In defence of lobbying

The lobbying industry must be allowed to function transparently within the ambit of the law.

This is an unedited draft of today’s column in Business Standard.

A famous Indian politician was searching for an issue that could energise his party cadre and move the masses. An group of businessmen produced a report on “making India self-contained in her supply” of a particular commodity. It had arguments on the rationale on consumption of the commodity, why it was necessary and why the poor needed it more than the rich. One of the politician’s close associates forwarded the report to the party leadership across the country while his personal secretary echoed the report’s arguments in an op-ed article the subsequent week.

The politician embraced the cause and triggered off a historic agitation, the basis of which, partly at least, was the output of corporate lobbying. The politician was Mohandas Karamchand Gandhi, the industry group was FICCI and the commodity common salt. The historic event in question, of course, is the Salt Satyagraha (see this post for details). It would be hazardous to suggest that a FICCI monograph singularly triggered off Gandhi’s famous march to Dandi. It would, however, be equally hazardous to discount the importance of lobbying on national politics then, as indeed in contemporary times.

The current debate over corporate lobbying conflates two separate issues: one, the legitimate persuasion of politicians on the merits of a certain policy measures and two, the illegal activity of bribing them in pursuit of this goal. The latter is wrong. The former is necessary. We might be in the throes of moral panic, but we should not mix up the two.

Lobbying is inevitable in a modern representative democracy: the more rules you make, the more complex the economy, the more the need for ‘specialists’ to intermediate between citizen, corporation and the state. That’s why we have lawyers, who help individuals and firms navigate the legal system. That’s why we have chartered accountants, who interpret the arcana of tax laws. These intermediaries play an important economic role by specialising in such matters and saving you and I the trouble of mastering law and the tax code when all we want is to go about our business.

Lobbying serves a similar function. It is far more efficient for businesses to hire public affairs specialists and lobbyists rather than involve the management in the byzantine world of Indian politics. If we consider lawyers and chartered accountants as legitimate professionals, why not lobbyists?

One argument against mainstreaming lobbying is that lobbyists risk making democracy a plaything of the rich. Those with deeper pockets will get to unduly influence government policies. This is reasonable in and of itself. However, isn’t it true that richer people can afford better lawyers and bend justice in their favour? Isn’t it true that richer people have smarter accountants who can find ingenious ways to pay less tax? More importantly, isn’t it the case that richer people already influence government policies, but in opaque, shady, dubious or wholly illegal ways? Those who doubt this can contact Mr Kejriwal for details.

Hey wait! What about the Niira Radia controversy? Doesn’t that connect shady corporate lobbying to high corruption? Yes, it does. However, that controversy arose in a country where lobbying is not only unregulated by perceived by many as a dubious activity. Had lobbying been a recognised as a legitimate profession, bound by its own norms and governed by a set of rules—like law and accountancy—we might have been spared some of the scandal.

This is, in fact, a good time to have a public debate over lobbying. Before 1991, most corporates would line up outside government offices as supplicants pleading for licenses, quotas and permits. After 1991 and until the exposure of big corruption scandals of 2010, canny businessmen sought to create legislative loopholes that would allow them to squeeze through, but keep their competitors out. This approach is becoming untenable.

Economic growth, globalisation, the Right to Information (RTI), urbanisation and the penetration of social media have changed the nature of how India’s corporations and governments engage each other. Businesses that try to create and exploit loopholes have a greater chance of being exposed, with the attendant loss to reputation and valuation. Like their counterparts in mature democracies, Indian businesses will have to engage in public affairs in cleaner, more professional, and transparent ways.

This can only happen if we allow the lobbying industry to function within the law. It is far better to regulate it rather than drive it underground. Indian democracy will be better served by placing the lobbying industry in a regulatory environment that requires companies to declare their lobbying activities and expenses, lobbying firms to disclose their activities and lobbyists to adhere to professional codes of practice. This is what the United States does. It’s not a silver bullet, but certainly an improvement over hypocritically persisting with a sanctimonious moral blindfold and pretending to be surprised that odious things happen in our country.

Copyright © 2012. Business Standard. All rights reserved.

Populism, freedom and democracy

Defending free speech is best done by voting

The Indian governments’ second cave-in over Salman Rushdie at Jaipur last week should worry us. The Rajiv Gandhi government’s surrender to Muslim ‘sentiment’ over Satanic Verses triggered the process of competitive intolerance that has created an environment where anyone—citing religious feelings—can have books, movies and art banned, and their creators persecuted. A quarter of a century is usually sufficient to reflect on the follies of the past, realise the consequences of the mistakes made and resolve not to repeat them. The UPA government could have managed Salman Rushdie’s appearance at the Jaipur Literary Festival better. Here was an opportunity to not only reverse the tide of competitive intolerance but also secure an unassailable position in the political landscape.

