Weekend Reading

Three news articles are on my reading list for this weekend. They may not look interconnected but they are.

First is the news report that Dr. Amar Bose donates his company Bose Corp. to MIT his Alma mater. Bose is will known for its high quality and extremely expensive speakers. One has to only experience their speaker systems to believe how wonderful they are.

There is nothing new about a student giving back to his college but when you see a person giving away almost everything back to his college it is logical to conclude that the student believed that he owed a lot to that institution. That sort of love and bonding doesn’t come easy. That is probably the strength of United States. They have built those wonderful universities that build characters like Amar Bose. Note that Amar Bose is an Indian he did not study at IITs.

In India probably only IITs have managed to develop that sense of pride among it’s alumni. However there is nothign great about IITs. They only do an average job. IITs are elite institutions not because of its systems and legacy but more because they get top 0.05% of India’s student population. These students who manage to beat almost everyone else in cut throat competition will probably succeed wherever they go. Real test of IITs will be when there will be around 50 IITs in India giving degrees to top 5% of student population.

Second article is about the so called civil society and their so called fight against corruption. Indian Express has been consistent in it’s criticism of the fight against corruption. I don’t know the reasons behind it but many of them resonate perfectly with me. In this news article  Adv. Shanti Bhushan who has been at the forefront of the movement for so long claims that the root cause of corruption is the post 1991 economic reforms which resulted into privatization.

Any person who is above the level of “idiot” can see that if there is any reason why the middle class in India like me and perhaps many of my readers can hope for good future is because of these reforms. Which again were not bestowed by Dr. Manmohan Singh but India was forced to do so otherwise it would have simply collapsed.

Another person named in that news report is Ms. Arundhati Roy. This attention whore does not need any introduction. When I saw Swami Agnivesh joining the movement I knew this lady will soon follow. When you see people like her joining a movement it is simple to predict where this movement will go.This lady has deep contempt for almost everything that the Indian middle class has respect for.

Despite this the middle class has been supporting this civil society which demands more government controls everywhere. Any person with an IQ level above that of a retard would perhaps see what is wrong with his argument and what it means for the middle class

“Liberalisation gave rise to the industry of privatisation. In the name of privatisation, and disinvestment, the government is now in a position to transfer thousands of crores of public money in the public sector undertakings to private hands. A similar thing happens when the government gives away natural resources, like oil or gas, to private companies. This has led to the creation of a corporate mafia,” Bhushan said. He claimed that futures trading, “speculative” market mechanisms and “non-transparent financial instruments” were all contributing to corruption.

Taking a swipe at the judiciary, Bhushan said that the new-found enthusiasm of the courts in matters relating to corruption was only a result of “a huge public awakening”.

I cant write more about this because I cant control my anger.

Third news item is the most important one. I am impressed with quality of articles that WSJ keeps coming up with.

While the civil society seems to be socialists with a different tag, this article explains why India is still so desperately poor and implicitly shows us why we have so much corruption.

Why are we so poor? It is because the economic activities that I can engage in are very limited. I would love to setup my own company, employ a small team and find an investor. But that wont happen so easily because as the article explains

A new start-up is required to go through 37 procedures to obtain a construction permit and obtaining a permanent water connection permit requires a waiting period of 45 days. Further, the overall cost of starting a business in India is currently the 99th highest globally, at a staggering 66% of per capita gross national income (compared to China at 4.9% and Russia at just 2.7%).

That explains why India is not very likely to have its own Google or Twitter or Apple. All we will have is X brothers running illegal mines and minting money.

This is not a co-incident. This is a plan. The ridiculous regulations and incompetence of our systems is not mere a reflection of our mentality but it is by design. These regulations act like entry barrier. What stands between you and wealth is this wall of regulation. To cross this wall you have to bribe. Everyone including a clerk to the minister.

The world behind that wall of regulations does not have intense competition and you pay bribes precisely to ensure that. Once competition is limited, there is very little scope for new ideas to come in which limits the innovation and hence opportunities. Thus the people who either cant pay bribes or don’t want to pay them continue to suffer and remain helpless and poor.

Slowly these people accept that this suffering is their destiny. They try to get close to the leaders who can sometimes let them make a little extra money. They develop this Stockholm syndrome and think that they are privileged.

That is why you see so many young lads in Panaji wearing t-shirt with “Babush” written on it. They think that by occasionally paying their hotel bills and lending them money sometimes the leader is doing a great favor to them. In reality he is the one who is standing between them and a fortune.

The end of corruption will not come by shouting slogans. Not certainly by joining hands with the civil society who demands more government controls and regulations.They are escapists who are taking path of least resistance and which certainly is a wrong past.

This change will come when we our-self get into politics. Writing blogs and posting cool and smart Facebook statuses is not the way. We must act in a way that has very direct impact on the political landscape around us.

Unfortunately we feel that the cause we fight for must be realized in our own lifetime. I don’t think that is necessary. It may or may not get realized. If it gets realized nothing like it. If it doesn’t, our predictions about the doom will come true or else it will teach us humility.

