Gurcharan Das

A liberal but strong state is need of the hour

2012-01-08T14:18:00.000+05:30

The mistake is to think that the current paralysis in decision making in Delhi is limited to politicians. Gutless bureaucrats, risk averse at the best of times, have done as much damage. India’s economy has sound fundamentals and is today one of the world’s strongest, but its confidence has been badly shaken by a weak state that cannot enforce its own laws, let alone enact its legislative agenda. Partly to blame is the Anna Hazare movement which has led to contempt for state institutions. Around the world, the Left wants a large state and the Right wants a small one, but what India needs is a liberal but strong state that will, at least, implement its own laws.

The other mistake is to believe that the Indian state has weakened in the past two decades as a result of coalition politics. Truth is that India has always had a weak state and its history is a story of political disunity and warring kingdoms. Even our strongest empires were far weaker than say, the Qin Dynasty in China which built the Great Wall to keep out invaders. (That those invaders ended up in India in a chain reaction is another story.) The historian, Chris Bayly, describes how early European travellers to India were struck by the energy, colour and sophistication of the bazaar compared to the decadence of its rulers.Although historically weak, at Independence India inherited strong, robust institutions of the state—a professional police, bureaucracy, and judiciary. These are now in decay and the gap between ideals and reality has grown. It should not take seven years to build a road that takes two elsewhere; neither should it take 19 years to get justice; nor 23 years to build a dam. Poor governance and its cousin, corruption, are symptoms of a weak and soft state.

However, India has historically had a strong society, which prevented tyranny by the state. An Indian was defined by his village, caste and family, not by the state (as in China). The law—dharma--also emerged from society, not the state, and was later codified in Dharmashastras. But that old society is now changing. As Adam Smith predicted in The Wealth of Nations, the growth of markets would lead to a division of labour and new social groups would emerge. Open access to markets and job mobility would undermine traditional social authority, replacing it with more flexible, voluntary groups. Two decades of high growth is doing that and Anna’s movement reflects how it. The country is evolving from a traditional to a modern civil society. This is a positive thing for a modern democracy needs a vigorous civil society to keep it honest.

The past twenty years of capitalist growth have made India one of the world’s fastest growing economies. The contrast between a successful private economy and a weak, public order has led to the impression that India might be able to manage without a strong state. But markets do not work in a vacuum. They need a network of regulations and regulators to enforce them. In the past two decades good regulators have definitely contributed to India’s economic success. The telecom revolution was partly ushered by its first regulator (TRAI) under Justice S. S. Sodhi and B.K. Zutshi, who were strong enough to withstand pressures from the Telecom Department, which wanted to weaken private mobile companies. Stock exchanges have been strengthened by SEBI, the capital market regulator. The Reserve Bank’s oversight of banking has improved and matured. The insurance and pension regulators have also earned their spurs. On the other hand, power regulators in the centre and the states are mostly spineless, self-serving, retired babus, who have failed to implement Electricity Act 2003, and prevented a power revolution in India.

A ‘strong state’ usually carries a bad odour, conjuring up authoritarian images of Nazi Germany or Soviet Russia. A ‘liberal, strong state’ is, however, not oppressive. It is efficient, enabling and tough against law-breakers. It punishes the corrupt swiftly. But it also protects liberties and dissent and enjoys legitimacy among the governed. A strong civil society is needed to hold such a state accountable. More than ever, Indians today need to make a liberal case for such a strong state.

When democracy won but the people lost

2011-12-11T11:20:00.000+05:30

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.

Duty or revenge, no one is above the law

2011-10-09T14:48:00.000+05:30

On a sweltering afternoon on September 29^th 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.

A primer for the corruption fighter

2011-09-11T12:40:00.000+05:30

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.

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

2011-09-05T12:31:00.000+05:30

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."

Middle class gets back its dignity

2011-07-10T15:27:00.000+05:30

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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Judging sex, lies, war and yoga politics

2011-06-12T11:26:00.000+05:30

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.

Good omens for rule of law in India

2011-05-01T12:06:00.000+05:30

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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It is immoral for us to slow growth

2011-03-06T16:00:00.000+05:30

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.

Politics of freebies promises a bleak future

2011-03-04T15:34:00.000+05:30

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.

Is it Criminal to think small in India?

2011-02-06T14:48:00.000+05:30

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.

Don’t be silent, prime minister!

2011-01-02T18:18:00.000+05:30

“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.

Chance to start afresh

2010-12-26T18:16:00.000+05:30

There is a lesson in the morality play that we are witnessing today which has been triggered off by the 2G financial scandal. It comes from a scene in Malcolm Gladwell's recent collection of essays called What the Dog Saw, and I have condensed it below:

On the afternoon of October 23, 2006, Jeffrey Skilling sat at a table at the front of a federal courtroom in Houston, Texas, waiting to be sentenced by the judge. Mr. Skilling was no ordinary criminal. He was wearing a navy blue suit and a tie. Huddled around him were eight lawyers. Outside, television-satellite trucks were parked up and down the block. Skilling was head of the energy firm, Enron, that Fortune magazine had ranked among the “most admired” in the world and valued by the stock market as the seventh-largest corporation in the United States. It had collapsed five years ago, and in May, Skilling had been convicted by a jury for fraud, and almost everything he owned had been turned over to compensate former shareholders.

“We are here this afternoon,” Judge Simeon Lake began, “for sentencing in United States of America versus Jeffrey K. Skilling, Criminal Case Number H-04-25.” The judge asked Skilling to rise. He then sentenced him to 292 months in prison – twenty-four years, one of the heaviest sentences ever given for a white-collar crime. He would leave prison an old man, if he left prison at all.
“I only have one request, Your Honor,” said Daniel Petrocelli, Skilling's lawyer. “If he received ten fewer months, which shouldn't make a difference in terms of the goals of sentencing, if you do the math and you subtract fifteen percent for good time, he then qualifies under Bureau of Prison policies to serve his time at a lower facility. Just a ten-month reduction in sentence….” It was a plea for leniency. Skilling wasn't a murderer or a rapist. He was a pillar of the Houston community, and a small adjustment in his sentence would keep him from spending the rest of his life among hardened criminals. Judge Lake thought for a while, then he said “No”.

Indians are not unfamiliar with Enron. As a result of its involvement in the beleaguered power plant at Dabhol, the words ‘crony capitalism' entered our vocabulary in the 1990s. Unlike India, persons in high places in the United States serve time in jail. American judges are in the habit of meting out exemplary punishment, as Judge Lake did to Jeffrey Skilling of Enron. Indians would dearly like to substitute in the narrative above any number of names, although Andimuthu Raja, former Minister of Communications is the one that comes to our mind today.

Wasted rage?

As things stand in today's India, we investigate, charges are filed; we even establish guilt; but then years go by, and nothing happens. People lose interest. It would be a real shame if all the valuable rage we have accumulated over weeks in the 2G affair were to go waste. One way to ensure it does not happen is to actually put a few people behind bars this time and do it reasonably quickly. It would go a long way to restore our faith in the system.

In a recent opinion poll, 83.4 per cent of the people in eight major Indian cities believed that corruption had gone up after liberalisation, which only confirms that people still do not understand that corruption persists in India because reforms are incomplete and scams occur in sectors like mining and real estate, which have not yet been reformed. That it occurred in telecom, an otherwise reformed sector, does come as a surprise. It has happened because the minister created artificial scarcity in the spectrum and gave it away in driblets to those who allegedly bribed him. The scam could have been avoided if the licenses were awarded via open, transparent bidding on the Internet, as in the case of the 3G spectrum.

The 2G scandal should also remind us about the real corruption of India which does not make the headlines. The ordinary, small and medium entrepreneur still faces on the average 27 inspectors who have the power to close his factory unless he pays a bribe. The most notorious are those in the excise, sales, and the income tax departments. Of course, for every bribe-taker there is a bribe-giver, who is also guilty of wrongdoing. But remember, it is an unequal relationship. The citizen is always vulnerable before a person in authority. The official holds the threat of closing a citizen's enterprise. A few states have tried to rein in petty officials but mostly they run amok, rapaciously. Hence, many young, honest men and women today shy away from becoming entrepreneurs. The ‘inspector raj' is one of the reasons that India has failed to create an industrial revolution.

Beginning of accountability

Returning to the big picture, it is a matter of some cheer that in recent months ministers have been sacked, serious inquiries have begun, individuals have been arrested. We are also heartened by Nitish Kumar's huge victory in the Bihar elections, which he claims was the result of good governance. We would like to believe that this is a turning point in our history, the beginning of some sort of accountability in our public life. It is sobering to remember, however, that we said the same thing in 1989 when Rajiv Gandhi's Congress-led government was defeated after the Bofors gun scandal when the Prime Minister's family and friends were allegedly involved in bribes and kickbacks.

We ought to take inspiration from the United States not only because it punishes guilty persons in high places as Judge Lake did in the narrative above, but it enforces its Foreign Corrupt Practices Act (FCPA) vigorously. If any of the telecom licensees in the 2G scam had been American companies—for example, AT&T-- India would have quickly found its smoking gun. Ten years ago, America's Justice Department was investigating 5 to 10 companies involving foreign bribery at any given time; today, it is 150. Under American inspiration, Britain just passed a new Bribery Act, which is even tougher than the U.S. law. To ensure that companies don't simply consider FCPA fines as a “cost of doing business,” the U.S. attempts to jail corporate officials, both American and foreign.

The rage of the Indian public would be redeemed not only by jailing a few people but also by instituting reforms in the system similar to the American FCPA. Only then will some of the taint go away from an honest Prime Minister who seems to be presiding over one of the most corrupt governments in recent Indian history.

Licence raj could kill microcredit

2010-12-05T14:03:00.000+05:30

Although human life is less than the blink of an eyelid interms of the universe, it is staggering what it is able to create. Thirty million (yes, three crore!) poor women in Indian villages have taken small loans and started enterprises. With the loan they buy a cow to sell milk, or invest in a sewing machine to sell clothes or open a small kirana shop. What began as charity work by NGOs has become self-sustaining business, thanks to the entry of professional microfinance companies (MFIs) who are gradually replacing the village moneylender. In many districts, micro-credit is as common as a cell phone or a paan-walla. It has given women dignity, many of whom display the same intelligence and drive as our best entrepreneurs in Bangalore. It is financial inclusion at its best.

Success, however, creates envy as the Pandavas discovered in the Mahabharata. The problem began in October when politicians in Andhra Pradesh accused microfinance companies of loan sharking and causing suicides. They called for interest rate controls and told women to stop repaying loans. The police began to imprison MFI employees. The state issued an ordinance that requires MFIs to obtain government permission for each loan, which means that 1.3 crore tiny loans in Andhra villages will require prior approval—an impossible task, reminiscent of the dreaded licence raj and a clear invitation to bribery. Meanwhile, a credit culture of weekly repayments built over a decade is destroyed. Banks, fearing default, have stopped lending to MFIs, and this miraculous business is about to close, thus killing the hopes of three crore micro-entrepreneurs.

Microfinance companies charge 24% to 32% interest, which appears high until you realize that we too pay 30% on our credit cards and village money lenders charge 65% to 100%. Even the Nobel Prize winning Muhummad Yunus’ Grameen Bank charges 20% interest (based on subsided credit). The truth is that it is expensive to deliver and collect loans weekly in rural areas. Customers do not think it high because they earn far more from the businesses they start with their loans. Success invites rogues and some loan sharks have disguised themselves as MFIs (with names like ‘Vessel under the Borewell’) and are giving the industry a bad name by using strong arm collection tactics. Suicides are, of course, a terrible tragedy. But it is extremely unlikely that suicides could have been caused suddenly by professional MFIs who have built trust with customers over a decade. If rogue MFIs are responsible, they should be punished. Why kill the ethical ones through Licence Raj?

Officials want to shut this business because it threatens the government’s microfinance company which gives subsidized loans at only 3%. But women prefer private MFI loans because they say you need to bribe to get a government loan. And when you add the cost of multiple trips to the city and the bribe, the government loan ends up costing over 40%. The private MFI delivers the loan at the doorstep every seven days. Although official’s claim that women are being duped, we all know that a poor person is far more aware of every paisa she earns and spends.

Politicians had so far ignored MFIs, but the successful public stock offering (IPO) of one of the microfinance companies woke them up. If MFIs were making good money, why couldn’t they have a slice? They colluded with officials to announce a harsh ordinance that has brought the entire micro-lending industry to its knees. Since it is a matter of survival, they are waiting for MFIs to come running to them with bribes.

Microfinance should be regulated, but in an intelligent manner. MFIs should be transparent and be obliged to disclose interest rates. Competition should be encouraged—it will lead to lower rates. Rogue MFIs should be caught and punished. Imposing caps and harsh interest rates controls will destroy the industry as it did in Tunisia and Columbia. Countries that had tried to control loan rates have invariably killed their microfinance business for industry margins are thin. Our regulators should learn from countries like Peru, which has imposed capital buffers, and this has led to a stable environment.

This astonishing story reminds us that the poor do not need charity but opportunity. Just when microfinance’s success is inspiring other businessmen to seek a ‘fortune at the bottom of the pyramid’, such as Tata’s Nano, its own death would be a tragic loss. Crores of women would be thrown into the money lender’s clutches. Andhra’s image will also take a beating. Until recently, Andhra was hailed for pioneering this industry. An international official was heard to say recently, ‘corrupt officials and politicians of Andhra are about to kill the chances of the poor’. The new Chief Minister of Andhra, Kiran Kumar, should now step in and not allow this to happen.

In search of America’s liberty and India’s dharma

2010-11-14T17:53:00.000+05:30

It is one thing to win power, another to wield it. Two dispirited leaders met in Delhi this week. President Obama was chastened by dramatic electoral losses in the US Congress and Prime Minister Manmohan Singh disheartened by never ending corruption scandals. Both seemed to have forgotten the fundamentals of what created their respective democracies. Just as one cannot understand America without the concept of liberty, so is India inexplicable without the idea of dharma. At the end, their spirits did lift but both leaders have much work to do to restore confidence in their ideals.

John Boehner, the new speaker-to-be of the House of Representatives and an architect of the Republican recapture of power, explained Mr Obama’s fall from grace. He said that President Obama had ‘ignored the values that have made America—economic freedom, individual liberty and personal responsibility’. It does not matter if Mr Boehner is right; half of America believes it. Every nation is an ‘imagined community’ and what voters ‘imagine’ is what counts. America’s image of itself is a land of opportunity and entrepreneurship—it is not a European style welfare state with a culture of entitlement. Mr Obama forgot liberty in is his pursuit of equality, say his critics.

Just as America’s founding fathers were obsessed with liberty, so were India’s founders deeply attached to dharma--so much so that they placed the dharma-chakra in the middle of the Indian flag. The Congress party still does not realize how much it is diminished by the relentless series of corruption scandals. People insistently ask, ‘where is dharma in our public life?’ This is a sad because we placed so much hope in a prime minister, who is personally honest and who promised good governance as his primary goal in his first three major speeches when the UPA first came to power in the middle of 2004.

The ideal that exists in the Indian imagination is of a ruler guided by ‘dharma’. In this context, dharma does not mean ‘religion’, which is a recent usage that emerged only in the 19th century Bengal when Christian missionaries claimed that ‘Jesus’ path was the true dharma’. Hindus countered their challenge, claiming that theirs is sanatana, ‘eternal’, dharma. The meaning of public dharma which inspired the makers of our Constitution is ‘doing the right thing’.

Although the economic circumstances of India and America are different, the answers to their problems are surprisingly similar. America is a rich country which is stuck in a jobless recovery--wages have been lagging for decades. Its best and brightest prefer to work in services and its industrial base is fast eroding. India is poor but rising rapidly. Like America, its high growth rate is driven by services, not by industry. In our euphoria over India’s growth we forget that we still have to create an ‘industrial revolution’. Only through low tech, labour intensive industry will we be able to create jobs for the rural masses.
Both India and America have to get their best and brightest to go into industry rather than glamour jobs in finance.

Instead of creating bogus jobs through employment guarantee schemes, India needs to create genuine jobs through private enterprise. To do this we need to reform our labour laws; pass the land acquisition law; remove ‘inspector raj’ which encourages bribery but discourages entrepreneurs; and push massive skills training through public private partnerships. Our present high growth will only take us to a middle income status--$5000-$7000 per capita income. After that India will get stuck like many Latin American states, unless we improve governance and create an industrial revolution. ‘Let us not take high growth for granted’, says the respected economist, Ajay Shah.

India should also emulate Mr Obama’s obsession to improve the ‘quality’ of primary education in order to build our industrial base. He is the first Democratic president to say that ‘bad teachers should be fired if they can’t train kids to succeed’. India’s problem with government schools is much worse than America’s. One in four government primary school teachers here is absent and one in four is not teaching. Yet, our new Right to Education Act is silent on outcomes. Mr Obama’s courage to take on teachers’ unions in America should inspire our leaders to also speak out about the ‘dharma of a teacher’.
Mr Obama’s visit ended on a high note and two politicians have since been sacked. The real work must now begin. To restore dharma in public life, Dr Manmohan Singh must drop corrupt members in the UPA cabinet; push civil service reforms to make officials (including school teachers) accountable; enact labour reforms and the land acquisition bill; stop the dangerous Food Security Bill, which holds the potential for becoming the biggest corruption scandal in India’s history. Only then will he begin to restore dharma and make India deserving of ‘great power’ status.

Urban Longings

2010-10-28T12:50:00.000+05:30

No son of a peasant ever wants to be a peasant. This is an old truth going back to when the first city appeared on the earth 10,000 years ago. A farmer yearns to live in a city and be called a ‘citizen’. From the word ‘city’ also comes ‘civic’ and ‘civilized’. A civilized person is supposed to show concern for his fellow citizens; and from this act of civic kindness is born ‘civilisation’. The city loosens the barriers of prejudice—of caste, religion, and feudal status--and this is why every peasant wants to part of the urban proletariat.

The city emerged in history when a farmer first discovered that he could exchange his surplus grain with something that his neighbours possessed. He stood at a trading post. Soon a bania came along. He bought the grain, opened a shop, and a bazaar was born. With surplus food, everyone did not have to toil for food—they could buy it. Thus arrived brahmins, barbers, charioteers, poets, and prostitutes--all the grand occupations and services that could be exchanged for food. So, the city came into being from banias and bazaars.

It is fantastic to the point of madness that the same city today is an urban agglomeration of 20 million inhabitants, the size of Mumbai and Delhi. Mumbai is larger than the population of 150 countries and 17 states in India and India has 25 of the world's 100-fastest growing urban areas. Half the world’s population, 3.3 billion, already lives in cities, and this will only go up. With our average farm size down to 1.4 hectares—so tiny, it is difficult to make a living—urbanization is inevitable. Already crowded, noisy, polluted and violent, the city overwhelms us with its alienating ugliness. If the Indian city is a dictionary of filth, fear, and loathing, as our newspapers remind us daily, why do so many of us choose to live in it? I shall attempt to answer this question in this essay.

Ever since its birth, the city has exercised a mesmerizing hold on the human imagination. It exists not only as brick and mortar, but also in the mind. The city is a woman who beckons but does not yield her secrets easily. It offers the promise of hope, a place to realize one’s talents and capabilities, to experience the cosmopolitan without the need of a passport. Filled with desire, fantasy and pleasure, especially in the way it catches the imaginative lives of women, their stories, their dreams and loves, the city is the ‘sinuous gait of a beautiful woman’ as Baudelaire once expressed with delight.

The city, however, also exploits and oppresses human beings, and Charles Dickens captured this so well in 19th century England. Dickens resonates with us in India today because his novels deal with an urban reality that is ours—crime, beggars, crowds, pollution, and poverty, all this existing side by side with great wealth. Yet to a new migrant from Bihar, Mumbai is an ‘amazing place’, as David Copperfield said of London when he saw it for the first time. Urban India today is at the same stage of capitalist development as Dickens’ London.

Ugly concrete blocks, decked out in tinted glass and neon-bright colours, are slowly taking the place of old tiled village houses. Commercial streets are noisy and suffer from unregulated construction. Our urban ills are the result of outdated building codes, poorly defined lines of municipal authority. It is the same sordid tale of bad, unreformed laws, corrupt bureaucrats and builders, and a government that is ‘far too big for the little things and too small for the big things’. Add to this the general pressures of development and urbanization in a rapidly growing country. These are formidable obstacles.

Because of the harsh, ugly reality of urban squalor, we try to escape in pastoral dreams of the countryside. Mahatma Gandhi, a man of the city, had such a romantic view before B.R. Ambedkar, corrected him: ‘What is the village but a sink of localism, a den of ignorance, narrow-mindedness and communalism?’ Those of us who cannot escape to the country, dream of shady parks and tree-lined boulevards, kindly public squares, and understated commercial development. Some of it is a reaction to the rational modernism of Le Corbusier, who said notoriously that a house is a ‘machine to live in’. He designed only one city, Chandigarh, but he had great influence on urban planning in the years after World War II. His alienating urban towers for the poor are now discredited. They became the new slums after years of poor upkeep. The nadir was reached in the dynamiting of the failed Pruitt-Igoe high rise housing in St Louis in 1972.

In India too there is a reaction. Cities like Chandigrah and Gandhinagar are considered a mistake. Sensible urban planners humanely place the urban poor and our informal economy at the centre of their thinking. Walkability is their first thought when designing a road. Ranjit Sabhiki celebrates the 116 urban villages of Delhi, which have acted like a safety valve, where migrants have a found a room of their own and created businesses with an indomitable entrepreneurial spirit. These villages have prevented Delhi from creating slums like Mumbai. Yet the movie, Slumdog Millionaire, teaches us about a certain humanity in the slum. Mumbai is more humane than Delhi because it had its origins in commerce--buying and selling teach you interdependence and civility. But Mumbai’s superior public culture is also due to its better transport system. Now with the Metro, Delhi has a chance to change its public culture. Rubbing shoulders with fellow citizens in the Metro could build empathy and respect and bring about a civic revolution in an unkind city.

Our other great hope is the Jawaharlal Nehru National Urban Renewal Mission, which has already begun to affect positive changes in some of our cities. It is making important choices in favour of public transport, sustainability, walkability and urban governance. Let us not delude ourselves. Urbanization is inevitable and no country achieved prosperity without it. Cities concentrate poverty but are they also offer the hope for escaping from it. For me, the city is irresistible. It is the turmoil of human freedom as I watch the river of life flow past in full majesty in a crowded bazaar. My hero is the statesman, Pericles, who gave the best reason why he fell in love with the city of Athens: it was because its democratic freedom awakened in its citizens’ hearts the sentiment of man’s humanity to man.
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The Next Battleground

2010-10-17T13:09:00.000+05:30

Book review for The Wall Street Journal, Saturday Oct 16, 2010
by Gurcharan Das

Robert D. Kaplan, Monsoon: The Indian Ocean and the Future of American Power, Hardcover, price $28, 384 pages, Random House, 2010

We have come to accept that the 500-year domination of Asia by the West is coming to an end and that the balance of power in the 21st century will rest on the fortunes of China, India and the United States. In “Monsoon,” Robert D. Kaplan goes further, suggesting that it is in the Indian Ocean where history will be made and where the global struggle for democracy, energy, religion and security will be waged.

Mr. Kaplan, whose books include “Balkan Ghosts” and “Warrior Politics,” has a gift for geopolitical imagination. Maps do matter, he feels, and the right map can stimulate thinking about the future of the world. To understand the 20th century, it was important to understand the map of Europe. When it comes to the 21st century, however, Americans are at a disadvantage because of an inherent bias in their mapping convention: Since the 16th century, when Flemish cartographer Gerardus Mercator developed a method of showing the globe as a flattened surface, Mercator projections have tended to place the Western Hemisphere in the middle of the map, splitting the Indian Ocean at its far edges. Yet the Indian Ocean encompasses a quarter of the world’s surface and is home to half of the world’s shipping-container traffic.

From the Horn of Africa, the Indian Ocean stretches past the tense arc of Islam—with its tinderboxes of Somalia, Yemen, Iran and Pakistan—past the Indian subcontinent all the way to the Indonesian archipelago. The Indian Ocean will be the vital geography, says Mr. Kaplan, where the rivalry between China and India will play out, and where America’s future as a great power depends on its ability to command a place on this new center stage of history.

Hovering over the book is a familiar question: Will the 21st century be defined by wars of identity, in particular the clash of fundamentalist Islam with others, or will it be a story of a largely peaceful, economic rise of India, China and other nations in Asia and Africa? Mr. Kaplan believes in the more optimistic scenario. The message of “Monsoon” is that the economic impulse is likely to prevail and in the long run even the more extreme Islamic nations will turn middle class. Al-Jazeera, the Middle Eastern television network, is symbolic of this bourgeois Islam.

The best thing that the U.S. can do, Mr. Kaplan says, is to continue to protect the vital trade routes of the Indian Ocean for the benefit of all, in alliance with the navies of the new powers of the Indian Ocean world. But America will have to shift its obsession with al Qaeda in order to be perceived as “legitimate” by the new, insecure middle classes of Asia, and learn to project its soft power.

To this end, according to Mr. Kaplan, the U.S. can learn something from India, whose soft power is admired around the world. The country is perceived by many as a pluralistic, democratic, nonviolent land of the ideals of Buddha, Gandhi and Tagore, ruled by the righteous principles of dharma during the best periods of its history—of the emperor Akbar in the 16th century, for example, and Ashoka in the third century B.C. This perception may explain why India’s rise does not stir uneasiness in the same way that China’s does. America too is a land of ideals, of course, but the world tends to forget that and needs to be reminded.

“Monsoon” rests on the premise that the Indian Ocean is “more than just a geographic feature, it is also an idea.” I am not persuaded. Just as I am not persuaded that Asia is an “idea” in the sense that the West is. I have trouble imagining what people mean when they say that the 21st century will be an era of Asian dominance. It makes sense to talk about the rise of India and China, but Asia is too diverse with too many cultures, nations and religions—and it is too disunited. Yes, there have been rich, historical connections between Asian countries based on trade, diplomacy and Buddhism, but that is insufficient to support Asia as an “idea.” This is a landmass, after all, that stretches from the Near East to the Far, across seven time zones and half the world’s latitudes.

For the 21st century to be a peaceful era, Mr. Kaplan suggests, China, India and America should look to history for inspiration. The Indian Ocean was a trading cosmopolis before the Portuguese arrived in the late 15th century, an oceangoing marketplace where Indian, Chinese, Arab and Persian traders were brought close by the monsoon winds to create a grand network of communal ties. Such comity will be hard to duplicate as India and China grow more powerful and their interest in dominating the Indian Ocean increases accordingly. It should be noted that the navies of China and India will soon rank second and third in the world, trailing only the U.S.

India fears encirclement by China, and India’s other neighbors are increasingly uneasy about Beijing’s swelling power and assertiveness. Amid these worries, many Asian countries still look to America as the only credible guarantor of security in the Indian Ocean.

Mr. Kaplan offers plenty of striking insights in “Monsoon,” and his analysis generally makes sense—but I nonetheless have trouble believing that the future of the 21st century will hinge on naval power. Military ships these days seemed designed more for intimidation and transport than for all-out naval warfare—they’re sitting ducks for sophisticated rocketry.

When it comes to the contest between India and China, I do not believe it will be decided either by arms or economic strength. Both countries will soon become prosperous and middle class. The race will be won by India if it fixes its governance before China fixes its politics; or by China if it finds a way to give its people liberty before India reforms its institutions of the state--bureaucracy, police, and judiciary.

Mr. Das is the author of “The Difficulty of Being Good: On the Subtle Art of Dharma.” (Oxford University Press, 2010).

Good politics is about prudence, not moral perfection

2010-10-17T13:08:00.000+05:30

Two weeks have gone by since the Allahabad High Court pronounced a historic verdict on a property dispute that seems to go back at least five hundred years. The verdict says less about the law and more about our country which is remarkable for the extraordinary continuity of its traditions rather than their antiquity. We live at the same time in the first, the eleventh and the twenty-first centuries, and the court’s judgment has upheld this continuity and simultaneity of our historical lives. The verdict has ensured communal harmony but do we have reasons to worry that it might encourage demolition of other mosques on sites where there were pre-existing temples?

Nothing is quite perfect in the world and certainly not human beings. Well-meaning legal and secular fundamentalists, who have criticised this judgment, seek moral perfection in a pragmatic nation. Both Hindus and Muslims worshipped inside the 2.77 acre compound of the Babri Masjid--at least since the 19th century. This peaceful practice was disrupted in 1949 when someone placed idols of Ram inside the mosque as a political act. The judgment of the High Court has restored the plural situation which existed before this political act. Court verdicts are inevitably political but the best ones have kept us united and democratic. This verdict is a good example of prudence, the chief virtue of rulers according to Edmund Burke, because prudence eschews perfection.

Whether Ram was born in a particular spot is of little significance to me and given a choice I would have built a park on this disputed property. However, I respect the deep meaning it holds for others. The High Court judges have also shown consideration for this ideal of public dharma, which in fact gave birth to the Indian republic. India’s founding fathers came to this ideal from different inspirations--Gandhi from the Gita; Nehru from the deeds of Emperor Asoka, and Ambedkar from the Buddha. Such was the importance of this ideal that they placed it at the centre of the Indian flag as dharmachakra, the wheel of dharma. India cannot be understood without dharma, just as France cannot be comprehended without “égalité” nor America without “liberty”.

The good Vidura says in the Mahabharata that in judging a ruler’s actions he looks to the results. If it benefits the people, it is an act of dharma; if it harms them then it is adharma. This is also the spirit behind the pragmatic verdict of the High Court. Unlike Yudhishthira, Vidura would agree to ‘sacrifice an individual for the sake of a village and a village for the sake of a nation’. Vidura is half brother and royal counsellor to the king of Hastinapur and he speaks from the experience of managing a state. In agreeing to sacrifice a person in order to save many, he has drawn a distinction between public and private dharma. The English thinker, Jeremy Bentham, went on to make this criterion famous in the 19th century via his Utilitarian slogan—‘the greatest good of the greatest number’.

Conquerors have come and gone in all countries. Each conqueror razed old monuments to build new ones. Christian shrines came up on pagan temples of Rome and Greece. Muslim conquerors built mosques on Hindu temples just as Hindus and Buddhist fought over their sacred spaces. It is the way of the world. We not unique and we should be relaxed about our history. Since some people are not, this historic judgment has prudently revisited history in order to close it without opening new wounds. It acknowledges the birthplace of Ram without holding anyone responsible for the destruction of a temple or a mosque.

The reaction of people has been mature, which is not surprising at a time of galloping economic growth and rapid change in our society. Indians have moved on--we are not less religious, but we care about other things now and have less appetite for the politics of religion. We are more self-confident and optimistic. For these reasons this verdict will not encourage demolition of other mosques, as some believe. The young, especially, have moved away from the politics of Ayodhya, which is a cautionary warning to the BJP about Hindutva’s relevance. It too should move on to more relevant concerns such as governance. There are more votes in promising judicial, administrative, and police reforms.

This is an important judgment for modern India and the people have responded in a mature and wise manner. By appealing to the subtle, pragmatic, and ancient art of dharma, it is a very Indian verdict. Those who have criticised it seek rational solutions when the vast majority of Indians are driven by belief. The High Court has wisely reclaimed the ancient ideal of public dharma, which is happily the proud foundation stone of our Republic.

Don’t close these schools

2010-09-20T12:54:00.000+05:30

The summer of 2010 will be remembered by many Mandal Education Officers in Andhra as a particularly lucrative one. Emboldened by the new Right to Education Act, they swooped down on unsuspecting schools in the slums and villages of Andhra Pradesh in order to shut them down. By June end they had created so much fear and terror among poor parents that the Secretary of Education of the state government had to clarify that the new law gives unrecognized schools three years to gain recognition and will not be closed immediately. By then corrupt officials of the state bureaucracy had achieved their objective. Bribes had tripled and one official even boasted that he may not have done as well as at the Commonwealth Games, but it had been one his best months.

