The magic of Shruti Nelson

The partner, as some of you may know, curates and organises art shows. A show she’s put together is running in New York at the moment, but I’m far more excited about a show that opens today in Mumbai: it features works by Shruti Nelson, a painter from Baroda, and while I’ve long been a fan of hers, some of this work is way beyond even my expectations.

You can check out some of the paintings featured in the exhibition here. My favourites: 1, 2, 3, 4.

Heck, they’re all good, and they’re much better close up, so visit the exhibition if you’re in Mumbai and check them out.

Reason vs Rationalisation

A shorter version of this piece was published today as the second installment of my column, Thinking it Through, in Mint. I also posted this on the old India Uncut.

Often when I argue with friends, or on the internet, I am dismayed by how intransigent some people are. No matter how many facts I throw before them, or how solid my reasoning is, I simply cannot convince them of my point of view. No doubt they feel the same about me. “He refuses to listen to reason,” they think, even as I bemoan how unreasonable they are.

This is not a phenomenon peculiar to me: we live in deeply polarised times, and around half the world believes that the other half ignores reason altogether. Well, it is my belief that we overestimate reason to begin with. The Scottish Philosopher David Hume once described reason as “the slave of the passions,” and I believe that much of the time when we feel we are being reasonable, we are actually rationalising conclusions we have already arrived at, positions that we already hold.

An excellent illustration of how our mind does this comes from neuroscience. In the 1960s, neuroscientists Michael Gazzaniga and Roger Sperry carried out a series of experiments on patients with split-brain epilepsy. A common treatment for such patients used to be to sever the corpus callosum, the part of the brain that connects the two hemispheres of the brain. This effectively splits the brain into two: rational thought is carried out by the left hemisphere, but the two halves of the brain stop being aware of the happenings the other half.

Describing the experiments in his book, “The Blank Slate,” Steven Pinker wrote of how “the left hemisphere constantly weaves a coherent but false account of the behaviour chosen without its knowledge by the right.” One example: the experimenters would flash the word “walk” in the visual field of the right hemisphere. The patient would get up and start walking. But when asked why he did so, his left brain, which would be unaware of what the right brain had seen, and would effectively be doing the replying, gave answers such as “to get a coke.” The remarkable thing is that the patients actually believed their explanation, even though the conscious mind arrived at it after the unconscious mind prompted the body to start walking.

Pinker called the conscious mind “a spin doctor, not the commander in chief,” while Gazzaniga referred to the left brain as “the interpreter.” In his book, “Phantoms in the Brain,” VS Ramachandran wrote, “[t]he left hemisphere’s job is to create a belief system or model and to fold new experiences into that belief system. If confronted with some new information that doesn’t fit the model, it relies on Freudian defence mechanisms to deny, repress or confabulate – anything to preserve the status quo.”

In other words, the left brain’s job to to make sense of the world and build a coherent worldview. This isn’t easy. The world is full of complicated phenomena, and the most intelligent among us would not be able to make sense of it all if we tried to place each disparate event in its proper perspective. We would be perpetually bewildered.

To deal with this, our brains evolved to seek patterns in everything. Michael Shermer, in his book “How We believe,” wrote: “Those who were best at finding patterns (standing upwind of game animals is bad for the hunt, cow manure is good for the crops) left behind the most offspring.” Of course, while we are especially good at seeking patterns in everything, not all patterns are meaningful, and many simply come from confusing correlation with causation. Thus, a cricketer who makes a century when he happens to have a red handkerchief in his pocket may carry that handkerchief with him for the rest of his career.

Indeed, this explains religion. For much of our existence, science hasn’t been around (or able) to answer the big questions of the day. We’d have gone mad thinking about it all if we didn’t have religion to give us ready-made patterns that explained everything. Similarly, in the modern world, we have all kinds of belief systems that help make sense of the world around us, and provide us with cognitive shortcuts to think about the world.

When these belief systems are attacked, it is natural for us to not want to have to rethink them. As an economist would say, that would be inefficient, wasting too much time and energy. Thus, various kinds of defence mechanisms originate for this purpose, such as the confirmation bias, which is a tendency to consider only evidence that fits our existing beliefs. A believer in astrology would do this, for example, by considering all correct predictions by an astrologer to be proof of its validity, while ignoring the ones that turn out false.

And indeed, this is why most arguments, especially about politics and economics, are so frustrating. If both sides have firm beliefs, they stand little chance of convincing the other person, for most reasoned argument in such cases is rationalisation couched as reason. The next time you get into one of those arguments, and witness one of them, you will actually be able to observe this happening. The delight of it all is that the people involved will not be aware of this process, and will honestly believe themselves to be open-minded individuals who are, well, thinking it through. But that is mostly self-deception.

Where’s the Freedom Party

My weekly column for Mint, Thinking It Through, kicked off on February 8, 2007. It will appear every Thursday. This is the first installment, also posted on the old India Uncut.