It is surprising how many people like this are working in this direction, may their tribe increase

And do not for a moment believe you are alone…There are many with you…many like you and me…people-like-us…Think of Nisha Singh. Read about Geeta Gokhale and Prahlad Pandey and Ujjwal Banerjee and many others, such as Deepak Mittal, Dr JP Narayan, Dipinder Sekhon, Sanjeev Sabhlok, Suneeta Dhariwal, Somnath Bharati, Sanjay Sharma RV Krishnan and his colleague KK Iyer, Surya Prakash, Vijay Anand, R K Atri, Promod Chawla – to name just a few…and of course stalwarts such as Swami Ramdev – who has publicly announced his intention of getting involved in active politics… [Source]

The illusion of freedom and the reason why we are poor

Atanu’s writing have been always very insightful. He is repetitive for someone who has been reading him for a long time but most of the points he make are worth repeating.

In the April issue of Pragati he write about our illusion of freedom.

It is worth noting that Indians do quite well outside India. In the US and other developed countries, they are extraordinarily successful. Their ability to prosper outside India is in sharp contradistinction to the inability of their counterparts within India to prosper. Could that imply that it is not nature but rather something in the Indian environment which accounts for Indians not prospering in India? Since it is the government which largely creates and controls the environment, could it be that India’s greatest handicap is the quality and nature of its government? [Source]

Transforming India into a developed country within one generation by 2040, is possible if, among other things, Indians gain comprehensive freedom. For that to happen, a new set of politicians and policymakers have to enter government and in effect change the government objective. Given India’s democratic setup and the Indian preference for non-violence, change will have to be brought about at the polling booth. This means that the voters have to elect a different set of people to office, people who are honest, committed and visionary.

Change of awareness precedes change in behaviour. Therefore for the citizens to vote differently there has to be a change in their understanding of reality. Most Indians would reject the idea that they are not really free and that the government may not have their best interests at heart. As Ram Dass pointed out, “If you think you’re free, there’s no escape possible.” The illusion of freedom is as good a prison as ever constructed. For India’s transformation, the challenge therefore is to make people aware that they lack freedom and that they have to struggle to get them. [Source] [Emphasis added by me]

We lack in economic freedom. To do any economic activity you have to take a zillion permissions which are entirely at the discretion of the people in power. May it be Sarpanch or the Minister. You are completely at his mercy. It is that power that helps them gain money through illicit means and probably is at the root cause of corruption. Unfortunately the recently discovered “Civil Society” is supporting more government control instead of freedom in the name of fight against corruption and the middle class who is the beneficiary of any little freedom we have is actively supporting it.

Many people claim that the early leaders had no idea about the kind of corruption their polices might lead to. Well, there is a negative evidence. Read what Rajaji had to say about Nehru’s policies.

Centralization and Over-government was growing in such a manner that even the Panchayati raj, Rajagopalachari charged had turned out to be a fraud to get the Conrgess Party’s work done at the state expense.

How many frauds has this party caused since then and we still continue to hail its leader as visionaries and name our toilets to ariports after them.

 

Why are we so poor?

More I look around more frustrated I get. Nobody seems pay any attention to excellence, every product on shelf, every program on t.v., every telecom provider, each and every government institution and service around us provides us inferior quality products and services which are invariably overpriced compared to their quality.

Hire an ‘expert’ air-condition repairer and he makes the problem even worse. Rs. 30 lakh flat has plumbing that parishes within 2 years. Pizza that costs half thousand and yet fails to kill your hunger. Trains that never run on time. Platforms so overcrowded that people die due to stampede. The medicines you buy are likely to be fake, the water you drink might be contaminated. The customer service of your bank, telecom etc. fail consistently to solve your problems. You have to pay bribe to get your legitimate work done in government office that too not without losing temper and peace of mind.

While the common man struggles with these micro level problems there are tragic macro problems. High inflation, terrorism, hostile neighbors, politicians corrupt beyond redemption, colleges that resemble whorehouses , news channels that are as clueless as Alice in Wonderland, intellectuals like Humpty Dumpty for whom words mean what they want them to mean.

I dont think this is co-incidental. I dont think its our fate that we have to live in these pathetic situation. Its clearly our fault. Our government has consistently made decisions which will ensure that we will remain poor. The quality of public services is so bad that we people have stopped expecting anything from it. We just learn to live.

Maoists with a fat dictionary , like Arundhati Roy often claim that Maoists are result of state’s humiliation of poor people. Honestly, I too feel humiliated by our government. I will love to wield and Ak 47 and shoot all the responsible, but whenever I will aim it at someone my conscious will tell me that its not one person who is responsible for it.  There are simply too many adding their own but to magnify the problems we face. Punishing them all is not the option nor someone like me has that right.

Then what do we do? To bring in corrective measure we need someone really great to come forward. Thankfully our history has so many examples that every time humanity is in deep trouble someone comes up to fight it out. Krishna or Rama are just symbols that characterized this reality. But we dont live in times of myths anymore, we need some like them NOW.

Lines between politicians, mafia, thugs have blurred. To tackle them from any side is link pinching an elephant with a paper clip.

Mayavati’s rule in UP exemplifies all the rots that have caught Indian political landscape.

