Making defence procurement uncontroversial

Fixing complex procurement rules and getting over our hypocrisy over middlemen

Sadly but unsurprisingly public debate over General V K Singh’s comments to the media is overwhelmingly concerned with personal motives, interests and conduct of the individuals involved. Given what has made it to the public domain is a fraction of a whole saga most “Why?” questions have no known answers, forcing people to impute motives and connect dots. Since everyone loves a good ‘scam’ we can expect the heat and decibel levels to go up in the coming days. [See a related post on “What to debate while debating in the dark.”]

The most important question though has answers that are not cloaked in secrecy but are in plain sight. That question is: Why are there endless controversies over defence procurement, for things ranging from frozen meat to coffins, from trucks to helicopters? Inability to make defence procurements uncontroversial is not merely a corruption-related issue. It is a national security issue. If all you need to do to slow down India’s military modernisation is a plausible scandal, everyone from India’s strategic adversaries to disgruntled equipment vendors have an inexpensive option to do us in.

So why, despite endless revisions of procurement policies and rules, despite putting personally incorruptible ministers in charge, despite the efforts of honourable general officers to clear things up, do we still have a situation where someone can allegedly walk up to the army chief’s office and offer him a bribe? [See Nitin Gokhale’s report]

The answer is because our defence procurement rules are too complex and we have made it illegal for those who can help navigate through these byzantine rules to operate openly. As I wrote in a 2007 op-ed in Mint:

Given their remarkable resilience, there has been no attempt towards examining why middlemen exist in the first place. Ironically, is this inability to come to terms with the fact that middlemen might play a useful economic role in a system with complex regulations has not prevented this government from further complicating regulations to keep them at bay. [Mint]

To make defence procurements uncontroversial then either we must simplify the procurement procedures or allow middlemen to operate under a regulatory framework. But why are procurement procedures complicated in the first place? That’s because we add too many objectives to a single purchase. Beyond whether a given purchase is effective, we are concerned about indigenisation, technology transfer, offsets and suchlike. At the same time we are frequently oblivious to the geopolitical implications of large purchases. My colleagues and I have argued in favour of liberalising the defence procurement regime so that the armed forces get the best bang for the buck. [See this Takshashila Discussion Document]

Others might disagree with the need to liberalise defence procurement and that argue that complex procurement rules are unavoidable. Even in this case, the policy on middlemen must still change. If rules are complex there will be those who can make money from navigating through them. That’s how lawyers, chartered accountants and travel agents make a living. There’s nothing intrinsically wrong or immoral about middlemen, agents and lobbyists. It is our rules that make them so, driving underground a genuine economic activity.

Instead of prohibiting middlemen in defence procurement, a far better policy would be to create a regulatory framework under which they can operate legitimately. Agents could be required to declare their past and current affiliations, and disclose relevant family connections. Former defence officers and their civilian counterparts could be required to serve out a cooling off period before getting into the business. The policy objective ought to be to align—to the extent possible—the economic incentives of the middlemen to the organisational interests of the armed forces.

While there can be a genuine debate over the best approach to military modernisation—on what is the right balance between liberalisation, indigenisation, public and private sectors—it is hard to see how we can continue to justify the failed policy on middlemen. Unless you are blind to reality, blinkered by sanctimoniousness or bound by hypocrisy, it should be clear that the consequences of the anti-middleman mindset are eating into the moral fabric of our defence services.

Related Post: A military modernisation manifesto

The Great Middle Indian Churning of 2011

Where do we go from here?

Here’s a piece that I wrote for The Atlantic online last week:

India’s Great Middle-Class Moment
After decades on the sidelines, the growing ranks of Middle India are starting to find their voice. But can the political system respond?

NEW DELHI, India — What should the world make of the remarkable political churning in India this year? People around the world are braving bullets for the right to vote but here we were, turning out in the streets in large numbers, supporting demands made by such self-appointed leaders of civil society as the hunger-striking Anna Hazare for a draconian anti-corruption law.

Parallels with an “Arab Spring” in India don’t fit, not least because we last did that kind of anti-regime business in August 1942, when Indian nationalists mobilized non-violent protests to get the British to quit India. And when Indira Gandhi dispensed with constitutional niceties and assumed dictatorial powers in the mid-1970s, we threw her regime out in 1977 not by shouting her down in the town square but by voting her out at the polling booth. Her return to power a couple of years later, again through the electoral route, proved the regime changing power of India’s electoral democracy.

