Poverty and Wealth

I wanted to write this post a long time back, but now is just as good a time when the calls for coronation of the prince have reached a crescendo. During the election campaign Rahul Gandhi had said, "We believe in the poor people of India and they are ashamed of the poor in India." It is part of electioneering, I agree, but in order to gain votes and power the Nehru-Gandhi family and by extension Congress has equated Poverty with virtue and wealth to a vice. Add to this the famous Nehru quip, "Profit is a dirty word" and we have generations condemned to poverty. Sarojini Naidu once famously observed of Mahatma, " It costs a lot to keep Gandhi poor," only half in jest. Now, Mr. Rahul Gandhi says, " we should not be ashamed of our poor."

Perhaps, but we should be ashamed of the fact that such a large number of our people are condemned to poverty. Instead we are ashamed of our rich."Any wealth gotten is at the expense of someone else, therefore the rich deserve to be stripped off their wealth" is a tenet of socialism that has chained our wings. Instead, our aim should be "wealth creation." The Poor don't deserve to remain "poor" for such a long time. We should have taught ourselves how to fish, rather than take fish from one fishermen, cut them into pieces and redistribute it to others while taking a few pieces for doing the work of distribution. This leaves everybody but the distributer poorer.

When even the Communist party in china embraces free market and shuns socialist policies to achieve tremendous growth, it speaks of the rot that has set in that we regress time and again to our socialist policies, Unless, we see past the halo of our erstwhile leaders whose ideas have long past their shelf life(if they ever had one), we cannot identify this rot and will be incapable of eliminating it.

Here Atanu describes the tale of two countries, comparing U.S - Argentina at the start of last century to India-China in this century. Yet, the illuminated want us to believe that this is "really" a reform oriented government which was impeded only by the left with only a few sane voices questioning this hypothesis. Whatever growth we have achieved so far is despite the government, not because of it. The sooner we realize it, the better. After all, "Socialism is a luxury to the wealthy, but a suicidal creed to the poor"

On coalition governments

Mr.Venkatesan Vembu argues over at DNA that Shaky coalitions make for good economies:

For starters, it's no coincidence that the time-cycle of India's move into a higher orbit of economic growth matches pretty closely the period when coalition arrangements have come to occupy centre-stage at the Central level.

Virtually all the economic opening up and reform programs that enabled this speedier growth were carried out when motley, multi-party coalitions were in power: this is just as true of Congress-led arrangements as of those led by the BJP or the extremely nebulous and politically malleable "United Front".

But Mr.Vembu doesn't explore the reason behind this counterintuitive (seemingly) occurence.

Leglislatives tend to be mammoth inert beasts. So any "reform" is naturally difficult- be it positive or negative. The advantage with unstable coalitions is that, a single party may not have the power to inflict serious damage to the economy. In Henry David Thoreau's words, "No government is better than a bad government."

Compared to the motley crew assembled at the center in the last four parliaments, the INC led government of 91-96 had a fairly stable constitution. Although Dr.Manmohan Singh or Mr.P.V.Narsimha Rao may claim the credit for liberalisation and thereby kick starting the deteriorating economy, it is a fact that situation forced their hand. The governments following '96 didn't have to shift radically from the set precedent.

Unfortunately, of late the parties seem to have discovered a new formula. Where as at one time they might have tried to stop the attempts by the other parties to introduce legislation, now by scratching each others' backs they are able to side step competition and force through policies whose (harmful) effects leave no corner of the country untouched. Thankfully, their teamwork skills are just as deficient as their other skills.

Recent growth of regional parties is also a welcome step in the direction of decentralization of power. If the "national" parties had empowered the individual by having in place a system of consistent feedback with a strong ground level cadre, they might not have suffered this fate.

In this context, I find our Prime minister's laments like "independents are spoilers" and "Regional parties are like tax barriers" laughable. Sir, they are not tax barriers or spoilers but competing suppliers and you just fear competition like any other supplier because it will benefit the consumer at your cost. By saying that, you are either being dishonest or have a suspect understanding of very basic economics.

It remains to be seen if we can grow in spite of the erroneous policies and a fractured polity incorporated into our state or if circumstances force our hand once again in the future.

PS: The arguments were made for organised dilution of power through the organisational hierarchy ultimately translating into empowerment of the individual. This is not the same as dilution of power by setting up an extra-constitutional towers of power.

Sunday Levity

SP wants to ban computers and English - the two factors that led our growth post '99. Of course, it backtracks spectacularly calling for "protection" of jobs against computers. Irony(and Tragedy) is that few people see the similarity between SP's ridiculous posturing, and an equally paleolithic "Protection of small-traders" by banning entry of FDI into retail business, supported by all political parties.

Advani walks out (or should I say runs away) from the Devil's advocate. Is it the same man Thapar praised as being one of the most difficult people to interview? Well, atleast Neera Yadav was denied the ticket, close on the heels of Tytler and Sajjan.