It’s frustrating being a libertarian in India. Libertarians, broadly, believe that every person should be have the freedom to do whatever they want with their person or property as long as they do not infringe on the similar freedoms of others. Surely this would seem a good way for people to live: respecting each other’s individuality, and not trying to dictate anyone else’s behaviour.

Naturally, libertarians believe in both social and economic freedoms. They believe that what two consenting adults do inside closed doors should not be the state’s business. Equally, they believe the state should not interefere when two consenting parties trade with each other, for what is this but an extension of that personal freedom. And yet, despite having gained political freedom 60 years ago, personal and economic freedoms are routinely denied in India. Even worse, there is no political party in the country that speaks up for freedom in all its forms.

Consider our Left parties. They speak up for personal freedoms (though often as a matter of convenience), such as for free speech and against censorship, but, bound by dogma, they oppose economic freedom. They do not understand that when two people trade with each other, they do so because they both benefit, and that allowing people to trade freely creates prosperity better than government handouts can. They do not see the good that our limited reforms of the last 15 years have done. They point to the existence of poverty as evidence that the reforms have failed, not admitting that the reforms have not been carried out in the areas that affect our poor the most.

The Left claims to speak for the poor, but most of the policies it supports, such as the labour laws and the minimum wage, harm poor people the most. It does not accept that poverty is a result of inadequate employment and insufficient productivity, and that unleashing private enterprise, by removing all the barriers to it that still exist, would solve these problems. It opposes foreign investment, as if anything but employment and prosperity could result from it. It views economics as a zero-sum game, and assumes that the only way to enrich the poor is to steal from the rich.

Then consider the Right. The religious right routinely tramples on personal freedoms in the name of religion and tradition and suchlike. It takes offence at any criticism, and is an enemy of free speech. The extreme elements of it, which are more common than we acknowledge, and even won a state election resoundingly not long ago, treat an entire minority as subhuman. And yes, inspired by nationalistic fervour, they often oppose economic freedoms as well.

But why blame the political parties? Politics is all about demand and supply: our politicians do not value freedom because our people do not demand it. There are a variety of different reasons for why this is so.

When it comes to economic freedoms, it so happens that many of the great truths of economics are deeply unintuitive. The fact that markets aren’t zero-sum, for example, or that the spontaneous order of millions of individuals working separately towards their self-interest can produce and distribute goods far more efficiently than central planning can. Also, most of us have grown up in a socialist framework, and instinctively look to our mai-baap state for solutions. We look to the government to provide jobs, to lift people out of poverty, to provide free education to all, and so on. “What does a poor man care about freedom?” an IAS officer friend recently asked me. “All he wants is food.” And indeed, the connection between economic freedom and jobs and food on the plate is not one that is immediately obvious.

When it comes to personal freedoms, we are so used to living in a country where they are denied to us that we don’t even notice their absence. As a matter of routine, films are censored, books are banned, and our personal and sexual preferences are restricted. Free expression is endangered in this country, and whether it’s MF Hussain painting a Hindu goddess nude or an Orkut forum about Shivaji or a comedian making fun of Mahatma Gandhi, our default reaction is to ask that it be stopped. How can free speech thrive in a country where giving offence is treated as a crime?

Am I hopeful for things changing? Yes and no. Yes, because as the cause and effect of economic freedom becomes clearer, people will see through socialist rhetoric and realise that only free enterprise can provide jobs, lift our living standards, and raise this country out of poverty. On the other hand, such a clear-cut utilitarian case is harder to make for personal freedoms, and political parties, in any case, thrive on catering to special interest groups. They are, thus, generally likelier to restrict freedom even further instead of removing existing restrictions.

Immense sighs emerge. Perhaps I should simply have been a Communist or a Fascist.

Bollywood hails the free market

A version of my piece below was published on January 19, 2007 in the Wall Street Journal as “Bollywood’s New Capitalist Hero.” (Subscription link.) It was also posted on India Uncut. It isn’t meant to be a review of “Guru”, towards which I have mixed feelings, but a comment on one aspect of it.

Who would ever have thought that one of the villains of a Bollywood film could be import duty? “Guru”, the latest Bollywood blockbuster by the respected director Mani Ratnam, is that rare film—perhaps Bollywood’s first—in which free markets are lauded as a force for good. Aliens emerging from the Taj Mahal would be less surprising.

“Guru” stars Abhishek Bachchan as Gurukant Desai, a character inspired by Dhirubhai Ambani. Ambani was that rare tycoon who went from rags to riches during the worst years of India’s license raj, building Reliance Industries, which today is India’s largest private sector company. In the era in which Ambani flourished, the state throttled private enterprise with licenses, regulations and sundry restrictions that had at their core Jawaharlal Nehru’s pithy sentiment: “Profit is a dirty word.” Ambani built an empire in spite of this system, enriching millions of middle-class shareholders in the process, for whom he became a folk hero well before his death in 2002.

