by Ajay Shah
The first element of achieving change is a dissatisfied public that is able to speak up. In places like China, freedom of speech is circumscribed and it is not that easy to express dissatisfaction with the way things are going. In India also, freedom of speech is under attack, and particularly when it comes to our problems of crony capitalism, the threats that we face are dire. But in some other fields – e.g. the protests against the events in Delhi – there are no real barriers to speaking out.
When does democratic outrage genuinely change the republic?
Everyone is against rape. Shouldn’t our outrage about rape immediately yield a world where women are safe? Unfortunately, the safety of women comes from the functioning of the complex machinery of laws, police, lawyers, judges, courts. To fix the problem, we have to modify this machinery.
The workings of government are a vast clanking machinery with many moving parts. When you see something going wrong in the outcomes, it isn’t always easy to diagnose the problems of objectives, accountability, and organisation structure that are inducing the problem, and envisioning the change that is required in order to solve the problem. The protester is saying I’m mad because the car does not work. But it takes a skilled engineer to understand why the car does not work and how to fix it.
Sometimes, I see activists who are revulsed at the workings of the dark satanic mills; who emphasise the protesting and downplay the fixing. There is sometimes a mix of frustration and reverse snobbery in play. I think that at its best, democratic society needs both: the activism (that puts a searchlight on things going wrong in society) and the wonkery (that actually gets things done). I respect the work of activists: What is in the searchlight of the public debate is where we have a chance to break free from the tyranny of the status quo. But there is no escape from getting engaged in the plumbing, from figuring out how it works, and coming up with fully articulated blueprints for change.
In a blog post about Occupy Wall Street, Paul Krugman says:
It would probably be helpful if protesters could agree on at least a few main policy changes they would like to see enacted. But we shouldn’t make too much of the lack of specifics. It’s clear what kinds of things the Occupy Wall Street demonstrators want, and it’s really the job of policy intellectuals and politicians to fill in the details.
This emphasises a two-part process: a democratic process throws up an opportunity for change, after which the quality of the change that is obtained depends on the capabilities of the policy intellectuals and politicians.
While voice is a precondition, it is not enough. The Anna Hazare movement set out to conquer corruption and achieved nothing. A great deal of energy was expended, and it generated plenty of television footage, but it came to nought.
A related example: a while ago, there was a public outcry about insecticides in soft drinks. I think the activists got it wrong : the really important target should be the low quality of drinking water, and not corporations peddling soft drinks. We did not have the policy intellectuals and politicians who could think about reforming water and sanitation, who could harness the outrage and get a meaningful reform program going. Hence, that episode has failed to alleviate the insecticide in India’s drinking water.
Example: London’s Great Smog of 1952
The Great Smog of China by Clarissa Sebag-Montefiore in the New York Times tells a great story. In 1952, London was hit by a terrible bout of air pollution, termed ‘The Great Smog of 1952‘. 4000 people died. As she says: Most Londoners who lived through the Great Smog thought it was simply an especially foggy period until the undertakers ran out of coffins and the florists sold out of funeral flowers. This led to a ‘Clean Air Act‘ of 1956.
Look at the Clean Air Act of 1956. It takes a great deal of thinking to go from outrage at 4000 dead, to figuring out how to draft this. There are hundreds of decisions in the 15,389 words of the law, all of which have complex implications in terms of public administration, incentives for private households and firms, and so on. It isn’t about setting up a death penalty for emitting smoke: it is about finding the smallest possible intervention that will get the job done, and one that is feasible given the implementation constraints of government.
Example: India and airports
Circa 2002, the airports were a disgrace. There was a public outcry. The government reacted. Today Bombay and Delhi have decent airports. Why did this work so well?
- The outcome – a high quality airport – is visible and measurable and monitorable. In other fields – e.g. criminal justice system – it is much harder to know where you stand, which reduces accountability.
- MPs and ministers use the airport. In contrast, with the criminal justice system, they have opted out of public systems. In a problem like corruption, many might actually want the status quo to continue.
- Airports are relatively cheap and easy: All you had to do was to offend the employees of AAI. The government wrote contracts with GMR/GVK, and the passengers are footing the bill in terms of paying user charges every time they fly. There was no tradeoff between pushing airports and pushing welfare programs.
