governance, political economy, institutional development and economic regulation

Archive for April, 2014

The third public toilet


Public toilets are an emotive subject. The Gates Foundation has developed one which incinerates the waste using solar power; expectedly an innovative and green solution from the Big B of Silicon Valley. The Japanese have for long unleashed their geekiness on customizing digitally operated toilets to become so threatening that just trying to use one becomes daunting for the technologically challenged. But the king of public toilets, in India, remains Bindeshwari Pathak whose brain child “Sulabh” has, since 1970, provided public toilet comfort to travelers, itinerants, slum dwellers and the homeless; an astounding 15 million every day and growing.   

Expectedly, therefore, whilst striking a blow for equity and protection of minority rights, the Supreme Court directed the government that Transgender (TG) be recognized as a third gender and provided with separate public toilets. A laudable objective in a country, where even the existing two genders and the “specially enabled” often “feel” the absence of a public toilet.

Public toilets are certainly the way to go. Private toilets are awfully costly and wasteful. They generally occupy at least 10% of the carpet area of your house. This is valuable space grossly underused in nuclear families. At current realty rates, private toilets need to rank as a luxury on par with air conditioning. If you can’t afford air conditioning you probably should not be investing in a private toilet.

But much depends on the availability and quality of public options. Many public services do not have toilets segregated by gender; think airplanes or railway carriages or even small restaurants. It was only in 1739 that gender based toilet segregation became available in French restaurants.   

The notion of separate public toilets for men and women is related to three cultural traits which vary across the world. First is the “prudish” trait which requires that physical contact between men and women be minimized, just as volatile chemicals are stored separately in laboratories, to avoid mishaps and misadventures from their inadvertent mixing. So separate queues for women in banks, separate buses, separate rail compartments, separate taxis and separate toilets.

Second, is the need for comfort and absence from sexual stress that flows from being with the same gender. After all one is at ones most vulnerable in the toilet and the successful completion of the task at hand requires one to be at ease and relaxed. So there is validity in the assumption that separate toilets for men and women are both more efficient and effective.

Third, is the need for assuring physical safety, especially of women.  A public toilet, by its very character, is shielded from public gaze. In addition, if it is unlit or located in isolated areas, as they often are, they become fertile ground for sexual assault and intimidation. Hence the need for separate toilets.

It is probably in this context that the SC directed a third public toilet for the third gender. The issue that arises is should toilets be segregated by gender (a physical attribute) or sexuality (a mental attribute).

Gay or Lesbian persons would probably choose to use the toilet of their sexuality rather than that of their gender on the grounds of prudishness, lack of sexual stress and safety. Unexceptional, straight people of either gender would probably agree with them on their choice. They probably feel the sexual tension if they are to share a toilet with a gay/lesbian person who only has a common gender with them but a different sexuality.

The key problem with using sexuality to determine which of the three public toilets to access, is that it is not discernible at “face value”. Gender being a physical characteristic is easier to spot but still needs physical examination. Also there is the issue of Bisexual persons who probably deserve a special toilet of their own.

The way to solve the gender/sexuality based toilet access conundrum is to use a proxy. This should be the way you are dressed. Irrespective of gender or sexuality if you dress as a woman, you should have access to the women’s toilet and vice versa for men. Transgenders could also be conveniently accommodated using this metric.

Of course this still does not solve the problem of the closet gay/lesbian persons who hide their sexual orientation by dessing according to their gender, because the law in India criminalises their sexual practices and social norms still discriminate against them. But that is changing. The Supreme Court is considering a curative petition which will likely overturn its recent regressive decision which passed the baton to Parliament to decriminalize “sex against the order of nature”.

Once this happens, the problem of the third public toilet shall have been solved. Everyone shall have access to the public toilet one dressed for, exactly as it is for entry into exclusive clubs and bars. You are only allowed in if you have dressed appropriately.

It is in the government’s interest also to fast forward legislation on decriminalizing gay/lesbian sexual practices and recognizing same sex marriages. Otherwise it faces the uphill challenge of adding a third public toilet to the non-existent two.

Accidents happen


Can accidents be completely avoided? Can our environment be monitored; analysed and controlled to make everything predictable? Astrologers will tell you they have been doing exactly this for ages. Not everyone believes them.

An astrologer has predicted that India’s next PM will be a bachelor. This had raised the hopes of Rahul, Bhenji, Amma, Didi and Naveen Patnaik. Modi has a wife and so clearly is not in this contest.

