Renu Pokharna

Archive for March, 2012|Monthly archive page

No teacher left Behind

In Education, School Vouchers on March 30, 2012 at 6:55 am

One of the great successes of global development over the past 60 years has been getting kids in school. In 1950, less than half the world’s primary-school-age children were enrolled. Today that figure is trending rapidly toward 100 percent. More schooling is associated with all sorts of good things — not least higher earnings as an adult, lower fertility among girls, and lower mortality among their kids. And the world’s governments are responsible for educating the considerable majority of those in school — perhaps one out of 10 students at the primary level is in private school. Kudos to the ministries, aid agencies, educators, and parents that made all of this possible.

The bad news is that many of the billion-plus kids in school today aren’t learning very much. In fact, in public schools in the developing world, many are learning close to nothing — many kids leave school unable to read or do simple sums. If we’re going to convert more kids in class into more knowledge in heads, we’re going to have to turn our focus from the students to the teachers — ensuring they have the incentives to perform.

In terms of access to schooling, countries across Africa, Asia, and Latin America are massively ahead of where developed countries were only a little more than a generation ago. According to data from Robert Barro of Harvard University and Jong-Wha Lee of Korea University, Ghana’s population (ages 15 and over) had been in school for an average of nearly eight years in 2010. Zambia’s averaged nearly seven years, Bangladesh six, and Haiti a little above five. Now consider that France, Germany, and Spain — as recently as 1970 — were all below five years.

At the same time, developing countries have done a lot less well in ensuring kids actually learn something while sitting in class. Despite close to universal enrollment in primary schools in Bangladesh, over 50 percent of 11-year-olds are unable to write basic letters or numerals. International tests suggest the average math ability of Brazilian 15-year-olds is equal to that of the bottom 2 percent of Danish students. In South Africa’s Western Cape province, only two out of 1,000 sixth graders in predominantly black schools passed a mathematics test at grade level in 2005.

The problem isn’t that kids are incapable of learning. It is true that some children do arrive at school tired from a long walk, malnourished, or weakened by illness — and that can have an impact on test scores. But put even the most disadvantaged children in the right environment, and they learn lots very fast. Take one widely cited example: Sugata Mitra put a computer in the wall of a slum in New Delhi, and within days kids were surfing the Internet and playing games on Disney’s website — all without any formal instruction. In other words, slum kids in India can learn enough computer literacy to waste time online as fast as their Western counterparts.

If it isn’t that the kids can’t learn, is the problem that the teachers can’t teach? It is true that a study in southern Africa found many primary school mathematics teachers who actually scored lower than their students on math tests. But, as a rule, most teachers still know enough to help their charges learn. In fact, according to Abhijit Banerjee and Esther Duflo at MIT’s Poverty Action Lab, the same teachers in an Indian experiment who proved atrocious at providing an education during the semester in public schools turned out to be very effective at teaching literacy in summer camps. Put the teachers in the right environment and kids learn stuff.

This points to another possibility: Teachers in government schools just have too little incentive to teach. In fact, the problem may start with the problem that they have too little incentive to bother turning up to class at all. On an average day, some 16 percent of teachers are absent in Bangladesh and 27 percent in Uganda, for example. In schools in India’s Andhra Pradesh state, the chance that a teacher was in class and actively engaged in teaching during the school day was only 28 percent.

Even if they do turn up and bother to teach, public school educators are often encouraged to deliver a curriculum that is pretty much destined to leave all but the most well-prepared students behind. And, of course, in places like Tanzania and Bangladesh, they face large classes and atrociously limited supplies. Perhaps worst of all, many parents of their students may be incapable of teaching the basics or helping with homework at home — because they did not attend school themselves. But there’s plentiful evidence that if you get the incentives right, teachers in public schools can provide a better quality of education.

Some of that evidence comes from nonstate schools. All over the developing world, there are private schools providing an education for as little as $1.50 a month, suggest Banerjee and Duflo. They often operate out of a teacher’s house and are frequently run by educated girls who don’t want to leave their home village and can find few other opportunities. For all their limited stock of books and supplies, and for all that the teachers are frequently unqualified secondary school graduates, such schools often do a better job than the public system. In Pakistan, kids in private school are two-and-a-half years ahead of their public school contemporaries in test scores as early as third grade. And it isn’t just that richer kids go to private schools — the impact of being in a private school on test scores was nearly 10 times the impact of being from a rich family compared with a poor one. Similarly, in India, according to nationwide surveys, 47 percent of government-school students in the fifth grade could not read a second-grade textbook — compared with only 32 percent of fifth-grade private -school students.

This suggests that efforts to ensure teachers turn up and teach could generate returns in the developing world. Additionally, curricula flexible enough to allow them to teach to the level of their students could make a big difference. Imagine a system that actually rewarded educators if their kids showed advances in learning basic skills over the year. Compare that with the present system in much of the world, which pays teachers more purely on the basis of seniority and encourages them to finish the national curriculum lessons — however inappropriate that is for the skill level their students start the year with.

An additional approach is to help kids learn outside the classroom — akin to the Indian hole-in-the-wall computer experiment, but on a much larger scale. One example is putting subtitles on TV programs in the same language as is being spoken on the screen. The approach has been tried in India — a country with a TV audience of about 600 million. In 2002, the producers of Rangoli — a very popular program that plays songs from Bollywood musicals — started subtitling the hit videos. Survey evidence suggests young TV viewers who watched Rangoli at home had half the illiteracy levels of TV viewers who did not watch the show after five years of schooling and watching.

The good news of the past 30 years is that we’ve made immense progress in ensuring that all kids — and girls especially — go to school. The better news for the next 30 years is that we have some understanding of the ways to ensure those kids actually learn something. All that is left is the willingness to confront the political challenges connected with rewarding teachers for learning outcomes — and ensuring they have the tools to help deliver inside and outside the classroom. That bit should be easy, right?


12 Mar 2012, Foreign Policy

Rein in the bureaucracy if you want us to deliver, perform: private sector stars in govt let PM know

In Bizarre Laws, Bureaucratic Delays, Civil Services Reforms, Red Tape on March 30, 2012 at 6:32 am

Former corporate heavyweights who are now part of the government ‘system’ have asked the Prime Minister to streamline the institutional framework in which they work, so that they have more autonomy and are better able to achieve desired outcomes.