India must be unique in the world for wanting to close down schools that serve the poor. What would be admired elsewhere as an example of entrepreneurial initiative (or jugaad as we say) is illegal here. These schools typically charge fees of Rs 100 to 250 per month but do not get recognition because they fail to meet all the standards—for example, they don’t have a large enough playing field or they cannot pay the minimum government teacher salary of Rs 20,000 a month. In order to comply with standards, they would have raise fees to Rs 1200, and then the poor would not be able to afford them.

Why should a parent spend hard earned money on fees when her child could go for free to a government school plus get a mid-day meal? The reason is that one in four government primary teachers is illegally absent on any day and one in four who is present is not teaching. This disgraceful lack of accountability is obvious to the poorest parent. A low cost private school may not be much but at least the teacher shows up and is motivated. Hence, more than half the children in urban India are now in private schools and a quarter in rural areas. This migration is so rapid that Jean Dreze predicts that government schools will soon become ‘ghost schools’.

To want to close down institutions that genuinely serve the needs of the poor seems bizarre and immoral. Their critics dismiss these schools as being of very poor quality and claim that the poor are being ‘duped by unscrupulous elements’. But what about the even poorer quality of government schools that drives parents to these schools in the first place? No one knows quite how many unrecognized schools exist in India but estimates are in the lakhs. It is hard to believe that millions of parents are capable of being ‘duped’ year after year. While sending its own children to private schools, the establishment stridently opposes a similar choice for the poor. Of the twenty million employees of the state, hardly any send their children to government schools (except to elite Central or Navodhya schools).

The Right to Education Act is a landmark legislation created by well meaning persons. It has many fine features but its great weakness is to totally neglect outcomes. More than half our children in class 5 cannot read nor do simple arithmetic that is expected of them in class 2. The focus of the law makers was to get all children into school. Oddly enough, more than 95% of primary school age children are already in school. The real problem is high dropouts and this relates to high teacher absence. The Rs 43,500 crore required by this new law will mostly finance government teacher salaries that are now seven times India’s per capita income against a global norm of two. High teacher salaries are good in principle but only if they are accompanied by performance.

In the end no democracy will allow tens of thousands of schools to close down. The new law will merely raise the amount of bribe to inspectors. This in turn will force schools to raise fees, and the burden will fall on the poor. Imagine a law that makes people dishonest and harms the poor! Our democracy is a work in progress, and the answer is not to close schools but to understand their situation and amend the law. Since these schools charge such low fees, let us have a graded system of recognition, as we have first and second class tickets in a railway train. Allow these schools the freedom to pay market salaries to teachers and a have smaller play areas to ensure that their fees remain affordable by the poor. Don’t treat them like illegal brothels but see them as heroic examples of people solving their own problems. Make them safe from rapacious inspectors. They are symbols of India’s unique economic model—of a nation rising despite the state.

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Gurcharan Das is the author of ‘The Difficulty of Being Good: On the Subtle Art of Dharma’

Stranger At Home

2010-08-15T13:09:00.000+05:30

English be speaks progress. India’s youth is much the worse without it.
Our obsession with the English language has served us brilliantly. It has kept us united as a nation; it has contributed significantly to the social mobility of Indians; it has been a major factor in our recent success in the global economy.

One of the cheerful things happening in India is the quiet democratising of English. Dalits are today its biggest advocates because English allows them to work in call centres and other modern jobs where there are fewer caste barriers. A recent survey in Mumbai shows that Dalit women who knew English rose economically by marrying outside their caste--31% of Dalit women who knew English had inter-caste marriages compared to 9% who did not know the language. Dalits identify vernacular languages with caste oppression. Hence, Dalits across the country hailed Mayawati’s decision to introduce English from the first grade in U.P. (That there aren’t English teachers is another issue!)

The linguist, Peggy Mohan, likens social mobility through English to the mobile phone. Just as the masses today are leapfrogging to cell phones without going through a landline stage, Mohan thinks that English will evolve from an elite to a mass, second language of the new emerging Indian middle class. If functioning in pre-literate dialects is not to have a phone; and learning a standard regional language, say shudh Hindi, is to acquire a landline; then aspiring Dalits at English schools, will actually leapfrog from their pre-literate mother tongues to literacy in functional English. The child who confronts English for the first times faces incomprehension initially, but eventually most manage to take a leap into a new world.

U.P. is also a crucible to observe the social mobility of Muslims. Mulayam Singh shares a distaste for the English language and computers with many Muslim clerics. Because he lost Muslim support after his bear hug with Kalyan Singh, he decided to win Muslims back with an anti-English crusade. This strategy backfired, however, for young Muslims find English and computers are the route to good jobs—minority employment in IT/ ITES industry is 12 per cent employment compared to less than 4 per cent in other sectors. It escaped Mulayam’s attention that every mofussil Muslim mohalla and qasba in U.P. has small private English-medium schools catering to artisans, rikshawallas, reriwallas.

Since the nineties there is a new, quiet confidence in our nation, and our attitude to English has also changed. It has become an Indian language. Unlike my generation, today’s young are more relaxed about English and think it a skill, like learning Windows, and comfortably mix it with their mother tongues. When they speak English, even if inaccurately, they feel that they own it.

I do not agree with critics who claim that we have created a rootless elite, which has lost the ability to think because it does speak any language well. I went to an English medium school and work mostly in English but Hindi is my street language. Even though I do not read Hindi newspapers or novels, I have spent the last six years reading the Mahabharata. There are millions of English speaking Indians like me, who balance our language of empowerment (English) with our language of identity (the vernacular). There is thus no danger of losing rich and ancient languages like Marathi and Kannada and vernacular chauvinists are unnecessarily alarmed. That said, if our children had learned both English and vernaculars in a lively way from class one, we would have become a truly bilingual and culturally richer nation.

There is also a problem with the way we teach language. For example, we teach an artificial Hindi in a soulless way, which doesn’t connect with people. Fortunately Bollywood does a much better job and Hindi’s popularity continues to grow. Unless we drastically reform how we teach regional languages, they will suffer the landline’s fate.

English, too, continues to be taught abysmally and we have run out of English teachers. Over the next ten years 3.5 million jobs will be outsourced globally. India is likely to lose these jobs, according to the expert, David Graddol, author of English Next, because we are losing our “English advantage” to other countries. China is doing a far better job in training English teachers, and soon English speakers in China will outnumber those in India, according to Graddol. If this is not a wake-up call, I don’t know what is!
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Gurcharan Das is the author of India Unbound and The Difficulty of Being Good

Dharma in the public place

2010-08-07T13:08:00.000+05:30

Nothing is quite perfect in the world and certainly not human beings, as the Mahabharata reminds us. Our tendency to latch on to bad news at the expense of good news is unexcelled, and we tend to lose all balance in our judgements and miss out on the small victories of the day. Lalit Modi, the creator of the Indian Premier League of Cricket (IPL), has gone from being public hero to public enemy and this turnabout causes us some discomfort. If only we realized that dharma in the public place is different from private morality, we might be spared the confusion.

The good Vidura tells us in the Mahabharata that in judging a king’s action he looks to results. If it benefits the people, it is an act of dharma. Hence, a ruler would agree to ‘sacrifice an individual for the sake of a village and a village for the sake of a nation’. Vidura is half brother and royal counsellor to the king of Hastinapur and he speaks from the experience of managing a state. In agreeing to sacrifice a person in order to save many, he has drawn a distinction between public and private dharma, a pragmatism that is uniquely suited to public policy. The English thinker, Jeremy Bentham, went on to make this criterion famous in the 19th century via his Utilitarian slogan—‘the greatest good of the greatest number’.

Our confusion in judging Lalit Modi arises from our inability to distinguish between public and private acts. Like Yudhishthira in the epic, we get into a muddle because we bring in intentions. Mr Modi’s problem began in March when the IPL decided to expand from eight to ten teams. The winning bids came from the Sahara group for Pune and the Rendezvous consortium for Kochi. The affair came out in the open on 11th April when Mr Modi revealed in a tweet that among the shareholders of the Kochi group was one Sunanda Pushkar from Dubai, who had received Rs 70 crores in ‘sweat equity’ and been seen in public with the minister of state, Shashi Tharoor, who had introduced her as his fiancée. There was public clamour. Who was Ms Pushkar and why did she receive stock options worth Rs 70 crores? And if this was Mr Tharoor’s share, what did he do to deserve it?

Mr Tharoor twittered back accusing Mr Modi of sour grapes because the teams he had backed had lost the auction. Mr Tharoor claimed that he was merely mentor to the Kochi franchise without any financial interest. Ms Pushkar explained that she was an events manager in Dubai who planned to promote the Kochi team and it was common for professionals to get ‘sweat equity’ instead of salary at the start. Neither the opposition nor the government were convinced and Mr Tharoor resigned as minister. In three weeks Lalit Modi was suspended as IPL commissioner.

Sources close to Mr Tharoor allege that after the auction, Mr Modi tried to coerce the Kochi winners to back off—offering them $ 50 million to do so. Since they were adamant, he allegedly appealed to them to shift their franchise to Ahmedabad. Mr Modi counters that 75% of the Kochi capital was from Gujarati businessmen who wanted to stage the matches in a Gujarati city. Besides, the Kochi stadium was incomplete and likely to be embroiled in environmental issues for years.

Other allegations were made against Mr Modi—he was benami shareholder in the Rajasthan team and his relatives had a stake in the Punjab and Kolkota teams; $80 million was paid as ‘facilitation fee’ by Sony/MSM to the World Sports Group to compensate the latter after the contract was renegotiated but the money allegedly went into dubious bank accounts. Lalit Modi’s extravagant life style did not help—a private jet, a yacht, a fleet of Mercedes Benz and BMWs. But Lalit Modi was always a high roller. His father apparently gave him $ 5000 to buy a modest car when he was a student in America, but the young man promptly gave a down payment for a Mercedes Benz. He was also convicted on a drugs abuse.

Mr Modi retorts that he comes from a wealthy family and what has his lifestyle to do with it? Since he does not suffer fools and pettiness, he quickly made enemies with the minions at BCCI who were consumed with envy over his success. But they admit that IPL would not have been born if the flawed Mr Modi did not possess a rare talent for execution. When faced with adversity in its second year, he shifted IPL’s entire structure to South Africa within weeks, and without a hitch. If he had not snatched autonomy from the small mins of the BCCI, the IPL would have ended as Ranji trophy’s pale copy where they sometimes forget to bring a ball.

The only explanation for Mr Tharoor’s supposed gains is that that businessmen in India still place great faith in the power of politicians to influence outcomes, and in this case 4.5% equity was the price to ensure that their bid won. The losing consortia may also have had their political mentors. It is another reminder of the ever present danger of crony capitalism in a free market democracy.

How do we judge the moral failures of the IPL? Vidura would balance the good against the bad. He would point to the magical nights that it brought to tens of millions of cricket fans on TV; the new cricketing talent it unearthed; the Rs 600 crore that the government earned in service and income taxes; the staggering $4.13 billion in brand value it achieved; and the indefinable value of rare, flawless execution in a nation that is in agony over the Commonwealth Games. Against this Vidura would weigh the negative deeds of Mr Modi and unhesitatingly agree that the law must take its course, and Mr Modi punished for wrongful acts.

But in his personal judgement Vidura would be ambivalent. As he would in judging ambiguous figures like Dhirubhai Ambani, Pratap Singh Kairon, and the Pandava heroes in the epic. Let me illustrate. A few years ago a child almost drowned on a beach in Goa before a young man jumped into the sea and saved it. A few days later the hero confessed to a reporter that he may not have jumped if no one had been watching. He did it, he said, to impress his friends, and particularly one girl in their college party. The reporter said, ‘In that case, you are not such a hero!’ Vidura, however, would have looked to the result and said, ‘But the child was saved! Dharma was done. Why worry about his motives? But Yudhishthira would have jumped in even if no one had been looking. He would have done it as his dharma, as a duty to ahimsa, to save a life.

It is because we confuse intentions and consequences, ends and means, that dharma is sukshma, ‘subtle’, according to Bhishma. In Lalit Modi’s case we bring in his motives—‘he got tempted by greed’; he needed to feed his ego and extravagant lifestyle’ etc. We must remember: ‘The child was saved! What difference does it make if the hero was trying to impress a girl?’
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Gurcharan Das is the author of ‘The Difficulty of Being Good: On the Subtle Art of Dharma’

Ayn Rand and I

2010-08-03T17:06:00.001+05:30

Ayn Rand and the world she made, Anne C. Heller, Tranquebar Press, Chennai, 2010,567 pages, Rs 495, ISBN 978 93 80658 01 8.

It is not easy to connect a writer’s life with her ideology. Most biographers assume that there is an obvious and intimate connection and get on breezily with the job. Too often the connection turns out forced and the reader feels that she has been taken for a ride. Anne Heller’s excellent biography of the Ayn Rand is an exception. Her great achievement is to have connected Rand’s extraordinary legend and individualistic philosophy of unbridled capitalism to her life as a youngster, Alissa Zinovievna Rosenbaum, an awkward and wilful Russian Jewish prodigy, who had written four novels by the age of eleven. Heller makes you believe that that Rand’s excessive self-absorption and vehement protest against any form of collectivism are rooted in her family’s suffering in early-twentieth-century Russia, where Jews were violently persecuted and personal freedom died when the communists came to power.

‘Call it fate or irony, but I was born, of all countries on earth, in the one least suitable for a fanatic of individualism, Russia,” wrote Ayn Rand. Her father owned a prosperous pharmacy in St Petersburg and she and her two sisters grew up in an upper middle class home with a cook, a maid, a nurse, and a Belgian governess. Rand made good use of her advantages but disapproved of her mother’s social climbing ways.

It was always dangerous to be a Jew in Russia, however, and as the economy deteriorated during World War I, the Czar grew more repressive and the brunt of popular anger fell upon Russia’s five million Jews. Anti-Semitic bloodshed rose. Czarist gangs groups roamed the countryside, spreading rumours that Jewish profiteering was responsible for war losses and shortages. As the Russian army retreated from the advancing Germans, Russian troops were ordered to round up residents of Jewish villages in the Pale and herd them east to Siberia.

The war created unimagined hardships for all Russians, but especially Russian Jews and its toll in lives and penury led to the revolution. Rand’s family were battered and starving. Lenin’s government after the war consciously initiated the red Terror by encouraging acts of proletarian plunder against the city’s bourgeoisie and twelve-year-old Rand was in the family store on the day Bolshevik soldiers arrived, brandishing guns. In an instant her father was out of business and out of work. The anger and helplessness that Rand she remembered seeing on her father’s face remained with her all her life.

Rand escaped to America at twenty-one by lying to the U.S. consular official that she was engaged to marry a Russian man with whom she was in love and to whom she would unfailingly return. The truth was that she never planned to return to Russia. Ironically, Rand would become famous for celebrating honesty and integrity as indispensable virtues of the capitalist hero. Later she continued to invent, exaggerate, and hide things in order to bolster her public image, and this may be due to her experience as a Russian Jew where small deceptions were a matter of survival.

In America she began life as a middling script writer in Hollywood, where she encountered the same envy, conformity, and mediocrity that she had loathed in Russians. She found the same ‘collectivist motivation’ by which ordinary people sought life’s meaning outside them and looked to someone to tell them what to do. It reinforced the grand theme of her life: the exceptional individual against the mob. Howard Roark in The Fountainhead became Ayn Rand’s first full-fledged individualist hero: a gifted architect who yearns to create bold new building, but is stopped endlessly by frightened conformists and envious schemers. With this novel, Rand became a cult hero. Atlas Shrugged followed, and together the two books have sold more than 13 million copies, and continue to sell 300,000 per year after three generations.

A good biography makes us look within, and Ms Heller’s book has made me reflect, especially on why I became a libertarian and a vigorous supporter of free enterprise. This book also served as a mirror, making me conscious of the flaws that I share with Ayn Rand, in particular an excessive and unhappy self-regard, and an insatiable desire to be ‘somebody’ and not ‘anybody’.

Like many, I read Rand’s The Fountainhead as a teenager, and could not help but be moved by Howard Roark, who is as American as Huckleberry Finn or Holden Caulfield. He is determined, defies authority, hates mediocrity, and does not seek the world’s praise. He is ‘inner directed’ in an ‘outer-directed’ world, (a distinction I learned from the Harvard sociologist, David Reisman, who had used it to describe the conforming, salaried, American white collar office goer of the 1950s).

I quickly forgot Ayn Rand when I went to college and read serious philosophy. When her name came up in undergraduate conversations, I dismissed her as a writer of potboilers and propaganda. Like everyone around me in the mid-1960s, I passionately believed in Nehru's dream of a modern and just India. But as the years went by, I discovered that Nehru's economic path was taking us to a dead-end. Having set out to create socialism, he had created statism. Later when I was working as a manager I found myself caught in the thick jungle of Kafkaesque bureaucratic controls, a story that I have told in India Unbound.

Thus, I came to admire free enterprise after decades of living under the inefficiency of Nehru’s ‘mixed economy’ or License Raj, as many call it. Whereas I turned against state control from economic compulsions, Rand came to free enterprise from her collectivist Russian experience. I rebelled against the inefficiency of socialism; she revolted against its lack of human freedom and individuality. My embrace of markets was a pragmatic decision; she sought in capitalism a moral foundation. Both of us ended in a suspicion of state power but our paths were different. For me political liberty was not an issue because India had uniquely embraced democracy before capitalism. Democracy came to India soon after 1947 but our love affair with capitalism only began seriously after the 1991 Reforms when we began to dismantle the socialist institutions of the License Raj.

Ayn Rand understood that free markets brought phenomenal productivity and prosperity, but to her it was a side effect. The real deal was that capitalism gave a person’s ‘natural, healthy egoism’ the freedom to enrich himself and others. ‘Selfishness is a magnificent force’, she declared. ‘I decided to become a writer – not in order to save the world, nor to serve my fellow men—but out of the simple, personal, selfish, egoistical happiness of creating the kind of men and events I could like, respect, and admire’, she wrote in 1945.

I must confess that I was not able to go as far as Ayn Rand in embracing individualism as a creed; nor did I become a votary of unbridled, laissez faire capitalism. I also think that her use of the word ‘selfishness’ was unfortunate (perhaps, because she learned English late in life after coming to America). She would have been more effective if she had distinguished between ‘self-interest’ and ‘selfishness’. One would not wake up in the morning if one is not self-interested; but selfishness in ordinary English usage suggests the pursuit of one’s ambition at the expense of others. I suspect she meant the former sense of ‘self-interest’, which is a natural, rational instinct and which leads to healthy ambition without trampling on others (implied in more negative ‘selfishness’).

Unlike Rand, I set great store by enlightened regulation in the free market—regulation that brings transparency in transactions, ensures competition, catches crooks, but does not kill the animal spirits of entrepreneurs (as we did during the License Raj). Like ancient Greeks, Ayn Rand looked to human reason to distinguish the moral from the immoral to guide and protect human beings in this uncertain world. I look to the ancient Indian idea of dharma. My thinking on capitalism has been tempered by my encounter with the epic, The Mahabharata, which I read between 2004 and 2008.

Capitalism is still trying to find a comfortable home in India and I believe players in the marketplace have a great responsibility to act with restraint, unlike Wall Street bankers in the recent global financial crisis. ‘Restraint’ is one of the meanings of dharma; so as is ‘balance’; both meanings of dharma appear in the Mahabharata. If human beings act with ‘balance’ there is harmony in society and the cosmos. India is still a half-reformed economy--huge sectors like real estate and infrastructure are still unreformed--and we need to keep reforming it, reducing the discretionary power of officials and politicians.

Successes of capitalism produce over time enervating influences when a generation committed to saving is replaced by one devoted to spending. Ferocious competition is a feature of the free market and it can be corrosive. But c
ompetition is also an economic stimulant that promotes human welfare. The choice is not between the free market and central planning but in getting the right mix of regulation. No one wants state ownership of production where the absence of competition corrodes the character even more, as Ayn Rand pointed out repeatedly. The answer is not to seek moral perfection which inevitably leads to theocracy and dictatorship. Since it is in man’s nature to want more, the notion of dharma teaches us to learn to live with human imperfection, and seek regulation that not only tames crooks in the market but also reward good behaviour.

I was particularly distressed by Ayn Rand’s support for Senator McCarthy’s witch-hunt of American communists in the 1950s. Rand felt alienated in New York, ‘which was such a politically liberal city in the 1950s that Saul Bellow descried it as an intellectual annex of Moscow’. Anne Heller adds, ‘the post-war Right tended to view McCarthy’s Senate hearings as not only necessary on their face but also as payback for earlier leftist allegations that the antiwar, pro-capitalist Old right conservatives were Nazis and Fascists. Rand’s support for McCarthy, as for HUAC [the House Un-American Activities Committee], may have had as such to do with her fragile understanding of American due process as with her principled abhorrence of Communism’.

I too abhor Communism but I have never felt the need to punish Communists for their convictions. I also feel alienated in a gathering of Left-leaning intellectuals in India as Rand did in the America of the New Deal. I have always believed that Senator McCarthy was a vicious and undemocratic American. He was driven by an intolerance that was deeply un-American in its temper, and he diminished his country in the eyes of the world. Soon after McCarthy died from alcoholism in the 1950s, Rand innocently asked Joan Kennedy Taylor, ‘Tell me, what did people have against McCarthy?’

Taylor replied, ‘Well, Ayn, it’s primarily because he wasn’t truthful. He said all these things and couldn’t back them up.’ And Rand said, ‘Oh, I see. The Big Lie’.

Rand liked McCarthy and detested Eisenhower, ‘a conservative who lacked principles and backbone’. She was indignant over a 1957 Time Magazine article recounting a 1945 meeting between General Eisenhower and his Russian counterpart, Marshal Georgy Zhukov, in Berlin. The two had been debating the strengths of their respective forms of government. The article quoted Eisenhower as saying, ‘I was hard put to it when [Zhukov] insisted that [the Soviet] system appealed to the idealistic and [that ours appealed] completely to the materialistic, and I had a very tough time trying to defend our position because he said: “You tell a person he can do as he pleases, he can act as he pleases, he can do anything. Everything that is selfish in man you appeal to…. We tell him that he must sacrifice for the state.” The fact that Eisenhower couldn’t defend ‘the noblest, freest country in the history of the world’ as a matter of principle against a puppet of ‘the bloodiest dictatorship in history’ infuriated Rand.

I agree with Rand’s conclusion. Without a morality of rational self-interest capitalism cannot be defended. The problem of capitalism is the inability and the lack of courage of its defenders to defend it. It is difficult to defend the capitalist idea of the ‘invisible hand’ (made famous by Adam Smith) because the hand is, in fact, ‘invisible’. In contrast, equality and sacrifice for the masses are visible ideals.

As a libertarian, I have always admired the Austrian economist Ludwig von Mises. I agree with him that political liberty is founded on private property, free markets, and limited government. A Jewish refugee from Nazi occupied Austria, he had been a great social and economic theorist in pre-war Europe but was unknown in America. Mises met Ayn Rand in the early 1950s in New York and they quarrelled immediately over the government’s right to impose conscription or forced military service or ‘draft’, which was then underway in America. Mises, who had a purely economic aversion to state power, supported it. Rand called it a violation of individual rights. Rand became angry and said, ‘you treat me like an ignorant Jewish girl!’ Henry Hazlitt, their host, tried to make peace, ‘Oh, I’m sure, Ayn, that Lu didn’t mean it that way’. Mises jumped to his feet and shouted, ‘I did mean it that way!’

The following day she met one of the guests who had been present at the dinner party, and asked him to take sides in the dispute. When he pleaded neutrality, she replied, ‘That’s not possible. You are either with him or against me.’ He refused to choose and she never spoke to him again. In her copy of Mises’ famous book, Human Action, Rand wrote ‘bastard’ in the margin because Mises preferred a practical, economic argument for capitalism rather than a moral one.
Rand emerges somewhat diminished from Heller’s vivid and affecting account of this great champion of liberty and individuality who insisted on obedience and conformity from her followers (including from Alan Greenspan). A friend of John Hospers tried to console him after their falling-out: ‘Well John,’ the friend said, ‘You were a scholar. She was a revolutionary’.

On moral luck and human vulnerability

2010-07-03T13:59:00.000+05:30

I was in Mumbai on that December night in 1984 when tragedy struck in Bhopal. I was head of an American multinational’s Indian subsidiary, a company not unlike Union Carbide, whose managing director also happened to be my friend. We were among a few foreign companies that had stayed on and had toughened under the punishing conditions of the ‘license-quota-permit raj’. I was in shock over the horrific human tragedy but my sadness came from another thought, ‘what if it had been me’? I placed myself in his shoes and wondered if I would have acted differently? Probably not, and I thought about human vulnerability and how unbelievable lucky I was.

The epic, Mahabharata, reminds us that life is uncertain. Just as Yudhishthira is consecrated ‘universal sovereign’, he gets trapped in a rigged game of dice and loses everything, including his kingdom and his wife. The loaded dice is a metaphor for the fragile human condition. Imagine, if life is a game of dice governed by rules known to be deceptive, in which the least competent player is forced to stake everything, knowing full well that he will lose? Imagine too that death is the only outcome of the game. ‘In such a world one mostly fights for time,’ says David Shulman, the great Sanskrit scholar.

Clouds of poisonous gas rose in the night sky of December 3 from the Union Carbide factory, killing some 2,250 people and affecting 578,000 others. Of that number, it is estimated that between 15,000 and 25,000 people died subsequently, and tens of thousands of others remain sick to this day. No one in India seemed to know how to cope with the greatest disaster in industrial history and I could feel frustration rising in the nation as the days rolled on. Our national frustration then was not unlike America’s growing aggravation today as each new drop of BP oil that leaks into the Gulf of Mexico.

Twenty five years later, a court has awarded a two year sentence of rigorous imprisonment to seven persons, including my friend, in the Bhopal case. There has been national outrage both at the delay and the lightness of the sentence. Indignation at the sentence is understandable for so horrific a disaster--the human psyche seeks equally gruesome punishment to maintain moral equilibrium. The dawdling pace of justice in India is, of course, a national disgrace which diminishes us daily, but the fact is that crime and punishment in an industrial disaster is a difficult and complex issue.

In order to establish a higher level of crime would require showing criminal intent or prior knowledge of the disaster. For a higher sentence, the prosecutor would have to link the leaking of gas by an unbreakable chain of events to failure of individuals. It is difficult to imagine that directors or employees could have known that negligence on their part would lead to catastrophe of such proportions, and if they had known of the consequences, would they have ignored it? In the absence of intent, the only crime is of ‘rashness and negligence’ and for which the managers have been punished. But I am not sure if even that sentence will be sustained in appeal. The managers at Union Carbide knew they were dealing with a hazardous chemical but had no inkling that either the plant design or their operation was flawed. The 1982 audit report had pointed out few infirmities but they had reportedly rectified them.

The ‘evidentiary link’ was also missing in Andersen’s case, and this explains why India has failed to extradite him. The same logic applies to criminality in the recent, disastrous oil spill in the Gulf of Mexico. Nevertheless, Carbide got away by paying a paltry penalty for the worst industrial disaster in history. It is especially galling when you compare with what BP has paid and will end up paying. The tiny payment has fanned anti-multinational sentiment in India and reinforced a belief that multinationals have double standards. The truth is that multinational operations throughout the developing world are run to much higher technical and managerial standards than local companies. Look, for example, at the safety standards of the Indian railways. When did we last try to jail a railways minister or employee for negligence?

I compliment the Group of Ministers for their balanced and determined approach in recent weeks. It has restored sanity in our society whose discourse had been overtaken by a lynch-mob mentality. They have rightly recognized that the first and foremost duty is to the victims of the disaster and their survivors. Dow Chemicals, although it has no legal responsibility, should share in the financial burden as an act of magnanimity. If only the government had shown this sanity and determination twenty-five years ago so much suffering and tragedy could have been averted.

The lesson from Bhopal and from BP’s oil spill is that we need tort remedies to address the risk of future disasters. The legal system should not allow private individuals to keep the gains from dangerous activity and pass off losses to the public. We require liability to be fixed in advance on companies. Once these remedies are in place we can relax our ever-present licence-permit mentality. Solid insurance underwriting is likely to do a better job in pricing risk than any program of direct government oversight. This logic also suggests that America needs to rethink the Price Anderson Act's $375 million cap on damages to cover nuclear power disasters.

All this has reinforced my belief in the ancient Greek idea of moral luck. It could have been me sleeping innocently on December 3rd under the poisonous cloud. It could have been me working for Union Carbide? The Greeks knew that human life is fragile, but their lyric poet, Pindar, felt that its peculiar beauty also lay in human fragility. He compares a human being to a fragile vine ever in need of fostering weather. It needs gentle dew and rain and the absence of sudden frosts--and it needs caring keepers. So do human beings need fostering, but we also need to keep clear of catastrophe. Greek philosophers hoped to banish contingency by living a life of reason. Ancient Indians, on the other hand, believed that righteous action according to dharma would reduce their vulnerability.

India is becoming a venturesome, entrepreneurial society like America. Humans have a tendency to procrastinate. We don’t take advance measures because disaster is distant and unlikely. Prevention is costly and tedious, and frankly there is so much to do in the here and now. Since the consequences could be ominous, the low risk of occurring should not be a reason to ignore it. So, we need regulation. Regulation should be strong enough to reduce risk, yet not so strong as to stifle our new found entrepreneurial energy. We want regulators to work cooperatively with companies but not to be captured by them--‘crony capitalism’ is an ever present danger in our young capitalist democracy. In the end, no amount of regulation will prevent catastrophe. Humans are prone to err. What is needed is dharma or good faith among both companies and officials to limit harm. Regulators should also remember that costs forced on companies become higher costs for consumers.

Gurcharan Das is the author of ‘The Difficulty of Being Good: On the Subtle Art of Dharma’

Private Affluence, Public Squalor

2010-06-05T16:51:00.000+05:30

Recently on Karan Thapar’s program on television, a ‘stylish left wing’ commentator (SLW for short, a useful acronym that I owe to Saubhik Chakrabarti) said with a straight face that our troubles with the Maoists originated in our neo-liberal economic model and our post-1991obsession with growth. She then went on to lecture us about the callousness of the new middle class whose chief passion is vulgar consumption, and there is growing disparity between the rich and the poor.

Karan Thapar, sensing a juicy moment of controversy, smacked his lips and looked intently at me, asking me to respond. I explained patiently to my distinguished SLW panellist that growth is a necessary condition for lifting the poor everywhere, including in the tribal areas. It is not a sufficient condition, however, for people also need functioning schools and primary health centres, honest policemen and forest officers. The real problem, I said, is not with our economic model, but with poor governance. As a result we have public squalor amidst private affluence. So, don’t blame growth, blame the state’s inability to deliver public services, especially in remote tribal areas, where the police and forest officers tend to be rapacious.

Private success and public failure is an old debate between the defenders of capitalism and its critics, but it has revived again after the global financial crisis of 2008. Hence the historian, Tony Judt, laments like my SLW panellist, in his new book, Ill Fares the Land: ‘Something is profoundly wrong with the way we live today. For thirty years we have made a virtue of the pursuit of material self-interest indeed, this very pursuit now constitutes whatever remains of collective purpose.”

For a hundred years, public life in liberal Western societies has been conducted in the shadow of the Left-Right divide and it has provided a peg to understand public affairs. In the 1960s, politics infected the young who thought they knew how to fix the world. In the 1970s, there was a backlash to their unmerited arrogance. The Right triumphed intellectually in the 1970s and politically in the 1980s with success of Thatcher and Reagan. The Left grew defensive, especially after the collapse of communism. By 2000, the Washington consensus was the ruling wisdom in the world as country after country deregulated, lowered taxes and privatised enthusiastically. Today, after the crash of 2008, there is an awakening, and the Leftish rhetoric of Obama in America resonates with voters.