The BJP- India’s Hindu party, the one supported by “fundamentalist Hindus” and backward sadhus and sadhvis- oddly does not seem to believe in Astrology. They decided to go with Modi despite knowing that he was not strictly a bachelor. Possibly, the BJP has other in-house Astrologers who do not agree with the first prediction. But then that calls in question the science of Astrology itself, if practioners disagree on outcomes just two weeks away.

Medical “science” is no different. It junks homeopathy as being theoretically indefensible. But it has no explanation of why Buddhist lamas can die “clinically” and yet remain “alive” in the Lotus posture in which they died, with no decay of the body for years, till they decide to “leave” it. Modern science is far from the frontiers of certainty.

What about parenting? How long should you shield your growing children from risk and uncertainty? Indian parents go out of their way to protect their children as long as they are physically and financially able to do so. This is how they themselves were brought up. In a closely controlled and rigidly stratified environment this is possible. But in an “open” environment, where innovation is key, the past presents very few lessons for the future because the future bears no resemblance to what has happened. IBM did not know this and where are they today?

In the financial world, bankruptcies happen to the ”best” companies. They also result in better companies prospering against the inefficient ones. In India we still do not let companies die. We protect banks and large corporates from the risk of bankruptcy. “Industrial reconstruction” is the name of the game. It doesn’t work. Instead, such protection creates a culture of weak and fat companies like Air India and Kingfisher. These companies, which gorge on the tax payer’s money, the equity of minority investors, who are foolish enough to invest in them and our money saved in Banks, bur negligently lent to such companies as for example Bank of India. The lesson is that death, sometimes by accident, should not be averted beyond a point.

If there were no accidents and we had absolute certainty, there would be no progress, only the stillness of the grave. An apple accidentally fell on Newton’s head which lead to the theory that in the absence of balanced, countervailing natural forces the world would explode/implode.

Can there be reward without risk? The trick lies in drawing the line between the two sensibly. Merchant bankers, private equity managers, political pundits, businessmen, doctors, human resource managers and teachers and know how to balance risk and reward. For this core skill they are compensated handsomely except GP doctors, HR managers and Teachers. All three cater to the human mind more than to the dry dictates of their discipline. But science is increasingly making them redundant by progressively degrading the value of basic human skills. It is substituting human skills with more efficient machines at an alarming rate. Driverless cars and pilotless airplanes; robots on the production line; robots in shops and soon robots in the home; robots for ground level surveillance; drones in the air.

On the flip side science has also progressively reduced the risk from accidents for humans. People live longer and healthier lives but whether net productivity has increased as a result is debatable. A rigorous analysis of net economic growth after accounting from the environmental loss from negative externalities has never been done systematically in any country. It was tried in China in 2005 but quickly abandoned when the high economic growth rate got reduced to zero in some provinces.

The problem with not accounting for natural resource use is similar to a consumer overusing her credit card. For such feckless consumers a “debit card” which deducts the bank balance for every use is better. Green GDP accounting applies the “debit card” discipline to countries.

Seemingly “riskless” economic and “quality of life” benefits encourage wasteful use of resources because they appear “costless” in the near term. Climate change is an outcome of our successful endeavor to cocoon humans from want, disease and death. This has increased population to unsustainable levels. It has also made the rich across the world highly resource intensive. Delicate lives require air conditioning; motorized transport; communication networks and vast quantities and varieties of food, all of which degrade water sources, air quality and the biosphere in which we live. Bottled mineral water for drinking; gallons of water for endless showers; swimming and golf courses have made us water addicts. Our rivers and seas, air quality and land degradation can be directly related to the pressure of a growing population and an increasingly unsustainable lifestyle.

Upgrading all 7.2 billion of us to the average quality of life of the top quintile would either require a quantum leap in clean technology to outpace current population growth or very quickly degrade us to destruction. Paul Ehrlich (The population bomb. 1986) posed this question. Half a century on we still face the same conundrum.

More people live in degraded environments today than in 1965. Whilst the “environment hot spots” of 1965 in the industrialised countries have been cleaned up, the “hot spots” have shifted to more populous locations in developing countries. In 1955, air pollution was the biggest killer in Texas, US. Today smog from burgeoning automobiles and factories is the killer in Beijing. If rivers were fetid in the 1950s in the US, the Holy Ganga River is a cesspool today in India. Despite huge advances in technology since 1965, we still do not know how to give 7.2 million people the minimum acceptable standards of life within the available resources.