Ambani’s means were sometimes controversial, and the film reflects this. Towards the end,  Desai is on trial for economic offences that have much to do with import duty and the like. He stands up to make his final statement, and is asked if he is going to speak standing up. In a memorable moment, he thunders, “Do I need a license to stand?”

Desai then evokes the name of Mahatma Gandhi, and implicitly compares Gandhi’s freedom struggle against imperialism to his own struggle with the forces of economic oppression. It is an apt comparison, stated with all the drama and flourish that Bollywood is famous for, but it is almost unbelievable that it is being made in a Hindi film.

In Bollywood, over the ages, one of the template villains has been the businessman. He will look suitably sinister, will alienate his own children, and will either deal in drugs or arms on the side, or spend his time evicting slum dwellers. Anything for profit, especially murder and rape. Most Bollywood businessman villains were classic caricatures of “the evil capitalist,” exploiting the workers and growing rich on their blood and toil. They often freelanced as mafia dons or were crony capitalists, but when the hero raged against their greed, this distinction was lost: business—and the profit motive—were itself painted as twisted, and the rare benevolent businessman stood out starkly as an exception to the rule.

Indeed, Abhishek Bachchan’s father, the screen legend Amitabh Bachchan, himself acted in many films as the angry young man who speaks up for the poor against big business. The senior Bachchan’s best years were in the 1970s, when the Soviets were idolized and America and free enterprise were reviled. Times have changed, and for the first time, Bollywood has acknowledged that change.

Why India needs school vouchers

This piece of mine was published on January 15, 2007 as an Op-Ed in the Wall Street Journal Asia. (Subscriber link.) It was also posted on India Uncut.

On India’s Republic Day, January 26, the New Delhi-based Centre for Civil Society will launch a campaign for school choice. It’s an apt day for the event. While India’s constitution guarantees universal and free education, the government has utterly failed that mission. It’s time to encourage the private sector to step in.

Public primary education in India is in dire straits. According to a 2006 study by Pratham, a nongovernmental organization, more than half the children who join school in the first grade drop out before reaching eighth grade. A study conducted the prior year by the same organization found that 35% of school-going children surveyed between the ages of seven to 14 failed a reading test involving a simple paragraph; 41% of them couldn’t subtract or divide properly.

Little wonder that private schools are sprouting up like wildfire to fill the gap. Often illegal, these schools don’t just serve the rich and middle classes, but the poor as well. And the quality of education these schools provide is often higher than in their public counterparts. A 1999 government report titled the “Public Report on Basic Education in India” found that private schools across rural parts of North India were vastly superior to public schools in terms of facilities and learning environment. On surprise visits during school days, the researchers found only 53% of the accredited public schools actively engaged in teaching.

The Centre for Civil Society’s campaign aims to enable more parents to send their children to private schools by promoting school vouchers. (Currently, India doesn’t boast any school voucher schemes, though a few are in the works.) Inspired by Milton Friedman, vouchers enable parents to enroll their child in a school of their choice. Variations on the idea include tuition reimbursement and direct cash transfers. In each scheme, the principle is the same: empowering parents with choice to increase competition among educational institutes and engender better quality education.

Much more could be done. Currently, India’s private sector is actively discouraged from setting up educational institutes. To offer state-approved degrees, a school must meet a number of parameters, including government-trained teachers, large playgrounds, and other onerous requirements. Above all — inanely — private schools cannot operate for a profit. Entrepreneurs evade these hurdles through innovative financial structures such as trusts, but the necessity of this kind of manipulation scares away many would-be entrepreneurs. According to a 2001 CCS study, it takes 14 different licenses from four different authorities to open a private school in New Delhi – a task that, if done legally, could take years.

India’s parents aren’t waiting for a government fix. A 2005 study by education specialists James Tooley and Pauline Dixon showed that 65% of schoolchildren in Hyderabad’s slums attend private unaided schools—for which their parents had to pay—rather than a free government alternative. In a similar finding, an October 2006 survey by CCS showed that 14% of households in Delhi earning less than 5,000 rupees ($113) per month opted to send their children to a private school.

It is a common canard that the cost of education is higher in private schools than in public schools. Numerous studies have shown that private schools use capital as much as twice as efficiently as their public sector peers. Why? When competition is absent, waste ensues. Voucher schemes, put simply, allow public money to be put to better use.

As in any society, education is the foundation of future economic success. The Centre for Civil Society’s campaign for school choice may be a nascent effort, but it’s of critical importance to the India of today — and of tomorrow.