We have a somewhat different Left-Right divide in India. Most of us who call ourselves liberals in India are tolerant of dissenting attitudes and oppose interference in the affairs of others, but we do not generally oppose state intervention on ideological grounds. We do have a deep commitment to religious and political tolerance, but most of us would be called ‘social democrats’ in Europe. Although we do not generally oppose state intervention on behalf of the poor, we do feel badly let down by the incapacity, incompetence, and corruption of the Indian state. The inefficiency of the public sector is an issue everywhere, but in India it diminishes us daily. We do not oppose the public sector for threatening our liberty, as Americans do. We oppose it for its inefficiency. Our problem is not of the ‘what’ but of the ‘how’.
Meanwhile, the world has also changed. Despite the crash of 2008, hardly anyone really wants to replace capitalism. People mostly want to reform the financial sector. It was different when I was in college. We believed that a state-run economy was the best way to promote growth. Today nobody does, except perhaps in North Korea. Policy makers everywhere, especially those under the age of fifty, have a free-market orientation. There may be differences of emphasis, but they are all oriented toward markets. One reason is that capitalism has produced the highest standard of living in history. Since 1991, it has lifted millions of people in China, India, and Brazil out of poverty.
Ideology thus seems to have had its day. Marxism is no longer attractive to the young. No one defends the public sector on the grounds of collective interest. There are, of course, many models capitalism in the world. The countries of Scandinavia are more egalitarian; those on the European continent have a much greater commitment to public health and welfare; the English speaking countries, especially the UK and America, have the greatest commitment to the market and are the most suspicious of excessive regulation. They also suffer from the greatest inequality.

The future of India and China is mercifully no longer dependent on ideology. The race between the two hangs on the more practical question if India can fix its governance before China fixes its politics. Because the state has failed to deliver in India our policy makers increasingly seek pragmatic public-private partnerships. But this is a slow process for people are still suspicious of the market. They may not seek moral perfection in public life but they tend to impute good motives to government officials. They think businessmen make money for their own good and markets loot the unfortunate. They have trouble in seeing that the pursuit of profits can lift the general standard of living of the whole population. The idea is too counterintuitive. Hence, SLW commentators are always popular on TV.

Like Max Weber, the Mahabharata, would have approved of ideology’s decline in our times. The epic is unique in engaging with the world of politics and suspicious of public figures who seek moral perfection. When King Yudhishthira feels guilty after the war for ‘having killed those who ought not to be killed’, he decides to renounce the throne. To avert a political crisis, the dying Bhishma tries to dissuade him, teaching him that the dharma of a political leader is pragmatic and prudent, what Edmund Burke called the ‘god of this lower world.’ A political leader must eschew the ‘ethic of ultimate ends’ and follow the ‘ethic of responsibility’, as Weber put it. Our experience with the last UPA government taught us that when ideology becomes the driving force of politics then room for compromise is diminished and this makes for a dangerous world. The answer to Maoism in our tribal areas is to reform public institutions—the police, bureaucracy, and the judiciary--and not get distracted by futile, SLV discussions of economic models.
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Gurcharan Das is the author of ‘The Difficulty of Being Good: On the Subtle Art of Dharma’

IPL and Capitalism

2010-05-01T16:21:00.000+05:30

The recently concluded Indian Premier League (IPL) has been a non-stop party that lasted for six weeks to which everyone was invited provided you wanted to have fun. It brought magical nights to millions across India, a respite from their drab, desperate lives. It was filled to the brim with desire--for cricket and Bollywood, for chatter and glamour, for tomfoolery and unrequited sensuality, and for high rolling betting. (There was even satta market on the beleaguered Lalit Modi’s fate as the league commissioner, and the returns from every rupee on Mr Modi surviving were Rs 5.50 last Saturday.)

IPL is indeed a metaphor for a new India—crass, brash and razzmatazz--but it is in big trouble. What began as a trifling spat between Shashi Tharoor and Lalit Modi ended in the resignation of the minister and the suspension of the IPL commissioner. Everyone has had a say by now and some good suggestions have emerged for the reform of the IPL and the cricket board (BCCI). But in the chorus of remonstration there was a definite anti-capitalist refrain. Coming as this does on the heels of the global financial crisis and the recent troubles of Goldman Sachs, the legitimacy of the market is once again in question in a country where capitalism is still trying to find a comfortable home.

The most strident voices belonged to members of Parliament who demanded a probe by a Joint Parliamentary Committee. Some political parties called for nationalizing the IPL. Lalu Prasad (RJD), Mulayam Singh Yadav (SP) and Sharad Yadav (JD-U) insisted on banning it. The JD(U) member, Shivanand Tiwari, demanded that funds of the IPL and BCCI be confiscated. CPI leader Gurudas Dasgupta criticised the 20-20 game format, saying it was a ‘caricature’ of cricket in which players were bought like ‘vegetables’. The deputy leader of the Opposition, Gopinath Munde asked that if bar girls in Mumbai had been barred from performing, why should cheerleading girls be allowed in the IPL? Mulayam Singh called cricket a ‘foreign game’ and wanted it replaced by a desi one.

How does one begin to judge the IPL? When it comes to public policy, it is best to follow the advice of Vidura, the royal adviser in the Mahabharata, who looks to the general good. If an act benefits the vast majority then it is right. Cricket’s two main stakeholders are the players and the fans. It has given an opportunity to many talented cricketers to rise and showcase their talents. Going by television ratings and packed stadiums, more Indians have been entertained by the IPL than anything else. By Vidura’s criterion, IPL has performed brilliantly. Lalit Modi is undoubtedly a great entrepreneur who has also driven the IPL’s brand value to a staggering $4.13 billion in less than three years.

There are serious problems, however. Conclusive proof must be found for match-fixing, rigged auctions, tampering with roster selections and other allegations. We need full public disclosure of all the bids. Modi must be tried fairly based on evidence, not personal dislike. BCCI must also be overhauled. As the custodian of cricket, it runs like a cabal, exploiting its monopoly privileges. As to gambling, the best answer is to make sports betting legal—then it will open and fair. This will generate huge revenues for the government and cut the nexus with the underworld.
With regard to the competitive status of Indian cricket, our team has become world’s no. 1 in tests; it is clawing to the top in the one day version; and the 20/20 team did win the inaugural world cup. BCCI’s seems to have delivered far better performance than other sports associations, where government plays a bigger role.

A Rajya Sabha member complained that the evil in IPL was foreign and he traced it to the market. The honourable member did not realise that markets are natural to human beings. Banias and bazaars have been with us for thousand of years, ever since Indians first engaged in agriculture and there was a surplus. Our first towns in the Indus valley emerged as centres of exchange. But markets are not the same thing as the market system, which requires that moneymaking be regarded as respectable. Historically, commerce has had a bad odour in all societies. In India, the merchant was third in the cast hierarchy. Even though we have the wondrous spectacle of thousands of young Indians starting business ventures today, the idea that their struggle for personal gain might actually promote the common is too bizarre. This is behind the animus against the big sums in the IPL. Even sophisticated Indians distrust the market – perhaps, because no one is in charge. No wonder Samuel Johnson said, “There is nothing which requires more to be illustrated by philosophy than trade does.”

Besides politicians, journalists and academics have been the most vociferous in criticising IPL’s capitalist ideology. The philosopher, Robert Nozick explains in a classic essay why intellectuals everywhere dislike capitalism. They feel entitled to greater prestige, money and power, whereas the market rewards those who fulfil perceived demand in the marketplace. The wordsmith’s expectation is created early in school. In the classroom the brightest are rewarded with the highest marks and teachers’ smiles. Hence, they grow up expecting praise. When it does not come in later life, and when society values things other than verbal ability, they grow resentful and sullen, especially when they experience downward mobility.

Lalit Modi’s entrepreneurship necessarily involved assuming risks and valuing novelty, characteristics that are not common in a stable society. He was a brash new kid around the block, and he will admit that entrepreneurial success does not lead to social acceptance. Old money does not like new money. The economic historian, Jean Baechler, tells us that in sixth century BC firms in Babylon took in money deposits, issued cheques, made loans at interest, and invested in agricultural and industrial enterprises. Yet they were looked down upon. All agrarian civilizations have looked down upon merchant capitalists and commercial activities have been universally held in low esteem.

It was only in the High Middle Ages that this changed, and capitalists were finally given social acceptance and protection from the predation of the state, as Deepak Lal argues in Unintended Consequences. It was due to a legal revolution in the eleventh century when Pope Gregory VII in 1075 put the church above the state. The resulting church-state created the whole legal and administrative infrastructure required by a full fledged market economy. This led to the rise of the West and its divergence from the rest of the world.

India after 1991 has joined in this capitalist adventure, and with vigour. Because India got democracy before capitalism, the critique of capitalism began in the 1950s even before full blown capitalism arrived in 1990s. Hence, players in the capitalist game have a responsibility to behave with restraint until capitalism establishes a comfortable home. IPL’s irregularities have not helped. But having said that, it is impressive that the critique of IPL has been constructive by and large, and shows we have come a long way in our attitudes. The challenge before regulators remains—how to bring transparency in the market without killing the animal spirits of the likes of Lalit Modi.

Gurcharan Das is the author of ‘The Difficulty of Being Good: On the Subtle Art of Dharma’

Don’t close down budget schools, give them graded recognition

2010-04-03T16:38:00.000+05:30

Unrecognised private schools, which cater to the poor in the slums and villages of India, have been under threat for a long time. With the passage of the Right to Education Act the threat is now real. The new law specifically calls for these schools to be closed or recognized within three years. In 2008, the Delhi High Court in 2008 had also wanted to close roughly 10,000 such schools in the national capital.

The reason why budget schools do not get recognition is because they do not meet standards—for example, they do not have a playing field of a certain size or they cannot pay the minimum government teacher’s salary--which is over Rs 20,000 a month after the Sixth Pay Commission. If they had to pay this salary or have such a playing field, they would have to quadruple their fee and the poor would no longer be able to afford it.

Unrecognised private schools are successful because teachers are accountable to parents who can move their child to a competing school if they are not satisfied. In a government school there is little accountability as teachers have permanent jobs with salaries and promotions unrelated to performance. Hence, one in four government primary teachers is absent and one in four who is present but found not to be teaching. This horrendous situation is obvious to the poorest parent.

No one knows how many unrecognized schools exist in India but estimates range in the lakhs. To want to close down institutions that serve communities and meet a gap in the supply of education seems bizarre and even immoral. The government’s answer is that these schools are of poor quality. This means that it thinks that millions of parents who send children to these inferior schools must be stupid. Why would parents pay hard earned income when a child could be educated free and get a free mid-day meal in a government school? The government’s answer is that parents are duped by ‘unscrupulous elements’. It is the command mindset—‘I know what is good for you!’ You can fool some people some of the time, they say, but not all the people all the time. Lakhs of private schools cannot enrol millions of children for decades unless they meet a genuine need. The irony is that while sending its own children to private schools, the establishment stridently opposes a similar choice for the poor.

Why is it that we do not trust private initiative in education? Even eminent persons like Amartya Sen, who believe in the efficiency of the market, draw a line when comes to delivering education privately. Our animus against the market may have diminished considerably after liberalization in 1991 and the fall of communism, but most Indians still suspect capitalism. People increasingly believe that markets deliver prosperity but they do not think that capitalism is moral. Even those who work inside the system feel guilty and do not value what they do.

Greater reflection will show that human self-interest goes a long way in ensuring good behaviour in a competitive marketplace. A seller who does not treat his customers with fairness and civility will lose market share. A company that markets a defective product will quickly lose its reputation and its customers. False claims will lower sales. A firm that does not promote the most deserving employees will lose talent to its competitors. A purchase manager who does not buy at the right price will soon make his company uncompetitive and it will not survive. Lying and cheating will ruin a firm’s image, making it untouchable to creditors and suppliers. Hence, the free market does offer powerful incentives for ethical conduct backed, of course, by state institutions that enforce contracts and punish criminal behaviour.

I used to believe that government schools were the only answer for universal education. Then I read interviews with parents in slums about why they had removed their children from government schools with better facilities. The answer in most cases was that teachers did not show up, and when they did, they were not interested in teaching. Parents felt helpless and could do nothing because teachers only felt responsible to superiors in the state capital. Moreover, parents wanted children to learn English and computers, but teachers were either indifferent or incompetent to meet this demand. Budget private schools may do bad job of teaching English, but at least they try. Teachers are more motivated, and there is the ever present threat of losing the child to a competitive school. Now I understand why more than half the children in India’s cities and a quarter in India’s villages are in private schools.

Government makes it difficult for private schools to function. I was baffled to learn how often inspectors visit unrecognized private schools. It is not because of an unusual dedication to standards but to be ‘made happy’, as one private school owner put it. Schools have to bribe to keep inspectors from closing them down. Hence, they believe that the main impact that the Right to Education Act will be to raise the bribe required to keep inspectors ‘happy’. This in turn will force schools to raise school fees, and the burden will fall on the poor.

The answer is not to close down budget schools but to understand their situation. Since they cater to the poor, there could be a graded system of recognition. If we can have a first and a second class in the train why not officially designate ‘first’ and ‘second’ categories for schools. Since real estate is expensive, don’t insist on a size of a football field but allow budget school to operate with a smaller play area. Don’t insist on government salaries for teachers but give them autonomy to pay what the market allows. Set up rating agencies to assess the quality of both government and private schools to help parents to exercise choice. Of course, our first priority must be to reform government schools and that happens who will want to send her child to a private school anyway?

Finally, don’t be contemptuous. Don’t refer to them as ‘mushrooming schools run by unscrupulous elements’. Look at them instead as a heroic example of people solving their own problems. School entrepreneurs are like micro-finance companies who are trying to compete and ‘make a fortune at the bottom of the pyramid’. What they need is a safe environment free from rapacious inspectors. They need titles to their property so that they can use it as collateral to raise expansion capital. Like microfinance, which has come of age, budget schools will one day build scale and brand names. They are symbolic of India’s unique economic model—of a nation rising despite the state.

Gurcharan Das is the author of The Difficulty of Being Good: on the subtle art of dharma (Penguin 2009)

Entrepreneurs and Eggplant , The Wall Street Journal

2010-03-08T15:37:00.000+05:30

THE WALL STREET JOURNAL
OPINION ASIA MARCH 8, 2010, 2:06 P.M. ET

Entrepreneurs and Eggplant
A case study in how India's government is the main obstacle to economic progress.
By GURCHARAN DAS
New Delhi

Risk is built into capitalism because the rewards of investment arrive in the future. Risk usually comes from the unknown responses of customers and competitors in the marketplace. But in India, the greatest uncertainty still emanates from government and its overweening regulators, despite 18 years of economic reform. If anything holds India back from realizing its true potential, it is weak institutions of governance.

Nowhere is this heartbreaking truth clearer than in the tale of Maharashtra Hybrid Seeds Company. Founded in 1964 by Badrinarayan Ramulal Barwale (who received the World Food Prize in 1998) Mahyco, as it is known, has done pioneering work in hybrid seeds. Today Monsanto holds a 26% stake in the company. Having produced hybrids of cotton, sorghum, sunflower and wheat, it is currently researching improvements to more than 30 crops.
The development of genetically modified eggplant, known locally as Bt Brinjal, was the latest in this string of innovations. Mahyco's scientists toiled for years to figure out how to kill the pest, Brinjal Fruit and Shoot Borer, which wipes out 30% to 40% of India's annual crop. Mahyco conducted 25 environmental biosafety studies supervised by independent and government agencies to ensure that its product had the same nutritional value and is compositionally identical to regular eggplant; finally, it did rigorous field trials in collaboration with two Indian agricultural universities.

In October 2009, after nine years of trials, their invention was approved by the government's Genetic Engineering Approval Committee, which stated Mahyco's product is "effective in controlling target pests, safe to the environment, non-toxic as determined by toxicity and animal feeding tests, nonallergenic and has potential to benefit the farmers." Top Indian and international scientists hailed the innovation, hoping that it would open the door for further research and trials on the more popular foods like rice and wheat.

Yet on Feb. 9, Environment and Forests Minister Jairam Ramesh stopped the seed's introduction. He privileged the concerns of environmental groups, who had opposed Bt Brinjal on grounds of potential human and animal health and biodiversity. In placing an indefinite "moratorium" on the product, Mr. Ramesh adopted the precautionary principle, citing the need for more safety data and an absence of any "overriding urgency." He ignored the government's own regulatory process, the committee of distinguished scientists who had approved Bt Brinjal after nine years of intensive trials, and he undermined the trust between the citizen and the state.

It is a testimony to our argumentative democracy that the story did not end there. Mr. Ramesh's decision led to a huge outcry among India's scientists and farmers. Last month, Agricultural Minister Sharad Pawar wrote to the prime minister that biotech innovations that withstood regulatory scrutiny "should be vigorously encouraged." Any hesitation, he wrote, could hamper research in India on transgenic varieties of potato, rice, mustard, tomato, groundnut, chickpea and pigeon pea currently underway. He added: "Absence of clarity on some of these issues could jeopardize R&D not only by the private seed companies but also by public institutions."

In other words, India cannot attract investment if entrepreneurs cannot predict how the government will react. The telecommunications ministry has wavered for years on whether or not to sell 3G spectrum, and how to do it. Equally disheartening is the recent experience of private entrepreneurs in dealing with the railways ministry. Encouraged to invest in freight movement on the promise of a level playing field, they have discovered formidable hurdles placed in their way by the government's monopoly railway company. Similar stories abound in the airline industry, financial services and retail, too.

Entrepreneurs are used to risk—in fact, they seem to thrive on it. What really throws a spanner in the works of capitalism, however, is uncertainty. What's the difference? As the late great economist Frank Knight wrote in "Risk, Uncertainty and Profit," risk can be quantified using statistical analysis, yielding probabilities that guide efficient decision-making. Uncertainty, on the other hand, cannot be measured and therefore presents a true barrier to business. The capricious decisions coming out of Delhi are creating uncertainty.

Indian civilization has long understood the role of government in mitigating risk. The theme of risk even appears as far back as 2,000 years ago in the ancient Indian epic the Mahabharata, where a famous game of dice is the metaphor for the uncertain, vulnerable human life. The epic looks to the ruler and his dharma to bring predictability in the lives of human beings.
In the same way, it is the duty of governments to bring predictability into the uncertain lives of investors and business people. Entrepreneurs face more than enough insecurity in the marketplace. If India's government does not ensure a reliable regulatory environment or if allows ministers to interfere in established institutional mechanisms, who will take courageous, long-term risks? Who will invent the seed that sparks a second green revolution? No wonder investors continue to believe that authoritarian China is more investor friendly than democratic India.

Mr. Das, former CEO of Procter & Gamble India, is the author of "The Difficulty of Being Good" (Penguin, 2009) to be published in the U.S. in September by Oxford University Press.

Remember, the money doesn’t belong to you!

2010-02-01T12:09:00.001+05:30

At a lunch party in Delhi recently I was confronted by a woman in a pink sari who effectively pinned me down while she lectured to me on the importance of corporate social responsibility. No one came to my rescue for ten minutes and I began to fret. I wondered how to get away from her without causing offence. Then I remembered some advice from a Bengali friend who had mentioned that in such situations a white lie is one’s best ally. So, I glanced over my overbearing tormentor’s shoulder as though someone had distracted me. I whispered loudly, ‘Coming, coming!’ to the imaginary person. Then I lied brazenly to my oppressor, ‘Ah, what a pity, I am being dragged away’ and I moved on shaking my head reluctantly.

At first I felt guilty for having lied but soon I realized that I had done a good deed. The Mahabharata tells us about honest Kaushika, who is accosted by a gang of robbers, demanding to know where the witness to their crime is hiding. Kaushika unwisely tells the truth and promptly gets the witness killed. To his surprise, Kaushika ends up in hell where he learns that in this case his duty to ahimsa, ‘non-injury’ trumped his duty to satya, ‘truth’. In the same spirit I feel that that by lying I had saved my tormentor from the pain of learning that she is a bore. I am convinced that white lies are the basis of civilization.

What troubles me, however, is the presumption of the woman in pink. I ask myself why no one lectures doctors, lawyers, or even journalists on their social responsibility. Why rage only on the social responsibility of business? Business persons do seem to arouse much more hate, fear, and contempt. They are blamed for making us materialistic and consumerist, for promoting selfishness and greed. The market is reviled for debasing our taste through advertising, for making us buy things we do not need. Capitalism is denounced for alienating workers, for creating unjust inequalities, for corrupting the government and for ruining the environment.

It is true that in India our animus against capitalism has diminished in recent years as our economy has risen and we have tasted the fruits of reform. Communism’s fall has also helped. While people have begun to believe that markets deliver greater prosperity, they do not think that capitalism is a moral system. We still think that morality must somehow depend on religion. Corporate social responsibility (CSR) is supposed to be the answer to alleviate the guilty conscience of business persons for having made a profit. CSR has a nice ring to it and it has been a buzz word for over a decade. There are CSR departments in companies, CSR courses in business schools and CSR reporters in newspapers. And yet, why does something so worthy and high-minded leave me profoundly uneasy?

The premise of the lady in pink is that that a firm is obligated to ‘give something back’ to those that make its success possible. Her image of a firm is a free rider, unjustly enriching itself at the community’s expense. Hence, good deeds are necessary to redeem firms and transform them into good citizens. But why should firms be obligated to give something back when they give so much already? Rather than enslave their employees, they pay them wages and benefits. Rather than steal from customers, they deliver goods and services that people value and pay for. Rather than ride freely on public services, they pay taxes.

According to my friend, Parth Shah, the CSR movement is trying to get the market to perform the function of the civil society or the state. Society consists of the state, the market, and civil society, and the individual is variously a citizen (of a state), a customer (in the market) and a member of a community. It is often difficult to define the separate the three domains. Historically, the state has protected life, liberty, and property. Civil
Society, through voluntary organizations, self-help groups, religious communities and charities provided education, healthcare and supported the needy. Alexis de Tocqueville celebrated this vibrant social sector in his wonderful travelogue, Democracy in America and regarded it as the foundation of democracy.

Under the ‘fatal conceit of socialism’ (in Hayek’s words), the state began to usurp the functions performed by the market (the mercantilist state) and civil society (the welfare
state). The fall of communism has forced the state to withdraw from the domain of the market, and many countries as a result have experienced unprecedented prosperity in the past two decades. The state still controls the functions of civil society and hopefully one day it too will gain freedom from the state.

‘The social responsibility of business is to make a profit,’ said Milton Friedman, the Nobel Prize winner, in a famous article in the New York Times. He explained that in making a profit a company creates thousands of jobs, both directly and indirectly through suppliers, distributors and retailers. It imparts valuable skills to its employees. It pays millions in taxes. It improves the lives of millions of satisfied customers with its products and services. This is an enormous service to society. If some shareholders get rich along the way, does it really matter? Companies should focus single-mindedly on their competence, providing goods and services better than their competitors, and not get distracted by extraneous activity. A company’s social responsibility is to make profits legally, not to harm nature, and uphold the highest standards of governance.

I find that many executives and businessmen do not value what they do and hence are attracted to guilt allaying, often hypocritical PR programs of corporate social responsibility. Managers must first take pride in making a profit. Second, they must remember that the company's money does not belong to them but to shareholders. So, the only CSR activities that are justified are those that increase profits.

Individuals, however, should engage vigorously in philanthropy. It is immoral to spend the company’s money but it admirable to spend your own money on charity. It is a theft against Reliance’s shareholders if the company embarks on building hospitals, but it is admirable if Mukesh Ambani does. Hence, Tatas do their charity work through their trusts. CSR should be relabelled ISR, Individual Social Responsibility, and each of us, as individuals ought to feel the need to give back.
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Gurcharan Das is the author of ‘The Difficulty of Being Good: On the Subtle Art of Dharma’

Relax, capitalism is not the problem

2010-01-12T12:07:00.000+05:30

The epic, Mahabharata, thinks that human beings are fundamentally flawed and their faults make the world ‘uneven’ (vishama). As a result they are vulnerable to nasty surprises. Duryodhana is the chief purveyor of ‘uneveness’ in the epic, but the others also contribute to it in good measure—Yudhishthira cannot resist gambling, Karna suffers from status anxiety, Ashwatthama has a revengeful nature, Dhritarashtra is prone to excessive love for his eldest son, and so on. These human defects drive the epic towards calamity. Like the Mahabharata’s characters, investment bankers on Wall Street, rating agencies, and even regulators suffer from similar failings, and it is these dangerous infirmities that brought the global capitalist system to its knees in 2008.

A year ago the world was unravelling. People predicted that it was the end of the road for global capitalism. They forecast political collapse in many emerging markets. President Sarkozy of France, former Prime Minister Tony Blair of England, and the German Chancellor, Angela Merkel, kicked off a debate in January 2009 on the nature and the future of capitalism. Now, just a year later, the doomsayers have turned out to be wrong. The world economy is reviving, and India, China and other emerging markets are at the forefront of the recovery. Governments deserve much credit for having learned the lessons of the Great Depression of the 1930s and for expanding state support to their economies and have buffered the damage. In India some of this buffering did not happen by design, but by accident, as a result of the Congress party’s strategy of state spending via loan waivers, 6th Pay Commission, and NREGA, all the measures designed to win an election, including the raising of interest rates much before the crisis, which succeeded in slowing our growth rate.
John Maynard Keynes, the great economist, had a similar insight as the Mahabharata about our ‘uneven’ world. He lived during the Great Depression when there were many calls to end capitalism. The unevenness of the world is caused, he said, by ‘animal spirits’, which drive businessmen to take risks, often in the face of insufficient knowledge. John Nash, the Nobel Prize winning hero of the movie, A Beautiful Mind, traced this to ‘asymmetries of information’. This leads to crises--such as the dotcom bubble, in which many sensible persons quit their jobs in order to make a fortune. It burst in 2000 but was replaced a few years later by another mania of the ‘smart flippers of securitized mortgages of sub-prime properties’, which sent the world into a recession in 2007. Keynes believed that a capitalist economy left to itself is unstable, and needs state regulation.

Standard economic theory makes the mistake in ignoring the world’s vaishamya, brought about by human passions and animal spirits. Ever since Adam Smith, classical economics has assumed that capitalism is inherently stable. People buy and sell rationally, and this results in equilibrium. It forgets that people get into manias and even paan-wallas start buying shares on the basis of rumours. When manias take over there are bubbles and when bubbles are pricked confidence falls sharply and the whole economy collapses. Hence, we do need regulation to protect people from themselves—to ensure they are not falsely lured into buying bad assets. This regulation, however, must not kill the ‘animal spirits’ of entrepreneurs, which is what happened in India during the ugly days of the License Raj…and we almost lost two generations.

If Keynes thought that the answer lies in regulation, the Mahabharata seeks to ‘even’ out the world through dharma. Dharma is a complex word—it means virtue, duty, law, religion depending on the context, but it is chiefly concerned with doing the right thing. The Mahabharata recognizes that it is in man's nature to want more. Dharma seeks to give coherence to our desires by containing them within an ordered existence. No amount of regulation will catch all the Duryodhanas and the Ramalingam Rajus of the world. What is needed is self-restraint on the part of each actor in the market place in order to build trust within a society. The sunny world of Adam Smith may have been a tad optimistic, but Smith understood the importance of trust which underlies each transaction in the marketplace. Self-restraint is one of the meanings of dharma and the trust that it helps to create is the ‘dharma of capitalism’.

The market is based upon trust between buyers and sellers. The buyer trusts that the product will perform and the seller trusts that the buyer’s cheque will not bounce. This moral under-pinning is what the epic calls satya, ‘truthfulness’, which helps to balance the animal spirits and bring about stability. This is the middle path of reform that Keynes also recommends, not the utopian path of socialism.

Regulators and central bankers around the world are wrestling with how to reform their financial systems. They are expending huge energy in debates between the political Left and the Right when the greater divide is between conduct in accordance with dharma and adharma. It is not enough to punish Ramalingam Raju. Institutions must also develop a culture of self-restraint and reward as well an act of goodness--one of the very few things of genuine worth in this world. A life lived according to dharma diminishes the vulnerability of human beings to the ‘unevenness’ of the world.

The idea that an ancient Indian epic might offer insight into capitalism’s nature is, on the face of it, bizarre. The truth is that the Mahabharata’s world of moral haziness is far closer to our experience as ordinary human beings than the narrow and rigid positions that define debate in these fundamentalist times. The choice for policy makers is not between free markets and central planning but in getting the right mix of regulation. No one wants state ownership of production where the absence of competition corrodes the character even more. Dharma's approach is not to seek moral perfection, which leads inevitably to theocracy or dictatorship. Human beings need a coherent world to order their existence. They want good acts to be rewarded and bad ones punished. Good regulations should not only catch crooks but also reward dharma-like behaviour and the nobility of character. The point is not to throw out capitalism but to keep reforming it.

Gurcharan Das is the author of The Difficulty of Being Good: On the Subtle Art of Dharma,

Future is Ours To Seek

2010-01-01T12:02:00.000+05:30

Two trends, one good and one bad, have defined India’s first decade of the 21st century. The good trend is that prosperity has begun to spread, largely as a result of high economic growth. The second trend is the simultaneous rise in corruption. The lazy minded will connect the two trends, but in fact they are quite independent. High growth has been fostered by economic reforms and corruption is due to the lack of the reform of state institutions.

For the first time in history Indians are beginning to emerge from a struggle against want into an age when the large majority will soon be at ease. Like many parts of Asia, India too is slowly turning into a middle class nation. This is not happening uniformly--Gujarat is well ahead of Bihar, but even Bihar will catch up. At that point poverty will not vanish, but the poor will come down to a manageable level and the politics of the country will also change. This is the good news.

The bad news is that prosperity is spreading alongside the most appalling governance. In the midst of a booming private economy, Indians despair over the delivery of the simplest public services. It used to be the other way around. During our socialist days we despaired over economic growth but we were proud of our institutions. Today, the Indian state is in steady decline. Where it is desperately needed--in providing education, health, and drinking water--it continues to perform appallingly. Where it is not needed, it is hyperactive in tying us in miles of red tape.

When I speak of governance failure, I am not thinking only of the politician--Madhu Koda--caught with a bribe. Almost every transaction of the Indian citizen with the state is morally flawed. I have to renew my driver’s license in a few weeks and I am already worried if I will have to bribe someone. It is the poor, however, who depend most on public services and are the least capable of paying bribes. Year after year Transparency International ranks India amongst the most corrupt. In 2005, of the 11 public services it surveyed, India’s police were the most corrupt with 80% of the citizens admitting that they had to bribe someone in the police to get their work done. 40% had paid a bribe to influence the legal system. One in three parents reported bribing a government school or primary health centre. Yet it is these schools and health centres where one in four teachers is absent and where two out of five doctors do not show up. A farmer in an Indian village cannot hope to get a clear title to his land without bribing the patwari or talathi. It is only when I discovered, however, that one out of five members of the Indian parliament in 2004 had criminal charges against him did I lose hope.

What is eating away at our moral fabric is thus not the big scam which grabs the headlines—jehadi terrorism, Gujarat 2002, Naxalism. It is these quiet, everyday failures. When a school teacher is absent, he wounds the dharma of our society, which has always regarded the guru on a pedestal. He also gives his students a terrible lesson in civic virtue. Governance failure is both institutional and moral. If you punished one absentee school teacher, the others would show up. But to teach with inspiration, you need the call of dharma. Artha, material well being, and dharma, moral well being, are two out of the four aims of the sensible Indian way of life. While artha is rising, dharma has been falling during the past decade.

Hence, the reform of the Indian state is even more important today than economic reform. It is also more difficult because it is the rulers who are the oppressors and have the most to lose. We desperately need police, judicial, administrative and political reform. Many societies that we admire today, such as the UK, once suffered from poor governance. But they threw up leaders—Gladstone, Disraeli, Thatcher—who had the courage to fight vested interests and implement reforms. It is one thing to win power and another to wield it. The Congress party has learned to win elections but it has forgotten that it will be thrown out unless it improves governance.