Prime Minister Manmohan Singh has asked his principal secretary Pulok Chatterjee to study the suggestions and take necessary action.

The pressure on the government for greater room has come from Sam Pitroda, adviser to the PM on Public Information Infrastructure and Innovations, Nandan Nilekani, chairman of the Unique Identification Authority of India, S Ramadorai, adviser to the PM in the National Skill Development Council, Planning Commission member Arun Maira, and National Intelligence Grid CEO P Raghu Raman.

High profile lateral entrants into the government find it frustrating when the rulebook is thrown at them, often by the bureaucracy. Pitroda met the Prime Minister as the representative of this group recently, and presented a five-point strategy to design government organisations so that they deliver better.

“This system (what we have now) was designed by the British Raj to maintain status quo. It is not for faster development, something that we need today,” Pitroda told The Indian Express.

Pitroda’s note suggests that whenever an agency or entity is formed or carved out of the government to carry out a specific function, its chief executive must be given considerable operational freedom and autonomy. The PM must support these agencies by setting up a monitoring and facilitation cell in his office, the note says.

According to the note, the chief executive of the proposed organisation must have domain knowledge and a track record of creating and managing organisations that deliver. Existing organisations whose governance has been corroded by interference from entrenched government systems, should also be assisted by the cell in the PMO.

Finally, all government departments must be pushed to apply this concept of “agencification” — the process of agencies being carved out of government departments to carry out specific executive functions within a mandate and framework of policy provided by the relevant ministry — to improve delivery performance.

The letter and a three-page note that Pitroda handed the PM was provoked by a shared frustration lateral entrants into the government in important positions felt. In January, Raghu Raman shared his feelings with a group of eminent people including Ramadorai, Nilekani and Maira. This triggered the move to request Pitroda to broach the issue with the PM.

Earlier, under the ambit of the National Innovations Council, Pitroda and Maira had met secretaries to various government departments to understand their innovation efforts. The feedback suggested that the government was itself the bottleneck in efficient public service delivery.

“The government machinery does not perform, it comes in the way of innovation — this is what the secretaries told us,” Maira told The Indian Express.

Raghu Raman, who was earlier CEO of Mahindra Special Services Group, has been struggling to hire private sector professionals for the last 18 months at NATGRID.

Maira, a former India chief of the Boston Consulting Group, hit a wall recently in his attempts to reform the Quality Council of India, a government-private sector initiative. He resigned last week after 18 months as QCI chairman, after the Department of Industrial Policy and Promotion under the Ministry of Commerce and Industry did not allow him to recruit a secretary general as per the profile decided by the QCI board.

Raghu Raman said, “One has to realise that such roles have extremely contradictory requirements: bias towards results or outcomes — which is expected from the private sector — and an extraordinary focus on process — which is the government’s mindset.”


30 Mar 2012, Indian Express

Do not Disagree

In Politics on March 20, 2012 at 9:38 am

laming NGOs reveals the diminishing space for dissent in our democracy


Prime Minister Manmohan Singh’s stray remarks on NGOs have unwittingly revealed two bitter truths about Indian democracy. First, Indian democracy has diminishing place for dissent. Second, our diminishing capacity for dissent paradoxically stems from a government that is both technocratic and weak.

On the surface, Indian democracy has a cacophony of voices. But if you scratch the surface, dissent in India labours under an immense maze of threats and interdictions. Of course, NGOs should be transparent and accountable in terms of their sources of funding. And the reporting requirements for NGOs are immense. It is not the threat that NGOs pose that should worry us; it is the ease with which government can go after them. However, what was disturbing about the prime minister’s remark is its construction of what dissent is about. We all pay lip service to the idea that in a democracy there can be genuine differences. But the only terms in which we can understand deep disagreement is by constructing it as extraneously motivated. Nothing is more fatal for disagreement and dissent than the idea that all of it can be reduced to hidden sub-texts or external agendas. You may be a supporter of Bt brinjal or nuclear energy. But you ought to worry if we became a culture in which no one was spooked after Fukushima, or suspicious of data on agricultural technologies. The idea that anyone who disagrees with my views must be the carrier of someone else’s subversive agenda is, in some ways, deeply anti-democratic. It does away with the possibility of genuinely good faith disagreement. It denies equal respect to citizens because it absolves you from taking their ideas seriously. Once we have impugned the source, we don’t have to pay attention to the content of the claims. The necessity of democratic politics arises precisely because there is deep, good faith disagreement. Reducing disagreement to bad faith betrays a subconscious wish of doing away with democratic politics.

This has serious consequences for dissent. Our actions and rhetoric are sounding increasingly like China’s. The state, when challenged, will often resort to all power at its disposal to pressure organisations and institutions. Make no mistake about it: seriously taking on the state is still an act of bravery in India. The state has enough instruments to hold NGOs accountable. But it chooses not to do so in areas that are legitimate, like transparency. Instead, it uses its power selectively when its interests are crossed. But this government is determined to increase the asymmetry between state and civil society. The new FCRA regime, the proposed changes in the Direct Tax Code for not-for-profits, are symptoms of the desire to control. Second, the rhetoric, that the world outside, particularly of NGOs, is a conspiracy to hold India back, is second nature to paranoid regimes. The Chinese construct dissent as motivated. Indira Gandhi revelled in it. But in her case, in the backdrop of Allende, global geopolitics, the CIA and the KGB, there was a touch of plausibility. Now these arguments have so much a touch of farce to them. But they are pretexts to increase state control. Third, think of the pattern with this government. Like the Chinese, we have used the power of granting research visas to regulate research. Our visa regime for scholars is a shame for a liberal democracy. So great is our paranoia that in the small print of even PIO cards, you will see a prohibition on doing research. Like the Chinese, films showing India’s human rights record in an unflattering light are hard to release. Censorship, through formal and informal pressures, is legion. To be sure, politicians are often easy and unfair targets in Indian political discourse. But this surface politician-bashing disguises how hard it is to seriously interrogate the power structure in India.