Economic theory tells us a young population is a demographic dividend. What it ignores is that barriers to international migration for the young into the rich world, severely limit the world demographic dividend. Meanwhile poor countries are unable to utilize the abundant volumes of young people available to them. They do not have the resources to push the young up the “skills ladder” faster than technology makes old skills redundant.

As a race we are increasingly unable to deal with nature. Modern armies have such a heavy supply chain to keep their soldiers healthy, well clad and alive that they lose out on tactical flexibility. They face the classic logistics problem Rommel faced in Africa with his tanks outpacing the supply chain. This is also why the US troops were no match for the Vietcong (1956-1975) and NATO troops have failed against the Taliban, in Afghanistan (2001-2014). Both the Vietcong earlier and now the Taliban, are comfortable living with nature and use nature to their advantage. The average GI from the streets of Kiryas Joel, New York (the poorest place in the US) does not have this advantage.

Accidents happen and they are a must if we are to keep growing. What we can do is to enhance our capacity to manage and deal with accidents.

As parents we have learn to deal with the inevitable misfortunes and misadventures of our children with fortitude.

As citizens we have to become resilient to destabilising political change by making government progressively less crucial for our welfare. We must take on the risks and responsibilities ourselves.

As humans, we need to drastically reduce our foot print on nature and learn to live with personal discomfort; the loss of loved ones and shifting fortunes with equanimity.

At the end of the day all anyone wants is to lie on the beach with a drink at hand; or get our lunch ourselves from the fruit trees, vegetable garden or the river next door. We must not fool ourselves into imagining that this idyllic life comes without the need to swat flies and mosquitoes; avoid snakes, rats and lizards or sans sweat, cold or fever.

The price of accidents is discomfort. The benefits are sustainable life. Choose wisely. How long can we observe nature through a protective plate glass?


Recall; a “second-chance” for voters


It is never easy to choose. It becomes even more difficult if one is unsure how well your choice will work out. It becomes easier if the store you are buying from has a return’s policy. Even the Hindu Marriage Act permits divorce in case of irreconcilable differences or incompatibility. Why then should a voter be stuck with a representative who is just goofing-off for five long years?

India does not give voters the right to recall their representative to the glorious state of being an aam admi, if she does not perform as expected or fails to pursue promises made in the heat of the electoral battle. Retribution is possible only after five long years. The result is irresponsible promises made by candidates at election time and every conceivable excuse being trotted out over the next five years why they couldn’t be kept. Imagine how this would change if elected representatives could be recalled by dissatisfied voters.

Other than the 30 million workforce “aristocracy” employed in the formal sector (public and private), who enjoy security of tenure and termination benefits, the rest of the Indian workforce (370 million) labours in casual jobs, short term contracts or is self-employed. They live with the constant threat of dismissal or loss of employment. Why should the Damocles Sword of recall not also hang over the heads of politicians?

Recall powers are available to voters in the US, Switzerland, Venezuela and Canada. Some experts argue that even where such powers are available, they are rarely exercised, so why bother? This is short sighted. As any negotiator knows, the threat of possible retribution is far more effective than the action itself. A recall provision has multiple advantages. It reduces the risk for voters to experiment with untested candidates and thereby enhanced political contestability. It can also reduce the use of money power and make politicians more accountable.

Today few Muslims, outside Gujarat, would vote for Modi. It is not his economic policy that puts them off. Nor do they doubt his executive ability. Their main fear is of potential social instability, sectarian strife and possible subversion of India’s secular credentials, if Modi becomes PM.

“Proof of concept” is a standard instrument in contract negotiations which reduces risk and facilitates efficient contracting. What if Muslims had the option to give Modi a chance and yet retain the power to withdraw support in case they find him wanting? Is it not reasonable to assume that many would vote with their head rather than their heart? That they would be more reassured of choosing freely, without the fog of fear so prevalent today.

Conversely, the traditional supporters of the Congress (the poor, dalits and the urban liberal) would still be with the party if they had the option of keeping Rahul (an untested product) on probation. Kejriwal and his team would also have done better outside Delhi with a probation period. Reducing the risk and uncertainty always results in enabling customers to make more informed choices, based on performance on-the-job rather than just go for the familiar.

A recall referendum can also reduce the use of money power in elections. Today candidates spend Rs 100 million on an MP election because they have an assured revenue stream of Rs 250 million from just the MPLADs program over five years. Even if 40% of this amount leaks (as against leakage of 75% in rural development programs once conjectured by Rajiv Gandhi), this ensures recovery of the capital invested at the time of elections. If a recall provision is activated within two years of election, the potential revenue stream gets reduced to less than the capital invested. The result would be that candidates would not splurge as much as they do today and reserve their financial arsenal for subsequent eventualities.