Yet, the Congress regime failed. And failed abjectly. All it could do was to use low cunning to create fear and uncertainty among the participants. Those who believe that the first duty of the government is to protect citizens from violence will conclude that the UPA government in New Delhi and the Congress government in Jaipur have failed. After all, if we are to allow violent people to determine what a citizen can or cannot do, why do we need government in the first place?

“But it’s about UP elections!” comes the reply, as if fundamental rights are subject to the political exigencies of state assembly elections. While it is understandable that political partisans—who see everything through the lens of costs and benefits to the party they support—will offer this as an explanation, excuse and justification rolled into one, there is no reason for the rest of the citizenry to accept this as the ‘logic’.

“But under the Indian Constitution, fundamental rights are not absolute and the government has the right to place reasonable restrictions on them” comes another reply. This is an accurate statement. From the debates in the Constituent Assembly, to the verdicts of the Supreme Court and to the opinion of experts in constitutional law, there is no doubt that the Indian Republic seeks a balance between individual liberty and public order. Ergo, some actions by the government to abridge liberty in the interests of maintaining order are constitutionally legitimate. This is intended to give the government flexibility. It would be ridiculous to argue that the Constitution is so constructed to cause the government to yield to threats of violence. It would be wrong to blame the Constitution for a particular government’s cravenness or failure.

What then should we make of this affair? As Andre Beteille explains in his masterful essay on constitutional morality, the Indian system is prone to swings between constitutionalism and populism, with the former asserting liberty and the latter assailing it. Why, though, should populism be opposed to individual liberty?

Phrased differently, why should the government cave in to the demands of the intolerant and not to demands of the liberal? Actually, this is the same as asking “why is it unsafe for women to walk on our streets, why is it that our courts take too long to decide cases, why is it that we need a scores of licenses to start a business, why is it that it is so difficult for our children to get a seat in a good school, why is it that we don’t have decent drinking water, electricity supply, hospitals and, and, and …?” Given the public awareness and indeed consensus that these issues need to be tackled, why is the government so uninterested in pursuing these goals with any seriousness?

The answer might surprise you. It’s because India’s democracy is functioning as it should and the politicians are sensitive to the demands of their voters. The electorate is getting what it wants. The population isn’t. Public discourse in India is unduly influenced by the middle class, not least because it constitutes the market for our media. Middle India believes that that issues that it is preoccupied with should also concern political parties and the government. And when it observes that this isn’t quite what is happening, it is disappointed and—like a hopeless romantic who hits the bottle—drowns its sorrows in cynicism.

Democracy is a numbers game. Those with larger numbers can use the flexibility in the Indian Constitution to have their way to a larger extent. Now we can wish that we had a less flexible constitution where this wouldn’t be possible. But not all wishes have their Santa Clauses. Or, we could start practising democracy. Explaining the failure of the old Indian Liberal Party (in 1943!) B R Ambedkar drew attention to what he called “the elementary fact”, that “organization is essential for the accomplishment of any purpose and particularly in politics, where the harnessing of so many divergent elements in a working unity is so great.”

Technology has made organisation of large numbers of like-purposed people fairly easy. As Atanu Dey has argued, forming voluntary voter’s associations can make an individual voter more effective. It’s being put into action too—see the United Voters of India online platform.

Ultimately, though, it depends on how much of the population becomes the effective electorate. In other words, it depends on whether you vote or not. If you don’t, why blame political parties or the government for giving voters what they want?

On NDTV: All icing, no cake

The Prime Minister’s Office is on Twitter. Good. But what about the rest?

On NDTV’s Trending This Week show Shashi Tharoor, L Rajagopalan and I spoke to Sunetra Choudhry about the Prime Minister’ Office entering the fray on Twitter (as @PMOIndia). The points I made (or tried to):

1. This is the Prime Minister’s Office that is tweeting and not Manmohan Singh the person.

2. We should welcome it for two reasons: First, the PMO is not ceding or absenting itself from an important space in public discourse. Second, that it sets a precedent for the rest of government—across all levels, across the country—that Twitter is a legitimate place for it to put out information. “Don’t wait for an RTI application before you release information, you can do it proactively on a timely basis.”

3. However, Twitter is only a part of an overall information strategy and complements media appearances, press conferences, public speeches, online content and blog posts. Since Prime Minister Singh has been conspicuous by is absence on this front, merely being on Twitter is the icing without the cake.

