Thoughts on economics and liberty

My Times of India Article of 30 July 2007 on the bureaucracy

Hi, The TOI posted an edited version of my article on the bureaucracy on 30 July under the title, 'Reform the Bureaucracy'. Below is the original article I sent to TOI.

A new bureaucracy for India

We face an inexplicable dichotomy in India between the performance of our public and private sector. While Indian business performance is often second to none, the results of India’s public sector are poor beyond description. Delivering simple things like water, electricity, roads, and education is well beyond our capacity.

This is unacceptable, and an explanation is in order.

I suggest that the blame for our poor public sector performance can be laid on the way our bureaucracy is structured, and on the incentives it faces. I base this conclusion not solely on academic comparisons, but also on the learning acquired by working for 18 years in the IAS and for 7 years in one the very finest bureaucracies in the world, in the state of Victoria in Australia.

When I started off at the middle rung of the Victorian bureaucracy in 2001, one of the most unexpected observations I made was that the performance of senior Australian bureaucrats was significantly better than anything I had experienced in India. No IAS officer knows more in the relevant subject area, can think as well and as strategically, or lead a team of professionals better, than his or her Australian counterpart. Australia also constantly benchmarks against the world’s best. Being just a little better than Bihar is not considered sufficient.

In my book, Breaking Free of Nehru, now available freely on the internet, I have proposed a plan by which India can, without significant disruption to existing service-delivery, acquire a new bureaucracy. The solution hinges on transforming the quality of our Secretaries, and the incentives facing them. The change needs to begin at the top.

The principles driving this plan are:

  • abolition of tenure at senior levels;
  • open market recruitment for each position;
  • contestability of policy advice to political leaders;
  •  market competitiveness of remuneration;
  • extensive delegation of responsibility; and
  • provision of access to the latest technology, information and training.

The validity of these principles can be readily seen by thinking of how a good national cricket team is built.

If our cricket team was not to be selected based strictly on players’ track record, and if non-performers were not to be ruthlessly weeded out, we know that the team would stand no chance on the world stage. An Indian cricket team built on the principles that apply to our bureaucracy would have Pataudi as its captain and Sachin its 19th man, waiting patiently for a turn at the crease. And every Australian school team would soundly thrash this ‘national’ team!

It is true that merit is taken into account at the entry point of the IAS. But merit is not a one-off measure. Shouldn’t a secretary to the government be a person with a track record of world-best performance? Shouldn’t the person be a subject- matter genius, a management guru? A great leader? What has writing a good essay in an examination at age 21 to do with these competencies?

Second, we do not prune our officers for performance and integrity. The legal protections provided to IAS officers are such that even when caught taking bribes, they cannot be punished, let alone demoted for non-performance. With our society thus signalling their invincibility, these officers increasingly become indolent, arrogant and incompetent, and yet, advance without resistance into the position of India’s secretary to government.

While Indian tax payers support this ineffective bureaucracy, thinking perhaps that there is no alternative, advanced countries have used the findings of agency and public choice theory to design systems that reward expertise, leadership, and good performance; and ruthlessly punish bad performance. In doing so, they have transformed their public servants into dynamic agents of change and excellence.

I suggest that we need to begin the desperately needed change by making a fundamental shift in accountability, ensuring that the bureaucracy becomes merely one of the many potential service providers to Ministers. This can be done by Ministers contractually appointing world-renowned subject-matter specialists who are committed to delivering their party’s policy platform, as their advisers. No file would then go to a Minister without these advisers having had a look.

Ministers would then appoint their secretary through an open (preferably global) market competition ? in the first instance, on a two year ‘hire-and-fire’ performance based contract ? paying a salary comparable with what senior MNC executives get in India. Secretaries would similarly appoint their joint secretaries. To ensure continuity, leadership change would need to stop at this point in the first phase. No government employee would lose monetarily for two years while the restructure is embedded.

Each of the newly appointed secretaries would then implement a two-year strategic process to restructure the bureaucracy into ten departments: freedom, defence, justice, external affairs, public finance, physical infrastructure, social infrastructure, commerce, social capital and community, and sustainability. This would involve significant training and redundancy planning.

A Public Administration Act would underpin the restructured, new bureaucracy. Positions requiring significant judgment and leadership skills would be brought under a three-year performance-based contract. Upon the Act coming into force, Constitutional provisions on civil services would be repealed.

By no means am I trying to suggest that this reform will be a panacea for India’s chronic misgovernance. Our political and electoral systems need fundamental reforms, too. But we must begin somewhere, and changing our bureaucratic leadership will, at this stage, make the most difference.

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