How difficult and cumbersome is it to embed the recall provision? The answer is not very difficult or expensive. Voters should have the power to recall their representative after two years of election but prior to two years of the next election (for a standard five year term). This ensures that the recall provision is used only once. Experience shows that the provision is only selectively used so the additional expense is minimal.

How difficult is it to operationalize the recall? Once everyone has a UID (Unique ID) and a linked phone (this is not far away and by 2019 both would be a reality), a digital referendum can even be initiated on phone with a simple yes/no option by any interested group of voters. If 50% plus 1 voters vote to recall their MP/MLA the Election Commission, after verifying the genuineness of the digital referendum, would initiate the re-election process.

Why hasn’t this happened already? Some fears are justified. After all the majority of potential MP/MLA candidates are “arbpatis” (asset value above Rs 1 billion) valued at current market prices rather than historical or depreciated prices. With so much cash sloshing around in a poor country the assumption is that voters can be bought out by a rejected but rich candidate to force a recall referendum. This is possible. But there is nothing to stop the voters from voting for whomever they wish in the post recall election. They can thereby eat and yet have their cake. Many candidates who buy votes for cash encounter strategic behavior by voters.

But the most potent barrier to recall is the combined self-interest of politicians across parties against rocking their boat. Remember how they all bandied together against the Lokpal Bill; against disqualifying convicted criminals from remaining MPs and against audit of the books of parties? When the chips are down, functional and class interest dominates, as in any other profession. Politicos hang and sink together versus the issue of empowerment of citizens.

Of course voters should look before they leap and the principle of caveat emptor prevails. But “poverty is the biggest polluter” (Indira Gandhi 1970). Illiteracy, living on the razors edge and the absence of human dignity, are cousins of poverty. Can we really expect anyone in that situation to be able to rationally choose an MP without making mistakes?

What about frustrated voters exercising a virtual NOTA vote by voting in a fresh face (Kejriwal?) hoping against hope that he would be better than the known devils? Should such voters continue to suffer for five long years? Everyone has the right and the obligation to change their minds. Even the dacoits of Chambal were rehabilitated because the State gave them a “second-chance”.

We should apply the “second-chance” approach to electing representatives. If Toyota- the gold standard for automobile quality- can make mistakes and recall cars, voters are only human and they occasionally err.

Team Modi; the first 100 days


Come May 16, Team Modi will be “riding” into Delhi in a triumphant explosion of fireworks, marigold and rose garlands and ladoos (sweets). After the celebrations are done; the flags and caps given away to raddi and the posters hang limp and ragged, Modi will get down to implementing his manifesto and try to outdo Kejriwal’s frenetic 49 day blitzkrieg.

Elections are to a democracy, what war is to a Nation. Our elections tend to highlight the innumerable cleavages in society, some of them exceedingly bitter, which get papered over. But once in every five years we get to “ground truth” how far we have come in integrating ourselves.  The answer for 2014 is not very far. The bitterest divide and mutual suspicion is between Hindus and Muslims followed by between Dalits and the rest. Modi will need to act expeditiously on both.

What matters most to both social segments (Muslims and Dalits, both of whom are “outsiders” to the Hindu mainstream) is security of life and property and jobs.

Security is a matter squarely in the mandate of state governments. But there are some things the center can do.

First, appoint a BJP Home Minister who has a track record of plurality and a persona which encourages reconciliation and compromise, rather than confrontation. Arun Jaitley fits the bill. Second, ramp up the activities of the Intelligence Bureau. The IB operates nationally and can gather and report intelligence for prevention of organized crime and sectarian violence. Third, use the constitutional provisions to act against a state government, which ignores early warnings from IB and fails to protect its citizens against organized crime and sectarian violence. Fourth, fast forward the UID (Aadhar card). It is the best available mechanism for seamless digitization of an individual’s identity across the country; the prevention of duplication and verifying identity irrespective of the current location of the holder.  

A caveat here. As in business, there is no substitute for credibility and no better measure of good intentions than ones actions. Amit Shah, a close confidant of Modi, must not find a place in the cabinet. Shah was invaluable for his organizational skill to topple the old paper tigers of the BJP in UP; Lalji Tandon (Lucknow) and Murli Manohar Joshi (Varanasi) and keep a close watch over the faction ridden activities of the party in UP. His job is done and he must recede into the shadows of Gujarat.

