Essays and Op-Eds

The Horror of Nandigram

This is the 40th installment of my weekly column for Mint, Thinking it Through.

Reading the newspaper has been a depressing experience over the last few days. The headlines are dominated by events at Nandigram, where bombs are going off, land mines are exploding, the police is powerless and lawlessness reigns. West Bengal’s governor, Gopalkrishna Gandhi, has described it as a war zone. To many of us far from there, it must seem like a remote insurgency that does not affect us all. But it does—and we cannot truly be a free society if we turn our back upon it.

The problem at Nandigram began with eminent domain. Eminent domain is an instrument used by governments to take land from private citizens for public use. For example, if a road needs to be built, and the proposed route goes through private property, the government acquires the land at whatever price it determines. It does not need the buyer’s consent for this, which many would say is surely wrong—but when it involves public infrastructure, most people shrug it away as a necessary evil.

In the American constitution, eminent domain is allowed only for projects of “public use”. When the Indian Constitution was written, this was changed to “public purpose”, which is more open to interpretation. But the right to property was a fundamental right, which meant that owners of private property had legal recourse if they were being gypped. Our early governments and legislatures, socialist and fond of redistribution, chipped away at it, but the courts defended it. Then, with the 44th Amendment in 1978, it was changed from a fundamental right to a mere legal right. That’s a euphemism—effectively, it had been abolished.

The West Bengal government then carried out a programme of land reforms known as Operation Barga. But instead of transferring property rights from landowners to tillers, itself a dubious act, it left the property title with the landowner, and gave the tillers permanent tenancy rights and a revenue share of the proceeds from the land, as well as first right of refusal if the landowner wished to sell. Some did deals with landowners, getting ownership over a portion of the land in return for their tenancy rights over the rest. Others remained bargadars, as they are called.

Cut to the 21st century. The government decided to set up special economic zones (SEZs) across India, where companies would get benefits that would attract investment, such as exemption from some of the foolish restrictions on business that exist in the rest of the country. That sounds worthy, but the governments involved set about acquiring this land through eminent domain laws. Obviously the farmers whose land was acquired were upset. Firstly, many of them did not want to sell. Secondly, it was not even for a project of public use, like a road or a power project, which at least have a weak rationalization. It was for rich private corporations.

Eminent domain was not the only issue here. Many of the affected farmers in Nandigram and Singur, the sites of two such proposed SEZs, were bargadars, who were facing a breach of contract by the government on the promises made to them. All in all, there was enough justified fury in Nandigram for opportunistic political forces to move in and stoke the fires, on which the CPM threw kerosene with its barbarism.

It is shocking that defenders of such theft try to justify it by invoking free markets and capitalism. True free markets depend on the sanctity of property rights. What Buddhadeb Bhattacharjee’s government has been up to is cronyism of the worst kind, colluding with big companies at the expense of the common man. Ignorant journalists describe him as free-market-friendly, which is ludicrous. His disregard for property rights makes him as totalitarian as the orthodox Communists who criticize him for moving away from their faith.

India’s politicians down the years have been no better. The farmers thrust into the fire now have been in the frying pan for 60 years. They are not allowed to sell their land for non-agricultural purposes, which has prevented industrial development in rural areas. (The companies operating in these SEZs could then have negotiated for the land on their own.) The restrictions placed on private enterprise have prevented the manufacturing boom that would have given our farmers more choices. They are trapped in their profession—60% of India lives off the agriculture sector, compared with around 5% for developed countries. This is unsustainable, as farmer suicides across India demonstrate.

With Nandigram, things have gone too far. For 60 years we have denied our farmers alternative sources of employment. Now, we have tried to take their farms away. When they have protested, we have reacted with brutality. The British, when they ruled us, were accused of nothing worse. What is the value of our independence then?

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My thanks to Shruti Rajagopalan and Ravikiran Rao for their useful inputs. To read in more detail about how the right to property was eroded in India, check out Shruti’s Op-Ed for the Wall Street Journal Asia, Indian Property Wrongs.

You can browse through all my columns for Mint in my Thinking it Through archives.

Why Children Labour

This is the 39th installment of my weekly column for Mint, Thinking it Through.

If blouses were people, there is one variety of blouse that would feel rather ashamed of its origins right now. Last week, the clothing company Gap pulled a smock blouse for children from its stores because it was found to have been made by young children in India. The press called it names such as the ‘child labour top’, and the hapless thing is now being exterminated. A Gap spokesman announced that child labour was “completely unacceptable”, and that they would prevent a recurrence.

The resulting international outrage gave children’s rights groups the boost they needed to push forward a series of raids over the last few days. Child workers were rescued from seedy bylanes in Delhi, where they were hard at work in small, cramped rooms. The Observer  wrote that according to the UN, “Child labour contributes an estimated 20% of India’s gross national product with 55 million children aged from five to 14 employed across the business and domestic sectors.”

Working children are all around us: at the office canteen, the Udupi restaurant, the neighbourhood grocer’s, the traffic signal. It is so ubiquitous that most of us don’t even notice it when we shout, “Chhotu, ek chai la.” Nobody in his right mind can condone it—there are few thefts as appalling as that of someone’s childhood.