India’s political churning this year probably heralds a new phase in Indian politics, with the urban middle-class joining the political process. For a long time, this group has seen politics as a spectator sport, to be watched on television in between cricket and Bollywood. Repulsed by the choices on offer in the political menu, unenthused by the anachronistic agenda of mainstream parties and therefore unwilling to spend the time to go out and vote, the middle class Indian has, in terms of political involvement, practically seceded from the Indian republic. Meanwhile, economic growth has propelled ever-greater numbers of people into the middle class, inflating its numbers and amplifying its expectations from the Indian state.

The mainstream political parties missed the plot entirely. The Indian National Congress-led United Progressive Alliance (UPA) coalition government, which first came to power in 2004, set back the process of economic liberalization, by stalling on economic reforms, ostensibly in the name of the “common man.” This led to cronyism on the top — the last decade saw the expansion of family-held conglomerates rather than the start-up successes of the ’90s. It also led to rampant corruption in sectors of the economy that were untouched by reforms. The Congress and its allies purchased electoral mileage by introducing entitlements for the rural poor, but Middle India was too rich to be bought off and too poor to be sold to. The Bharatiya Janata Party (BJP), which demonstrated a reformist outlook when it led a coalition government at the turn of century, has since become loath to challenge the Congress party’s economic idiom, even after this approach failed it in the 2009 elections.

For the Middle Indian, stalled reform, cynical manipulation of constitutional institutions by the UPA government, and the entrenchment of an entitlement economy all meant inflation, corruption, and insecurity. Continue reading “The Great Middle Indian Churning of 2011”

On NDTV: The consequences of Hazaremania

A crossroads, not a victory

(You can also view it on NDTV’s website)

The points I made (or wanted to):

1. The conclusion of Anna Hazare’s fast after a compromise is not a victory for anyone. It’s a crossroads. In fact, there are two crossroads here. First, whether we will pursue political agenda by restoring and strengthening faith in constitutional methods or by taking recourse to street protests. Second, whether we will proceed along the path of economic freedom, openness and reform, or retreat into a new form of socialism that has so utterly failed us.

2. Parliamentarians behave the way they do not because they are idiots but because of incentives. The anti-defection law has made them automatons controlled by the party leadership. When they can’t debate substantive issues they choose to raise their volume or engage in disruptive behaviour.

3. Anna Hazare and his colleagues managed to galvanise the disappointment, outrage and exasperation that has built over the last 8 years. The fundamental cause of this is the stalling of the economic reform process. Political parties failed to understand and capitalise on Middle India’s growing but silent dissatisfaction with the state of affairs. We must not conflate Middle India’s sentiment with an endorsement of Lok Pal or indeed of Anna Hazare and his colleagues. The latter are at best trustees and custodians of public sentiment—they must not see this as license to pursue their own ideological and political agenda.

4. Because the moment is so extraordinary, it behoves Anna Hazare and the leaders of the India Against Corruption movement to act with humility, responsibility and good sense. Here they have fallen short.

5. The second freedom struggle is not about a bill. It’s not about a Lok Pal. It’s not even about making India corruption-free. It is about a quest for economic freedom to be pursued using constitutional methods.

Why the IT rules are bad. And how they can be reversed.

The IT rules are an unacceptable infringement of our freedom

The new IT rules put in place by the UPA government earlier this year have received far less public attention than they should. We covered them in this month’s issue of Pragati. One of the speakers at the recent Takshashila Shala described the damage they can do. In today’s DNA column I suggest how we, as ordinary citizens, can use constitutional methods to call for these rules to be reviewed. Write to your MP.

The following is the unedited draft of the piece published in DNA today.

So your daughter is finishing college soon. She’s waiting for entrance exam results and also applying for some jobs. Would you permit the guy who runs the neighbourhood internet browsing shop to know her name, address, phone number and keep her photograph? Would you be comfortable if he knows which websites she has been accessing? Probably not. Now prepared to be shocked. Under the new Rules under the Information Technology Act (IT rules), the Government of India requires cyber cafe operators to collect this information about your daughter. You’ll probably protect your daughter’s privacy by buying her a personal computer but what about the millions of fathers that can’t afford one?