After security comes the more uphill task of providing productive jobs. Jobs are the outcome of investment and inclusive growth, both of which the BJP manifesto focuses. An important keystone of growth, which has received less than deserved attention, is making government more effective; re-energizing babus to become performance oriented and reshaping the architecture of the central government. Here is what Modi can do in the first 100 days.

First, reassure the babus in Delhi; Joint Secretary upwards, numbering around 1000, that there is no retribution coming merely because they worked closely; were appointed or promoted under a UPA government. To build trust and camaraderie, the PM must view this set of babus as his personal executive team and be inclusive though his actions. Selection; performance review and most importantly grievance redressal, including regulated but direct access to him for senior babus, must be the PMs prerogative. Nothing works as well as even the briefest face-to-face interaction between a babu and her boss (even through face time at 5.30 am!) to build mutual commitment and confidence.

Second, Modi must act quickly on his promise of treating all the Chief Ministers of state governments as an integral part of his “development” team. The bad mouthing and name calling of the election must get subsumed by a common purpose for mutual gains. The key sticking point here is the manner and the proportion of finances which get distributed as central grants and loans to states. The proportion of central finances shared with the states can increase significantly, in real terms, if the center cuts back on the burgeoning central sector schemes which are devised in and financed by Delhi, but implemented by states. Modi needs to walk the talk here. He must transfer direct decision making power, including design discretion, to the states, subject to mandated and specific inclusion by states of local governments in the implementation of such schemes.

Third, quickly restructure the central government into a more cohesive team with adequate executive support for the leader. Nothing works like evoking symbols to illustrate purpose. Under the previous PM, the Planning Commission grew to become his de facto PMO for matters economic. This will no longer be necessary with a “real” PM in position. The Planning Commission should be merged into a Ministry of Economic Affairs; an internal economic think tank of the government.

The functions of the “real” PMO should be expanded to include a Service Delivery and Development Unit reporting directly to the PM. This unit would be mandated to problem shoot in strategic areas; work with Ministers to find solutions to clogged service delivery channels and straggling central projects; monitoring progress digitally in real time and generate an independent MIS for the eyes of the PM only.

This strategy of choosing specific problems to solve in delivery chains and then going after them hammer and tongs, rather than waiting endlessly for the more tedious all-of-government reform worked well for Tony Blair in the UK (the longest serving Labour PM) and more recently for PM Najib Razak in Malaysia for his re-election. Both interventions enhanced the efficiency and effectiveness of the government and subsequent electoral gains (UK -2005 and Malaysia-2013).  

Fourth, reduce the cost whilst enhancing the effectiveness of the central government. Ministries have burgeoned over the last decade to accommodate the “drift dharma” of coalition governments. The central government must be shrunk and ministries collapsed by broad banding related sectors;

(1) Combine the ministries of Heavy Industry; Steel; Chemicals; Industry and Commerce; Micro, Small and Medium Enterprises; Food Processing; Labour and Employment into one Ministry of Industry, Commerce and Employment.

(2) Combine the ministries of Urban development; Rural Development; Housing and Urban Poverty Alleviation and Drinking Water and Sanitation into a single Ministry of Development and Poverty Alleviation.

(3) Combine the ministries of Agriculture; Fertilizer; Water Resources; Forests and Wildlife and Earth Sciences into a single Ministry of Earth Resources.

(4) Combine the ministries of Petroleum and Natural Gas; Coal; Power and Renewable Energy into a single Ministry of Energy.

(5) Combine Road Transport; Shipping; Civil Aviation and Railways into a single Ministry of Transport.

Broad banding induces better networking and facilitates an integrated approach to problem definition and problem solving.

A more significant political advantage of broad banding is that it provides around ten significantly empowered Ministries (including Home, Finance, External Affairs, Human Resources and Health) to accommodate the senior BJP ranks who are currently smarting at their marginalization by the relatively younger Team Modi. Broad banding also allows junior BJP members to be inducted as state ministers for maturing into a line of succession.

The first instinct of a new government is to rush about fulfilling the “promises” made by them in the heat of the electoral battle. This is the glamorous thing to do, which gets instant acclaim both from the media and the citizens. But someone must do the back room drudge of repairing the plumbing; tightening the screws and fixing the nuts and bolts. There is little point in the Captain inviting the world to a deck party, if the waiters are sullen; the canapés indifferent; the boat leaks and the toilets stink. Time to pull the jhadoo out of the closet and use it vigorously.   

Why did the Economist bark?


