Sunday, December 11, 2011

When democracy won but the people lost

The past two weeks witnessed a remarkable spectacle in which India’s democracy won but India’s people lost. On November 24, the government announced a bold reform to allow 51% foreign stake in retail. It triggered off a storm of protest across the political spectrum, and eventually forced the government to back down and suspend the reform. During the entire debate no one asked why China and dozens of countries welcome foreign investment in retail. The defeat of the government means that Indian consumers have lost a chance for lower prices, India’s farmers have lost the prospect of higher returns, a third to half of India’s food will continue to rot, and millions of unemployed rural youth have been denied jobs and careers in the modern economy. It is also a severe blow to the future of reforms in India.

It does seem odd that democracy should win and people lose. But democracy’s great flaw is that it is easily captured by vested interests. In the 1980s, labour unions captured it to ban computers in government offices, banks and insurance companies. Today the powerful kirana trade has succeeded by funding opposition to a policy that was patently in the nation’s interest. The kirana lobby created an atmosphere of fear. The same fears were expressed during the 1991 reforms. If the government had given in then, India would not have lifted 200 million people out of poverty; not raised 300 million into the middle class and not made India the second fastest growing major economy.

Indians today are victims of the primitive “mandi system” which escalates food prices by 1:2:3:4, resulting in the world’s highest gap between the price a housewife pays and what the farmer receives. What a farmer sells for 1 is sold at the mandi for 2, which becomes 3 at the kirana store and 4 to the consumer. When you pay Rs 20 per kilo for tomatoes, the farmer gets only Rs 5. As tomatoes travel from the farm to the mandi to the bania, each middleman gets his cut. The price spread varies by commodity and season, but studies show that the gap is less in countries with modern retail. This is because large foreign retailers usually buy directly from farmers without middlemen. Thus, they can pay Rs 8-10 to farmers for the same tomatoes and sell them for Rs 15-17 to consumers, and still make a profit. Some middlemen will lose out but P Chengal Reddy, secretary-general of Consortium of Indian Farmers Associations says, "India has 60 crore farmers, 120 crore consumers and half a crore traders. Obviously, government should support farmers and consumers. FDI in retail will bring down inflation.”

It will also save food from rotting. Global retailers have perfected a cold distribution system. By investing in thousands of cold storages and air-conditioned trucks, they will reduce farm wastage, and bring a revolution in transport, warehousing, and logistics, as they have done in major countries like Argentina, Brazil, Chile, China, Indonesia, Malaysia, Russia, and Thailand, which have allowed 100 per cent FDI in multi-brand retail since the 1990s.

In none of these countries have small stores been wiped out; nor are there complaints of predatory pricing by supermarkets—the two fears expressed in the past two weeks. According to a recent study, small outlets have grown by 600,000 in China since 2004. “In Indonesia, after ten years of opening FDI in multi-brand retail, 90 per cent of the business remains with small traders, while employment in the retail and wholesale sectors grew from 28 million to 54 million from 1992 to 2001”. Kirana stores continue to succeed because they offer personalized service, give credit and deliver to the house.

This issue goes beyond shops and supply chains to whether India’s democracy can throw up the sort of leaders who can reach out and persuade opponents about much needed reforms. This was a test for the Prime Minister. He made a bold decision to usher in a retail revolution. He gave a choice to the states to opt out of the reform. He may have failed this time but if he is courageous he will persist and win the next time because he is doing the right thing for the nation.

Sunday, October 09, 2011

Duty or revenge, no one is above the law

On a sweltering afternoon on September 29th principal district judge S. Kumarguru began to hand out sentences. There was a hushed silence in the packed courtroom in Dharmapuri, Tamil Nadu. He began at 3.30 but could not finish until 4.40 because he had to read aloud the names of 215 government officials. Among those convicted were 126 forest officials, 84 policemen and 5 revenue officials. Seventeen were convicted of rape and they were sentenced from seven to 17 years; others received from one to three years on counts of torture, unlawful restraint, looting and misuse of office. Had 54 of the accused not died in meantime, the sentencing would have taken longer.

Early on June 20, 1992 four teams of government officials descended on the adivasi hamlet of Vachathi, near Sathyamangalam forest, also home to the dreaded brigand Veerappan. They assembled the villagers beneath a neem tree and let loose a reign of terror as they searched for smuggled sandalwood. They picked up 18 teenage girls and dragged them into the forest, where they raped them repeatedly. They only brought them back at 9 pm. Claiming a haul of sandalwood from the riverbed, the officials then put 133 villagers in jail.

How does the human mind begin to cope with this soul-numbing news? My first reaction was horror at the rape of teenage girls by men in uniform. Second, was a feeling of relief and catharsis when punishment was meted out to powerful men. The third emotion was outrage at those who allowed the case to drag for 19 years. Then questions arose in my mind. How could this happen in the first place? And was this not as serious an act of corruption as the 2G scam? And why was the nation quiet?

The last time I had felt similar emotions of revulsion was in reading about Ashvatthama’s night time massacre of the sleeping Pandava armies, which had turned the mood of the Mahabharata from heroic triumph to dark, stoic resignation. Ashvatthama was a fine young man but he was totally transformed by his father’s brutal murder. Many of the officials in the Vachathi raid were also fine young men, but their personalities changed during the losing battle against the infamous outlaw Veerappan and they got caught in a Mahabharata-like escalating cycle of revenge. How else do you explain it?