*  *  *

Further resources: Do check out Pratham’s comprehensive reports, ASER 2005 and ASER 2006. Tooley and Dixon’s landmark report is summarised and available in full here. Andrew Coulson’s paper, How Markets Affect Quality  (pdf link), is an excellent resource on the subject. You can read about the PROBE Report here, and buy it here and here. Mayank Wadhwa’s CCS paper on the licenses required to start a private school in Delhi is here, and the findings of the latest CCS survey are summarised here.

My thanks to Gautam Bastian and Shruti Rajagopalan for sharing their valuable insights with me on school choice, and directing me to many useful resources. Gargantuan gratitude grunts gregariously.

Fighting against censorship

A version of this piece by me was published on October 3, 2006 in the Wall Street Journal as “India’s Censorship Craze.” (Subscription link.) It was also posted on India Uncut.

American pop icon Paris Hilton corrupts Indian minds. That, at least, is the fear held by mandarins of Indian culture. So they’ve barred television channels in India from airing Ms. Hilton’s new music video, “Stars Are Blind,” in yet another example of the censorship fever sweeping the country.

Movie channels in Mumbai were recently blocked because they purportedly showed adult content. That’s despite the fact these channels routinely edit out all nudity and sex. And it’s only a few months since the film version of “The Da Vinci Code” was banned in several states after Christian groups protested.

In such a climate, nothing is too trivial to escape the target of aspiring censors. One Mumbai-based crusader for tighter controls on Indian television, Pratibha Naithani, has even called for an investigation into “violence on cartoon channels.” Why stop at violence? Perhaps Ms. Naithani hasn’t noticed yet, but in addition to routinely knocking things over, Tom and Jerry also frolic in the nude.

Such extreme examples are a reaction to the foreign cultural influences that have flooded in since India began opening up its previously closed economy to the outside world in 1991. That produced a predictable backlash from traditionalists whose sense of identity, and even their political base, is threatened by foreign influence. They seek refuge in arguing that India’s religion, culture and traditions need protecting from the forces of globalization.

Unlike the U.S., the Indian constitution provides little protection against censorship. Although it professes to give all citizens “the right to freedom of speech and expression,” that is qualified by so many exceptions as to make any protection almost meaningless. These include “the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality, or in relation to contempt of court, defamation or incitement to an offence.”

Naturally, it falls upon government bureaucrats to decide what falls within these exceptions. And the problem is that India has long had a climate where it’s considered perfectly acceptable for the state to meddle in what its citizens can watch, and listen to. In 1968, for instance, “abbreviated skirts” and scenes “suggestive of soliciting” were enough to send “A Tale of Four Cities,” a documentary by KA Abbas partly set in Mumbai’s red-light districts, all the way to the Supreme Court. India’s top judicial body duly upheld its ban , setting a precedent for censorship that is still cited today. It ruled that films had to be scrutinized more carefully than other media because “a person reading a book or other writing [or] hearing a speech or viewing a painting or sculpture is not so deeply stirred as by seeing a motion picture.” In the view of the court, thus,  Indians were like putty in the hands of these powerful media, incapable of making their own decisions or using their own discretion.

Such paternalism was quite in synch with the Fabian Socialism that India had adopted. The state was supreme in all matters, and whatever freedom it allowed its citizens—“subjects” would be as apt a term—was at its discretion. In India, we call it a mai-baap sarkar, which literally means “mother-father government,” indicating the all-encompassing authority of the state. Initially, most Indians took this for granted, and did not protest too much. The freedom that mattered to them in the early years of independence was political freedom, which was their source of national pride.

But, in recent years, things have begun to change. The economic growth triggered by India’s opening up has created a much larger middle class. And the intellectual influences that have poured in from elsewhere in the world have made this middle class more alive to the need to fight for freedom of expression.

That means the recent trend toward increased censorship has not gone without a fight. Where once censorship was taken for granted, it is now debated, and the army of news channels that have recently opened shop regularly feature debates on the subject. Online petitions protesting censorship are common, an early example being one four years ago in support of “War and Peace,” a documentary by Anand Patwardhan that was initially banned for criticizing India’s 1998 nuclear tests. Earlier this year, government instructions to ban a handful of (mostly innocuous) Web sites without giving any reasons provoked widespread outrage, especially after local Internet providers overreacted and mistakenly extended the ban to cover a large number of other sites. Bloggers across India filed applications under the Right to Information Act in an effort to discover the reasons for the ban, and some now plan to go to court to continue the battle for freedom of speech.

Such voices are still few, and these protests not yet loud enough to counter the regressive forces that routinely stifle freedom of expression in India. But they are growing, and offer hope for India’s future.

You can check out Article 19 of the Indian Constitution, which deals with freedom of speech, here. Article 19 (1) (a) states the principle of freedom of speech, but Article 19 (2) lays out the caveats to it. The history of how 19 (2) came about after 19 (1) (a) was written is quite fascinating, and was covered in an essay by Vikram Raghavan in a book titled “Reflections on Free Speech and Broadcasting in India” (OUP 2006; I don’t have the book, but Vikram was kind enough to email me his essay a year ago). Raghavan wrote about the KA Abbas case in his piece as well, and Anand Krishnamoorthi also had an excellent post on that subject.

