“corroded the moral fibre”

• Dr Manmohan Singh is a man of spotless integrity. He is a sensitive person whose heart is not callous to the call of human suffering. At his core, he also has a strong moral compass. I remember this from an interview I conducted with him twenty years ago when he was the Finance Minister and I was the Executive Editor of Blitz . My leftist leanings had made me a critic of the economic reforms introduced by him. Nevertheless, I was highly impressed by one particular answer that he gave. He explained that the licence-permit-quota raj that prevailed earlier, and was defended in the name of socialism, had not only suppressed India’s economic growth, thereby hurting the poor, but also “corroded the moral fibre” of Indian society by breeding corruption. 

The people of India did not heard this, could you repeat, please?

Hello, the road to Ambedkar’s vision of Bank management is too far away

The RBI, after becoming the handmaiden of the finance ministry, has over the last two decades recovered its autonomy and functions with the sobriety and independence intended in its founding legislation, the classic Reserve Bank of India Act of 1935. The Securities and Exchange Board of India (SEBI) started off without statutory teeth. Over the years, it has gained legitimacy, not only statutorily, but also by its actions in attempting to preserve a transparent capital market. China is doubtless ahead of us in hard infrastructure. But in the soft infrastructure of a working financial market, trust me, we are far ahead. When B.R. Ambedkar and Benegal Rama Rau worked out a Westminster model for our state, leveraging rather than discarding the provisions of the brilliant Government of India Act of 1935, they did succeeding generations a great favour.

All road to "Swiss" but misses the point!!

• That leaks make news is well known. More sensitive the leaks more shocking the news. The alleged ‘apology’ of L K Advani to Sonia Gandhi to the Bharatiya Janata Party task force on black money abroad saying that she held secret Swiss bank accounts was indeed a stunner. The leak shocked the BJP to grief, surprised the Congress to joy, and bewildered the media to splits. A plain reading of Advani’s letter shows that he has not regretted for the task force report mentioning Sonia’s name at all. Yet, thanks to the media spin, the whole country believes he has.

• Here is the story of the ‘regret’. The task force of the BJP consisting of four specialists — Ajit Doval, a  security expert, Prof Vaidyanathan, a  financial expert, Mahesh Jethmalani, a  senior lawyer and myself, an experienced chartered accountant — had submitted a meticulous report, running to almost 100 pages, on the black money stashed away abroad. Citing two unbiased sources, the task force report had said that Sonia Gandhi family reportedly held huge funds in Swiss banks. This should have made big national news; but it did not. Why?

(From article by S.Gurumurthy)

Excuse me please my NAME is Capital ‘C, & S, of course M!!

Prof Arvind on:

• Larry Summers, the recently departed Chairman of US President Barack Obama’s National Economic Council, posed the following question before his trip to India last November: “What is the self-perception of the Congress as a political party?” In fact, this broad question provokes three specific ones in the domain of economics. Is the Congress the party of Jagdish Bhagwati or Amartya Sen; Nehru or Indira Gandhi; or Aruna Roy or Nandan Nilekani?

I highly recommend to read the full article here.

Chinese Confucius via India’s confusion Conferred by government fiats

From a article by Mr.Shreekant Sambrani on fishing the NREGA:

• The great Chinese sage Confucius said that he gave a hungry man a piece of fish which took care of his hunger for a day. Teaching him how to fish would have taken care of his hunger for life. Poverty alleviation has two dimensions: its manifestation and its causation. Relief activities, feeding programmes and curative medicine address the manifest symptoms of poverty. They are akin to giving the Confucian hungry man a piece of fish. Augmenting assets to enhance their productivity, education and skills training to improve employability on a sustained basis, and preventive medicine together with added nutrition to increase vitality, all attack the factors that cause poverty in the first place and attempt to break the poverty trap. They teach the man how to fish and, hopefully, provide him a fishing tackle. 

• A Keynesian perpetual employment model of digging ditches and filling them up (or its modern Indian equivalent of rebuilding kutcha roads washed away after the monsoon year after year) may provide relief indefinitely, but does not address the root cause of the problem. Rural connectivity accounted for 40% of the NREGS activities until 2009. Having to undertake drought relief year after every drought year means that there is no drought-proofing worth the name. 

• NREGS is as yet in the nature of an entitlement. Conferred by government fiats, it could create dependencies and sycophantism. Power gained through economic means, be it higher income from productive activities or greater control over local developmental expenditure, is far more lasting and elevating. The ultimate test of effectiveness of NREGS is that it is no longer needed. That would be a true tribute to the valiant fire-fighter Mr Kanga 40 years on. 

• You see those hills?” Jamshed Kanga, an illustrious IAS officer, then divisional commissioner, Pune, asked the noted development economist John Lewis who was visiting him in 1972, pointing to the barren Sahyadri range behind his office. “I will break every one of those if necessary, but will not let a single person starve.” It was the worst drought in the history of independent India, with a monsoon deficit of 25% from the normal. Maharashtra and Gujarat were the worst sufferers. Kanga was true to his word. Massive relief works, mostly of the nature he had indicated, warded off starvation.

Amartya Sen’s nod to the licence-permit raj

Prof. Arvind Panagariya politely says that the acclaimed leftist economist Prof.Sen favours the growth killer "licence-permit raj" even now!!.

Some excerpt: 

• Sen leaves the impression that growth is at best a sideshow when it comes to the well- being of the poor. He essentially ignores the direct contribution growth makes to the creation of income and employment for the poor when he states: “The central point to seize is that while economic growth is an important boon for enhancing living conditions, its reach depends greatly on what we do with the fruits of growth. To be sure, there are large numbers of people for whom growth alone does just fine, since they are already privileged and need no social assistance.” Thus, contrary to the evidence that growth directly benefits the poor, Sen emphasises the accrual of such benefits only to those “already privileged” with the benefits to the poor depending principally on how what the government does with the “fruits of growth” . Why does it matter whether you choose to see growth as central to improving the wellbeing of the poor or as a sideshow ? Because the policies you would advocate critically depend on this choice. Bhagwati, who sees growth as central, has long advocated policy reforms that enhance growth prospects while also recommending increased expenditures on antipoverty programmes. 

