however, including the more center-right BJP. And lurking behind all these scandals lay the tycoons, the only people with funds sufficient to bankroll India’s increasingly expensive democracy.

  More than anything, it was public disgust at corruption that lay behind Narendra Modi’s electrifying election victory in 2014. Voters turned to Modi, the self-described son of a poor tea-seller, hoping that his record of clean governance and rapid growth as chief minister of his home state of Gujarat could be transferred quickly to New Delhi. For decades Indian voters had grudgingly tolerated venality among their politicians. But now the sheer scale of the kind of cronyism Rajan described had pushed the public to breaking point. “It really is a remarkable change, which has happened mostly over the last ten years or so,” I was told a short while before Modi’s electoral triumph by Ashutosh Varshney, the academic who back in 2011 had made the comparison between contemporary India and America’s Gilded Age. “Any economy that grows as quickly as India’s is bound to generate enormous human temptations. These very rich people have started buying politics, and the great churning in India you see against corruption is essentially about the purchase of politics by the wealthy.”30

  Indian Vertigo

  Even the briefest appearance by Mukesh Ambani had an air of fleeting excitement. I met him first in a plush Mumbai hotel at a private lunch for a few dozen business leaders in 2013. He arrived late, dressed in his usual dark trousers and a rustic white cotton short-sleeved shirt, and seemed thoroughly ill at ease throughout. Then in his mid-fifties, he was shorter and chubbier than I expected, with dark black hair swept back with oil. Armed guards stood by the door, a reflection of his status as the only businessmen in India to have what was known officially as “Z-list” security protection, a status normally reserved only for the most senior of politicians and civil servants.31 There were other speakers that day but I noticed that most of those attending spent more time glancing furtively over at the chief guest than listening, as if suddenly starstruck in the presence of corporate royalty. Towards the end Ambani stood up and gave brief remarks, talking in bland, uneasy clichés about his faith in India’s future and his belief in the exciting possibilities of new technology. He seemed nervous and his head nodded back and forth awkwardly as he spoke. After the meal he waited around only briefly, before emptying the room as he and his guards headed for the exit.

  To see Ambani in a more relaxed mood, I used to go along to each year’s Reliance Industries annual general meeting, one of the great displays of Indian corporate theater. Although not as boisterous as his father’s football ground jamborees, Ambani’s gathering in July 2015 still packed thousands of shareholders into the Birla Matoshree auditorium, a grand colonial-era hall a few blocks from Mumbai’s main cricket stadium and about fifteen minutes from Antilia. Paintings of political leaders lined the walls: Chhatrapati Shivaji Maharaj, a seventeenth-century warrior king who fought against the British; Nehru, icon of the Congress party; and Gandhi, national father figure, anti-capitalist, and a man who, implausibly enough, had been born into the same business-minded Bania caste as Ambani himself. A sense of history hung about the meeting, the company’s forty-first since its foundation. The twelve-member board sat on stage at a long table next to two giant images of Ambani’s father, the larger of which was framed and draped with pink and white flowers.

  Applause broke out at 10:51 a.m. as Ambani appeared at the front of the room, sporting the lucky red and white checked tie he favored for big occasions. He moved into the crowd, shaking hands and smiling, surrounded by cameras but seemingly enjoying himself. “Hello, hello, you are all welcome,” I heard him say from my seat a few rows from the front, as he slapped bystanders on the back and waved to familiar faces across the room. He grinned widely from the podium as proceedings got under way. Shareholders asked fawning questions and clapped as their chairman’s achievements were read out. The hubbub gave the proceedings a rowdy air, more like an American revival meeting than a somber business gathering. Ambani’s speech was workmanlike, mixing platitudes and lists: Reliance accounted for twelve percent of national exports that year; it had invested more, and paid more income tax, than any other Indian company too.32 He talked in particular about Reliance Jio, a bold and exorbitantly expensive new telecoms business he soon planned to launch, to replace the one lost a decade earlier to his younger brother in their divorce agreement. “Along with a new India, a new Reliance is taking shape,” he said.

  Up on stage, though, the old Reliance was still easy enough to spot. Nita Ambani had that year taken a seat on the board. Dressed in a glamorous traditional pink outfit, she brought a dash of color to a dais otherwise dominated by gray-haired men, many of whom were old family loyalists. Various
relatives sat in the front row, including the tycoon’s elderly mother and three children. Mukesh Ambani described Reliance as a modern, digital enterprise rather than the lumbering industrial giant of old. But the company still had a clannish and conspiratorial feel, in which loyalty to the boss mattered above all. “It is a politburo type of culture,” a rival tycoon once told me. One of Reliance’s most powerful employees was a somewhat mysterious executive named Manoj Modi. A short man with a thin mustache, he was a classmate of Ambani’s from the time when both men studied chemical engineering. Officially Modi ran Reliance’s retail operations, although his name appeared nowhere in that year’s annual report. Unofficially he was Ambani’s confidant and co-architect of the company’s ambitious new telecoms plans, which the duo had been plotting for a decade or more. Once a year, as the shareholder meeting droned on, Modi would appear quietly at the side of the hall to brief journalists, before leaving just as quickly.

  By this time Ambani had led Reliance for more than ten years, and had taken steps to soften his murky public image. He made donations to good causes, schmoozed at Davos and sat on the board of an American bank. His Reliance Foundation set up a hospital in southern Mumbai and founded the Dhirubhai Ambani International School, to which the city’s well-to-do clamored to send their children. Unable to control entirely what the press said about him, he instead bought a television station and began fashioning himself as a media magnate. Ambani had largely patched up the earlier feud with his younger brother too, with the two men striking deals between their respective businesses. His wife, Nita, had also grown into a public figure, becoming a member of the International Olympic Committee, running the family’s charitable arm, and zealously sculpting her husband’s image. She managed the Mumbai Indians too, the cricket franchise Reliance had snapped up at the launch of the glitzy Indian Premier League tournament in 2008. Invites to the company’s corporate box at the Wankhede stadium became especially prized, in a town that counted commerce and cricket as its two preeminent obsessions. Yet even there, among tens of thousands of delirious fans, the Ambanis often sat apart, watching the match from a large, blue sofa positioned on the pitch-side next to the player’s dugouts, and reserved only for them.