Mayavati has provided a dowry of Rs 10,000 each for 25,445 Muslim girls. Why exactly 25,445, how they will be chosen, and what will happen to the 25,446th girl, are mysteries I have not been able to unravel. Of Muslim schoolchildren, 91.64 lakh have got Rs 342.7671 crore in scholarships. I think Mayavati has made an arithmetical error; the total should have been Rs 343.65 crore. That would have given each student Rs 375. But then, aside from these scholarships, Mayavati has also forgone fees of Rs 14.9015 crore from 31,229 Muslim students in classes XI-XII; that comes to Rs 397.64 per student per month. I suspect the education department of UP sets especially complicated school fees to confuse Mayavati.

Uttar Pradesh has always grown inferior cane with low yields and high costs; it has thus needed the administered price mechanism for sugar. Mayavati boasts that she raised cane price by Rs 25 in one year — more than the most reckless chief minister of UP has ever done before. More pertinently, UP’s statutory minimum cane price was Rs 110 a quintal when Mayavati came to power. By last year she had raised it to Rs 165 — that is, 50 per cent in three years. Uttar Pradesh sugar mills simply could not compete after paying such an absurd price; and cane movement controls prevented them from getting cane from elsewhere. So as a last resort, they started importing raw sugar and refining it. Mayavati banned the import of raw sugar into UP in November from anywhere. Uttar Pradesh sugar mills had 1.5 million tons of raw sugar on the high seas. It landed in various ports, and was stacked up in warehouses. The sugar mills had to pay for its storage, but could not use it. No state has the power to ban imports from the rest of India under the Indian Constitution, but so what? Mayavati was never stopped by such small things like the Constitution. It is the duty of the Central government to enforce the Constitution; but in this case, the Manmohan Singh government preferred to look the other way. It gave the millers permission to sell the imported sugar in other states — if they would allow it — or to get it refined by other mills. Finally in November, UP farmers despaired of getting the fancy prices their government had ordained sugar mills to pay them for cane. They got fed up and started invading neighbouring cities, including Delhi and Lucknow, and bringing them to a halt. But Mayavati waited until all local cane had been sold or burnt for lack of buyers; she removed the ban in February. The country paid for her intransigence; sugar prices more than doubled in a year. [source]

We are being grossly mis-governed. Not matter how rosy pictures are painted by the government and media, I strongly feel that there is a disaster waiting for us in near future.

I hope when Krishna said that “whenever dharma goes in hibernation I will incarnate to protect the good people” he really meant it.

Goa and Agriculture

Save Tigers, Only 1441 left say some. On similar lines several people are shouting Save Farmers only very few left. Mr. Digamber Kamat showed the similar concern in his budget speech about the critical condition of agriculture sector in Goa.

I myself come from a family that is completely dependent on agriculture and we own a significant area of land by any standards. Precisely that is why I feel compelled to bring before rest of the community why the government policies are idiotic and their concerns a farce.

Understanding the problem.

India is an agrarian society. There is nothing to be proud of it but instead we should be ashamed of it. I will explain why. 52% of India’s population in engaged in this business which produces only 16.6% of its total GDP[1].  Ideally for a sector that produces only 16.6% of total GDP it must engage only 16.6% of population if the income levels of those engaged is to be equivalent to rest of Indians. Or the other option is let these 51% people produce as much as 51% of total GDP. Which will require 300% growth.

This one statistic explains why farmers are committing suicides, this one statistic enough to see why all the farmers are poor. As long as such a huge population is going to produce so very little the owners of such an enterprise are going to remain overwhelmingly poor. If they are poor they are likely to commit suicides. Rest of the problems follow.

How can we solve this problem? First. Can we increase the production by 300% ? Last so many years India’s agriculture sector has grown only by around 4%. 4% to 300% is a huge jump. One can grow this sector using following methods

1. Bring more land under cultivation (3 times what we have right now)

2. Use magical fertilizers, special breed of seeds etc.

3. Use crops that give more money.

Now, is it really possible? Land is a limited resource. We are probably at peak of fertilizer usage and we cant use more of it. Changing crops is a tough decision because to shift from Coconuts to Cashew will require huge capital and around 5 years.

Think of it at a micro-level. How can I increase my coconut production by 300% ? Better irrigation methods, more investment in upkeep etc. It needs money, time, man-power without any guarantee of returns. The production might rise at the most by 100% even than I am earning only half then someone else working in a different sector.

Second solution is that decrease the number of farmers. Voila! and we dont have to do anything, they are already committing suicides. That is not what I mean here. Let the population move from agriculture to other ways of earning a living. Manufacturing, Services and so on. Around 34% of India’s population that is around 350 million people in such case need to change their profession. While this is happening, the total land under cultivation should not go down. It should remain the same and it should be operated by 16% of India’s population.

Is this a feasible option? It’s implications are as follows.

1. With an additional workforce of 350 million people, India will need more industries, more cities, better infrastructure and importantly training for this workforce.

2. The people who will continue with farming will have to rely on mechanized farming, should own huge land pieces and employ as few people as they can.