• Sen, who sees growth as a sideshow, has rarely spoken in favour of promarket reforms, implicitly giving a nod to the licence-permit raj, which denied higher incomes and better employment opportunities to the poor. All politicians now recognise the centrality of growth in generating revenues to finance expenditures on health, education and employment programmes in a poor country like India. Because India started extremely poor at Independence and also grew very slowly for nearly four decades, successive governments failed to muster enough revenues to finance expenditures on these sectors. As a concrete example, Article 45 of the directive principles of state policy in the Constitution had required free compulsory primary education . But despite repeated attempts throughout, the goal remained unfulfilled until 2010 when accelerated growth finally yielded sufficient revenues to permit the implementation of the right to education as a fundamental right. 

The article published by Prof Sen in The Hindu is here.

Anywhere but nowhere

SG writes:

……the Congress has nobody worthwhile, the BJP has imploded, the third front is dead, and Mayawati, arre baap re baap... There was a time when the same class was fascinated with Musharraf: so smart, so with it, so confident, what swagger, so articulate, so much “like” us. More important, so unlike our smelly, pot-bellied, crotch-scratching politicians who mostly do not know how to dress or speak English. You know where he ended up as millions of brave Pakistanis took to the streets to protect their democratic rights and their judiciary.

The literary traditions in India

This particular ‘view from India' may indicate how the study of literature is essential to our varied inquiries into the tangled relationship between colonialism and modernity, as well as into a genuinely democratic postcolonial future.

How to analyze the public polices?

I have been thinking a freakonomics way of looking at things and how to analyze the public polices in general and the policy decisions taken by the politicians, bureaucrats, dominant private companies, corporate in particular. One may look at their behavioural pattern in private and personal life. In fact, one can very easily think of this particular method of thinking in healthcare and education that has been provided to their children, relatives etc. because most of these people sent their children to private schools and invariably argue for public schools for poorer children. Similar, for the abysmal healthcare centres for the poor and quality private healthcare for their personal.

The big problem is that where we get the data or information? Even if you prepare a questionnaires will these interest group accept and provide necessary information?

Is there any study in the world looking at this sort of analysis?

India’s economic reforms still now

Mr. Rajadhyaksha who is a managing editor of Mint reviews very compressively the period of India’s economic reforms which is now close to twenty years. The review also looks at possible reforms on various aspects that could have helped to grow even better and thereby less poor people, less underemployment, more accessible healthcare, more private schools etc.

If anyone wanted to have a view on what is all about India’s economic reforms that often the policy monks talks about in conferences and what needs to be done more in coming years has been very lucidly explained in this article.

Measure growth at individual level

Mani Shankar Aiyar writes: 

• ...........at a function where S Tendulkar the Chief Economic Advisor to the Prime Minister, drew attention to the Presidential Address of Simon Kuznets - the greatest authority the world has ever seen on national income - to the American Economic Association, where he said, “…all growths lead to widening inequality and therefore the higher the growth rate the wider is the chasm that grows between the better off and less well off.” He argued that this inequality does not amount to any lack of equity because the processes of growth raise the living standards of all. I think, statistically it is impossible to deny this. The only thing is that it does not apply to any one generation of people. It takes 250 years in historical terms for levels of living to be raised in society as a whole to render questions of inequality as being beyond the pale of democratic politics. 

• In India we ought to recognize that we are doing something that is historically without precedent: creating a full-fledged democracy before embarking on the processes of growth. In the USA, the constitution proclaimed the right of all to life, liberty and the pursuit of happiness but denied it to those who were the indigenous people of the USA. Perhaps some of the worst expropriations of other peoples land without the payment of any compensation and with death inflicted as punishment for refusing to part with land was in the same USA. It was quite late that the right to life, liberty and the pursuit of happiness was in theory granted to an entire people who had been stolen from another continent and transported across the Atlantic Sea to provide the manpower for the economic development of North America. After the proclamation of the emancipation of the slaves in 1863, it then took another 101 years till 1964 for the Civil Rights Bills to be passed to enable the American Black to enjoy the same civic political rights as others in his country.

• In the United Kingdom, democracy took approximately 1,000 years to evolve from being a matter of the rights of the Barons vis-à-vis the King which is what the Magna Carta was about, to women getting the Right to Vote in 1928. In France, they had a revolution in the name of ‘liberty, equality, fraternity’ and because fraternity means fraternal relations between brothers, half the population of France - the women - did not get the vote until after Hitler had been defeated in 1945. It is not surprising that the first feminist was a French woman called Simone De Beauvoir and her most celebrated book is called the ‘Second Sex’. Trade union rights, which are a phenomenon of the second or third century of the industrial revolution in developed democracies, had been enshrined in our Constitution and our law approximately 25 years before we even began our industrial revolution. So, as a result of 60 years and more of unbridled democracy, we have created a class consciousness among people that doesn’t require a dictatorship of the proletarian. These people, who have exercised political rights, are today asking themselves increasingly the question ‘what is in it for us’? What profits us if Bangalore becomes the IT capital of the world? What profits us if in pharmaceuticals the Indian industry is unbeatable? Curiously, the question becomes more and more serious as you go down the social hierarchy for it is by the most poor, the most deprived, the most exploited and the most discriminated-against segment of the Indian population, namely the tribals, that this very disturbing question is being put to the Indian State.

Call yourself a politician whether you do good or evil!!!

• When an investor comes to the state, he should be treated as a Jawai (son-in-law) but he is actually treated as a Jogi (beggar).  

• I think we need to put systems in place. I am the only finance minister who was not the tax minister. I was only the expenditure minister. 

• It’s Shaheed Bhagat Singh’s birth place. It’s very symbolic. We want to resolve that day that we will start the next freedom struggle. And the freedom is against poverty, illiteracy, drug abuse and unemployment.  

• Believe me no one lights a lamp at their grave today. But people who fought for the downtrodden, for the weak— Shri Guru Gobind Singh Ji, Shivaji Maratha, Maharana Pratap — crores of people visit their graves and worship them. What I am trying to say is that these are very exciting times to be an Indian and to be a politician. India is growing now, every seven years, our economy would double. We feel with our mortal hands we could change the destiny of our nation. 

(From Manpreet Singh Badal, former finance minister of Punjab interview with FE)

Who plays at what level?

But it’s disappointing to see what his ministry is doing. These new guidelines will take management education back to the year 1992 when India introduced postgraduate diploma in management (PGDM) programmes. The success of Indian Institutes of Management (IIMs) was responsible for this. In the age of liberalisation, we seem to be going backward. There can’t be a diktat on admissions and fees and curricula. Our view is that AICTE has not followed proper procedure in drafting these guidelines. It has not consulted the stakeholders before framing the guidelines. We have proof that these notifications were not properly drafted. When we raised this point with the AICTE chairman, he did not respond. Now we will produce the proof in the court.

