Renu Pokharna

Archive for the ‘Corruption’ Category

Change and its limits

In Corruption, Electoral Reform, Parliamentary Reforms, Politics on January 7, 2014 at 2:09 am

The Aam Aadmi Party has had spectacular success, of that there can be no doubt. But even its most hardened and committed supporters will agree that the government in Delhi will last only a few weeks — at most, a few months. It simply will not have the time or opportunity to prove its capability to govern. Its success has ironically thrown into sharp relief the best and worst of our current political system. It has established the vibrancy of our politics and the maturity of the electorate. At the same time, it has made clear the disjunct between the exercise of individual franchise and the delivery of stable governance. What one must question is the positive of a political system which enables the expression of protest but does not promote a steady and enduring government.

Kejriwal deserves the accolade of “man of the year”. His conviction, tenacity and simplicity are admirable. But compared to another “aam aadmi” who has also had comparable impact, albeit on a much larger scale, his limitations are obvious. Unlike Pope Francis, he does not have the mandate or experience to deliver. This is not his fault, but that of our political system.

Pope Francis was a little known Jesuit priest from Argentina called Jorge Mario Bergoglio. The cardinals of the papacy surprised the Catholic community by electing him the 265th successor to St Peter a month after Pope Benedict had roiled the church by resigning. At the time, the church was engulfed in a sexual scandal, the Vatican Bank was facing charges of corruption, papal institutions had hollowed and parishioners were leaving in droves. Pope Francis could not have inherited a more difficult chalice. His response was “aam aadmi” in character. He rejected the “lal batti” Mercedes and stayed with his clapped-out Ford Focus. He did not move into the apostolic palace but chose a two-room abode. He celebrated his 77th birthday with four poor people and a dog. His every action has exemplified humility and compassion. More substantively, he challenged conventional orthodoxy. He commented that the church was “obsessed” with abortion and contraceptives, and in response to a question on what he thought about gay priests, he replied “who am I to judge”. Further, he sidelined the traditional synod of bishops and appointed his own group of cardinals to advise him on bureaucratic and institutional issues.

The jury is still out on whether Pope Francis will succeed in revitalising the Church, and there is comment that he might be more style than substance. But what is clear is that this “aam aadmi” priest has the authority and tenure to convert intent into policy. He is the supreme unchallenged head of the Church and unless he decides otherwise, he will stay in that position for life. He can change the shape and content of the Church. In contrast, Kejriwal is shackled and will be fighting another election in a few months. The AAP deserves its moment, and whilst no one can or should dilute the significance of its achievement, it must not be surprised if “good” and “honest” people everywhere feel uneasy about the longer-term impact of its leadership in government. After all, it is in for the short haul; avowedly populist; without experience; and its economic programme does not hold up to rigorous scrutiny.

The AAP phenomena will be franchised. Civic groups across the country will be emboldened to take up political cudgels. The electoral response to these new political movements could be disproportionately strong, especially in urban constituencies. This is a healthy trend, as it will shift the contours and narrative of politics. It will upend conventional wisdom. No one in the Cong-ress or the BJP expected the AAP to do so well. Their belief was that the voter would ultimately cast her vote conventionally. The voter would not vote for a party that had no chance to win. “Why waste a vote,” would be the logic. I suspect this is no longer the refrain in party headquarters. The realisation must have dawned that the 60-million-odd new voters are singing to a different tune. They are fed up with the lack of governance and corruption. They do not like the political choices on offer and are looking for alternatives. This is all good. The shake up of old-style feudal politics driven by money and opportunism is long overdue.

At another level, however, this franchisee phenomena does raise some concerns. For two decades now, we have had coalition governments at the Centre, and it has become clear that coalition politics does not allow for statesmanship. It does not give leaders the room to take decisions that pay off in years rather than months. It is also a major reason for corruption. This is because of the required “give and take” and the compulsion to raise finance for the next election, not to speak of the individual impulse to make hay while the sun is shining. The silver lining has been that most state governments have been governed by parties with a clear and decisive majority. This has facilitated clearer (not necessarily cleaner) and better governance. The question, therefore, has to be asked: What if the politicisation of protest movements were to push state governments into the miasma of coalition governance? Would that be in the public interest?

The conditions for a revolution are created when people feel alienated from and disgusted with the institutions of government and the quality of governance. These conditions translate into action when people with passion, leadership and language give expression and meaning to this feeling. The revolution endures if the new political structures and systems reflect and respond to underlying social and economic realities. Take, for example, the American revolution. The people felt alienated from the rule of colonial Britain and disgust at the gap between the reality of social hierarchy and the rhetoric that Americans were “born, the heirs to freedom” for decades before the revolution. They did not, however, take to the streets until George Washington, Alexander Hamilton, John Adams and Thomas Jefferson gave expression and organisation to this discontentment. The principles of the revolution have endured for over 200 years because the political system has in the main reflected and responded to the interests and aspirations of the American people. In similar vein, Kejriwal and the AAP have given language and meaning to the disgust felt by people towards traditional political parties. They have marshalled this disgust into a brilliant movement of protest. The first-past-the-post system of parliamentary democracy has not, however, given them the authority to deliver. The question that the AAP must thus contemplate is whether its impact might not be more enduring and positive if, rather than looking to govern and risking exposure as an emperor without clothes, it was to use its organisational skills to compel a review of the political system and better alignment to the longer-term demands of a pluralistic, diverse, young and subcontinental polity?

Indian Express, 6 Jan 2014

Transfer of capital with ‘coercion’ and ‘fraud’

In Corruption, Property Rights on June 15, 2012 at 6:49 am

Naya Raipur, Chhattisgarh’s upcoming new capital and any government’s dream, is being built around discontent on the ground, the main complaint being of land acquired forcibly and without adequate compensation. The Nayi Rajdhani Prabhavit Kisan Kalyan Samiti, an organisation of around 6,000 farmers, has gone to Bilaspur High Court.

The 8,013-hectare township will have six-lane roads, elite housing societies and clubs, a Vedanta Hospital and an international cricket stadium, besides the new secretariat. What is Chief Minister Raman Singh’s dream today was actually conceived during the tenure of Ajit Jogi, the state’s first chief minister. When the Jogi government banned land sales in the project area in 2002, the BJP opposed the project. Chhattisgarh minister Punnu Lal Mohile, then an MP, had written to prime ministerAtal Bihari Vajpayee against it. Today, the Singh government has taken it forward, replacing a Capital Area Development Authority set up by Jogi with a Naya Raipur Development Authority.

There is one other change. A six-lane road takes an abrupt diversion near the capital complex. Had it gone on, it would have passed through 130 acres owned by minister Brijmohan Agarwal and another BJP leader, Satyabala Agarwa. Brijmohan, Raman Singh’s number two, had opposed the project during Jogi’s tenure.

Acquisition

Naya Raipur has 41 villages, in 27 of which the NRDA has acquired over 5,500 hectares: 130ha through compulsory acquisition, 2764ha by transfer of nistar (community) land and 2,724ha by mutual agreement, says S S Bajaj, NRDA CEO.

Farmers say the government drained them of options. In August 2005, the Raman Singh government banned land sales in the 27 villages except to the NRDA. “Where is the mutual consent? Whenever we needed money, we had to sell land at their price,” Kisan Kalyan Samiti secretary Kamta Prasad says.

Bajaj says the price was decided in a meeting with farmers, who claim it was fixed unilaterally. In a July 2006 meeting with then housing secretary P Joy Ummen and Raipur collector Subodh Kumar Singh, now special secretary to the CM, zilla panchayat member Ghanshyam Tandon noted that “the actual market price is more than determined by the collector’s guidelines”. “None of my suggestions was considered,” Tandon says today.

Sales began in 2006 at Rs 12.37 lakh per hectare, including compensation. In July 2009, when the NRDA was offering Rs 14.75 lakh, the government invoked the emergency clause giving the collector powers to acquire land within 15 days of a notice. Villagers in Barauda, for instance, were forced to sell to the NRDA rather than accept the Rs 4.30 lakh per hectare under the clause.

