Saturday, July 9, 2016

On Minimum Government, Maximum Governance

The recent expansion of the Narendra Modi council of ministers, taking it past the tally of the previous UPA government, is being seen as the latest blow the promises of Minimum Government, Maximum Governance - a slogan popularized by the Prime Minister himself, both pre & post elections as a symbol of this government's mantra and working style. The size of the council of ministers is a function of many factors, both administrative and political, and hence it is probably not the best measure of  Minimum Government, Maximum Governance. However, we do remember that the initial smaller size of the cabinet of ministers was touted as a sign of having a Minimum Government (again, probably wrongly), so the criticism now is perhaps a reply to that.

What does Minimum Government, Maximum Governance actually mean? What are some of the indicators that - what is being preached, is actually being practiced by the government ? Do people actually want it ? Is it actually the right thing to do at this point in time in India ?

On the two year anniversary of the NDA government, in an interview to The Wall Street Journal, Narendra Modi had this to say on the role of the state :
WSJ: What is the proper role for the state in the economy? 
Mr. Modi: The role of the State in the economy is best described in my maxim “Minimum Government, Maximum Governance.”  The state should be an enabler: a fair and transparent enabler creating an environment for sustainable growth and job creation, and giving a sense of belief to the people.
In a developing economy, state enterprises do have a role in some sectors.  They have to be managed professionally and efficiently. We have given them operational freedom and brought in talent from the private sector as well to facilitate this.  The state need not do business in certain sectors.  We have a new policy on strategic disinvestment.  We are in the process of identification of entities for strategic sale.

We can come up with many examples of  what maximum governance could mean. I suspect it is a euphemism for a government which delivers services to the citizenry in an effective manner. So the whole JAM (Jan Dhan + Aadhar + Mobile) architecture can be looked as a step in that.

Minimum government is a more difficult thing to pin down, but we can lay down some broad points in perhaps an increasing order of difficulty :

  1. Getting the government out of business or in other words privatization/ dis-investment;
  2. Procedural simplification for businesses and citizens in their dealings with governments etc, so in effect it could mean a range of things from Deregulation to Scrapping of old, defunct laws and so on;
  3. Reducing or limiting the size of the Central government and bureaucracy surrounding it;
  4. Reducing or limiting the scope of the Central government.

Point number 1 which is Privatization is probably the simplest means of demonstrating Minimum Government and the lack of privatization under this government has provided it's critics a convenient stick to beat it with. Why should the Government still own and run Air India - we ask. Of course, privatization means having to deal with bureaucratic tangles on one hand (the legacy of Maximum Governments of the past) as well as its political fall outs, unions and what have you on the other; and this government has appeared reluctant to spend its political capital on such things so far. On the question of the lack of privatization, Mr Modi had this to say in the same interview:
Actually, in any developing country in the world, both the public sector and the private sector have a very important role to play. You can’t suddenly get rid of the public sector, nor should you.  But if you look at the last two years of my government, and if you look at the entire post-independence phase of the country, you will find that in terms of money volumes the maximum disinvestment has taken place in the last two years.
So, as of now, we will continue to see some disinvestment, without big bang privatization and so on that count the record of this government is going to be a mixed one and possibly a disappointment for some of it's supporters.

Now let us look at Point 2. In terms of deregulation, simplification etc, one of the most discussed points is the Ranking for Ease of Doing Business. So far, we have seen small improvements in the ranking - up to 130th in the world in 2016 from 134th in 2015, but hardly something to write home about yet. But as you can see in the article, steps are indeed being taken, take the new bankruptcy code as an example. The government is setting itself ambitious goals, including getting into the Top 100 by next year.