But why does the government require your daughter to provide personal information to a stranger? National security, perhaps. After all terrorists have been using cyber cafes and unsecured Wi Fi connections to send manifestos (usually in bad English) and claim responsibility for attacks. So if cyber cafe operators collect the names and photographs of all their customers, the authorities will be able to quickly identify the terrorists the next time they send an email message. This is an excellent method to catch last year’s terrorists. Prospective terrorists are either unlikely to use cyber cafes because of these restrictions or if they do, provide false information.

The inability to use cyber cafes isn’t going to deter terrorists. It’s only going to cause them to use different tactics. Ordinary citizens however will suffer risks to their privacy. Cyber cafe owners will have yet another set of regulations to comply with. The unscrupulous among them might try to get around these rules through the well-known route of bribing the inspector. The inspector, who, among other matters has the authority to determine whether or not the partition between two cubicles is no more than 52 inches high, will have to avoid the temptation of looking the other way for a fee. If the Lok Pal comes in to effect, it might have to appoint an army of inspectors to investigate allegations against the army of cyber cafe inspectors that’ll will have to be appointed for the purpose of measuring the dimensions of cyber cafe partitions. The Lok Pal’s inspectors themselves, as we all know, will be extraordinary, incorruptible individuals, unlike cyber cafe inspectors.

And you ask why corruption is growing?

Maybe cyber cafes don’t concern you. What about free speech, which makes it possible for me to disparage the IT rules as being poorly considered? Under the new rules, users cannot post material online that is “grossly harmful, harassing, blasphemous, defamatory, obscene, pornographic, paedophilic, libellous, invasive of another’s privacy, hateful, or racially, ethnically objectionable, disparaging, relating or encouraging money laundering or gambling, or otherwise unlawful in any manner”. And who gets to decide what constitutes any of the above? No, not a magistrate or even a government officer. Anyone can send a notice to the owner of a website giving notice of a violation under any of the loose, subjective criteria. It then must be taken down within 36 hours.

Complain about bad service from an airline on your blog, and they can send a take down notice claiming it is defamatory, libellous or disparaging. In the hands of the easily outraged, aggressively hypersensitive and competitively intolerant sections of our population this will have the effect of further chilling freedom of expression. Moreover, the inclusion of the word blasphemy in that list makes you wonder which country we are in.

Actually, we don’t need these new rules to protect us from libel, paedophiles or incitement to violence. There are existing laws for that. A libel is a libel whether committed on paper or in ether. These rules, though, have the unacceptable consequence of stifling free speech. They weaken the ordinary citizen and put another coercive tool in the hands of the powerful and the intolerant. They must be reviewed.

Even though they came into force recently, they can be reversed. The government must place these rules before Parliament, which can amend these rules. All it takes is for one MP to demand a discussion. There is time but it is short..only until Budget Session 2012. Here’s what’s doable: write, call or visit your MPs. Write to the leaders of the political party you support. You’ll find their contact information at http://is.gd/loksabha and http://is.gd/rajyasabha. Explain to them that the IT rules are an unacceptable infringement of our freedom. Ask them to demand a discussion on the floor of Parliament. The government has exceeded the authority given it by Parliament and every MP should be concerned.

The rules can also be challenged in court, especially by persons who are directly affected by it. A well-drafted PIL in the Supreme Court is also possible.

The awakening of middle India this year can yet lead to better governance if we adhere to constitutional methods. It’s not going to be easy. Parliament is not what it once was. For years, it has not changed a single rule tabled by the government. But how hard is it to write to your MP? Your letter might make a difference.

© 2011 Diligent Media Corporation Ltd. Do not reproduce without permission.

Garibi Hatao Hatao

The old, failed and corrupt political economy of poverty alleviation fights attempts at reform

Jean Dreze, member of the influential, unaccountable and extra-constitutional National Advisory Council, has launched a pre-emptive attack against conditional cash transfers in the pages of today’s Indian Express. It provides an excellent example of how rank paternalism and contempt for the poor Indian’s right to live a free life guides the UPA government’s mindset. This mindset, of course, is covered in the language of “development economics”. In reality it is bad economics and bad for development in addition to being morally repugnant.