In March 2011, the NRDA bought nearly 80 hectares at Rs 14.75 lakh (all inclusive), days before the rate was raised to Rs 17.90 lakh.

Today, the rate in the 27 villages in Rs 25 lakh a hectare, again including compensation. In many of the other 14 villages, it is Rs 1 crore, leaving villagers hopeful of a similar offer. “Lift the ban, let’s negotiate with buyers,” Kamta says. NRDA chairperson N Baijendra Kumar says the ban is to protect villagers from middlemen.

Bajaj denies coercing farmers while Kumar says: “We have given exemplary compensation, the best for any such project anywhere.”

Farmers allege the NRDA leased their land at Rs 1.14 crore (residential) and Rs 1.82 crore a hectare (retail). Bajaj says any money earned is put back into the project.

Rehabilitation

The NRDA recently told the court it has provided Rs 772 crore to affected farmers, besides land elsewhere. It has built two small colonies, 20 one-room sets in Jhanjh-Navagaon and 200-odd homes of 400sq ft in Rakhi village. Bodhi Ram, who gave up ¼ acre for Rs 1.25 lakh, lives with his family of 15 in a single room without sewerage or water in the pipes.

Those who sold by mutual consent are given an 8-per-cent relaxation in stamp duty if they buy land in the state. Nearly half the farmers have profited, says Bajaj. A Chhattisgarh Nirman Academy trained some youth into carpenters, foremen and electricians but they are yet to get a job.

Nistar land

Following a January 2011 Supreme Court direction to all state governments not to occupy nistar land, then principal secretary (revenue) Sunil Kumar Kujur issued a circular on March 10, 2011, asking collectors them prepare a list and not to encroach on or acquire such land.

For Naya Raipur, the government transferred 2,764 hectares that included ponds, grazing grounds and graveyards. The NRDA then mortgaged land to HUDCO for a loan of Rs 555 crore.

In Barauda, youths Rakesh, Sandeep and Domeshwar point out their village head’s tomb in a graveyard where a housing colony is now coming up. Through the graveyard at Chicha village, a road runs now.

“In a modern township, the nature of nistar land changes,” says Baijendra Kumar, insisting this does not amount to violation of the court order. “Graveyards are important in a village but in a city they must be developed in a systematic manner. We are providing an alternative.” Bajaj promises nearly 2,500 hectares will be demarcated as nistar.

The court case

The November 2011 High Court petition names Ummen and the Raipur collector among the respondents, alleges coercion and fraud, demands a ban on further construction and challenges the sanctions granted. Farmers say Jogi’s plan had involved barren land but the present plan has acquired mostly agricultural land.

On February 24, Justice Satish Agnihotri stayed acquisition in the area. Court records show the case was transferred the same day to judge Prashant Kumar Mishra, who lifted the stay. Mishra, incidentally, was additional advocate general in the Singh government (2004-07) and advocate general (2007-09) before being elevated as High Court judge.

The transfer of the Mantralaya was scheduled last November, then postponed to April. As of now, trucks still carry construction material to the upcoming capital.

Farmer by farmer

Bharat Lal Chandrakar (above) of Palaud alleges the government ignored the trees and other structure on his land, which should have made him eligible for higher compensation. Government officers inspected the area and allegedly reported that his land has no such structures or trees. The Indian Express visited the spot and found several trees and two borewells.

Bal Mukund Shivnarayan’s land has a road running through it, making it eligible for higher compensation, but the SDM report does not mention it. “We go by what the SDM recommends,” says the NRDA’s S S Bajaj.

Suresh Kumar’s three-acre plot in Barauda had a six-lane road started through it even before the land had been acquired. He says the land is yet to be formally acquired. Bajaj admits Suresh Kumar has not been compensated but adds the money has been deposited with the collector.

 

14 June 2012,  Indian Express

Between govt rates and purchase ceiling, there’s plenty for officials and middlemen

In Bureaucratic Delays, Corruption, Dalits, Poverty Eradication on June 15, 2012 at 6:38 am

Sajivan Manjhi stands in a field and holds his radio set, a gift from the state government, to his ear to listen to the news. One of 70 Mahadalit “beneficiaries” given plots to raise houses in a pond in Pachlova village of Nalanda, he is angry with the government for the very scheme he had once praised.

“Government officials live in bungalows and plan swimming pools and they want us to live in ponds,” says Sajivan, a matriculate who reads newspapers besides listening to the news on the “government radio”, wondering where he will wash with the pond making way for houses.

The Mahadalit Vikas Yojana, launched in 2009-10, was an innovation in social engineering that clubbed 21 Scheduled Castes into a single vote-bank for the first time — 1.20 crore people representing 11 per cent of the population. They went on to help the Nitish Kumar return with a five-sixths majority, sending the caste calculations of Lalu Prasad’s RJD haywire and leaving Dalit leader Ram Vilas Paswan’s LJP almost redundant. The RJD had banked on the 31 per cent Muslim-Yadav vote but Nitish had schemes for minorities, too, besides many for Mahadalits who till then were dismissed as pachpaniyas — people who have some houses here and there.

Today, the flagship scheme is under the scanner, the houses in the pond being one of a number of reasons. There have been Dalits allotted land only on paper. And, as The Indian Express reported, the larger scam involves officials who have bought land cheap and sold it to the government at many times the price.

Scheme and scam

Every Mahadalit family was to get three decimals, or 1306.8 sq ft. Following a survey, the land reforms department shortlisted 2,18,180 families, mostly in Nalanda, Araria, Madhepura, Supaul, Khagaria, Gaya and Aurangabad. Land has so far been distributed land to 1,53,866.

The allotment is made in any of four possible ways, of which three — under the gairmajarua aam and gairmajarua khas schemes and the Privileged Persons Homestead Tenancy Act — involves government land.

The fourth way involves land bought from farmers and given to beneficiaries. It is here that things have not gone as they should have.

The government put a ceiling of Rs 20,000 for every three decimals bought, but it still left plenty of scope for corruption in a state where the government rate for two-crop land, the kind most commonly bought, is only between Rs 1,000 and Rs 3,000 per decimal.

The government has given such land to 29,920 families, and targeted another 27,603.

Circle officers in charge of purchase have engaged middlemen, often small-time real estate agents, in buying land of any kind — low-lying or elevated, near rivers — though the instruction was that it should near areas of habitation and with an approach road. In fact, the state has a dedicated follow-up, Mahadalit Basti Sampark Yojana, for Mahadalit Vikas Yojana beneficiaries.

The middlemen would look for farmers from whom they could buy at government rates or lower, convincing them that it could not fetch a better price as it was of little use with no source of irrigation to draw from.

Cases in point are at Kajra and Bistoria in Araria where, records show, the Raniganj circle officer bought 2.64 acres at Rs 3.63 lakh and 3.56 acres at Rs 4.90 lakh, paying middlemen a total Rs 8.53 lakh, then organised the government purchase days later at Rs 17.60 lakh and Rs 23.60 lakh, a total of Rs 41.20 lakh. The difference of Rs 32.47 lakh works out to 78.81 per cent of the amount the government paid.

There have also been allegations of circle officers conniving with farmers to “share the benefits”. Residents of Malpa, Mahuain and Barma under Guraru block of Gaya have alleged this but admitted there is no way it can be proved.

Point, counterpoint

Revenue and land reforms secretary Hukum Singh Mina has called all this an “eye-opener” but JD(U) national spokesperson Shivanand Tiwari has said there isn’t “any scam”. “It is not easy to run a government. There can be some slip-ups here and there,” Tiwari says.

The Opposition, so far starved of issues, has finally found the opportunity it was looking for. “I have been critical of this three-decimal scheme from the day it started. Why can’t the government give them Rs 20,000 rather than allowing misappropriation?” Paswan says.