Empowerment, not slavery

A version of this piece by me was first published on November 8, 2005 in the Wall Street Journal as “Self-Delusion.” (Subscription link.) It was also posted on India Uncut and the Indian Economy Blog.

Organized slavery ended decades ago, but to go by the criticism of some leftist commentators in India, one would imagine that it is alive and flourishing in the world’s largest democracy.

Recently it has become especially fashionable to hit out at call centers, or business processing outsourcing (BPO) units as they are officially known. A study published by an institute that comes under India’s Labor Ministry compared conditions in Indian BPO outfits with those of “Roman slave ships.” Chetan Bhagat, the author of a new book set in one such unit, “One Night @ The Call Center,” recently claimed that call centers are “corroding a generation.” It is common, almost clichéd, to hear call-center workers referred to as “cyber-coolies.”

All this criticism is terribly misguided. Contrary to being a form of economic imperialism, as its critics claim, India’s BPO industry is an indication of what is possible for a country to achieve with free markets. India’s call centers make use of one of its comparative advantages—cheap, English-speaking labor. More importantly, it empowers the estimated 350,000 people who work in this industry, instead of “stripping them of their dignity,” as a common canard goes.

The people who work in these call centers—indeed, in any company in India—do so out of choice, not coercion. They make that choice on the basis of the options available to them, options which are now far wider than they were a decade ago. When this writer was in college in the early 1990s, it was next to impossible for a young graduate to get a job on the basis of his degree alone.

Today, a working knowledge of English suffices. In the socialist decades after independence a middle-class man could save up enough to buy a house and a car only when he was in his 30s, or even 40s. Today, young people in their 20s can do so. Many of them use their time in the BPO industry to better their lives substantially. Some support families, others save up to go abroad for further education. Some simply make money, a goal apparently anathema to grizzled socialists.

Why, then, the criticism? One of the natural consequences of socialism is that a few stand in judgment of many, and make their choices for them. As India has moved away from the Fabian socialism it embraced on achieving independence in 1947, more and more people have been empowered by an ever-widening array of choices. Socialists in India have seen the Soviet Union collapse, the Berlin Wall fall, and India begin to liberalize. Their beliefs have traditionally been strengthened by what behavioral psychologists call the confirmation bias – accepting only the evidence that seems to support their worldview. Alas, such evidence has been vastly diminished in the last two decades. So they resort to reflexively lashing out at anything related to free markets.

India’s leftist “intellectuals,” and those who aspire to fill their shoes, view the world through a utopia-tinted lens, a utopia that is entirely their own construction. When they examine their own policies, they do so on the basis of the ideal world they are meant to result in, and not the mess they create in the real world. And when they criticize the choices people make in the real world, they do so on the basis of the choices they would have in this utopian socialist paradise.

These “intellectuals” do not condescend just to BPO workers, but to all those Indians whose aspirations are not aligned with theirs and who, typically, have more choices available to them because of free markets. To them, shopping malls are bad because they turn people into consumerist buying machines. They disparage the large number of television channels as being filled with Western junk, ludicrously proclaiming that the one state-owned channel India had two decades ago was better. They do not accept that increased choices are a sign of progress, and condemn the way other people choose to live their lives, insulting them by denigrating their choices.

But times are changing, and such self-righteousness is increasingly being exposed for the self-delusion that it is.

The kidnapping of India

A version of my piece below was first published onOctober 5, 2005, in the Asian Wall Street Journal (subscription link). It was also posted on India Uncut and the Indian Economy Blog

Imagine this scenario: someone kidnaps a child and, for decades, maims and exploits him. Then, in a sudden revelation, we learn that the kidnapper was once under the pay of a branch of the mafia that is now defunct. There is instant outrage, and everyone condemns the crime. “How could you have taken money from the mafia?” they ask.

This is, more or less, what happened this weekend when LK Advani, the leader of India’s opposition, demanded a “public enquiry” into “the biggest scandal of independent India.” He was referring to the recent revelations, in a newly released biography by a well-known former KGB operative, that much of the Indian government had been bought by the KGB in the 1970s.

“The Mitrokhin Archive II: The KGB and the World”, by former KGB archivist Vasili Mitrokhin, details an institutionalized corruption in India that the agency used to its advantage superbly. The book describes how the KGB paid bribes and retainers to members of India’s Left parties, as well as the ruling Congress party.