Before we look at Mr Dreze’s arguments, let’s look at this conclusion:

The most common argument for cash transfers is that cash makes it possible to satisfy a variety of needs (not just food), and that people are best judges of their own priorities. Fair enough. But if people are best judges of their own interest, why not ask them whether they prefer food or cash? In my limited experience, poor people tend to prefer food, with a gradual shift from food-preference to cash-preference among better-off households…I am more inclined to listen to them than to the learned champions of cash transfers. [IE]

The arrogance in the last sentence must come from sitting close to the Congress party president (another NAC member recently wanted to impose how many dishes could be served at wedding dinners). Mr Dreze, unsurprisingly, does not believe the people are the best judges of their own interests, for he uses the conditional “if”.

Even so, doesn’t he have a point when he says “why not ask them whether they prefer food or cash?” Not quite, because the question is a bit of sophistry. Basic economics will tell you that because cash is most fungible, if you give them cash, the question itself is redundant. If they prefer food they’ll buy food. If they prefer arrack they’ll buy arrack. Neither Jean Dreze nor the National Advisory Council, nor indeed the Government of India has any business dictating what an Indian ought to do with his or her income. Only ‘development economists’ of the dubious sort can think that development is possible when hundreds of millions of adult citizens have the right to vote and procreate but not to decide what to do with their money.

Just because the government gives this money doesn’t mean it can override the individual’s freedom to choose. Neither the government, nor the taxpayer whose money is transferred can deprive the recipient of her freedom.

Let’s consider Mr Dreze’s policy arguments. He first argues that conditional cash transfers won’t work in India (as they did in Latin America) because public services are “missing to a large extent”. This is bizarre, for giving Indians the money to procure services like healthcare and education from private operators allows them to escape having to depend on the government. Just because conditional cash transfers complement public provision in Latin America doesn’t mean they have to do so in India too. There’s no reason—other than socialist ones—why India shouldn’t go in for privately provided, but publicly financed, services. [See this post on the critics of the UID]

Next, he argues that targeting the scheme properly is a problem in India. And in so doing, he expects us to believe that conditional transfers in kind (for instance, food entitlements) can be better targeted than cash. In reality, targeting will remain a problem, not least because of the ‘political economies of development’ which require poverty to remain a problem. A poverty line, even if arbitrarily drawn, helps show the extent of the challenge. But once you target policies around a poverty line you run into all ‘targeting problems’ (see the case of Karnataka’s BPL cards). The entitlement economy also breeds competitive intolerance and political violence.

On these feeble legs Mr Dreze erects his defence of the Public Distribution System (PDS), independent India’s largest and longest running ‘scam’:

First, (food entitlements under PDS) are inflation-proof, unlike cash transfers that can be eroded by local price increases, even if they are indexed to the general price level.

Food entitlements may be “inflation-proof” for the recipient, but not for the government, which still needs to pay for it. It also creates incentives for government to interfere in the pricing of food: from underpaying farmers, to blocking exports, to entering into non-competitive import arrangements. Moreover, Mr Dreze fails to account for the true economic cost of the PDS—procurement, storage, distribution, wastage, pilferage and the associated shadiness that characterises it from bottom to top. Once you see the PDS as mostly inefficient and usually corrupt, you are unlikely to think throwing more money through it is a clever thing to do.

A government that really cares about inflation hurting the poor will be careful about the consequences of its policies. On the other hand, the UPA government listened to Mr Dreze.

Second, food tends to be consumed more wisely and sparingly; cash, on the other hand, can easily be misused.

The contempt for individual freedom apart, there is a practical reason why Mr Dreze is wrong: you can’t save, lend or invest food. Food entitlements will at best lead to hundreds of millions of well-fed, but poor people. To use Atanu Dey’s phrase food entitlements are a pro-poor scheme. They will keep people poor.

Third, food is shared equitably within the family, while cash can easily be cornered by selfish individuals.

Why, hasn’t Mr Dreze heard of families who treat their boy and girl children differently? Can’t food be bartered for arrack or exchanged for cash? Indeed, food or cash, there is nothing to prevent selfish individuals from hurting their families. It is conceit to believe that a government that lacks the competence to deliver drinking water to its citizens can somehow change human behaviour. Social ills need to be addressed, but unless the government is parsimonious in ambitions, outcomes will suffer.