The Economist is an impeccably written newspaper with a distinct right of center slant and a preference for global solutions for reforming economic fundamentals in trade, climate change, democracy, private investment and markets. It advocates efficiency before equity. It believes correctly that in a resource constrained world, a concern for equity, as bleeding hearts socialists wear on their sleeves, without the fundamentals of economic efficiency in place, is nothing but lip sympathy and is not sustainable. In short a government without resources cannot alleviate poverty. This is also Modi speak.

Usually, it does not peddle political agendas, beyond those related to the global fundamentals mentioned above. This week it departed from that sensible policy by recommending to Indians that they should not vote for Modi and that a government headed by Rahul would be better for India. ( Can anyone stop Narendra Modi? April 5, 2014)

The Economist prefers Rahul to Modi purely because of the single incidence of Godhra in 2002, and because Modi is a product of the Rashtriya Swyamsevak Sangh-RSS, which supports Hindutva, a concept perceived, rightly or wrongly, by Muslims to be proactively anti-Islam.

For a paper, celebrated for rational analysis, it is puzzling that the article does not explore why there were no further riots against Muslims in Gujarat after Godhra (2003 to 2014) whilst Modi was the Chief Minister and the consequences thereof. Two obvious conjectures which present themselves to explain why there were no repeat riots are explored here.

First, once Modi became the Chief Minister, it was no longer in his interest to ferment communal trouble or support it in Gujarat. If this indeed is the case, and if Modi has the controls which can conjure up and extinguish communal violence at will, then surely he would become even more empowered as Prime Minister. Gujarat has only around 4% of the national population of Indian Muslims. If protecting Muslims was important for Modi in Gujarat, it becomes even more important pan-India. Why then would be change once he becomes PM? Modi as PM would be good for Muslims and in fact bad for virulently anti-Muslim, Hindu fundamentalists. Surely this is the best reason why all Muslims and all secular Indians must vote for Modi, not reject him.

Second, an alternative conjecture could be that once Modi became the Chief Minister of Gujarat in 2002 he unleashed a wave of terror which either forced Muslims to migrate or frightened the Muslims into submission so completely, that they became second class citizens in their own homes. Being reduced to slaves, they were no longer a social or economic threat to Hindus.

This conjecture is not supported by data, which suggests that high, consistent growth in Gujarat has made the Muslims prosper more in Gujarat than in any other state in India during this period. This conjecture also does not gel with the safeguards against genocide in India’s institutional framework. Multi-party political architecture; the fact that there are a number of Muslim political parties; the option for any citizen to seek direct redress from the Supreme Court through a Public Interest Litigation; the fact that the Congress has remained in power in the Central Government since 2004 with all the premier national criminal investigation agencies available to it and finally, India’s free and vibrant press and media all militate against a possible secret, ruthless suppression of Muslims, by Modi in Gujarat, over twelve long years since 2003.

More importantly, the 2001 census recorded 4.6 million Muslims in Gujarat. Their population grew to 5.4 million by 2011. Migration across states is a common phenomenon for work; to flee a threat to life or property or to escape from rigid social norms dictated by caste or religion. The conjecture of an anti- Muslim wave of suppression is not supported by the steady increase in Muslim population in Gujarat.

If neither explanation leads us logically to support the recommendation to reject Modi, one is forced to conclude that the Economist has relied solely on its “gut” feel against Modi.

Interestingly it does not voice similar “gut” preferences in the UK Parliamentary elections (its home) about PM candidates. Nor does it do so in the case of the US or Germany. It tends to recommend political agendas only in the case of the poorer, post-colonial countries or those, like China, which march to a different drum beat than liberal democracy. Its veto against a particular PM candidate is unprecedented.

One does not know what drove the Economist to favour Indians with its recommendation on who they should vote for. But if their intention was to help Rahul to form a government, they just shot the Congress in the foot.

The Congress chief Sonia, who is more truly Indian than the staff of the Economist, knows that Indians (as I believe would any other nation) do not like to be preached at by those who do not share their context. The Economist does not function out of India. If it did and if its owners were Indians, with stakes in India, it would possibly have a more nuanced view on the merits and demerits of various political parties and candidates in the forthcoming electoral contest.

The purpose of this blog is not to argue for or against the recommendation of the Economist. After all, India may not have the best roads or 24X7 electricity (except in Gujarat) or clean water supply but we do have the freedom to express our views publicly, including in Gujarat.

The purpose of this blog is to mourn the fall from grace of the Economist for three reasons.