According to the book, politicians were by no means the only ones on the take, and the KGB had a number of newspapers and a press agency on its payroll in the early 1970s. But of course, it is the details about senior government officials that titillate. Many ministers in the government of Indira Gandhi, who ruled from 1966 to 1984, were under its pay, and suitcases full of banknotes would be sent to Mrs. Gandhi’s house to fund the Congress. The entire Indian establishment, it would seem, was up for sale.

The Left parties, predictably and amusingly, have denounced the book as a CIA conspiracy, while the Congress has maintained what Mr. Advani terms a “guilty silence.” Mr. Advani’s outrage, though, is misdirected. “The biggest scandal of independent India” is not the money that the Indian establishment under. Mrs. Gandhi may have taken from the KGB, but the inspiration it took from the Soviet way of doing things, and the pernicious ideas it borrowed, which condemned millions of Indians to a poverty that still persists, and vastly increased the powers of an already oppressive state.

Many of those policies are still in place – indeed, remained in place even when Mr. Advani’s party was in power – and India, like the kidnap victim of our earlier analogy, is still struggling to break free.

The Fabian Socialism that India embraced under Jawaharlal Nehru, India’s first prime minister and Mrs. Gandhi’s father, and the statist direction he took the country in could be put down to an ideological mistake that many of his generation made. But under his daughter the state became a conscious tool of oppression. Her government used ideology merely as rhetoric, and concentrated solely on accumulating power at the expense of the freedom of citizens.

Economic freedom was the first casualty. In 1969, Mrs. Gandhi nationalized all the big banks in the country. Gradually, this was followed by a series of draconian bills designed to suffocate private enterprise. The Foreign Exchange Regulation Act (1973) restricted foreign investment and imposed currency controls. The Industrial Disputes Act (amended by Mrs. Gandhi in 1976 and 1982) prevented companies with more than 100 workers from laying them off without government permission, thus distorting labor markets and providing a disincentive to industrial expansion.

The Urban Land Ceiling Act (1976) distorted land markets in urban areas, exacerbating the growth of slums. Mrs. Gandhi also reserved certain industries for small-scale companies, denying larger companies from benefiting from economies of scale, and pegging back labor-intensive manufacturing and preventing an export boom.

Mrs. Gandhi admired not just the economic policies of the Soviet Union, but clearly shared that empire’s disdain for democracy and political freedom. In 1975, after a judge found her guilty of election fraud in 1971 and ruled that she give up her seat in parliament, she declared a “state of emergency.” Articles 352 to 360 of the Indian constitution specify that when the country is faced with external or internal threats, the government can impose a state of emergency and assume what are, in effect, totalitarian powers.

The Emergency, as it is popularly known, lasted 19 months. Civil rights effectively ceased to exist, and people who opposed Mrs. Gandhi, including politicians and journalists, were summarily thrown into jail. It was a Stalinesque era. Mrs. Gandhi’s younger son, Sanjay, became notorious for his rampant behavior, bordering on the criminal and similar to that displayed years later by Saddam Hussein’s elder son, Uday. Among Mr. Gandhi’s pet schemes was a misguided family planning program under which thousands of young men were forcibly made to undergo vasectomies.

Mrs. Gandhi revoked the emergency in 1977, called for general elections, and was voted out of power. That was a tactical error, not a change of heart, and it came about partly because of self-deception. She truly believed that she enjoyed popular support, a perception partly based on the reports of intelligence agencies, who naturally told her what she wanted to hear. But the people of India have a short memory and little in terms of choice (and, some would argue, discretion). Mrs. Gandhi did come back to power in the next elections in 1979, using the ironic slogan, “Elect a Government that Works.”

It is tragic that Mrs. Gandhi is still evoked as a hero by members of her own party, and that her policies, which continue to cripple India, still find support. The liberalization of 1991, forced as it was by a balance-of-payments crisis, was partial and half-hearted. The License Raj that Mrs. Gandhi expanded with such autocratic zeal remains largely in place, as do most of the parliamentary Acts that shackled enterprise. Indeed, it is ironic that Sonia Gandhi, her daughter-in-law and heir to the Congress – not so much a party any more as a family heirloom – is commonly lauded as resembling Mrs. Gandhi. This is praise?

The strenuous denials of the KGB payouts and the furor over them repeat the same mistake that the Indian people have made for half a century now – of giving importance to intent over outcome. It makes no earthly difference now whether or not the KGB paid off the establishment in those terrible years. What matters is what the government of the time did, not why it did those things, and the molehill of intent is irrelevant besides the mountain of action. That mountain is in the public domain: the gradual stripping down, layer by layer, of personal and economic freedom. Most of that freedom has still not been restored, and the people of India just don’t seem to care. Even when it affects their own lives so intimately, economics is boring, a spy thriller is much more fun.

Good intentions, bad ideas

A version of my piece below was first published on September 15, 2005 in the Asian Wall Street Journal (subscription link). It was also posted on India Uncut and the Indian Economy Blog.