Delegating admissions to the state governments, which will certainly find this idea attractive, will breed corruption. We already have so much corruption at the national level. If you want to reform a sector you look at how to make it better, not worse. AICTE is changing the guidelines and norms every week. You can speak to engineering colleges for which AICTE has changed the norms three times in the last three years.

I will explain it like this. If an IIM is set up in places like Ranchi or Rohtak, and operates without faculty members, no one questions that. But had it been one among us, we would have been issued a warning letter about penalties. This is a ridiculous way of functioning. If you look at the quality of the MBA that the universities and their affiliated colleges in our country offer, you will be surprised by the lack of infrastructure. But the University Grants Commission (UGC) is not monitoring them. Many of them are ill-run. No one bothers to review B-schools at universities where students do not even find a decent job.

(From the Q&A: H Chaturvedi, Birla Institute of Management and Technology)

The CCT mania

• This doesn’t mean CCTs are a bad idea. Far from it, and several countries, including developing ones in Asia and Latin America, have successfully experimented with CCTs. Especially in education, there are also experiments with education vouchers in more than one state. However, what is the Nandan Nilekani task force going to examine? Is it a cash transfer or is it a voucher? From the nomenclature of the task force, we are talking about a cash transfer. But let’s think of a voucher first. A voucher offers choice, competition and efficiency. However, exercise of vouchers requires existence of choice on the supply-side. One can’t use food stamps if there is only one PDS shop within a radius of 10 km. Yes, supply-side responses occur, but they don’t occur instantly. 

• Moving on to cash transfers, if they are conditional, they are de facto not that different from vouchers and there will be universal resistance (on several counts) if we move on to unconditional cash transfers. On CCTs, shouldn’t we learn from what is now acknowledged to be a mistake, making NREGA payments mandatory through banks and post office accounts? That required a level of financial inclusion we don’t have. If we wish to successfully introduce CCTs, those pilots should be in so-called elitist and urban areas, where delivery is less of a problem. 

(From Bibek’s article on Saving a good idea)

The original notification of Task Force for Direct Transfer of Subsidies on Kerosene, LPG and Fertiliser to Individuals/Families Constituted is here.

MPS Asia Regional Meeting-Three

I will cover the first session on February 11, 2011. You can see the speakers paper here.

The First Session on Inclusive Growth: The Unfinished Road to Reforms was chaired by Mr Suman K Bery, Director General, NCAER, New Delhi. He did not talking anything interesting (at least to me). This is one peculiar nature of talk often one can hear from any Indian economists!

Professor Amir Ullah Khan talked about the Liberalisation of the Informal Sector. The talk was more or less as usual that the reforms process has not been able to touch the informal sector where the majority of working age population is engaged in India. Much of this working age group population is directly shifted from agriculture without any marketable skills. But this story is off filled with not pure water but of bathwater!!

However, I asked him, have you ever come crossed any study which has looked the factors like informal sector influences with political groups and government machinery vis-à-vis the incentive mechanisms that operate between these groups on various aspects. His answer, as I hunched, was a big NO.

The issues related to Politics of Growth: Constraints and Opportunities were addressed by Mr.N K Singh, who is a Member of Parliament (RS). Instead of giving the reality of the politics in today’s India he kept himself focusing on the populist polices to convince the audience that the politics of growth is on right track!! He also seems to be not clear about what is all about functional democracy. All the major areas in which he had stressed was macro view. However, there was few crossing reference for useful reforms that is appreciable.

According to him the issue of income inequality is more of methodological and distributive matters rather than the usual assumptions.

Mr Surjit S Bhalla discussed about the Delivering on Promises: Public Private Partnerships, UID, and Social Entrepreneurship. As one often read his works, it is not surprise when he says that “India is a great path of testing liberal values” at this juncture.

He also agreed that India’s economic growth is taking place despite of the government and not because of the government. But in China, the economic growth is because of the State, and not despite of the State. Moreover, the economic freedom have delivered what is suppose to be rather than often claimed notion that the political freedom actually delivered the fruits of economic growth.

He gave very interesting analysis of income inequality as experienced in India and elsewhere.

What was quite disturbing to hear from his talk was the applauding for Bihar’s Chief Minister Policy to promote girls education by giving bicycles. This has been done through the direct cash transfer to the child or parents instead to buy the cycles and distribute to them as done in Tamil Nadu and other southern states some years ago. This is absolutely mockery the cycle as an incentive has not held to girls for enrolling in higher education that did not happened in Tamil Nadu and probably will not happen in Bihar. But we have to wait and see where the bucks stop!! 

Earlier posts: 1 2

Manmohan Singh has more shades of the devious politics of Narasimha Rao than we realise

Please read the title of this post keeping in mind what Mr Shouri said during the MPS meeting about Mr.Narasimha Rao!!

Prof Mehta writes: 

• The PM’s responses were artful in many respects. But the timing and content of these responses are likely to leave the country more rather than less confused. 

• The lollipop character of the questions asked by the distinguished journalists suggests buying into the line that the government as a whole does not have much to account for. Not one probing question was asked about this government’s rampant decimation of institutions. Even the one thing the PM directly signed, the controversial appointment of the CVC, was conveniently forgotten. Unless there are fresh revelations, Raja, Kalmadi and maybe Ashok Chavan will be history in a few months, sacrificial goats that will have expatiated our longing that someone pays. The interaction was not designed to clear the air about what happened. It was designed to say: “Calm down, Raja is out, I am an honest guy and guess what, I am an economist too.”

Make that loot work is the welfare fanatics!!!

Surjit Bhalla on Scams in the name of poor: 

• But the scams pertaining to the national welfare schemes like MGNREGA and PDS, may annually be about the size of the 2G scam, if not more. I repeat—the flow of corruption money via operation of MGNREGA, PDS, fertiliser subsidy, kerosene subsidy, etc, may well be substantially in excess of Rs 40,000 crore a year, and well in excess of 1% of GDP each year. This conclusion is not new — the late PM Rajiv Gandhi reached the same conclusion in 1985 when he claimed that only 15% of the money meant for the poor reached the poor. 