The Mahabharata also had a problem with the self-destructive, kshatriya institutions of its time, and it had to wage a war to cleanse them. Draupadi’s call for accountability in public life in the Sabhaparvan ought to be our inspiration. She questioned the dharma of the rulers when confronted with governance failure. When there is no other recourse, citizens must be prepared to wage a Kurukshetra-like war against corrupt government institutions in order to bring accountability into public life.
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Gurcharan Das is the author of the Difficulty of Being Good: on the subtle art of dharma

A Discovery in India, Outlook

2009-12-21T15:47:00.001+05:30

James Tooley, The Beautiful Tree: A personal journey into how the world’s poorest people are educating themselves, Penguin; 302 pages; Rs 499

I first met James Tooley on a cold morning in Delhi. I was drawn to him by his sincerity, his passion, and most of all by his infectious smile, which made everyone in the room smile back at him. As I watched him I thought of Tagore’s observation in the Stray Birds about how much the world loves a man when he smiles.
Tooley’s remarkable book, The Beautiful Tree, is a tale of heroism. In it, he discovers that in the slums of India, in remote mountain villages of China, and in shantytowns in Africa, the world’s poorest people are creating their own schools to give their children a better future. In an extraordinary journey which began in the slums of Hyderabad, Professor Tooley finds out how committed entrepreneurs and engaged teachers in poor communities have started private schools with very low fees (Rs 70-170 per month) in two rooms or entire buildings and these are affordable for the children of rikshawallas, street hawkers, and daily labourers. He concludes that 65 percent of schoolchildren in Hyderabad’s slums are in private unaided schools. In India today, there are tens of thousands such schools which are run by the poor for the poor. The education establishment, however, wants to close them down. The new Right to Education Act gives the government three years to close all ‘unrecognized schools’.
Before his discovery in India, James Tooley believed that government schools were the answer to universal education. Then he asked parents in the slums why they had removed their children from government schools with better facilities, and why they were paying their hard earned income to send them to private schools. The answer in all cases was that government schools had failed. Teachers did not show up and when they did, they did not teach. Despite that you had to often bribe to enrol your child. This explains why more than half the children in India’s cities and a quarter in India’s villages are in private unaided schools.

The government makes it difficult for these private schools to function. Tooley was baffled to learn how often inspectors visited these private schools for the poor. It was not because of an unusual dedication to quality and standards, but to be ‘made happy’ as one of the school teachers put it. Schools have to resort to bribery to keep the inspectors from closing them down. The principle effect that the Right to Education Act will have on them will be to raise the bribe required to make the inspectors ‘happy’. This in turn will force these schools to raise fees to the children of the poor. As the headmaster of one of these schools, a man named Wajid at Peace High School, tells Tooley that he became a private school educator because ‘Sometimes, government is the obstacle to the people.’

The secret of success of these private schools is that ‘teachers are accountable to the manager (who can fire them), and, through him or her, to the parents (who can withdraw their children)’. In a government school, on the other hand, the chain of accountability is much weaker, ‘as teachers have a permanent job with salaries and promotions unrelated to performance. This contrast is perceived with crystal clarity by the vast majority of parents.’

Tooley also quotes studies which explain their success: ‘The results from Delhi were typical. In mathematics, mean scores of children in government schools were 24.5 percent, whereas they were 42.1 percent in private unrecognized schools and 43.9 percent in private recognized. That is, children in unrecognized private schools scored nearly 18 percentage points more in math than children in government schools.’ The reason is that on average, they had smaller class sizes, more motivated teachers, all the while spending less than public schools. When parents pay the fees that keep a school afloat, he reasons, the school becomes more accountable to them.

These schools do not get recognition because they do not meet standards—i.e. they do not have a playing field of a certain size and they cannot pay government salaries to teachers (which after the Sixth Pay Commission are around Rs 20,000 per year). If they had to pay those salaries and have those playing fields, the schools would have to quadruple their fees. Then they would no longer be schools for the poor.

Professor Tooley’s pioneering research has turned the conventional wisdom on its head with a profound message of empowering the poor. Instead of being dependent on government and foreign aid, the world’s poor are educating their children with their own rupees. Instead of trying to uproot this beautiful tree and close these schools, governments should help them to obtain some form of graded recognition so that they are not outside the law. The Beautiful Tree is required reading for anyone who cares about achieving universal education in India.

Bring in reforms to prevent more Kodas

2009-12-12T15:59:00.002+05:30

At a smart luncheon party in South Delhi this week something very peculiar happened. Someone blurted out, ‘These high and mighty guests are friends of Madhu Koda!’ This did not go well with our celebrity hostess, to whose discomfort the conversation soon went downhill as people sought the latest ‘juice’ on the Koda scandal. To my surprise, a consensus seemed to emerge that liberalization was at the root cause of corruption.

The link between corruption and economic reforms was also echoed in a cover story in one of our national magazines this week. In an opinion poll conducted by MDRA and the magazine, 83.4% of the people in eight major Indian cities believed that corruption had gone up after the liberalization process. It confirmed to me that people, who are otherwise sensible, still do not get it. They do not understand that corruption persists in India because reforms are incomplete and scams occur in sectors like mining which have not been reformed.

Madhu Koda’s is a rags to riches story. A labourer in a state owned iron ore mine in Chaibasa becomes an MLA in 2000. Five years later he is minister in charge of the lucrative mines portfolio. In 2006, he wins the ultimate prize--he becomes Jharkhand’s chief minister. Along the way he amasses Rs 4000 crores by giving away mining licenses in exchange for bribes, according to the charge-sheet. He turns non-entities into mining barons, gifting 11,100 acres of land to dubious companies. But he shares his wealth with his friends and everyone is happy.

Mining, like defence contracts, is prone to corruption. Extracting resources from the ground does not lend itself to the usual rules of competition. A mine is a natural monopoly and the state, which gives the right to mining, is also a monopoly. The two come together in the backroom and you get crony capitalism. What is the answer? It is not to focus on individuals but to change the system. Simulate competition. Have open, transparent bidding under a firm regulator (like an auction). The regulator evaluates the quantity and quality of coal in a mine, sets a minimum price (to keep out frivolous bidders and cartels) and offers the mine to the highest bidder. This would replace the present corrupt system of leases and licences, of monitoring production at each mine, checking each truck to ensure the operator does not clear 100 trucks and records only 30.

This is a tried and proven system followed in sensible mining countries and it will prevent future Kodas. The petroleum ministry has adopted it in India and it routinely auctions oil and gas fields. The Ambani brothers will not allow us to forget the many contentious issues related to the gas flowing from the Krishna-Godavari basin. But no one has criticised the government of corruption in awarding the gas fields to Mukesh Ambani’s company. The reason is that they were won in an open auction.

It is also important to break the monopoly of Coal India and de-nationalize coal mines which were nationalized by Indira Gandhi in 1973. India is the third largest producer of coal in the world but we have suffered immensely in the past 36 years from the lack of competition. ‘Power plant shut down because of lack of coal’ is a common headline in our local papers. Koda is a creation of this system. Efforts to undo it--Coal Mines (Nationalisation) Amendment Act 2000—remain stuck because politicians in the mining states do not want it.

Good societies do not look to heroes. They quietly reform their institutions. The best news is that we have in Delhi a coal minister, Sriprakash Jaiswal, who wants to reform precisely along the lines outlined above. His ministry is ready with a Bill to set up a regulator and open coal mining to competition. The Koda scandal should give him boost, but this reform will only happen if the entire cabinet and Sonia Gandhi put their weight behind it in order to counter the powerful lobby of mining interests, state politicians and bureaucrats.

The word ‘coda’ means the concluding passage in a composition of Western classical music. The coda in Madhu Koda’s story will hopefully see a speedy trial and a deterrent sentence for the guilty. But the really satisfactory coda will be the reform of the mining sector along the lines of the Hoda Committee report. The Koda story teaches that the answer is more reforms rather than less. Not only economic reforms, we need police reforms to make our investigating agencies autonomous; judicial reforms to speed up justice and deter future Kodas; administrative reforms to punish rotten bureaucrats and reward good ones and bring accountability; finally, political reforms to prevent criminals from entering politics. Only then will dharma rise in our nation. -

Wanted : A World Fit For Women

2009-12-08T15:46:00.000+05:30

The conviction this week of Ajeet Singh Katiyar in Delhi in the notorious Dhaula Kuan gang rape case of a university student from Mizoram is good news. More important than the conviction is the 71 page judgement of the court which admonished the defence for maligning the victim and maintained that the private life of the victim is irrelevant. ‘A lady who has lost her virginity is not unreliable’ said the judge, whose verdict was primarily based on the victim’s consistent testimony.

We seem to have come a long way from the 1979 case of 16 year old Mathura, who was raped by two policemen within a police compound when the court acquitted the policemen on the grounds that Mathura had eloped with her boyfriend and ‘was habituated to sexual intercourse’. This case ultimately went to the Supreme Court, which sadly upheld the verdict. It became a landmark case, which went on to energise the women’s movement in India.

There were echoes in this week’s judgement of another historic case--that of Hanuffa Khatoon, who was gang raped in 1998 at the Howrah Station by railway employees. In that case, the Supreme Court in an unprecedented judgement held rape to be a violation of the fundamental right to live with human dignity. The court said: ‘Rape is a crime not only against the person of a woman, it is crime against the entire society…Rape is therefore the most hated crime’.

It is to literature that one turns to understand the human moral condition. The Mahabharata offers an amazing moment of insight about women’s status. After Yudhishthira loses everything in the game of dice to Shakuni, Queen Draupadi is dragged by Duhshasana into the assembly of nobles to humiliate her. She cries out, ‘this foul man, disgrace of the Kauravas, is molesting me, and I cannot bear it’. She reveals a right wing conspiracy to steal her husband’s kingdom in a rigged game of dice and looks to the elders in the assembly at Hastinapur for justice. But they fail her. Most disappointing is selfless Bhishma, who says ‘a woman and a slave are the property of others’. In the end, as every Indian child knows, only her never ending sari protects her from being disrobed. By the way, a company offered a ‘Draupadi Collection’ of saris after the successful TV series, which presumably did not stretch infinitely.

The attempted public disrobing of Draupadi is consistent with the moral paradigm of patriarchy. Karna’s revolting remarks show that patriarchical culture divides women into angels and whores. Draupadi has become a ‘whore’ in Kaurava eyes after their ‘defeat’ of the Pandavas. Their big-chested masculinity does not allow them to think that this unhappy person could have been ‘me’. Their wish to humiliate her is also related to the disgust that many men feel towards the sexual act. All cultures contain the seeds of violence when it comes to female sexuality. Tolstoy’s famous novella, The Kreutzer Sonata grew out of the Russian writer’s own relationship with his wife, and it describes the events that lead to her murder. The husband has violent and humiliating sex with her, and he feels miserable each time he rapes her. Since she is merely an object of bestial desire, he decides that he must kill her to put an end to his misery. Only after her death does she become ‘human’ in his eyes.

It is tempting to believe in the cynical French saying that the more something changes the more it remains the same. In two areas, however, there has been dramatic advance in human equality. One is the almost complete elimination of slavery in the world and the other is the recent rise in the status of women, even in urban India. Indian law has done its bit in addressing the issues of property, dowry, and domestic violence (and some claim that it may even have gone too far). But the real change has come with the dramatic rise in women’s education and job opportunities in a rapidly growing economy. Two-thirds of India’s women still live in villages, of course, and they have a long way to go but India is rapidly urbanizing and they too will soon feel the change.

At last, good news about poverty

2009-11-15T15:55:00.000+05:30

If only we would pause and look beyond the horizon of day to day events, we would see a trend of great significance. More people on the earth have risen out of poverty in the past 25 years than at any other time in human history, and this has happened primarily because of sustained high economic growth in India and China. Unlike China which has embraced growth enthusiastically, India has a vast industry of ‘poverty-wallas’, who incessantly raise doubts if our growth is pro-poor.

These ‘growth skeptics’ tend to make our reformers defensive, which slows reforms and the nation loses the potential for even higher growth. Earlier they argued that post-reform growth was ‘jobless’ until recent data has proved them wrong. Nowadays, they usually say, ‘growth but…’ While the type of growth does matter, the truth is that growth in itself is virtuous, and we should celebrate that India is experiencing this miracle.

Now, two experts on poverty have come up with new research which shows that India’s high economic growth since 1991 is, indeed, pro-poor and has decisively reduced poverty. Gaurav Datt and Martin Ravallion, both respected economists, employed a new series of consumption-based poverty measures from 1950 to 2006 and 47 rounds of National Sample Surveys, to show that slightly more than one person in two lived below the poverty line in India during the 1950s and ‘60s. By 1990 this had fallen to one person in three. By 2005, it fell again, and only one in five persons now lives below the poverty line.

The authors conclude that ‘the post-reform process of urban economic growth has brought significant gains to the rural poor as well as the urban poor’. (See ‘Has India’s Economic Growth Become More Pro-Poor in the Wake of Economic Reforms?’ http://econ.worldbank.org, Policy Research Working Paper 5103). The poor in urban and rural areas are now linked through trade, migration, and transfers, which explains why rising standards in India’s towns are helping to reduce poverty in the villages. Even though agricultural growth has been relatively weak since 1991, overall high growth has affected positively the lives of the rural masses.

This is an outcome that the reformers had dreamt of. They believed that the reforms would create a more efficient and productive economy, which would raise the overall growth rate and it would transform both urban and rural society. This had happened during the great transformations which occurred in the West during the 19^th century and in East Asia in the second half of the 20^th century. It is now happening in India.

An earlier study by the two economists had examined the period prior to 1991 when our economy grew more slowly. India’s per capita GDP grew at an annual rate of barely 1% in the 1960s and 1970s; it picked up to 3% in the 1980s; and accelerated to 4-5% after 1991. In the pre-1991 period, modest urban growth brought little or no benefit to the rural poor. (Rural poverty decreased only through rural growth, such as the green revolution.) High growth after 1991 seems to be different—it has pro-poor backward linkages to the rural economy. Hence, the effort to create a more productive economy through the reforms is benefiting the poor, and we have the permission now to dream of becoming a middle class country. The dampener, alas, is that inequality after 1991 is also increasing.

This happy news, however, must be seen in the context of lost opportunities. If only India had reformed agriculture and had functioning schools and health centers, the poor would have gained even more from high growth. In another study comparing India, China and Brazil, Martin Ravallion shows that China (with higher growth) and Brazil (with lower growth) have done a much better job at poverty reduction. India’s failure in education and health is not a function of money alone, as the Prime Minister suggested this week when he vowed to raise spending on education to 6%. When one in four teachers is absent and one in four is not teaching, we need accountability in delivering services to the poor. Thus, administrative reforms are just as important to the lives of the poor than even economic reforms.

No ifs or buts, defeat Maoist violence

2009-10-25T13:14:00.000+05:30

Arundhati Roy writes seductively. Recently I picked up her new book, Listening to Grasshoppers, and I was mesmerized by her luminous prose but I disagreed profoundly with her conclusions. I was revolted, in particular, by her support for violence. She regards Naxalism as armed resistance against a sham democracy. I call it terrorism.

Roy thinks that India pretends to be a democracy in order to impress the world. I think our democracy is as real as my grandson’s thumb. Yes, it has many flaws but it is legitimate. We need to reform the police; speed up justice; make babus accountable; stop criminals from entering politics; etc.. Yet, this democracy has done a colossal amount of good. It has raised the prospects and self esteem of the lowest in our society and protected us from the great genocides of the 20th century. Gujarat, to its disgrace, may have killed 2000 people but Mao’s China killed more than 50 million, according to the Marxist historian, Eric Hobsbawm. One may be justified in taking up arms against a loathsome African or Latin American dictator but not against the Indian state.

Like many in the 1960s I was a Leftist and admired Charu Mazumdar who had founded the Naxalbari movement. Although I belonged to that idealistic middle class generation, I was not tempted to abandon all and join the Maoists. Perhaps, it was because I lived in sensible Bombay rather than Calcutta. The Naxalite movement died in the 1970s but it revived subsequently and today it operates in 200 districts across ten states and controls huge Indian territory. The Prime Minister thinks it is the greatest security threat to India, and I agree.

Soon after the Maoist leader, Kobad Ghandy, the police in Hazaribagh got another prize catch. On October 10th, they captured Ravi Sharma and his wife, B. Anuradha. Top level Naxalites, they hailed from Andhra but were running the Maoist movement in Bihar and Jharkhand for the past ten years. On their laptop the police found their strategy and their plans. Ravi Sharma is an agricultural scientist and a member of the Maoist Central Committee. As he was being led by the police to the court in Hazaribagh, Sharma told reporters that he did not regret killing thousands of people. “During a revolution,” he spoke honestly, “one does not care how many are killed; only the goal should be achieved.”

Ravi Sharma thus raised the old dilemma of means and ends. Vidura posed the same question in the Mahabharata when he justified sacrificing an individual for the sake of a village and a village for the sake of a nation. Vidura, like Sharma, judges an act to be dharmic if it produces good consequences for the greatest number of people. Yudhishthira, however, is concerned with means rather than ends. Having given his word to Dhritarashtra, he refuses to give in to Draupadi’s insistent demand that Pandavas raise an army and win back their kingdom which was stolen in a rigged game of dice. No matter how great the goal, Yudhishthira would not condone the Maoists’ use of violence.

I usually agree with Vidura but on this one I am with Yudhishthira. Marxists have never valued human life and have always found it easy to take the gun. Mao and Stalin easily justified killing millions for the sake of the revolution. They never understood that violence in the end brutalises both the oppressor and the victim. Neither should we let the Indian state get away by using wrong means for the sake of good ends. I agree with Arundhati Roy that the state should not get away with unlawful detention or killing people in custody. I applaud her and human rights activists for raising these issues.

The Naxalite movement has always found sympathy in our influential, leftish upper middle class. Like most people I was aghast at the beheading of police officer Francis Induwar on September 30 by the Maoists, and I expressed my horror to an elegantly dressed friend who was visiting me. She is with an NGO and has sentimental feelings for Maoists. She said, “Yes, it is wrong, but we need development as well as force to defeat Maoists.” I could not disagree with her, but I was appalled at the ease with which she dismissed the beheading. Mamata Banerji, the leader of Trinamool Congress, had the same response.

For once we have a home minister who understands the Maoist threat to our nation and is determined to act with courage. It is pathetic that he should be slowed by endless debate on development versus police action; or whether helicopters should fire on rebels and risk civilian casualties. We have talked for two decades. Enough is enough. No ifs or buts, you cannot negotiate with someone with a gun. Now is the time for action.
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Gurcharan Das is the author of The Difficulty of Being Good: On the Subtle Art of Dharma

Mukesh’s Sacrifice

2009-10-17T13:52:00.000+05:30

Corporate Affairs minister, Salman Khurshid, created quite a stir recently when he warned companies to refrain from paying “vulgar salaries” or face the music. Mukesh Ambani took his advice and cut his salary by 65%. Flaunting wealth is distasteful; it is also imprudent when market capitalism is still trying to find a comfortable home in India. However, the minister was profoundly wrong. The trouble with judging other people’s lifestyle is that soon you are tempted to control other things, and this is a short step to the command economy. Not to live ostentatiously is a call of dharma, not a legal duty.

The distinguished minister, who is a sensible lawyer, quickly realized his error and pulled back the next day. “Only the company’s shareholders can decide salaries…It cannot be mandated, but should be self-exercised,” he said. Yes, this is the right position—only shareholders have the right to fix salaries in a democracy, not the government. The significance of the minister’s two positions, however, goes beyond vulgar salaries and reflects an old conflict between our ideals of liberty and equality.
There is a voice in each of us which values liberty. It was alarmed at the spectre of the dreaded days prior to 1991 when our government did believe that the way to make a poor person rich is by making the rich poor. There is another voice, however, which values equality. This egalitarian voice was sympathetic to Khurshid’s advice to CEOs. Millions are hurting from the global economic recession and something is wrong when some earn Rs 40 crores while 250 million Indians survive on less than Rs 50 a day.

These two voices constitute the modern idea of a fair society. In democracies, liberty precedes equality. Socialist societies value equality more and will sacrifice freedom for more state control. The contest between these two ideals has been going on for 200 years but it ended when the Soviet Union collapsed in 1989. Liberty won, and it will win in China too one day. Absolute equality is unrealistic because the human ego will not shrink that far. So we have learned to live with the lesser goal of an “equality of opportunity”. In our desire for a just society, the political Left continues to champion equality while the Right gives precedence to liberty.

I have always believed that it is none of my business how much Mukesh Ambani earns. He creates lots of jobs, pays his taxes, produces wealth for society--and that is good enough for me. Moreover, we ought to be more concerned with reducing poverty in a poor country rather worry about inequality. Controlling CEO salaries will not lift the poor. But economic reforms will. A minister of corporate affairs can make a huge difference by making it easier for a person to start and run a business. The vast majority of Indians are self-employed entrepreneurs in the informal economy. They cannot enter the formal economy because of formidable barriers of red tape and bribery. Hence, India has the shameful distinction of being 134 in a list of 180 countries in the ease of doing business. Cut the tape, Mr Minister, and you will spawn enterprise and prosperity.

A well-ordered society, however, ought to design institutions that help to diminish inequality while preserving liberty. If the advantages of the affluent are perceived as a reward for improving the situation of the worst off, then the inequality will be perceived as more just. If the lowest worker in a company believes that his prospects will improve if his company performs well, then he will not resent an outstanding CEO earning 50 times more. This was elaborated elegantly by the American thinker, John Rawls, in his famous book, The Theory of Justice.

If you want to take the sting out inequality, Mr Minister, cut red tape but also give the poor titles to their small property so that they can get a loan against it and start a business. And persuade your UPA colleagues to implement labour reforms so that 90% of Indians in the informal economy can hope for some sort of safety net. This is the way to genuine, inclusive growth. And let’s not worry too much about vulgar salaries.

Is the middle path the way to peace with Pakistan?

2009-09-27T16:02:00.000+05:30

The foreign ministers of India and Pakistan are meeting today in New York to carry forward the peace dialogue begun at Sharm-el-Sheikh. India’s decision to meet has been prompted by Pakistan’s arrest of Hafiz Saeed, the mastermind of the Mumbai terror attacks. Many Indians feel cynical, however, about today’s meeting, especially after the disappointment at Sharm-el-Sheikh. Negotiating with a nation whose secret service might be plotting the next terrorist attack on you seems bizarre, but is there an alternative to the slow, maddening grind towards peace with our neighbour?

All of us dream of waking up one day to discover that the border between India and Pakistan had become as peaceful as the one between Canada and United States. It seems hopelessly romantic, but this is precisely what happened to France and Germany who were in perpetual conflict for 75 years. Now one cannot imagine these two European enemies ever going to war. If India and Pakistan could pull this off, we might even realize the vision of C. Rajagopalchari, who wanted the sub-continent to become re-unified into a peaceful confederation of nations like the European Union.

After the terrorist attack on Mumbai on 26/11, Indians were divided over how to respond. The hawks wanted to make a precision attack on the camps of Lashkar-e-Toiba. They modelled their strategy on Israel’s retaliation for the attack of its athletes in Munich. (You can watch it in the thriller, Munich, available on DVD.) The doves, on the other hand, advocated ahimsa, preferring to take the high moral ground and turn the other cheek. The third position was more circumspect and lay between these extremes. It is the policy which the Indian government has patiently pursued--providing dossiers of evidence to Pakistan, hoping that world pressure would force it to act against the terrorists. Will this frustratingly slow middle path reward us with lasting peace?

The Mahabharata seems to think so. Unique in engaging with the world of politics, the epic also had to wrestle with the same three positions. The first was the ‘amoral realism’ of Duryodhana, who believed that ‘might is right’ and when in doubt strike your enemy. At the other extreme was the idealistic position of the early Yudhishthira, who refused to follow Draupadi’s sensible advice, which was to gather an army and win back their kingdom stolen by the Kauravas in a rigged game of dice. The epic also adopted a pragmatic, middle path of negotiation, but when Duryodhana refused to part with the Pandavas’ rightful share, Yudhishthira had to declare war.

Mahabharata would thus reject the hawkish idea of a retaliatory strike against the terrorist camps in Pakistan--not for ideological reasons, but because it would only escalate the conflict. Israel’s many retaliatory strikes against Palestine have failed to ‘teach them a lesson’. It would also reject the dovish high moral ground of ahimsa because ‘turning the other cheek’ sends wrong signals to terrorists and the ISI. It would commend upright Manmohan Singh’s middle path of negotiation. But if negotiations fail, the Indian PM must be prepared to wield danda, ‘the rod of force’, just as Yudhishthira had to.

This pragmatic middle path is akin to the evolutionary principle of reciprocal altruism, which socio-biologists have made popular in recent decades--smile at the world but do not allow yourself to be exploited. Your first move should be of goodness, but if you are slapped, then you have to reciprocate and slap back. Many Indians believe that our government is not following this sensible advice. We are either too conciliatory or too scared of Pakistan’s nuclear weapons. Hence, Pakistan thinks us weak, and its secret service has no qualms in planning its next terrorist strike.

This is not entirely true. We may be unwilling to play ‘tit-for-tat’ but we have never compromised on our basic principles. Take Kashmir. Pakistan believes that peace with India depends on settling the Kashmir dispute, which is a doubtful proposition. India has held firmly that the answer to Kashmir lies in getting everyone to accept the line of control as the permanent border. It is true we have lost many historic opportunities to achieve this. Our best chance was after the Bangladesh War when we should have made it a condition at the Simla Conference for the exchange of Pakistani officers and soldiers.

As the bigger and more powerful nation India has to be more conciliatory. As the world’s second fastest growing economy, we cannot afford to be distracted by interminable ‘tit for tats’. Yes, Pakistan does drag us into a pit of identity politics, hobbles us at every step, and sidetracks us from our real destiny. This is all the more reason to accept the slow, hard and frustrating grind towards a negotiated peace. In the meantime, the best medicine is to try and ignore Pakistan.

Let’s protect workers, not jobs

2009-09-19T11:49:00.001+05:30

Anyone travelling in India by air must have got a sinking feeling last week when the Congress leader, Sanjay Nirupam, demanded that Jet Airways be nationalized. He raised the spectre of the ugly days when Indian Airlines had a monopoly of the skies before 1991. This would have effectively turned Jet Airlines from one of the world’s best airlines to one of the worst. Naresh Goyal, Jet’s founder, on the other hand, was scared of his pilots forming a union because of his memory of the 1974 Air India pilots’ strike which started the decline and fall of Air India.

The trouble in Jet Airways began when some of its pilots wanted to form a union. The management said 'no', and sacked two of the leaders. In response, the other pilots went on ‘mass sick leave’, which left tens of thousands of passengers stranded, wondering who to blame for their undeserved suffering. This comes at a time when the aviation industry is going through very tough times and Jet Airways has reported a loss of over Rs.200 crore in the last quarter. The strike added another Rs 200 crores to its losses.

The Mumbai High Court ruled the strike illegal. After the dispute was settled last week end, Justice D.Y. Chandrachud, refused to drop the charges against the pilots. Reflecting the angry public mood, he wanted to prosecute the pilots for contempt of court. “Employees of public utility services…cannot hold the public to ransom”, said the judge. The pilots’ lawyer argued, “Pilots are an emotional lot and have a sensitive task”. The judge countered, “Even doctors and judges have sensitive jobs”.

The right to form a union is part of every democracy but should pilots, who earn Rs 3-4 lakhs a month, be equated with down trodden labour? Should persons who perform essential services in public transport, military, police, and hospitals, be allowed to disrupt services? The judge obviously does not think so.

The Jet Airways affaire is an opportunity to revisit our archaic labour laws which hurt the interest of 90% of India’s employees while protecting an aristocracy like the pilots. Of course, labour laws are needed, but they should protect workers, not jobs. All governments try to prevent job losses but they never succeed. Companies have to survive in dynamic market conditions. In a downturn, orders are reduced from customers and the only choice before a company is to reduce its workforce or go bankrupt. Sensible countries, like those in Scandinavia, give employers the freedom to hire and lay-off workers based on market dynamics. They protect workers who lose jobs through a well designed safety net of unemployment insurance and re-training. .

India’s labour laws do the opposite—they protect jobs, not workers. They assume that a job is for a lifetime, and do not allow employers flexibility to lay-off workers in a downturn. Thus, Indian companies avoid hiring permanent employees, and 90% of India’s workers have ended up in the informal sector without any benefits or safety net. This is one of the reasons that the manufacturing sector has not become an engine of mass employment in India as it has in the Far East.

The answer is not to equate income security with job security. Let us begin by raising job retrenchment costs from the present15 days’ salary for every year worked to 45 or even 60 days. Second, amend Provident Fund rules so that employees can access their retirement accounts when they lose jobs. Third, raise the contribution to Provident Fund in order to provide a softer landing to job losers. Fourth, cover unemployed workers under a universal health insurance, such as the excellent RSBY (Rashtriya Swasth Bima Yojana). Finally, companies should pay for worker re-training and inflict pain on all employees before laying-off some—e.g. cut executive salaries by 50% (as Jet Airways has done) and worker salaries by 25%. Unions will object of course, but the reform of unions has to be part of the solution.

The Jet Airways strike has presented us with a mirror to look at our labour laws, showing how we deceive ourselves, thinking that we are protecting labour when we are only protecting an aristocracy like the pilots.

The dilemma of a liberal Hindu

2009-09-06T13:05:00.000+05:30

With the rise in religious fundamentalism around the world, it is increasingly difficult to talk about one’s deepest beliefs, says Gurcharan Das

I was born a Hindu, in a normal middle-class home. I went to an English-medium school where I got a modern education. Both my grandfathers belonged to the Arya Samaj, a reformist sect of Hinduism. My father, however, took a different path. While studying to be an engineer, he was drawn to a kindly guru who inspired him with the possibility of direct union with God through meditation. The guru was a Radhasoami saint, who quoted vigorously from Kabir, Nanak, Mirabai, Bulleh Shah and others from the bhakti and sufi traditions.

Growing up Hindu was a chaotically tolerant experience. My grandmother visited the Sikh gurudwara on Mondays and Wednesdays and a Hindu temple on Tuesdays and Thursdays; she saved Saturdays and Sundays for discourses by holy men, including Muslim pirs, who were forever visiting our town. In between, she made time for Arya Samaj ceremonies when someone died or was born. Her dressing room was laden with the images of her gods, especially Ram and Krishna and she used to say in the same breath that there are millions of gods but only one God. My grandfather would laugh at her ways, but my pragmatic uncle thought that she had smartly taken out plenty of insurance so that someone up there would eventually listen.

I grew up in this atmosphere with a liberal attitude - that is a mixture of scepticism and sympathy for my tradition. Why then do I feel uneasy about being a liberal Hindu? I feel besieged from both ends — from the Hindu nationalists and the secularists. Something seems to have gone wrong. Hindu nationalists have appropriated my past and made it into a political statement of Hindutva. Secularists have contempt for all forms of belief and they find it odd that I should cling to my Hindu past. Young, successful Indians, at the helm of our private and public enterprises, have no time or use for the classics of our ancient tradition.

A few years ago, I told my wife that I wanted to read the Mahabharata in its entirety. I explained that I had read the Western epics but not the Indian ones. She gave me a sceptical look, and said, “It’s a little late in the day to be having a mid-life crisis, isn’t it?” To my chagrin, I became the subject of animated discussion at a dinner party soon after.

“So, what is this I hear about wanting to go away to read old books”, asked my hostess, “aren’t there any new ones?” She gave my wife a sympathetic look.