The 65 year old Angammal, whose daughter had been raped, also spoke of vengeance. “It is sweet revenge for us”, she said, “to see those who raped our daughters being sent to jail.” Only the state is allowed to take revenge in civilized societies and we call it punishment. Some think that revenge is neurotic but I believe that the “thirst for revenge” fulfils a legitimate human need. If a good person suffers, then the bad person should suffer even more--this idea is embedded in the human psyche. Wanting to punish a villain is ubiquitous in literature and movies because it brings profound moral equilibrium to the human mind.

The statement of the senior-most official convicted, Mr. M. Harikrishnan was striking. The retired Conservator of Forests claimed that the officials “had merely been doing their duty”. The judge obviously disagreed and awarded him three years in jail “for causing evidence to disappear”. The Nazis who were tried at Nuremberg for killing Jews also had claimed in their defence that they had been doing their duty.

The Vachathi case is “one of the worst examples of the abuse of power in Independent India” said P. Shanmugam, who is one of the heroes of this story. As president of Tamil Tribal People’s Association, he worked tirelessly to bring justice for 19 years. But the real issue is this: how does one prevent such abuse of power in the future? I believe this will only come about if those charged with enforcing the law do not see themselves as above the law. To perceive oneself below the law needs a cultural change, especially in the police. The best feature of this court judgement is that senior officers have been punished for crimes committed by their juniors. Cultural change begins at the top. This is why we need Anna Hazare to continue his fight against corruption.

Sunday, September 11, 2011

A primer for the corruption fighter

The dust has settled and a degree of calm prevails. Anna Hazare has returned to his village after conquering Delhi. He ought to consolidate his gains now before letting loose another storm. He would do well to sit down with his advisors in this lull and draw up a result oriented, longer term agenda to fight corruption. To this end, I offer Team Anna a primer on what we know about corruption--what works and what doesn’t--a sort of corruption fighter’s manual.

A strong Lokpal is a good idea but it should be lean and effective. Less is always more and the Lokpal will succeed if it does few things. Let it focus on the big fish and leave the smaller ones to Lok Ayuktas, Vigilance Commissions, and other agencies. The Lokpal should have the power to initiate a case without the government’s permission and its decisions should be binding. Chief Vigilance Commission (CVC) has failed for these two reasons, and it too should be reformed by removing these two handicaps. The CVC should be answerable to the Lokpal but not be under it. Similarly, Central Bureau of Investigation (CBI) should be answerable to the Lokpal, but not under it. All three—Lokpal, CVC, CBI—should be autonomous bodies. However, in CBI’s case, the “single directive” (which requires prior government permission before prosecuting senior officers) should not scrapped as suggested by the Supreme Court for it was paralyze decision making.

A lot depends on luck when it comes to who is the Lokpal. The Election Commission was a mediocre institution until the determined T.N. Seshan came along, and he was followed by another outstanding CEC, J.M. Lyngdoh. Karnataka’s Lok Ayukta has recently brought the state’s chief minister to his knees. One can help ‘luck’ by insisting on probity, toughness, will power, and courage when selecting a Lokpal.

While the Lokpal is needed medicine, it is administered long after the sickness appears. Hence, prevention is better than cure. To prevent corruption, we must reform our institutions of governance—the administration, police, judiciary, and elections. Since Indians confront the bureaucracy daily, it is the first priority. Corruption will be cut if decision making is transparent, discretion is reduced, rent seeking opportunities shrink, officers are punished for deliberate delay--the favoured tactic of a corrupt babu-- and punishment is guaranteed to the guilty.

But none of these administrative reforms will work unless the incentive system within the bureaucracy is changed from the present one based on seniority--where everyone gets promoted based on years of service--to rewarding good performance and punishing poor outcomes. The present assessment system is ineffective—you cannot have eight out of ten officers being rated as ‘very good’ or ‘outstanding’, especially when India’s bureaucracy is rated the worst among 13 countries in a survey by an independent firm in Hong Kong.

There are two types of corruption—harassment and collusive. In collusive corruption the bribe taker and giver collude—such as in the 2G scam—to steal money that belongs to the state, and both should be harshly punished. In harassment corruption, an official gives a citizen what his rightful due—a ration card or a birth certificate--only after he earns a bribe. The bribe giver is a victim here and should be encouraged to complain. This is why Kaushik Basu has suggested that a bribe-giver be given immunity to encourage him blow the whistle. The virtue of the Jan Lokpal draft is the strong protection advocated for victims of corruption. The government’s bill is superior in stipulating strong punishment for false complaints.

The Internet is our best friend in preventing harassment corruption because it brings transparency in transactions. We got our first taste when buying railway tickets and corrupt booking clerks have practically gone out of business. Placing land records on-line in Karnataka and Andhra has reduced the corrupt power of revenue officials. Those states which are using e-governance in giving birth and death certificates, ration cards, pension payments, driver license renewals have cut down on speed money. It should be mandatory for every government department to place its rules, procedures, and forms on its website. Cash transfers based on the Aadhaar smart cards will do much more to reduce the massive corruption that exists in delivering jobs, subsidised food and fuel, and other services to the poor.

Citizens Charters have been a flop so far but post-Anna some state governments, like Delhi, have decided to implement these and from September 15 officials will be fined Rs 10 to Rs 200 per day when they fail to deliver services to citizens on time. Five states have announced that they plan to follow suit.