3. It is impossible to achieve in a year or two. It requires a very long time planning. The reason why we are facing this problem today is because our leaders did not plan for it 20 years back.

Now, that we have these two solutions we need to use both of them in an optimal fashion.

Governments Approach

As usual the government goofs up with this issue. It concentrates on farmers rather than farming. It neither tries to persuade them to change their profession neither pushes them to increase their production multiple times.

Instead government provides them with “live another day to fight” sort o schemes. Mr. Digamber Kamat allocates 145% more funds to agriculture in his budget. how exactly this additiona fund is going to affect the problem? We dont know.

Government’s assurances to poor farmers that they will see good day are completely false. The moment they decided to remain farmers they were destined to be poor. As long as they are going to remain farmers they are going to remain poor. Every farmer must make sure that his children dont become farmers.

In Goa’s case the problem is even more serious. With the highest per capita (2 lakh+) income in country, Goa is a state of relatively rich people. A good developed service sector, several people doing jobs abroad have increased the cost of life here. Compared to that farming is completely meager income business. The problem is compounded by relatively poor states nearby. Karnataka and Maharashtra have more land, cheaper workforce and relatively lower standard of living especially in the areas near to Goa. So when Goan farmer keeps a particular product as sale for a particular price, his Karnataki counterpart can afford to sell it at even lesser price.

What has Mr. Digamber Kamat achieved by making a false promise that his additional funds are going to help the poor farmers? It was just a politically convenient argument indeed a misleading one.

As more businesses come in Goa, the gap between farmer’s standard of living and standard of living of a person working as a peon is going to increase. With 4% growth a farmer will increase in income by 40% where as the 7th pay commission will increase the pay of peon by around 100% 10 years down the line not to mention regularity of income and stability in life.

Dr. Nandkumar Kamat has advocated that government must implement the land revenue act. Where every landowner will have to pay certain amount per area units every year. He cites how even during ancient times this model was so crucial form of revenue. He has ignored that during ancient times entire economy was agriculture based and agricultural land was a major asset. Today the case is exactly the opposite, levying any tax on owning such a land will be like kicking the poor man in shins. Poor men at least should have option to convert their land and sell it off.

The Problems

Government incoherent policy has resulted into several problems.

1. People believe that by continuing with farming they can live a good living some day.

2. People believe that government schemes will help them do so.

3. Being a farmer is a virtue.

4. Migrating in search of job, living their village is not necessary or is a bad thing to do.

5. He is not allowed to sell or convert his land where in he can earn lot more money.

Farmers in return face following problems.

1. Their peers who are in different business see steady increase in standard of living.

2. Their income is irregular, where it involves government schemes the farmer is made to feel helpless every time.

3. Farmer is at the mercy of weather and small time middleman who take his product to the market.

The way ahead

Problems can be solved. We should first define the problem. Government fails here unmistakably.

1. The population engaged in farming should produce equivalent percentage of total GDP.

As discussion earlier this can be done in two-way which are not exclusive but need to be applied simultaneously.

First: Increase Production

1. Encourage holding of large agriculture land and then getting it under cultivation. Promote mechanized farming discourage manual farming.

2. Encourage large corporate houses to take up agriculture. This has additional benefits. Such houses can use huge land, they can employ farmers as employees, they can automate farming as much as possible, they can add more value to products by processing them thus increasing profits to whatever extent they want.

3. When big corporate houses take up farming a good amount of population who was previously engaged in farming can now become their salaried employees. They can also earn lease money without losing their land.

Second: Decrease the number of farmers

1. Education, Education and Education. Providing high quality education that makes people employable instead of current namesake education that churns out educated fools can solve countries 90% of the problems.

2. To change profession you need to learn skills that have demand.  Government needs to set up more schools in such areas and encourage young people to give up farming and join some other industry.

Hybrid Approach

In a short-term though we need to take steps to give relief to farmers. Such steps must be

1. Allow large players to become middleman in agriculture business. Let Reliance Fresh and similar outlets be opened everywhere. Give tax concessions to them.

2. Build state of art mass transportation systems. How will this help? There will be a good population of young people who stay away from their house for their job and hence neglect their ancestral agricultural property. If distance between Cancona and Panaji can be covered in 30 minutes so many individuals in Cancona can engage in farming as a part-time activity.

3. Give tax benefits to business houses that invest in buying and maintaining agricultural property. Impose severe penalties on them to convert the land. This means small farmers can sell their land for a good price.

Overall we must understand that Goa can not sustain itself as an agriculture based society any day. It will have to remain dependent on neighboring states for its needs. At some point we will have to realize this truth.

Agriculture can be a hobby but it can’t be a profitable business for an ordinary man. If it has to be profitable than 20% of population must produce for rest 80% of people and nor vice versa.

As long as the poor men continue to believe the lies of government they are going to perish.

Shehar Sunsan Hai Kidhar Jaye?

Khosla ka Ghosla remains one of my favorite movies. But the reality behind that happy ending story is certainly not a happy one. Land being a scarce resource in India is at the root cause of several crimes and corrupt practices. But what makes me frustrated is the plight of the average person willing live by the law. He apparently has no saviour.