For the sake of these children, I have a request to make to the activists and journalists behind all these recent exposés: six months from now, in May 2008, do a follow-up on all these kids who have been ‘rescued’ and tell us how they’re doing. Are they going to school? Are they having a normal, happy childhood? Indeed, tell us in just one word: are they better off?

My guess is that most of the kids will be employed in similar jobs—or worse. There are studies to back my fears. Oxfam once reported on a situation in Bangladesh where international outrage forced factories to lay off 30,000 child workers. Many of those kids starved to death; many became prostitutes. A 1995 Unicef study described how an international boycott of carpets made in Nepal using child labour led to between 5,000 and 7,000 Nepali girls turning to prostitution because a better option was now denied to them.

It is common sense that if these kids could have a better life, their parents would make sure they got it. Parents in poor countries are no different from parents in rich ones. They want their children to be free from the cares of the world, to go to school, to not have to worry about their next meal. Like all other parents, they must be tormented by the thought of their child having to sweat it out for a living. Why do they make their child work then? Because poverty leaves them with no other choice.

In a 1997 paper titled The Economics of Child Labor, Kaushik Basu and Pham Hoang Van showed that “child labour as a mass phenomenon occurs not because of parental selfishness but because of the parents’ concern for the household’s survival”. Basu and Van set out the Luxury Axiom: “A family will send the children to the labour market only if the family’s income from non-child-labour sources drops very low.” This is why, they stated, “the children of the non-poor seldom work even in very poor countries… In other words, children’s leisure or, more precisely, non-work is a luxury good in the household’s consumption in the sense that a poor household cannot afford to consume this good, but it does so as soon as the household income rises sufficiently.”

There have been a slew of studies in recent years that support Basu and Van’s findings, such as a 2004 paper by Eric Edmonds, Does Child Labor Decline with Improving Economic Status? (Yes.) A 1997 study by Alan Krueger even put a figure to it, stating that child labour ceases to be seen in an economy when it reaches an average income of $5,000. A 2005 study by Edmonds and Nina Pavcnik described child labour as a symptom of poverty, and not a cause.

Shutting down a sweatshop here or there may make us feel compassionate, but it amounts, almost literally, to throwing out the baby with the bathwater. The families concerned remain so poor that the kids need to find work. The Indian state has proved incapable of providing education or feeding them, and by legislating against child labour, merely drives it underground and provides a revenue stream for hafta-grabbing officials.

In a small percentage of cases involving child labour, coercion is used. That is unambiguously wrong, and should obviously be prosecuted. But most working kids in India are bonded not by physical force, but by economic circumstance. The solution to this is something that I keep harping on in this column—the government must stop restraining the only force that can lift millions of parents out of poverty: private enterprise and free markets. There is no other long-term way to fix this terrible problem.

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My thanks to the fellers in the Satin egroup for their inputs, particularly Neha for pointing me towards a couple of useful studies. Some of the studies I wanted to go through aren’t available for free online, so thanks to Yazad and Gaurav for using their institutional contacts to get them for me. Here is some interesting reading on the subject, in case you’re interested:

Child Labor (pdf file)—Eric Edmonds
Trade and Child Labour—Eric Edmonds and Nina Pavcnik
Child Labor or Child Prostitution?—Thomas DeGregori
The Factory System of the Early Nineteenth Century—William H Hutt
Kathie Lee’s Children—William Anderson
Child Labour (Global Ethics Consortium)— Don Berkich
Good for the Goose, Bad for the Gander—Peter T Leeson and Joshua Hall
Research Changes Ideas About Children and Work—Virginia Postrel

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You can browse through all my columns for Mint in my Thinking it Through archives.

Understanding Terrorism

My review below of What Makes a Terrorist, by Alan B Krueger, appears in today’s Mint.

What causes terrorism? In the post-9/11 world, this question has assumed an urgency that goes beyond academics. All our lives are touched, in some way or the other, by terrorism. Powerful governments base their strategic decisions on what they perceive to the answer, and if they are wrong, they can contribute to the problem instead of finding solutions. What Makes a Terrorist, by Princeton economist Alan B Krueger, is an important book for this reason.

Krueger states early in his book: “The popular explanations for terrorism—poverty, lack of education or the catchall ‘they hate our way of life and freedom’—simply have no systematic empirical basis. These explanations have been embraced almost entirely on faith, not scientific evidence.” He then goes on to present a pile of available data on terrorism that backs up his assertion.

Krueger’s book is drawn from three lectures that he gave as part of the Lionel Robbins Memorial Lecture Series in February 2006. In the first of these lectures, he tackles poverty and education. Looking into the economic background of terrorists, Krueger cites a study that compares “suicide bombers and other militants” from the West Bank and Gaza strip with the entire male population aged 16 to 50, and find that “suicide bombers were less than half as likely to come from families that were below the poverty line.” Krueger gets similar results from studies on Hezbollah and Gush Emunim, an Israeli group. 