Land is the biggest source of corruption because government decision making is deliberately opaque. Change of land use, municipal permissions, completion certificates, plus dozens of permissions result in massive collusive corruption. The amounts are even larger in awarding contracts for natural monopolies--mining, oil and gas, telecom spectrum—and the answer is open, transparent bidding (like an auction) under a firm regulator. Because most industrial and large real estate projects require environment clearance, the ‘licence raj’ had shifted to this ministry.

Ever since Indira Gandhi disallowed corporate donations, elections are now only fought with black money. Cleaning up electoral funding has to be a priority along with other electoral reforms such intra-party democracy and banning criminals from politics. Judicial and police reforms are crucial. The police cannot be a lackey of state chief ministers and has to be given autonomy as reform commissions have suggested. Given the growing cases of the misconduct of judges, the judicial appointments must come under a judicial commission comprising of non-judicial persons.

Finally, the most important lesson--keep the government small. A lean government tends to be more competent and less corrupt. Sensible governments no longer run industries, airlines, and hotels. Fewer controls and fewer licenses mean less corruption, as we have seen since 1991. Reforms are the best medicine against corruption.

Monday, September 05, 2011

India Says No to $80 Toilet Paper, Wall Street Journal

An anticorruption campaign has given voice to a growing middle class tired of public indignities

A year ago, no one in India could have imagined that cabinet ministers, powerful politicians, senior officials and CEOs would be in jail now, awaiting trial for corruption. The credit for this dramatic shift belongs in no small part to the anticorruption movement of a 74-year-old activist, Anna Hazare, supported by determined justices of the Supreme Court, an exceptional auditor general, rival television channels in search of "breaking news" and, crucially, a newly assertive Indian middle class. The long-term impact of this movement is unclear. It could lead to something profoundly good, or it could destabilize the whole system.

A series of corruption scandals has swept India over the past year. These include graft-ridden purchases for the 2010 Commonwealth Games in Delhi, for which rolls of toilet paper were purchased for $80 each; the government's sale to favored companies of licenses for the mobile-phone spectrum, at prices so low that they are estimated to have lost taxpayers somewhere between $10 billion and $40 billion; and the grabbing of expensive apartments in Mumbai by politicians, officials and generals on prime property that was meant for war widows.

Fighting this pervasive corruption has been Mr. Hazare, a villager in a white rural cap who evokes the figure of Mahatma Gandhi and has successfully emulated Gandhi's protest tactics of hunger strikes and peaceful marches. Mr. Hazare launched his first hunger strike, a five-day fast, in April. As a result, the government agreed to draft a bill creating an anticorruption agency that would investigate complaints against officials, but the bill was weak, and Mr. Hazare rejected it.

His second hunger strike, which he staged last month in Delhi, drew tens of thousands of supporters and spurred the government to agree to discuss his own version of the bill—a considerable victory, since politicians of all parties have stonewalled the creation of an anticorruption agency for 40 years.

Many officials were taken by surprise by Mr. Hazare's support from the middle class, which is almost a third of India's population today, up from 8% in 1980. Since reforms in 1991, India has become the world's second-fastest-growing economy, and the middle class is expected to become 50% by 2022.

There are still vast areas of horrible deprivation, but a significant number of Indians have experienced a palpable betterment in their lives. As a result, the discourse of the nation, or what Alexis de Tocqueville called "habits of the mind," are changing. People have begun to believe that their future is open, not predetermined, and can be altered by their own actions.

The same thing happened in the West after 1800. In her book "Bourgeois Dignity: Why Economics Can't Explain the Modern World," Deirdre McCloskey argues that the West rose not only because of economic factors but because the discourse about markets and innovation changed. People became encouraging of entrepreneurs. New perceptions and expectations emerged.

In the same way, the rise of India and China has brought dignity to their middle classes. Ordinary conversations over chai in India are now about markets and focus on the contrast between private success and public failure. While the private sector provides cutting-edge services and products to the world, the roads outside are potholed, electricity is patchy and water supply erratic. The difference between the two worlds is accountability: In private life, if you don't work, you don't eat; in public life, jobs are effectively for life. Indians believe that they are rising despite the state and are often heard to say that "India grows at night, when the government sleeps."

India's electoral politics do not cater to this aspiring middle class. Every party treats the voter like a victim, focusing on welfare programs or historical wrongs. Politicians have not realized that with high growth, mobility and a demographic revolution, aspiring Indians will soon overtake those who see themselves as victims. The person who got India's 851,695,668th cellphone in June was a village migrant, and no one in the country's political life captures his hopes. An op-ed about Mr. Hazare's protest movement in the Times of India had just the right title: "It's the middle class, stupid."

For too long Indians have been denied dignity by public officials who ride in cars topped with flashing lights and make citizens wait endlessly in gloomy offices, placing miles of red tape in their way to get even basic documents. The newly assertive middle class will no longer put up with this. As the social anthropologist Shiv Vishwanathan says, "The consumer revolution that we have experienced in the past two decades has told the citizen that he can expect a higher quality of governance."

It would be a shame if Mr. Hazare's movement contributed to undermining India's finely crafted constitutional system, which has made its democracy the envy of the developing world. Street protests and hunger strikes can gain attention, but legislation requires working within the system, in the messy details of parliamentary negotiation.

Mr. Hazare's bill is needed medicine, but it is being administered long after the sickness appeared. Clearing swamps is a better way to tackle malaria than administering quinine.

To prevent day-to-day corruption, Mr. Hazare and others like him need to work on reforming the rules of India's bureaucracy—creating transparent decision making, reducing discretion, shrinking opportunities to manipulate public rules for private gain and penalizing delays (the favored tactic of a corrupt bureaucrat). Indian bureaucracy needs to be transformed from a system based on the benefits of seniority to one that rewards good performance and punishes poor outcomes.