Lalu mentions The Indian Express exposé while attacking the government. “How much proof does the government need now? Rather than trying to correct things, they are going for a coverup,” he says. “There is deep-rooted corruption everywhere. Many more scams will come out in the days to come.”

The scheme is one of about a dozen the government has taken up for Dalits, with three departments to take care of them — revenue and land reforms, SC/ST welfare and health. The SC/ST welfare department is in charge of the Bihar Mahadalit Vikas Mission to ensure all schemes are properly implemented (see box).

HOW MUCH INVOLVED

3 decimals

Or 1306.8 sq ft. what each family gets under Mahadalit Vikas Yojana

2.18 lakh

Families shortlisted

1.54 lakh

Lakh families get land

29,920

Of these families get land under the system that involves purchase from farmers, which brings middlemen into the process

27,603

More families to get such land

Rs 20,000/3 decimals

Ceiling for purchase from farmers

Rs 3,000/decimal

Maximum Govt rate for two-crop land, range starts at Rs 1,000

More for mahadalits

Mahadalit Basti Sampark Yojana. To link villages to a main road.

Dasrath Manjhi Kaushal Vikas Yojana. For vocational training.

Mukhyamantri Mahadalit Poshak Yojana. Rs 500 a year to each student of classes I -V for uniforms, shoes.

Vikas Mitras. 10,000 Mahadalits, appointed at Rs 3,000 a month, to coordinate with government on schemes.

Mahadalit Shauchalaya Nirman Yojana. Rs 300 to each family to build a toilet. Funds for 2,33,333 toilets disbursed so far.

Mukhyamantri Jivan Drishti Yojana. Rs 400 to each family to buy a transistor set.

Mahadalit Heath Card Scheme. Mahadalit families to get such cards for routine checkups.

12 June 2012,  Indian Express

Mixed Metaphors

In Bureaucratic Delays, Corruption, International Relations on June 12, 2012 at 6:59 am

What’s worse: declaring war against a social problem or calling for a Marshall Plan to solve it? Both are enduring and popular metaphors. Unfortunately, both lead to bad government decisions. Public policies shaped by such thinking more often than not result in waste, blind spots, and Manichaean mindsets that limit the search for more effective approaches. Think of the long-running wars on drugs, terrorism, and cancer. The results, all too predictably, have been more confusing than the problems.

In fact, no imitation of the Marshall Plan has ever worked, and no war on a big social problem has ever ended in defeat for the enemy (save, perhaps, cigarettes). But the allure of these spurious comparisons remains as strong as ever. Without any apparent effect, Marshall Plans have been proposed to help Africa, the Middle East, New Orleans, Iraq, and even Wallonia, Belgium’s least prosperous region. Bill Gates wants a Marshall Plan to broaden access to technology, French President Nicolas Sarkozy urges one for his country’s poor suburbs, and the AFL-CIO thinks the U.S. auto industry deserves its own Marshall Plan.

Advocates of war against big problems are just as plentiful. We have been asked to go to war against poverty, drunk driving, email spam, and teen pregnancy, just to name a few. In the United States, liberals denounce the Bush-era “war on science” while conservatives each year mobilize against the “war on Christmas.” And of course, there’s the favorite war of the global chattering class — the war against global warming. “This is World War III,” Barbara Young, then head of Britain’s Environment Agency, declared in 2007. “This is the biggest challenge to face the globe for many, many years. We need the sorts of concerted, fast, integrated, and above all huge efforts that went into many actions in times of war.”

There are many good reasons why declaring war on a social problem or launching a Marshall Plan to help a country or region are such attractive metaphors for politicians. Wars unite countries and stifle internal dissent. Wag the Dog is not just the title of a movie in which a war is manufactured to rally support for a government, but also an age-old political tactic. The war metaphor is also attractive because real wars — those between nation-states as opposed to those against concepts or bad socioeconomic trends — are finite. University of Notre Dame scholar Daniel Lindley has found that the average length of a war is 308 days when the country that starts it wins and 660 days when initiators lose. No surprise, then, that the war metaphor keeps getting deployed: It boosts expectations that in a few years a major scourge — cancer, terrorism, poverty — will be eliminated. “War” also holds the seductive promise of an open checkbook for the politicians who so liberally apply the term; after all, budgetary constraints tend to disappear during war along with all those pesky rules. Wars are for heroes, not for accountants who limit the resources needed for victory.

The Marshall Plan metaphor has been similarly irresistible, with its implications of massive funding and unquestioning public support. But the original Marshall Plan launched by the United States to help Europe after World War II was neither as financially sizable nor as uncontroversial as proponents commonly assume. (Economist Tyler Cowen estimated U.S. aid, which peaked at around $90 billion in today’s dollars, was no more than 5 percent of the gross national product of the recipient nations.) Still, the plan has come to epitomize a bold, massive — and successful — governmental mobilization.

Alas, these good metaphors yield bad policies. The war on drugs, for example, has been more successful in spawning immense bureaucracies and winning big budgets and partisan political fights than in ending drug use. Decriminalizing marijuana for medical purposes is becoming a popular reform in the United States, and 14 states have already adopted it, with more sure to follow. But do we know if marijuana does indeed have the medical benefits claimed by reformers? No. As a result of the mindset — and the policies — nurtured by the war on drugs, medical researchers have been blocked from access to marijuana and unable to scientifically test the claims. Only now, after four painful and futile decades, is the war on drugs losing support.

The same perils apply to the “war on terror.” As former U.S. National Security Advisor Zbigniew Brzezinski famously noted: “The damage these three words have done — a classic self-inflicted wound — is infinitely greater than any wild dreams entertained by the fanatical perpetrators of the 9/11 attacks when they were plotting against us in distant Afghan caves. The phrase itself is meaningless. It defines neither a geographic context nor our presumed enemies. Terrorism is not an enemy but a technique of warfare.” Indeed, the war on terror was even more spectacularly successful than the war on drugs in securing political, legal, military, and financial blank checks for those waging it. But that, too, is changing as anti-terrorism efforts are now more carefully scrutinized, checks are written with more strings attached, and alternative approaches are tested. Recognizing that language is power, U.S. President Barack Obama took a key first step in banning the bad metaphor. At his insistence, the Pentagon was forced to lose its precious GWOT (global war on terror) acronym and the GWOT mentality that went with it. But as many of his predecessors learned, Obama is finding that wars are hard to exit. Once a war against poverty, crime, or terrorism is launched, announcing a unilateral truce is usually political suicide. Instead, presidents get boxed into absolutist policies in which compromise is impossible and victory is the only acceptable outcome.

But no matter the complications, these wars aren’t going away — they’re just too politically convenient. It took only a few hours after Haiti’s terrible Jan. 12 earthquake for pundits to call for a Marshall Plan. One thing by now is certain, however: Although aid will materialize, a Marshall Plan will not. As we all know but the metaphor users routinely and conveniently ignore, the Marshall Plan’s success was driven by the hard-to-replicate conditions in Europe after World War II, with its highly educated populations, well-developed private sector, and relatively efficient public bureaucracies.

So: Beware the metaphor. All these wars and Marshall Plans are getting the world nowhere. But their frequent use does have a silver lining: At least you’ll know that whenever they are proposed, bad policies will soon follow.

 

Apr 2010,  Foreign Policy

 

Book-cooking guide

In Bizarre Laws, Civil Services Reforms, Corruption on June 12, 2012 at 6:52 am

ONE of the best things about being a government is that nobody audits your accounts. Politicians have huge leeway in drawing up and presenting their budgets. Hans Hoogervorst, the plain-speaking chairman of the International Accounting Standards Board (IASB), has referred to public-sector accounting as being in “a stage of primitive anarchy”. A new IMF paper offers a helpful taxonomy of government-accounting gimmicks*.

The simplest wheezes push spending into the future. Classic forms of deferred spending that do not show up on balance-sheets until later include pension promises and public-private partnerships, where governments pay companies for infrastructure after construction is done. America met a 1987 deficit target by simply delaying military pay and Medicare payments.

