Tuesday, July 31, 2012

An Interview with Dr. Amartya Sen

DR. AMARTYA SEN.  Excellent exchange of views and ideas. Few Exerpts.

Well you know, how much a Prime Minister can do in a democratic system is of course determined by the forces with which he has to reckon. About Manmohan Singh, what advice I would give... to restore his image, I don't think, having known Manmohan Singh for a very long time, he would be worried about restoring his image. I mean, he's a very fine economist, of course you would like that reputation to remain which has remained. If there's any question it is if he's a great political figure or not.  And I think he has certainly been, if you think about what he has achieved, is enormous amounts, doing many things, if you think about it. Not only the fastest period of...longest period of Indian growth has been under his prime ministership.

I think what we have to look at is not so much his image because I think that's not what he will be mainly concerned with but whether he is doing well for the country and for that yes, there are things to do. You have to mobilise the political system .Because you know, democracy is meant to be governed by discussion. Instead of that what we've ended up in India is government by pressure groups. And the pressure groups are very strong. When Manmohan tries to do something on employment or making food cheaper for very poor, people immediately jump at the idea and say you are fiscally irresponsible.

But you know, I think I have always been saying this is the Indian colonialism. If one American magazine calls him "underachiever" then all of India is calling him "underachiever". I think we should not attach that much importance to it.

But I believe that their reading of corruption or what causes corruption or how it can removed is wrong there. We have to look at how the economic system operates. I have a lot of sympathy for him. I am not lacking sympathy for getting absolutely maddeningly angry about the extent of corruption.

Like feeding kids is fiscally irresponsible! Giving subsidy to diesel fiscally irresponsible even though subsidy to diesel absorbs much more money than feeding kids. That argument that welfare is killing India is one of the extraordinary things. It's one of the wonders of Indian media that Indian media has already decided Indian growth has already slowed down because of food subsidies, because it hasn't even begun! But the fact that people could think that it would be a terrible thing to do and not worry about those things is because the middle classes which control the media: "It doesn't matter, those things could continue! My God, if you could kill welfarism we can have huge rate of growth!"

I don't like using an expression of that kind. But it is certainly middle class bias. Because their kids are not unfed. People sometimes ask, why is it that people cry about inflation, why is it so big a political issue? That is partly because those who are vocal are seeing their income rise along with price rise, they're doing fine. But they don't need to worry. There are housewives whose income hasn't changed, whose allocation of budget for bazaar haven't changed. But the prices of food have gone up. They have to cry but they haven't got the voice.

But I think if they put it in perspective: India is still the second fastest growing economy in the world... largest economy in the world. Its gap with China is much the same. China has taken the big dip too as India. After the dip, India is still about 6- 6.5 per cent if they're just one quarter, that is 5.3 but overall for the 6.5.. There have been previous quarters where they have been even lower than this number. But some countries like Brazil have gone from 7 or 8 per cent to 0.8 per cent.

I'm in favour of reforms, I want much more reforms of this kind. But I don't have a particular pre-assigned belief that FDI in every field is that right thing. Nor do I have a belief that's it's a wrong thing. We have to see the result. It will bring investment, that is good. It will cut out jobs for many. Small jobs will be cut out by the large corporations. That is a bad thing. So you have to balance these.  If you convert all these into a slogan (and I'm glad you raised the issue of slogans) then you miss out the thing. In each case, we have to judge. FDI cannot be intrinsically good or bad, we have to see what does it actually do. For that, we need an analysis in each case.

Wonderful Dr. Sen I am a big fan of yours.

(From CNN-IBN interview with Sagarika Ghosh)


Thursday, July 19, 2012

India the most reckless political experiment in World History

Exerpts of a book review by Ramchandra Guha

THE REPUBLIC OF INDIA is the most reckless political experiment in human history. Never before was a single nation constructed out of so many diverse and disparate parts. Partitioned at birth on the basis of religion, India now has almost as many Muslims as the Muslim homeland of Pakistan. It has more Christians than Australia, more Buddhists than Tibet, more Sikhs, Jains, and Parsis than any country in the world. The Hindus, nominally the religious “majority,” are divided into tens of thousands of endogamous castes and sects. Meanwhile, the extraordinary linguistic diversity of India is represented on the country’s currency notes, with the denomination—50 rupees, 10 rupees, and so on—written in seventeen languages, each with a distinct script.