Then again, the irony of disparaging cash is surely lost on Mr Dreze, champion of a scheme to provide, err, cash for work. NREGA is a conditional cash transfer, isn’t it?

Fourth, the PDS network has a much wider reach than the banking system. In remote areas, where the need for social assistance is the greatest, banking facilities are simply not ready for a system of cash transfers (as it is, they are unable to cope with NREGA wage payments).

This is an argument for getting the banking system pervasively into rural areas. Indeed, implementing conditional cash transfers provides banks with an incentive to set up more outlets in rural areas. Liberalising the financial sector to enable greater financial inclusion is necessary in any case, and implementing cash transfers might provide enough of an anchor tenant effect to get it going.

Last but not least, cash transfers are likely to bring in their trail predatory commercial interests and exploitative elements, eager to sell alcohol, branded products, fake insurance policies or other items that would contribute very little to people’s nutrition or well-being.

There is nothing wrong in buying or selling alcohol and branded products. Selling fake insurance policies is illegal. Conflating the two is a manifestation of an ideological prism that abhors free markets and free people. Indians might be poor but they are aspiring for the comforts, fashions and fallacies of modernity. The government has no mandate to prevent his and condemn to have-nots into shall-not-haves.

Mr Dreze’s pre-emptive salvo seeks to defend against the dismantling of the edifice of India’s old, failed and corrupt political economy of poverty alleviation. Ideologues confuse socialism for development. The vested interests that collect rent from the PDS, government hospitals, schools and suchlike are fighting to retain their spoils. Both have little interest in making Indians prosperous.

Justice Sawant’s remarks on Anna Hazare

“When the social power is used irresponsibly, or to subvert the constitutional authority, it is hardly distinguishable from terror.”

The Maharashtra state government instituted a Commission of Inquiry under Justice P B Sawant, in September 2003 to inquire into allegations of corruption and maladministration against several people, among them Anna Hazare. The Commission submitted its report on February 22, 2005 and has been placed online (by Sampath Bulusu on June 8, 2010).

It goes into the minutae of the allegations and a cursory reading suggests how the enormity of red tape might cause people—like Anna Hazare—acting in good faith to commit technical violations of the law. Justice Sawant dismisses most of the allegations against Mr Hazare, but finds his trust acting illegally in at least one matter (see pages 269-271). The message is clear and ironic in the light of Mr Hazare’s demand for more bureaucracy and more laws: government encroachment on the citizen’s economic freedom creates a cesspool that criminalises ordinary citizens, that in turn breeds official corruption.

If we see Mr Hazare as an ordinary person—as this blog does—these transgressions are minor, excusable and should not cause us to doubt his personal integrity. Those who believe in the extraordinariness of Mr Hazare, however, should introspect.

That apart, Justice Sawant’s comments on Mr Hazare’s method of fighting corruption need more attention. Given that the latter is at the forefront of a movement to create an all-powerful super-watchdog, it is germane to look into his previous record.

6. There is no doubt that the participation in elections is not the end-all of the citizen’s role in democracy. The mere fact that the citizens have the power to change the government or to replace their representative by another in the next election, does not prevent them from exercising their other democratic rights during the period between the two elections. It is a mistake to believe that the only duty of the citizens in the democratic governance is to exercise their right to vote. The right to vote is only one of the democratic rights of the citizens. The citizens have a fundamental right to participate in the day to day governance of the society.

The mode and manner such participation may vary and may include all peaceful activities from petitioning to the government to taking out processions to register protests or to demand particular actions. The citizens may also undertake constructive activities, with or without the assistance of the government to improve the conditions and quality of the social life. Both the agitational and the constructive activities have become necessary in the present democratic societies, since the so-called democratic societies have limited democracy and that too only in their political life. Beyond the right to vote and the right to contest in the elections,the political democracy confers no other right. In the absence of the social and economic democracy, even the rights to elect and to get elected remain on paper for a majority of the people. With the enormous social and economic inequalities which are growing everyday, the right to vote itself may be manipulated, while the right to contest elections has become the preserve of the wealthy few. Thus, the equality, which is the basis of democracy, does not exist even in the formal political process.