Also read Loot For Work Programme by Jean Dreze, (Jul 1, 2005, ToI)

MPS Asia Regional Meeting-Two

Let me give you some sort of mixed picture from what I have noted from the various talks given by economists and experts in the MPS meeting on the opening dinner (Feb 10th, 2011).

Dr.Parth J Shah gave introduction with few facts about the CCS’s success stories such as its campaign (BAMBOO IS NOT A TREE!) against bamboo as a tree instead a grass, school choice campaign (education voucher or 25 percent reimbursement by Government) etc. He also mentioned that this is the second meeting organized in India.

He also mentioned that the amendments in the Shop and Establishment Act by the Government of Haryana paved a major window of opportunity to open call centres in India. Haryana was the first State in India to reform the above Act.

Professor Deepak Lal, who was immediate past President of MPS, gave Welcome Address. What was interesting from his address was that unfortunately the MPS society is divided when it comes to the debate of foreign polices!! He also said that this Society is not addressing the issues raised in the context of foreign polices.

The present President of MPS is Professor Kenneth Robert Minogu and he gave President Address. Few points from his address: (i) one point we should not be too taken by media that India, the global power, it is dangerous to think this and the State, (ii) he talked about the Prof F A Hayek’s works on the false government aims , promotion of welfare with debts, and (iii) the universal orders or spontaneous orders.

The MPS Asia Regional Meeting’s Inaugural Address (Full Paper in PDF) was given by Shri. Arun Shouri. Some major points from my noting: (i) India’s economic growth story is taking place despite of the government and not because of government has claimed to be, (ii) the former prime minister of India who initiated the economic reform in 1990s was the “honest crook”!!!, (iii) please do not go by your vision, please do not go with their past record, (iv) the Hayek’s notion of liberalism, (v) all political parties in India run by people who believe in nothing, (vi) the Indian family values for care each other which is actually the driving force for growing economy, (vii) morality is public life, (viii) the welfare polices are being promoted, despite of its weakness, with the blessings of people like Amartya Sen, (ix) natural order of society, virtual foundation of society, (x) a dog with a bone is his mouth cannot park.

Raj Cherubal had asked the important question which people like us ponder: what would the answer of Professor F A Hayek if he is alive in the mid’s of today’s crisis in India and abroad?

Mr Shouri answered rightly that the development and growth is taking place in a particular society not because of government but despite of it. But one can easily argue that Mr.Shouri is biased.

Previous posts: 1  

Life is full of competition

• Like it or not, life is a series of competitions. You may be competing for a grade, a spot on a team, a job or the largest account in town. The higher your self-esteem is, the better you get along with yourself, with others, and the more you'll accomplish.

 But for the last line can be reverse!!!

See here for more.

Central banks-The super-fiction

During the MPS 2011 Asia Regional Meeting, I met Dr. Jim Walker, who is an Austrian economist and CEO of Asianomics Ltd.

The following is from his interview with ET:

Is the US economic recovery real? Will more money flow back from Indian stocks to the US this year? 

No, the US recovery is weak, because it's based on artificial stimulus. Once that fades, there would be problems again. But money may still flow back from India if risk-aversion rises. It will go into bonds and gold in 2011. I will remain bullish on gold till central banks change the way they operate. Most central banks are losing their credibility, be-cause of the way they are handling the crisis by pumping in more and more money. For Ben Bernanke, the best thing is to quit the job, because he is not really solving the crisis. 

Do you think the spike in oil price is justified when the US is yet to recover and emerging markets are slowing? 

The jump in oil is an outcome of the loose US monetary policy. There is no shortage of oil supply at the moment. The real problem is Ben Bernanke here. The real economy doesn't want the money he is pumping. So, it is spilling into other assets. A lot of commodities are at least 20-30% higher than what they should be.

Professor Elinor Ostrom in Walk The Talk

Professor Elinor Ostrom, a 2009 Nobel prize winner in economics and the first woman to win the Nobel for Economics says in her interview with Indian Express: 

SG: So, this very special idea of going and engaging with communities...does it come from your political science education or was it something that evolved in your mind as you analysed economics?

Both. I was very much influenced by James Buchanan and Gordon Tullock and their early work on the logic of constitutional choice. They focused on polycentric systems, only they didn’t use the term. They were looking at self-governance and how people form organisations and Buchanan did win a Nobel Prize. So I was very much influenced by Buchanan. I am very much influenced by Amartya Sen.

SG: Even in India, it’s a common expression—seven generations, saath peedhi, even if a politician makes a lot of money, he has made enough for his seven generations. Or if somebody has done a lot of pious work, you say he has earned enough credit with the almighty for his seven generations.

That’s interesting. But I think that is one of the reasons I urge people to respect the indigenous people. In terms of health knowledge, there is a lot of indigenous knowledge about herbs and other things that work for illness and how to manage illness in an effective way. But we also find that sometimes indigenous knowledge is wrong and as we do tough science, we say ‘no, that’s wrong’.

What I object to is the presumption that the government officials have got all the knowledge and locals have none. On the other hand, I don’t want to say the government officials don’t have any because there are times when you can have access to good scientific information at a large scale.

Who catches mice in the gym-Chinese or Indian?

The young libertarian Abheek writes:

"I joined a swanky gym and shelled out the extra dough for a personal trainer. Though my trainer is, yes, ethnic Chinese, I'm using the term "Chinese trainers" loosely. I know other trainers who qualify too. Whoever they are, these trainers have certain traits. For instance, they won't allow you to:

• Arrive late for a training session;

• Miss, postpone or reschedule a training session;

• Take a break during the session;

• Complain about not getting a break during the session.

What Chinese trainers understand is that no exercise is fun until you're strong. And to get strong you have to lift a lot of weights over and over again. We unfit, lazy sloths never want to lift weights on our own, but once we get the trainer's praise and see some results, our self esteem rises."

MPS Asia Regional Meeting- One

The 2011 MPS meeting theme was: India as Global Power: Practicing Liberal Values at Home and Abroad

This is the Second MPS meeting in India till now. The primer free market economics think tank in India, the Centre for Civil Society (CCS) had co-organized the First Mont Pelerin Society in Goa on January 27-30, 2002. The theme was: Freedom and Development: Making Democracy Work.