Like the Chinese, we construct civil society as a special site of threats. What is appalling in this singling out of people who do research, or of NGOs, is this: private corporations are allowed to move money practically as they please, they can even advertise or lobby in ways beneficial to them, but NGOs have to be watched and blamed for obstructing the country’s progress. To be sure, NGOs are being given an increasing place in a range of service-delivery activities. This is more to compensate for state failure in those areas. But NGOs as sources of dissent are still suspect. Corporate activities and capital are constructed as a privileged site. The space of ideas and protest is represented as presumptively subversive, and anti-national. This is deeply revealing of what we think of dissent.

The hallmark of technocracy is that it cannot countenance the possibility of radical disagreement. Since there is a technically right answer, disagreement can only be explained by attributing motives. But while the mindset is technical, the capacity for political negotiation has also diminished.

The simple fact is that, for whatever reason, the government has not been able to bring Jayalalithaa on board on the nuclear plant issue. If it did, its capacity to negotiate with dissenting groups would be different. But this is a political failure, pure and simple. There is a systematic reason why the government’s arguments often lack credibility even among open-minded people. How do you trust a government’s claims on dams, when it keeps data on water flows a secret and publishing such data a crime? How do you trust a government on environmental assessment when there is general consensus that Environmental Impact Assessments (EIAs) are so flimsy? How do you trust claims on radiation and chemical poisoning when there is no reliable data on incidence of cancer? The problem is not foreign funding. The problem is that government’s secrecy, lack of engagement, has diminished its capacity to produce authoritative and trustworthy knowledge. This is the breach which opens up the need for different sites of knowledge production. This is a governance failure. But instead of attending to a political or governance failure, the technocratic mind will go for impugning dissent.

Jairam Ramesh did the right thing. He did something rare in this government: he owned up to his decision and his responsibility plain and simple. But the prime minister unwittingly showed what a banana republic India can be. If a few crores here and there, given to NGOs which have no instruments of power other than their ability to mobilise, can bring this country to a standstill, then we are indeed in deep trouble. Banana republics are more paranoid about dissent than self-confident democracies.


The writer is president, Centre for Policy Research, Delhi


29 Feb 2012, Indian Express

Errors of Commission

In Bureaucratic Delays, Centre-State Relations, Civil Services Reforms, Macroeconomic Policy, Poverty Eradication on March 20, 2012 at 9:32 am

The Planning Commission is not an institution. It is a syndrome. It, often unconsciously, operates on assumptions that no longer have much plausibility. It has lost much of its credibility as an interlocutor in India’s debates. During the recent controversy over the poverty line, the commission was often accused of being “out of touch”. Much of the discussion focused on the poverty line, and the uses to which it should or should not be put. But it is also clear that the Planning Commission has ended up in a cul-de-sac because its institutional mission is incompatible with the governance requirements of the 21st century.

The Planning Commission has gifted individuals. There is no reason to doubt their commitment to India’s growth prospects and the well-being of the poor. But we need to ask: why has it lost authority? Part of the answer may require excavating a whole range of illusions it has fallen prey to. The Planning Commission has long been a victim of its own name. It has this illusion that it can neatly order India’s economy. It does so, but often as a kind of conjuring trick, where real credible objectives disappear under a set of entrenched assumptions.

First, the commission exhibits great confusion over ends and means. The Planning Commission’s goal should have been to end poverty. It needed to work backwards from that end to ask the question: what instruments are necessary? Instead it picked on a bizarre intellectual construction, the poverty caps, and defended those with the zeal of a politburo. So you got a strategy where a commission told you how many poor you could have, independently of the means of identifying them. Instead of focusing on the objective, it made holding a line its raison d’etre. The illusion of targeting became more important than the achievement of objectives.

The Planning Commission arrogated to itself the role of a quasi-ombudsman, whose job became “just say no”. It is difficult to find any major innovative social sector scheme — whether it is food, health, employment or education — whose intellectual origins were in the Planning Commission. Instead of taking the lead on how socially desirable objectives could be met, its entire approach was to act as a kind of fiscal police. As a result, it completely ceded the initiative in the social sector space to other actors and now does not have a leg to stand on.

The commission does not plan. It creates the illusion of planning. Planning ought to be future-oriented. The Planning Commission ought to be a space to think at least a decade or so ahead. But in almost every field the commission has touched, it ends up bringing a strangely pinched-up imagination to planning. Ever wonder why our infrastructure always looks like it was based on yesterday’s realities, rather than future needs? Somewhere, in the explanation, the Planning Commission’s penny-wise, pound-foolish conception of its role will figure prominently. But the other issue with planning is this: we often confuse plans with a statement of objectives. A plan not only requires a destination, but all the series of steps that will get you there. These steps have to be embedded in a range of ground realities from finance to administrative capability. The commission’s abilities to internalise these ground realities in the steps it proposes have become even shakier.

The commission’s penchant for standardisation extends to its own proposals. Take, for example, its current obsession with public-private partnerships. These are worthy instruments. But there are huge questions about sectors in which these should be applied, and the terms that define a good PPP. But the Planning Commission now has an unenviable track record of indiscriminately advocating them in areas where there is less compelling justification for them, and on insisting on standard models for these. Again, rather than work backwards from an objective to an instrument, the commission seizes on an instrument as a fad.

The commission, as the late economist Amaresh Bagchi used to remind us, is a big detriment to the development of states. It narrows the space of state governments to set priorities on expenditure. It is pre-empting more resources. It has an in-built bias towards standardisation and homogenisation. India is now a diverse and fast-moving economic space. Planning that does not have flexibility or responsiveness to local conditions is designed to fail. But it is bizarre to think that we can have supple planning without giving more autonomy to states, cities and local governments. Yet, the Planning Commission, in the end, peddles the illusion that without its omniscient choices and conditionalities, anarchy would ensue in the states. Nothing is farther from the truth.

The commission mistakenly believes that inclusive consultation can be a substitute for inclusive governance. It is has to be said, the commission’s consultative reach has become truly impressive. But institutionally this consultation produces odd outcomes. For, on the one hand, it allows the commission to check every box. Most approach papers have all the bases covered. You can never accuse the commission of not discharging its responsibilities. It can point to the right phrase as evidence. But on the other hand, this inclusive approach makes the central goal of planning obscure. Planning is not simply about stating all the good things you want. It is about explaining the hard choices that need to be made. These are often implicit in the financial allocations the commission makes. But these financial allocations often bear little relationship to the overall strategic direction.