This is an unnatural nation, as well as an unlikely democracy. Never before was a population so poor and so illiterate asked to vote freely to choose who would govern it. Unlike in the West, where the franchise was granted in stages, the Indian constitution immediately gave the vote to every adult regardless of caste, class, education, or gender. This was an act of faith, greeted with widespread disbelief: writing of the first general elections, held in 1952, a prominent Indian editor observed that they were the “biggest gamble in history.” It was a gamble that seems to have paid off—there have been fourteen general elections since, each the greatest democratic exercise in human history (with some four hundred million voting in the last iteration in 2009), as well as regular elections in states more populous than France or Germany.

In the end he wonders what went wrong in a country which always had great thinkers/leaders?

IN A BOOK PUBLISHED in 2007, the year marking the sixtieth anniversary of Indian independence, I argued that while a democracy had to be founded by visionaries, it could be run in mid-career by mediocrities. Such was the case with India, and with the United States, for the distance between Mahatma Gandhi and Sonia Gandhi was no more, and no less, than the distance between George Washington and George W. Bush. Five years later, I see that this might have been an excessively sanguine judgment. The people who rule India today are worse than mediocrities. Forget idealism or vision, they are not even competent, being motivated rather by vanity, greed, or nepotism (or all of the above).

“The state is impersonal; the Argentine can only conceive of personal relations,” wrote Borges. “Therefore, to him, robbing public funds is not a crime. I am noting a fact; I am not justifying or excusing it.” The causes of corruption in India are somewhat more sociological— not so much “personal” as “kin” and “community” and interest group. Public funds are diverted not to one’s friend or mistress, but to one’s nephew or caste-mate. But the effect is the same, namely, the undermining of institutions meant to serve society as a whole rather than a particular slice of it.

Apart from some exceptions. most instis are corrupt:

Some institutions have stood apart from the trend. The Election Commission of India runs polls efficiently and fairly; the comptroller-and-auditorgeneral rigorously scrutinizes public spending; the Finance Commission allocates funds to states in a non-partisan manner. Unlike in neighboring Pakistan, Bangladesh, Nepal, and China, the armed forces have stayed scrupulously away from politics. Many (but by no means all) judges of the Supreme Court are competent and honest.

On the whole, though, public institutions in India are defined more by corruption and incompetence than by transparency and accountability. The Gandhian period seems, in retrospect, an aberration. Inspired by the idealism and the spirit of self-sacrifice of the national movement, two or three generations of politicians, civil servants, and judges subordinated their personal ambitions (and kinship ties) to the impersonal goals of the institutions they had chosen to serve. As late as the 1960s, most cabinet ministers and all Supreme Court judges were, in a financial sense, incorruptible. But as the impulse animating the freedom struggle receded, the basic building blocks of the society reasserted themselves. Whether acting in their private or their public capacity, officials of the state would now privilege the interests of their family, caste, and community above those of the institution itself.

Final para says it all - Republic of India remains a work in progress

Sixty-four years after the British departed, the . The experiment has clearly not failed, nor has it emphatically succeeded. Home to the most elevating as well as the most depressing aspects of the human experience, it inspires—in this citizen at any rate—pride and embarrassment in equal measure.

Wednesday, July 18, 2012

Solution to Policy Paralysis

Equip bureaucrats to mitigate, rather than take, risks

There is a widespread perception that decision-making systems in the bureaucracy, at all levels, have become slow and inefficient. While public perception is linked to a multidimensional reality, it will be useful to look at these issues within a framework that focuses on the commonly held belief that even “good” decision-makers are no longer willing to take risks and that the passing of the buck and abdication of responsibility are reasons for the poor quality of decision-making. This framework, however, does not include cases where the decision-maker is fundamentally ill-motivated.