Attending the MPS Asia Regional Meeting was more than interesting but it was great fun. I have learned a lot. I have met many persons whose writings I read for several years. I had long conversation with some of these hard-core liberals on different issues. I have also met people whom I knew and are all concerned about liberalism in India. Thanks to the CCS for giving me the opportunity to participate in the MPS Meeting. However, I had expected some of others persons who are all often talk and write about liberalism in India; but they did not come for the MPS Meeting. I really have no clue about why they did not turn for this event.

But eight years after the democracy is stuck now rather to work. But we did not stop talking about the superpower!! This is the difference between the basic value or principle of Indian epic Mahabharata and Greek epic. In the later case you can get on to the next level of doing things but in the former case you have to justify why do we stuck, who is responsible etc. But this is not to say that we are all argumentative Indian!!

My earlier post: 1

Income inequality

Professor Angus S. Deaton says:

Coming to Third World countries such as India, do you think there is a trade-off between inequality and poverty? 

• No, not in any simple way....I do believe that growth, in its initial phases, is uneven , and doesn’t necessarily benefit everyone. I also believe that growth is necessary for (income) poverty alleviation. So to reduce poverty in the long run, we may have to put up with increasing inequality for a while. But as long as poverty is falling, I am not too worried about modest increases in inequality. 

I have already written in this blog. But still, to give you quick reference. You will get altogether different view point if you read what Austrian economist Von Mises wrote in his article on Inequality of Wealth and Incomes.

Back from MPS 2011 Asia Regional Meeting

This is the first time I attended the Mont Pelerin Society Asia Regional Meeting. The Society was founded by Prof F A Hayek in 1947. I read about this Society for long long time and its dream come true!! The main MPS website is here and the Wikipedia link is here.

I met several new people and had interesting conversation with them. I will post in coming days few posts on the MPS meeting. There people from fifteen countries.

Back from MPS 2011 Asia Regional Meeting

This is the first time I attended the Mont Pelerin Society Asia Regional Meeting. The Society was founded by Prof F A Hayek in 1947. I read about this Society for long long time and its dream come true!! The main MPS website is here and the Wikipedia link is here.

I met several new people and had interesting conversation with them. I will post in coming days few posts on the MPS meeting. There people from fifteen countries.

Remembering professor B.R Shenoy

I apology my readers in this blog for late awaking!!! The work pressure sucked me all the time!!

                      

Professor B.R Shenoy died on February 8^th, 1978. This year marks 33^rd death anniversary. But he still alive with all us whether you know him or not, whether you have ever read his writings or not! The topics on which he applied his mind is as large as the subject itself-political economics.

I wanted to pay my tribute to this marvelous economics teacher from whom I learned many meaningful ideas and what I considered is that learned ideas is going to unfold in life. He also foresaw the paid news corruption. He also had no faith on the reforming the corrupt departments, organization, independent board, etc.

What he wrote (From Theoretical Vision: B.R Shenoy edited by R.K Amin and Parth J Shah, 2004) about economics of corruption (Lecture delivered at the H A College of Commerce, Ahmedabad February, 1975) is interesting to mention here: 

• Both theory and experience have shown that corruption is among the inevitable by-product of the policy interventionism. Corruption necessarily grows as these polices progress. Indian is a classic illustration of the functional link between corruption and interventionism (p.128). 

• The only hope of eradication of corruption on the current scale is a complete U-turn in our policies-abolition of ….control and exchange restrictions auctioning away to the highest bidders in the private sector the existing public sector undertakings, removal of the system of permits, licenses and quotas as professor Erhard did in Germany (p.132). 

• The various reform schemes will only shift the parties receiving the corrupt payments. Corruption will continue. If, for instance, the issue of …licenses is entrusted to an independent board of men of the highest integrity, corrupt activity will move from the government departments concerned to the independent Board and its staff (p.132). 

Let the new generation of youth awake to put their precious time to understand these and unite for making our life worthy living with more freedom.

Direct Cash Transfer in Budget 2011-12

Hema writes in the ET that:

Ms Nath is an advocate of reforms in the distribution of government subsidies. She is known to be in favour of creating an effective system to transfer cash directly to intended beneficiaries. Whether this will be reflected in the coming budget remains to be seen.

Parliament in: theory and practice

M.K Gandhi wrote more than a century ago that: 

• "The best men are supposed to be elected by the people. The members serve without pay and therefore, it must be assumed, only for the public weal. The electors are considered to be educated and therefore we should assume that they would not generally make mistakes in their choice. Such a Parliament should not need the spur of petitions or any other pressure. Its work should be so smooth that its effects would be more apparent day by day. But, as a matter of fact, it is generally acknowledged that the members are hypocritical and selfish. Each thinks of his own little interest. It is fear that is the guiding motive. What is done today may be undone tomorrow. It is not possible to recall a single instance in which finality can be predicted for its work. When the greatest questions are debated, its members have been seen to stretch themselves and to doze. Sometimes the members talk away until the listeners are disgusted. Carlyle has called it the "talking shop of the world". Members vote for their party without a thought. Their so-called discipline binds them to it. If any member, by way of exception, gives an independent vote, he is considered a renegade. Parliament is simply a costly toy of the nation. 

• The Prime Minister is more concerned about his power than about the welfare of Parliament. His energy is concentrated upon securing the success of his party. His care is not always that Parliament shall do right. In order to gain their ends, they certainly bribe people with honours. I do not hesitate to say that they have neither real honesty nor a living conscience. " [M. K. Gandhi, Hind Swaraj, Chap. V] 

A Lok Sabha MP from Orissa state in India writes: 

• When we Indians decry the state of our Parliament, we mostly focus on the symptoms, not the underlying causes. The undesirability of disruptions and the repeated adjournments of Parliament are obvious and have been done to death. It is important to shift the discussion to the root causes and possible solutions if we are to see any improvements.

Evolution of migration, not birds alone but human too

Economist Bibek Debroy told some basic facts about his grand parents, parents and sons story of migration, beside his own in the EFN Asia Conference. I learned a great amount of knowledge from his brief talk. I also asked some basic questions and he firmly answered. The extended story has now been published in an article last week in the Indian Express. It is interesting to read. In fact, I always wondered what would be my own story after reading Prof.Deepak Lal’s own story.   

Demystifying the liberalism and multiculturalism

What we as an individual in a society composed by our actions need to do is the following; first understand the core principles of liberalism at individual level, and do not bother and confuse about multiculturalism, because the word multiculturalism is as complicated as the word ‘secularism’; both has inherited problems; do not link with multiculturalism when you try to understand the entity called liberalism; make sure that the foundation of liberal values are established in your thinking by your own way and methods, then move for understanding the multiculturalism but ensure that you are not moving away from liberal values over the period a journey to understand the multiculturalism.     