“Tell us, what you plan to read?” asked a retired civil servant who had once been a favourite of Indira Gandhi. He spoke casually as though he was referring to the features of a new Nokia phone. I admitted that I had been thinking of the Mahabharata.

“Good lord, man!” he exclaimed. “You haven’t turned saffron, have you?”

I think his remark was made in jest, but it upset me. I found it disturbing that I had to fear the intolerance of my “secular” friends, who seemed to think that reading an epic was a political act. I was reminded of a casual remark by a Westernized woman in Chennai who said that she had always visited a Shiva temple near her home, but lately she had begun to hide this from her fiercely secular friends, who she feared might paint her in saffron.

With the rise in religious fundamentalism around the world, it is increasingly difficult to talk about one’s deepest beliefs. Liberal Hindus are reluctant to admit to being Hindu for fear they will be linked to the RSS. Liberal Christians and liberal Muslims abroad have had the same experience. Part of the reason that the sensible idea of secularism is having so much difficulty finding a home in India is that the most vocal and intellectual advocates of secularism were once Marxists. Not only do they not believe in God, they actually hate God. As rationalists they can only see the dark side of religion -- intolerance, murderous wars and nationalism and cannot empathize with the everyday life of the common Indian for whom religion gives meaning to every moment. Secularists speak a language alien to the vast majority, so they are only able to condemn communal violence but not to stop it, as Mahatma Gandhi could, in East Bengal in 1947.

Part of the problem stems from ignorance. Our children do not grow up reading our ancient classics, certainly not with a critical mind as youth in the West read their works of literature and philosophy in school and college. In India, some get to know about epics from their grandmothers; others read the stories in Amar Chitra Katha comics or watch them in television serials.
If Italian children can read Dante’s Divine Comedy in school, English children can read Milton and Greek children can read the Illiad, why should “secularist” Indians be ambivalent about the Mahabharata? It is true that the Mahabharata has lots of gods and in particular that elusive divinity, Krishna, who is up to all kinds of devious activities. But so are Dante, Milton and Homer filled with God or gods?

I suspect Mahatma Gandhi would have understood my dilemma about teaching the Mahabharata in our schools. He instinctively grasped the place of the epic in an Indian life and he would have approved of what V S Sukthankar wrote: “The Mahabharata is the content of our collective unconscious .... We must therefore grasp this great book with both hands and face it squarely. Then we shall recognize that it is our past which has prolonged itself into the present. We are it." The epic has given me great enjoyment in the past six years and I have become a Mahabharata addict. I feel sad that so many boys and girls in India are growing up rootless, and they will never have access to these forbidden fruits of pleasure.

As we think about sowing the seeds of secularism in India, we cannot just divide Indians between communalists and secularists. That would be too easy. The average Indian is decent and is caught in the middle. To achieve a secular society, believers must tolerate each other’s beliefs as well as the atheism of non-believers. Hindu nationalists must resist hijacking our religious past and turning it into votes. Secularists must learn to respect the needs of ordinary Indians for a transcendental life beyond reason. Only then will secularism find a comfortable home in India.

Adam Smith's Dharma

2009-08-21T13:48:00.001+05:30

In January this year, President Sarkozy of France, former Prime Minister Tony Blair of England, and the German Chancellor, Angela Merkel, kicked off a debate in Paris on the nature and the future of capitalism. It was in response to the global economic crisis. This article--my inaugural column for the Times on Saturday--is a contribution to this debate.

The idea that an ancient Indian epic might offer insight into capitalism’s nature, on the face of it, appears bizarre. The truth is that the Mahabharata’s world of moral haziness is far closer to our experience as ordinary human beings than the narrow and rigid positions that define debate in these fundamentalist times. Capitalism is also about ordinary persons--buying and selling goods in the market place.

The Mahabharata believes that human beings are flawed and these flaws make our world ‘uneven’, vishama--making us vulnerable to nasty surprises. Duryodhana is one of the chief causes of ‘uneveness’ in the epic. Others too have their flaws--Yudhishthira’s weakness for gambling, Karna’s status anxiety, Ashwatthama’s revengeful nature, Dhritarashtra’s excessive love for his eldest son, and so on. These defects are dangerous and they drive the epic towards calamity. Investment bankers on Wall Street and rating agencies suffered from similar infirmities. And they have brought the global capitalist system to its knees.

John Maynard Keynes, the great economist, had a comparable insight about our ‘uneven’ world. He lived during the Great Depression when there were also many calls to end capitalism. The unevenness of the world is caused by what Keynes called, ‘animal spirits’, which drive businessmen to take risks, often in the face of insufficient knowledge. John Nash, the Nobel Prize winning hero of the movie, A Beautiful Mind, traced this to ‘asymmetries of information’. And this leads to crises--such as the dotcom bubble, in which many sensible persons quit their jobs in order to make a fortune. It burst in 2000 but was soon replaced by another mania of the ‘smart flippers of securitized mortgages of sub-prime properties’, which sent the world into a recession in 2007. Keynes believed that a capitalist economy left to itself is unstable, and needs state regulation.

Standard economic theory makes the mistake in ignoring the role of human passions and animal spirits. Ever since Adam Smith, classical economics has assumed that capitalism is inherently stable. People buy and sell rationally, and this results in equilibrium. Classical economics ignores vishama--that people get into manias and even paan-wallas start buying shares on the basis of rumours. When manias take over there are bubbles and when bubbles are pricked confidence falls sharply and the whole economy collapses. Hence, we need regulation to ensure people are not falsely lured into buy bad assets. This regulation, however, must not kill the ‘animal spirits’ of entrepreneurs, which is what happened in India during the ugly days of the License Raj…and we almost lost two generations.

If Keynes thinks the answer lies in regulation, the Mahabharata seeks to ‘even’ out the world through dharma. Dharma is a complex word—it means virtue, duty, law, religion depending on the context, but it is chiefly concerned with doing the right thing. The Mahabharata recognizes that it is in man's nature to want more. Dharma seeks to give coherence to our desires by containing them within an ethical life. No amount of regulation will catch all the Duryodhanas and the Ramalingam Rajus of the world. What is needed is self-restraint on the part of each actor in the market place in order to build trust within society. The sunny world of Adam Smith may have been a tad optimistic, but Smith understood the importance of trust which underlies each transaction in the marketplace. This trust is the ‘dharma of capitalism’.

Regulators and central bankers around the world are wrestling with how to reform their financial systems. They are expending huge energy in debates between the political Left and the Right when the greater divide is between conduct in accordance with dharma and adharma. It is not enough to punish Ramalingam Raju. Institutions must also develop a culture of self-restraint and reward an act of goodness--one of the very few things of genuine worth in this world.
---
The writer is the author of the book, ‘The Difficulty of Being Good: On the Subtle Art of Dharma’, which examines the ambiguous moral life of India under the lens of the Mahabharata. It is being launched next week.

An old tale of two modern brothers

2009-08-18T13:41:00.000+05:30

Once upon a time there was an ambitious young man named Mukesh Ambani who invested Rs 38,000 crores to look for gas, deep on the ocean’s floor off the turbulent coast of Andhra Pradesh. Some called him mad. If ONGC, the government exploration company, did not find anything after wasting thousands of crores of taxpayer’s money for decades, how could he risk his and his shareholder’s money in this reckless manner? What if nothing was found?

They did not know that Mukesh is one of life’s winners. Not only did he find the gas but the amount was beyond anyone’s wildest dreams. It was the biggest energy discovery in the world at the time. More impressive still, he has brought it into comercial production in half the normal time, thus creating another world record. No wonder he is a hero to millions. His breakthrough will reduce significantly the nation’s energy bill for importing oil and it reinforces our faith in private exploration. And there is still much more gas under the ocean floor, according to experts--Myanmar has also found gas at its end of the same ocean. Given the nation’s desperate need for energy, we must hurry and find it.

Mukesh Ambani has a younger, more flamboyant brother named Anil, who is also highly accomplished. But he has a different temperament--he loves glamour and power and cultivates politicians and film stars. In fact, he is married to one. All this does not not go down well with his sober, older brother. After their father died, power passed on to Mukesh. Since he did not trust Anil, he ignored and marginalized him. Anil fought back. After a fearsome battle, their mother intervened and divided the business. We have a saying in India: “Haveli ki umar saath saal”, which means the life of a business house is 60 years. After that the family splits up, usually in the third generation. But the Ambani brothers have split up in the second.

As part of the family division, Mukesh agreed to provide gas to a power plant which Anil intended to put up in U.P. at a price of $2.34 per mmbtu. This was the price that Mukesh also agreed to supply NTPC, the mamoth government owned power producer. Mukesh refuses to honour these contracts. He claims that the official price is $4.20, which is also closer to today’s market price (based on actual bids made in April 2007). The difference in the two prices is worth tens of thousands of crores. So, a lot is at stake. Both the brothers, it seems to me, have a strong case, which is now before the Supreme Court, and I am glad I am not the judge.

Normally a fight between two brothers should not matter to the nation. But it does in this case. The quantity of gas is so vast that it affects the nation’s finances. A lower energy price also means lower inflation—it means a lower government subsidy to fertilizer and power plants. But a lower price also implies that the government will make a huge loss from its revenue sharing contract with Mukesh. Hence, the court has to bear in mind the interests of both the producers and the consumers of gas.

Whatever the outcome in the court, it is crucial that the image of India as a mature democracy with a rule of law is protected. Only then can we hope to attract investor-explorers in the future. They are all set to gamble vast sums without any certainty of finding the gas. They should at least have the comfort that they are dealing with a trustworthy government, which will not nationalize, nor change the rules of the game midway, and will uphold their contract. If the court judgement upholds the lower price, it will certainly dampen the spirits of investors. On the other hand, by upholding the prior contract between the brothers, the court will also send a positive signal to future investors that the rule of law prevails in India.

Investors are thus watching the government carefully. The state should not take sides in private conflicts. It should be neutral and fair. This is how trust is built. But last month Anil Ambani attacked Murli Deora, the petroleum minister, at the annual meeting of his company. He suggested that something smelled rotten—the government was favouring Mukesh. The suggestion of crony capitalism has shaken the confidence of investors. I cannot remember the last time when a businessman had the guts to publicly attack a cabinet minister. Businessmen have too much to lose--tax raids, denial of licenses and loans from public institutions. Why did Anil Ambani take this risk? Wait for the next episode.
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Gurcharan Das is the author of The Difficulty of Being Good: On the Subtle Art of Dharma, which interrogates the Mahabharata in order to answer the question, ‘why be good?’ It is being launched on August 25th.

Scenes from a Punjabi Childhood

2009-07-17T16:11:00.003+05:30

It was around four ‘o clock in the afternoon that my grandfather used to come home from the courts. We would eagerly await his arrival since he always brought home fresh sweets from the Bengali hunchback’s shop. As he approached the wooden gate of the house he would clear his throat, and this was a signal of sorts. His daughter- in- law would quickly cover her head; my grandmother would go to the kitchen and put water on for tea; we, his grandchildren, knew that it was the last round of dice in our afternoon game of Pachisi before the scores were tallied. This family routine persisted right through the 1940s.

My grandfather had other uses for his harsh, grating cry . When he cleared his throat in his office, his client knew that the interview was over, not unlike the government officer who signals the end of a meeting by noisily pushing back his chair. Occasionally, my grandfather would strike terror in the witness’s heart with the same piercing sound in the middle of an interrogation.
As we settled down to tea, my grandfather would ask, ‘So, what’s happening?’
‘Nothing much’, my uncle would reply nonchalantly, ‘Gandhi and Nehru were arrested again today ’.

My grandfather would grunt and the conversation would move on. We were a professional, middle-class family, not particularly given to patriotic enthusiasms. We were more interested in the latest scandal in our neighbourhood that had been uncovered by my uncle. Men like my grandfather were typical of a new professional middle class that had emerged in the late 19th century in the Punjab with the introduction of western education. It consisted of lawyers, post masters, railway engineers, medical and forest officers, and of course, bureaucrats and clerks.--all the new professions that were needed to run a province. Since passing an exam was the only barrier to entry, its members came from various castes and backgrounds. Although opportunities were open to all, the upper castes were the first to seize them. Once you learned English, cleared an exam, rewards and prestige were showered upon you. You became the new westernized urban elite whose rise matched the decline of the landed gentry.

My father was a civil engineer with the Punjab government and he spent his days building irrigation canals and bringing water to the parched land. I shuttled as a baby on the lap of my mother between canal colonies and my maternal grandfather’s sprawling home in Lyallpur. Most of Punjab was arid, but over three generations, the vision and toil of engineers like my father had created a network of canals that irrigated the land and turned it into a granary. The lower Chenab canal was one of the first to be built in the last quarter of the 19th century. With it came the orderly and planned town of Lyallpur, named after Sir James Lyall, the Lt. Governor of the Punjab. My grandfather proudly moved there in the early part of the twentieth century to start a law practice. And it was where I was born soon after Mahatma Gandhi challenged the British to ‘Quit India’ in 1942.

In the middle of Lyallpur was a brick clock tower from where eight roads emanated and a town spread out in concentric circles. Our house was off one of these roads called Kacheri Bazaar and the district courts were located there. Our road connected the tower with the sumptuous gardens of the Company Bagh which sprawled over forty acres. Since it was hot in the summers and cold in the winters, our daily life varied considerably with the seasons. We spent most of the day in our open courtyard where most of the business of the house was transacted. In the summers, we moved from the courtyard to the covered veranda before the sun rose too high. By midday, it was very hot and we went deeper into the cooler rooms inside. The bamboo shades came down after lunch as the house prepared for sleep. We returned to the courtyard in the early evening after the mashkiya had sprinkled cool water on it from his bag of goatskin. We even slept in the courtyard on hot summer nights and watched the brilliant stars high above. In the winters, this process was reversed. We slept inside and came out gradually with the morning sun. We spent most of the day in its luxurious warmth, shifting our chairs and charpais according to the sun’s path, and only returned inside at sunset.

Grandfather’s house was one of the first to come up in Kacheri Bazaar. He had been young and ambitious in the early years of the century with all the confidence of a man on the way up. He was filled with hope, thinking that the British were doing some good in India. Their railways had bridged the country and their canals had made a huge difference to the economy of the Punjab. But their best contribution, he felt, was the rule of law. As a lawyer he had experienced English justice first hand, and he reminded us more than once that English magistrates were mostly fair and decent.

As we sat drinking tea in the courtyard, grandfather would tell us of his latest case in court. My uncle would sometimes interrupt with an appreciative remark about the quality of the hunchback’s sweets. Conversation was the great pastime in our house. If two persons were together they would not read or work, they would sit down with a cup of tea and talk. And they could talk for hours about people they had never met. One day to our dismay, grandfather did not back bring sweets. He brought fruit instead. The house immediately rose up in revolt. Grandfather explained patiently that sweets were bad for us, and in the end he had to pull out all his lawyer’s tricks in order to persuade us. So, we switched reluctantly to eating fruit, and the air began to smell of mangoes and leechies in the summer and oranges and maltas in the winter. But for months we talked nostalgically of the hunchback’s sweets.

Grandfather valued routine, and at five o’clock his friends would arrive to play bridge. Some of them smoked the hookah while they played. Soon afterwards the family barber appeared and he gave give each bridge-player a shave, and would even oblige with a haircut if needed. After playing a few rubbers, grandfather would get up, ask for his cane and leave with his friends for the Company Bagh. As they walked, they talked about the politics of Lyallpur and of India, and in particular the growing distance between Hindus and Muslims.

In the gardens, grandfather was drawn to the odours exhaled by the exotic plants. Although his friends preferred the colourful beds of English flowers neatly laid out during our brief spring season, he was pulled by the fleshy, erotic scents of the magnolias, the jasmine and other decadent vegetation. He told us one day how he had been filled with nausea on learning that they had found the corpse of a Hindu boy in the carnation beds. The innocent boy had been stabbed by a Muslim youth and had come here to die all alone amidst the fragrance of the magnolias. They had found him face downwards, his face covered in vomit, his nails clinging to the soil. They had turned him over and he had covered the handsome face with his white handkerchief.
‘What did he die for, this poor boy?’ grandfather exclaimed when he returned home.
There were increasing incidents of violence between Hindus and Muslims throughout my childhood. One day when I was four my aunt had pulled me away from the window, and closed the shutters because a Muslim mob had begun to throw stones at our Hindu neighbour’s house. Grandfather talked about the madness of Hindus and Muslims killing each other ever since Jinnah had brought the possibility of a homeland for Punjab’s Muslims. Who would have thought, he said, that this would be the consequence of India’s struggle for freedom from colonial rule? His bridge friends reassured him that Hindus and Muslims had lived together for hundreds of years and they would continue to do so for hundreds more. It was merely a temporary insanity. After all, they were the same people--Indian Muslims were mostly converted Hindus. But we feared the worst.

After returning from the Company Bagh, grandfather would sit in his cane chair and watch the fading summer light in the courtyard. I sometimes joined him. We would watch my grandmother lead the women to the roof of the house in order to perform the sandhya. With lighted earthen lamps the women would chant Sanskrit verses in praise of the evening and the setting sun. Listening to them from below, grandfather had once observed with a smile that not a single one of them understood what she was saying.

My grandfather’s status had risen gradually over the previous decade as he had gradually married off his daughters, one by one, to Class I officials of the colonial bureaucracy. The eldest had married an official in the Indian Railways, who had impressed us with his luxurious salon-on-wheels in which he once came to visit us in Lyallpur. The second girl had married a professor of English in the prestigious government college at Lahore. He was an accomplished tennis and bridge player and this gave him an entry into a social world denied to the rest of the family. When he came to visit us in Lyallpur, he did not fail to drop important names casually in his conversation. The third, my mother, married a civil engineer in the Punjab government’s department of irrigation; and the fourth an officer in the Indian army. By marrying his daughters shrewdly to high-ranking professionals rather than to landlords, who were in fact wealthier than these officials, my grandfather bought social status and security for his family. And so we rose from the middle to the upper middle class within a generation.

As he rose in the world, grandfather became more finicky about his clothes. I would watch him change before he went out in the mornings. The servant would bring him polished shoes and helped him to put them on. Then he assisted him with his coat. Finally, it was time for the turban, an important moment, when all conversation was suspended. He wore his turban in a particular fashion, which he had learned from a stylish lawyer who had recently returned from Lahore, the capital of fashion. He made one, two, and then three turns around his head with the starched white cloth, and it was done. The servant offered him a silk handkerchief and his gold watch. He saw himself in the mirror and twirled his moustache. He looked a man of substance as he opened the gate and strutted off to his chambers.

After he left, my grandmother would get ready to do her social rounds in Lyallpur. She would be dressed in a starched white sari and she would often ask me to join her. We would set off at ten or eleven in the morning in our horse-drawn carriage, sometimes to mourn a death and other times to celebrate a birth or even an engagement. On the way we had to sometimes go through Civil Lines where the small British community and westernized Indians lived. The avenues would become broader and the bungalows more spacious. We passed the imposing Government House where the District Collector lived. It was a dazzling white building surrounded by colonnaded verandas set amidst acres of green lawn. Against the boundary wall there was an occasional splash of red or white bougainvillaea. The overall effect befitted the dignity of the district’s highest official. Next to it was the equally imposing government college surrounded by playing fields.

As our carriage went along the geometrically laid out roads and past the curving gravel driveways of the lesser officials of the Raj, my grandmother observed that the smells in this part of the town were different from ours. I once asked her why we could not live like this, in a stately house with green lawns amidst these splendid avenues shaded by trees. She replied that she would feel lonely here. She liked the bustle of the town, and she had got used to the high walls of her courtyard. My grandmother felt sure that she would feel naked in these ‘inside-out’ houses where the verandas and gardens faced the outside. It was not natural to live like this, she added

It was unnatural in another respect as well, and I understood this many years later. Civil Lines certainly had an unmistakeably different atmosphere from the chaotic part of the town where we lived, but it was not English either. Years later I visited England when I was grown up. I searched for our Civil Lines there but I did not find it. Our sun is too strong, our land is too flat, and these buildings were too imposing. Our alien rulers may have tried to create a bit of England, but they had not succeeded. Civil Lines was an imperial, intrusive, and antiseptic imposition and it was alien to both races.

During our journeys about town my grandmother would sometimes tell me a story from the Mahabharata. I would listen in fear and pity to her account of the epic’s great heroes. She had no doubt that the events actually happened. They had taken place before our degraded age. In those days, gods used to mingle with men, and human beings were more inclined to adhere to the highest ethics of dharma. Grandmother had a sense of cosmic time and she believed that the epic was a true account of the deeds of her righteous ancestors in the Punjab, who with the aid of the God, Sri Krishna, defeated unrighteous foes. For her the Mahabharata was not merely an epic—it was a divine work.
*******

I was born a Hindu and had a Hindu upbringing. My grandfather belonged to the Arya Samaj, a reformist sect that had come up in the nineteenth century. Our ancestors did not have a living memory of their own political heritage and this must have been difficult. We had lived under Muslim rulers since the 13th century and had regarded political life as something filled with deprivation and fear. After the Muslims, we saw the rise of the Sikh kingdom of Ranjit Singh, and with its collapse around 1850 came the powerful British with Christian missionaries in tow. Thus, three powerful, professedly egalitarian and proselytizing religions surrounded us--Islam, Sikhism and Christianity. And so I can understand why my ancestors were eager to receive the Gujarati reformer, Dayananda Saraswati, who established the Arya Samaj in the Punjab in the second half of the nineteenth century. He advocated a return to the Vedas, a diminished role for Brahmins and vigorous social reform. He ‘modernized’ our Hinduism.
‘Arya’ in Sanskrit means ‘noble’ among other things. European scholars in the nineteenth century took this ancient word from the Vedic texts to propagate a racial theory of ‘Aryan’ origins of Hindu culture and society based on a common Indo-European language system. We embraced this idea enthusiastically for it related us racially to European Aryans. Arya Samaj had the positive impact of helping to create a nationalist sentiment among the new Punjabi middle classes for freedom and independence from Britain. The invention of an Aryan race in nineteenth century Europe had tragic consequences for Europe, culminating in the ideology of Nazi Germany. Half a century after the Second World War, the word ‘Aryan’ evokes repulsive memories of Nazism and is thoroughly discredited in the West. In India, however, it has been revived, curiously enough, with the rise of Hindu nationalism and the ascent of the Bhartiya Janata Party.

The Arya Samaj started many schools in the Punjab and my father went to one of these, the Dayanand Anglo-Vedic (D.A.V) School, in Lahore. After completing it, he passed the entrance examination to the coveted Roorkee Engineering College, which had been set up by the British in the mid-nineteenth century to train civil engineers who were to build the growing network of irrigation canals and roads in the Punjab and the United Provinces. By the time my father went to Roorkee in 1931, there was a growing Punjabi middle class. Roorkee was a fine place. It not only gave my father an excellent technical education, it also fostered intellectual curiosity and introduced him to modern ways. He learned to ride, to play tennis and to think for himself. Oddly enough, it also made him deeply curious about the spiritual life.

Two years later, my father came home triumphantly waving a coveted degree. This was in 1933 in the middle of the Great Depression when the Punjab government had stopped hiring irrigation engineers. But he was patient. He bided his time, and eventually he got into the government the following year. During the year of waiting, he embarked on a spiritual quest. He found a mystically-inclined Guru who had an ashram on the banks of the Beas River; through him, he developed a lasting passion for the spiritual life. The Guru was a sant of the Radhasoami sect, descended intellectually from medieval bhakti and sufi traditions that gave him about the possibility of direct union with God through devotion and meditation. His modern mind appealed to my father’s rational, engineer’s temper. So, my father turned away from the Arya Samaj.
My maternal grandmother in Lyallpur remained a traditional Hindu when everyone was rushing to join the Arya Samaj. Her dressing room was filled with the images of her many gods, prominent among them Krishna and Rama, and she would say in the same breath that there are millions of gods but only one God. Her eclecticism did not stop there. She would visit the Sikh gurdwara on Mondays and Wednesdays, a Hindu temple on Tuesdays and Thursdays and she saved Saturdays and Sundays for discourses by holy men, including Muslim pirs, who were forever visiting our town. In between, she made time for Arya Samaj ceremonies when anyone was born, married, or died. My grandfather used to jest that she had taken out lots of insurances—at least someone up there might listen to her. My father’s mysticism, my grandfather’s Arya Samaj and my grandmother’s traditional Hinduism seem to have coexisted in a chaotic sort of way without causing disharmony in my mind. Amidst this religious pluralism, I have grown up with a liberal attitude and temper that is a mixture of scepticism and sympathy for the Hindu way of life.

Our family in Lyallpur had a hypocritical attitude towards money. Officially, we did not accord it a high place, but, in fact, we loved it. Although we professed a low opinion of the bania commercial castes, grandfather was not above money-lending. Belonging to the Arora sub-caste, we thought we had descended from ruling families from mythical times. Aroras and Khatris were the dominant castes of urban Punjab, although Khatris thought they had a higher status. Both of us, however, engaged in commerce and were also functionaries at princely courts. When the British came in the mid- nineteenth century, both were among the first to embrace western learning and the modern professions. Although Brahmins were superior to us in caste hierarchy, they lost their social position because they were slow to learn English and confined themselves to studying Sanskrit and to religious duties.

I remember my grandmother used to admonish our bania grocer for manipulating his weighing scale. It was the same with the family jeweller, but she treated him with more finesse. She would also scold her son for wasting his pocket money on “adulterated” ice cream. Each commercial transaction, it seems, was a challenge in our lives. It was always a case of us—educated, honest, middle- class citizens—versus them—tax dodging, street-smart banias. We may have looked down on banias, but we loved the bazaar. The most famous bazaar in the Punjab was Lahore’s Anarkali, and to shop in it was the fondest wish of every Punjabi. People came from all over the Northwest to taste its fun, gaiety, and laughter. All of Anarkali’s women, they used to say, were beautiful, and all its men handsome. And if something could not be had in Anarkali it was probably not worth having. For this and other reasons, they called it ‘paradise on earth.’

*************
The great event of the year was our annual visit to the orchards of my great aunts who lived in Gujranwala district. It took weeks of planning and co-ordinating and there was much excitement and bustle in our Lyallpur house before we left. The entire family went by train from Lyallpur to Gujranwala, and along the way, at different stops, other relatives would join our train, and by the time we arrived, we had become a great big clan party. At the railway station at Gujranwala, we piled onto sad-looking tongas, and amidst much merry making, we headed for the prosperous orchards of our country cousins.

Their prosperity as landlords was recent. It had come with the canal. With water available in plenty, they began to grow fruit that was transported by agents to far away places like Lahore. There was a sharp divide in attitudes between our cousins and us. We were from the town and we considered ourselves superior even though they were wealthier. They owned lands but we were better educated. We felt squeamish about their bathroom and lavatory arrangements but they were more generous and their big-heartedness always won us over. My grandfather once observed that more than anything else it was the English language that divided us from our Gujranwala family. They had the money but we held the status. When Punjab was partitioned in 1947, they suffered far more than we did. All of us became refugees--both Gujranwala and Lyallpur went to Pakistan. But they lost their lands, and they became poor. We were educated and we could get jobs and get going.

My stay in Lyallpur with my grandparents came to an end when my father found a house in a canal colony in the Hisar district of East Punjab. We went by train and stopped en route at his Guru’s ashram. My father wanted to receive the Guru’s darshan, which he believed held the power to protect us and give us spiritual moorings. My father’s mother had also accompanied us to the ashram and she impulsively placed me at the Guru’s feet and asked him to give me a name. She suspected that my mother had given me my name, Ashok Kumar, because she thought my mother was secretly in love with the movie star of the same name. His film Achhut Kanya, produced by Bombay Talkies, had been a big hit in the cinemas of Lahore, Lyallpur, and in the rest of Punjab.

‘Since you have placed him at my feet, let us call him ‘Guru Charan Das’, he said with a smile. Thus, I was transformed overnight from the ‘prince of happiness’ to the humble ‘servant of the guru’s feet’. The Guru must have known that this child needed to be reminded about the virtue of humility every day. The first two parts of my name became gradually condensed into one, but it did nothing to make me humble or spiritual.

My mother was visibly unhappy in the canal colony. She felt lonely and the vast, unbroken horizon on the dusty, treeless plains of Hisar added to her sense of isolation. She missed her family, her friends and the comforts of Lyallpur. She was also anxious because I got diarrhoea soon after we arrived. Her only comfort was the continuing monotonous sound of the running canal behind our house. My father was a quiet and shy man and at first his silence also troubled her, but she got used to doing all the talking. As a sub-divisional officer, he was the most important official of the Raj for miles. His job was to maintain his portion of the canal, making sure that the water flowed efficiently through smaller distribution channels to the farmers’ fields. This was difficult at times because some farmer would invariably divert his neighbour’s water, and this led to a quarrel - and even murder. In such a situation, he became the judge.
The few buildings in the canal colony were of brick. They had flat roofs with wide verandas, all white washed inside as dictated by the Public Works Department. My mother tried to make friends with the wives of the overseers but she found them uneducated and could not resist a feeling of superiority. She liked being the wife of an important official. The farmers overwhelmed her with gifts of grains and vegetables from the fields, but my father invariably returned them. They were a bribe and he knew that the price he would have to pay, and it would be to look the other way when the farmer illegally widened the water channel to his field.

After eighteen months in Hisar my father was transferred to a desk job in the government’s irrigation department in Lahore. After the canal post, my mother was thrilled to be in the capital city of Punjab where she had been to college and had many friends. My father got a modest house in a middle-class area, not too far from the sprawling Lawrence Gardens, presided over by a statue of John Lawrence, the ‘Lord Sahib of India’. It was our first real home and my mother furnished it with pride and care - but within my father’s limited means. She was overjoyed to be young and alive and living in Lahore. She was under the spell of its enchanted streets, its vivacious bazaars and its beautiful women.
**********
Our idyllic life in Lahore was short-lived. In the late afternoon of 20 August 1946, there were urgent steps outside. My mother was sitting at the dressing table. She held a bottle of coconut oil in her hand and she was combing her hair. I was watching her in the mirror when my father burst in and announced that Lord Louis Mountbatten had been appointed Viceroy and he had declared that the British would finally leave India. My mother dropped the bottle.
‘Look what you did!’ she exclaimed accusingly.

Eight months later, Mountbatten announced that Punjab would have to be partitioned to make room for the Muslim state of Pakistan. Our happiness over our country’s approaching independence turned to fear and uncertainty, and a pall of gloom settled over the Hindus of Lahore. We wondered if Lahore would go to India or to Pakistan. In those months before the boundary line was drawn, everyone was in a panic. We no longer felt safe. Large-scale violence broke out in early August 1947. While the Muslims were in a majority in Lahore, the Hindus owned eighty percent of the property. When our neighbour's house was burned in early August, we realised that we might be trapped on the wrong side of the new border. The next day a Muslim mob came and threatened to burn us alive if we did not leave. We escaped that night to the home of a Muslim friend of my father's who hid us in his storeroom. On August 8 we fled. My younger aunt's husband, a major in the army, brought us to safety in a military truck, and deposited us at the Guru’s ashram at Beas. On August 9, 1947 occurred the ‘Great Killing of Lahore’ in which 10,000 Hindus were slaughtered.

At midnight on August 14th the British Raj came to an end. On the same day Pakistan was born, carved out of Punjab and Bengal. Sir Cyril Radcliffe did the actual carving in five weeks and the demarcation on the map came to be known as the Radcliffe Boundary Award. The Guru gave asylum to thousands of refugees like us. He set up tents and make-shift kitchens. To our good fortune, according to the boundary line drawn by Mr. Radcliffe, the ashram found itself forty miles inside the Indian border. My mother cried continuously for she had heard no news from Lyallpur and she was afraid that her family was trapped. In his last letter, my grandfather was reported to be stubbornly insisting on staying on even if Lyallpur went to Pakistan. My father had been to Jullunder, the nearest town, to enquire after their whereabouts, but he had not succeeded. On the historic night of the 14th, dozens of people were huddled in our ill-lit tent glued to the radio. Despite the suffering and the uncertainty about the future, the refugees were filled with emotion as Nehru began his historic speech at midnight. For the first time we heard the new nation’s anthem but few recognised it. Someone stood up. Then, one by one the others also got up until everyone in the dark tent was standing up, and many had tears in their eyes. When the reference came to ‘Punjab’ in the anthem, the refugees looked at each other, helplessness in their eyes.