Krueger cites public opinion surveys across Jordan, Morocco, Pakistan and Turkey that show that terrorism finds more support among the better educated than among the uneducated. The biographical details of known terrorists bring him to an identical conclusion.

Krueger examines a few possible reasons for this. One, groups like Hamas recruit “mainly on college campuses,” and the impoverished don’t attend college to begin with. Two, the supply of wannabe terrorists is greater than what terrorists groups can absorb—a Hamas leader once told the New Yorker: “Our biggest problem is the hordes of young men who beat on our doors, clamoring to be sent on suicide missions. It is difficult to select only a few.” These few would be those more likely to succeed—and perhaps consequently, more educated and less poor.

Krueger argues that while poverty may be a factor in street crime, terrorism, which he defines as “politically motivated violence”, draws a different kind of person. He draws an analogy with voting, saying that voters tend to be better educated and wealthier than non voters because “they care about influencing the outcome and consider themselves sufficiently well-informed to want to express their opinions.” He sums it up neatly: “Most terrorists are not so desperately poor that they have nothing to live for. Instead, they are people who care so deeply and fervently about a cause that they are willing to die for it.”

Does poverty play a part at the political level then? Perhaps terrorists take to violence to protest at the poverty around them? Krueger’s second lecture counters this view. “[I]nternational terrorists are more likely to come from moderate-income countries than poor ones,” he says. His data throws up an interesting set of factors that countries spawning terrorism have in common: “the suppression of civil liberties and political rights, including freedom of the press, the freedom to assemble, and democratic rights.” Krueger elaborates: “When nonviolent means of protest are curtailed, malcontents appear to be more likely to turn to terrorist tactics.” In other words, terrorism as a form of political expression may often be a last resort, when all others are closed.

Krueger’s third lecture evaluates “the economic consequences of terrorist attacks”, concluding that “terrorists only affect the economy if the public lets them, that is, if people and their leaders over-react.” A valuable part of the book comes at the end, where Krueger reproduces the question-and-answer sessions after his lectures, in which he and his audience delve into the nuances of his findings. 

Krueger’s book contains more insight on Middle-Eastern terrorism than on South Asia, but that is a minor quibble, and a constraint imposed by the data available to him. Humans everywhere are essentially the same, responding to incentives and scarcity, as represented by their social conditions. Krueger’s book is a necessary read for anyone who wishes to understand terrorism, especially because many of the popular notions of what causes it are not rooted in reality. One wishes that politicians, especially, would pay attention.

Remembering Frédéric Bastiat

This is the 38th installment of my weekly column for Mint, Thinking it Through.

A few days ago, I was fortunate enough to win the 2007 Frédéric Bastiat Prize for Journalism. I picked up a handsome cheque and an engraved candlestick at a ceremony in Manhattan, and reflected that much as I valued the money and would cherish the candlestick, I would have been happier if the writings that made me eligible for this award had been unnecessary. The Bastiat Prize, according to its organizers, is meant for “journalists whose writings wittily and eloquently explain, promote and defend the principles of the free society.” In the India of my dreams, I would not need to do those things.

Frédéric Bastiat was a French essayist who lived in the first half of the 19th century. His ideas, however, are terribly relevant to modern India. Indeed, if his work had been widely read and understood by the men who brought us freedom and shaped our nation after independence, we would not be such a poor country. Virtually every mistake that independent India’s policymakers made in the economic sphere could have been avoided if they had just read his great essay, That Which is Seen, and That Which is Not Seen.

It begins: “In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause—it is seen. The others unfold in succession—they are not seen: it is well for us, if they are foreseen. Between a good and a bad economist this constitutes the whole difference—the one takes account of the visible effect; the other… both of the effects which are seen, and also of those which it is necessary to foresee.”

To illustrate the difference between what is seen (and that a bad economist notices) and what is not seen (that a good economist foresees) Bastiat gives us the parable of the broken window. Imagine that a young boy breaks a shopkeeper’s window. At first onlookers commiserate with the shopkeeper, but then they point out that this is actually good for the economy. After all, the glazier will get 6 francs for repairing the window, and he might spend it on various goods and services, which would benefit the producers of those, and so on.

But this is bad economics. A good economist would also consider the hidden costs of the broken window. Had the shopkeeper not spent 6 francs on repairing the window, he would have spent it on something else, bringing the same benefits to the economy as the glazier’s spending that money. While the glazier’s spending is seen, the spending not done by the shopkeeper is not seen. One man’s loss equals the other man’s gain—and the economy, as a whole, loses the value of the broken window.

This seems commonsensical, doesn’t it? And yet, economists and politicians commit the Broken Window Fallacy all the time, such as when they say war is good for the economy, or when they talk about the economic benefits of Hurricane Katrina or 9/11—or of government spending.

When the government spends money, the bad economist extols the good that the spending does. The good economist sees the price that the taxpayer pays. Bastiat writes: “You compare the nation, perhaps, to a parched tract of land, and the tax to a fertilizing rain. Be it so. But you ought also to ask yourself where are the sources of this rain and whether it is not the tax itself which draws away the moisture from the ground and dries it up?”