Hidden borrowing is a favoured euro-zone tactic. Portugal reduced its deficit in 2010 and 2011 by taking over pension assets from private companies without recognising the new public liabilities. Greece was not alone in buying derivatives that flattered public-debt levels.

Governments can also bring future revenue forward, by selling assets or the rights to future cash flows; or avoid investment costs altogether by letting firms collect toll revenue after building infrastructure. Spending by non-governmental public entities is another way to keep liabilities off the books. Greece’s debt figure shot up by 7.8% of GDP in 2010 when Eurostat, the EU’s statistical agency, reclassified bus, railway and other public companies in the government accounts.

Some of these measures are legitimate in their own right: the private sector can often manage assets better than governments, for example. And not every public-accounting flaw is to the benefit of governments: their right to tax is not recognised on balance-sheets, for example. But trickery causes damage beyond simply obscuring the true fiscal position.

When markets are risk-averse few will take a chance on dubious public-sector accounts. There is a correlation between the amount of creative accounting that went on in the euro zone in the decade to 2003 and government-bond yields now. Ian Ball of the International Federation of Accountants (IFAC), the body behind a set of non-binding accounting standards for the public sector, says that “transparency is a prerequisite for confidence.”

The IMF has a helpful laundry list of ways to keep sneaky politicians in check. Accounting measures should follow the movement of economic value, not cash, so that delaying pay packets until next year (or retirement) has no effect. Governments should publish net worth, which encompasses assets and liabilities, so taking over pension schemes is less appealing. Budgets should forecast up to 50 years out, so the full effects of policy are clearly seen.

These measures would not be needed if governments followed private-sector accounting rules. The IASB and the IFAC signed an agreement in November to encourage harmonisation between public- and private-sector accounting standards. Don’t hold your breath.

 

7 Apr 2012,  Economist

Harmful Regulations Hit Close to Home

In Bizarre Laws, Bureaucratic Delays, Business, Corruption on June 4, 2012 at 12:35 pm

I returned home last night to a disturbing scene. Someone was moving his things into one of the vacant flats downstairs. “Are you moving in?” I asked. “No. MCD guys were here. They kicked us out of our flat and demolished it.” I quickly went up to see. Their place looked like it had been hit by a bomb. Half of their ceiling—a giant concrete slab, one foot thick and 11 feet long—hung ominously in the centre of the room; above it, a gaping hole opening to the sky. Chunks of rubble and dust covered the floor and furniture that remained in the room. “What happened?” I  said, thinking that it looked like a war zone. “We heard a knock and opened the door to see who was there. MCD guys said, ‘move your stuff into other rooms!’ and then broke down the roof.”

Next I learned that my friends, families who live in the other two flats upstairs from me, must also vacate as soon as they can to avoid a similar fate.  Fortunately, none of them had been there when MCD (Municipal Corporation of Delhi) came.  If they had been, they would have been made immediately homeless without sufficient warning to make alternate arrangements.

What struck me so palpably is that these three perfectly good apartments, a whole bundle of valuable goods, were to be obliterated from existence. The action seemed completely tragic from an economic point of view. It pierces the heart when we understand that wealth comes not from creating scarcity of goods but by their abundance. There are many homeless people in the city and many many others who live in make-shift shacks. Yet, perfectly good apartments are being destroyed reducing the supply of housing.

Why has this happened? Apparently, the building has been deemed to have one more floor than was authorized. The landlord had not acquired sufficient licenses for what he had built. It is clear that some form of regulation (either market or governmental) is needed to be sure that some peoples’ actions do not bring harm to others.  This is certainly relevant in Delhi, where there is a moderate risk that earthquakes could cause problems to structurally unprepared, tall buildings.

But rather than blaming the landlord outright, it is important to understand how hard and costly it is to stay on the right side of the law in this matter. The World Bank Doing Business Index ranks India 181 out of 183 in ease of dealing with construction permits. (Delhi is ranked joined-fourth within India.) People generally have little expectation that such formalities have been followed.

Think about the waste and loss of resources being cause by this mis-coordination: all the concrete, steel, labour effort, copper wire, ceiling fans, etc., that had gone into the construction, not to mention the resources being used to demolish this wealth and to retrofit the remaining floors that could otherwise have gone to more productive purposes. Wealth and value is being turned to dust—literally. Moreover, the tenants must also pay the expense of finding new places to live, time searching, money spent paying brokers, effort to move all of their goods. This excludes the stress and anguish they must feel.

(The interest of the MCD officers seems not to be the height of the building, per se, which constitutes the danger to others, but instead with destroying the economic viability of the flats. It remains to be seen what will have to happen with the top floor.)

It might be different if this were a one-off occasion, the consequence of breaking a hard and fast law. But this is not the case. The biggest problem, it appears to me, is the absence of the rule of law, a clear set of rules consistently applied to all.

There is little security of property rights or a low-cost way of coordinating productive activity with the rights of others. Without this rule of law, it is difficult for everyone involved to know what the rules are and what will be enforced. The landlord was unclear, the tenants were unclear. (Tenants of the building had all received official police verification that they were living on these premises.) What remains is not the rule of law but the arbitrary rule of men. This lack of clarity makes the “Warrant to Demolish Fourth Floor” issued by the court a warrant for the authorities to intimidate and extort. (Rumour has it that the bribe for leaving the three flats on the top floor was an absurd Rs. 25 Lac!)

In addition to the sheer loss of resources due to past error and mis-coordination is the increased uncertainty investors face when making decisions for the future. This principle applies from the smallest to the largest scale. The people whose flat was destroyed had recently invested in carpet for their apartment, which is now ruined. My friends invested in a new key, which is now useless. These are trivial examples, but the principle is significant when generalized. Why make numerous minor improvements when it all might come to nought? (Having lived in the US and UK extensively, the striking thing about the quality of life in Delhi is not that anything is absolutely absent, but how the quality of almost every material thing and service seems to be lower quality.  It is these little things, like straws on a camel’s back, that lead to a rougher overall quality of existence for the average person here.)

The same principle applies to the supply of housing. Increased voluntary investment would lead to higher availability and quality of housing and to lower prices. But heavy construction licence requirements, tenancy laws, rent controls, and unclear rules and arbitrary enforcement makes people choose to restrict their investments in construction (especially in non-”luxury” housing). The landlord in my building, instead of investing in more such buildings, may choose not to take up as many opportunities to produce more housing. Others surely have had or have seen similar experiences leading them to restrict their investments, too. These all reduce the supply.

Reducing the supply or restricting its growth, of course, means that the demand causes a higher price than there would otherwise have been. My friends must now move elsewhere, increasing the demand for other apartments, pushing up their prices, ultimately displacing those of lower income and connections. People must live in more cramped, low-quality conditions, or be homeless.

Thankfully, the Delhi Development Authority has proposed that height restrictions on buildings, per se, should be removed in 2021 because of growing demand and the costs of growing horizontally.

While contemplating the lunacy and injustice of these events, I recall that these problems are faced to a much greater extent by the very poorest who operate far more in the “informal,” unlicensed sector. They cannot afford to make themselves formal and benefit as fully from cooperation in the formal market. They are more open to harassment. It is even harder for them to invest and build wealth with the resources they have. Burdensome and arbitrary regulations like these cause wealth destruction, stagnation, and remove the bottom rungs of the ladder of economic self-advancement.

 

1 Mar 2012,  Spontaneous Order

Farmers and billionaires alike suffer at the hands of government interference

In Bizarre Laws, Business, Corruption, Red Tape on June 4, 2012 at 12:29 pm

In November 2008, Sonia Gandhi said that “public sector financial institutions have given the economy the stability and the resilience we are now witnessing in the face of the economic slowdown.” Pranab Mukherjee said a few months later, “Never before has Indira Gandhi’s bold decision to nationalize our banking system exactly 40 years ago – on 14th of July, 1969 – appeared as wise and visionary as it has over the past few months.” This desi schadenfreude about the Western economies was used to justify a policy that continues to gravely hurt the Indian economy.