Any analysis of the risk involved in decision-making needs to begin by defining it. Here, the risk is that the decision may be “wrong”; and we broaden it by including a situation where there is a widespread perception to this effect. It goes without saying that if the risk is to be defined as, say, adversely affecting one’s career advancement, the results of the analysis will be quite different though, of course, equally illuminating. With respect to wrong decision-making, any analysis would reveal that some of the factors contributing to it are inadequate knowledge, particularly of the techno-economic-social-environmental interfaces; lack of clarity of the time frame, whether short term, medium term or long term; an understanding of the public purpose for which the private sector is a stakeholder; the possibility of crossfire in a corporate warfare situation; simultaneous media coverage hindering decision-making processes and, finally, the interface of Parliament and the courts or audit in relation to accountability incidentally impinging on decision-making in an unconnected matter. The recent cases related to the allocation of natural resources, mining, defence acquisition, among others, can be analysed from this perspective.

It is sometimes wrongly postulated that in such a situation it is necessary that key decision-makers are selected for their risk-taking ability, and that such risk-taking should be encouraged. In such circumstances, as in any “fog of war” situation, a high proportion of decisions could inevitably be perceived as wrong. What is really needed is to ensure that decision-makers know how to mitigate, that is reduce, risk and then manage the residual risk as best they can, using their manifest expertise. Broadly, risk-mitigation would involve risk-allocation to or risk-sharing with technical and regulatory agencies. Here risk-allocation and risk-sharing must be distinguished from buck-passing by ensuring that the responsibilities of the partners are based on the respective management or technical domain expertise; by developing and using systems and institutions to generate, manage and analyse techno-economic data; by creating more transparency in the system and disclosure from those in the higher echelons of decision-making; and, finally, by fostering an informed stakeholder community of experts, media, civil society organisations, industry or sector associations. A little reflection would show that the space we have created for ourselves for risk-mitigation is clearly insufficient and is a major reason why residual risk is still so high. Additionally, we may not have created enough capacity for residual risk-management.

The problem is compounded by the fact that the decision-maker is already immersed in a risk-averse environment, where even normal decision-making is often subject to prolonged, repeated or intense scrutiny, sometimes by people with inadequate knowledge of the relevant domain; where potential conflict-of-interest situations are embedded or non-level playing fields are created; or where analytical tools are used unpredictably (for instance, legal instead of economic, or social instead of environmental). In such a situation, when residual risk is high and managing risks require special skills that are in short supply, what is really required is to reduce risk-aversion at the systemic level rather than fire-fight at the situation level.

What can be done to reduce risk-aversion and ensure that residual risks can be well managed? Each sector will need to work its own way through the problem, but generic solutions include a few key factors.

One, encourage independent and semi-independent advisory bodies, techno-economic think-tanks, policy research institutions, sector regulatory bodies that can provide considered and attributable consultancies to departments, parliamentary committees, courts and civil society organisations.

Two, create internal institutional units in technical and regulatory organisations for better evidence-based policy analysis.

Three, have a stronger emphasis on creating competent HR. This has multiple implications in terms of the quality of recruitment, sufficiency of tenures, promotion of specialisation and facilitation of multidisciplinary expertise, among others. Today, those with technical expertise do not, in most cases, develop the ability to contribute at the highest levels of sectoral policy-making, preventing the use of credible techno-economic mechanisms to mitigate or manage risks, that too at a time when decision-making is increasingly technical and complex.

Four, have stronger engagement with parliamentary committees, including robust mechanisms to enable their secretariats to easily access technical and techno-economic analysis and advice.
Five, encourage serving and retired senior policy-makers and technocrats to appear or write in the media, explaining or analysing public policy.

Six, develop enterprise-level communication strategies as against programme-level strategies as at present, with professional inputs on an ongoing basis, so that the optimality of decisions can be seen in relation to outcomes and time horizons and as per the vision and strategy of the organisation or the department as a whole.

Finally, in high-risk situations, high rewards (recognition, advancement, etc) are required not to encourage people to unnecessarily take risks, but to attract people who have the skills, experience and expertise to be able to mitigate risks

By S. Vijay Kumar, from- Indian Express, The writer is secretary, ministry of rural development.