Indeed, all government spending carries hidden costs, for not only do taxpayers lose the money that the government forces them to part with, they are also disincentivized from working harder or expanding their businesses. Society is at a loss for this. And yet, India’s economy, since independence, has been based on a massive mai-baap government, growing like a hungry beast at our expense.

Protectionist policies—subsidies, tariffs and various market barriers—are another example of ignoring what is not seen (the cost that consumers bear) for what is seen (the benefit that accrues to producers). To illustrate this, Bastiat wrote the magnificent satire, The Candlemakers’ Petition, in which candlemakers petition the French government for protection against competition from the sun.

When Sonia Gandhi wrote a letter to Manmohan Singh earlier this year warning him that foreign investment would threaten small kirana shops, she was petitioning for candlemakers. Indian newspapers do the same when they oppose foreign investment in media. Every powerful business group or lobby tries to block out the sun, as does the government. And who is left in darkness? We are.

I could go on and on, but Bastiat, the master of the crisp, lucid elucidation, would not approve. So I shall end here. To read Bastiat’s writings, do check out http://bastiat.org. It will all seem so familiar.

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You can browse through all my columns for Mint in my Thinking it Through archives.

The Population Myth

This is the 37th installment of my weekly column for Mint, Thinking it Through.

Government of India websites can be a hoot sometimes. If you visit the website for the department of family welfare, you will find the flashing slogan, “Have fun with one!!! Control population!!!” Had there been a place to leave comments on that site, I would have written, “Have fun with one! Control exclamation marks!”

When I was a schoolkid, I was taught that a key reason for the poverty of countries like India is their population. This is almost considered axiomatic in India today—and in much of the world, in fact. The thinking behind this is simple: there are a limited amount of resources on our planet, and if there are too many people, there won’t be enough resources to go around. We’ll run out of food. We’ll run out of natural resources. We’ll soon run out of land, and there will be “standing room only”. Harrison Brown once worried about the population increasing “until the earth is covered completely and to a considerable depth with a writhing mass of human beings, much as a dead cow is covered with a pulsating mass of maggots”.

It’s been a while since Brown’s prediction, and the earth isn’t a dead cow yet. If his kind of alarmist thinking was true, we’d have seen two trends over the last few decades: one, population density would be an indicator of poverty, and people would want to migrate away from cities, and not to them. Two, resources would have become scarcer and the quality of life would have gone down wherever populations have risen. In reality, quite the opposite has happened.

A recent study by Nicholas Eberstadt of the American Enterprise Institute, titled ‘Too Many People?’, looks at the impact of population on the world. First, Eberstadt finds no link between population density and poverty: he points out that Monaco, with a population density almost 40 times that of Bangladesh, is doing well for itself. So are Bermuda and Bahrain, which are more “overcrowded” than Bangladesh and India.

Eberstadt’s report also points out that over the last century, the real prices (deflated by the value of manufactured products) of wheat, maize and rice have dipped sharply, as have the real prices of non-renewable resources such as metals. Life expectancy has shot up in this time. Eberstadt concludes that while the natural resources of our planet might be limited, we are “now experiencing a monumental expansion of a different type of resource: human resources. Unlike natural resources, human resources are in practice always renewable and in theory entirely inexhaustible.”

Indeed, these human resources are the most valuable of all. All human beings, if allowed to express their creativity, add more value to the world than they consume. When two people exchange goods or services, both benefit, and more people means more trade. More people also means more specialization and division of labour —one theory holds that England’s industrial revolution was enabled by this.

Economist Julian Simon, in his book The Ultimate Resource, points out that historically, spurts in world population have coincided with leaps in productivity. The first one happened at around a million BC, at the time of the tool-making revolution. The next spurt came at about 10,000 BC, when we began to cultivate the earth. The latest one began about three centuries ago, and continues today, as the growth of technology has led to vastly higher standards of living, and longer lifespans than ever before.

If population growth was undesirable, why would people migrate to cities in such large numbers? In cities, we become part of economic networks that are larger than what we would get in smaller places, with more opportunities, and a greater chance to specialize. Across history, the prosperity of a nation has gone hand in hand with increasing urbanization. India’s cities may have much that is wrong with them—they are congested, polluted and lack all sorts of infrastructure—but still people flood in every day.

Government authorities insult us when they say that India’s problem is too many people. On the contrary, India’s problem is an inept and bloated state. It does not allow free markets that would enable the entrepreneurship and creativity natural to all humans. It has a monopoly on building infrastructure, and has failed utterly, leading to the crises we see in all our major cities, and the absence of roads in the hinterlands that would allow more urban centres to come up. In areas essential to unleashing our “ultimate resource”, such as education and health care, it has constrained private enterprise while itself being incompetent. In short, the cause of India’s poverty is not its people, but its system of government.

But look where the sanctimony comes from!

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You can browse through all my columns for Mint in my Thinking it Through archives.

My thanks to Gautam Bastian for pointing me to the department of family welfare website, and to the cartel for their inputs.

Dear Rahul Gandhi

This is the 36th installment of my weekly column for Mint, Thinking it Through.