In the end, my grandfather had no choice. On August 9, a train filled with half-dead Muslim refugees arrived in Lyallpur. They told a harrowing tale of murder, arson and rape on the other side of the border. The Muslims of Lyallpur vowed revenge. On the morning of the 10th, the Muslim clergy called a meeting in Lyallpur’s main mosque and called upon God fearing Muslims to kill non-Muslims. Sikhs were singled out to pay for the crimes in Amritsar, Jullunder and Ludhiana. On hearing this, Sikhs began to cut off their hair and shave their beards. The barbers of Lyallpur were unusually busy that day. But it did not help. Two thousand Hindus and the Sikhs were killed on the 10th. Grandfather’s family escaped miraculously. My uncle, the major, showed up at their door without warning on the same afternoon with a military van. He gave them an hour to pack. As they piled in, my grandmother said, ‘O wait! I forgot to lock the front door’. My grandfather shook his head, ‘she’s locking the Muslims out’.

A week later, my father learned that he had been transferred to Simla, which had now become the temporary capital of the new, truncated state of Punjab after the loss of Lahore to Pakistan. We left the ashram the following day but found only chaos at Jullunder’s railway station. No one knew to what schedule the trains were running. On both sides of the railway platform, crowds of refugees were huddled together, believing that they would be safer in groups. As soon as a train approached, the refugees would get up. Pushing and shouting, they would rush for the train. But the last four trains had not stopped.

We did finally manage to get onto a train which was going east. But it did not move, and seemed to stand still for hours. My father went to check with the station master. From the window of our compartment, I watched him go past and I saw a tall Muslim police officer standing erect on the platform. Suddenly, there was movement. A train was coming from the opposite direction—from Delhi going to Lahore. Activity increased on the platform, but the policeman seemed unaffected, and continued to stare straight ahead. Then two very young Sikh boys emerged from nowhere. They could not have been more than fifteen or sixteen. They came from behind and thrust a dagger into the policeman. He did not cry. He just fell and died. My mother pulled me back and tried to shut the window, but it would not close.

We heard screams as the incoming train slowed down. There were sounds of bullets. My mother pushed me down. We lay on the floor of the carriage. They were shooting at the incoming train. There were more shots followed by more shouts. The train full of half-dead bodies did not stop. Minutes later an old Sikh forced his way into our compartment. Full of fear my mother screamed. ‘We are Hindus, don’t kill us!’ Then she saw her husband come in after the stranger. My father had found him at the ticket window when the shooting began and the old man grabbed hold of my father’s shirt. Both had hidden in the toilet of the First Class Retiring Room. Eventually we began to move. We reached Ambala, where we changed for Kalka, and from there got on the hill train for Simla.
*******
The view from the tiny window of the miniature hill train was enough to refresh the most exhausted emotions. On each bend of the winding route, we saw green slopes with tiers of neatly cultivated terraces, which looked like gardens hanging in the air. Belts of pine, fir and deodar punctuated the terraces. Masses of rhododendrons clothed the slopes. Towards the south, we could see the receding Ambala plains far below. Sabathu and the Kasauli hills were in the foreground. Northwards rose the confused Himalayan chains, range after snowy range of the world’s highest mountains. The stench of death was left behind at Jullunder station.
The train stopped at Barog where a white car on rails went speeding by. ‘The rail car’, the Anglo-Indian ticket collector explained, ‘carries the rich and the busy who don't have luggage and who want to reach Simla in a hurry. Until a week ago it was the only white sahibs rode in it, but now it seems everyone is doing it. Amazing, how quickly the brown sahibs have slid into the shoes of their departing masters!’

At Shogi, we glimpsed the first wondrous vision of Simla. From afar, it looked like a mythical green garden dotted with red-roofed houses. Our excitement mounted. We passed Jutogh, crossed Summer Hill, turned into tunnel number 103, and finally reached Simla's Victorian railway station. The town of Simla occupied a spur of the lower Himalaya and ran in an east-west direction for six miles. We settled in a little cottage which was situated in an unfashionable part of town known as Chhota Simla, at the southeast end, sloping directly south towards Jakhoo hill. The government provided us a house that was tiny and icy cold at night. But we loved our little house. It was situated in a handsome grove of deodars and from our veranda we had a spectacular view of the next ridge and many ridges beyond. From the narrow veranda, we stepped onto a little lawn; from the lawn, there was nothing to step onto except fresh air for the ground suddenly dropped beneath our feet.

My earliest memory of Simla is of waking up suddenly on a frosty morning. It was just after dawn and I was only half awake. It had been raining and along with the wet there was a rawness in the air. I could hear the wind blow. I ran to my mother’s bed. She stretched her arm and I nestled by her side. With her warm hands she felt my body and pressed me closer to her.
‘Did you have a bad dream?’ she asked.
I did not answer. I was content to feel her warmth. In her big bed with her soft arms around me, I felt protected. I cuddled against her and in a moment I was blissfully asleep.

I was put into St Edward’s school soon after we arrived. I cried on the first day when I was taken by the headmaster to the first grade. I stood shyly behind the door, not daring to go in. I was shorter than the other boys and my hair was cut square and parted in the middle like a peasant’s. I was ill at ease in a new shirt which pinched me under my arms. My new shorts braced up tightly. I sat down at a desk at the back, not daring to cross my legs. When the bell rang in the afternoon I did not get up. I would have kept sitting there had the teacher not returned to the class to pick up her bag. The daily two mile walk to school along Cart Road framed my new life. In the mornings I would be rushed and nervous, my hair wet, as I hurried to school, In the afternoons I would dawdle back home, usually with other boys. I would linger, eat wild berries along the way, and arrive kicking a pine cone with my new Bata shoes.
In the evenings, everyone in Simla went to the Mall no matter what the season. Between five and seven o'clock the thing to do was to get dressed and take a stroll from the Ridge to the end of the lower Mall in order 'to eat the air’. It was a wide, winding stretch of about a mile along a gentle slope with glamorous shops and smart cafes. One went there to be seen and to see others, and every evening you found a veritable fashion parade where men, women and children vied with each other in the elegance of their clothes.

We had never seen anything quite like Simla: the Tudor belfry of Christ Church cathedral with its massive brass bells; the elegant Victorian villas with their gardens bursting with dahlias and pansies; the imposing architecture of Viceregal Lodge. Simla had been, after all, a grand bouquet to the Englishmen's fondest imperial dream. For five months of the year, from mid-April to mid-September, it used to be the imperial capital from where the British Viceroy ruled the Indian Empire (extending, administratively speaking, from Burma to the Red Sea). Every English man and woman in India used to yearn to be in Simla for 'the season', when it was one of the gayest places on the earth. The refugees from West Punjab were so happy to be alive that they embraced Simla with reckless abandon and tried to make a new life; this helped them to forget the one they had lost in Pakistan.

My father earned a modest salary, and my mother ran the house on a tight budget. Her biggest expenses were on school fees, uniforms, and milk for her growing children. She worked hard to get us into an English-medium school although it cost more than she could afford. It had a long waiting list because of the recent influx of refugees and she had to apply “influence” to get us in. She made sure that we worked hard at studies, got good marks, especially in English and Mathematics. At the end of the month there was little money left for anything else.
A shy mid-level government official, my father was a man content with his own company. But my mother had a great and unrequited desire to be a part of Simla’s fashionable society. She wanted ‘to see and to be seen’; she wanted to mix with the elite; she wanted to be a ‘somebody’--and she lived in fear that her own world was insignificant compared to the grand world beyond us. The natural solution was to join ‘the club’, the ADC. Although it had begun as an Amateur Dramatics Club, a sort of extension to the Gaiety Theatre during the British days, it was now mainly a social club and, more importantly, the meeting place of the fashionable in Simla. Unfortunately, we could not afford it.

She must have transmitted her anxieties to me for I grew up with an acute concern for status. I compared myself to those who had things that I did not possess; to boys who were more attractive to girls than I was; and especially to those who made it to the school cricket team. I must have been twelve when a bachelor friend of our family’s saw me hovering outside the ADC one day. He put an arm around me. ‘Come, my boy, let’s go into the Green Room for a cup of tea,’ he said.

We were greeted by the hall porter and we walked past smoke-filled card rooms to another room full of young people and laughter. I looked around me with awe. Bearers in starched white uniforms with green cummerbunds and sashes and tassels were gliding between the tables. ‘So, this is where the smart people of Simla meet’, I thought. As my host hailed a group of young people to join us, I was intoxicated by my first encounter with an inaccessible and forbidden world--the glamour, the clothes, the sophistication of language and manners. I imagined these people dwelling in big houses, with tall hedges and high gates, leading a life quite unlike my own.
Among them I recognized a girl who was a few years older. She looked utterly beautiful. I kept looking at her, hoping she would recognize me. But she looked through me. Even when I smiled at her she ignored me. My head was spinning when I returned home. I was excited by my first encounter with a forbidden world. I tried to recall her thin face. I could visualize her shining brown eyes, her long dark hair, and the unusual way she tilted her head. The more I thought about her, the more inaccessible she seemed to become. I would lie awake for weeks thinking of her.

My discovery after a few days that I knew where she lived left me breathless. I had recognized her because I used to pass her house daily on my way to school. I had seen when I had accidentally peered through their hibiscus hedge. What had been an impersonal landmark on my daily trudge to school now seemed to acquire a special character. Even before the bell rang in the afternoon announcing the end of school, I would begin to think of her. I would hurriedly gather my books and run out before any of my schoolmates decided to tag along. A red, round post-box—a proud symbol of the British days—stood a hundred yards from her home and it announced the pleasure that awaited me. When I reached her gate, I would slow down my galloping pace, take a deep breath, and walk with measured steps.

My heart beat would quicken as I looked thorough the latticed gate, which gave a view of the side of the house along with the winding path leading up to it. From this angle I could tell if they had company. I could observe the servants moving back and forth to the lawn with the tea service. As I walked along the road I could see the front of the house. I was grateful for the hibiscus hedge that was cut low for I could see the lawn but I had to be careful not to be seen. I became skilled at hiding behind a giant deodar tree that was on a slightly higher level. The house itself had a long gabled front of red brick but years of Simla’s weather had mellowed it.
They always seemed to have company and on my ‘lucky days’ I would be able to spot her. She would sometimes be talking to her friends. At other times she would be playing badminton towards the side of the house. I saw her one day up close. She was in light blue and sitting on the lawn a few yards away from the hedge. She was speaking with two boys and a man of indeterminate age. Her head was unmistakeably tilted as she listened to the man. Suddenly she looked up and she saw me. Her lively eyes seemed to mock me. A shiver ran through my body and I quickly moved away. A few minutes later I heard a voice. It was the same man who called out to me from the hedge. He told me that it was not polite to stare at people. I was mortified and I walked away quickly. When I reached home I was depressed by the contrast of my drab life with the brilliance of her world.
Some years later, I met the object of my dreams properly and discovered that she was a snob, and like all snobs she had an enormous capacity for inflicting pain.
----
Glossary

bhakti : love or devotion for a personal form of God
charpai : a bed with a wooden frame, interwoven with rope
darshan : seeing, beholding, vision of the divine; to see with reverence
dharma : duty, law, virtue, doing the right thing
mashkiya : a person who pours water from a goatskin bag
pir : a Sufi teacher, spiritual leader
sant : saint, guru
Sufi : inner, mystical dimension of Islam
tonga : light horse drawn carriage
---

This account forms a chapter in Remembered Childhood, Oxford University Press, Nov 2009. Some of the incidents have appeared earlier in a different forms in my autobiographical novel, A Fine Family and my non-fiction narrative, India Unbound.

Like honeybees collecting nectar, (Outlook, July 20, 2009)

2009-07-09T12:37:00.003+05:30

Ever since 1991 we have come to expect a vision of the economy’s future in the Budget speech of the Finance Minister. This did not happen on July 6, 2009. The day before, the Economic Survey had raised the hopes of real reform. Those hopes were dashed. Pranab Mukherjee spoke like an accountant, not a statesman, and the stock market fell by almost a thousand points. The new government lost an opportunity to spell out its program and win over domestic and foreign investors.

Ultimately, the nation needs private investment to pull us out of this economic downturn. Because of the failure to articulate the long term, investors worry that the big spending stimulus of this government is here to stay and it will crowd out private investment. A large deficit is understandable in these recessionary times, but we needed a commitment to return to fiscal responsibility once normal times return. Deficit spending on this scale risks a re-rating of the country, which would mean a higher cost of money, higher inflation, and bad consequences for the Indian rupee.

Nevertheless, there are many positives in this Budget. In our bad old socialist days, Finance Ministers would have raised tax rates to cover fiscal deficits. This time the FM actually decreased tax rates for individuals (from 34% to 31%) while holding them for companies. This was courageous and it is strongest indicator that Pranab Mukherjee has changed and believes in growth. Many countries suffering from the global recession have increased tax rates. This FM also showed guts in scrapping the irritating and ugly Fringe Benefit Tax. The major negative was the raising of the Minimum Alternative Tax for companies from 10% to 15%, and this will hurt our fastest growing companies and those in infrastructure.

The best thing the in the Budget is a re-commitment to a dual Goods and Services Tax (GST) from April 2010. This is a wonderful idea which has been championed for years by Vijay Kelkar. India is not a common market where goods and services move smoothly. Anyone who sells a product lives through a nightmare of excise, state and central sales taxes; entry, turnover, and service taxes; and the terrible octroi which keeps trucks waiting for hours at check points. GST will integrate all these indirect taxes into one flat tax, which is IT intensive, offering frictionless interface between taxpayer and collector. Like the VAT, it taxes only the added value at each stage, lowering the overall tax burden. Those who persist in selling without a bill will lose credit on taxes already paid, it will force them into the tax net. It will improve compliance and make us a more honest nation. A lot of work needs to be done to make GST happen but the Finance Minister’s re-commitment to GST will now galvanize the centre and states to work hard and move to the most important tax reform in India’s history.

Another positive feature of Pranab Mukherjee ‘s speech was his commitment to changing the attitude of tax collectors. P. Chidambaram, in his well-intentioned zeal for taxes, had let loose the tax departments on the taxpayers and this had created fear, bad blood, and the loss of some of the goodwill created during Jaswant Singh’s time. Mukherjee wants tax collectors to be “honeybees collecting nectar from the flowers without disturbing them, but spreading their pollen so that all flowers can thrive and bear fruit.” This is the right attitude. Despite many honest and hard working officers in income tax, customs and excise, these departments continue to give India a bad name. In successive surveys, foreign investors cite them as the reason why India is not a good place to do business.

The Congress Party was re-elected in May on the promise of economic populism. On July 6 the government delivered on that promise. This is bad news for India because populism is a temporary palliative and does not lead to long term prosperity of the poor; it is also something that our country cannot afford. The nation waited to hear about the reforms that would create precisely those enabling conditions for the poor to pull themselves up. India’s tax payers are not against a safety net for the poorest, but they want the benefits to reach the poor. When the FM announced handouts in the thousands of crores, it was his duty to reassure us that the money would not be lost once again in corruption. We waited in vain to hear what government was doing to improve delivery. Without the overhang of the Left, there is no excuse for the UPA taking the country backward. If it persists in this it will lose the goodwill of so many who voted for it.
---
Gurcharan Das is the author of The Difficulty of Being Good: On the Subtle Art of Dharma (Penguin 2009), which interrogates the Mahabharata in order to find the answer to ‘why be good?’

To thine own self be true

2009-06-27T11:20:00.001+05:30

When Polonius said in Hamlet, ‘to thine own self be true’, he was not thinking of Part I of the UPA government’s forthcoming Budget. Polonius was saying that integrity and success lie in being true to oneself. This Budget is expected to announce a massive give-away of rice and wheat at Rs 3/- per kilo, and the scheme is likely to fail because it fails Polonius’ test. Eighteen years of slow, incremental economic reforms have fashioned a certain kind of nation which was captured brilliantly in the film, ‘Slumdog Millionaire’. If the movie caught the character of the nation’s poor, the Indian Premier League (IPL) of cricket mirrors it for the middle class. The character quite simply is of a vibrant and energetic private sector that is hemmed in by an arid eco-system of weak governance. As if to underline this, our bureaucracy has recently been rated the worst in Asia in a survey of twelve countries.

While we deeply admire the UPA’s commitment to the poor, we are repelled by its inability to understand our state’s limitations. As it is, there is huge corruption in the public food distribution system and it would be far better to make cash transfers to the poor via smart cards. It will not harm the poor farmer either, as selling grains at Rs 3, which will inevitably end up in the black market. Smart cards are being successfully used in the national health insurance scheme (RSBY).

Millions of Indians are stuck between the factory and the farm but they do not sit around and complain. Each morning they pull themselves up and go out and create a livelihood in the informal sector. Our regulations, alas, do not make it easy—hence India is rated 128th in the ease of doing business. In a massive new study, Moving out of Poverty, people claim that they have risen out of poverty through their own initiative, and not through hand-outs. The poor prefer an enabling environment that lets them work with dignity. Our advantage over China is that we respect property titles and Karnataka and Andhra are showing that when secure titles are on-line, the poor capitalize on them to start businesses in the informal economy.

Unlike the statists behind the Rs 3/- scheme, many UPA ministers are refreshing in seeking to create enabling conditions for the poor. The new minister of HRD, Kapil Sibal, understands that teacher absenteeism is forcing even the poor to desert state schools and he is focused on better delivery through public-private partnerships. The energetic Kamal Nath has begun to cut red tape and remove bottlenecks in pursuit of an ambitious target to build roads, putting greater onus on the private sector. M M Kharge plans to spend Rs 30,000 crores to develop skills, and knows that the only way to impart vocational education is with the involvement of companies. Sivaprakash Jaiswal has announced the end of state monopoly in the corrupt coal mining sector, and it raises the hope of finally bringing efficiency to a sector that accounts for 55% of India’s energy basket. Veerappan Moily has promised ‘sweeping, holistic judicial reform’ that will tackle the backlog of 30 million pending court cases among other reforms. All these five ministers are following Polonius’s advice.

In the past year both China and India held a sports event. The magnificent Beijing Olympics were a tribute to the efficiency of the Chinese state. The Indian Premier League (IPL) is a testimonial to our private sector. When the timing of the IPL clashed with the elections this year the IPL did not give up. It played off the English and South African boards to get the best deal and the result was an amazing sight--Delhi playing Hyderabad in Cape Town and Mumbai playing Chennai in Johannesburg. With bold ambition, quick thinking, meticulous planning and brilliant execution—all the skills that are making Indian companies successful on the world stage—the IPL filled stadiums, shuttled ten of thousands of Indians to South Africa, and enticed millions to their TVs back home. It took a hundred years for Major League Baseball in America to hold its first game outside the US and fifty for the American Football League to play outside. The Indian Premier League has gone global in its second year.

The two sports events are metaphors for two models of development. The Chinese state can deliver rice and wheat at Rs 3 to the poor. But India’s cannot. The UPA government would do well to remember Polonius advice and be true to our nation’s character.

Why the future belongs to India

2009-05-10T16:42:00.001+05:30

In preparing for a much publicised debate in London on the motion ‘The future belongs to India, not China’, I was reminded of a conversation with my mother. She had asked, what is the difference between China growing at a rate of 10% and India at 8%? I replied that the difference was, indeed, very significant. If we were to grow at 10% we could save twenty years. This is almost a generation. We could lift a whole generation into the middle class twenty years sooner. She thought for a while and then said gently, 'we have waited 3000 years for this moment. Why don't we wait another twenty and do it the Indian way?'

She had understood that the cost of democracy is the price the poor pay in the delay of their entry into the middle class. She did not elaborate the 'Indian way' but it must include taking a holiday on half a dozen New Years Days! It is easy to get mesmerized by China's amazing progress and feel frustrated by India's chaotic democracy, but I think she had expressed the sentiments of most Indians who will not trade off democracy for two per cent higher growth.
In referring to the 'Indian way', my mother meant that a nation must be true to itself. Democracy comes easily to us because India has historically 'accumulated' its diverse groups who retain their distinctiveness while identifying themselves as Indian. China has 'assimilated' its people into a common, homogeneous Confucian society. China is a melting pot in which differences disappear while India is a salad bowl in which the constituents retain their identity. Hence, China has always been governed by a hierarchical, centralized state-a tradition that has carried into the present era of reform communism. China resembles a business corporation today. Each mayor and party secretary has objectives relating to investment, output and growth, which are aligned to national goals. Those who exceed their goals rise quickly. The main problem in running a country as a business is that many people get left out.

India, on the other hand, can only manage itself by accommodating vocal and varied interest groups in its salad bowl. This leads to a million negotiations daily and we call this system 'democracy'. It slows us down--we take five years to build a highway versus one in China. Those who are disgruntled go to court. But our politicians are forced to worry about abuses of human rights, whereas my search on Google on 'human rights abuses in China' yielded 47.8 million entries in 13 seconds! Democracies have a safety valve-it allows the disgruntled to let off steam before slowly co-opting them.

Both India and China have accepted the capitalist road to prosperity. But capitalism is more comfortable in a democracy, which fosters entrepreneurs naturally. A state enterprise can never be as innovative or nimble and this is why the Chinese envy some of our private companies. Democracy respects property rights. As both nations urbanize, peasants in India are able to sell or borrow against their land, but the Chinese peasants are at the mercy of local party bosses. Because India has the rule of law, entrepreneurs can enforce contracts. If someone takes away your property in China, you have no recourse. Hence, it is the party bosses who are accumulating wealth in China. The rule of law slows us down but it also protects us (and our environment, as the NGOs have discovered).

We take freedom for granted in India but it was not always so. When General Reginald Dyer opened fire in 1919 in Jallianwala Bagh killing 379 people, Indians realised they could only have dignity when they were free from British rule. The massacre at Tiananmen Square in 1989, where 300 students were killed, was China's Jallianwala Bagh. China today may have become richer than India but the poorest Chinese yearns for the same freedom.

Because the Indian state is inefficient, millions of entrepreneurs have stepped into the vacuum. When government schools fail, people start private schools in the slums, and the result is millions of 'slumdog millionaires'. You cannot do this in China. Our free society forces us to solve our own problems, making us self-reliant. Hence, the Indian way is likely to be more enduring because the people have scripted India’s success while China’s state has crafted its success. This worries China’s leaders who ask, if India can become the world’s second fastest economy despite the state, what will happen when the Indian state begins to perform? India's path may be slower but it is surer, and the Indian way of life is also more likely to survive. This is why when I am reborn I would prefer it to be in India.

----The writer is speaking in a debate in London on 12 May 2009 in support of the motion ' The future belongs to India, not China'-----

The Dharma of Capitalisam, Wall Street Journal

2009-04-21T13:50:00.001+05:30

The most damaging fallout from this economic crisis may well be a loss of trust in the democratic capitalist system, especially if those who are unemployed and suffering begin to believe that "anything goes" in an unfair world. In the rush to rewrite the rules of the game, policy makers might consider the message of dharma from Indian philosophy and literature, which offers a more nuanced answer to moral failure and the ethics of capitalism.

Dharma can mean virtue, duty or law, but is mainly concerned with doing the right thing. It is the moral law that gives order and balance to each human being and the cosmos. The concept is uniquely suited to guiding us through our present economic and regulatory quagmires because it is concerned with the achievable rather than the ideal. It recognizes that happiness comes from upholding a certain balance, by living according to a system of beliefs that restrains and gives coherence to our desires. Dharma does not seek moral perfection as Christianity or Islam does. Hence, pragmatic Indian statesmen throughout history have turned to it to address issues of public policy.

Dharma is probably best exemplified by the story of Queen Draupadi in the 2,000-year-old Indian epic, the "Mahabharata." In it, the queen asks her husband, Yudhishthira, about unmerited suffering: "When everything was going so well for us, why was our kingdom stolen in a rigged game of dice?" she complains. She exhorts her husband, who gambled away the kingdom, to raise an army and get their possessions back. But he reminds her that he has given his word to his enemies to remain in exile for 13 years as punishment for losing the game.
"What is the point of being good?" she persists. "Isn't it better to be powerful and rich than to be good in an unfair world where those who steal and cheat sleep on sheets of silk and pillows of down while those who are good have to settle for the hard earth? Why be good?" To this he replies in the only way that he knows: "I act because I must."

The King's answer represents the uncompromising, compelling voice of dharma. For him, good acts produce good karma, and these acts eventually change the balance of dharma in the universe. If people did not keep their commitments, the social order and the rule of law would collapse. Dharma is needed by everyone to live a happy, flourishing life.
There were many dharma failures in the run-up to today's economic crisis, in which all actors seemed to behave rationally. When U.S. house prices were rising and interest rates were low, even the poor got a chance to get a mortgage and a home. Banks securitized these mortgages and sold these complex financial products to other financial institutions, who also gained through better returns. When the housing market turned down, these financial products turned toxic. Whom do you fault?

Dharma draws a fine line between rational self-interest and selfishness. It would judge all actors in today's crisis guilty for tipping the balance of dharma in the wrong way. The undeserving recipient of the loan may have misjudged his or her ability to repay. The banker, motivated by short-term reward, pushed subprime mortgages to shaky borrowers without doing sufficient due diligence. Rating agencies underestimated the riskiness of the assets. The institution that bought the risky financial products failed to protect its shareholders. Regulators were captured by interests -- and when they acted, it was from domestic compulsions, forgetting the global consequences.

President Barack Obama's reaction to the crisis, among other things, was to seek to claw back bank bonuses. Congressional Democrats suggested an extortionate tax on bonus recipients at banks that received federal bailout money. To want to punish someone in this crisis is understandable but it is a dangerous path. What the world needs instead is the calm and principled voice of King Yudhishthira. He would have appealed for a voluntary return of bonuses while explaining to the public that Wall Street had been bailed out to save Main Street's pain. Furthermore, honoring bonus contracts is necessary to support the rule of law.
If envy is the sin of socialism, greed is the sin of capitalism. As capitalist nations grow, the resulting wealth creates enervating influences. Generations of savers are replaced by spenders. Ferocious competition is a feature of the free market and it can be corrosive. But it is also an economic stimulant that promotes human welfare. The subtle art of dharma tries to strike the right balance between healthy and unhealthy competition.

The choice for policy makers today is not between free markets and central planning but in getting the mix of regulation right. No one wants state ownership of production where the absence of competition corrodes the character even more. Dharma's approach is not to seek moral perfection, which leads inevitably to theocracy or dictatorship. It recognizes that it is in man's nature to want more and it seeks to give coherence to our desires by containing them within the discipline of an ordered existence.
only catches crooks but also rewards dharma-like behavior and nobility of character.
Mr. Das is the author of the forthcoming book, "The Difficulty of Being Good: On the Subtle Art of Dharma" (Penguin).

Young India, old politicians

2009-04-12T12:28:00.000+05:30

Not a single politician has explained to us during this election campaign why India has risen to become the world’s second fastest growing economy. It did not happen because our leaders gave cheap rice, reservations, employment guarantee schemes, loan waivers, or anything else on the mind of our political class. Hence, a suspicion has grown that our country may be rising despite its politicians and the economy grows at night when the government is asleep. The best that our leaders have done since 1991 is to gradually get out of the people’s way.

If one did manage to find a stray neta who understood the reasons behind India’s success, it would probably be a younger one. For it is young, self-assured Indians, whose minds are decolonized, and who are confidently scripting India’s success story via the private sector. This is unlike China, whose success is being orchestrated by a purposeful state. This too makes sense for three fourths of China’s politburo consists of young technocrats. In comparison, almost one fourth of India’s greying legislators have a criminal record.

If India can rise despite the state, it would seem to matter less and less who wins this election and which coalition comes to power. The ability of politicians to do real harm (as they could during the ‘licence raj’) has diminished. What is remarkable about India’s history is not what happened in 1991, but that every government after that has continued to reform, albeit in a slow, halting manner. Even slow reforms have added up to make India a high growth economy. That it has happened in a chaotic democracy in which Mayawati aspires to be PM is the real triumph.

The political reason for our success is that every government had a few young reformers, who understood that a nation prospers not by giving people fish but by teaching them to fish. In 1997, Chidambaram delivered a ‘dream budget’ when no one was looking; Arun Shourie had the determination to push through the privatization of loss making state companies against opposition within his coalition; BC Khanduri had the will and the skill to push forward an ambitious highways program; Lalu Prasad had the good sense to leave it to young Sudhir Kumar to stage the greatest turnaround in the Indian Railways; Suresh Prabhu did wonders in electric power until his envious, ageing boss cut him down. These were young men in a hurry. Compare them to the sad, elderly Arjun Singh, who fell asleep during meetings and cussedly refused to reform our education system.

The Sanskrit epic, the Mahabharata, is unique in engaging with the world of politics and it has a lesson for our rulers--learn to behave your age. The classical Indian life is lived in stages. The first is brahmacharya—the period of adolescence when one is a celibate student; in the worldly second stage, grihasthya, the householder produces, procreates, provides security for the family and enjoys the world. At the third, vanaprasthya stage, one begins to disengage from worldly pursuits to have time for rest and reflection; and in the final stage, sanyasa, one renounces the world in quest of spiritual release from human bondage. This is how to live a flourishing and balanced life. The Mahabharata reminds us that the second stage is the indispensable material basis of civilization, and this is the time for politicians to become statesmen. Our weary, old politicians have got it all wrong—they are trying to hold on to power at the wrong stage of life. The epic would approve of Rahul Gandhi’s efforts to bring the young into our political life.
Because of high growth, prosperity will now spread in India but happiness will not unless we fix governance. Every political party has promised cheap rice, more schools, more hospitals and more everything in its manifesto. But 80% of the rice will not reach the poor, 25% of the teachers will be absent from schools and 40% of the doctors will not show up at primary health centres. A few, younger MPs have understood the Indian voter’s deep despair over corruption in the delivery of public services. Hence, they have rightly concluded that our first priority must now be not economic reform but governance reform.

The Mahabharata also had a problem with the self-destructive, kshatriya institutions of its time, and it had to wage a war to cleanse them. We too, I fear, will have to wage a Kurukshetra-like battle against our corrupt government institutions in order to bring accountability into public life. Like Yudhishthira in the epic, we shall have to struggle in order to recover dharma and a meaningful ideal of civic virtue. Fortunately, a few younger netas understand this and it is they who will write our future and not the tired old men who are trying desperately to hold on to power while pretending to rule us.
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The writer’s forthcoming book, The Difficulty of Being Good: On the Subtle Art of Dharma, interrogates the Mahabharata in order to answer the question ‘why be good?’

Dharma fails on Wall Street

2009-03-15T13:20:00.000+05:30

‘Oh, so you are one of them!’ is how someone greeted my nephew, who is embarrassed to tell people that he is an investment banker. ‘I’d rather say that I run a brothel,’ he says. ‘At least, that’s a business people understand.’ Bankers, having brought the world economy to its knees, have become pariahs overnight and a target of people’s rage. International Labour Organization warns that global unemployment could hit a staggering 50 million. A typical knee jerk reaction is call it ‘greed’ but that is not helpful. We have always known that if envy is a sin of socialism, greed is a failing of capitalism. Much has been written of this crisis but not enough about its moral quality. Do free markets inherently corrode character?