Admittedly, the commission has a difficult task. It is now located amidst a thicket of actors. The prime minister has very little authority to throw his strategic weight behind the commission. The task of aggregating diverse views into a plan is not easy. To the commission’s credit, it is engaging in a lot of self-examination and trying to be more experimental. Plans are required. But the commission is still not reconciled to the fact that the very scale at which it plans militates against innovation. And by not giving ministries, state government, local governments enough space or ownership, it dooms proposals to failure.

The commission has taken a dazzling array of talent and sucked them into this illusory world of its own making. Thought leaders who should have been at the cutting edge of thinking about growth, or a new welfare architecture, or new data, have now become the object of easy scorn. They may not be personally out of touch. But the institution they serve is ill-fitted for the times we live in.


The writer is president, Centre for Policy Research, Delhi


6 Oct 2011, Indian Express

What Isn’t for Sale?

In Business, Trickle Down, Uncategorized on March 20, 2012 at 7:23 am

There are some things money can’t buy—but these days, not many. Almost everything is up for sale. For example:

A prison-cell upgrade: $90 a night. In Santa Ana, California, and some other cities, nonviolent offenders can pay for a clean, quiet jail cell, without any non-paying prisoners to disturb them.

Access to the carpool lane while driving solo: $8. Minneapolis, San Diego, Houston, Seattle, and other cities have sought to ease traffic congestion by letting solo drivers pay to drive in carpool lanes, at rates that vary according to traffic.

The services of an Indian surrogate mother: $8,000. Western couples seeking surrogates increasingly outsource the job to India, and the price is less than one-third the going rate in the United States.

The right to shoot an endangered black rhino: $250,000. South Africa has begun letting some ranchers sell hunters the right to kill a limited number of rhinos, to give the ranchers an incentive to raise and protect the endangered species.

Your doctor’s cellphone number: $1,500 and up per year. A growing number of “concierge” doctors offer cellphone access and same-day appointments for patients willing to pay annual fees ranging from $1,500 to $25,000.

The right to emit a metric ton of carbon dioxide into the atmosphere: $10.50. The European Union runs a carbon-dioxide-emissions market that enables companies to buy and sell the right to pollute.

The right to immigrate to the United States: $500,000. Foreigners who invest $500,000 and create at least 10 full-time jobs in an area of high unemployment are eligible for a green card that entitles them to permanent residency.

Not everyone can afford to buy these things. But today there are lots of new ways to make money. If you need to earn some extra cash, here are some novel possibilities:

Sell space on your forehead to display commercial advertising: $10,000. A single mother in Utah who needed money for her son’s education was paid $10,000 by an online casino to install a permanent tattoo of the casino’s Web address on her forehead. Temporary tattoo ads earn less.

Serve as a human guinea pig in a drug-safety trial for a pharmaceutical company: $7,500. The pay can be higher or lower, depending on the invasiveness of the procedure used to test the drug’s effect and the discomfort involved.

Fight in Somalia or Afghanistan for a private military contractor: up to $1,000 a day. The pay varies according to qualifications, experience, and nationality.

Stand in line overnight on Capitol Hill to hold a place for a lobbyist who wants to attend a congressional hearing: $15–$20 an hour. Lobbyists pay line-standing companies, who hire homeless people and others to queue up.

If you are a second-grader in an underachieving Dallas school, read a book: $2. To encourage reading, schools pay kids for each book they read.

We live in a time when almost everything can be bought and sold. Over the past three decades, markets—and market values—have come to govern our lives as never before. We did not arrive at this condition through any deliberate choice. It is almost as if it came upon us.

As the Cold War ended, markets and market thinking enjoyed unrivaled prestige, and understandably so. No other mechanism for organizing the production and distribution of goods had proved as successful at generating affluence and prosperity. And yet even as growing numbers of countries around the world embraced market mechanisms in the operation of their economies, something else was happening. Market values were coming to play a greater and greater role in social life. Economics was becoming an imperial domain. Today, the logic of buying and selling no longer applies to material goods alone. It increasingly governs the whole of life.

The years leading up to the financial crisis of 2008 were a heady time of market faith and deregulation—an era of market triumphalism. The era began in the early 1980s, when Ronald Reagan and Margaret Thatcher proclaimed their conviction that markets, not government, held the key to prosperity and freedom. And it continued into the 1990s with the market-friendly liberalism of Bill Clinton and Tony Blair, who moderated but consolidated the faith that markets are the primary means for achieving the public good.

Today, that faith is in question. The financial crisis did more than cast doubt on the ability of markets to allocate risk efficiently. It also prompted a widespread sense that markets have become detached from morals, and that we need to somehow reconnect the two. But it’s not obvious what this would mean, or how we should go about it.

Some say the moral failing at the heart of market triumphalism was greed, which led to irresponsible risk-taking. The solution, according to this view, is to rein in greed, insist on greater integrity and responsibility among bankers and Wall Street executives, and enact sensible regulations to prevent a similar crisis from happening again.

This is, at best, a partial diagnosis. While it is certainly true that greed played a role in the financial crisis, something bigger was and is at stake. The most fateful change that unfolded during the past three decades was not an increase in greed. It was the reach of markets, and of market values, into spheres of life traditionally governed by nonmarket norms. To contend with this condition, we need to do more than inveigh against greed; we need to have a public debate about where markets belong—and where they don’t.

Consider, for example, the proliferation of for-profit schools, hospitals, and prisons, and the outsourcing of war to private military contractors. (In Iraq and Afghanistan, private contractors have actually outnumbered U.S. military troops.) Consider the eclipse of public police forces by private security firms—especially in the U.S. and the U.K., where the number of private guards is almost twice the number of public police officers.

Or consider the pharmaceutical companies’ aggressive marketing of prescription drugs directly to consumers, a practice now prevalent in the U.S. but prohibited in most other countries. (If you’ve ever seen the television commercials on the evening news, you could be forgiven for thinking that the greatest health crisis in the world is not malaria or river blindness or sleeping sickness but an epidemic of erectile dysfunction.)