Dear Rahul

Congratulations on your recent elevation as general secretary of the Congress party. Yes, I know, it was just a formality, and there’s more to come. Still, it’s a start, and one that you used to make a statement.

Shortly after getting this post, you took a delegation to Manmohan Singh and asked for the National Rural Employment Guarantee Scheme (NREGS) to be extended to all 593 districts of this country. A couple of days later, the Prime Minister announced that extension. With this, you demonstrated your clout in the party, and you also made a gesture of commitment towards the poor people of this country.

I have a question, though. Have you had a chance to look at the reports evaluating the NREGS that have been released recently? One of them, by the Society for Participatory Research in Asia, found that just 6% of the households registered under the scheme actually got 100 days of employment in 2006-07. Another, carried out by the Centre of Environment and Food Security (CEFS) a few months ago, is even more worrying.

“(A)bout 75% of the (NREGS) funds spent in Orissa have been siphoned and pocketed by the government officials,” it reports, “and this loot has been very participatory and organized.” The CEFS could not find “a single case where entries in the job cards are correct and match with the actual number of workdays physically verified with the villagers”. The report concludes: “(O)ut of Rs733 crore spent in Orissa during 2006-7, more than Rs500 crore has been siphoned and pocketed by the government officials of executing agencies.”

These figures are astonishing, for one-third of the money has not been reported as siphoned off. As your father, Rajiv Gandhi, once remarked, only about 15% of government spending on the poor reaches the intended beneficiary. India’s chief justice, K.G. Balakrishnan, recently spoke out against the Public Distribution System, saying that in some states, “not a single grain reaches the common man”.

A common reaction to these findings would be: “Oh, the programmes are OK, it’s the implementation that has been faulty. We just need to fix that, and all will be well.” But Rahul, surely you know that these are not aberrations that can be sorted out with a committee here and an inquiry panel there. This corruption is written into the system itself.

It is in the nature of government to want to increase its power, influence and budgets. This is exacerbated when government servants are unaccountable and tenured, as they effectively are in India. Government servants, like other rational human beings, look to their self-interest first. All their incentives are tailored towards misuse of power, with no safeguards built into the system against it.

Even if you could magically transform every bureaucrat in India into a paragon of honesty, a scheme like the NREGS would still be a mistake. That is because the scheme has a cost: The money spent on it doesn’t come from the heavens, but from your maidservant and your driver and millions of poor people in this country, who may never file returns, but are constantly assailed by hidden taxes.

Leave aside the many ways in which you could spend this money better: solving India’s power shortage, building roads to connect India’s hinterlands so that smaller urban centres can take the load off the big cities, and so on. If you just leave this money with the taxpayers to begin with, they will put it to more productive use than an unaccountable government spending someone else’s money. Also, individuals will have more incentives to work hard if they are taxed less, and businesses will have more resources available for expansion, all of which benefits the economy, raises productivity and creates jobs.

Indeed, if it’s employment you really want to provide, the best way to do so would be to remove the barriers to private enterprise that exist in this country. Put an end to the licence and inspection raj, reform our labour laws, abolish the laws that agricultural land can only be used for agricultural purposes, remove the restrictions on many goods being manufactured by anyone other than “small scale units”, and welcome foreign investment. All of these will provide far more employment than the well-intentioned but ill-conceived NREGS.

Rahul, in the same breath that the media acknowledges you as a future leader of this country, it mocks you for having nothing but your family name as your qualification. Prove us wrong. Reject received wisdom, learn from the lessons of the past 60 years, and convince your party that the key to India’s prosperity lies not in the actions of its government, but in the enterprise of its people. Set them free.

All the best.

Amit

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Also read: My WSJA Op-ED on the subject that appeared today, How Not to Help India’s Rural Poor.

My Op-Ed from two years ago: Good Intentions, Bad Ideas.

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My thanks to Prem Panicker, fellow Warrior Against Wastage, for sending me the reports referred to in this piece.

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You can browse through all my columns for Mint in my Thinking it Through archives.

How Not to Help India’s Rural Poor

This Op-Ed of mine was published in the Wall Street Journal Asia today.

Politics is often about grand gestures, and the Congress Party’s 37-year-old new general secretary, Rahul Gandhi, understands this perfectly. Shortly after landing his position last month, Mr. Gandhi demanded that Prime Minister Manmohan Singh extend a massive cash redistribution scheme, the National Rural Employment Guarantee Act (NREGA), to all 593 districts of the country. Mr. Singh duly assented.

If this is an indication of Mr. Gandhi’s power—and how he might use it in future—it’s not encouraging. The NREGA was enacted early last year by the Congress-led coalition. The act guarantees the government will provide 100 days of work every year to every rural household in India—there are no reliable figures on exactly how many of these there are—at an estimated total cost of $3 billion before the newly announced expansion. First launched in 200 districts, it was expanded to another 130 in the last fiscal year.

As expected, NREGA has proved little more than a siphon for corrupt bureaucrats, not a boon to the poor. And now, there are numbers to back up that assertion.