What prompted me to utter the above words is Mr.Mehta article in today’s IE. Some excerpts: 

• Munich Conference has evoked sharply contrasting responses. Some see in the speech an attempt to rescue liberalism from its counterfeit cousin, multiculturalism. Others see an enactment of the same narrow politics that produced a crisis in many liberal societies in the first place. 

• The contest between liberalism and multiculturalism was about the relationship between freedom and diversity. Multiculturalism often fell into three traps in the context of this relationship. First, it ignored the fact that equal freedom for all individuals is the core value.  

• ……instead of saying that your identity should be irrelevant to citizenship and to the goods that the state distributes, multiculturalism made identities the axis of distribution. The more identities become an axis of distribution, the greater the chance of destructive group politics. 

• But liberal politics globally has been curiously susceptible to being taken over by right-wing nationalists.

• This is often because defenders of liberal values end up aligning them with a particular way of life or national identity. In India, for example, the debate over reforming personal laws was often framed as being about “national integration” rather than about values of individuality and freedom.

• Liberals should be worried about any attempt to benchmark national identity; such benchmarking diminishes the force of liberalism. 

• The aspect of the speech that was potentially vague was the use of state power to clamp down on extremist groups. When state power should be used for clamping down is always a challenging question for liberals; a liberal society has to put up with a lot of offensive speech. But the challenge that liberal states face is over their credibility in being impartial. Do prejudgments and prejudice make these states more assiduously pursue groups belonging to some communities than others? 

• In short, the future of liberalism will depend not upon a philosophical statement that all groups engaging in extremist speech be condemned; it will depend upon the impartiality of state practice towards all citizens.

• The truth is that we still don’t fully understand the circumstances under which there is a turn to extremism. In that sense, Cameron’s implicit diagnosis that the turn to extremism was fuelled by state multiculturalism seems quite premature. Multiculturalism has its flaws. But it would be foolish for liberals to suppose that simply because state multiculturalism failed, the answer must lie in a more “muscular” liberalism.

• Liberal values are eminently defensible. But their realisation in practice involves sensibly dealing with complex layers of history, psychology and a sense of self.

Postscript!!: British Prime Minister David Cameron speech at the Munich Security Conference is here (PDF).

Demystifying the liberalism and multiculturalism

What we as an individual in a society composed by our actions need to do is the following; first understand the core principles of liberalism at individual level, and do not bother and confuse about multiculturalism, because the word multiculturalism is as complicated as the word ‘secularism’; both has inherited problems; do not link with multiculturalism when you try to understand the entity called liberalism; make sure that the foundation of liberal values are established in your thinking by your own way and methods, then move for understanding the multiculturalism but ensure that you are not moving away from liberal values over the period a journey to understand the multiculturalism.     

What prompted me to utter the above words is Mr.Mehta article in today’s IE. Some excerpts: 

• Munich Conference has evoked sharply contrasting responses. Some see in the speech an attempt to rescue liberalism from its counterfeit cousin, multiculturalism. Others see an enactment of the same narrow politics that produced a crisis in many liberal societies in the first place. 

• The contest between liberalism and multiculturalism was about the relationship between freedom and diversity. Multiculturalism often fell into three traps in the context of this relationship. First, it ignored the fact that equal freedom for all individuals is the core value.  

• ……instead of saying that your identity should be irrelevant to citizenship and to the goods that the state distributes, multiculturalism made identities the axis of distribution. The more identities become an axis of distribution, the greater the chance of destructive group politics. 

• But liberal politics globally has been curiously susceptible to being taken over by right-wing nationalists.

• This is often because defenders of liberal values end up aligning them with a particular way of life or national identity. In India, for example, the debate over reforming personal laws was often framed as being about “national integration” rather than about values of individuality and freedom.

• Liberals should be worried about any attempt to benchmark national identity; such benchmarking diminishes the force of liberalism. 

• The aspect of the speech that was potentially vague was the use of state power to clamp down on extremist groups. When state power should be used for clamping down is always a challenging question for liberals; a liberal society has to put up with a lot of offensive speech. But the challenge that liberal states face is over their credibility in being impartial. Do prejudgments and prejudice make these states more assiduously pursue groups belonging to some communities than others? 

• In short, the future of liberalism will depend not upon a philosophical statement that all groups engaging in extremist speech be condemned; it will depend upon the impartiality of state practice towards all citizens.

• The truth is that we still don’t fully understand the circumstances under which there is a turn to extremism. In that sense, Cameron’s implicit diagnosis that the turn to extremism was fuelled by state multiculturalism seems quite premature. Multiculturalism has its flaws. But it would be foolish for liberals to suppose that simply because state multiculturalism failed, the answer must lie in a more “muscular” liberalism.

• Liberal values are eminently defensible. But their realisation in practice involves sensibly dealing with complex layers of history, psychology and a sense of self.

What Congress has done to Indians and India?

Ramachandra Guh explains in the recent interview with Rediff on the emergence of Indian national congress and its use in society.

I have not read the full interview. However, I feel it is important to read this particular interview as it through many lights on the worthy of yesterday congress vis-à-vis today’s congress in India and aboard.

Anthony Clifford Grayling on Hayek

I now often think that if the late twentieth-century was the effects of Milton’s economic freedom movement, the twenty-first century will be the true effects of F A Hayek’s thoughts on the economy and our lives, and there is no doubt about.

It is a ironic, illusion and apathy in our academic and research institutions which continue to underestimate the Austrian School of Economics in general and Hayek’s thought in particular. Beside, the underestimating of our own great scholars like BR Ambedkar, BR Shenoy, Ambirajan, Rajaji, C.N Annadurai etc continues for no considerable reason of thoughts. But certainly the nation pays the price for this ignorance and will pay in future also.

In an interview with ET Prof Anthony Clifford Grayling says:

When you look around the world, the ideas of which economic philosophers do you see to have had the most influence? 

• I think the contemporary western regimes are infact influenced by people like Frederich Hayek and Milton Friedman. We have a timeline here of the last fifty years as mainly rightwing political economy.

• Economics always used to be called political economy. We have now allowed the people who control the lifeblood of the economy, those in the financial services industries and others, to separate it from the overall political process and the question of the social good. 