India's churning reflects a deep middle-class anger with pervasive graft in the government, police and judiciary. Bourgeois dignity may well hold the key to this Indian puzzle, but it needs to find expression within the bounds of the country's constitutional system. Street theater seldom makes for lasting reform—and sometimes brings down the good with bad.

—Mr. Das is the author of "The Difficulty of Being Good" and "India Unbound."

Sunday, July 10, 2011

Middle class gets back its dignity

A year ago no one could have imagined that cabinet ministers, powerful politicians, senior officials and CEOs would be in Tihar jail awaiting trial. Corruption is no longer the news about India; it is our unexpected and puzzling response to it. What explains the unending movement against bribery is an increasingly self-assured and impatient new middle class, which has finally attained self respect and dignity and is being taken seriously by the media. The middle class will become 50% of India’s population by 2020, and when that happens our politics will also change. What we are seeing today could either destabilize the system or lead to something profoundly good.

The big story of our own times is not Islamic terrorism or even the global financial crisis but how China and India have embraced liberal economic ideas and have risen. In both countries the middle class has attained a sense of dignity which was denied to it for so long. Deirdre McCloskey’s new book, Bourgeois Dignity: Why economics can’t explain the modern world, reveals that the West rose after 1800 not only because of economic factors but also because the discourse about markets, enterprise, and innovation changed. People became enthusiastic and encouraging of entrepreneurs. The development of the West is explained not as much by colonialism and imperialism; not by Marx’s theory of classes; not by Max Weber and his Protestant ethic; not even by Douglass North and the central role of institutions. It has much more to do with how people’s perceptions and expectations changed.

Robert Lucas, the Nobel Prize winner, says that ‘for income growth to occur in a society, a large fraction of people must experience changes in the possible lives they imagine for themselves and their children…economic development requires a million mutinies’. There are still vast areas of horrible poverty and deprivation in India but there is also a critical mass of people who can see that their lot is palpably better than their parents; their future is open, not pre-determined, and can be changed by their own actions. They feel that dignity is being bestowed on their middle class dreams as their children are getting MBAs and aspire to become CEOs. Ordinary conversations over chai and chaat are about markets and innovation. Even leftist theorists at JNU and in the Congress Party have been forced to rethink their old prejudices. What has changed is ‘habits of the mind’ as India has become a ‘business respecting civilization’ in Schumpeter’s words.

Indians won political liberty in 1947 but they gained economic liberty only in 1991, and gradually they have attained dignity. Dignity is a state of mind engendered by social, political, and economic liberty. For too long Indians have been denied dignity by public officials who ride around with lights flashing on top of their cars and announce their dignity either by making citizens wait while they pass or by placing endless red tape in issuing a birth certificate, a ration card, a passport or whatever a citizen is owed as a matter of right. Liberty without dignity is self-despising; dignity without liberty makes for status without hope; but liberty with dignity is hugely empowering.

If our new found prosperity and dignity is founded on the reforms, how does one explain the lack of reform in the past seven years of the UPA government—especially when the father of the1991 reforms is our Prime Minister? And why is sullen BJP not supporting the Goods and Services tax (GST), which is possibly the biggest future reform in the country’s financial life? Sonia Gandhi, in particular, needs to comprehend that no country became successful by trying to spend its way to prosperity through populist welfare programs. Food inflation would not be hurting as much today if we had reformed agriculture. Black money would be far less if we had reformed the real estate sector. People would be less angry if the UPA government had fulfilled its promise to make the bureaucracy more accountable through administrative reforms.

What politicians of all parties need to understand is that the newly emerged middle class, having attained hard fought dignity, will no longer allow itself to be humiliated by public officials as in the pre-reform decades of the Licence Raj. It sees today a dramatic contrast between its own private life of accountability—if you don’t perform, you lose your job--and the public life where you are rewarded even if you don’t perform or are corrupt. It just won’t put up with it. Since its voice is not heard in Parliament, it expresses itself in the only way it can, through rage on television night after night. Rising expectations are creating pressures on leaders and these could either undermine the political system or be a transformative force for the good. Bourgeois dignity is the key to an Indian puzzle.

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Sunday, June 12, 2011

Judging sex, lies, war and yoga politics

Human beings are flawed animals with plenty of good and bad in them. They are also addicted to judging each other. During the past month there has been plenty of high moralizing about the world’s most powerful leaders. But in most cases the judgements have often been flawed as I will show in the cases of Dominique Strauss Kahn, Osama bin Laden, Rajat Gupta and Baba Ram Dev

Throughout human history when a servant or someone of low status accused a powerful person of rape, she was ignored. This is why the arrest in New York of Dominique Strauss Kahn (DSK), the former head of the International Monetary Fund and a contender for the presidency of France, has exhilarated the world. The trial will soon decide if DSK is guilty of sexual assault. In the meantime, there is victory in the fact that the maid was given the respect she deserved when New York’s police took her accusations seriously and arrested a very powerful and wealthy man.

The mistake people made in judging DSK was to confuse his womanizing with sexual assault. It was as wrong as the idea still prevailing in India that a loose women cannot be raped. There is huge difference between consensual and forced sex, and a woman's right to say “no” is not diminished by the number of times she may have said “yes” in the past. In fact, DSK’s ability to find willing partners makes him an unlikely rapist. Only one historical allegation matters--Tristane Banon’s claim that he sexually assaulted her and tried to rape her during an interview in 2002. In the eyes of the law there is no difference between raping a prostitute or a virgin. A husband who forces his wife to have sex also commits a crime; a married woman who has an affair does not.