Last month, the Delhi-based Society for Participatory Research in Asia, a non-profit organization, released a preliminary study on NREGA’s governance. The results are shocking. In the financial year beginning in April 2006, only 6% of the households registered under the scheme actually received their 100 days of employment. PRIA’s study also cited shoddy implementation practices across 14 of India’s 28 states. In the surveyed villages, only 45% of registered households had even applied for work under the scheme. And of those households that had applied for a job, only 44% had received one within the required 15 days.

PRIA’s results mirror the findings of another study carried out by the Centre of Environment and Food Security earlier this year. The CEFS study focused on the state of Orissa, and found that about 75% of the funds spent in Orissa had been “siphoned and pocketed by the government officials.” “We could not find a single case where entries in the job cards are correct and match with the actual number of workdays physically verified with the villagers,” the study noted. Out of a total $187 million in public monies spent in the state during the 2006-2007 fiscal year, around $127 million was effectively stolen.

This kind of wastage shouldn’t come as a great surprise. India’s bureaucrats hold effectively tenured positions, and are often unaccountable to the public they serve. Their incentives are tailored only toward increasing their power and their budgets. Government is not transparent, and most common citizens do not contemplate legal recourse against it, as the legal system is dysfunctional and the rule of law is weak.

Instead of promising government jobs to agricultural workers, India’s government could do far greater good by stimulating competition—and investment—in rural India. As it is, government too often gets in the way. For example, one law limits the geographic area in which farmers can sell their produce, and some states require farmers to sell to monopolist distributors. Another law restricts produce shipments across state lines. Topping it all off, India is one of the biggest defenders of market-distorting agricultural tariffs in the World Trade Organization’s Doha Round negotiations.

The National Rural Employment Guarantee Act is symbolic of everything that’s wrong with India’s approach to economic reform. What’s needed is not grand gestures and more handouts, but a comprehensive review of how to stimulate private investment and entrepreneurship. Mr. Gandhi should understand that there is no better guarantee of employment than economic growth.

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Also read: My Op-Ed in WSJ two years ago about the NREGA, Good Intentions, Bad Ideas.

A Political Game Show

This is the 35th installment of my weekly column for Mint, Thinking it Through.

In the last few days, I have been thinking deeply about how to solve India’s problems. I have interspersed this demanding activity with furious bouts of watching television. One moment I ponder over who I should vote for in the next general elections. The next moment I send an SMS voting for Aneek Dhar in Sa Ra Ga Ma Pa. A moment later I worry about poverty. Then I watch a repeat of Jhalak Dikhla Ja. Thus the moments pass.

After all this, I have come to the conclusion that only television can solve problems. This has been reinforced by some big bloggers, which means I am right. Scott Adams, on the Dilbert Blog, has proposed a new reality show that pits think tanks against one another, with the public getting to vote for the policies they like. Alex Tabarrok, on Marginal Revolution, has suggested a game show called So You Think You Can Be President?, which puts presidential candidates through rigorous and entertaining tests.

I suggest a similar game show for India, tailored to discovering the qualities that matter to Indian voters. Instead of going out to vote at polling booths, which involves arduous physical labour (at least to a desk-bound half-Bengali like me), we should be allowed to vote via SMS and phone calls. The revenues thus generated can go straight into the government’s coffers, and taxes can be abolished. (See, don’t you like this idea already?)

As there are 545 seats to be filled in the Lok Sabha, there can be 1090 regular episodes of this show, which we can call, ahem, Kaun Banega Lok Sabha MP? There will be two episodes per constituency: one for the contenders to flaunt their skills, and another to announce the result. And yes, voting will not be restricted to the residents of a particular constituency alone, for no constituency is an island. (Andaman and Nicobar Islands are many islands, but you know what I mean.) Multiple voting will also not be barred – those who vote the most care the most, and deserve to have more say. Plus, they’re effectively paying our taxes.

Once all the MPs of a state are chosen, there can be a few extra episodes to choose the parliamentary leaders of each party, with the entire country ensuring inner-party democracy. And thus the government will be formed. At four episodes a week – Monday to Thursday, the Kyunki Saas Bhi Kabhi Bahu Thi model – the process of choosing the Lok Sabha will last just over five years, which is the term of a current MP anyway. Only, unlike in the present system, the constitution of the Lok Sabha will change every week. The flux will keep shaky coalition governments on their toes, and revenues should remain healthy.

Anyway, all that is boring. Let’s get to the content. What will the politicians really do in this reality show? I propose that the contenders be put through a number of rounds to weed out unworthies, before the public gets to vote on the final three. These rounds could include:

One, The Chai-Paani Round. One quality an Indian politician must have is the ability to monetize a position of power to maximum effect. (Forgive the jargon, but I don’t like words like ‘bribe’ and ‘corruption’. Very crude.) In this round, the candidates will be given unexpected positions of power for a day, and their takings will be compared at the end of the show. For example, they could all be made clerks at the RTO for a working day. The lowest earners will be eliminated.