• If we incorporate the government into money—taxation, fiscal policy, redistribution, etc—we get a disaster like the Soviet Union or any socialist economy you can think of. Or even what held India back for so many years under the Nehru-Gandhi economic philosophy. 

• But a realistic one. This is why Dworkin, for instance, argues, that the old socialistic idea of equality, the equality of distribution, is a mistake. Because it terribly distorts the economy. So what a society should have is an equality of concern.   

One should read the full interview here, although one may get disappointed after reading some fiction of thoughts like Amartya Sent et al!! 

Raghuram Rajan on Economics crisis

 He writes in his blog: 

• these expectations could have been distorted by ideology – it is hard to get into the past minds of economists. But there is a better reason to be skeptical of explanations relying on ideology. As a group, neither behavioral economists, who think that market efficiency is a joke, nor progressive economists, who distrust free markets, predicted the crisis. 

• Like medicine, economics has become highly compartmentalized – macroeconomists typically do not pay attention to what financial economists or real-estate economists study, and vice versa. Yet, in order to see the crisis coming, you had to know something about each of these areas, just like it takes a good general practitioner to recognize an exotic disease. Because the profession rewards only careful, well-supported, but necessarily narrow analysis, few economists try to span sub-fields.

Economically illiterate jholawalas

• As someone who grew up in that era of central planning, licences and permits, I consider it my duty to describe what a shabby, sad, hopeless place India used to be. The economy grew at barely 3 per cent (a figure derided as the Hindu rate of growth) so most Indians lived in absolute poverty. Millions in our poorer states worked as slaves under the euphemism ‘bonded labour’. There was a miniscule middle class and even the richest Indians lived poorly by the standards of the world. 

• The only people who had easy access to the shoddy products of our controlled economy were politicians and bureaucrats. From their fine bungalows in Lutyens’ Delhi, they controlled quotas and permits as if all of India was their private estate. The rest of us lived with shortages of everything. Sugar, milk, bread, cooking oil, domestic gas, electricity, water and almost everything else was always in short supply. It is not that Indian entrepreneurs were incapable of producing adequate supplies of these things but that government policies ordained that they dare not without a permit or a license. This was based on the flawed economic principle that government factories would produce everything India needed. These factories were run in sloppy fashion by careless officials so an uncontrolled private sector would have put a quick end to them. This is why the private sector had to be licenced and controlled. So successful were these controls that our biggest businessmen could regularly be seen begging for licenses in the smelly corridors of Delhi’s Bhawans. 

• The people who should be most worried are the well-meaning but economically illiterate jholawalas who constitute Sonia Gandhi’s National Advisory Council. Under their guidance, she has emerged as the Lady Bountiful of Dr. Manmohan Singh’s government handing out jobs to the rural unemployed, forest land to tribal people and free food if the NAC’s latest scheme goes through. All these freebies have been made possible by the fact that the Indian economy, thanks to the enterprise of its private sector, has been growing at a remarkable pace. If Indian businessmen decide that they would be better off investing in some friendlier country, then we could go rapidly back to the way we used to be. So if anyone needs to heed the Prime Minister’s warning, it is Sonia Gandhi especially since many of the interfering ministers claim to be acting in her name. 

(From Back to the licence raj? by Tavleen Singh)

Bastard Keynesianism!!

Don’t mistake me!! There is a boon on that title!! (Bastard Keynesianism: The Evolution of Economic Thinking and Policymaking since World War II (Contributions in Economics and Economic History) by Lynn Turgeon)

I indeed wanted to post after the celebration of 75 year old Keynes book on General Theory. The damages done by this book is now history.

Moreover, Ann Pettifor writes in Blooomberg: 

• This “bastard Keynesianism,” as British economist Joan Robinson called it, subverted and continues to block the Keynesian revolution both in vision and in method. Monetarists were concerned with the quantity of money. Keynes’s overwhelming concern was with the rate of interest on money. He argued that monetary policy should always support the private and public economy, stimulate it, and prevent recession. 

The Austrian school of economics main concerns is unlimited money creation and artificial creation of interest rate. So biting the money with extremely low interest rate is the culprit for economics crisis.

O for Obama vs O for ostrich

Freed from real pressure to adhere to universal values, any powerful autocracy will be less willing to play by the rules on trade, resource, security, currency and other issues. If anything, this opens up space for it to subtly help shape new international rules in the years ahead.

Dividendnomics

From Nitin’s new fortnightly column in DNA: 

• Dilip Rao, a blogger at Law and Other Things, found a Freakonomics-like correlation between birth rates and terrorism in some states. He notes that a spurt in birth rates in the early 1970s in Punjab and Jammu & Kashmir meant that there was a youth bulge available in the 1980s to answer the separatists’ call. We can trace back the rise of terrorist violence in these states to Operation Blue Star or the rigged 1987 state election, we can prove that Pakistan used these conflicts to conduct proxy war, but Heinsohn goes to the extreme to argue that the cause itself is immaterial - if there is a youth bulge, it will be accompanied by violence. 

• While these studies do not indicate or claim a definitive causal link, the data are sufficient for us to regard youth bulge violence as a long-term risk to national security. Going by the National Commission on Population’s projections to the year 2026, Uttar Pradesh, Madhya Pradesh and Delhi will experience a net increase in young people. The 15-24 cohort will grow in Bihar, Assam, Haryana, Uttarakhand, Jammu & Kashmir, Maharashtra, Jharkhand, and Gujarat. States that cannot both reduce grievances and create enough opportunities are likely to get into trouble. 

• The best way to minimise grievances is not by pandering to them individually, but by delivering overall good governance. The politics of entitlement that the UPA government seeks to make respectable under the veneer of “inclusive growth” breeds more grievances for every entitlement. These are already expressed through the idiom of competitive intolerance and coercive violence. While they must be rolled back, those politically opposed to the Congress must do so without themselves creating and appealing to grievances.

K.Subrahmanyam-nation lost a pillar of versatile strategist

During a book release function I had an opportunity to meet him and his wife in the mid of 2010. His talk was very interesting as he spoke about his career and the march of India’s strategic affairs. His talk is really memorable to me.