When this retrospective praise was being heaped on the nationalization of banks, few spoke out in criticism of a decision that essentially cemented the government’s grip on the economy and politicized access to finance and credit. The near-silence of the business community, the media and policy analysts was deafening and instructive at the same time; instructive because it tells the tale best of why India’s brief flirtation with a market economy since 1991 has increasingly started tending towards an oligarchic crony capitalism.

The government’s control of the banking system is inimical to equitable, rapid and sustainable growth. By controlling access to credit, the government retains enormous discretionary power over a lever that directly affects businesses and consumers alike. The spectre of government interference has spared neither poor farmers nor billionaires. There can be no better way to illustrate this than the ongoing brouhaha over the travails of Kingfisher Airlines.

Among other things, businessmen in the aviation sector raise debt financing to purchase or lease aircraft. Like most industrialists in India, they prefer dealing with public sector banks. Managers there are easier to “persuade” when it comes to loan initiation and restructuring. Indian state bank managers have stretched to new depths the triple bottom line concept – the bank’s bottom line, the manager’s bottom line, and the politician’s bottom line, in reverse order of importance. Kingfisher has never made a profit so far. The provision of soft loans or easier debt payment terms by politically-controlled banks without any commercial logic would still constitute a ”bailout”, even though it would not be called that.

The operational aspects of running an airline are also anti-market and rife with government interference. Air turbine fuel (ATF) is a major cost. India’s oil sector is in strict government control, with oil public sector undertakings (PSUs) ruling the roost in the supply of fuel. High ATF surcharges cross-subsidize more politically important fuels like diesel and kerosene that are supposedly used more by the poor. The landing fees for airlines have been high at airports still under the partial control of the union-dominated Airports Authority of India (AAI). The state also bankrolls competing airlines (Air India), and disallows foreign airlines from investing in India. Moreover, whenever private airlines have tried laying off staff, they have at best only partially succeeded because of political pressure.

In the case of Kingfisher Airlines, the civil aviation ministry and finance ministry both swung into action to see whether a bailout could be contemplated, even as the opposition protested the bailout of a private company with public money. Strange as it may sound, the government is simultaneously over-taxing and subsidizing all private airlines.

This simultaneous taxing and subsidizing is what a crony government does best, retaining the opportunity to arm-twist and manipulate at will. Frederic Bastiat had written, “Government is the great fiction through which everybody endeavors to live at the expense of everybody else.” Through its control of nationalized banks, the United Progressive Alliance (UPA) government waived off farm loans in 2008 before the general elections, and this benefited richer farmers disproportionately. More recently, politicians in Andhra Pradesh gave a body blow to microfinance institutions (MFI) by encouraging defaults on private loans. For some, bailing out poor farmers is considered proper, while writing off loans for industrialists is seen as wrong. In the case of Kingfisher Airlines, they may be correct — but consistency is perhaps the hobgoblin of little minds.

The irony is that farmers and billionaires alike suffer the same fate at the hands of a nosy government that wants to needlessly interfere in economic activity. Farmers, of course, have it even worse – the government retains so much influence over their industry that they can’t even price their products themselves. The romanticization of poor farmers prevents us from thinking of them as private sector participants. Various agricultural commodities in India are still subject to strangulating regulations on aspects such as pricing, transportation, packaging and point of sale. Labour and energy markets for farmers continue to be distorted. Inefficient employment schemes make labour expensive during harvest season. Power availability remains inconsistent because most states – Gujarat being a notable exception – do not have the political courage to say no to free electricity. Of course, the effective price of something which is not available is not zero, but infinite.

Recently, Uttar Pradesh chief minister Mayawati raised cane prices by Rs. 40 per quintal to appease sugarcane farmers ahead of next year’s assembly elections. This hurts mill owners in the short run, and the setting of prices by government diktat isn’t healthy for the sugar industry. India’s agriculture sector continues to languish relative to other sectors because of this reason — it has been perennially hemmed in by politicians who have eagerly placed political expediency ahead of economic rationale, at the expense of those they claim to serve.

A nationalized banking system is designed to serve the interests of government, not the citizens. Indeed, India would be better served if state-owned banks were privatized instead. The only government which has contemplated the same was Atal Behari Vajpayee’s administration, which brought a proposal to reduce government shareholding in banks below 51% and transfer management control. More recently, finance minister Pranab Mukherjee announced that new banking licenses would be issued – the last one was given out in 2004 – but the government hasn’t made any real moves to implement the announced policy.

For inclusive growth and fair access to finance, we need calibrated deregulation and more private banks, not over-staffed banks that expect regular equity infusions from the government. The UPA has pumped in over Rs. 30,000 crore into PSU banks over just 3 years, stoutly refusing to dilute the government’s shareholding. Over the next decade, the banks need over Rs. 4 lakh crore.

Did somebody say ”bailout”?

 

16 Nov 2011,  MINT

UP adopts e-tendering for mining

In Bureaucratic Delays, Corruption, Red Tape on May 31, 2012 at 7:44 am

LUCKNOW: Nearly a month after having approved the e-tendering mechanism for allotting contracts in the mining sector, the UP government, on Wednesday, ordered the immediate implementation of e-tendering for awarding all new mining leases in the state.

Under the fresh system, lease holders will need an environment clearance for mining if the land area is more than five hectares for mining activities on under 5 hectares of land, no environment clearance will be necessary. The government also said that in cases where mining contracts that are still valid, the lease holder or contractors will need to obtain environment clearances by August 2012.

Uttar Pradesh Electronics Corporation Ltd will be the implementing agency for this process, which will include the entire tendering process of registration, submission, opening and evaluation of bids and finally awarding of contract. Corporation is equipped with necessary software and experience as it is already implementing e-tendering in many other state government departments.

Infrastructure and industrial development commissioner (IIDC) Anil Kumar Gupta said e-tendering would make the contract process transparent and error-free. Though provisions for e-tendering already existed, they had not been implemented in the mining department. The changes will also reflect in the state’s new mining policy.

Till now, tendering for the mining licences was being done manually in UP, with mining contracts being awarded on a ‘first-come-first-serve’ basis by district magistrates. There sector was also riddled with complaints of corruption and domination by mining mafia.

Under the new system, the entire bidding process, including registration, coding, bid opening, evaluation and awarding of contract, will be done online.

Hardware support will be provided by Uttar Pradesh Electronics Corporation Limited, while software inputs will be lent by the state technical unit of the National Informatics Centre (NIC). This will leave little scope for allowing fake bids, or last minute entry of bidders based on political or bureaucratic will.

Though the new e-tendering mechanism has been made effective immediately, it will only govern minor minerals — sand, stone chips and Yamuna sand (maurang), among others. Mining licences for major minerals like iron-ore, gold, rare earth elements, zinc and other minerals will continue to be allotted on a first-come-first-serve basis since they are governed by the Mines and Mineral Development Regulation Act of 1957, which is currently under review in the Lok Sabha.

An order to implement the online tendering system was also issued earlier by the Allahabad High Court. In addition, the World Bank had also said it would not grant a development policy loan to UP unless a transparent e-procurement process was put in place.

Following these orders, former chief minister Mayawati had introduced the e-procurement system in January 2008, but the practice was quietly dropped in 2010 without citing any reasons. In 2008, as a pilot project, e-procurement was introduced in seven departments, including PWD, and family welfare, which was plagued by the National Rural Health Mission scam. Later, it was also extended to four more departments in 2009 but dropped hurriedly in January 2010 because it was “too transparent”. This happened even though the same ministers had earlier approved the system after hearing of the project’s successful implementation in Maharashtra and Karnataka. In Andhra Pradesh, Rs 2,000 crore was saved between 2003 and 2006 by taking the e-procurement route.