Two, The Gunda Raj Round. In this round, one crore rupees will be stuffed into the pocket of each candidate, and they will be dumped in the middle of a violent constituency unknown to them, with their whereabouts made available to all the criminal gangs of that area. (Each candidate will be in a separate place, alone.) The contestants will be judged on how much money they manage to keep with themselves, and the truly talented politicians will no doubt even multiply it. This will test their resourcefulness, diplomacy and alliance-building skills.

Three, The God-Promise Round. In this round, the contestants will make promises to the voters on what they will do for them once they are in power. The producers will calculate the total amount of money these promises will cost. If any candidate’s promises end up costing more than the amount of money raised in that episode by SMSs, he will get disqualified at the start of the result round. If his promises are especially outrageous, he may get a wildcard entry into Kaun Banega Rajya Sabha MP?, which will be telecast on weekends.

Four, The Naach-Gaana Round. We are a song-and-dance nation, and this round might ensure that, unlike in the current system, our leaders have at least one talent to their name. Also, I demand that Anu Malik be one of the judges. My life will be complete if I get to see Manmohan Singh singing “You are My Sonia” in front of Anu Malik. Wouldn’t you like that too?

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You can browse through all my columns for Mint in my Thinking it Through archives.

These Dreams of Flying

This is the 34th installment of my weekly column for Mint, Thinking it Through.

Earlier this week I escorted my aunt from Chandigarh to Delhi, where she was due to catch a flight back to the US. She was in India after many years, and at Chandigarh airport she looked around us and remarked that many of our fellow travellers would probably have travelled in trains a decade ago. I gushed about how competition in the airlines industry had made prices so much more affordable for all of us. Lower prices, more choices, yada yada yada.

Having dropped her off, I made my way back to Mumbai where I came across this poignant news report in London’s Sunday Times:

An Indian entrepreneur has given a new twist to the concept of low-cost airlines. The passengers boarding his Airbus 300 in Delhi do not expect to go anywhere because it never takes off.

All they want is the chance to know what it is like to sit on a plane, listen to announcements and be waited on by stewardesses bustling up and down the aisle.

In a country where 99% of the population have never experienced air travel, the “virtual journeys” of Bahadur Chand Gupta, a retired Indian Airlines engineer, have proved a roaring success.

While flying has become relatively affordable over the last decade, for most people in India it is still a dream. Kudos to Gupta for finding a market in these dreams of flying, but I can’t help thinking that many of his customers could actually take a flight for themselves if the government just got out of the way. How is that? Let me explain.

I flew from Delhi to Mumbai on a GoAir flight that cost me Rs1,985. Out of that, Rs1,485 was taxes to the government, with the airline pocketing just Rs500 of my fare. Indeed, I have bought tickets in the past that have brought the airline in question around Rs100, but the total cost of my ticket has always been more than Rs1,500 because of the taxes. And how much did a ticket to Gupta’s make-believe plane cost? According to the Sunday Times report, “about £2 each”.

If the government did not take its hafta, flying would be within reach of Gupta’s customers, and of most people who travel by trains. Sure, most tickets would cost more than a hundred bucks, but having booked umpteen flights on makemytrip.com, I think it is safe to say that if you booked in advance, you’d be able to fly anywhere in the country for between Rs500 and Rs2,000.

During her visit to India, my aunt was also amazed at the ubiquity of mobile phones. Everyone she met had a mobile, from my parents’ cook to the drivers of autorickshaws we rode on, and so on. They could not have dreamed of owning a landline 10 years ago, and if they were from out of town, they would have made an STD call to their families once a month. Indeed, even middle-class people often had to spend years on a waiting list to be ‘allotted’ a landline in the 1980s. Today, because of competition, most people, at least in cities, can afford mobile phones.

The lesson there is that the more the government removes barriers to trade, the more people benefit. Governments pay lip service to fulfilling the needs of people, but that is something that businesses do best. Any business that fails to satisfy its customers will fail in a truly competitive market. Any need that people have in a free market will be fulfilled by some entrepreneur or the other. The efficiency that competition forces upon these businesses cannot be matched by government, for the incentives of government employees are tailored towards increasing their power, influence and budgets—and nothing else.

The exorbitant taxes that the government takes off airline tickets are effectively a barrier to trade. Such barriers, typically, harm the poor more than the rich. I don’t know what the government does with these taxes, as it does not present us with an itemized account of how it spends our money, but I am certain the private sector can do it better.

The taxes charged on our airline tickets come at a cost. One, they act as a brake on the expansion of the industry, which would serve more customers, provide more quality and employ more people if there were minimal taxes. Two, they take money away from people who would otherwise spend it or save it, and would surely do so to more productive purpose for the economy than an unaccountable government spending someone else’s money.

The state has failed miserably in performing the few tasks that justify its existence, such as providing effective law and order. Instead, it collects a vast amount of hafta from us, most of which is wasted, as Rajiv Gandhi once admitted and none of his successors would have the audacity to deny. It has also hobbled free enterprise, the cost of which is felt by the many people who sit inside Bahadur Chand Gupta’s plane, listening to the announcements, dreaming of flying, waiting to take off.

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You can browse through all my columns for Mint in my Thinking it Through archives.