Particularly, what he had mentioned was as Ritu Sarin wrote in January 9, 2000: 

• Interestingly, none other than Dr K. Subrahmanyam, presently convenor of the National Security Council Advisory Board (NSCAB) was on the hijacked plane in 1984 and was a key witness for the prosecution. And just as Pakistan is insinuating that the hijack of IC-814 is the handiwork of the Research and Analysis Wing (RAW) and that there was an agency official on board, Jain's judgement shows that after the 1984 hijacking, a similar canard was raised against Subrahmanyam. Six of the seven hijackers had told the Ajmer court that it was K. Subrahmanyam who (to quote the judge), ``planned the entire hijacking to supervise and examinethe nuclear installations of Pakistan.''

• The judge, of course, dismissed such There are other similarities between the two hijackings, separated by a period of 15 years.  

Unlike today’s seasoned economists, experts, etc Dr.K Subrahmanyam turned down Padma Bhushan in 1999 and believed that bureaucrats and journalists should not accept any award from the government because they are more liable to be favoured. 

Nitin has already posted one of his interview with KS sir. C Uday Bhaskar has nice obituary in ET.  Professor Sanjay Subrahmanyam is the son of KS.

From the BS Report:

• He is survived by his wife, Sulochana, a Tamil scholar, and three sons, S Vijay Kumar (secretary, mines, Govt of India), S Jaishankar (India’s ambassador to China) and Sanjay Subrahmanyam (a distinguished historian).

The IDSA page is here and according to ToI He was suffering from cancer and diabetes but his end came after a heart attack, family sources said. 

Liberal at fiasco or fiscal

Mr Venu writes with political hunches in coming Budget:

• At a more macro level, Pranab Mukherjee is under severe pressure to consolidate the rising fiscal deficit as a means to lower inflationary expectations. The RBI, in its monetary policy statement last fortnight, has clearly pointed to high inflation as the main risk to growth and has called upon the Centre to use its fiscal instruments to complement the central bank’s effort to lower inflation expectations.

• Pranab Mukherjee had delivered liberal doses of fiscal stimuli in the previous two budgets as the world economy remained shaky post the global financial crisis. One of the key outcomes of the liberal fiscal and monetary policies pursued around the world since 2009 is high inflation, which emerging economies, particularly, are grappling with. So clearly it is time for some roll-back of both monetary and fiscal boosters in emerging economies. India cannot escape that process, as inflation is the biggest tax on the poor. 

But there is hardly anyone, who can say boldly the current FM is liberal nor his past  Budgets were liberal in tone. 

MFIs and Money

Swamination Aiyar on "Elementary economics says that money is fungible, and you cannot say how one single element of cash inflow is used for which spending purpose." 

Getting polluted for power

It sounds big when Mr.Kiran asks: 

• Why, the writers might enquire, is technology not being used to ensure an efficient and transparent transfer of funds to the beneficiaries, as also to streamline the public distribution system for food grain? Why is our world-beating IT industry's expertise not being more extensively used to first reengineer and then make cost-effective the systems and processes connected with governance, healthcare, law enforcement, traffic management, etc?  

But the reason of his mind goes all the way to square one which is nothing but the absolute power hunter in the business cum politics in local and global. See what he said in the same column: 

• The letter might reiterate the collective aspiration of a happy, healthy, caring and compassionate society, with equality of opportunity and social justice. It would ask whether present policies are attuned to this goal, and urge that the right to good health and right to food be enacted as laws, along with a universal right to livelihood (as a progression from right to work). It would condemn the illegal campaign of intimidation against human rights activists, demand the release of Binayak Sen and an end to state-sponsored, private, armed gangsters who are only spurring an escalating cycle of violence. 

Taxation is coercive-morally

That is what I said to one of my new friend in 2006. At that time and now he works with NGOs. We had long debate about this simple logic. I told him that we the people of this country elect representatives every five years to the place called Parliament and make our life, liberty and property protective but that dos't not happen. I simply told to my friend that the Elected Representative have no right to VOTE on behalf of the people for Taxing our hard earned money by all means and all grounds especially and (more importantly) Morally. He kept on asking me, how to think in practical life about this idea. I told him that we need to take away the power from the so called Representative of People and States from the Parliament by law to tax. He still ponder on it!! I still believe it by virtue of natural law or an order!!

Read:

The exchange between me and Matt Steinglass at Democracy in America over whether Obamacare incorporates Hayekian insights is an excellent example of they way libertarians and liberals continue to fail to connect. And most liberals remain pretty hostile to these common libertarian ideas: 

• Democracy sucks.
• Unions hurt more than they help.
• Campaign spending is political speech.
• Economic inequality does not undermine democracy or democracy’s role in establishing and protecting equal liberty.
• Economic rights are as important as political and civil rights, and should be just as vigilantly protected, even if  that leads to huge inequalities, which do not, by the way, threaten democracy or the value of political and civil rights.
• Taxation is coercive but imprisoning the guy who nicked your lawn gnome isn’t.                        

Also Taxes, justice and coercion

The same India with news stars

That said, this book has its share of flaws. For a reader not already familiar with modern Indian history, it may feel a little too rushed, like a film watched on fast forward. At times, Mr. French veers toward the hokey, regurgitating without skepticism nonsense about the Internet as "a Hindu concept, a deity with many arms," or the notion that the software firm Infosys has invented a new "Indian way of working," and claiming, somewhat breathlessly, that "India is a macrocosm, and may be the world's default setting for the future."

Easy to build but hard to operate

State skill vouchers: Making government money available for private delivery is difficult to do but is the only way to create competition and gather information about outcomes. We need to shift state money from financing institutions to financing students. Giving skill vouchers to children who can’t afford to pay for their training but can redeem these vouchers at skill centres would expand capacity.

Blessing with cursing

The principal of St Stephen’s College, New Delhi Mr.Valsan Thampu writing (It’s not about the brand) in the Indian Express says that: 

• As against the 12,000 applications for 400 seats in 2007, there were 28,000 in 2010. Perhaps we should be proud? Perhaps not! 

In case he is proud, what is the purpose? When he deprives thousands of students by simply denying admission to the institutions by simply not expanding the number of seats available with teachers and other facilities!!!!!

The night the light went out…but blinking

No excuse please!! 

Free market: When government discretion and tariffs are sold on the market.

Even more says Prof Mehta that:

• Since language is an inherently social enterprise we will all have to contribute to the reconstruction of our language. But how can one possibly make sense of our times, when words and institutions lose all their meaning? In uttering them, we conjure up merely unmeaning shadows of their former referents. 

But the language with the same letters needs to be painted, and perhaps the spirit is different!!