The road to hell is paved with good intentions—and nobody knows that better than India’s poor. There can be no better intention than removing poverty but, for more than half a century, a well-intentioned and bloated state has only perpetuated it with misguided policies and regulations. And New Delhi still hasn’t learned from these mistakes. The Indian government is soon to embark on perhaps the grandest waste of taxpayers’ money yet: the Rural Employment Guarantee Bill.

The REGB, recently passed in parliament with unanimous support across political parties, is supposed to provide 100 days of work in a year to every rural household across the country that wants it. This is expected to cost Rs. 40,000 crore (around US$ 9.1 billion), which amounts to 1.3% of GDP. And by some estimates, costs may reach four times that figure. The bill is in line with the rhetoric of the Congress-led coalition government, which came into power last year disdaining the liberalization policies of the preceding BJP government, and promising to introduce “reforms with a human face.”

The problem is that there is no evidence that the Indian Government is capable of properly implementing any social welfare plan. Former Prime Minister Rajiv Gandhi remarked in 1987 that only 15% of the money spent by the government actually reached its rightful recipient. The rest was wastage. Similar distribution schemes—such as the Public Distribution System and the 1976 Employment Guarantee Scheme in the state of Maharashtra—fell victim to inefficiency and corruption, and have all failed to achieve their stated objectives.

These failures have much to do with the the vast Indian bureaucracy, which is designed in such a way that inefficiency is inevitable, and corruption likely. Bimal Jalan, a former governor of India’s central bank, put it succinctly recently when he pointed out that “the most important problem in governance and administration of projects or schemes launched with great hopes is the involvement of a large number of agencies and ministries in decision-making and implementation. It is also common experience that these multiple agencies do not work in unison to resolve any administrative issue.”

Whatever money does make it through all the confused bureaucracy is prone to being siphoned away at the end of the line, where local distribution is meant to take place. The recently passed Right to Information Act, a welcome move that is supposed to increase transparency by forcing the government to make its paperwork available to anyone who wants to see it, can only be of limited help. Most of the country does not even know about it, or would not dare to use it against an oppressive local government.

The REGB will also have economic consequences. Labor markets could be distorted at local levels if the wages paid by the scheme are more than the local rate decided by the market. If the government runs short of funds and makes drafts on private savings held by banks, interest rates could go up. Then there’s the obvious fact that the money spent on this scheme could certainly be put to better use somewhere else. New Delhi could use it to build much-needed infrastructure like roads, ports and power installations, enabling greater participation in the economy and generating more sustainable employment.

The key to generating employment lies in less government intervention, not more. The government needs to reform India’s archaic labor laws, whose inflexibility hampers industrial growth as well as employment. In a variety of repressive ways, firms are not allowed to enter into free contracting, and cannot manage their workforces according to market conditions. In theory, labor laws are supposed to protect workers from being fired, but in practice such laws discourage industrial units from being set up, and hamper entrepreneurship and industrial expansion. The effect is that employment is far lower than it would have been in a free market.

India also needs to shut down its “License Raj,”—the oppressive web of regulations that acts as a massive disincentive to entrepreneurs and businessmen. It is no coincidence that India ranks 118th on the Heritage Foundation Economic Freedom Index, and 127th on the UNDP Human Development Index. Economic freedom and development go hand in hand, and India could have done as well in manufacturing as it has in services had its entrepreneurs been given the freedom to set up businesses without having to apply for myriad licenses, bribe numerous officials, and sometimes spend years in the process. Increased entrepreneurship and industrial growth would have been far more effective than the REGB in generating long-lasting employment.

India’s 58 years since independence have been ones of lost opportunity, with a waste of human capital and millions of lives lost to needless poverty. Successive Indian governments have made all the right noises about reducing poverty, and then followed all the wrong policies. Sadly, the REGB looks like more of the same.

When it pours

A shorter version of my piece below was published on August 5, 2005, in the Asian Wall Street Journal. It was also posted on India Uncut.

One moment you are connected to the world in a global hub of the worldwide village; the next, the lights go off, the phone networks cease to function, and the water rises outside, creeping up on cars and first-floor apartments like an insidious idea. What does it take to shut down South Asia’s financial capital, Bombay? A few hours of rain, that’s all.

On July 26, Bombay received 944 millimeters of rainfall, the highest ever-recorded in India, and more than the average for a season in the city. (London gets less in a year.) The city ceased to function. Power and telecommunications went dead in parts of the city, the airport shut down and trains stopped running. Traffic came to a halt, as if the vehicles on the street were stuck to it. The water rose as high as 15 feet in some suburbs, and the highways looked like rivers from where the poor wet crow flies. People across the city were rendered immobile and incommunicado, as a modern city was shut down by an ancient element: water.

