Our weekly explainer on economics using lessons from popular culture. In Installment 55, Sanju suffers from the Unintended Consequences of Bad Regulation.
Sanju is a biopic on Bollywood superstar Sanjay Dutt’s dramatic and controversial life. Some viewers have been impressed with Ranbir Kapoor’s acting and the touching depiction of the circumstances under which Dutt committed the mistakes that he did–including but not limited to the illegal possession of three AK-56 rifles with ammunition. But there are many who have dismissed the movie as a glorification of Dutt’s stupidity and “bad boy” character.
This post is not meant to analyse the movie but to discuss a possible counterfactual for Sanjay Dutt’s life–one in which he has no connections with the mafia. The Bollywood-Underworld nexus is a well-known phenomenon. There have been some high-profile cases where persons from the film industry have had close encounters with gangsters. For example, on January 21, 2001, Bollywood filmmaker Rakesh Roshan was shot in the arm and chest by Abu Salem’s gang members.
Bollywood filmmakers like Mahesh Bhatt and Rakesh Roshan frequently sought money from gangsters like Dawood Ibrahim and found themselves in an awkward position with the underworld, which was not afraid to threaten them with death if they didn’t meet their conditions. But why was the film industry seeking money from the underworld instead of more formal sources? The answer lies in the Industries Act of 1951, which listed out all the industries that financial institutions could formally lend to. Until 2001, the film industry was not listed, so filmmakers could not borrow like entrepreneurs in other fields. Faced with a booming film market, film-makers turned to the underworld, which was happy to finance films and get a chance to hang out with the who’s who of the glitzy film industry.
Therefore, much of the Bollywood-underworld relationship is an unintended consequence of India’s attempt to regulate industries. Note that it’s perfectly fine that governments are interested in regulating the finance of enterprises and economic activity. After all, we would not want formal financing of a kidnapping and ransom industry, no matter how profitable it is.
But the government could have taken a better approach where they could have published a ‘negative list’ of activities that were out of bounds for formal financial institutions. This would have avoided unintentionally providing the mafia with an income source, and prevented the physical and emotional trauma faced by so many people in the industry. Governments are still paying the price for this mistake in the form of spending significant resources to provide police protection to individuals who are still threatened by the underworld.
In the movie, Sanjay Dutt’s wife Manyata Dutt, played by Dia Mirza, says referring to Sanjay Dutt, “Bad decisions make for good stories.” I’m not sure if the same can be said about government policy.