Looking around I can only see a forest of people, Jana-Aranya. Just like the one portrayed in Satyajit Ray’s classic (all his movies are classic isnt it?) The Middleman. almost every profession today and especially the government service has become corrupt to the core. injustice seems to be the only thing that is assured.

From education to software industry, from politics to media, cricket to bollywood. The truth behind Armani suites and khadi remains so stark that it instills fear in my heart. An average person in Mumbai plays exorbitant rent for one room devoid of even basic facilities such as toilet and bathroom. He travels in the most celebrated and uncomfortable travel arrangement called local trains. These trains are better only because road transport sucks.

We can not deny that Indian middle class has struggled a hell lot. In fact the struggle of this class during the socialist regime of nehruvian politics is simply unbelievable. But that struggle for survival has killed so many good things about the middle and poor class. 80% of India’s  population remains middle and poor class.

The middle in last few decades tried hard to survive and raise its level above their past. They tried to acquire education by all means. Traveling hundred kilometers to get a better college staying hungry to save money. Their parents worked hard so that their children could study. The government had to build only schools. Provide transport and infrastructure to its people and people would have figured out rest. In fact people did. The government however did exactly opposite. IT mindlessly controlled education and milked this cow for its political benefit.

Just as the middle-class of my parents generation had discovered that education is their only salvation. The political class discovered that education can be exploited to keep people ignorant and less aware. Hence they controlled education just as British did. Quality of this education was kept very low and access was made extremely difficult.

Education leads to jobs was another belief that the middle class had. Government controlled even that. License quota raj ensured that no new jobs are created and if created only the chosen once would get entry. The middle class in its desperation and helplessness did not leave any stone unturned to get a job. Today we see the result. Getting a government job means paying bribe to those who offer a favor. It also means after you get a job you are free to rape, ripe and squeeze your position as per your will.

Today it is not possible to move an application without giving away your hard-earned money to some one who does not deserve it in the first place. What scares me is the attitude that the average man has developed for this phenomenon of corruption. He is the “Sahib” he has to take bribe, after all he has paid lakhs to get the job, he has to get return on his investment. I was told by a driving school agent.

When I visit malls, shopping complexes, multiplexes, Mac Donalds and KFCs I see that a lot of so-called youth is hanging out there. A lot of middle class families come there to enjoy. Certainly as it would appear from outside the Mango Man of this country has come a far away. He has raised himself above a level he was 20 years back. He has worked hard for it. But while doing so he has paid a big price.

Behind all that glory and glitter of Malls and Multiplexes lies a sad truth. All this has come up with a price. That price is , all of our systems have become corrupt and in-efficient. Not just these systems are going to suck our blood and money over a period of time, they are also going to ensure that we remain in that exploitive bracket so that we remain an easy prey  for that system. If you want to get out of that bracket you will have to turn yourself into an exploiter. A person willing to survive by fair means has no place left here.

There are some important characteristics of corruption. It is rationalized by instincts to survive and it is driven by greed. It initially breeds on money but later it’s survival and growth demands larger sacrifices. Hence it spreads its tentacles through guns and goons. They suck so much that nothing more remains to be sucked up. They rely on the average man’s ability to rise above all odds. They figure out every possible way to screw a helpless and poor man. Most important casualty in this process is the freedom. A look at city life will assure you that freedom of speech, trade,right to property come with several illegitimate caveats.

There is little difference left between exploited and exploiters. It all about lick above and kick below stuff. But while all these things are true about corruption. There are other truths as well. While we feel that all is well and we are progressing. Behind this progress we are digging our own grave in which one day we will fall with a catastrophic destruction. This catastrophe will come uninvited and unanticipated. It will swipe not just corrupt but also those at the bottom of this exploitation pyramid.

For optimists there is another hope also. Someone will rise against this and will single handedly turn the wheel. He will be the messiah for religious minded. I dont belive in Superman either.

 

 

Poverty and Cargo Cult

When tribals on an isolated island saw some European soldiers and their equipment, they were surprised. More over when they saw Airplanes dropping items for these soldiers they started believing that the Gods send them these gifts because of the rituals these soldiers perform. These perceived rituals is nothing but wearing the uniform, marching, talking on radio equipment etc. Hence in order to gain same benefits, the tribal too prepared airbase by cutting down the trees, radio equipment out of wood and straw, they too marched with sticks etc. And they waited for the God to send them gifts from heaven. This sort of behavior is called cargo cult.

Humanity survives on hope. The known fact is that actions lead to outcomes. One just hopes that the outcomes will be favorable to him. “Smarter” people understand the link between actions and outcomes and accordingly chose their actions. “Dumber” people on other hand either just hope that their arbitrary actions will lead to positive outcomes or try to copy the “Smart” people. When we consider this Cargo cult as a metaphor for various institutions of the modern world we need not view the dumber people as half naked tribal. He can be wearing a Kurta with a red rose on it or he can also be a Phd. with a blue turban.

India has around 450 million people living under the line of poverty. Several attempts have been made to eradicate this poverty. We had multi billion rupees  schemes to solve this problem. But the poverty is still where it is. In fact, as the rest of the world is changing with a rapid pace, the intensity with which poverty acts as an “holding back” force for society has become far more critical. The longer we will take to eliminate this curse, the gap between we and the rest of the world will widen.