There were many dharma failures in this drama. When U.S. house prices were rising and interest rates were low, even the poor got a chance to get a mortgage and a home. Who could oppose that! Banks combined these mortgages into a collateral debt obligation (CDO), got it rated, and sold it to institutions, who also gained through better returns. When the housing market turned down the CDOs became toxic. Who do you blame? In a sense all are guilty. There is a fine line between self-interest and selfishness and the balance of dharma tipped the wrong way. The undeserving recipient of the loan lied about his ability to repay; the banker, moved by short term reward, promoted the ‘sub-prime’ mortgage; the rating agency was dishonest in colluding with the bank; the institution who bought the risky CDO failed in its duty to protect its shareholders.

The calamity might have been contained if Lehman Brothers had been bailed out on September 14, 2008. The old rivalry between Dick Fuld, the CEO of Lehman Brothers, and Hank Paulson, the former CEO of Goldman Sachs may have come in the way. The blue bloods at Goldman Sachs had long harboured a deep prejudice against the upstarts at Lehman. Fuld was arrogant and always managed to steal the limelight. But Paulson, as U.S. Treasury Secretary, possibly unconsciously, allowed personal prejudice to distort his thinking when he refused to save Lehman. When Lehman collapsed, so did confidence and bank liquidity, and this was the tipping point of the global collapse.

It is extraordinary that there is no remorse. Investment bankers who tipped the global economy into a recession, still expected bonuses, as though they had a God given right to earn more than ordinary human beings, much like the aristocracy just before the French Revolution. Particularly embarrassing was the disclosure about John Thain, chairman of Merrill Lynch, who spent $1.2 million to do up his office, which included a $1400 waste paper basket and $35,000 commode in the bathroom. He paid $4 billion in bonuses to his executives when Merrill Lynch had declared a loss of $15 billion in Q4. When he said that bonuses were needed ‘to retain the best people’, someone quipped, ‘What best people? They just lost you $15 billion!’

It is a lesson for the millions in India who have just risen into the middle class. Successes of capitalism produce over time enervating influences when a generation committed to saving is replaced by one devoted to spending. Ferocious competition is a feature of the free market and it can be corrosive. But competition is also an economic stimulant that promotes human welfare. The choice is not between the free market and central planning but in getting the right mix of regulation. No one wants state ownership of production where the absence of competition corrodes the character even more. The answer is not to seek moral perfection which inevitably leads to theocracy and dictatorship. Since it is in man’s nature to want more, let’s learn to live with human imperfection, and seek regulation that not only tames crooks in the market but also rewards dharma-like behaviour.

A person who lost her job because of troubles on Wall Street, insistently asks, ‘Why me? What did I do to deserve this?’ Draupadi asked the same question in the Mahabharata. ‘When everything was going well for us, why was our kingdom stolen in a rigged game of dice?’ She wants her husband to raise an army, and win it back. But Yudhishthira says that he has given his word. ‘But what is the point of being good?’ she asks. To which he replies, ‘I act because I must’. It is the uncompromising, compelling voice of dharma. This is an answer that the investment bankers might ponder.
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On the difficulty of being good

2009-01-25T16:03:00.001+05:30

B. Ramalingam Raju has been much on the minds of the citizens of our Republic, whose birthday we celebrate tomorrow. It is thus a good time to reflect on Satyam’s moral significance for our post-liberalization era. Although the story is still unfolding, there are intimations of sadness and tragedy about a man who has committed the greatest fraud in Indian corporate history. The swindle was worth Rs. 7136 crores, and the deceit went on for seven years. As a result, the public—both Indian and foreign investors—have lost around Rs 23,000 crores in the value of their shares, and over 40,000 employees face an uncertain future.

Raju built through skill, talent and dedication a great company. Ten years ago, I looked him in the eye and I saw sincerity, competence, and great purpose. I saw ambition, not greed. Soon after that I ran into one of his customers in the U.S. and she spoke glowingly about Satyam’s dedication to quality, reliability, and integrity. There is no tribute greater than a satisfied, passionate customer, and it explained to my foggy mind, at least in part, why India had become the world’s second fastest growing economy.

Why should a person of such palpable achievement turn to crime? Was it just greed or was it because his stake in Satyam had dwindled to 8.6 %, and the company was in danger of slipping out of the family’s control? Raju had two sons and possibly a sense of filial duty drove him to create companies in real estate and infrastructure, two sectors of our economy that are only half liberalized, where politicians insist on bribes up-front for favours delivered. Since revenues from the new companies were far away, Raju dipped into Satyam to pay the politicians. It might have worked but no one counted on a downturn and a liquidity crisis. Desperately, he tried to restore the stolen assets back to Satyam by merging it with his son’s companies but that didn’t work.

When Raju crossed the line from his cheerful and familiar world of open and competitive capitalism into the dark nether regions of crony capitalism, he was no longer in control. He had walked from the transparent world of reformed India into the shadowy underworld of unreformed India, whose rules are set by crooked politicians. Why did he do it? Greed is too easy an answer. It might have been hubris, like Duryodhana’s in the Mahabharata, who thought he was master of the universe and could get away with anything. It is easy to believe your infallibility when everyone in Hyderabad tells you so.

The better comparison, I believe, is with the father. Raju was ruined by his Dhritarashtra-like weakness for his sons. We should nurture our children, but we don’t need to leave them a company each, certainly not by crossing the line of dharma. It takes moral courage to resist the sentiment of partiality to one’s family. This is why the Mahabharata challenges the old sva-dharma of family and caste, preferring instead the newer, universal sadharana-dharma, which teaches us to with behave impartially with everyone.

Satyam is a case of fraud and criminality. So, let us also stop wringing our hands, looking for regulatory answers. It is not a governance failure. Internal and external auditors, and independent directors are guilty only of negligence. This was such an ingenious crime that that no still understands it. Remember, there are crooks in every society, and they will get around the most fool-proof systems. So, don’t try to reform the system—it will only create more red tape and kill the animal spirits of capitalism. The important thing is to quickly get to the truth, and put the guilty behind bars. Ideally, make the crooks sing and book their political protectors as well. Don’t blame liberalization either--the answer is more reform, not less, in order to break the nexus between politicians and business in the unreformed sectors of our economy.

Raju’s story causes us discomfort because it challenges our unexamined conception of success. Surely, there is a better way to live, we ask. Yudhishthira also challenged the kshatriya concept of success in the Mahabharata. When he insisted on taking a stray dog into heaven, he performed an act of dharma, showing that goodness is one of the few things of genuine worth in this world that might take away some of the familiar pain of being alive and being human in these post-liberalization times.

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The Next World Order, New York Times

2009-01-02T16:39:00.002+05:30

CHINA and India are in a struggle for a top rung on the ladder of world power, but their approaches to the state and to power could not be more different.

Two days after last month’s terrorist attack on Mumbai, I met with a Chinese friend who was visiting India on business. He was shocked as much by the transparent and competitive minute-by-minute reporting of the attack by India’s dozens of news channels as by the ineffectual response of the government. He had seen a middle-class housewife on national television tell a reporter that the Indian commandos delayed in engaging the terrorists because they were too busy guarding political big shots. He asked how the woman could get away with such a statement.

I explained sarcasm resonates in a nation that is angry and disappointed with its politicians. My friend switched the subject to the poor condition of India’s roads, its dilapidated cities and the constant blackouts. Suddenly, he stopped and asked: “With all this, how did you become the second-fastest growing economy in the world? China’s leaders fear the day when India’s government will get its act together.”

The answer to his question may lie in a common saying among Indians that “our economy grows at night when the government is asleep.” As if to illustrate this, the Mumbai stock market rose in the period after the terrorist attacks. Two weeks later, in several state elections, incumbents were ousted over economic issues, not security.

All this baffled my Chinese friend, and undoubtedly many of his countrymen, whose own success story has been scripted by an efficient state. They are uneasy because their chief ally, Pakistan, is consistently linked to terrorism while across the border India’s economy keeps rising disdainfully. It puzzles them that the anger in India over the Mumbai attacks is directed against Indian politicians rather than Muslims or Pakistan.

The global financial crisis has definitely affected India’s growth, and it will be down to perhaps 7 percent this year from 8.7 percent in 2007. According to my friend, China is hurting even more. What really perplexes the Chinese, he said, is that scores of nations have engaged in the same sorts of economic reforms as India, so why is it that it’s the Indian economy that has become the developing world’s second best? The speed with which India is creating world-class companies is also a shock to the Chinese, whose corporate structure is based on state-owned and foreign companies.

I have no satisfactory explanation for all this, but I think it may have something to do with India’s much-reviled caste system. Vaishyas, members of the merchant caste, who have learned over generations how to accumulate capital, give the nation a competitive advantage. Classical liberals may be right in thinking that commerce is a natural trait, but it helps if there is a devoted group of risk-taking entrepreneurs around to take advantage of the opportunity. Not surprisingly, Vaishyas still dominate the Forbes list of Indian billionaires.

In a much-discussed magazine article last year, Lee Kwan Yew, the former prime minister of Singapore, raised an important question: Why does the rest of the world view China’s rise as a threat but India’s as a wonderful success story? The answer is that India is a vast, unwieldy, open democracy ruled by a coalition of 20 parties. It is evolving through a daily flow of ideas among the conservative forces of caste and religion, the liberals who dominate intellectual life, and the new forces of global capitalism.

The idea of becoming a military power in the 21st century embarrasses many Indians. This ambivalence goes beyond Mahatma Gandhi’s nonviolent struggle for India’s freedom, or even the Buddha’s message of peace. The skeptical Indian temper goes back to the 3,500-year-old “Nasadiya” verse of the Rig Veda, which meditates on the creation of the universe: “Who knows and who can say, whence it was born and whence came this creation? The gods are later than this world’s creation. Who knows then whence it first came into being?” When you have millions of gods, you cannot afford to be theologically narcissistic. It also makes you suspect power.
Both the Chinese and the Indians are convinced that their prosperity will only increase in the 21st century. In China it will be induced by the state; in India’s case, it may well happen despite the state. Indians expect to continue their relentless march toward a modern, democratic, market-based future. In this, terrorist attacks are a noisy, tragic, but ultimately futile sideshow.
However, Indians are painfully aware that they must reform their government bureaucracy, police and judiciary — institutions, paradoxically, they were so proud of a generation ago. When that happens, India may become formidable, a thought that undoubtedly worries China’s leaders.

---Gurcharan Das is the author of “India Unbound.”

Changing rules of dharma

2008-11-30T15:08:00.000+05:30

Speaking of the global financial crisis, Sonia Gandhi recently applauded Indira Gandhi’s bank nationalization of 1969, saying that it had given India ‘stability and resilience’. Like the Bourbons of France our political class neither learns nor forgets anything. I don’t think Sonia Gandhi realizes quite what she was saying. India’s bank nationalization delivered neither growth nor equity. Any public sector bank manager will tell you how loans were diverted to friends of politicians rather than to commercially deserving farmers. Bad debts of banks rose alarmingly in the 1980s and moral hazards persist.

Indira Gandhi drew us further away from world trade, raised tariffs and taxes, and made us one of the world’s worst performing economies from 1966 to 1989. Industrial growth plunged to 4% a year vs. 7.7 % in 1951-1965. Manufacturing productivity declined half a per cent a year. Rakesh Mohan estimates that her mistakes cost the nation 1.3 per cent lower GDP per capita per year—meaning that our income would have been more than double today. I don’t blame Nehru for adopting the wrong economic model as socialism was the wisdom of his age; I blame Indira for not reversing course as sensible countries in East and Southeast Asia did. Even China changed in 1978, but we had to wait till 1991. She multiplied by zero and put us back by a generation.

But let’s not dwell on the past. India is in the midst of a dire crisis and we don’t seem to realize how much we are hurting. Panic has choked credit worldwide. Our economy is slowing pitifully. Exports are collapsing. Banks have stopped lending. Construction has come to a halt. Fear has taken over, and people are not buying (except mobile phones). As demand shrinks, so do revenues and profits of companies. Investment has stopped and lakhs in textiles and construction are out of work.

The Mahabharata points out that rules of dharma change in times of crisis when one is forced to observe apad-dharma. Paradoxically, defending capitalism requires state intervention. History teaches that decisive government action can stem the pain. If Lehman had been bailed out the world might not have gone over the cliff. But once normal times return governments must sell off the banks that they had bailed out and not leave them as cash cows for politicians, like our public sector banks.

The quickest way to restore confidence is to further cut interest rates, CRR and SLR, and recapitalize banks. Today’s rates are still too high. Since oil and commodity prices have plunged, the risk of inflation has receded. As property prices decline, and as old mortgage terms become available, people will begin to buy the homes they postponed when interest rates rose. When people buy houses, they give jobs to millions. The same goes for other sectors. Consumer spending will raise demand, restore production, and lead to investment. There is a currency risk in this strategy, of course, but the risk of deflation is greater.

Of course, we should spend massively in infrastructure, but the trouble is that even the current programs are not moving. World Bank has threatened to withdraw funding from highway projects. 234 out of 515 Central projects are delayed. Hence, public spending wont work when speed is of the essence. The saving grace is that we have been accidentally ‘pump priming’ via the rural employment guarantee scheme and loan waivers. What we must not do is to close borders no matter how much local industry clamours for protection. In the 1930s every country tried to protect its own industry. World trade declined 60% between 1929 and 1932 and this caused a worldwide depression. We must do everything to protect the fruits of globalization which has lifted millions out of absolute poverty over the past 20 years. No one can predict when the present crisis will be over. Things could get much worse, meanwhile, but capitalism will eventually correct itself.

What are you reading these days?

2008-11-16T15:04:00.000+05:30

One of my earliest memories is of a visit to a lending library. We lived in Shimla and I had discovered a circulating library near our home. Since my mother would not let me borrow a comic, I picked up my first copy of Enid Blyton. When we got home, my overbearing uncle thundered: “How can you let the boy read this trash!” Blyton may not be Shakespeare but with her I began my love affair with reading. When my kids were of that age they too found a lending library at Kemps Corner in Mumbai. When our family meets nowadays, we don’t ask, ‘how are you feeling?’ We ask, ‘and what are you reading these days?’

Just as a great city must have a big public park along with lots of small neighbourhood parks, so it must have one big public library and many neighbourhood libraries. Ideally, public libraries should be free, paid by taxes, and managed by the municipality. But this is a distant dream in India where the state has failed to deliver even more basic services like schools and hospitals. So, what do Indians do? Well, we don’t sit around. We start lending libraries in the bazaar, which are a metaphor of India’s middle class as it pulls itself up by its bootstraps. When government schools fail we start private schools in the slums; when public health centres fail, we open cheap health clinics.

Generally lending libraries charge ten percent of the book’s price. Since a new paperback costs Rs 200, one can borrow it for Rs 20, which is cheaper than an ice-cream. Chennai boasts the most lending libraries—129—but Eloor, they say, is the best with 80,000 volumes in a digital catalogue. Now thriving in Bangalore, Kolkata, and Delhi, it started in Kerala, the legendary home of the Reading Room movement. Hundred years ago villagers could not afford a newspaper and so they shared it or read it aloud to others. Thus, reading rooms were born. They made people politically aware, and EMS describes how they helped abolish the princely states of Travancore, Cochin and Malabar and united Kerala. By 1947 every village in Kerala had its reading room from which the communists recruited their cadres.

When I was thirteen, I visited America, where I discovered the neighbourhood public library from where I could borrow books for free. I walked in one day, filled out a form, and I was a member. The library had got started through a philanthropic donation of Andrew Carnegie, the ‘robber baron’ who built America’s steel industry. Between 1900 and 1917, Carnegie founded 3000 neighbourhood public libraries, insisting that the local municipality had to guarantee tax support for running and maintaining them.

In India, we do have some grand public libraries—the National Library in Kolkata, the Royal Asiatic in Bombay, and the splendid Connemara in Chennai. But these are more for scholars. Our most inspired library effort in recent years has been Delnet. The brain child of Dr HK Kaul, Delnet has electronically linked 1350 public libraries in India and a member can access 75 lakh books via an inter-library loan within 2-3 days.

But a neighbourhood library has a social purpose as well. Like a tea or a paan shop it brings people together. Delhi Public Library has a few branches but it insists on your identity verified by an MP/MLA/Gazetted Officer before you can borrow a book. My library in America only wanted an envelope bearing my family’s home address—such as a phone bill—as proof. I was treated as a citizen, not as a subject. Despite television and on-line reading, people will continue to read books for pleasure. Perhaps, one day we too will spawn our Carnegie. Or, as we turn into a middle class nation, we will demand publicly funded libraries. Meanwhile, at least, we have our lending library in the bazaar.

Finally, a lifeline for India’s poor November 2, 2008

2008-11-10T17:47:00.001+05:30

Nothing causes as much anxiety in a family as when someone falls sick. 65% of India’s poor get into debt and 1% fall below the poverty line each year because of illness, according to NSSO 2004. The answer, of course, is health insurance, but only 6% of India’s workers have it. Free public hospitals are not an option as two out of five doctors are absent, and there is a 50% chance of receiving the wrong treatment, according Jishnu Das and Jeffrey Hammer’s study. This tragic state of affairs is, however, set to change dramatically with Rashtriya Swasthya Bima Yojana (RSBY), a visionary national health insurance scheme, which provides Rs 30,000 ‘in patient’ health benefits at a premium of Rs 600, which the government pays if you are poor.

A brain child of an IAS officer, Anil Swarup, this scheme will succeed when others have failed because of choice, competition and a magical ‘smart card’. A patient can choose from almost 1000 private or government hospitals. States can choose from 18 public or private insurance companies. Insurers have the incentive to recruit the poor as they earn premiums by doing so. Hospitals will not turn away the poor because they don’t want to lose the Rs 30,000 in potential revenue. The poor have a choice to exit a bad hospital, something that only the rich can do today. Competition between hospitals will improve the quality of health care and new hospitals will come up because there is now money in catering to the poor.

The insured carry a smart card with a photo, fingerprints of the family, and an official’s ‘key’ who is accountable. It makes transactions cashless and paperless for the 725 pre-agreed medical procedures. This card contains Rs 30,000 and it tracks expenses day to day in the hospital and the money is deducted automatically after each procedure. No need for pre-approval or reimbursement. Since the poor are migratory birds, the smart card empowers a Bihari to use a hospital in Gujarat. Smart cards are designed to prevent fraud because of 11 unique types of embedded software.

So far 500,000 cards have been issued in six months covering 2.5 million people. Most states have agreed to the scheme because the centre foots 75% of the premia. Haryana and Gujarat are the most enthusiastic. Uttarakhand and Orissa are dragging their feet. Kerala is offering it to everyone as long as the non-poor pay their own premia; thus, it has become a universal product of the insurance company. Only Madhya Pradesh and the North East states, to their disgrace, have not joined. If all goes according to plan 30 crore people or one third of India will be covered in five years at an annual cost of Rs 4500 crores--a tiny sum compared to the money wasted in dozens of other schemes. Previous state health insurance schemes failed because they insisted that people use public hospitals and public insurers—with predictable results. This one will succeed because insurance companies, hospitals, and patients all have ‘skin in the game’.

Smart cards can dramatically cut corruption in all our social programs. India spends 14% of GDP in subsidies for the poor, which is more than enough to wipe out poverty. But poverty persists because subsidies leak out through corruption. Smart cards can also carry data on payments for rations (PDS) or earnings from employment schemes (NREGS) and it can expose corruption very quickly. Despite the Left’s strident rhetoric, middle class Indians do not resent income transfers to the poor as long as the benefits reach the poor. Our problems in India are of the ‘how’ not of the ‘what’. The smart card addresses the ‘how’, and we know its powerful because corrupt officials and politicians are trying hard to kill it. For the nation, it is the best Diwali present amidst all the gloom in the marketplace.

A passion for death or life? October 19, 2008

2008-11-10T17:45:00.000+05:30

The persistent attacks of terror on Indian cities by Islamist fundamentalists and on Christians in Orissa by Hindu fundamentalists have spread fear, re-opened old wounds, and polarized us. India’s economic rise is threatened as much by religious fanatics as by the global financial meltdown. This raises an insistent question: Will our 21st century be the story of an India turning middle class or will it get derailed by religious wars?

I have always believed that India would relentlessly march towards a modern, capitalist and democratic future; and terrorist attacks are a noisy, tragic, but ultimately futile sideshow. Islamism and Hindu extremism are a barely disguised form of tyranny, which will eventually lose their appeal. Even fundamentalists will get absorbed in finding good jobs, decent homes, and good schools for their kids. Since the attractions of peace are greater than of war, commerce will replace conquest as the route to achievement. History is on my side. In the past two centuries, the combination of democracy and market capitalism has triumphed over feudalism, monarchy, theocracy, fascism and communism. Europe, the home of religious wars, is now tolerant, and irreligious. There are today 120 genuine democracies versus only 10 a hundred years ago.

Since 9/11, Americans have also been debating the future of capitalist democracy. Many believe that Islam is incompatible with modern democratic values. Samuel Huntington in his book, The Clash of Civilizations, argues that future conflicts will not be between nation states but religious civilisations, and he predicts that Islamism will form an alliance with China to bring down the West. Francis Fukuyama rebuts this in The End of History. After communism’s fall, he predicts most countries will become capitalist democracies and the world will be at peace. But people, he feels, need more than shopping malls to satisfy their thymos--the human need for spirited achievement, which religion and wars fulfilled in the past. This explains the amazing religious revival in America, which Philip Jenkins has documented in The Next Christendom: The Rise of Global Christianity. He describes a new, vigorous, missionary Christianity that is increasingly assertive. The question is whether aggressive conversions by this new Christianity is producing the current backlash from Hindu extremists, who are behaving no better than Islamist terrorists.

For all its seductiveness, I never did buy the ‘clash of civilizations’ theory. Radical Islam or jihadism is political rather than religious. Sayyid Qutb and Osama bin Laden employ dangerous ideas of violence that are not Islamic but resemble anarchist ideologies of Europe. They resonate with Arab and European Muslims because of their deeper alienation with the West. In India, we have reacted to terrorism more maturely than the U.S. Indians are more relaxed than paranoid Americans, and this must dishearten terrorists. Our security agencies have not shown the same competence, however. Our government has also failed to assert the primacy of the citizen over the group, and stop pandering to religious and caste identities. Religion is a double edged sword----while it gives meaning to our confused, uncertain private lives, it also creates an exclusive identity, and this asserts itself publicly before long. In a competitive democracy secular politics does not spring automatically. It took centuries in the West to persuade politicians to eradicate religion from political rhetoric. The Islamic world is still struggling with this problem.

It may seem odd to say this at a moment that capitalism has been humbled, but I still believe that secular, democratic, capitalist India will prevail in the end. Just as we have rejected socialism and central planning as the path to prosperity, so will our plural, secular democracy ultimately defeat political Islam and political Hinduism.

When everyone lost, October 5, 2008

2008-10-14T18:04:00.001+05:30

When you teach people for two generations not to respect the property of others you are bound to have a tragedy. Singur is 50 km northwest of Kolkata where Ratan Tata made the surprising decision to set up a factory for the world’s cheapest car, the Nano. Bengal’s image may have improved but it still has a poor work culture. But its chief minister Buddhadeb Bhattacharjee is a charming man. He sees himself as the Deng of India, and he persuaded Tatas with an attractive plot of 1000 acres.
Although the state offered farmers a higher than the market price, some refused to sell their land. When they protested, the ruling CPM party let the police loose and acquired their land forcibly. Mamata Banerjee, an opposition leader, sensing an opportunity for votes, arrived on the scene and insisted on the return of 300 acres. By now the factory was almost ready; Tatas claimed they needed the land to house component suppliers to keep costs down. Mamata’s agitation soon went out of control. Tatas fearing for their staff’s safety, decided on Friday to leave Singur.
Here is a tragedy in which everyone lost! CPM’s culture of violence has been exposed. Buddhadeb’s hopes for an industrial renaissance of Bengal are dashed. Tatas and their vendors face massive relocation costs which have jeopardised Nano’s magical price. Mamata will now only be remembered for destroying Bengal’s future. For the people of Singur the dream of a better life is over. And India’s image is unhappily tarnished.
So, who does one blame? Clearly, the state violated the farmers’ right to property when it forcibly acquired their land. We used to think that property rights concerned only the rich—especially when the targets were zamindars and big business, whose banks and insurance companies were nationalized without due compensation in the 1950s and 1960s. The judiciary, however, kept warning successive governments that the right to property was fundamental. But our socialists were impatient, and on one sad day in 1978, the Janata government removed ‘property’ from the list of fundamental rights in our Constitution. Today, thanks to Mamata, we have realized that the even a poor farmer has a right to his land.
Just as I have a right to my life, I also have the right to the shirt on my back or my home, so that I may live in peace. I can only give up this right when I voluntarily sell my property. If someone forcibly takes it away, the state has a duty to get it back. In societies where property rights are secure and legally enforced, citizens feel safe. They have the incentive to buy, sell, engage in business, and everyone's life improves. There are times, however, when the state has to acquire private land forcibly for a public purpose such as a road. But acquiring property from farmers for the sake of industry does not qualify as ‘public purpose’. To our democracy’s credit, our government has now realised its mistake. A new land acquisition bill is up for Parliament’s approval in the next session. In the future, industry will have to negotiate with farmers, and only if there is a deadlock and only if 70% of the farmers have agreed to sell, will the state step in.
The lesson from this Bengali tragedy is give the poor a clean title to their property—their huts and plots--so that they may take a loan against it. Also, put land records on the Internet so that corrupt revenue officials will not exploit the poor. Karnataka has done it—it has computerized 2 crore land records of 67 lakh farmers. This is one way out of poverty. The Bengalis are our Irish, who as Yeats said, have an abiding sense of tragedy. Their tragic sense lies in striving to be rational but recognising life’s underlying irrationality. One cannot avoid tragedy, but strengthening institutions like property rights can help to minimize it.

Kashmiri choice, August 24, 2008

2008-09-01T15:53:00.000+05:30

A Kashmiri Muslim student came to see me last week and it was not long before our conversation turned to the current azadi wave in the valley. He did not think that an independent Kashmir was viable, and its only choice was either to be with India or with Pakistan. After a pause he asked guilelessly, why was India a democracy and Pakistan an autocracy? This set me thinking. I told him that Pakistan was more the norm--third world countries do not generally become stable democracies. India is an exception.

India’s democracy and Pakistan’s autocracy have deep roots in history. India’s nationalist movement was older and more widespread. Millions of ordinary Indians were drawn in by Mahatma Gandhi. Muslim nationalism emerged later and did not become a mass movement--Jinnah was more comfortable in the drawing room rather than the ‘dusty road’. While Indians prepared for democracy over three generations, Pakistanis-to-be got the itch only a couple of years before independence. After Independence, Pakistan’s politicians performed abysmally. The Muslim League Party disintegrated; there were nine governments in ten years; and the army under Ayub Khan seized power in 1958.

Jinnah’s great error as to impose Urdu as the national language when only 8% of Pakistanis spoke Urdu and 55% spoke Bengali. Thus, he sowed the seeds of Bangladesh. Sri Lanka made the same tragic mistake. India did not succumb to this anti-democratic temptation by imposing Hindi. This is how India gave space for sub-identities to flourish, allowed the rise of peoples’ leaders from linguistic states, and deepened democracy.

Although his slogan in the 1945-46 elections in undivided India was ‘Islam is in danger’, Jinnah wanted to build a modern nation. Even though General Zia ul Haq reinforced theological priority, I do not believe Islam prevents Pakistan from being democratic. The rise of Islamism does tear the ordinary Pakistani’s loyalty between the brotherhood and the state, but the Maulvi is not Pakistan’s natural leader as in Iran. The chief obstacle to democracy is the army. Hence, I am relieved that Musharraf is gone. It does create a vacuum that might be filled by extremists, but longer term the best thing for India is to have a democratic Pakistan.

For a brief moment in the mid-1970s the two nations seemed to converge. Zulfiqar Ali Bhutto began to steer Pakistan towards genuine democracy while Indira Gandhi took India on the path of dictatorship. The paths diverged after 1977 as Mrs Gandhi called an election, and Bhutto was executed by Zia in 1979. India returned to the path of democracy, whose binding glue is the liberal notion that all Indians are equal citizens before the law, owing loyalty to the Constitution. This is a British legacy. Before that we were a collection of communities and kingdoms. Although we still feel loyal to our caste or community, we are different from tragic Pakistanis whose land has been hijacked by the military. Once there is military rule you get a state within a state. You are powerless to stop your secret service from creating monsters like the Taliban, and before you know it your country has become the world’s top university for terrorists.

I then turned to my young Kashmiri friend. He wished more Kashmiris could come and see India’s vibrant democracy, its confident economy, and the rise of the low born. ‘There is a simple choice before all Kashmiris,’ he said: ‘If you want to be a citizen of a modern democracy with unparalleled opportunities, you will choose self-assured India. If you believe that Islam is in danger and you want the army’s protection, you will choose tragic Pakistan’.

In praise of grand gestures, August 10, 2008

2008-09-01T15:50:00.001+05:30

On a soggy monsoon afternoon last week I found myself in the company of not just one but two finance ministers, P.Chidambaram and Jaswant Singh, at the launch of a book by the admirable Swaminathan Aiyar. An unfailing rule for spreading happiness in the political class is to flatter—there is no limit to how much one can boost the human ego. I chose, however, a less comfortable course and quizzed the worthy politicians about the painfully slow pace of reforms. When both BJP and Congress agree on the major reforms, why can’t we insulate them from the football of competitive politics?

With the Left finally off its back, the Congress’ dream team wants to redeem some honour after four years of non-performance. Chidambaram picked up the ball and recalled how it had taken over five years to pass the insurance bill when it should have taken five months. When it was finally done, the NDA capped the foreign equity at 26% even though it had earlier killed the same bill because it was opposed to 20%. Jaswant Singh, normally quite charming, seemed bewildered and defensive. Perhaps, it was Sushma Swaraj’s outrageous statement that had put him out of sorts. When she declared that the BJP would not help pass the pending reforms, she was actually saying that she did not care about the lives of ordinary Indians.

The Congress, of course, is no better when it is in the opposition. Both parties should memorize Arun Shourie’s precept—the Opposition should never oppose anything it would itself do in office. Later over tea, the irrepressible Mani Shankar Aiyar, with classic Doon School bluster, reproached me for harbouring undemocratic temptations. If he had listened, I would have told him that many democratic countries pursue bipartisan policies when national interest is at stake. In the UK, the Northern Ireland issue was always above politics and prime ministers always kept Opposition leaders informed. The unwieldy US Congress has an unwritten rule, ‘politics stops at the shore’. Thus, bipartisanship rapidly delivered the Marshall Plan to reconstruct Europe after the World War II; Homeland Security after the 9/11 attack; and the sub-prime mortgage bailout this year.

The Nuclear Deal was one such moment in India’s history. It was less about energy and more about national security. Both the BJP and the Congress agreed on its essentials. Yet it became hostage to tragic politics. Bipartisan institutions could have spared us the cash-for-votes scandal and saved the political class’ image. Democracy does not have to mean permanent conflict. The Opposition does not have to only oppose. Mamata Banerjee is a failure because voters think that she only knows how to oppose. Ultimately, cooperation reflects character.

The Prime Minister showed statesman this week in reaching out to the Opposition on the Amarnath issue. Emboldened by this, he should now prime-move a bipartisan summit with key Opposition leaders, seeking agreement on an economic reforms slate over 200 days. The BJP knows at heart that pensions, insurance, banking are as much about national interest as preventing terrorism. The secret is to take the competitive sting out of the process. With this agreement in hand, Manmohan Singh should repeat what he did in July 1991. He should institutionalize an implementation mechanism inside the PMO for monitoring weekly progress. I am thinking of the famous Thursday Meetings of the economic secretaries, which were coordinated by AN Varma, Narasimha Rao’s principal secretary—it was the crucial instrument for implementing reforms at an unprecedented pace in 1991. This is the way to answer our mini-9/11 terrorists. India’s destiny will not be stopped by anyone.

