India needs reforms, not a revolution

Corruption and an unresponsive democracy push the middle class to a brink.

The middle class of India, rapidly expanding and no longer as dependent on state jobs as earlier, has grown louder and angrier over the last few months at the corruption of the present Congress government – which has been in power for seven years.

They have found a voice in a 74 year old social activist – Anna Hazare. His group, India Against Corruption, has asked for various demands to be fulfilled regarding a national ombudsman – “Jan Lokpal” – by August 30th, failing which Mr. Hazare will continue his (by then) two week long fast, presumably unto death. The government, probably foreseeing this confrontation, had earlier jailed him on a technicality – but public opinion correctly forced it to release Mr. Hazare.

Yet the Congress government, for all its faults, must think hard before blinking. Mr. Hazare, a well-meaning idealist no doubt, should be free to hurt himself as he pleases, but an agency with unprecedented powers of investigation and prosecution cannot be created exactly according to the demands of any one constituency. Not to mention that passing such a bill in haste could actually increase corruption – any ombudsman risks getting captured by the corrupt; after all the present government managed a tainted appointment to the Election Commission, and almost got away with the same at the Central Vigilance Commission. Moreover, even if the proposed ombudsman remains relatively clean, its prosecutions in a country of India’s size will certainly be selective and colored by political biases – even if not by ulterior motives.

The only lasting solution to corruption – as un-sexy as it sounds – is economic, administrative, and political reforms. Consider the economics first. There is a very clear correlation across countries between economic freedom and less corruption. Indeed, many of the recent scams – about spectrum, land and other natural resources – have been because discretionary allotments were employed instead of transparent auctions. More chronic, retail-level corruption is also because of the state being involved in almost all areas of the economy. Indian politicians, twenty years after its first major economic reforms, still cannot give up on the easy patronage networks provided by, amongst other things, the hundreds of mines, hotels, textile units, banks, colleges and hospitals which are either directly run by the state or so over-regulated that you cannot run it without political “friends”. It is as if the “new public management” theories of where and how the state must interfere – adopted by even many center-left politicians of the West – never hit Indian shores.

Unfortunately, the Congress has completely stalled on economic liberalization, and instead is pushing for universal entitlements on employment, food, education and healthcare. Invariably, these programs are centralized, statist and averse to leveraging private competition for delivery. While fiscal deficits because of the global slowdown has forced the government to partially modernize these programs with better technology, the underlying push remains leftward. These schemes would need many more unionized bureaucrats and teachers, and with their salaries much higher than their private sector counterparts – corruption becomes inevitable in the various layers of their recruitment chain, incentivizing the successful ones to recoup their “investments” and angering the losers at the unfairness of it all.

Then consider the political incentives for corruption. Individual politicians are not allowed to spend more than three cents per voter for campaigning! While parties can spend more, they still have to raise it in dubious ways as lobbying is not legalized. As a result, some have called for state funding of elections – but that is likely to make the situation worse by entrenching incumbents and not hitting at the root cause of corruption, which is the arbitrary and centralized power amongst Delhi’s politicians to dole out policy favors.

Also, the unresponsive nature of the Indian democracy precipitates brinkmanship. In a mature democracy, a government can defuse any shrill demand by simply introducing the relevant bill in parliament and letting members vote according to, amongst other things, their constituents’ wishes. In Mr. Hazare’s case, that would have forced his supporters to pressure individual representatives and the movement’s real strength would have been tested. Unfortunately, Indian democracy – while most certainly not being a sham – is a shallow one. There is no democracy within parties and an anti-defection law empowers party bosses to regularly force its members, at the risk of being expelled from parliament, to vote according to their whips. This gives the executive significant power, while parliament becomes toothless to hold it accountable.

Mr. Singh cannot now introduce the demanded bill and be seen as not issuing a whip just for this bill. A fact worth noting here is that one of the authors of the anti-defection law, a law which was also – surprise – meant to reduce corruption, is now one of Mr. Hazare’s prime backers. Good intentions can indeed have some very unintended consequences.

In the short term, the government must involve the opposition to send a unified message to the public about the dangers of passing radical institutional upheavals overnight. The debate needs to be expanded to all parties and constituencies – not just Mr. Singh’s government and Mr. Hazare’s group.

One response on “India needs reforms, not a revolution

  1. Surya

    Looking at this now, all the self-righteousness seems irritating. The bill is hollow, has some dangerous provisions, and some of the statements from the civil society wallahs are undemocratic to say the least. But what is the worst that can happen? This Tamasha too will die out after a few days. India has lived through Indira Gandhi and Mandal and Ayodhya. This is nothing. Probably something good might even turn up. BJP would probably abandon the communal platform once and for all and see the value of the development plank. Like Steve Jobs would say, we cannot connect the dots now. Let it all play out. In retrospect we will be connecting the dots one day and saying how we were all wrong (or right).

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