First, the blatant disregard for facts and logical thinking is not in keeping with its own traditions of rigorous analysis based on facts. If one wants to be prescriptive, even greater care needs to be taken to lead the reader through the analysis which informs the conclusion. In this edition, the Economist has failed miserably against this single measure of responsible journalism.

Second, by completely ignoring the possibility that any other political coalition, other than the BJP or the Congress, could form a government, the Economist has failed to read the tea leaves correctly. BJP and its allies may not get the absolute majority to form a government. Congress may end up getting no more than 50 to 60 seats, or just 13% of the seats in the Lok Sabha. In this event it may not want to form the government. It may prefer to support a regional party, like that headed by Amma or Didi or another consensual leader. It would prefer this to avoid the additional opprobrium of continued poor governance, which is the most likely outcome of a coalition government. It would keep its powder dry for a re-election, within two years, once it has regrouped and Rahul is more firmly in charge of the party.

Third, the Economist has fallen into the trap of equating the Indian electoral system with the Presidential form of government in the US. By hectoring readers to reject Modi, it wrongly projects the election as a Presidential fight between Modi and Rahul. However, it does retrieve its high reputation subsequently by arguing that should the BJP win (despite its recommendation), it must not choose Modi as the PM. This indeed is unprecedented. It is either, imperious, journalistic, vigilantism at its most inefficient and immoral worst or is the result of disagreement, within the Economist staff, leading to a committee writing the article.

Economists, like Sherlock Holmes, look closely every time a dog fails to bark. They should give similar attention when a dog barks, seemingly without reason. Is the Economist both helping the BJP to win by predicting its victory whilst making Modi lose by raising the bogey of Hindutva? If so why and at whose behest?

Political casualties: Jobs, gender & social change

man behind

After security of life and property, the most visceral driver for winning at politics is the provision of jobs. With a job come social standing; an income and continuous honing of skills, ensuring sustained employment through an individual’s life. We aam admis are not wrong in assuming that everything else; education, health coverage, a decent house, a happy life, can all be bought with money in the pocket. How are political parties responding to our concerns?

Frankly they are not. Governments lost direct control over employment post 1990 once the world changed forever with the collapse of the Soviet Union. Suddenly, the gates were opened. Both expectations and ability became benchmarked to highly competitive international standards. It was no longer possible for the traditional silk sari handlooms in Varanasi to survive the competition from power looms in Gujarat or cheap silk imported from China. Industry continues to face the brunt of competition.

Within industry, it is the small and medium enterprises which have become unviable today. Many of their products require vast scale like the incredibly cheap Mumbai vegetarian “thali” (platter) which is viable only if turnover is high. In India, “scaling up” invites huge transaction costs. It attracts oppressive regulation and social protection measures and is constrained by poor infrastructure. The result is low job creation even in private industry.

Agriculture has for long been fed on the opium of subsidies and high administered purchase price for food grains at the expense of investments, which incentivize our best farmland to be used for low value cereals rather than cash crops. Like all opiates, this strategy has prolonged the day of reckoning but not avoided it. Fan, Gulati (Ashok Gulati, India’s best known Agri-Economist) and Thorat lay this bare: ‘Investments, Subsidies and Pro-Poor Growth in Rural India’, Agricultural Economics 39, 2008.

Banking on the service industry to provide the boost in jobs is like banking on hot money inflows to correct the foreign exchange deficit in the trade account. Services are the sunrise sector but it is also highly susceptible to global economic shocks. Jobs in services (tourism, hospitality, finance, IT, health care) are easily transferable to the most competitive international location.

Providing jobs in today’s world is an international concern, not just in India. But the manner in which we are going about managing the problem is pathetic.

The present government’s quick-fix formula was to enhance government spending for temporary work in rural areas, where joblessness is most acute. Certainly a decent temporary measure, but clearly not fiscally sustainable in an economy which is moving towards a leaner government. We borrow to finance even our recurrent expenditure today. Only a “too big to fail” economy like the US can sustain such misadventure. More importantly, we are crowding out public investment. How long can we afford to underspend on defence, infrastructure, health and education to finance “band aids” in the name of social protection?

The “quick-fix” mantra for joblessness is to enhance skills and spend more on education, assuming that a highly skilled labour force will enhance competitiveness and pull in more investment and jobs. As a generic solution, both are acceptable. But unless we fashion our education system to make children productive in the modern world, we could end up enlarging the hopelessness of the educated unemployed. We see this already in Punjab and in the North East.