Go beyond Left and Right, July 27, 2008

2008-07-28T14:25:00.000+05:30

On July 22, the Congress led UPA won a vote of confidence in Parliament over the nuclear deal. Despite the murky moments I truly enjoyed the debate. I got a sense of how our MPs think, feel and view the world. There were great moments in the speeches of Lalu Prasad, Rahul Gandhi, Omar Abdullah and others. Suddenly, it was all eclipsed by the stomach turning sight of bundles of currency flying about.

The debate showed how much our political landscape has changed after 1991. Both the right and the left are exhausted. The left, which earlier stood for idealism and change, has lost all common sense. It defends the status quo in voices from Jurrasic Park, forgetting that it too is a victim of vested interests. The right, which in India means the Hindu nationalistic right, finds less and less takers for its Hindutva ideology. The Congress is in deep trouble, unable to shed its traditional attachment to statism. It fails to grasp that the Indian mind is now unbound, and the young want to take charge of their lives.

Ideology is also exhausted in the rest of the world, where left and right matters less and less. In the West the left tries to conserve the welfare state. The liberal, economic right wants to dismantle it. Beyond that, the distinctions are blurred. The right has accepted transfers to the poor but it wants them to be efficient. The left no longer wants government to run businesses. Few oppose the market--the debate is on how to regulate it wisely.

If people don’t care about ideology, how will politicians win elections? Human beings want the same things everywhere--a safe, place to live; good schools and hospitals; clean air and water; be able to ply one’s trade without having to bribe; a judge to resolve disputes speedily. The amazing thing is that our politicians will do everything but deliver these. When we throw them out after five years, they blame ‘anti-incumbency’. Some of us have heard of an obscure railway official named Erapalli Sreedharan, who is quietly building a world class Metro for Delhi. If he were candidate for the Prime Minister, we would vote for him. His ability to execute projects has nothing to do with capitalism, socialism or Hindutva. The Chinese politburo has this advantage over our cabinet—its leaders have Sreedharan’s abilities.

Indians have been raised on a steady diet of Mahabharata, and so we are pragmatic. The Yudhishthira, who made the reluctant decision to go to war, was following a practical, achievable dharma. He was aware that while ahimsa, non-violence, is the ideal way to act, violence is sometimes inevitable. In politics, protecting the state’s interest is the path to justice rather than seeking human perfection. When ideology becomes the driving force of politics, room for compromise disappears. The Congress Party has just learned this lesson in the most painful way from its Marxist allies. As a general rule, the ethic of perfection appeals more to those who are far removed from public office.

The history of the twentieth century is littered with the graves of ideologies, all of which had some great and benign aim. This was the faith of Lenin, of Mao, even of Hitler, and who knows, maybe even Pol Pot. In India, we escaped these tragedies, but our modest experiments with Fabian socialism led to statism, and we are still trying to shake off that yoke. Our politicians should learn from history—shed ideology, acquire implementation skills, and focus on the real needs of people. This is the way to beat ‘anti-incumbency’ and win the next election.

One cheer for Mayawati, July 13, 2008

2008-07-28T14:23:00.000+05:30

On July one, 86 lakh children in class one and two began to learn English in government schools of Uttar Pradesh. It fulfilled a long standing demand of parents who believe that they have lost two generations to Hindi chauvinists. They know that a child who learns English by age 10 has a natural advantage for the rest of its life. Shortage of English speakers is one reason why software companies, call centres, export oriented industry has been slow in coming to UP and the caricature of the ‘bhaiya’ persists.

Mayawati’s decision on English was hailed by Dalits, and for good reason. A study in Mumbai shows that among Dalit women, those who learn English rise economically and socially by marrying outside their caste. 31% of Dalit women who knew English had inter-caste marriages compared to 9% who did not know English. This makes sense. Knowing English gives a Dalit woman a chance to work in call centres and other modern jobs where there are fewer caste barriers. Is Mayawati finally realizing that there may be more votes in meeting people’s real needs than in erecting statues to Ambedkar? She has also ordered toilets for girls in 90,000 primary schools.

It must have taken some courage to challenge the teachers’ union and the Hindi establishment. So, why do I offer only a single cheer to Mayawati? I would give her three cheers had she attacked the basic disease of teacher absenteeism. The famous Kremer-Murlidharan report shows that one in four teachers is not present in school, and one in four present is not teaching. As a result, 53.1 % of UP’s children in Class 5 cannot read a Class 2 text, according to ASER surveys. 67.2 % of children in urban UP and 29.1 % in rural UP are now in private schools.

What is the answer? Quite simply, the government should fund students and not schools. When a child reaches age 5, the government should give parents a voucher (like a scholarship), which can only be exchanged for education at a school of the parent’s choice. Since all parents want a good school for their kids, vouchers will create competition among schools. As vouchers will be the only source of a school’s income, and as teachers will be paid salaries only from vouchers, teachers will show up and even teach with inspiration. Teachers will have an incentive to perform. Good teachers will be able to earn more thanks to higher voucher income earned by their school. Teacher morale will thus rise. They will be accountable to parents rather than remote officials in the state capital.

Competition for vouchers will improve both government and private schools. Bad schools will close down, good ones will flourish. The poorest parents will be able to send their child to a quality school. The ability to exit their children from a bad school is hugely empowering—it is like having “voice” in a democracy. The rich have it because of their money power. Vouchers will give them purchasing power and “voice”. A poor child will get the same opportunity as a rich one to rise in the world, and we will progress to our dream of equality of opportunity.

Mayawati used to be a teacher. So, she will appreciate this public-private partnership. Teachers unions will oppose her, of course. She will be scared of losing lakhs of teachers’ votes, but she must remember that she will gain crores of votes of grateful parents. I’m convinced that more and more sensible policies will come from Dalit/OBC leaders who have fewer vested interests to protect (like teachers’ unions).

A winning merger June 29, 2008

2008-06-30T16:58:00.001+05:30

For some years now I have been on the board of Ranbaxy and have watched with admiration as the company transformed itself into India’s first real multinational. I have seen it inspire a dozen other companies and helped create a world class generic drugs industry that is feared by the Western giants for aggressively challenging their patents and admired for lowering the cost of medicines around the world. How then was I to respond to the announcement by Ranbaxy’s CEO, Malvinder Singh that he wanted to sell his family’s stake for Rs 10,000 crores to a Japanese company, Daiichi Sankyo? The family was equally shocked. A CEO’s ability to keep months of negotiations secret in a country afflicted by verbal diarrhoea speaks to the company’s character.

My initial reaction was one of dismay—how could one of India’s finest companies become a mere Japanese subsidiary? A company that had acquired 14 companies in 30 months was now itself about to be acquired. Slowly I realised, however, this momentous deal would make the merged company much stronger and create greater value to the Indian nation.

In a world where the large, drug-discovery companies are struggling with expiring patents; where rising health care costs have pushed countries to favour quality, affordable generic drugs; where intense competition between generic drug makers has dramatically lowered profit margins; the logical solution is for the discovery and generic companies to merge. This is why the drug discoverer, Daiichi Sankyo, has valued the generics Ranbaxy at $8.5 billion when its stock market value was only $5 billion and is paying 35 times its future earnings. However, it will only be able unlock Ranbaxy’s value if it does not gobble it up like most mergers, but leaves it alone, as Roche, the Swiss company, did with Genentech.

But how could selling an Indian company create wealth for India? Companies create wealth for nations when they create jobs, give returns to shareholders, and pay taxes to governments. If Ranbaxy had not been sold, it would have continued to generate steady returns. By joining hands with a larger, innovative Japanese concern, it will produce more and better products, be able to better fight patents, and provide Japanese skills in process, quality and teamwork to its employees. Daiichi Ranbaxy will potentially create more jobs, more returns to both shareholders, and more taxes to both governments. And when the family invests its Rs 10,000 crores in its other businesses-- Fortis hospitals, Religare finance --it will create more ‘Ranbaxys’ and more wealth for India.

Compare Malvinder Singh’s decision to sell at the right time to the sentimental, insecure reaction of Escorts and DCM families in the 1980s. When Swaraj Paul bid for these companies, our pre-reform government stopped him. Most companies of the two groups went downhill after that as the next generation was neither hungry nor capable. The families lost and so too did the nation. In Ranbaxy’s case, the family put the business interest before their own. Thus, Daiichi wants Malvinder Singh to stay on as CEO.

The Ranbaxy affair shows how the Indian public has also matured. Ten years ago our political class would have shed tears, waved the flag and stopped this deal. The 2008 Pew Survey of 24,000 people across 24 major nations concludes that Indians are now amongst the most confident people. Nine in ten Indians favour foreign trade and six in ten welcome foreigners buying up Indian companies. We have behaved far better than the French when Laxmi Mittal bought Arcelor. Now let’s apply this lesson and sell off our obsolete, bleeding public sector navratnas as well.

Deceits of our political class June 15, 2008

2008-06-16T16:21:00.001+05:30

Another election has come and gone. As the dust settles in Karnataka, Election Watch, a civil society watchdog, has reported that 40 out of the 224 winning MLAs have a criminal record. Of those who contested three were brothers--all of them criminals. To make sure one succeeded the brothers obtained tickets from different parties. The bet paid off--one was elected.

We have known about criminals in our politics for some time now. It is easy to get depressed when law breakers become law makers. Yet there are reasons to feel hopeful. Karnataka has elected 20% fewer criminals. Jaffer Sharief, the former union minister, was unable to give a Congress ticket to the notorious Samiullah because of local outcry. Criminal MLAs have declined in Gujarat, Delhi, MP, and Rajasthan. Even in corrupt UP, criminal MLAs came down in 2007 from 206 to 160. There are no criminals in the Bihar cabinet. Both the BJP and the Congress have begun to scrutinise candidates more diligently.

The nation has to thank a group of professors at the Indian Institutes of Management for this. Disgusted with our politics, they formed the Association of Democratic Reforms, which filed a Public Interest Litigation in the Delhi High Court in December 1999 demanding the Election Commission provide voters with the criminal background of candidates. They won the case. The government appealed, however. The IIM professors again won in the Supreme Court in May 2002. At this point, twenty one political parties rose up against the Supreme Court’s decision. The government hastily brought in an ordinance, which the Supreme Court also declared illegal.

As a result election candidates are now required to file an affidavit giving details of convictions or pending criminal cases. This is a big step forward. 1200 NGOs have joined together to form Election Watch to publicise criminality of candidates. A Bill on Electoral Expenses in 2003 has tried to control political expenditure, and the Central Information Commission’s ruling last month that income-tax returns of the political parties must be provided under the Right to Information Act will boost financial accountability.

Politicians argue that all this will lead to frivolous and false frame-ups by crooked rivals. It will. Note, however, that candidates are expected to disclose only cases that have been admitted for trial with charges framed. Analysis of Rajasthan Assembly elections in December 2003 showed that half the alleged criminals were, in fact, criminals who were in the midst of trial proceedings on very serious charges. The other claim of politicians that offences are mostly political in nature--related to bunds, dharnas and rallies--is also not borne out by data. It also begs the question, why should politicians flout prohibitory norms in the first place? It is true, this will not stop false cases but in the end transparency is a greater good. The real worry is that most crimes of politicians are never even booked--this is the real deceit of the political class.

You would think that political parties would not want to be tainted by criminals. So, why give them tickets? It must be because they are “winnable” with their money and muscle power. For the whole political class to unite, however, to prevent disclosure and transparency is an amazing act of deceit. One day, perhaps, the cost of harbouring criminals will become intolerable as civil society pressure grows. Meanwhile, let us celebrate the fact that a few determined individuals could take on the entire political class with the aid, no doubt, of the two institutions that we admire--our higher judiciary and our Election Commission. It restores our faith in democracy.

Go on, save the deal June 1, 2008

2008-06-04T13:23:00.000+05:30

Lal Krishan Advani is a lucky man. Fortune has given him the chance of a lifetime. He can save the historic Indo-US nuclear accord and grow in stature from a politician to a statesman. Less than four weeks remain, after which the treaty will die. The Left has no room for manoeuvre, but the BJP does. If Advani seizes the day and persuades his BJP colleagues, he will go into history as the “white knight” that saved India’s energy and security future. He would also take a giant step to fill the large shoes of his predecessor, and become more worthy in the eyes of NDA’s coalition partners.

A hundred years from now history books will recount that when oil was ruling at $135 a barrel, India’s leaders were complacent. They argued that since 65% of India’s power needs are met by coal and only 3% by nuclear energy, why does India need a nuclear treaty? Oil did run out in the 21st century, but the nuclear deal rescued India. Initially, it freed the country from 35 years of nuclear apartheid, allowing it to import uranium, which helped to lift the performance of its 17 reactors from 50% to 95%. After the treaty, India’s energy needs were increasingly powered by nuclear energy while other countries scrambled for the last few barrels of oil.

History will describe how China rose in the second quarter of 21st century to dominate the world. Some Asian nations became its satellites, including its closest ally, Pakistan, to which it supplied vast quantities of arms. India was able to hold its own thanks to the treaty, which paved the way for closer ties with the Western democracies. The West stood by India during its times of trouble and eventually India went on to balance power in Asia and the world.

History will narrate that the nuclear treaty never compromised India’s right to Pokharan III. China and France did nuclear tests in 2020, which ended the CTBT regime. India was by then the world’s third largest economy, and it followed up with its own test. The Democrats in America, instead of throwing the CTBT at India, were relieved to see India balance Chinese power in Asia.

History will report that during the 2009 election campaign Advani confidently took credit for having saved India’s future from a traitorous Left and an indifferent Congress. During his campaign, Advani claimed that in saving the accord he had merely completed a process that Vajpayee had begun with Pokharan II; Jaswant Singh had followed up in his dialogues with Strobe Talbott and Brajesh Mishra with Condoleeza Rice. Manmohan Singh had crowned this effort, he said, showing great wisdom in signing the accord with Bush. He claimed that BJP’s pressure forced crucial changes in the final treaty in India’s favour. Advani told voters that when the UPA let its own Prime Minister down, BJP had to rescue the nation’s honour and energy future.

This history will also have a coda. When he was trying to persuade his BJP colleagues in June 2008, Advani quoted from Arrian’s account of Alexander the Great. As the Greeks were crossing the Jhelum in narrow boats on a stormy, monsoon night in 326 BC, just before their famous battle with Raja Puru, Alexander told his generals, “Don’t be afraid my friends, your grandchildren will sing your praises and remember your glory.” Hearing this, the BJP leadership broke into applause. They had finally found a statesman to lead them to victory at the next elections. Rescuing the nuclear treaty became the turning point in the career of Lal Krishna Advani.
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A Right to Walk May 18, 2008

2008-05-30T16:09:00.002+05:30

When the Bus Rapid Transport (BRT) fiasco was being discussed in a high-level meeting in Delhi, a dazzling thought came into the head of a senior official. ‘Why don’t we just get rid of the footpath!’ he exclaimed triumphantly. Someone gently pointed out to the worthy administrator that his wife also happened to walk on the same street daily and what would she say about eliminating the footpath?

What Americans call a sidewalk, and the British a pavement, we call a footpath. In romantic minds it conjures images of tree lined boulevards and sidewalk cafes in gay Paris. But in a typical Indian town let the mind focus on the image of children walking home from school on a busy road without a footpath. A lorry comes hurtling at them at 70 km per hour, and suddenly those children could be yours. In a nation where people mostly walk, it is frightening that footpaths are non-existent or disappearing. We build roads for cars—pedestrians are nuisance. Where footpaths do exist in a few cities, they have either been encroached upon or filled with garbage or taken over by hawkers, litterers and urinaters. Walking to the bazaar is not for the faint hearted.

Kanthi Kannan, a lady in Hyderabad, has started “The Right to Walk” movement to address this problem. She filed a Public Interest Litigation in 2005 praying for the Andhra High Court to save footpaths in her neighbourhood. She bombarded municipal officials with Right to Information emails, asking why the width of the footpath leading from Mehdipatnam to Sarojini Devi Eye Hospital had been reduced and a structure resembling a Dargah built upon it. By March 2008, her efforts had met with some success. Footpaths were restored, parking forbidden on them, but the structure remained untouched. She discovered that no one is responsible for footpaths. The municipality thinks it is a problem of the Roads and Buildings Department, which denies it and says its job is only to build roads.

Mumbai used to be wonderfully endowed with broad sidewalks. I worked there in the 1980s when the municipality approached my company, asking us to build a narrow garden along the long stretch from Mahalaxmi Station to King George’s hospital. They wanted us to illegally encroach upon the footpath in order to prevent squatters from taking it over. Such was the political power of the squatters! We did build a lovely, longish garden along E Moses Rd but l felt guilty about cutting into the walking surface. I consoled myself that at least the pedestrians were now walking along flowers, grass and trees.

Prosperity is beginning to spread in India but happiness is not. This is because our government repeatedly fails to provide simple public goods which citizens in other nations take for granted. Footpaths are one of them. It may seem churlish to worry about footpaths when there are more pressing problems of hunger, illiteracy and water. Remember, however, India’s future rests in its cities. By 2020, half of India will be urban, middle class, and crowded. What will be the point of becoming prosperous if it isn’t safe to walk?

Kanthi Kannan’s noble example shows that instead of sitting around and complaining, citizens can make a difference. The starting point is to extend your circle of concern beyond your front door (as Yudhishthira did in the Mahabharata when he insisted on taking a stray dog into heaven). You will discover that municipalities do respond to citizen pressure if citizens are united and relentless. Demand footpaths but don’t be surprised if they demolish your proud garden if it encroaches on the pavement.

Why India is not a threat May 04, 2008

2008-05-30T16:02:00.001+05:30

On a recent lecture tour of the Far East I was repeatedly asked a fascinating question: Why does the rise of India not threaten the world in the same way as China does? We in India don’t realize the depth of fear that China inspires in the East.
My first reaction was that India is a democracy and democracies are supposed to be more peaceful. I was quickly reminded that democracies have been known to invade places like Iraq.

True, but democracies tend to have more voices and more checks and balances. India’s democracy, in particular, is a coalition of twenty parties. It cannot govern itself--how could it possibly threaten anyone? India’s inability to take advantage of an historic opportunity to climb to world power status through the Indo-US nuclear deal shows this. My audiences found it inexplicable that Indians could quibble over a treaty that is so obviously in India’s self-interest. Someone wondered if we had a self-destructive streak. The consensus was that had China been a multi-party democracy, and had it been presented with the same opportunity, it would grabbed and run with it. .

Asian security analysts, I was surprised to note, had deep respect for India’s military capabilities. They seemed to know all about our navy’s aircraft-carrier force, our air force’s latest Sukhois and MiGs, and our army’s professionalism (although they felt that we had been badly let down by DRDO). They believed that India’s military did not threaten Asia because of the turmoil in our neighbourhood. Terrorist threats from Pakistan, an unending civil war in Sri Lanka, Maoists in Nepal and Bangladesh’s chronic instability—these were huge distractions which prevented India from thinking strategically about its role in the world.

East Asians who had visited India felt that we still needed to get our act together. Although India’s economy was growing brilliantly and Indian companies had become world beaters, they found our physical and social infrastructure “depressing”. What is the point of having a world class airport in Bangalore if it is isn’t well connected to the city? What is the point of having a million government primary schools if half the students can’t read a single sentence? One speaker asked why Indians are still wedded to democracy when it has failed to deliver the most basic public services.

Nevertheless, I came away with a feeling that East Asians are cheering us and believe that history’s momentum is on our side. They have their own reasons, of course—they fear China and desperately want a countervailing power. They don’t trust Japan—the wounds of the Second World War have not yet healed. They wish that the Indian state would show more determination, however, and shed its old self-perception of a victimized Third World nation. Some expressed the hope that India’s rise would improve Asia’s image as a whole. India’s mind was closer to the West. Indians spoke good English and were more open. The West distrusted Han China profoundly because it was closed, and the Tibetan protests had not helped.

Buddhists in the audience seemed to cheer India’s rise because the post-9/11 world needed our traditions of tolerance and non-violence. I was surprised to see how many remembered Mahatma Gandhi and Tagore. They even wanted me to feel embarrassed about our nuclear weapons. On my way home, I asked myself that if it is true that the Indian state is genuinely less aggressive, then that is in fact the right answer to the original question about why India’s rise does not threaten the world. I, for one, do not want an intimidating India which seeks military greatness. .

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War of the creamy layers, April 20, 2008

2008-05-30T16:00:00.000+05:30

One of our great triumphs as a nation is that we widely condemn social discrimination. This was demonstrated again on April 11 when the Supreme Court allowed a 27 per cent quota for Other Backward Castes (OBCs) in higher education. I am against all quotas but I support vigorous affirmative action. Our leaders in the future will be next generation OBCs, and if they are not better educated, governance will not improve. Why then do I feel a deep pain in my gut over the court judgement? This case, alas, was not about social justice; nor about legitimate OBC aspirations. It is was about a war between two “creamy layers”--middle class factions of the backwards and forwards-- in which the nation may have lost. I fear this “landmark” judgment will do irreparable damage to our few good institutions.

The ordinary family in the village merely wants a good school to lift its children out of poverty. IITs are as alien to it as the Queen of England. The hidden purpose of the OBC quota was to push the wards of OBC netas, babus and elite into our top institutions via an unfair handicap. But the strategy backfired because the Court has excluded the “creamy layer”. Since the aspirations of OBC voters and politicians are different, the quota controversy was unreal. It was not about compensating for disadvantage. As Mayawati has discovered there are poor Brahmins and rich OBCs.

The India of our dreams is one where everyone will belong to the middle class. High economic growth, of the sort we have today, can deliver this dream. But individuals of talent will play a disproportionate role. Since talent is such a scarce resource, successful nations nurture it through elite institutions like the IITs. They don’t place a person with 20th rank in the IIT-JEE exam in the same classroom as one with 20,000th rank. At the same time they meet the demands of the others through an adequate supply of reasonably good institutions. This is how they achieve excellence and equity.

The clamour for quotas in higher education arises from scarcity. We have very few good colleges because education, unlike industry, has not been liberalized. It is firmly under the control of netas and babus, whose energy is spent in doling out favours. Because the government refuses to give autonomy to universities, less than 50 out of 300 can produce an employable graduate. If they had the freedom to set their own fees, curriculum, salaries, and standards, many of our colleges would take a leap upwards.

By contrast Indian industry is more autonomous. In competing for customers it has been expanding supply at breakneck speed. In March, India achieved a miraculous 300 million mobile phone customers in a country of 200 million households. Before liberalization, we had five million phones in 1990. No one talks about quotas for telephones any more because the market has raised both supply and quality. The same thing could happen to education. Prosperity doesn’t trickle down; it goes down like a flood.

The political class is dead set against liberalizing education because scarcity would disappear. So would the need for quotas and so would vote banks. The roots of individual failure are laid in school. World Bank data shows that Arjun Singh presides over one of the worst primary school systems in the world, worse than many African countries. His job was to reform it. Instead he let loose a caste war. But voters are no fools and they can see through his game. If he thinks the Congress Party win will votes from his game, he is mistaken.

Power of subtitles April 6, 2008

2008-04-07T13:37:00.001+05:30

Girirajsingh Natubha studied up to Class 2 in Jamnagar. All his life he struggled to read simple words. A few years ago, however, he found to his surprise that he had begun to read. It happened quite amazingly after he began watching Chitrageet, a Gujarati television program of film songs, which had sub-titles at the bottom of the screen. Since he knew many of the songs, he could anticipate the next word. When it appeared he would read it unconsciously and sing along, Karaoke style. Soon he found he was able to recognise words in the bazaar and before long he was reading headlines in the newspaper.

A brainchild of Dr Brij Kothari, a social entrepreneur and an IIM professor at Ahmedabad, ‘Same Language Sub-titling’ is a simple but powerful idea which is proven to improve literacy among adults and children. When lyrics are sub-titled on film songs, and words appear in sync with the actor’s voice, the viewer makes a sub-conscious link of the spoken to the written word. Literacy, thus, takes a sudden leap for early and struggling readers. Based on his powerful academic findings, Kothari decided to become a social entrepreneur and help raise India’s literacy. Between 1997 and 2002, he made countless attempts to persuade Doordarshan to allow him subtitle film songs on TV. Each time he was thrown out of their offices. In 1999, a new director at the Ahmedabad Kendra agreed to experiment with subtitles on four episodes of the Gujarati program, Chitrageet. It created such a sensation that they had to continue it for a year.

The breakthrough, however, came in 2002 when a new Director General of Doordarshan, Dr. S.Y. Quraishi, overrode the objections of his entire risk-averse staff and allowed Kothari to subtitle their hugely popular national program Chitrahaar. It happened soon after he won the $250,000 global innovation prize from the World Bank, which he used to pay for the cost of sub-titling. For the past five years, every Sunday morning, 15 crore persons have watched Chitrahaar and Rangoli with subtitles. A Nielsen-ORG study, conducted in 2002 and 2007 to assess the impact of sub-titling, showed that only 25% schoolchildren could read a simple paragraph in Hindi after five years of schooling. However, this jumped to 56% if they were also exposed to subtitling for 30 minutes a week on Rangoli. Equally dramatic results were found among adults.

Despite this success, however, a Damocles’ sword hangs over Kothari’s head. Unless Prasar Bharati takes a policy decision, subtitling will depend on the whims of each CEO, although the last two have been supportive. Moreover, the Department of School Education and Literacy ought to fund subtitling rather than Kothari having to go with a begging bowl each year to raise funds. It costs a pittance (one paise per person per week) compared to the rewards of giving lifelong reading practice to 15 crore early-literate personse every week. Since subtitling also raises the ratings of the program by 10-15%, I’m surprised private channels have not jumped into this game, including children’s cartoon channels.

You’d think that the best way to bring about change in a democracy is through politics. But when our political class is callous, unreliable and venal, you have to depend on individuals. India has always had our spiritual entrepreneurs, the most famous being the Buddha. In recent years we have seen the flowering of business entrepreneurs, making India one of the world’s most dynamic economies. Now we have also begun to produce social entrepreneurs like Brij Kothari who are making a difference. Hence, India is rising not because of its political leaders but despite them.

Thackeray scores a self-goal March 23, 2008

2008-04-07T13:35:00.001+05:30

The damage is done. Hit by an exodus of North Indian labour in the past two months following Raj Thackery’s Marathi rage, industrialists in Pune, Nashik, and Thane have slowed their expansion plans in Maharashtra and are looking towards other states. They fear a return of the old nightmare when Datta Samant’s labour militancy combined with Bal Thackeray’s xenophobia drove white collar jobs from Mumbai to Bangalore and blue collar jobs to Gujarat.

In a free market, investment flows to the most attractive destination. What makes a destination attractive is, in part, the availability of industrious workers. Immigrants everywhere tend to be hungrier and harder working than locals. Economists like Harvard’s Richard Freeman, have shown that societies that encourage immigration outperform those that do not. This is why experts predict that America will remain competitive in the 21st century, while Europe and Japan will decline. As a land of immigrants, America is more capable of accepting immigrants, unlike Europe and Japan which have historically failed to absorb outsiders. Under pressure of ageing populations and shrinking workforces, Europe and Japan will thus lose out to China and India. .

The Indian Railways sells 6. 4 billion tickets annually. Assuming a third are commuters, this means roughly four journeys per person per year in a nation of 1.1 billion people. We are a nation on the move, especially the poor in search of jobs and a better life. Our cities are becoming more cosmopolitan and an Indian identity is being forged, which will increasingly trump regional identities. This imposes real costs on Raj Thackeray’s bigotry.

Maharashtrian workers do have a legitimate problem, however. How do they respond to the challenge of more nimble and productive immigrants? The answer is to make Maharashtra even more attractive for investment. Raj Thackeray should push for better infrastructure, better colleges, and better vocational schools. This will make Maharashtrians more skilled and more competitive. Eventually, many will move up into the middle class and leave the menial jobs to migrants.

There is a more troubling question, however. What makes ordinary, decent Maharashtrian boys turn into a violent and cruel mob? It is the same question that Germans have asked for 75 years—“how did we become evil Nazis in the 1930s?” David Livingstone Smith tries to answer this in his book, The Most Dangerous Animal. He argues that all human beings are disposed to evil—it only needs a trigger like Hitler or Thackeray. The men of the German Reserve Police Battalion 101, who shot 38,000 Jewish unarmed civilians one afternoon, were “middle-aged family men without military training or ideology”. The same could be said of all mass killings. The murderer could be you or me. Scientists explain our violent tendencies through our genes. Like all social animals, from ants to chimpanzees, we are highly xenophobic. The more closely knit we are, the more aggressive we are to outsiders. Our Constitution makers realized the dangers of giving power to the human animal—hence they set up a system checks and balances.

Raj Thackeray is not the only one to score a self goal. Malaysia’s “bumiputra” movement continues to drive investment from Malaysia to other South East Asian countries. Germany failed to attract Indian software engineers a few years ago, despite an attractive ‘green card’ scheme, because its people are inhospitable to immigrants. In a competitive world, it takes maturity and luck to realize that immigrants make a society successful.

This Waiver is immoral, 9th March, 2008

2008-03-10T15:32:00.001+05:30

Nagoba Khamnakar feels like a fool. Like many farmers in his village of Mahakurla in Chandrapur, Maharashtra, he borrowed money from his bank last year. He repaid it diligently, in installments and on time. Many of his neighbours, however, did not. When the Finance Minister announced last week in his Budget an amnesty against repayment of small farm loans, he said sadly, ‘What is the use of being honest?’

Canceling debts of small farmers worth a massive Rs. 60,000 crores, equal to 3% of all loans in the entire banking system, was a staggering, seductive but a hugely destructive act. When Devi Lall, announced a similar loan waiver worth Rs 9,000 crores in 1990, he killed most cooperative and rural banks. Farmers stopped repaying loans, banks stopped lending to them and it took ten years for the nation to recover from that mistake. When we hurl abuse at Devi Lall, we always add, ‘What did you expect from an illiterate peasant!’ But what do we say to a government headed by eminent economists and reformers?

One’s heart goes out to those in distress in the rural areas. There is great suffering, indeed, in our villages. But there are other, better ways to relieve it without turning the nation dishonest. For example, a sustainable crop insurance program or a restructuring the loans would have done much more good. There will be distress again; farmers will borrow again; and get into trouble again. A crop insurance scheme will then come to their aid, unlike this one-time political bribe. Sharad Pawar, the Agriculture Minister, admitted as much when he confessed the day after the Budget--‘I cannot say if [suicides] will stop after this loan waiver’.

Human society is based on trust. When the ordinary person takes a loan, he feels duty bound to repay it. He will even sell his family’s jewellery to fulfill his promise. This is because we learned as children from our mothers to keep promises. Tulsidas’ ideal, ‘praan jaye par vachan na jaye’ was held up to us as a moral ideal. We admire Karna in the Mahabharata for not switching sides because he had given his word to Duryodhana. This loan waiver wounds that moral universe. It tells the farmer not to bother to repay his next loan, because, who knows, another party will be in power and it too will cancel his debts. What message does this send to the honest village woman who struggles every week to repay her micro-loan? It is like excusing the crooked businessman who bounces his cheque. Or bailing out victims of sub-prime loans in America who are clamoring for a similar act of false compassion.

The irony is that the UPA government might actually lose more votes than it gains from this loan waiver. According to NSSO figures, almost 60% of farm loans are from money lenders. They will not benefit. R Radhakrishna Committee says that farmers from the suicide prone areas of Vidharbha and Chatisgarh will benefit less than the richer farmers in the irrigated areas who grow sugar cane and grapes. Since those who will not benefit (or benefit less) are greater than those who will, resentment will build, and the UPA might end up in losing more than it gains. Sharad Pawar has understood this. Hence, he told the farmers of India last week, ‘Don’t pay a single paise to money lenders.’ No one likes the village sahukar, but to break a promise to someone you don’t like is just as wrong as to someone you do.

Imagine the staggering paradox--to turn a nation dishonest in order to win an election, and then go on and lose it! This is one irony that the UPA government might prefer to forget.