Arun Jaitley v Kapil Sibal

At last a debate. Arun Jaitley for BJP taking on Kapil Sibal from Congress. Four major issues debated were Governance, Stability, Security and Economy. Hosted by Rajdeep Sardesai of the CNN-IBN, it was mostly a fair debate.
This is how I saw the debate go, followed by my comments on the substance of the debate:

1) Governance : Sibal 1-0 Jaitley:
2) Security : Sibal 0-1 Jaitley
3) Stability : Sibal 0-1 Jaitley
4) Economy: Sibal 0-1 Jaitley

Sibal scores on the Governance front with the record of 8.5% growth rate supporting his claims. Unfortunately, I would disagree with any government that claims to be responsible for economic growth. Government will only hinder growth by placing artificial barriers like Trade duties, Taxes etc. When they do cut the taxes, they aren't making a "great economic decision" per se, but handing people back what was rightfully theirs. Just as the NDA was taking undue credit for the growth in economy in 2004, UPA is now taking undue credit for the economic growth in '04-'08. The best a government can do (especially in a poor country like ours) is to get out of the way and empower the poor. The poor don't need dole-outs as much as opportunities.

I do applaud the UPA for passing the RTI act, but the rest of claims made on governance are good old fashioned bull. Regarding the infrastructure etc, Sibal may claim that they have begun a plethora of programs, but most of these programs have been allocated funds but grossly abused and mismanaged the typical malaise of a corrupt bureacratic machinery backed by an immoral power structure.

On the issue of security, Sibal might as well have given up the round even before it began: The pathetic and unprecedented record on terror - not only of the Pakistani/Bangladeshi origin, but also of the Maoist origins, speaks for itself. Yet, he did put up a good fight bringing up the issue of Parliament attacks ( a miserable intelligence failure doubtless - But when our RAW cannot tail a civil journalist without being captured, it is a tall order expecting it to gather any substantial information). The counter by Jaitley about the response is well taken. Police reforms are long overdue yet none of the parties have mentioned anything concrete and our response after Mumbai attacks goes to show how badly equipped our police forces really are to handle security threats. Although audience was responsive to Sibal's statements like "We donot send out invitations to terrorists", I wasn't impressed. They were just straw men raised to skirt the issue.

On Economy, a thumbs up to Jaitley on two counts : BJP's positioning itself as a right of center party with greater emphasis on empowerment of people is the right way forward, Hence Tax and interest rate cuts. And secondly, because Sibal's statistics were pulled out of the air. As a commentator put it - "WTF? Is Kapil Sibal crazy? 50% retrenchment means 70 million lost jobs--considering size of American workforce. The actual unemployment rate is close to 8%."
Sibal may tout NREGA as UPA's poster boy, but NREGA was derided and strongly criticised by many organisations including the IMF. Throw in the Rs.60,000 crore loan waiver, and you have a perfect recipe of injecting paper money without any increase in production - in other words inflation. The danger of running a fiscal deficit of over 10% seems to be lost on Sibal and INC/UPA.

I disagree with both Jaitley and Sibbal on the role of Government in an economy, but that is only to be expected from a country where the constitution requires all parties to pray at the altar of socialism. Sibal also seems to be unaware of the Laffer curve effect, which tends to make up for the loss in tax revenue due to tax cuts by increased economic activity.

Stability would have been a tie(with both UPA and NDA losing allies), but for the recent RJD/SP split from UPA which presented Jaitley with a lot of ammunition. Sibal couldn't counter the arguments of the fighting between the Congress and its allies - NCP, RJD, SP being the primary culprits.

On the issue of Leadership, I have to reluctantly agree with BJP's anointing of Dr.Manmohan Singh as the weakest Prime Minister. I might have retained a neutral view in the elections if Pranab Mukherjee was the Prime Ministerial candidate. However, it is obvious to one and all that Sonia Gandhi pulled the strings from Janpath 10, against Pranab Mukherjee so that the PMO is not occupied by a strong leader who might jeopardise the chances of Rahul Gandhi leading the charge next time around. Although the argument that "educated men are needed" is often made, the education counts for nothing if this education doesn't make a contribution towards shaping the policy. Here Arun Shourie talks about incidents with Dr.Manmohan Singh in foreign policy. (Please watch the video, confirm the claims made and then make a judgment on his competence)

PS: Overall a nice debate and although my deep mistrust towards all politicians and Governments continues, I'd much rather not see the same bunch of thugs occupying power for consecutive terms - instincts of damage control.

Money

There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch!Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40% of our national income.

While Friedman may have been generous to suggest that government spends somebody's money on someone else, in Indian context I'd be happy if the government spends money for somebody else instead of on itself. I'm no economist, but a fiscal deficit amounts to borrowing money for current spending. In this light, the projected deficits of 12.3% GDP in the US and as much as 10% of GDP in India make for a very sorry reading. And the claim of 5.3% growth rate seems highly inflated as it is primarily driven by 17% growth in ‘community, social and personal services': in other words government sops ahead of the parliamentary elections.