7. This is because the so-called democracy as has been practised, has made no change to the class-structure of the society. On the other hand,it has deepened and widened the class distinctions. The ruling class is not interested in bringing about the social and economic democracy. On the other hand, since it can survive and thrive only on social and economic inequalities, it is interested in perpetuating them. Hence,the work by the civil organisations aimed at reducing the inequalities and their harsh social consequences, becomes all the more necessary.

The agitational activities have however to be carried on by observing certain norms. Not only have they to be peaceful, but also legal. A care has also to be taken to see that they do not lead to anti-social activities or become extra-constitutional centres of power. Such a development will itself encourage lawlessness and spell out the end of the rule of law. The mode of agitation has further to vary according to its object and the social conditions obtaining at the time. Else,it will not only not achieve its object but will prove counter-productive. It has to be remembered that the agitational activities also constitute a social power, which is as much liable to be abused as the political power. When the social power is used irresponsibly, or to subvert the constitutional authority, it is hardly distinguishable from terror.

8. When instead of the system, the individuals are targeted by the public agitation, several untoward consequences follow. As the present inquiry has revealed, while making the allegations of corruption,the complainant Shri. Hajare relies exclusively on the information supplied to him by his workers or on the contents of the representations made to him by the discontented. The information thus made available may not all be disinterested and may be motivated by various considerations, including personal, political and corrupt. In any case, such information coming from whatever source it may, has to be verified at least by giving an opportunity to the person against whom the complaint is made. This is an elementary precaution which has to be taken before making the individual a target of agitation.

As has been admitted by Shri. Hajare, the persons against whom he receives complaints, are not even intimated by him about them. They have, therefore, no opportunity to reply to the charges in the complaints. Shri. Hajare gave two reasons for dispensing with the said basic requirement viz. that this Andolan has no funds to call for the explanations from the concerned individuals, and secondly, his team of lawyers clears the complaints before the agitation is started. The first reason is both strange and indefensible, while the second is as much unjustified.

If the movement against corruption, which he has started, does not have sufficient funds even for the postal correspondence with the persons concerned, certainly he cannot make the targeted individuals suffer on that account. It is further not his case that even his lawyers give an opportunity to the persons concerned to explain the charges against them before they clear the complaints for agitation.

It must be realised that when persons like Shri. Hajare who have come to be respected by the society on account of their laudable work in other fields, publicly accuse any person for his misdemeanour, the people come to believe it intrinsically, and the person concerned earns a social odium for life-time, even if later he comes to be cleared of the charges. There have been cases where persons have been victimised either by public or private complaints, at the strategic moments in their life and career. The blackmailers, in particular, take advantage of such situation.The adequate precautions, which even otherwise are a must, become all the more necessary in such movements.The social power should not become or allowed to become an engine of oppression of the innocent. [Justice G B Sawant Report pp22-24, emphasis added]

Shutting down Geelani’s Grievance Factory

Jammu & Kashmir needs a guerilla development plan

Excerpts from my DNA column:

The business of manufacturing grievances, operated by the likes of Syed Ali Shah Geelani, involves both FDI and FII. Provocateurs and hardcore separatists act as the focus of violent unrest, mobilising young people using old methods and new. Motivated or excitable sections of the media add tickers, employing terms like “intifada” and “Jasmine” (or heaven-forbid, “Gandhian”), to describe the proceedings.

The separatist game plan is to prevent the state, especially its Kashmir region, from returning to what we all like to call “normalcy”.

To halt this cycle, it is necessary to both raise the costs of protesting and the benefits of not protesting. While the political and security machinery —wiser from handling last year’s stone-pelting experience — can well reduce the attractions of a summer job as a street-protester, the state has been less successful in creating alternative occupations.

The main reason New Delhi’s outlays fail to generate outcomes is because there is a lack of capacity in the state and local administrations. Even if it didn’t make its way to the wrong pockets, it is difficult to spend that much money simply because the Jammu & Kashmir doesn’t have sufficient numbers of competent officials who can implement programmes. It takes years to raise these numbers in the best of circumstances. The problem is, young people have to be kept off the streets right now.