One reason for our failure to eradicate poverty is “the cargo cult”, that has entered into the minds of our policy makers, media and rest of the public. And Cargo Cult as a policy means it will never succeed. Admitting that it has not succeeded or admitting that it will never succeed actually is same as admitting that whatever we did until now has been an example or gross stupidity. Hence it becomes inevitable for the “Tribal Chief” to conclude that the reason we are failing is that we are not imitating those favored by God with perfection. Hence they direct their efforts in imitating with a higher order of perfection.

A good example of this happened in Goa. A delegation from Goa Government which included some ministers  (I am not sure if the chief minister himself ) went to Singapore to study how they maintain law and order there. The first decision they took after coming to Goa was that the uniform of Goa police must be changed to smart blue and white instead of khaki. They even implemented this decision. Does this act any different from those tribal people compared in the order of stupidity?

NREG is one such scheme which has come from the so called smartest economist’s so called dream team. I must admit that they are little smarter than the goan chief minister. They went in a little depth to understand relationship between actions and outcomes. They realised that majority of the poor are poor because they don’t have employment. So the simplest solution was to provide them employment. Let them dig a canal and pay them hundred bucks a day. Once the canal is dug let them bury that canal and again earn 100 bucks a day. I am sure if they still find this an no so efficient solution, they will ask the diggers to use tablespoons instead of shovels as it will provide still more employment.

But I think we should not complain. Cargo cult can be practiced only when the tribal chief is smarter then the rest of the powerful members of the tribe. It is more logical to put it this way: majority of the tribal members are dumber than the chief. At some point of time even the chief understands the stupidity of his own action. But rather than admitting he makes sure that the people under him are always dumber. Thus he continues to rule while giving an illusion that the future is full of hope.

What can be the right solution to poverty then? I am not wise enough to see the entire chain of actions that will finally ensure that there is no starved, poor human in our country. It does require a great deal of smartness, but I can make out the difference between a Cargo Cult solution and the smarter solution. The solution is that if there is any way a poor can become rich, it is only by his own will. Who wants to be poor any ways? one would ask. The answer however surprisingly is that there are many people who want to be poor. Can the government show a good number of examples where a family listed as a BPL family has managed to get above that line? Can the government show a single example where a particular community which was listed as backward 40 years back has now successfully raised itself above that backwardness? Instead we will see several communities agitating to be identified as backward and those who are already backward will agitate to prove they are still more backward.

The reason for this is simple. One fundamental principle of economics is that “people react to incentives”. Government has created incentives for poor to remain poor, to get more poor. Poor gets free rice, mindless work and loan waiver and blah blah blah. Backwards get reservation, fee waivers, free travel and so on. They do this under the otherwise harmless terms like social justice, equality and poverty elevation. Anyone who see can see that government is going the cargo cult way is dismissed by terming as communal, conservative , retrogressive, champion of social injustice and so on. When these adjectives are applied to the opponents they start feeling apologetic about speaking the truth and soon join the cargo cult. Thus the tribal leader however honest he might pose himself, is actually ensuring that his Janata/Praja is dumber than him. That gives him a control and promising future.

Soon there will be a Super NREG scheme to hide the failure of NREG. Soon there will be another grand loan waiver or some other scheme in a more attractive packaging and a still bigger price tag. That will hide all the past failures and will create a more glorious picture of the future. India will be a superpower they will say. Why? Because we have such huge number of software engineers. We are an IT superpower. We have millions of mobile users we are an telecommunication superpower. Because the tribal doesn’t understand the difference between a stick and rifle. Just the way stick will not work in a real war, those thousands of engineers will be incapable of generating wealth the way engineers do in United States or Japan. Because we see only the front end. We only see that the degree certificate sees “Bachelor of Engineering”, we don’t pay attention to quality of educational infrastructure we build, quality of education imparted to those young minds and opportunities that we create for them when they are ready.

When someone tells me that India will get developed one day, soon there will be no poor people, soon we will be the best in world, I remember a Ghazal by Mirza Ghalib. Such poets, however worldly unwise they might be, see the truth more bluntly and honestly.

एक बराह्मण ने कहा कि ये साल अच्छा है
ज़ुल्म की रात बहुत जल्द टलेगी अब तो
आग चुल्हों में हर इक रोज़ जलेगी अब तो
भूख के मारे कोई बच्चा नहीं रोएगा
चैन की नींद हर इक शख्स़ यहां सोएगा
आंधी नफ़रत की चलेगी न कहीं अब के बरस
प्यार की फ़सल उगाएगी जमीं अब के बरस
है यहीं अब न कोई शोर-शराबा होगा
ज़ुल्म होगा न कहीं ख़ून-ख़राबा होगा
ओस और धूप के सदमें न सहेगा कोई
अब मेरे देश में बेघर न रहेगा कोई

नए वादों का जो डाला है वो जाल अच्छा है
रहनुमाओं ने कहा है कि ये साल अच्छा है

दिल के ख़ुश रखने को गालिब ये ख़याल अच्छा है

Reference:

Atanu Dey on india’s development

Poor Arent Lifeless Bricks

India is a poor country. As per world bank reports there are about 450 million people living below world poverty line. (less than $1.25 or Rs 62.5 per day). Over all the World Human Development Index HDI report keeps India in the company of Sub saharan countries. We are with countries like Solomon Islands, Lao People’s Democratic Republic, Sierra Leone and Equatorial Guinea. But shut your eyes wide to this. Say that we have half million people working in IT industry and soon we will be a superpower.