Water is to Bombay what Kryptonite is to Superman. Normally this is a city where nothing stops. It swirls with movement, seemingly chaotic but always purposeful, and even in the late hours of the night, when the rest of Indian sleeps, Bombay buzzes with activity, connected to the rest of the world, bearing the fortunes of India. Unless it rains heavily.

Every year Bombay is badly hit on at least a couple of days during the monsoons, as the city shuts down because of too much rain. Weather forecasts rarely give enough notice, and a more accurate warning is the crying of street dogs. As rain lashes down and the water level rises, they keep moving along the streets in search of higher ground. When there is none to be found, and they cannot escape the water, they start crying. They do not do this in packs, mostly, and it is not as conspicuous as wolves wailing at the wind. So it is often lost amid the many other noises of a busy city.

Then, across the city, as if souls are leaving bodies at the scene of a mass suicide, drivers abandon their cars. The water is often knee-deep by now, and traffic has stopped moving. Trains stop plying, buses empty out, and commuters across the city begin wading through water to get home.

It is no picnic. The water is dark-brown and muddy, straight from the sewer. It is effectively Bombay’s drainage system come overground. Bits of garbage float on the water, as do plastic bags of all colors: red, green, yellow, pink. Even India’s debris is colorful. And the water swirls sometimes, enough to whip the sandals of your feet so that you are forced to walk barefoot. You could roll your pants up, but the water can reach your armpits, and there’s only so far that a trouser can go.

Many people remain where they are. In their schools or offices, where they might spend a hungry night, with restaurants either partly submerged or unable, for obvious reasons, to deliver. Expecting mothers who need to deliver are unable to reach nursing homes, or if they are already there, their husbands cannot make it. Some commuters stay in their cars, hungry and, as the water rises around them, thirsty. (This year some people died like this as their autolock systems prevented them from leaving their cars, and they suffocated in their underwater vehicles.) Waiting can be dangerous, and that is what drives so many to walk.

A walk home could mean 30 kilometers of trudging through the dirtiest obstacle course on the planet. Some of my friends once walked from the southern edge of the city to a northern suburb, a trek that took them more than eight hours. At one place, the water was chest high, and one of them needed to relieve himself. He did not bother to unzip. “What would have been the point of that?” he asked me later.

The conditions can be brutal, but the people are not. Bombay is a city known for its relentless pace, but if you slow down to take it in, you find that people can be very kind to you. Like the autorickshaw-driver who dropped a schoolgirl home after she spent 11 hours in his vehicle, and refused to take money for his efforts. Like the people everywhere who allow you to use their mobile phones to call home, or to take a sip of their water, even though it is now an incredibly precious commodity in this time of its excess. Like the men who pulled me out of a manhole that almost sucked me in when I was wading through thigh-deep water. Indeed, like all the people who stand around manholes in waist-deep water so that no one steps into them accidentally, and the families that cook food all day and then wade out to distribute it.

A combination of factors combined to make this year worse than most other years. To begin with, it rained much more: so much more that buildings across the street looked like ghostly images, and one could not be certain if they really were there. Secondly, the sea was at high tide. When that is so, it rushes into those parts of the drainage system that have an outlet into the sea, and the rainwater doesn’t seep away fast enough. And the water down below mixes with the water on top.

But partly to blame was Bombay itself. The garbage disposal systems of the city are inadequate. Construction is growing in the northern suburbs of the city faster than the infrastructure can keep up. Environmentalists claimed that the reclamation of parts of the Mithi river, near some of the worst-affected suburbs, caused it to overflow when the cloudburst took place. And, most importantly, there was clearly no disaster management plan in place for such a situation.

The result was that more than 150,000 people were trapped in the railway stations alone, as the metallic monsters that bear six million people every day lay inertly on the water like dead, floating earthworms. Slums and shanty townships were also badly affected, with some houses simply being washed away – addresses wiped out – and others being submerged. There was a landslide in parts of Mumbai, and many people died in a stampede caused by rumors of a tsunami.

Television channels showed pictures of the city from above, cityscapes turning into seascapes, with rescue workers on inflatable boats picking up lone swimmers. They ran scrolls at the bottom of the screen with messages like “Ramesh Shah, call home soon, parents worried,” as if Ramesh Shah was anywhere near a television set or a phone that worked.

The rain ceased, temporarily, after a day, but began again last weekend. Some suburbs remained flooded in the interim, and did not get power and water supply for a week. Where the water receded, the streets piled up with massive amounts of rotting garbage, onto which crows descended and stray dogs lingered. I came across the carcass of a buffalo lying in the middle of the road, which for some mysterious reason was wearing a helmet. As many as 1,500 dead cattle punctuated the streets of Bombay, and the city government refused to clear them up, saying that it was the owners’ responsibility.

It would all take time to clear up, but eventually the city would function again, and everyone would feel proud of living in such an important city. And the dogs, those that were left and were now dry, would stop crying. Until next year