Kashmir needs a guerilla development plan, using unconventional tactics to quickly create an economy that engages its youthful population. According to the Economic Freedom of the States of India 2011 report Jammu and Kashmir stood 9th (out of the 20 states studied) in terms of economic freedom, moving up from 15th position in 2005. It scores better than even Maharashtra, Punjab and Karnataka. So a plan that exploits and enlarges economic freedom might do the trick.

It should create zones in urban areas where entrepreneurs can move in and start business in a matter of days. Instead of waiting for training institutes to be built, it should facilitate skills training in small batches. It should avoid handouts, and inject resources into microfinance institutions for them to lend more and to younger people.

Such a plan stands a good chance of strengthening social capital and cultivating a sense of individual responsibility. This spring’s narrative can be different if Geelani’s “Grievance Factory” is made to suffer a labour shortage. [Read the rest on DNA]

Societies with greater economic freedom have lower corruption

And India must focus on economic freedom

In the light of the current debate over the solution to corruption, here’s something to think about. There is a correlation between higher levels of economic freedom and lower perceptions of corruption. Here’s an old chart that shows the relationship. It uses 2006 data, but it should hold with newer data as well (Update: Barbarindian has a chart with the latest data, LT @centerofright).

Economic Freedom vs Corruption Perceptions
High economic freedom correlates with low corruption

(Click on the chart to enlarge it.)

This chart shows a correlation. And correlation does not mean causation (OMIPP alert!). In other words, from these data alone, we cannot conclude that higher economic freedom causes lower corruption. We can, however, conclude that wherever there is greater economic freedom, perceptions of corruption are lower, and vice versa,

The question is: which variable should we focus on? There are enough rules, laws and agencies to investigate and prosecute corrupt officials. Clearly, there is overwhelming dissatisfaction over the efficacy of this method. There’s nothing to prove that one more super rule, super law and super agency will do the trick where so many others have failed. Indeed, it is likely to worsen the problem by adding to the red tape and logjam.

It therefore makes sense to shift focus to economic freedom. It’s worked to reduce corruption in India in some fields. You don’t have to bribe the telecom department officer and the line-man to get a phone connection anymore. That’s because there is relatively more economic freedom in the sector: from infrastructure to services, from retail to equipment, there are multiple providers. You have the freedom to choose, the freedom to switch and the freedom to reject phones, plans and providers.

But when the UPA government sought to curb economic freedom—by the blatant abuse of executive power—there was massive corruption.

Indeed, in sectors where there is relatively more economic freedom, corruption has generally been “kicked upstairs”, as this article in Pragati shows. In the 2G spectrum case, it was not prevented and punished in time by a man of well-known integrity. This should be an indictment of that man rather than the system.

Related Link: The 2011 Economic Freedom of the States of India shows how states that have greater economic freedom do better in a wide range of governance outcomes.

Against Jan Lok Pal and the politics of hunger strikes

Tackling corruption requires economic reforms and a popular re-engagement with electoral politics

The idea of a Jan Lok Pal is flawed and profoundly misunderstands the causes and solutions of corruption in India. It seeks to create another chunk of government, more processes and rules, to solve a problem that, in part, exists because of too many chunks of government, too many processes and rules. [See Pratap Bhanu Mehta’s column and this editorial in the Business-Standard]

If the Jan Lok Pal presides over the same system that has corrupted civil servants, politicians, anti-corruption watchdogs, judges, media, civil society groups and ordinary citizens, why should we expect that the ombudsman will be incorruptible? Because the person is handpicked by unelected, unaccountable ‘civil society’ members? Those who propose that Nobel laureates (of Indian origin, not even of Indian citizenship) and Ramon Magsaysay Award winners should be among those who pick the Great Ombudsman of India—who is both policeman and judge—insult the hundreds of millions of ordinary Indian voters who regularly exercise their right to franchise. For they are demanding that the Scandinavian grandees in the Nobel Committee and the Filipino members of the Magsaysay foundation should have an indirect role in selecting an all-powerful Indian official. [See this post at Reality Check India]

The argument that people should be involved in drafting legislation is fine, even if it misses the point that the government is not a foreign entity but a representative of the people. It is entirely other thing to demand that the legislation drafted by an self-appointed, unaccountable and unrepresentative set of people be passed at the threat of blackmail. If we must have representatives of the people involved in lawmaking, we are better off if they are the elected ones, however flawed, as opposed to self-appointed ones, whatever prizes the latter might have won.