I got the Sunday Times link via email from Anand Krishnamoorthi. My thanks to the cartel for its inputs—as always.

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Update (October 5): Readers have written in to inform me that a fair chunk of what the airlines list under ‘taxes’ is actually a fuel surcharge that goes to the airlines. That may be so, but aviation fuel in India is heavily taxed, and is consequently much more expensive than in other South-Asian countries. The latest figures I could get hold of were from a year ago, when aviation fuel cost Rs37,000 / kl in India, as opposed to Rs22,383 in Bangkok, Rs21,111 in Singapore, Rs21,427 in Kuala Lampur and so on. Obviously the airlines pass on this extra burden onto the consumers, but it may not have been such a burden in the first place if not for the taxes.

It’s hard to say exactly what percentage of the fuel surcharge can be attributed to the tax on aviation fuel, but I’m guessing that’s a huge factor. Either ways, I stand by my argument.

The Twenty20 Age Begins

This is the 33rd installment of my weekly column for Mint, Thinking it Through.

Monday has long passed, and the immediate elation around India’s victory in the Twenty20 World Cup has abated. Yet, I still feel excited, and certain of the historical significance of this win. In 1975, when the first One Day International (ODI) World Cup took place, it seemed like a tamasha to everyone, a passing fancy. Today, it is a huge deal, and West Indies are inscribed as its first winners. I’m certain that the Twenty20 World Cup will be as important one day, and India will be remembered as its first champions. That’s quite something.

My excitement is not just about India winning. I am as charged up about Twenty20 cricket, though it is a format I was initially suspicious of, being a purist in love with the intricate and elongated dramas of Test cricket. My preconceptions about Twenty20 cricket have been—forgive the cliché, but I can’t resist this one—knocked for a six.

I believed that it was a sloggers’ game, and that bowlers were doomed. That is clearly not true. Bowlers played a key role in every victory in this World Cup, and players like RP Singh, Daniel Vettori, Stuart Clark, Umar Gul and Irfan Pathan (in the final) showed that traditional bowling skills—as opposed to just pitching it full and hoping it doesn’t go for six—are central to this game. And slogging alone isn’t enough to do well—in fact, it’s an invitation to disaster, for canny bowlers will always lure sloggers out, and wickets hurt every team.

In the simplistic view of the cynics—and I was one myself—the three-hour version of cricket has no space for subtleties or nuance. I now disagree. Most other sports are played in shorter spans of time, and a 90-minute game of soccer and a three-set game of tennis have plenty of subtlety and nuance. Cricket has enough drama in its DNA to be enthralling in any span of time, and we got a demonstration of it during this World Cup.

Twenty20 cricket will evolve just as one-day cricket did. In the 1970s and 1980s, cricketers took a similar approach to an ODI as they did to a Test match. (Remember Gavaskar’s 36 not out in 1975, and Boycott and Brearley in the 1979 final?) It took time for players to figure out the game, for captains to develop strategies suited to 50 overs of play, for cricketers to work on skills tailored to this new form. Many of those—the quick singles, the sharp fielding, pacing a chase—transformed Test cricket as well.

Similarly, Twenty20 cricket has a grammar and rhythm of its own, with an increased urgency around each delivery, and players will soon adapt to it, and export those qualities to other forms of the game. There will be more 400-plus scores in one-day cricket, and an individual double-century is surely not far away. The mental framework of our international cricketers has been changed by Twenty20 cricket, and it will impact ODIs and Tests as well.

Contrary to what many expect, though, I don’t see Twenty20 cricket becoming the commercial heart of the international game anytime soon. This is simply because there are more commercial breaks in a one-day match. As long as ODIs have a following, cricket boards will schedule more of those, though that might change if ODIs go the way of Test matches in terms of viewership.

Twenty20 games can have a powerful impact on domestic cricket, though. At the moment domestic cricket, particularly in the subcontinent, has a negligible following. Most of us don’t have the time to watch domestic games, especially as the international calendar is so crowded. Twenty20 cricket makes fewer demands on our time, and domestic Twenty20 tournaments, if well organized and promoted, should draw healthy audiences. That will also expose newer stars to the cricket-watching public.

Speaking of new stars, a big reason why this World Cup was so important for us was that it gave us a snapshot of the future. The decision by the Dravid-Tendulkar-Ganguly trio to withdraw from the tournament was a magnificent one for Indian cricket, as it gave us a chance to see what a young Indian team, without the baggage of the past, would look like. MS Dhoni’s team looked united, confident, devoid of politics and happy together.

That does not mean that we should discard the older players, for we need them in the season ahead, and should persist with them as long as they merit their place. But it does invalidate the argument that we should stick with our legends because the newcomers aren’t good enough. This tournament showed that we have eager, hungry young players waiting their turn, and any seniors who underperform should be shown the door—respectfully, but without regret.

I’m suspicious of false euphoria, and wary that I might fall prey to it myself. But I can’t help thinking that exciting times lie ahead for both India and the game of cricket. What do you think?

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You can browse through all my columns for Mint in my Thinking it Through archives. And while on the subject, also read Do We Really Love Cricket?