31 May 2012,  The Times of India

Washington’s I.T. Guy

In Bureaucratic Delays, Civil Services Reforms, Corruption, Electoral Reform on May 30, 2012 at 7:23 am

Shortly after Barack Obama’s election, as progressive activists and Democratic operatives were jockeying for positions large and small within the new administration, Carl Malamud launched a quixotic campaign for an appointment as the director of the U.S. Government Printing Office. The public printer’s task, historically, has been to compile and distribute to the American people the considerable amount of information produced each day by the federal government.

Malamud, who has made a career of exploring and developing the transformative technology of the latter 20th and early 21st centuries, was eager to convert the job of public printer, which traces its roots to Benjamin Franklin, into an Internet-age publisher. He started a campaign for an appointment under the slogan “Yes We Scan.” Rep. Ed Markey, highly regarded in the tech world, wrote a glowing letter to President Obama that described Malamud as “the best qualified individual” for the post. And members of Congress received full-color books that collected supportive “tweets.”

Although Malamud says he went on three White House interviews for the post, he was unable to win the support of the leaders of the congressional committees who oversee the GPO. But lack of an official title hasn’t stopped Malamud from pursuing his open-government goals. “If called, I will certainly serve. But if not called, I will probably serve anyway,” he told The New York Times last February.

Malamud has taken it upon himself to see that all public information — from court decisions to financial disclosures to Army training tapes — is actually, well, public. Malamud, 51, has worked as a network administrator, run technology startups, and taught at Massachusetts Institute of Technology’s Media Lab and in Japan. He has written for Wired and Computerworld, and on one memorable day in the early 1990s, he hooked up the first White House Internet connection. Since 2007 he has devoted himself — and his bank account — to using technology to open the government to the people. He’s the sole employee of an organization, Public.Resource.org, dedicated to that purpose.

These days Malamud lives just outside of Sebastopol, a small town near San Francisco. When I met him in January, he was in New York City to make a presentation at Princeton’s Center for Information Technology Policy about his latest project, a proposed government-run online platform that would allow anyone to easily access all of the laws in the United States, from towns and cities all the way up to the federal level. Nearly everyone I’d talked to in Washington described Malamud as tireless, and he quickly proved them right. We talked nonstop for two hours.

The work of freeing government information often carries the connotation of exposing secrets about nefarious policies or officials’ bad behavior. Malamud, a technologist through and through, approaches it from a different angle, one that can be more palatable to the political class. His art is in figuring out how to free documents that aren’t restricted by secrecy but by the fact that the government has failed to put them online. The conventional wisdom about making all such information publicly available is that it would be too difficult, too invasive, too expensive. Malamud has made it his monumental task to disprove that. It’s a simple idea: If those materials affect people’s lives, they can and should be easily and freely accessible. Citizens must be empowered to see how the government machine works, and especially in the Internet era, there’s no excuse for keeping them in the dark.

Given Obama’s reputation as a our most tech-savvy president to date, and one whose election was due, in part, to online organizing, Malamud is betting that he can get this administration to see the wisdom in open-source government. His success or failure will speak volumes about whether Washington will reap the benefits of the Internet age — or whether the current celebration of technology culture will simply fade away.

***

Malamud’s battle to get government information online is almost as old as the Internet itself. In the early days of the World Wide Web, he ran the nonprofit Internet Multicasting Service (“the first radio station on the Internet”). From his office in the National Press Building in Washington, D.C., he broadcast everything from House and Senate floor debates to United Nations ceremonies, along with the occasional reading of the works of T.S. Eliot. At the time, Congress was pushing the Securities and Exchange Commission to publish online the financial disclosure forms required from corporations so that everyone had access to the information. The documents weren’t secret; Wall Street had easy access to them through paid services. But the SEC complained that putting the corporate disclosures online would cost $40 million and that too few Americans on the budding Internet would be interested in the data.

In 1994, Malamud received a grant from the National Science Foundation and put the financial information online himself for a fraction of what the SEC claimed it would cost. After 18 months, the online service, known as EDGAR, had skyrocketed in popularity, and Malamud seized the moment. He challenged the SEC to take over the site, putting up a note that read “This Service Will Terminate in 60 Days.” The SEC balked, citing a lack of computers and in-house expertise. So Malamud and allies loaned the commission some basic servers, tape drives, and monitors. “We put the computers in the station wagon and drove down to the SEC,” Malamud says. “We configured their T1 line and got them up and running.” The SEC’s EDGAR database is still online and remains an invaluable resource for everyone from high-rollers and journalists to students and senior-citizen investment clubs.

One top Democratic Hill staffer describes Malamud as having “a lot of ’80s punk in him mixed with DIY.” Indeed, his do-it-yourself style often doesn’t look very D.C. His website features a “Seal of Approval” — as in, a smiling cartoon seal. He likes to have friends and colleagues take their picture with a cardboard version of the seal. A program for recycling court records features an animated trash can. His joint project with the Commerce Department — in which he converts VHS tapes of old government movies to digital and posts a copy on YouTube — is called FedFlix, a reference to the movies-by-mail service NetFlix (“Carl likes to name things,” says one Democratic leadership staffer). Many of the 1,900 films Malamud has freed are, well, deeply weird. One Army training film features a female officer lecturing an underling on what a smart fashion choice miniskirts can be.

Other projects include taking several thousand photographs that the Smithsonian claimed copyright on, determining that they were in the public domain, and posting them on the photo-sharing site Flickr. He wrangled with the heavily subsidized broadcaster C-SPAN to put congressional proceedings online without copyright restrictions. His work is imbued with a spirit of whimsy and a history buff’s appreciation for all things government. But of his reputation as a gadfly, he says, “I hate that label. I take a thousand DVDs and rip them and put them online. That’s not a gadfly thing.”

“People are very confused when they first encounter Carl. They try to figure out what his angle is. They think he’s trying to get funding,” says Andrew McLaughlin, the deputy chief technology officer at the White House and a former Google exec. “Instead, he says, ‘Give me a terabyte of data.'” If you think of politics as transactional, the Malmudian equation doesn’t make a lot of sense. For one thing, freelance liberation of government information isn’t exactly lucrative. When Malamud delivered a keynote speech to several hundred people at the Grand Hyatt in Washington this past September, Public.Resource.org had only $180 left in the bank.

Donations from friends in the tech realm keep his organization afloat. Google has given Malamud what he calls pity money. “They knew I was literally going bankrupt,” he says. “I’d maxed out my credit cards.” In 2007, the Omidyar Network, a philanthropic investment firm established by eBay founder Pierre Omidyar and his wife Pam, made a sizable contribution to the cause. Malamud quickly spent $600,000 of it buying court records from the Federal Judiciary and putting them up online for anyone to use. It may seem crazy to execute such a feat for no electoral or financial gain, but it’s the sort of thing people do pretty regularly online — make things and give them away, hoping that other people will do cool things with them. Examples include everything from Lostpedia, the fan-written Wikipedia-style compendium on the ABC show, to Linux, the free, user-created computer operating system. Malamud just happens to think the same philosophy should apply to the federal record.

Malamud’s views on technology and information were shaped by the Internet wars of the late 1980s and early 1990s, when a pitched political battle erupted between governments, international technical bodies, and technologists over whether the development standards behind the nascent Internet would be available, for free, to anyone who wanted to help build the new network — or whether they would only be accessible to a select few experts and at a considerable cost. For a time, it looked like the forces pushing a closed approach were winning. “It just seemed wrong,” Malamud says. For one thing, he couldn’t get his hands on the standards he needed for the technical guides he was writing at the time.

What emerged was a universe of simple, open, universal rules. And you know the rest of the story: an innovation revolution followed. “The open standards won,” he says, “because any kid could download the rules of the game, understand how they work, and make a contribution.” Technologists had fought bureaucracies all over the world — and won. “It taught us,” Malamud says, “that we can make government heel.”