A second example: Osama Bin Laden’s death hopefully has buried the demons of 9/11 in the American mind, bringing to a close what Americans have mistakenly called ‘the bin Laden decade’. A hundred years from now historians will remember the first decade of the 21st century for the rise of China and India, not bin Laden. Islamic terror is a doomed ideology. Human beings prefer peace to war. Parents want children to go to school, get a job, and look after them in their old age. True, there is a desire for recognition— to be somebody, not a nobody. Greeks called this thymos, and this desire was satisfied in the past by becoming a ‘war hero’. But today’s young prefer to become CEOs, cricket heroes, or film stars. Islamist warriors, I reckon, will eventually succumb to the consumerist middle class life.

Americans can learn something from India which has also suffered from Islamist terror. George W. Bush proclaimed he had ‘moral clarity’ after 9/11, and so he invaded Iraq. India’s political leadership, on the other hand, was accused of being cowardly after 26/11. The truth is that India behaved sensibly and maturely. It did not become paranoid over terror like the Americans. After each attack, India shrugged its shoulders, quietly improved its security systems, and remained focused on its economic destiny.

My third example: people across India admire Baba Ram Dev, who has brought yoga and healthy living to millions. But his solid achievements do not give him permission to blackmail the government via a fast unto death (FUD). Everyone sympathises with his ends but not his means. Peaceful protest is acceptable in a democracy but FUDs are dangerous and authoritarian. With his resources and his acumen, Baba Ram Dev could achieve tremendous results by working within the rule of law.

A final example: Rajat Gupta was the toast of the world’s corporate elite. He had been head of McKinsey, and was director American Airlines, Procter & Gamble, and Goldman Sachs--a rare executive whose integrity was beyond reproach. But a tape of his voice, divulging secret details of a Goldman board meeting to a convicted hedge fund manager brought about his fall. Why does a man, who had everything, do something so dreadful? I can only speculate: he was well off but not wealthy like his friends. In coveting wealth, he forgot that he was a professional executive (a guardian of wealth, a kshatriya) not an owner of wealth (a vaishya).

What these examples illustrate is that the moral life is anything but clear. DSK’s womanizing life-style is irrelevant to his crime. George W. Bush’s ‘moral clarity’ brought great suffering to the Iraqi people and diminished America’s prestige; India’s ‘cowardly’ response to terrorism turned out to be wiser. Baba Ram Dev’s admirers confuse means and ends. Rajat Gupta confused his role in life. The Mahabharata had the right idea— “dharma is sukshma, ‘ambiguous’”, says Bhishma. Hence, we ought to be cautious and humble before judging others.

Sunday, May 01, 2011

Good omens for rule of law in India

On April 8, the day before Anna Hazare broke his fast, I was in Cairo to present the ‘Indian model’ for Egypt's future. After the conference, a few of us wandered off to Tahrir Square, where a massive demonstration had broken out. Through a twist of fate, I found myself suddenly on the podium, offering good wishes to the 37,000 protesters from the people of Al Hind. In the next three minutes I tried to convey a lesson from India’s democracy: it is not elections, not liberty, not equality that finally matters; it is the rule of law. Corruption persists in India because the rule of law is weak.

That night at three am I woke up to the sound of gunfire. I thought they were bursting crackers. There was a knock, and my host whispered that the army had moved into Tahrir Square and I should be prepared to flee as my ‘three minutes of fame’ was posted on YouTube. Filled with fear, I quickly changed, picked up my laptop and passport, and waited. I must have fallen asleep because the next moment it was 7 o’clock and I was still alive. I saw a cloud of smoke above Tahrir Square and switched on the TV to learn that the army had left as quickly as it had come, leaving two dead.

I returned home much relieved. My Egyptian adventure made me view our own politics differently. Although I share Anna Hazare’s rage against corruption, I feel ambivalent. However, the arrogant grandees of the political class, who from their private jets and black SUVs, are trying to smear his anti-corruption movement have not understood the limited nature of political power in India.

India has always had a weak state and a strong society. Because political authority was either too distant or irrelevant to its daily life, we never allowed state power to be so concentrated, as in China, that it could reach deeply and change its basic social institutions. The type of despotic governments that emerged in China or Russia, which were able to divest the whole society of property and personal rights, have never existed in South Asia. Hence, India’s history is of relative political disunity while China’s is one of strong empires. Not surprisingly, India became a chaotic democracy after Independence. In the 1960s Gunnar Myrdal called it a ‘soft state’. Today, India seems to be rising from below, marching towards a modern, democratic and market-based future without too much help from the state. It is quite unlike China, whose success has been scripted from above by an amazing state that has built incredible infrastructure.

What is this society that has held India together for centuries? Jawaharlal Nehru defined it in three words: village, caste, and family. It consists of the over half a million autonomous, self sufficient villages; more than two thousand, hierarchical jatis or sub-castes; and the joint family. What is significant is not hierarchy, as most think, but the idea that the group is more important than the individual. India’s society is changing today with power shifting from traditional to the civil society, including media.

The Indian state evolved from a tribal society, and the tribal raja’s authority was limited by his kinsmen. The land did not belong to the king but to the clan families. Even when sovereign states emerged in the 6th c BC, like Magadha, the king’s power was limited by dharma or the law, and by the Brahmin who interpreted the law. The law did not spring from the king as it did in China, but was above the monarch who was meant to protect it. The Raja who violated dharma is called a mad dog in the Mahabharata, and it calls for a revolt against him.