We have seen some interesting progress in terms of scrapping of laws at both the central level as well as states under BJP. In this interview, Bibek Debroy of the Niti Aayog, mentioned that 1200 ! laws have been removed from the statute books at the central level. Also consider this article from the same author describing the ambitious project of cleaning up the statute books in the state of Rajasthan. It is an extremely instructive article which tells us how complicated and messed up our laws are. These lines here give a good idea of the nature of the activity.
First, are there old statutes and rules that can be repealed, similar to the recent Union government initiative? Second, can one rationalise and harmonise statutes/rules, and avoid the confusion that lack of standardisation causes? Third, can one place all statutes/rules in the public domain? Fourth, can one reduce excessive government intervention in statutes/rules?
As a possible template, such a massive reform exercise doesn’t take off unless it has the personal interest and the blessings of the chief minister. That message has to percolate through to departments. To state something not often appreciated: Rajasthan government doesn’t administer a statute/rule; a specific department within the Rajasthan government does, and every such department regards its statutes/rules as proprietary stuff, not to be trifled with. That’s where the CM’s intervention is vital. Equally importantly, there has to be a faceless bureaucrat, who will take the CM’s agenda and run with it, pestering and hounding departments, refusing to back off.
Posterity will not pardon me if I let that bureaucrat remain faceless. Had it not been for Rakesh Verma, the additional chief secretary, I am certain we wouldn’t have delivered. This isn’t about the Industrial Disputes Act. This isn’t about the corporate sector. It is about all the laws/statutes and all citizens. It is about making laws friendlier, including simpler language, where fresh drafting is involved. Rajasthan is the only state to have done this. Kerala repealed 697 statutes in 2005 and another 107 in 2009. That was huge, but not exhaustive. Rajasthan’s exercise is exhaustive.
Now, coming to Point 3 - with the recent expansion of the cabinet of ministers, there is no real case to be made here for this government. Neither have we seen any particular coverage of reducing the size of the bureaucracy. Instead, the focus seems to have been in making the bureaucrats perhaps more empowered and efficient. The only thing one can say is perhaps Fiscal Deficit targets are kept in check, for now, despite having a large state.

And finally coming to Point 4 - well this is the most difficult to pin down and grapple with. Our own history post independence of centralized planning and Socialism, instead of a Free market,capitalist system; influences the general thinking of the public and politicians in a certain way. In this article, Sanjeev Sanyal mentions Why India needs to no longer be an Ashokan republic, but a Chanakyan one. But in some sense the legacy of this Ashokan "nanny state" since independence, further accelerated by various well meaning progressive instincts of our elites, politicians and judiciary,  has resulted today in a nation in which we have regulations for everything : from free speech, opening schools, and from cinema to temples.

In this essay about free speech, PB Mehta rightly mentions:
The Indian Constitutional imagination was always marked by statism. The ideals of liberty in any constitution are shaped by the greatest fears of that society. Where the fear of tyranny dominates, there is greater emphasis on protection against coercion. For India’s founders, the bigger fear was not tyranny, but social oppression. The State needed to be empowered to protect society from itself. 
Not only is untangling of this complex web of laws going to be a herculean task for anyone who seriously attempts it, there is also a question of whether there is an actual appetite for it among the citizenry. One of the places that we see this in action, is the contentious case of school education. We know for example that the Right to Education Act imposes very many constraints on the running of non-minority schools - from policies of admitting students, to policies for promotion and indeed starting new schools. Very many schools are being shut down across the country due to non compliance. And yet, if you read news reports, all parents associations across the country seem to be doing is railing against exorbitant fees and getting government officials to intervene and then coerce schools into complying and thereby possibly shutting them down in the future. When it comes to a choice between having more choice of schools and liberty on the one hand and state regulations on the other, we Indians seem to prefer state intervention and regulations.

The same instincts and history of statism means that a secular state has Hindu temples under government control, rather than in the hands of communities at a local level, the only argument being that the state is in a better position to guard against possible caste/ gender based discrimination. The same instincts of statism means that we are seeing a clause being inserted in the Real Estate to prevent religious, sexual orientation, diet discrimination.

The one clear contrast to our preference for statism and fear of social oppression is the American tradition of Liberty. Liberty, that unique word that you hear all the time in the American political and social discourse is almost absent from our own discourse. Right from the times of James Madison, Americans have had Liberty as one of, if not their most,cherished ideals. It is perhaps the only large country where generally one party and about half the country is interested in limiting the size and more importantly the scope, of the federal government. And that is why many Republicans and Conservatives are truly concerned about the GOP's candidate of 2016, Donald Trump - who promises great management instead of a limited government.