The Jan Lok Pal will become another logjammed, politicised and ultimately corrupt institution, for the passionate masses who demand new institutions have a poor record of protecting existing ones. Where were the holders of candles, wearers of Gandhi topis and hunger strikers when the offices of the Chief Election Commissioner, the Central Vigilance Commissioner and even the President of the Republic were handed out to persons with dubious credentials? If you didn’t come out to protest the perversion of these institutions why are you somehow more likely to turn up to protest when a dubious person is sought to be made the Jan Lok Pal?

But this is us. Given this reality, the solution for corruption and malgovernance should be one that does not rely the notoriously apathetic middle classes to come out on the streets. The solution is to take away the powers of discretion, the powers of rent-seeking from the government and restore it back to the people. This is the idea of economic freedom. Societies with greater economic freedom have lower corruption. We have long argued that we are in this mess because we have been denied Reforms 2.0.

How can we have Reforms 2.0 if “those politicians” are unwilling to implement them? The answer is simple: by voting. Economic reforms are not on anyone’s political agenda because those who are most likely to benefit from them do not vote, and do not vote strategically. At this point, it is usual to hear loud protests about how voting doesn’t work, most often by those who do not vote. This flies in the face of empirical evidence—when hundreds of millions of people turn up to vote. If it were not working for them, why would they be voting? They might not be demanding Reform 2.0, but something else, and are getting what they want. Instead of ephemeral displays of outrage—what happened to those post 26/11 candle-light vigils?—it is engagement in the electoral process that is necessary. There are some innovative ideas—like that of voters associations—that can be attempted.

There are no better words than those of B R Ambedkar on the place of satyagraha in India after Constitution came into force on 26th January 1950:

“…we must abandon the bloody methods of revolution. It means that we must abandon the method of civil disobedience, non-cooperation and satyagraha. When there was no way left for constitutional methods for achieving economic and social objectives, there was a great deal of justification for unconstitutional methods. But where constitutional methods are open, there can be no justification for these unconstitutional methods. These methods are nothing but the Grammar of Anarchy and the sooner they are abandoned, the better for us.” [B R Ambedkar/Constituent Assembly]

In my view civil disobedience in general and hunger strikes in particular must be used in the most exceptional circumstances where constitutional methods are unavailable or denied, and only till the time constitutional methods remain unavailable or denied.

Some contend that the system isn’t working, or has been so perverted by the incumbent government, that it is necessary to resort to public agitation. This is a dubious argument. Constitutional democracy is an enlightened way to make policy by reconciling—to the extent possible—the diverse interests, opinions and levels of political empowerments of a diverse population. Any other way amounts to coercion in one form or the other.

If we are to allow that hunger strikes and street protests do better than constitutional methods, then how would you decide issues where there are sharp differences? If two Gandhians go on hunger strikes asking for polar opposites, do we settle the issue by seeing who gives up first? What if competing groups escalate the agitation to violence against each other? Should we condone civil war?

The working of those constitutional mechanisms can and must be improved. By us. The anti-defection law must go. India doesn’t have a comprehensive law governing political parties. It needs one. Police reforms have been stalled for decades. There is a substantial reform agenda that must be pursued. By us.

However, the inability to implement these reforms is no excuse for resorting to civil disobedience or, as it happens in other countries, calling in a dictatorship of the proletariat, the military or the priesthood.

The Jan Lok Pal bill is not a solution to the problem of corruption. It risks making matters worse. Hunger strikes are not the right means to promote a policy agenda in a constitutional democracy like ours. The promoters and supporters of Jan Lok Pal and the public agitation to achieve it are profoundly misguided. Their popularity stems from having struck a vein of middle class outrage against the UPA government’s misdeeds. That doesn’t mean that the solutions they offer are right.

The Acorn opposes Jan Lok Pal and the politics of hunger strikes as much as it opposes corruption and misgovernance.

Related Links: Offstumped has a series of posts on the subject. See also Atanu Dey, Satyameva Jayate, Sanjeev Sabhlok and the Filter Coffee here on INI. The March 2011 issue of Pragati covered these themes: see Rohit Pradhan’s take on the importance of constitutional morality.