Consider too the reach of commercial advertising into public schools, from buses to corridors to cafeterias; the sale of “naming rights” to parks and civic spaces; the blurred boundaries, within journalism, between news and advertising, likely to blur further as newspapers and magazines struggle to survive; the marketing of “designer” eggs and sperm for assisted reproduction; the buying and selling, by companies and countries, of the right to pollute; a system of campaign finance in the U.S. that comes close to permitting the buying and selling of elections.

These uses of markets to allocate health, education, public safety, national security, criminal justice, environmental protection, recreation, procreation, and other social goods were for the most part unheard-of 30 years ago. Today, we take them largely for granted.

Why worry that we are moving toward a society in which everything is up for sale?

For two reasons. One is about inequality, the other about corruption. First, consider inequality. In a society where everything is for sale, life is harder for those of modest means. The more money can buy, the more affluence—or the lack of it—matters. If the only advantage of affluence were the ability to afford yachts, sports cars, and fancy vacations, inequalities of income and wealth would matter less than they do today. But as money comes to buy more and more, the distribution of income and wealth looms larger.

The second reason we should hesitate to put everything up for sale is more difficult to describe. It is not about inequality and fairness but about the corrosive tendency of markets. Putting a price on the good things in life can corrupt them. That’s because markets don’t only allocate goods; they express and promote certain attitudes toward the goods being exchanged. Paying kids to read books might get them to read more, but might also teach them to regard reading as a chore rather than a source of intrinsic satisfaction. Hiring foreign mercenaries to fight our wars might spare the lives of our citizens, but might also corrupt the meaning of citizenship.

Economists often assume that markets are inert, that they do not affect the goods being exchanged. But this is untrue. Markets leave their mark. Sometimes, market values crowd out nonmarket values worth caring about.

When we decide that certain goods may be bought and sold, we decide, at least implicitly, that it is appropriate to treat them as commodities, as instruments of profit and use. But not all goods are properly valued in this way. The most obvious example is human beings. Slavery was appalling because it treated human beings as a commodity, to be bought and sold at auction. Such treatment fails to value human beings as persons, worthy of dignity and respect; it sees them as instruments of gain and objects of use.

Something similar can be said of other cherished goods and practices. We don’t allow children to be bought and sold, no matter how difficult the process of adoption can be or how willing impatient prospective parents might be. Even if the prospective buyers would treat the child responsibly, we worry that a market in children would express and promote the wrong way of valuing them. Children are properly regarded not as consumer goods but as beings worthy of love and care. Or consider the rights and obligations of citizenship. If you are called to jury duty, you can’t hire a substitute to take your place. Nor do we allow citizens to sell their votes, even though others might be eager to buy them. Why not? Because we believe that civic duties are not private property but public responsibilities. To outsource them is to demean them, to value them in the wrong way.

These examples illustrate a broader point: some of the good things in life are degraded if turned into commodities. So to decide where the market belongs, and where it should be kept at a distance, we have to decide how to value the goods in question—health, education, family life, nature, art, civic duties, and so on. These are moral and political questions, not merely economic ones. To resolve them, we have to debate, case by case, the moral meaning of these goods, and the proper way of valuing them.

This is a debate we didn’t have during the era of market triumphalism. As a result, without quite realizing it—without ever deciding to do so—we drifted from having a market economy to being a market society.

The difference is this: A market economy is a tool—a valuable and effective tool—for organizing productive activity. A market society is a way of life in which market values seep into every aspect of human endeavor. It’s a place where social relations are made over in the image of the market.

The great missing debate in contemporary politics is about the role and reach of markets. Do we want a market economy, or a market society? What role should markets play in public life and personal relations? How can we decide which goods should be bought and sold, and which should be governed by nonmarket values? Where should money’s writ not run?

Even if you agree that we need to grapple with big questions about the morality of markets, you might doubt that our public discourse is up to the task. It’s a legitimate worry. At a time when political argument consists mainly of shouting matches on cable television, partisan vitriol on talk radio, and ideological food fights on the floor of Congress, it’s hard to imagine a reasoned public debate about such controversial moral questions as the right way to value procreation, children, education, health, the environment, citizenship, and other goods. I believe such a debate is possible, but only if we are willing to broaden the terms of our public discourse and grapple more explicitly with competing notions of the good life.

In hopes of avoiding sectarian strife, we often insist that citizens leave their moral and spiritual convictions behind when they enter the public square. But the reluctance to admit arguments about the good life into politics has had an unanticipated consequence. It has helped prepare the way for market triumphalism, and for the continuing hold of market reasoning.

In its own way, market reasoning also empties public life of moral argument. Part of the appeal of markets is that they don’t pass judgment on the preferences they satisfy. They don’t ask whether some ways of valuing goods are higher, or worthier, than others. If someone is willing to pay for sex, or a kidney, and a consenting adult is willing to sell, the only question the economist asks is “How much?” Markets don’t wag fingers. They don’t discriminate between worthy preferences and unworthy ones. Each party to a deal decides for him- or herself what value to place on the things being exchanged.

This nonjudgmental stance toward values lies at the heart of market reasoning, and explains much of its appeal. But our reluctance to engage in moral and spiritual argument, together with our embrace of markets, has exacted a heavy price: it has drained public discourse of moral and civic energy, and contributed to the technocratic, managerial politics afflicting many societies today.

A debate about the moral limits of markets would enable us to decide, as a society, where markets serve the public good and where they do not belong. Thinking through the appropriate place of markets requires that we reason together, in public, about the right way to value the social goods we prize. It would be folly to expect that a more morally robust public discourse, even at its best, would lead to agreement on every contested question. But it would make for a healthier public life. And it would make us more aware of the price we pay for living in a society where everything is up for sale.


April 2012, The Atlantic

Free-Trade Blinders

In Business, Poverty Eradication on March 20, 2012 at 6:58 am

CAMBRIDGE – I was recently invited by two Harvard colleagues to make a guest appearance in their course on globalization. “I have to tell you,” one of them warned me beforehand, “this is a pretty pro-globalization crowd.” In the very first meeting, he had asked the students how many of them preferred free trade to import restrictions; the response was more than 90%. And this was before the students had been instructed in the wonders of comparative advantage!