Changing the system of education is not enough. We need to change the structure of jobs available and the social norms incentivizing competiveness. Here are issues against which to benchmark the party you vote for.

First, change the system of education by bringing in flexible curricula permitting choice in subjects and learning curves (the dynamic VC of the Delhi University is a champion and has taken the lead in this). Quick learners should be enabled to leap frog in subjects they are good at and slow learners allowed to learn at their own pace. Better assessment systems to determine “learning” rather than memorizing by rote are necessary. Upgrading teacher skills and compensation is critical. Teachers are the “front line” of the government. They provide multiple services at the lowest administrative level of a ward or a village. There is no reason why their emoluments and benefits should be less than that of comparable civil servants.

We know that learning outcomes are also determined by the home environment of a student. In poor Bihar, students gather around kindly mentors, who help them prepare for the civil service exams. These mentors substitute for a supportive home environment. But it is hard for poor kids to let their potential shine through. It is similarly hard for poor parents to forsake the income from a child begging; rolling bidis; making firecrackers or weaving carpets.

Conditional cash payments are an effective instrument to substitute for the lost income. The government pays parents to keep their children in school. Even in the developed world, availing of student aid to continue studying, is the “Band-Aid” to sit out the recession and resulting joblessness.

Second, learning is driven by job expectations. The government remains the biggest employer today. Its share in employment, relative to the private sector is reducing. But significant sovereign functions, like policing, justice and decentralized administration remain underserved and are legitimate public employment growth areas.  Government is also the most accessible employer for the poor and unconnected and recruits on merit and positive affirmation (reservation) policy.

Change the manner in which government jobs are filled and we immediately change learning incentives. Today, the incentive is to cram and learn by rote, with the sole intention of getting high grades in the relevant recruitment exam, which offers entry to life time cadre-based public employment. The choice of subjects is consequently driven by “score potential” in the relevant civil service exams rather than personal interest or the aptitude of the student.

Make government recruitment “position” based and end the cadre based selection system. Select against the narrowly focused job requirements of a specific “position” like Assistant-Trade Development; Sub Inspector-crime investigation; Appraiser-Customs; Development Grant Officer or Executive Magistrate. Potential candidates will immediately self-select potential jobs and equip themselves with the necessary qualification for being: a government accountant; office manager; purchaser; store keeper; HR manager; economist; GP doctor; civil engineer; criminal lawyer; community outreach and media; scientist; or a statistician.

This will also avoid the problem of too many students studying social sciences and too few in science or technology. Do we really need the numbers of History, Political Science, Sociology, English, Sanskrit or Music graduates we produce? Why not limit the number of seats offered in government aided universities for such subjects and enlarge those available for the more job related subjects? Why not make it compulsory for those entering government service to pass a basic speaking and reading test in a regional language of choice, Hindi and English? After all basic communication skills are what an average person needs, to be effective in a multi lingual country.

Third, we must prepare for the dwindling market for low skilled labour in armies, in the police, as household help, or as providers of brawn in industry and agriculture. The “akhara” (wrestling ring) is no longer the place to hone your employability. “Geekiness” is in. Geekiness gives women an immediate comparative advantage since they mature earlier. Given equal opportunities, they outshine men in early academic achievement which remains the best available proxy for value in the workplace.

India cannot compete internationally with one hand tied behind its back. We must change traditional Indian gender based roles. Not an easy task and best done by charismatic leaders who become personal role models like Maggie Thatcher, who convinced the British that women can think and act effectively. Sonia, Bhenji, Didi, Amma and Sushma Swaraj are contemporary Indian role model politicians as are the women (though not enough) in leadership positions in other professions.

The building blocks of social change have to be (1) reservation for women in politics and government jobs; (2) a gender review of our laws and regulations by a Law Commission to weed out negative discrimination against women, as for example in customary law and (3) developing a consensus across religions to weed out iniquitous taboos.

Consider that shockingly, we still practice “gender untouchability”. Women are advised not to visit places of worship when they are menstruating and are barred from the kitchen in traditional, wealthy households. Such “gender untouchability” is at the core of why girls miss or drop out of school more than boys. Menstruating is a lot better than picking your nose or hawking and spitting in public, both of which are socially accepted.

Making work gender neutral is key to using our human resources competitively. Even men, who today have to earn a living, may welcome this once they can discard their false pretensions of being the sole provider and head of the family. The recipe for happier and longer lives for men is spending more time cooking, swabbing or changing diapers. Behind every liberated woman stands a confidant man.

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