A successful nation must have an effective state and society. A weak state tolerates corruption, creates uncertainty in peoples’ minds, and weakens the rule of law. People generally obey the law because they think that it is fair and applies to everyone equally. But if policemen, ministers, and judges can be bought, then people lose confidence in the rule of law.

The belated arrest of Suresh Kalmadi, the charging of Kanimozhi, and A. Raja already in jail—these are good omens for the future of the rule of law in India. It is now important to try and sentence the guilty speedily. The political class has stone-walled a Lok Pal bill for 40 years. Anna Hazare’s original version was hugely flawed but with persistence we will soon have an effective law. A Lok Pal bill is not a panacea but it is a big step in the right direction. Meanwhile, I feel grateful that India has come a long way. Unlike Egypt, I do not have to fear the army, nor Islamists high jacking our secular democracy.
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Sunday, March 06, 2011

It is immoral for us to slow growth

Chinese Premier Wen Jiabao said last Sunday that his country’s annual growth target has been lowered to seven percent for the next five years. He made this remark in an on-line chat with the nation. “We must no longer sacrifice the environment for the sake of rapid growth as that is unsustainable,” he said. He urged the government to shift its focus from GDP growth to the quality and benefits of growth.

Premier Wen’s statement comes in the wake of huge concerns in the West over the impact of China’s (and India’s) economic growth on the global environment. China's GDP growth reached 10.3 percent last year and is expected to be nine percent this year. Although he was talking to his netizens, Wen’s message was aimed at his critics in the West. His remarks appear to be eminently sensible--who could be against protecting nature? But is Premier Wen right to slow down the growth rate of a poor nation? I do not think so.

There is a saying that a woman can either be beautiful or faithful but not both. The proverb illustrates the human tendency to create mental boxes and fit people into them. Wen appears to have fallen into the ecological trap in believing that you can either have high growth or a clean environment. We too will soon be asked that if China is taking steps to lower its growth rate, why is India still obsessed with high growth? Indeed, the day after Wen’s online chat, India’s finance minister Pranab Mukherjee presented a road map in the Budget to achieve a 9% GDP growth rate, hoping that it might go higher.

The dichotomy between high growth and protecting the environment is false. A nation can grow rapidly and save its environment just as a woman can be both beautiful and faithful. The only sensible way to grow, in fact, is to make peace with nature and save the green-blue film on which life itself depends. But to ask a poor country to slow down its economic growth is immoral—it is to condemn its poor to penury. The past two hundred years teach us that the poor will only rise into the middle class unless there is growth. Growth creates jobs and wealth, which the government taxes and spends on roads, education and healthcare, and this enables the poor to rise. Indeed, 350 million Chinese and 225 million Indians have risen out of poverty in the past 25 years because of high growth.

Once upon a time I used to be a huge fan of the ecology movement, but I feel gloomy today. I am upset that so many fine projects have suffered from endless delay at the hands of activists. No one calculates the real cost of delay--the lost future of a starving child who does not realise a dream when a factory or power plant does not come up. The movement has evolved into an anti-science, anti-growth, secular religion. I shudder to think that if activists had been as zealous in the 1960s, they would have killed India’s ‘green revolution’, which multiplied our wheat and rice crop many times and succeeded in feeding 500 million additional mouths.

Meanwhile, bureaucrats and politicians have captured ecology and made it a lucrative business in India. Indeed, the prime minister complained in 2009, “Environmental clearances have become a new form of Licence Raj and corruption.” Hence, I was glad when a clean, modern minister came in 2009. But my optimism soured quickly when he turned activist and began to re-open major projects, such as Niyamgiri, Lavasa and POSCO, and proceeded to “make an example” of them. His arbitrariness resounded around the world and turned investors against India. The Reserve Bank reported recently that India’s foreign direct investment declined by 36% in the first half of 2010-11 primarily because of “environment policies in mining, integrated township projects and ports.” Of course, the environment ministry must ensure that projects meet standards, but it must do so by creating transparent institutions and not through arbitrary acts.

All of us must become sensitive to nature, especially with the rapid degradation of forest cover and global warming. But we must also be aware of the fundamentalist and irrational nature of the ecology movement, which is willing to sacrifice human opportunities to preserving nature. Environmentalists have nostalgia for vanishing, old lifestyles and refuse to admit that their earlier Malthusian predictions were wrong. Despite massive population growth, people around the world are better off today, and as prosperity and education spreads, population growth has begun to slow down in most countries. Obviously, we have to protect nature, but if it does come to a choice, human beings, I think, must precede nature. To believe the contrary is not only elitist but also immoral.

Friday, March 04, 2011

Politics of freebies promises a bleak future

The stench of corruption spreads quickly from Delhi. With the news that Tamilnadu chief minister’s daughter, Kanimozhi, is soon to be charged by the CBI, the money trail in Raja’s 2G scam seems to be established. The noose is tightening and DMK’s PR machine is working overtime to spread ‘sincere lies’ before the state election on April 13. Each of the major parties--the DMK and the AIDMK--commands the loyalty of about a third of the voters. The Congress, DMK’s junior partner, controls 12% to 15% of the vote and Vijaykanth, AIDMK’s partner, holds around 9%. The AIDMK has the anti-incumbency advantage but it will be a close contest. What should concern us, however, is another form of corruption raging under the bright Tamil sun that challenges our political morality.