We know that when the same question is asked in real surveys with representative samples – not just Harvard students – the outcome is quite different. In the United States, respondents favor trade restrictions by a two-to-one margin. But the Harvard students’ response was not entirely surprising. Highly skilled and better-educated respondents tend to be considerably more pro-free trade than blue-collar workers are. Perhaps the Harvard students were simply voting with their own (future) wallets in mind.

Or maybe they did not understand how trade really works. After all, when I met with them, I posed the same question in a different guise, emphasizing the likely distributional effects of trade. This time, the free-trade consensus evaporated – even more rapidly than I had anticipated.

I began the class by asking students whether they would approve of my carrying out a particular magic experiment. I picked two volunteers, Nicholas and John, and told them that I was capable of making $200 disappear from Nicholas’s bank account – poof! – while adding $300 to John’s.  This feat of social engineering would leave the class as a whole better off by $100. Would they allow me to carry out this magic trick?

Those who voted affirmatively were only a tiny minority. Many were uncertain. Even more opposed the change.

Clearly the students were uncomfortable about condoning a significant redistribution of income, even if the economic pie grew as a result. How is it possible, I asked, that almost all of them had instinctively favored free trade, which entails a similar – in fact, most likely greater – redistribution from losers to winners? They appeared taken aback.

Let’s assume, I said next, that Nicholas and John own two small firms that compete with each other. Suppose that John got richer by $300 because he worked harder, saved and invested more, and created better products, driving Nicholas out of business and causing him a loss of $200. How many of the students now approved of the change? This time a vast majority did – in fact, everyone except Nicholas approved!

I posed other hypotheticals, now directly related to international trade. Suppose John had driven Nicholas out of business by importing higher-quality inputs from Germany? By outsourcing to China, where labor rights are not well protected? By hiring child workers in Indonesia? Support for the proposed change dropped with each one of these alternatives.

But what about technological innovation, which, like trade, often leaves some people worse off. Here, few students would condone blocking technological progress. Banning the light bulb because candle makers would lose their jobs strikes almost everyone as a silly idea.

So the students were not necessarily against redistribution. They were against certain kinds of redistribution. Like most of us, they care about procedural fairness.

To pass judgment on redistributive outcomes, we need to know about the circumstances that cause them. We do not begrudge Bill Gates or Warren Buffett their billions, even if some of their rivals have suffered along the way, presumably because they and their competitors operate according to the same ground rules and face pretty much the same opportunities and obstacles.

We would think differently if Gates and Buffett had enriched themselves not through perspiration and inspiration, but by cheating, breaking labor laws, ravaging the environment, or taking advantage of government subsidies abroad. If we do not condone redistribution that violates widely shared moral codes at home, why should we accept it just because it involves transactions across political borders?

Similarly, when we expect redistributive effects to even out in the long run, so that everyone eventually comes out ahead, we are more likely to overlook reshufflings of income. That is a key reason why we believe that technological progress should run its course, despite its short-run destructive effects on some. When, on the other hand, the forces of trade repeatedly hit the same people – less educated, blue-collar workers – we may feel less sanguine about globalization.

Too many economists are tone-deaf to such distinctions. They are prone to attribute concerns about globalization to crass protectionist motives or ignorance, even when there are genuine ethical issues at stake. By ignoring the fact that international trade sometimes – certainly not always – involves redistributive outcomes that we would consider problematic at home, they fail to engage the public debate properly. They also miss the opportunity to mount a more robust defense of trade when ethical concerns are less warranted.

While globalization occasionally raises difficult questions about the legitimacy of its redistributive effects, we should not respond automatically by restricting trade. There are many difficult trade-offs to consider, including the consequences for others around the world who may be made significantly poorer than those hurt at home.

But democracies owe themselves a proper debate, so that they make such choices consciously and deliberately. Fetishizing globalization simply because it expands the economic pie is the surest way to delegitimize it in the long run.

20 Mar 2012, Project Syndicate

Mandate for a dream

In Corruption, Dalits, Politics, Poverty Eradication on March 9, 2012 at 6:10 am


India is stirring in ways that confound political analysis. Uttar Pradesh was, by all measures, a remarkable election: intense, youthful but at the same time peaceful, civil and substantive. To the superficial eye, these elections seem like old wine in new bottles: intense local bargaining, equations of caste and community, candidates tinged with corruption or criminality. However, underneath, there is almost a social revolution in the making. Voters are showing a remarkable capacity for making fine distinctions. The strategy is, first and foremost, to search for the party most likely to form a stable government. These elections confirm a growing trend that knee-jerk anti-incumbency is a thing of the past. Performance can be rewarded as much as punished.

In UP, voters were called on to make very sophisticated strategic judgements. But strip away the too-clever-by-half analysis. And they are choosing empowerment over patronage, the future over the past, performance over rhetoric, sincerity over cynicism, rootedness over disembodied charm, measured realism over flights of fantasy. They are carefully assessing alternatives through the prism of local circumstances. Identities still matter, but voters are no longer prisoners of those identities. Despite the occasional clumsiness of the Congress, the election in UP was without a trace of community polarisation: no one felt on the edge or under siege, all could exercise options without being unduly burdened by the past. In a democracy, where you are going should be more important than where you are coming from. These elections have redeemed that promise.

The UP election was a major test for Rahul Gandhi and the Congress. It could be argued that the UP electorate will vote differently in national and state elections. Even with this caveat, Rahul Gandhi should (and has admitted) responsibility for the lack of momentum in the Congress. The party’s four cardinal mistakes in this election were hubris, communalism, disingenuousness and whining. And national undercurrents do reverberate in local politics. There was a sentiment that voting for the Congress would only reward its presumptuousness and self-induced paralysis at the Centre. Despite the dissipation of the Anna Hazare movement, the odour of corruption dented the Congress’s general credibility. The party clumsily injected a 1970s-style communal discourse, displaying its own cynicism. Rahul Gandhi’s perpetual attempt to run as an outsider, as if the Congress is not responsible for the tales of woe he recounts, is patently disingenuous. Every single issue he took up, from Bhatta-Parsaul to Bundelkhand, had no follow-up.