Under these circumstances it was possible for the political leadership to achieve airports, and make some in the elite (and themselves) happy, at no cost to their conventional focus on welfare programs and at no cost to anyone other than a few unhappy employees of AAI (who did not even lose their jobs).
There was the difficult problem of building regulatory capacity at AERA. The leadership in AERA of the early years did things better than most infrastructure or financial regulation in some respects. My personal experiences with AERA in recent months have left me enormously impressed at the capabilities in the organisation. But at the same time, the problem that they face is a relatively simple one. To use Pratap Bhanu Mehta’s delicious phrase, building airports in Bombay and Delhi was not a wicked problem.
Example: London’s Big Stink of 1858
Going much further back into time, London went through the ‘Big Stink of 1858‘, where the Thames was clogged with human waste. In the summer of 1858, within 18 days, Parliament drafted and enacted legislation that, in time, made the Thames one of the cleanest rivers of the world.
That’s a remarkable story. As an illustration of the firepower amongst the policy intellectuals: they had Michael Faraday working on the problem! We don’t have a Michael Faraday in our midst; we have yet to match the capabilities of the UK circa 1858.
Some areas are harder than others
Drawing on work by Lant Pritchett and Michael Woolcock, we should apply three tests to understand when doing something in government is hard: (a) Does a public service have a large number of transactions? (b) Do front line workers have discretion? (c) Are the stakes high?
When these three problems come together, building sound public systems is extremely hard. As an example of this thinking, financial regulation is hard while monetary policy is easy. By these three tests, building a criminal justice system is truly hard.
How do good countries grapple with the problem of constructing a criminal justice system? As an example, the John Jay College of Criminal Justice, at the City University of New York, works in this field. It has over 1000 academics working on this one field! In this one field, they have placed more than 2x the number of academics across all fields at IIT Bombay.
There are thus two reasons why making progress on the criminal justice system is hard. Unlike the airports example, these are difficult areas: Large number of transactions, front line civil servants have discretion, and the stakes are high. And unlike the partial success of the equity market reforms, we in India have not laid the foundations in terms of analysis of problems, consensus-building, and construction of key individuals that can play leadership roles in the change.
Example: India’s stock market reforms
Financial regulation is a wickedly hard problem. There are a large number of transactions, front-line workers have discretion, and the stakes are sky-high. If all regulation and supervision were done in government, it would be truly hard to make things work, particularly in India.
Hence, there is a neat two-part separation of the work. The exchange is a unique private body that does regulation and supervision. In the bad old days, the exchanges in Bombay and Calcutta were riven with conflicts of interest and did not do a good job of supervision. This gave us stock market crises in 1992 and 2001, which had large-scale consequences for the country. Calcutta Stock Exchange was a small player in 2001, but the problems there were big enough to matter to everyone.
There was an outcry. This led to a dramatic program for change. A new governance model was put into place at NSE and BSE, where there is a three-way separation between shareholders, managers and trading members. The managers, who perform quasi-State functions in supervision, have no shareholding nor stock options. It worked.
Why did it work? It is important to look back into time. Right from the 1980s, ideas for reform had been tossed about. The G. S. Patel Committee, in 1984, had many of the key ideas of the following 20 years in its report. A little noticed feature of the G. S. Patel Committee report is in the preface, where the research support of a R. H. Patil from IDBI is acknowledged. Many of the names that figure in the story of the Indian stock market in the following 20 years were part of the G. S. Patel Committee; as an example R. H. Patil was the founding CEO of NSE.
As a consequence, in 1992, when the crisis came, there were people and ideas in the system that were ready to respond. The knowledge and consensus that was available then carried us half the way.
Through the 1990s, there was a process of analysis and thinking about policy alternatives. There was a view on how change should proceed, and the conservatives were able to stall it. In the listless years from 1996 to 2001, a lot of hard work got done on fully thinking through the next batch of reforms. When, in 2001, the next crisis came, the Ministry of Finance was able to access well-developed ideas and people that drove the next batch of change.