The DMK believes it won the last election because it promised free television sets. To promise is one thing but the DMK government actually gave away millions of TVs! The sets were paid for from the state treasury--not party funds. In the coming election, voters are being promised fans, mixies, laptop computers, and 4 gm of gold for a poor bride’s mangalsutra. Tax payers in Tamilnadu are outraged but Kanimozhi asks, ‘what is wrong in giving people what they need?’ People wonder, however, if free TVs have a link to DMK owning a Tamil TV channel. Some greedily ask, will the next politician offer Rs one lakh cash?

It is not that Tamils don’t value integrity. They just don’t expect it from their politicians. They cynically believe that politics is the art of the sincere lie and cite the example of Dhritarashtra in the Mahabharata, who flourished through hypocrisy and nepotism. Chennai is not so different from Hastinapur and Tamil voters would prefer to be bribed openly. Populist give-aways have always been a great temptation. Roman politicians devised a plan in 140 B.C. to win votes of the poor by giving away cheap food and entertainment—they called it ‘bread and circuses’. Punjab’s politicians gave away free power and water to farmers, which destroyed the state’s finances and also the soil (as farmers over-pumped water). Hence, Haryana has supplanted Punjab as the nation’s leader in per capita income.

The idea of free TVs and mixies is morally troubling. The election commissioner has pleaded helplessness, saying that freebies only contravene the law when they are distributed before an election. Most of us do accept state spending on public goods. Roads, parks, and schools are examples of public goods as they are open to everyone. However, spending public money on private goods (such as TVs) seems offensive. It is legitimate for the state to equip schools and public libraries with computers but not to give free laptops to a section of the people. It is just as wrong to erect statues to oneself with public funds. But the Supreme Court has ruled otherwise. It has recently absolved Mayawati, arguing that the people of U.P. had elected her and can remove her at the next election if they object to her statues. There is a fine but important line between public and private goods.

Nothing quite explains Indian politics as the fact that we embraced democracy before capitalism. The rest of the world did it the other way around. India became a full fledged democracy in 1950 with universal suffrage and extensive human rights, but it was not until 1991 that it opened up to the accountability of market forces. This curious historic inversion means that we learned about rights before we learned about duties. In the market place, one has to produce before one consumes and earn a salary before one can buy a TV. In the same way, an election is supposed to enforce accountability in competitive politics. A voter should vote on the basis of performance. Instead, the Tamil voter is going to vote for a free mixie. Because democracy came before capitalism, Indian politicians have a tendency to distribute the pie before it is baked.

It is ironic that Tamilnad should be the setting for this corrupt practice. The state has high literacy and a reputation for being one of India’s best governed and most prosperous. It has had a succession of good administrations no matter which party was in power. Food rations actually reach PDS shops and NREGA wages are actually paid to the deserving! With prosperity, Tamils have outsourced menial work and are now learning Hindi in order to speak to their Bihari servants. But political morality evolves through experience.

Free TVs mean less money for investing in the future--in roads, ports, and schools. Eventually Tamilnad will pay a price—for without investment, growth will slow down. Ask the voters of Punjab. One day, the Tamil voter will also understand the trade-off—free TVs mean that their children will have a poorer future.

Sunday, February 06, 2011

Is it Criminal to think small in India?

There are two spaces in the politics of India. And one of them is empty. The two spaces reflect the classic division between those who look ahead and aspire versus those who look back and complain. Our political parties cater to the second--to the victim in us through their politics of grievance. The present gridlock in the parliament is also symptom of the same dispirited politics—no party is sufficiently hungry for reform to break the logjam. No one reflects the spirit of a rapidly growing India. Nor is anyone thinking big--and it’s criminal to think small in India. Until the second space is filled, our politics will not be whole.

Congress appeals to the victim in the ‘aam admi’ with an ever expanding menu of job guarantees, food, gas and kerosene subsidies, and more. The BJP panders to the sufferer of historical Muslim misrule and to Congress’ minority vote-bank politics. Mayavati and caste parties focus on the historical injustice to Dalits and OBCs. The Shiv Sena gratifies the injured pride of the ‘Marathi manoos’. All of this is about the politics of grievance and injustice.

India, however, is changing dramatically. It is nothing short of a miracle that it has become the world’s second fastest growing economy in the midst of the most appalling governance. With high growth, mobility, and a demographic revolution of the young, Indians who aspire will soon overtake those who see themselves as victims. Pew surveys show that a majority of Indians believe that they are better off than their parents and that their children will do even better. The person who got the 750 millionth phone number last month was a village migrant whose dream keeps slipping as his calls keep dropping partly because A. Raja corruptly handed out the 2G spectrum. India’s 100 millionth internet user in 2013 will have information which only the most privileged could access twenty years ago. No one in India’s political life captures their hopes.

China’s politicians do a far better job. While we debate if growth is pro-poor, China talks about growing rich. It understands that performance is a function of expectations. Those with higher expectations get higher performance. China no longer thinks itself a Third World country—it is challenging America today. In India, only a few politicians-- Nitish Kumar, Sheila Dixit, and Narendra Modi--appeal to the aspirers. They speak the language of governance, roads and schools. But we need many more of them.

When I put this to a powerful Congress politician, he said that ‘India shining’ had died in the 2004 election. I gently reminded him that India’s high growth economy had delivered 300 million into the middle class; another 250 million had been lifted out of poverty since the 1980s. So, a total of 550 million aspirers are surely worth fighting over. ‘Ah, but there are still another 550 million whiners, and their votes are more reliable than the shiners!’ he said. If poverty were to magically disappear in India, the Congress party might lose its reason to exist.