There is little aspirational about the Congress politics: it is still tethered to a discourse of noblesse oblige that is out of touch with the dynamism of a society. And personal sincerity has done little to transform the party’s political structure. There are limits to leadership by avoidance. And there are limits to how much he can substitute for local candidates. Rahul, like Rajiv Gandhi, risks being done in by sycophants masquerading as strategists, communalists masquerading as minority protectors, and party officials who do not think that governance matters.

Punjab was supposed to be a crucible for the Youth Congress experiment, an enlisting of youth energy to transform the state politics. This was a state the Congress was not supposed to lose. The credibility of this as a political project is now certainly dented. How the party can turn this around is an open question. Rahul’s strategy was to shore up his own authority, and that of the government, on the wave of an electoral victory. But now this needs a rethink: the only way the party’s fortunes can be restored is by a veritable reinvention of his government.

It is hard not to feel a tinge of sadness. Mayawati had crafted an extraordinary social coalition. She will still remain a formidable political force, but she underestimated the degree to which even the very constituencies she had empowered were feeling the weight of bad governance. While she empowered some constituencies, the institutionalisation of low-level corruption was nothing short of oppressive. She forgot that social coalitions not wedded to intelligent governance will not last long. Perhaps a smart economist will decode the paradox of UP — that a 7 per cent growth rate was accompanied by a consumption growth rate of close to 1 per cent.

The Samajwadi Party was a beneficiary of anti-incumbency. But its campaign was sophisticated and well-judged. Akhilesh Yadav queered Rahul Gandhi’s pitch, by projecting a youthful modernist face, but with the added advantages of being seemingly rooted in local social circumstance. A cohort of younger voters did not have the visceral memories of the previous Mulayam Singh government. He talked the language of aspiration. And it is to his credit that while attacking the government, he promised a politics beyond recrimination. The SP tried to project that it could be more than a party of its core social base. The alignment of freshness, the capacity for synthesis, combined with Mulayam’s formidable political machine, proved to be an irresistible combination.

The implications of elections are not cast in stone; they depend on the lessons parties draw from them. But both national parties have to do a lot of rethink. It is often argued that national parties are giving way to regional agendas. The truth is the opposite. National parties are giving way because they don’t have a national agenda; it is the regional parties that have become the carriers of a future dream. Their organisational bases are fragile and their political imaginations ossified. The BJP had low expectations, but despite Goa and Uttarakhand it has reason to worry. It does face a structural problem: no next-generation leadership in UP that can project a future, and no national leadership that has the capacity to energise new voters. Vajpayee’s memory can get you only so far.

The implications for national politics are immense. Even if it is magnanimous, the incentive for the SP is to ensure that the Congress does not grow. Anti-Congressism also gets a new lease of life. The motive for every party is now to demonstrate that the Congress cannot govern. The Central government has been facing a crisis of authority. Its moral image has been battered; its capacity for negotiating with regional parties has been diminished. These results only exacerbate this crisis of authority. In the short run, expect a rocky political ride. It will take something drastic to reverse this erosion of authority.

Democracy will not bring angels to power. But its dignity is something deeper, and altogether more enchanting. It allows for the greatest freedom: the capacity for reinvention. Democracy will give even devils a second chance. In doing so, it tames them, rescues them from their own hubris.

7 Mar 2012, Indian Express

Soon, harsher fine, longer jail time for traffic rule violations

In Urban Management on March 3, 2012 at 3:21 am

Think twice before talking or texting on your mobile phone while driving, or taking to the wheel after having a drink or two for it can burn a hole in your pocket as the government on Thursday decided to sharply enhance the fines — as also jail terms — for traffic rule violations, in some cases by as many as five times.

Penalties for general traffic rule violations like jumping the red light, failing to wear the seat belt or helmet has been increasd from Rs 100 to Rs 500 under the proposed amendments to the Motor Vehicle Act cleared by the Union Cabinet. Other amendments include a substantial hike in compensation to accident victims.

A new section would be included to deal with penalties for use of mobile phones while driving.

Driving under the influence of alcohol would attract a minimum fine of Rs 2,000 or six months imprisonment or both. This penalty would apply if the alcohol level is 30-100 mg in 100 ml of blood. In case the alcohol level is 60-150 mg, the penalty would be one year imprisonment and Rs 4,000 or both, and if the level is beyond 150 mg, the offender would have to shell out Rs 5,000 or undergo two years imprisonment or both.

The government has decided to make the law tougher for repeat offenders. If the offence is repeated within three years in case of drink driving, the penalty would range between Rs 8,000 and Rs 10,000 and imprisonment from three years to four years besides cancellation of driving licence.

Using a mobile phone while driving would attract a minimum fine of Rs 500. For repeat offenders, it could go up to Rs 2,000 to Rs 5,000.

Similarly, penalties for driving dangerously and driving after consuming drugs would also go up. For instance, the fine for driving under the influence of narcotics substances has been increased from Rs 2,000 to Rs 5,000 for first offence and Rs 3,000 to Rs 10,000 for subsequent violations. The offence can also attract a jail term of six months.

If a minor is found behind the wheel, the fine would now be Rs 2,000, up from Rs 1,000. Over-speeding would attract a fine of Rs 1000 and Rs 5,000 for subsequent violations. One of the proposed amendments was to increase the compensation in fatal accident cases from Rs 25,000 to Rs 1 lakh and Rs 50,000 from the present Rs 12,500 for grievous injuries.


2 Mar 2012, Indian Express

Fodder scam: charges framed against Lalu, Jagannath Mishra

In Civil Services Reforms, Corruption, Poverty Eradication on March 3, 2012 at 3:19 am

Six months after their appearance before a special Criminal Bureau of Investigation (CBI) court here, charges have been framed against Rashtriya Janata Dal leader Lalu Prasad and the former Bihar Chief Minister, Jagannath Mishra, in connection with the multi-crore fodder scam case.

Mr. Prasad and Mr. Mishra are among the prime accused in the scam that finally unravelled in 1996, proving that funds in excess of Rs. 900 crore had been siphoned off over a two-decade period by politicians and bureaucrats belonging to successive administrations on the pretext of purchasing livestock feed.