4. You can’t govern a country of a billion people by remaining silent.

5. The median age of an Indian is less than 29 years, which means half the population is below this age. It is important for the government to engage them. If the tweets are boring, rehashes of press releases (or worse, approved by a committee,) the PMO might look like a middle-aged uncle turning up at a teenagers’ party pretending to be cool.

Related Links:
My on the “rise of netions” at MEA’s Public Diplomacy Conference 2010; my Shala talk on radically networked societies; and Business Standard column.

Three thoughts for the Republic

On constitutionalism, a competent state and the importance of strengthening federalism

For quiet contemplation on Republic Day:

On constitutional morality; the need to get basic functions right; and on the wages of an imperfect federalism.

Join the Indians for a Strong Republic page on Facebook.

The Three Thoughts Archive:
Three thoughts on on Republic Day 2011, 2010, 2009, 2008, 2007, 2006, 2005;
and on Independence Day 2011, 2010, 2009, 2008, 2007, 2006, 2005, 2004.

Middle India’s political game-changer

Why the Annawalas must endorse individual candidates in the coming elections

This is the original draft of today’s DNA column.

Anna’s candidates

It’s the season for game-changers. Everyone is proposing one. Here’s mine.

After ending his fast at New Delhi’s Ramlila Maidan last month, Anna Hazare announced that “electoral reforms would be next on his agenda, followed by issues of decentralisation of power, education reforms, labour and farmers’ issues.” If that sounds like a political manifesto, it is. For that reason it must be pursued politically.

Now, Hazare said he can’t afford to stand in elections because he can’t buy votes. Whatever that says about his attitude towards electoral democracy and whatever it says about the claim that the whole nation is behind him, he is entitled to stay outside the ring. His new colleagues, the leaders of the India Against Corruption (IAC) movement, say that they do not intend for it to become a political party. Which too is fine, for there is value in a non-partisan nationwide movement that eschews identity politics and demands good governance. Will they perhaps endorse a political party? After all, with the UPA government brazening it over a series of huge corruption scandals, will they say “let’s give the BJP a chance”? It is unclear if the IAC or its leaders intend to endorse any political party, but we should not be surprised if they decide not to. Perhaps some of the people on the stage at Ramlila Maidan will contest elections but that’s not going to make a big difference.

The real game changer is this: the IAC should announce that it will endorse one candidate in every single Lok Sabha and state assembly constituency. Not on the basis of party affiliations, but on the basis of its assessment of who among all the candidates is the best choice. Continue reading Middle India’s political game-changer

Three thoughts on Independence Day

New mantras for a new India

It’s been a tradition on this blog to post three thoughts for quiet contemplation on Independence and Republic days. Today, there’s a song to go with them.

Hum Hindustani (1960). Music: Usha Khanna, Lyrics: Prem Dhawan, Singer: Mukesh

The three thoughts: A mantra for the alternative; who says nationalism must be intolerant and what is wrong with asking women to learn martial arts.

The three thought archive:
Three thoughts on on Republic Day 2011, 2010, 2009, 2008, 2007, 2006, 2005;
and on Independence Day 2010, 2009, 2008, 2007, 2006, 2005, 2004.

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.

A million ironies now – salt tax edition

“Controlling and regulating all aspects of the Salt Industry”

Deep in the Union Budget for the financial year 2011, under Demand No. 12 for the Ministry of Commerce and Industry’s Department of Industrial Policy and Production, is an expenditure of Rs 30 crore for the Salt Commissioner. The explanatory note says:

Salt Commissioner: The Organisation is responsible for administration of the Salt Cess Act, 1953, and the Rules framed thereunder. It regulates the production and rational distribution of salt including iodised salt. It also regularly monitors the price and availability of salt. The budget provides for establishment charges of the organisation and for development/welfare works.

If your interest is piqued, you can look up the Salt Cess Act and visit the website of the Salt Department. The latter tells us that “The Central Government is responsible for controlling and regulating all aspects of Salt Industry.”

According to its latest annual report (for financial year 2008), the Salt Department spent over Rs 17 crore to collect around Rs 3 crore in Salt Cess.

What would the Mahatma say?

Three thoughts for the Republic

Organising our republic, keeping it united and improving its lot

For reflection on Republic day: Pragati’s inaugural editorial; on the grand strategy of uniting India and why we urgently need Reforms 2.0.

The three thought archive:
Three thoughts on on Republic Day 2010, 2009, 2008, 2007, 2006, 2005;
and on Independence Day 2010, 2009, 2008, 2007, 2006, 2005, 2004.