And so pragmatically speaking, given our current income low income levels, given our history of socialism, given our tendencies in the society of fearing social oppression more than the tyranny of the state (despite humongous corruption), and dare I say, our lack of interest or it would seem - desire for Liberty, the best we can really hope for now, is a more effective and efficient government, which cuts out redundancies, middlemen and corruption where possible. (To be fair, we have seen some improvements in delivery of good services, across governments in the past decade - take the case of Income Tax return processing or Passport departments, for example.) We can also push for more federalism, reducing the scope of the central government and empowering state governments to do more, and this government has taken some steps in that direction. If we could additionally, curtail the state's instinct of rushing into solve problems that don't need state intervention probably, like trolling in social media for example, it would indeed be a major shift.

In India, we are unlikely to ever see many articles similar to this one - making among other things a moral case for Liberty and Limited Government. Thankfully though, we are beginning to see some interest in this direction of making a pragmatic case. Reuben Abraham and Vivek Dehejia lay down a pragmatic agenda for limited government, the first half of Modi’s mantra of “minimum government, maximum governance” in this article. A new conversation for a vision of a limited government and a limited state may actually be the most positive impact of this mantra being brought in by the Prime Minister. Actual results will probably take a much longer time.

PS: This article by Shri Debroy in Swaraja making the case for studying the classics for better appreciation of Reforms is well worth reading on this topic. As he mentions here, Reforms indeed mean a small government, as mentioned in this paragraph.

We continue to debate reforms—big bang, steady state, first generation, second generation. Often, we have our preconceived notions about what “reforms” are. To me, whichever aspect of reforms we debate, the discourse is essentially about three strands. First, the government cannot do everything. Second, the government doesn’t know everything. Third, the government means a decentralised government.

Saturday, July 2, 2016

On Brexit

So, BREXIT happened last week. In a surprising result to many, including me, Britain voted to leave the European Union 52-48. I had not been following the Brexit campaigns (Daniel Hannan speech videos notwithstanding)  nearly as much as the fun and games of Trump and Bernie. In fact, the departure of the RBI Governor Raghuram Rajan dubbed R3XIT, which got a lot of coverage, was sold as a massive blow to market sentiments and that combined with the possibility of Brexit had all financial market commentators on high alert and that's how it came back on to my radar. Since the surprise result, which caused tremendous financial mayhem, I have been following the political and media reactions and the fallout with some interest and dare I say, amusement - especially the part pertaining to the British political Game of Thrones like scenarios.

As one might expect, the rejection of the European Union by the English is being condemned by the liberal elite. It is being looked at as a racist, xenophobic reaction. Some others are calling it a rejection of elites by the masses. Many have called into question - the wisdom of having a referendum for such an issue (perhaps rightly), while others are vociferous in asking for a re-match so to speak.

Yuval Levin, writing in the National Review, had one of the best posts that I read. I totally agree with his line on foreign elections: As a general matter, I tend to think that honing sharp opinions about foreign elections is a bad habit to be in.

The points about the tensions between the Left's view that globalism is the future and nationalism is the past, and how it contradicts the present realities is very well made. The parallels of the feeling among the common people fighting against the elites in both Brexit and the rise of Trump are well described by Levin and his invocation of Edmund Burke is spot on:

I think the sheer vastness of our society, as well as the substance of the American idea and the demands of human flourishing, mean that a revival of the national spirit in America would need to be a kind of sum of subsidiarity—that it would follow from a revival of the local and communal. This is what Edmund Burke had in mind with his famous reference to the “little platoon,” which is often selectively quoted to suggest an elevation of the local in place of the national. Burke said “To be attached to the subdivision, to love the little platoon we belong to in society, is the first principle (the germ as it were) of public affections. It is the first link in the series by which we proceed towards a love to our country, and to mankind.” That insight seems to me to harbor an answer to the crisis that manifests itself in the simultaneous rise of radical individualism and radical cosmopolitanism.
Essentially, Levin is suggesting that it is through flourishing local communities and groups that society can combat the various challenges of let's say the negative aspects of globalisation, that certainly cannot be ignored now.