Designated CBI Judge V.K. Srivastava charged Mr. Prasad with fraudulent withdrawals of Rs. 47 lakh from the treasuries at Banka and Bhagalpur districts where allegedly forged and fake bills were drawn by the Animal Husbandry Department in 1995-96 when Mr. Prasad was Bihar Chief Minister.

The court has also framed charges against Jagdish Sharma, the current Janata Dal (United) Lok Sabha member from Jehanabad, in connection with the case.

In the first week of February, the special CBI court had directed Mr. Prasad to appear before it, while rejecting his plea to allow cross-examination of witnesses of the prosecution.

At the time, both Mr. Prasad and Mr. Mishra had pleaded innocence, claiming that they had been framed and that the CBI had not obtained gubernatorial sanction for prosecution in the case.


2 Mar 2012, The Hindu

A very poor programme

In Corruption, NREGA on March 3, 2012 at 3:14 am

It is a fact universally acknowledged that India is at a fiscal crossroads. It swerved quite significantly to populism over the last several years, and the consequences of this lurch are that the UPA’s own finance minister is (thankfully) losing sleep over the fiscal burden. More specifically, over the subsidy burden.

As we all know, the fiscal problem is the net resolution of taxes and expenditures. A country may be taxing its citizens too little, so revenue needs to be raised. Or it may be profligate and spending too much, and causing sleepless nights. Both sides need to be examined, and this will be attempted in articles in the next few weeks.

In an earlier article, ‘The real scandal’ (IE, February 4), I outlined the performance pertaining to one popular, indeed flagship, spending programme of the UPA — its employment guarantee scheme for the poor, MGNREGA. The article documented the fact that several non-poor in rural India were receiving jobs meant for the very poor. In addition, perhaps as a coincidence, it was noted that Congress-ruled states like Andhra Pradesh and Rajasthan were particularly bad in administering resources to the poor.

There have been two sets of (related) criticisms about my findings. The first problem, as indicated by leading World Bank poverty economist, Martin Ravallion in the Economic and Political Weekly (‘Corruption in the MGNREGS: Assessing an index,’ February 25) is that looking at non-poor who receive MGNREGA wages as an indication of leakage or corruption is inaccurate because the non-poor may be close to the Tendulkar poverty line and/or may have been “hit by a shock that will affect their future incomes”. In the latter case, the non-poor availing of hard low wage labour maybe doing so because they are temporarily poor. Ravallion also makes the point that my corruption leakage index is negatively correlated with the headcount ratio of poverty — obviously, states which have a low poverty rate, like Kerala, will have a higher proportion of non-poor. Hence, the non-poor in Kerala will receive a higher proportion of wages distributed via MGNREGA. “It may be entirely possible that the scheme is better targeted in Kerala than calculations based on the Tendulkar line,” hence, Ravallion concludes, my estimates of the leakage to the non-poor is really an artifact of the data.

Ravallion and the critics will be right if the non-poor receiving benefits were close to the poverty line. It is nobody’s case that the Tendulkar poverty line is sacrosanct, so people with incomes some percentage points above the poverty line are poor according to most sensible definitions. However, to be noted is the contention by supporters of the programme that MGNREGA is meant really for the poorest of the poor. Aruna Roy, member of the National Advisory Council and a strong advocate of the scheme, spelt out the wish, the intent and the purpose of the programme almost three years ago: “NREGA evolved out of a political response to a people’s movement and the articulated needs of rural workers. It put the people’s right to seek work in a legal framework, and approached development through the economic and social empowerment of the poor and the marginalised. The focus was clear: work must be provided on demand. The assets created should benefit the poorest and most marginalised communities first” (‘Dalits, the Poor and NREGA’ , The Hindu , August 27, 2009).

What is clear in the language and intent of the Act is that MGNREGA is an income supplement scheme for the poorest of the poor, that is, those individuals who are in desperate need of incomes and are willing to do unskilled manual work. MGNREGA 2.0 is in the works, and upon receiving recommendations for the same, Jairam Ramesh, minister in charge, stated that the scheme was meant “for our self-selecting poorest people” (emphasis added).

The table documents the consumption, income and wealth levels of MGNREGA beneficiaries in 2009-10. Estimates are based on the NSS 2009-10 survey; this survey had a special set of questions on participation in the programme and the results broadly match the numbers published by the Ministry of Rural Development. Five facts suggest that far from being for the poorest of the poor, the MGNREGA programme is not even for the poor or the near-poor.

Fact 1: Sixty per cent of the beneficiaries are non-poor.

Fact 2: The non-poor receive 17 per cent more workdays than the poor.

Fact 3: The MGNREGA non-poor are in the top third of the consumption distribution of rural Indians — at the 66th percentile compared to the 14th percentile for the poor beneficiaries. The poor who do participate are right in the middle of the poverty distribution, so at least this aspect of the programme is working well. Presumably, they are also doing whatever work is being done. It is unlikely that someone belonging to the top third of the distribution is indulging in desperate backbreaking work for low wages.

Fact 4: The expenditure patterns of the poor and non-poor beneficiaries are revealing. The poor spend Rs 62 per household per year on jewellery. The non-poor MGNREGA beneficiaries spend close to eight times that amount, or Rs 487 a year. For the MGNREGA non-poor, fully 14 per cent goes towards purchase of jewellery, compared to only 2 per cent for the MGNREGA poor.

Fact 5: On an all-India basis, some Rs 8830 crore were paid as wages to the MGNREGA non-poor; and some Rs 1260 crore went towards jewellery purchases.

The poverty expert, Ravallion, had made the point that the non-poor were most likely those that were temporarily poor. It is unlikely that an income emergency leads people to go and buy jewellery, or that temporary poverty means that your expenditure level is in the top third of all rural Indians.

Jairam Ramesh, please note — the facts suggest that something is drastically wrong in MGNREGAland, a programme meant, in your own words, for the poorest. The scheme was outdated on inception some five years ago. MGNREGA 2.0 should really be MGNREGA 0.0. It would be much better to implement a cash-transfer scheme for the genuine poor identified through Aadhar, than to be caught in a puritanical trap that only encourages corruption.


The writer is chairman of Oxus Investments, an emerging market advisory firm


2 Mar 2012, Indian Express