From the viewpoint of politicians, all change is risky. Fear of the unknown feeds into inertia: Why suffer a political cost for sure, offending the status quo, for a reform that might not work? We improve the probability of a reform being attempted when two properties hold: (a) We have a fully articulated blueprint for change, which is backed by high quality thinking and evidence, and (b) People who can staff the reform effort are available.
From 1980 to 2000, the committee process created a working consensus on what was needed to be done, took new ideas from heretical to mainstream, and built individuals who went on to play leadership roles in achieving the change.
That’s the good part. And yet, in some ways, this has started turning into a failure story of sorts. After 2001, when the big changes fell into place, the policy community stopped focusing on the stock market. It was felt this is a solved problem. There was a lack of institutional memory about what had gone wrong in 1992 and 2001. The three-way separation between shareholding, management and securities firms was not remembered, and has been undone. We are going back to dangerous times.
Why has the wonkery been so weak in India?
Why are the policy intellectuals and politicians of India so weak on the questions that matter for India’s future? There are two elements of an explanation. The first is money.
In India, we spend roughly 1% of GDP on research in four fields : defence, nuclear engineering, the space program and agriculture. But all these fields are of second order importance when compared with the main story of India’s future, which is at the intersection of politics, economics, law, ethics and philosophy. In these areas, we are spending 0.001% of GDP. This ratio of 1000:1 of expenditure between these areas is inappropriate. As a consequence, we are failing to grow the intellectuals and university departments in these fields.
This matters for the wonkery. It also matters for the activism. If we could do better on the education that millions of people get in college, we could have a much more thinking citizenry which could be much more effective in mass political action. Our failures on universities are limiting the feedback loop through which growth should feed higher education and should feed back into better politics.
The second problem is development economics. What little is there of the social sciences and humanities in India matters less than it should, owing to the development economics worldview. Everyone outraged about violence in India should ask why the policy wonks of India are so interested in health, education and welfare programs, and so disengaged with the most basic public good of all, law and order. Why have economists thought the private goods of primary health centres are more important than the public goods of policing and courts?
To some extent, the two problems are related. India has offered little by way of career paths in studying India, and getting engaged in the project of building the republic. The development economics establishment, in contrast, offers a full career path: with Western aid agencies, NGOs, the World Bank, academic development economics, and much nourishment from a socialist government. This gives strong incentives for people to focus on poverty, inequality and welfare programs. This has enfeebled the wonks, for the big questions that India now faces are not poverty, inequality or welfare programs.
As Sunil Khilnani says, the most important task for each of us in India is to get involved in politics, in the sense of taking interest in how the State functions and undertaking actions small and large that will prod it towards better functioning. We have traditionally felt that the greatest threat that we face is that of an apathetic citizenry.
It now appears that we have a more active and participatory demos and this is a great thing. We are seeing profound changes in the world of activism. New technologies are reducing the cost of mobilisation. Millions of people have joined the conversation. We find that they care about core public goods and corruption. The voice of the people is negating the socialist claim of all these years, that what people care most about is garibi hatao and inequality. These are great developments.
But while this is a necessary element for a well functioning republic, it is not sufficient. The surge of policy involvement by citizenry is not getting translated into action on a commensurate scale. The constraint is the weakness of the elite. We lack the policy intellectuals and politicians who are able to pursue wicked problems, diagnose what is going wrong, and articulate a tangible program for change.
The policy intellectuals and politicians are missing in action on the questions that matter. The bulk of the existing policy establishment is focused on poverty, inequality and welfare programs. As Shekhar Gupta has emphasised, the ruling ideology among most politicians is ossified in the thought process of the 1970s. India has moved on, but our political ideologies haven’t.
Intellectuals are the yeast that make a society rise. Our under-development in intellectual capacity limits our ability to translate a moment — like the anti corruption movement – into change. In addition, there is a danger that an irate public that is weak on political philosophy will settle for cartoonish solutions like Lok Pal or Naxalism or a death penalty for rape.
The wonkery is intellectually bankrupt today. The policy intellectuals and politicians who are able to reshape themselves to fit the needs of India from 2013 to 2038 will matter. A greater conversation between the two cultures will also matter greatly, with each cross-fertilising the other. Activism and wonkery are the yin and yang that must work together to build the republic.
This post grew out of email discussions with Joshua Felman.