This piece is Dissent Magazine described the divide over Brexit as a London problem. These lines summarized the divide very well:
In shorthand, Britain’s EU problem is a London problem. London, a young, thriving, creative, cosmopolitan city, seems the model multicultural community, a great European capital. But it is also the home of all of Britain’s elites—the economic elites of “the City” (London’s Wall Street, international rather than European), a nearly hereditary professional caste of lawyers, journalists, publicists, and intellectuals, an increasingly hereditary caste of politicians, tight coteries of cultural movers-and-shakers richly sponsored by multinational corporations. It’s as if Hollywood, Wall Street, the Beltway, and the hipper neighborhoods of New York and San Francisco had all been mashed together. This has proved to be a toxic combination.
For the rest of the country has felt more and more excluded, not only from participation in the creativity and prosperity of London, but more crucially from power. 
This piece in The Spectator gave a vivid account of the divisions that this referendum exposed.

The referendum revealed a great divide in Britain. According to YouGov polling, the overwhelming majority of university graduates — 70 per cent — were for Remain. But among those with nothing above some GCSEs, a similarly big majority — 68 per cent — were for Leave. The highest social classes were for Remain (62 per cent). The lowest were for Leave (63 per cent).
There was also a city versus country divide. Parts of London were well over 70 per cent for Remain, whereas country areas — particularly on the coast — were for Leave.
Every election is divisive, but none has pitted rich against poor like this one. The social divide has been far more dramatic than the divide between the two main political parties. In general elections, the professional and managerial classes favour the Tories by a margin of four to three. The difference is nothing like as marked as the social divide in the referendum vote. As a generalisation, the split has been between the educated ‘haves’ on one side and the working class on the other. The Remainers found ways of making this point — casting themselves as cosmopolitan and ‘open’ against the crude and (presumably) closed-minded Leavers. 

David Frum, writing in the Atlantic, was of the opinion that immigration was the main reason behind Britain voting for leave. This paragraph is a very good summary:

Is it possible that leaders and elites had it all wrong? If they’re to save the open global economy, maybe they need to protect their populations better against globalization’s most unwelcome consequences—of which mass migration is the very least welcome of them all?
Matii Taibbi in the Rolling Stone had this: The Reaction to Brexit Is the Reason Brexit Happened.

Were I British, I'd probably have voted to Remain. But it's not hard to understand being pissed off at being subject to unaccountable bureaucrats in Brussels. Nor is it hard to imagine the post-Brexit backlash confirming every suspicion you might have about the people who run the EU.
Imagine having pundits and professors suggest you should have your voting rights curtailed because you voted Leave. Now imagine these same people are calling voters like you "children," and castigating you for being insufficiently appreciative of, say, the joys of submitting to a European Supreme Court that claims primacy over the Magna Carta and the Bill of Rights.
The overall message in every case is the same: Let us handle things.
But whatever, let's assume that the Brexit voters, like Trump voters, are wrong, ignorant, dangerous and unjustified.
Even stipulating to that, the reaction to both Brexit and Trump reveals a problem potentially more serious than either Brexit or the Trump campaign. It's become perilously fashionable all over the Western world to reach for non-democratic solutions whenever society drifts in a direction people don't like. 
Brendan O'Neil had a piece on similar lines in The Spectator, describing the dangerous recent trend of modern elites quick to not accept democratic verdicts that don't go according to their wishes.

And finally, Ed West in this prescient piece written just before the result tells us how societies are likely to be increasingly divided in the foreseeable future because people are beginning to identify themselves in two starkly different terms:

So whoever loses tomorrow will feel great bitterness. They will feel especially bitter because they’ve learned to see their nation not as a group of people joined together by ancestry or adoption but as an extension of their own ideals. I’ve seen lots of people tweet they want to remain because they want this country to be defined by certain values. Others saying that the other side are taking away their birth right by steering the country away from the way they want it to go.
Perhaps, but being a citizen of a country, rather than just a subject, means suppressing your own wants and concerns in favour of the common good, since your ideals, and your preferred direction, might be squarely at odds with those of your fellow citizens. And so the less a country is defined by things like history and the more by ideals and values, the more bitter the arguments will be over what those ideals are, and the less ready people will be to accept when they happen to lose.

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