What does it REALLY mean to be poor? I personally have not faced extreme poverty. India’s poverty can be best expressed through following facts, unless one questions World Bank and other organization’s integrity.

1.Over 200 million, or about one-fifth of India’s population, is chronically hungry.

2. 2.5 million children in India die every year before reaching the age of five. (Gujarat Riot Victims: 2000, Tsunami Victims: 7000)

3. Literacy Rates in India today are 66% for Adult and 88% for youth while the same figures for China are 91 and 96%.The difference between male and female literacy rates is 21%

Unemployment, Healthcare, Public Transportation, Urban Waste management, Education are few more areas where I can cite that few million people are not getting even the basic structure that every human must deserve.

If we compare china with India. Take 1978 as the base year where India and China were at par. Even a century ago when United States was Emerging as a superpower, Argentina was just at par with it. Today we know the difference between US and Argentina. India’s comparison with China has been exactly the same. When in 1978 India and China were at par, today China has overtaken India by a margin too large. In fact China has beaten India squarely.

But India is democracy. Things happen at a slow rate here. I think this is the worst excuse one can give. There is no logical relation between democracy and being slow. Even Japan, England , US are fairly democratic. Democracy being slow is acceptable logically only if we use “democracy in India is corrupt” as a intermediate premise. But whatever it may be, any system that allows 2.5 children to die every year when they could have been saved is essentially useless.

We must note that all the governments right from 1947 were self professed pro-poor governments. They implements what they called pro-poor policies. Their every speech promised elimination of poverty. Despite that nothing has happened. The reduction in poverty over years has happened largely due to luck and global development. Its not a change brought by systematic planning and policies.

The roots of India’s failure in eliminating poverty (or any other failure) lie in its faulty policies. Refer to any article on India’s poverty today. In the cause one cause is never missed. That is the license Quota Raj. Despite this the Indian government was just not ready to do it. They finally had to do it in 1991. It was done because the only choice left was to go bankrupt. People responsible for this dark period not just went unpunished but were even glorified. The same license quota raj is also one primary reason of increasing corruption in India.

One decision to give up the license regime and open the markets made significant difference to India’s economy. But this was neither predicted nor wished by Indian policymakers. China did. They opened their economy in early 80s and India lost 10 important years.

As this article argues these faulty policies look at poor as a lifeless bricks. Bricks that are used to line up and build the ladder that helps to attain power. The pro-poor policies are not actually targeted at “eliminating” poverty but they actually “sustain” poverty. The best example is of NREGS explained beautifully by Atanu Dey. I think its the ignorance of masses (which is again a result of intellectual poverty attributed to our poor education system) and even the media hero that consider such schemes as pro-poor.

Let me quote from the livemint article

One of the authors of this study, Narayan, even told The Times of India in an interview: “People want a free-market economy. But they need the skills to connect with it. The government machinery needs to treat the poor with dignity and respect. This is something that they value a lot. The people also desired free and fair elections and honest leaders as it helps in empowering them.”

The true way to eliminate poverty is by viewing these people not as helpless ones but as able people. Provide them with opportunity and not outcome. Dont provide the employment but just provide them with opportunity to employment. If you dont allow to setup industries, if you dont allow private companies to setup schools you end up having an employment guaranty scheme which produces ZERO output. It help the poor to sustain for another day but doesn’t help him a day after.

If the government has stressed enough on education, urban planning, industrialization and wealth generation instead of slogan against poverty. Today India would have been a far better country. Even today we fail to recognize our mistakes.

The only reason why we hope India is developing is because of handful of industries like IT. (But India’s computer infrastructure is very weak and underdeveloped compared to that of china. ) These industries have comes into existence only due to free market policies. The planning comission had never visualised IT as an industry and outsourcing as a component adding to GDP. Still today IT has grown. In fact every aspect that the government has ignored has grown. Just compare Cricket (not controlled by government) and Hockey (Controlled by Government).

I think it is time for government to think of poor people not as lifeless bricks that deserve compassion and support but as able individuals who need freedom from cliches. Given them freedom to write their own destiny. Give them freedom to choose their own future. They are very much capable of doing well, but only if government doesnt interfere.

My Related Posts

1. India’s Growth Story

2. My thoughts on Recession

3. Atlas Shrugged

4. India’s Middle class failure

The union budget: A primer from a non expert.

Because this was en election year only an interim budget was presented by Pranab Mhukharjee this April. Now that a stable government is in place, he is expected to present the final budget.