One way Malamud has sought to do that is with his technical expertise. When he pushed C-SPAN to post its government-video archives on the Internet, unburdened by copyright restrictions, his ability to describe concrete solutions to video — conversion and streaming-quality challenges won over C-SPAN Co-President Rob Kennedy. “Our conversations with Carl,” Kennedy says with appreciation, “are often very technical.” But Malamud’s technological orientation can also make bureaucratic obstacles enormously frustrating. “I’ll use the word ‘pure,'” Kennedy says. “He’s kind of a purist about government domain,” referring to the idea that the public should be able to easily see, read, and copy information that has to do with the workings of its government.

“We hold our priests to a higher standard,” Malamud says. A former congressional staffer myself, I suggest to Malamud that, given Congress’ limited resources, progress might be slow going. What are the options in the short term? He replies, “If they can’t afford to put all the hearings online, then they should have less of them.”

***

Malamud was born at the intersection of technology and government. He spent the first five years of his life in Switzerland while his father, noted physicist Ernest Malamud, worked at the famed European Organization for Nuclear Research, better known as CERN. (Malamud the younger returned to CERN in the 1990s while writing his travelogue Exploring the Internet. He was taken to see a young engineer working on an exciting project. “Interesting,” Malamud recalls thinking to himself, “but it won’t scale.” The engineer was Tim Berners-Lee, and his invention, the World Wide Web.) In the late 1960s, Malamud’s father moved the family to Illinois for a job at the Department of Energy’s Fermilab. Malamud earned a bachelor’s in business at Indiana University and dropped out of graduate school there with a gentleman’s MBA before finishing his dissertation in order to build IU’s computer lab, or as Malamud puts it, “do computers again.” Three years later, after working as a computer systems analyst at the Federal Reserve Board, he enrolled at Georgetown Law, but left to start his own computer consulting practice.

Years of consulting, writing, and teaching as well as some run-ins with the current and former staff of Democratic administrations followed. While running the Internet Multicasting Service in the mid 1990s, he was called in to wire the White House. In 2005, when former Clinton Chief of Staff John Podesta founded a new progressive think tank, Malamud came on as chief technology officer. He was not impressed with what he found at the Center for American Progress. “It was an all-Microsoft shop,” he says. “It was crawling with consultants. And it sucked.” Malamud spent two years converting Podesta’s think tank to open-source software built by its community of users, needling the Smithsonian for making exclusive deals with cable broadcasters, and setting up better computers.

In 2007, Malamud filed papers to incorporate Public.Resource.org. His goal was simple: to do whatever possible, from the outside, to make copies of laws, court documents, and other government materials available for free. It’s a ripe field. For example, PACER, the federal court’s online document service, charges 8 cents per page for access to public information. The money goes to a good cause, funding much-needed technology for district and appellate courts. In 2006, PACER generated $58 million in revenue, according to the Federal Judiciary. “I know they need the money,” Malamud says. “I’m sympathetic to that. But that doesn’t give them the right to claim something that’s not theirs.” Malamud has been working diligently to both post PACER documents that people have already paid for and get the courts to do away with the fee. In addition, he has targeted WestLaw and LexisNexis, which charge thousands of dollars for access to annotated legal proceedings.

He’s also focused his attention on the state of Oregon, which has claimed copyright on its statutes, selling copies for hundreds of dollars a pop. The claim of copyright on public law is dubious, especially considering that the constitutional justification for copyright is to spur creativity and innovation. There’s little threat that states are going to stop passing laws just because they can’t sell copies of them. Malamud’s latest victory has been buying and posting copies of building and other safety codes from all 50 states, even though very often they are marked with a copyright from one of the vendors that produces model safety codes. Justifying the gamble is a 2002 decision, Veeck v. Southern Building Code Congress Int’l Inc., that found that once something has the effect of law, it can no longer claim copyright.

Malamud is certainly willing to provoke but prefers to be sure the law is on his side. In response to his call to open PACER, a young activist, entrepreneur, and programmer named Aaron Swartz used a bit of code and a trial program at his local library to download nearly 20 million pages of files, which caught the attention of the FBI. Malamud ended up in an interrogation room with two armed agents. “Unlike my good friend Aaron Swartz and others who are willing to stick it to the man,” Malamud says, “I look very carefully at what we’re doing to see if it’s legal or not.”

In 2010 Malamud is shifting his focus somewhat. In the past, he’s often been a lone operator. Now he wants to evolve into a leader of a large-scale movement to change the relationship between people and the law. Malamud hopes that Obama’s election has created an opportunity to go beyond the decision in the Veeck case and firmly establish as an American principle that laws are accessible to anyone. The movement is centered around a simple idea known as Law.gov: an online platform that will allow anyone to easily and freely access federal, state, and local law; judicial rulings and briefs; congressional hearing transcripts; regulations; and other government materials. Malamud estimates that running something like Law.gov would cost $50 million a year, and he plans to spend the next year convening meetings about it at the nation’s top law schools, tapping into the vibrant movement for free access to law, getting judges on board, and figuring out how to build such a system.

“When I started this, I understood that I might crash and burn,” he says. “The whole point is that even if we crash and burn, the dialogue will be useful.” Indeed, the Law.gov concept is already running into the buzz saw of jurisdictions. Roberta Shaffer, head of the Law Library of Congress, surprised many when her holiday letter to her staff announced that the law library had already applied to direct the Law.gov domain. Shaffer wouldn’t speak with me for this article, but the Law Library of Congress’ Facebook page did post a pointed message: “The Law Library of Congress is a government entity, and has no formal or official relationship with Carl Malamud,” it reads. “However, the Law Library is always interested in working with and receiving feedback from concerned citizens and the organizations with which they are affiliated.” It doesn’t stop there. “Therefore, we welcome and consider input from Carl and many, many others on our public-facing initiatives.” It’s at that second “many” that you begin to think that the Law Library might not be all that welcoming to Malamud’s views on public information.

Still, Malamud believes that if he can appeal directly to the president, he can convince him that opening up access to the nation’s law archives is a worthy and achievable goal. Obama is a former constitutional law professor, after all, and a bit of a technocrat. “We really want to take this football, hand it over to the president, and say ‘go for it,'” he says. But Malamud is not convinced that the Obama White House is populated with true believers. Obama “would do his job a lot better if he did improve that infrastructure,” Malamud says. “But I don’t think that’s something that he gets. I don’t think that’s something that Rahm Emanuel gets. If you look at the [chief information officer] and [chief technology officer] of the United States sitting there with a Dell computer and a 15-inch monitor, you think to yourself, ‘Why in the hell does our CIO not have, like, three 30-inch monitors?'”

It’s time for the government to catch up to technology. Creating free and easy access to court records, congressional hearings, and C-SPAN archives isn’t a partisan issue. But open access is a populist politics all its own, a challenge to the pay-to-play mentality that has allowed the financial world to leap so far ahead when it comes to information-sharing technologies. “You see what they did with it,” Malamud says. “They drove our economy down. They stole all our money. This stuff can very much be used for evil, and it has been, often. The opportunity here is that it can now be used for different things.”

 

13  June 2010,  The American Prospect

How to get children out of jobs and into school

In Bureaucratic Delays, Corruption, Poverty Eradication on May 30, 2012 at 7:08 am

THREE generations of the Teixeira family live in three tiny rooms in Eldorado, one of the poorest favelas (slums) of Greater São Paulo, the largest city in the Americas. The matriarch of the family, Maria, has six children; her eldest daughter, Marina, has a toddler and a baby. Like many other households in the favela, the family has been plagued by domestic violence. But a few years ago, helped in part by Bolsa Família (family grant)—which pays mothers a small sum so long as their children stay in education and get medical check-ups—Maria took her children out of child labour and sent them to school.