Could the BJP become a party of aspiration? Vajpayee tried this when he unleashed the telecom and IT revolutions. His ‘India shining’ slogan did not lose the 2004 election—in fact, it was the defeat of key NDA allies in Andhra and Tamilnadu. But even he could not shed Hindutva. There is no one today in the BJP who has the courage and vision to discard the old baggage and convert it into a classical right of centre, secular party that stands single-mindedly for reforms and good governance.

Aspirational politics would tackle our problems differently. Take, for instance, food inflation. The politics of grievance applies short term bandages--it tries to catch hoarders, stops forward trading, forbids export of grains when the country has had a bumper rice harvest and expects a record wheat crop (while ignoring Rs 17,000 crores of grains rotting under the tarpaulins of FCI). The politics of aspiration would recapitalize and reform agriculture and raise long term supply—it would allow competition against FCI in the warehousing of food, permit foreign investment in retail to establish cold chains, and allow farmers to lease their lands in order to raise productivity.

Who will fill the empty space in Indian politics? None of our parties understands that we live in a time of revolutionary change. Could it be Rahul Gandhi? But so far he hasn’t given any hint that he thinks big. India has doubled its cotton crop in the past five years; yet there have also been suicides of farmers in the cotton growing areas. Both facts are correct. Rahul Gandhi has chosen to focus on suicides. The future, however, will be built by those who focus on the first, who think big and give young Indians a sense of limitless possibilities.

Sunday, January 02, 2011

Don’t be silent, prime minister!

“The things we admire in men, kindness and generosity, openness, honesty, understanding and feeling, are the concomitants of failure in our system. And those traits we detest, sharpness, greed, acquisitiveness, meanness, egotism and self-interest, are the traits of success. And while men admire the quality of the first they love the produce of the second.” In these famous lines, John Steinbeck, goes to the root of our present crisis in public morality.

He has also expressed the dilemma of every Indian mother who has to give a name to her son. Unlike the West, where everyone is called Tom, Dick or Harry, parents in India spend months trying to decide their child’s name--they are, after all, forecasting its future. Torn between names that suggest goodness and success, they prudently choose success, which explains why every fifth Indian boy is called Arjun, and no one Yudhishthir.

Mahabharata’s heroes come to mind because there are parallels between the epic’s lament and the things we might say about our leaders today. Our republic has been in a state of continuing crises for months; the epic is a continuing repository of crises in public morality. Just as we have a problem with our governance institutions, so did the epic. What is at stake, both then and now, is our conception of success. Andimuthu Raja, former Minister of Communications, causes us discomfort because he has undermined this conception. Until recently, Raja was a huge success in the world’s eyes—he had power, money and status. Then he fell. We turn to Yudhishthira, the epic’s un-hero, to find out if there another way of engaging with the world. He (and Steinbeck) raise thorny questions: What price are we are willing to pay for worldly success? Is it possible to be both successful and good? Why high status cannot be conferred on a person who is honest and kind?

The problem of silence is at the heart of today’s political crisis. The rage of the Indian public is over an honest Prime Minister who seems to be presiding over one of the most corrupt governments in recent Indian history. In these dark days, people have desperately wanted to clutch on to an honest man. They found one in selfless, ethical Manmohan Singh. So was Bhishma, yet he remained silent when Draupadi was being disrobed. When Draupadi insistently questioned the ‘dharma of the ruler’, everyone remained silent. Then Vidura scornfully spat out at the immorality of silence: when a crime occurs, he said, half the punishment goes to the guilty; a quarter to his ally; and another quarter falls on the silent.

Our prime minister’s silence in the 2G scandal has been deeply disturbing. Soon after Raja announced his fraudulent policy in September 2007, the PM sensed that a crime of huge proportions was afoot. He wrote to Raja objecting to his policy, asking him to be transparent. Raja replied immediately, defending himself. On 3 January 2008, the PM acknowledged this letter—yes, ‘acknowledged’, as though he had acquiesced. This gave Raja the go-ahead to issue the licenses. In May 2010, the PM admitted that Raja had indeed written to him. Why did the Prime Minister fall silent after having objected to the policy?

Raja has shamed us before the world. We, however, have always known the ugly truth: India’s corruption begins when one is born--you have to bribe someone to get a birth certificate. It ends when one dies, when you are forced to ‘buy’ a death certificate. In between lies a dreary life of civic unvirtue, of continuous rishwat and sifarish. Founded on such high ideals, why is India so corrupt? There is nothing wrong with our genes. And the issue that Yudhishthira and Steinbeck have raised is a universal problem. You cannot blame parents for wanting children to grow up to be winners in life’s rat race. But you can teach children to do the right thing--not to be silent when they see a crime. You can also reduce corruption by reform of the institutions of governance.

What makes Draupadi’s question admirable is her insistence on dharma. Huge energies are spent on debates between the political Left and the Right when the real divide is between right and wrong conduct. Manmohan Singh understands this. This is why he promised to attack corruption through governance reforms in 2004 when he came to power. Reforming is never easy—it is like waging a war at Kurukshetra—but it must be done. The purpose of the Mahabharata’s war, we discover at the epic’s end, was to cleanse the earth which was groaning under the accumulated iniquity of its rulers. Our own rulers should prepare for the same fate as befell the sons of Bharata, unless they act now. The rulers of France also lost the faith of their people and suffered that fate in 1789.