Like most of the people even I thought that budget and it’s impact on my life is insignificant. Even the tax exemption levels affected me very little. However my opinion has changed over last few months. Thanks to me reading lot many things about economics.

Causes of most of the problems lie essentially in the economic policies of current and past governments. Why am I so poor? Why our roads suck and cities stink ? Why is that a few million children below my age have to sleep without proper food? Many of these question directly depends on economic policies and budget is where those polices manifest themselves.

Economics has two major components. Macro and Micro. While Macro talks about the high level stuff that only experts understand. Such as fiscal policies, currency depreciation (whatever it means) and so on. Where as micro economics is what we do everyday. Why I stopped buying Times of India, stopped watching doordarshan, switched from Airtel to Idea and so on. Budget touches both the aspects of Indian economy someway or other.

“Sir, with these words, I commend the budget to the House.” These words, traditionally said at the end of the finance minister’s (FM’s) budget speech, mark the culmination of perhaps the most complex annual economic exercise in the country. Budget speeches have helped chart the country’s future direction at the macro level (such as when Manmohan Singh allowed 51% foreign direct investment in certain sectors in 1991) to the micro (such as when Morarji Desai specified the number of matchsticks (50) that a matchbox could contain in order to get excise exemptions in 1962).

[Source : Livemint]

Most of my knowledge about Budget is derived from Yeshwant Sinha’s biography. “Confessions of a Swadeshi Reformer”. When India was in economic crisis, when India had to keep its gold with world bank to secure loans, when it was about to go bankrupt this man was the Finance Minister. It was just before Narsimha Rao Government.

India right from Nehru’s days had adopted socialist approach to the economy. The 5 years plans. Planning Commission. Mahalobnis model etc. In these models the most natural principle of economics that “demand-supply” relationship was violated. The Government controlled all the resources by means of license quota raj. Most of the companies from BSNL to Indian Oil to Air India to you name it were owned by government. Even private companies were not given freedom to produce what they want.

For example. Say I was rich enough to start my own company that would manufacture polythene bags. In such a case I had to first put an application to the government that I want to start one. Then government issues me an license. That license would also put and upper and lower limit on production. I will have to take separate licenses to import machinery, to buy land to get electricity etc. I will not have any freedom to decide how much I will produce with which machines and at what price I will sell it. All this is decided by the government officials who sit in the government offices.

The idea (and I don’t find it noble) was that the government officials were in a better position to decide what the society needs and how much. Smart people would indeed quickly notice that this gives immense power to the officials. Hence a license may be issued to produce polythene bags but license to import German Machinery may not be given which would get me on my knees. The officials then give me the license only after I pay a bribe of few crores.

Thus someone like Dhirubhai understood the rules of the game a prospered. Many perished. Among those who perished , the common man was the most important one. The state could not protect the interests of common man and secondly it gave a great boost to corruption.

The concept of “state control” was right from British Days. British wanted to control every aspect of economy so that they could hold everyone at ransom whenever they needed. British went the people like Jawaharlal Nehru decided to continue the system because they too wanted the control in their hand. Its absolute power. They glossed it as some “pro-poor” policies.

That is why when the whole world told us that we should give up this license quota raj, our politicians did not listen. They continued till their ass became sore. It was under Narsimha Rao’s government that they had left with no choice but to bring in reforms. He ordered Manmohan Singh to present a budget full of reforms for which he is being hailed even today. No one asks the simple question “Why was it not done before?”.

It happened in 1991. China had started it’s reforms in 1978. Those 10-12 years made a huge difference to us. China’s per capita income was well below India’s in 1978. Today its thrice ours. Which means china has far less poor, hungry ,dieing people than India. Does that mean that India’s poverty, illiteracy must be blamed on the anti-reforms mentality of our leaders? yes certainly it is.

Budget is prepared by a team of few IAS officers who get unreasonable demands from each department of the government. They are locked up in a room in Delhi where they prepare the budget. Only two men can move out of that building. One is the FM another one is the Finance Secretary. The budget and it’s key points need to be approved by the PM before it is presented to the house.

The budget is not just about one year. Firstly it needs to present year before years closed books. Actual figures of revenue and expenses of last year and projected revenue and expenditure of coming year. We mostly focus on last part.

The trade off between political objectives and economic objectives of a budget are significant. A politically oriented budget would find stuff like Loan Waivers a great idea. Where as for an economist it is essentially a nightmare. Economist would always want less and lesser government control on everything while politicians want absolute control over anything. The time has proven that lesser government intervention helps an industry to grow leaps and bounds. Best example is telecom. As soon as FDI in telecom was allowed we have seen a boom. But on other sectors which see strict government control such as Aviation Infrastructure or the general infrastructure are sick.

If you ask me India’s economy is a tale or sins and redemption. A budget is most of the times either a confession/attempted redemption or it is another sin that tries to hide the previous sins.

funny quotes on Inflation

Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair.

Law of inflation: whatever goes up will go up some more

By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.

Inflation is bringing us true democracy. For the first time in history, luxuries and necessities are selling at the same price.

Some idea of inflation comes from seeing a youngster get his first job at a salary you dreamed of as the culmination of your career

“Invest in inflation. It’s the only thing going up.”