The programme allows the children to miss about 15% of classes. But if a child gets caught missing more than that, payment is suspended for the whole family. The Teixeiras’ grant has been suspended and restarted several times as boy after boy skipped classes. And now the eldest, João, aged 16, is out earning a bit of money by cleaning cars or distributing leaflets, taking his younger brothers with him. Marina’s pregnancies have added to the pressure. She gets no money for her children because she lives with her mother and the family has reached Bolsa Família’s upper limit. After rallying for a while, the Teixeira family is sliding backwards, struggling more than it did a couple of years ago.

Their experience does not mean Bolsa Família has been a failure. On the contrary. By common consent the conditional cash-transfer programme (CCT) has been a stunning success and is wildly popular. It was expanded in 2003, the year Luiz Inácio Lula da Silva became Brazil’s president, and several times since; 12.4m households are now enrolled. Candidates for the presidency (the election is on October 3rd) are competing to say who will expand it more. The opposition’s José Serra says he will increase coverage to 15m households. The ruling party’s Dilma Rousseff, who was Lula’s chief of staff, says she is the programme’s true guardian. It is, in the words of a former World Bank president, a “model of effective social policy” and has been exported round the world. New York’s Opportunity NYC is partly based on it.

Much of this acclamation is justified. Brazil has made huge strides in poverty reduction and the programme has played a big part. According to the Fundaçao Getulio Vargas (FGV), a university, the number of Brazilians with incomes below 800 reais ($440) a month has fallen more than 8% every year since 2003. The Gini index, a measure of income inequality, fell from 0.58 to 0.54, a large fall by this measure. The main reason for the improvement is the rise in bottom-level wages. But according to FGV, about one-sixth of the poverty reduction can be attributed to Bolsa Família, the same share as attributed to the increase in state pensions—but at far lower cost. Bolsa Família payments are tiny, around 22 reais ($12) per month per child, with a maximum payment of 200 reais. The programme costs just 0.5% of gdp.

But the story of the Teixeiras and others like them should sound a warning to those who see Bolsa Família as a panacea. There is some evidence the programme is not working as well in cities as in rural areas—and the giant conurbations of developing countries are where the problems of poverty will grow in future.

This concern differs from the usual complaints about the programme in Brazil. There, critics think it erodes incentives to work and sometimes goes to the wrong people. On the whole, though, studies have not borne out these complaints. A recent report for the United Nations Development Programme found the programme did not lead to dependence and that its impact on the labour market was slight. According to World Bank researchers, Bolsa Família’s record in reaching its target audience is better than most CCTs.

Worries about the imbalance between rural and urban benefits may be harder to brush away. Bolsa Família does seem to have a rural bias. Rural poverty is great in Brazil but even so, the programme’s incidence in rural areas is high: 41% of rural households were enrolled in 2006, against 17% of urban ones. In the two largest cities, São Paulo and Rio de Janeiro, fewer than 10% of households are in the programme. Yet these cities contain some of the worst poverty in the country.

Brazil’s success in cutting poverty seems to have been greater in rural areas than in urban ones. Bolsa Família does not publish figures on urban and rural poverty but the official report on the United Nations’ millennium development goals does. The most recent progress report, published in March, said that rural poverty fell by 15 points in 2003-08, much more than the urban rate (see chart 1).

Impressive though they are, these figures, based on household survey data, may understate the fall. Income and spending figures suggest poverty as a whole is lower (they show almost 8m fewer people in absolute poverty). Rafael Osório of the Institute for Applied Economic Research (IPEA) thinks rural poverty rates may well be lower than 12%. If so, Bolsa Família has done an even more splendid job in the countryside than it seems.

Other evidence supports this. Rural malnutrition among children under five in the arid parts of the north-east (one of Brazil’s poorest regions) has fallen from 16% to under 5% since 1996. And since 1992 the proportion of rural children in primary education has caught up with that of city children, while rural enrolment in secondary schools has increased faster than the urban rise (see chart 2).

Because poverty in rural Brazil used to be higher than urban poverty, a larger reduction is both natural and desirable. In the 1990s there were fewer social benefits in rural regions so a nationwide programme was bound to help them more. Moreover, as the ministry of social development, which administers Bolsa Família, points out, the programme was never designed to be run in a uniform way. Local areas use different methods so some variation is inevitable.

Despite all this, the cities remain a problem. In absolute terms there are as many poor people in urban areas of Brazil as there are in rural (because the country in general is largely urban). And there are three reasons for thinking Bolsa Família works less well in the towns.

The first is that, in urban areas, the introduction of the programme has left some people worse off. When Bolsa Família was expanded in 2003, it subsumed an array of other benefits, such as a programme against child malnutrition, subsidies for cooking fuel, stipends for youngsters between 15 and 16, and so on. Though hard to prove (national figures are not available), anecdotal evidence suggests that the family grant can be worth less than the former array of benefits.

Jonathan Hannay, the British secretary-general of the Association for the Support of Children at Risk, a charity in Eldorado, reckons that in his favela households like the Teixeiras used to be able to get the equivalent of two minimum wages (for a family of six) from the old benefit system. The average Bolsa Família grant is a fifth of the minimum wage. One city, Recife, even decided to top up benefits to former welfare recipients when the programme started. More generally, the cost of living in cities is higher than in the countryside, so the family grant (which is the same size across the country) is worth less.

Second, the programme seems to have had little success in reducing child labour in cities. In fact, its record on child labour in general has been rather disappointing, but the urban problem seems more intractable. In rural areas parents take children out of school to help with the harvest. This is, in part, a cultural phenomenon: children learn farming by working the fields. They are often not paid. But their work is temporary and, since children are allowed to miss 15% of school days without penalty, rural kids may be able both to work and stay in the programme.

Child labour in cities is different. Children earn money selling trinkets, working as maids and so on, and their earnings are often greater than the modest benefits from Bolsa Família. So there is an economic incentive to cut school and leave the programme. Of the 13,000 households who lost their grant because of school truancy in July, almost half were in São Paulo alone. The real damage done by child labour happens when the children have no education at all—and that is more likely to happen in cities.

Third, Bolsa Família may affect the structure of households in favelas more than in the countryside. Family benefit goes to the head of a household (almost always the mother). But in densely populated favelas, where—surprising as it may seem—housing is expensive, and where a young woman is likely to stay with her mother after she has her own child, the new benefit still goes to the head of the household, ie, the new child’s grandmother. This is what happened to the Teixeiras. It may, some observers fear, produce a sort of double dependency, on family grant and on family matriarch.

None of this means that Bolsa Família is, on balance, a waste of money in urban areas. As the FGV’s Marcelo Neri points out, the programme shows the state in a new and better light in favelas: as a provider of benefits in places where it has either been absent or present only in the form of brutal police squads.

In addition, the elaborate bureaucracy built up by the programme—every household gets a debit card and the ministry of social protection runs a giant database with every transaction—should make it easier to be more precise in targeting the needy. More important, it should make it possible to use the Bolsa network to do new things, such as helping teenagers of 16 and 17 who are products of the system train and look for work. It should also be possible for cities to top up the family grant. Rio de Janeiro is designing a new programme, called Bolsa Carioca, to do exactly that.

Still, there has been a tendency to treat Bolsa Família as magic bullet—in Brazil and beyond. Once a country has a Bolsa Família-type programme, it thinks it has dealt with the problems of poverty. It has not. Rômulo Paes de Sousa, the executive secretary of Brazil’s social-development ministry, talks about “old” and “new” poverty—old being lack of food and basic services; new being drug addiction, violence, family breakdown and environmental degradation. These “new” problems are more complex. Where they are being overcome, it is taking the combined efforts of the police (to reclaim the streets), new shops and commerce (to make life more bearable), Pentecostal churches (which give people hope)—and Bolsa Família.

Rural Brazil, with its malnutrition and absence of clean water and clinics, is an area of old poverty and Bolsa Família has been wonderfully effective in fighting it. But many of the problems of fast-growing cities, particularly in developing countries, are those of new poverty. And nobody, including the designers of Bolsa Família, has a magic bullet for those.

 

29 July 2010,  Economist