Thoughts on economics and liberty

Category: Public policy

My non-prize entry for 2018 Richard Koch Breakthrough Prize on the housing supply problem of England

A few weeks ago I spent a few hours to propose an entry to the Breakthrough prize on the housing problem in the UK, hosted by the IEA.

I’m informed that 350 entries were received. Mine was not shortlisted, although I must say that I’m a bit surprised, given I don’t believe there is any better solution than the one I’ve suggested. But there is a problem: My paper involves the most stinging criticism possible of the town planning “profession” and anyone in the judging committee with even the remotest “training” in that discipline would have found my paper extremely confronting. Nevertheless, I remain open to learning new things from the prize winning entries which will be announced tomorrow in London.

I will provide my comment on the winning entries as soon as I come across them.

Btw, I’ve not changed a single word in this (download the original PDF entry here), although I know that there is at least one typo in the entry.

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The cats can do without the monkey, thank you!

Executive Summary

Real house prices in the UK are now roughly double the level they were in the decades preceding the year 2000. To economists the cause is clear: the fatal conceit of planners who second-guess markets.

The planning system came inadvertently to its riches in 1948 as an arbitrator on the lines of the fabled monkey who mediated a dispute between two cats. Since then its erratic actions and grandiose visions have suffocated the people but the true impact of its conceit was not obvious till the late 1990s because cities were expanding outward. Since then, growth has turned inwards to the CBD and now the restrictions imposed by the planning system are blatantly visible – even to non-economists.

The remedy is to get the planning monkey out of the way and use markets to resolves our differences. We can let immediate neighbours directly negotiate with developers and, to address concerns of the broader community, a charge can be imposed by local councils on developers to fund a local growth plan that addresses the key negative effects of densification. The planners can then focus on the few things they actually do well.

 

Cities have one main function: economic access. They provide labour and retail markets to business and jobs to labour. Through the productivity they unleash, cities enable people to climb out of poverty. Cities are also great for the environment since they shrink man’s footprint on the planet despite a growing population. Any beauty, cultural values or amenity that remain are an interesting appendage, like a dog’s tail.

But over the past 20 years many Western cities, including in the UK, have failed to enable jobs and prosperity because the planners have used the tail to wag the dog. Planners have completely lost the plot about cities.

Over these past 20 years the rise of knowledge industries has increased the demand for housing in the inner city. But planners have imposed huge hurdles on development that have made house prices impossibly high in job-rich areas. Figure 1 shows that real house prices remained flat (kept pace with inflation) between 1975 and 2000, at an average real price of around £104,000. But after 2000, prices skyrocketed, with the average real house price of around £202,000 despite a sharp correction during the global financial crisis.

Figure 1: Real house prices in the UK remained flat till 2000 but then skyrocketed

Source: Nationwide Building Society[i]

As well, unjust economic inequality is rising, as the wealth of already well-to-do incumbents in inner city suburbs is shooting to the sky while the less fortunate are forced to stagnate on the city fringe. Intergenerational economic mobility is being dampened and long-term social disadvantage settling in. Further, ‘[s]ince 2010, home ownership has fallen to a 30-year low, rough sleeping has more than doubled, and the number of new homes being built still hasn’t recovered to pre-recession levels’[ii].

The cause of this grim situation is self-evident to economists who have, for a very long time now, been sceptical of the town planning system. But their concern was not shared widely since not many people understand the impossibility of central planning. Moreover, a unique coincidence of factors kept housing pressure out of the inner city and planners were not able to do too much harm till around 2000, when things changed and the planning system’s failings hit the fan. Today, hopefully, the cause of the situation is clear enough to everyone and society will be willing to authorise a root and branch reform of the planning system.

A short recap of how we got here

Planners in the UK received the power on 1 July 1948 to provide planning permission for most new developments. Unfortunately, no serious policy thinking had been done prior to this decision. No one knew the precise problem society wanted planners to remedy and whether doing so was even feasible. After all, prior to 1948, the markets and local governments had been perfectly competent to decide what would be built and where it would be built. There was no shortfall of creativity and beautiful buildings even as cities helped banish poverty.

A lack of clarity about the basic purpose of planning is evident in the discipline’s textbooks which include virtually everything under the sun within their scope. The books also display a great pretence of knowledge about their ‘expertise’, which is largely the knowledge of self-created and pointless bureaucratic processes, and hoops and hurdles.

Arguably, town planning made some sense in the post-World War II era when it guided the rebuilding of war-torn cities and raised funds from developers for essential local infrastructure. Ronald Coase – who was awarded the Economics Nobel prize in 1991 – agreed in 1959 that the separation of industrial and residential uses by the planning system is an efficient way to deal with polluting and hazardous industries.[iii]

On the other hand, F.A. Hayek – who was awarded the Economics Nobel prize in 1974 – was not so sanguine. In a chapter devoted to housing and town planning in a 1960 book, he worried that planners have a ‘desire to dispense with the price mechanism and to replace it by central direction’[iv]. This was scathing criticism but it rolled off the backs of planners who did not understand what he was saying. Hayek was basically saying that planners were violating the entire learnings of two hundred years of economics. Town planners ignored Hayek and brashly went about their new business, churning out (what some would say were delusional) strategies, visions, objectives and processes.

The adverse impact of planning on house prices remained somewhat muted till around 2000. But that is only because in the post-World War II era, cities wanted to sprawl. Manufacturing was scattered in the regions and outer suburbs, the baby boomers wanted open homes in job-rich outer suburbs, and the car enabled workers to commute on relatively uncongested roads.

But the direction of city growth reversed with the onset of the IT revolution of the 1980s. Since the late 1990s manufacturing has moved from the West to Asia, particularly to China, and knowledge and information technology industries have taken its place. Knowledge industries depend critically on agglomeration effects and have a strong desire to locate close to the central areas of cities, often near the major universities where they can tap into a rich seam of labour. The advent of big data and artificial intelligence has accentuated this trend. In the meanwhile, jobs have dried up in rural areas with agricultural productivity having shot up across the world.

Today, all roads lead to the CBD. In some Western countries virtually half the high-value new jobs are being created in the CBD and immediate surrounds.

Completely ignorant about what is going on, planners have continued to extend urban boundaries even though that’s not what the markets are signalling, or they have imposed housing targets on councils without the slightest understanding of the incentives that force councils to oppose densification.

The town planning profession vigorously denies its culpability in causing this mess. It points its finger at interest rates and demand side factors to explain the problem of housing affordability. But its arguments don’t stack up. The cost of construction materials has been falling, and low interest rates should have boosted housing investment to meet any increase in demand. Many new houses have indeed been built – since people have no choice but to live somewhere – but many of these have been built in the wrong place: in places without access to jobs.

Planning must limit itself to matters of life and death

It was a huge mistake to hand over enormous power into the hands of people who do not understand what cities are and how the economy and markets works. Today, we have essentially two options: to limit the planning system to things it is capable of doing well or to disband it and start afresh.

In considering what we must do we can take Hayek’s prescient advice. In his 1960 book he suggested, in relation to town planning, that we consider ‘practical measures … to cause the (price) mechanism to operate more efficiently by making owners take into consideration all possible effects of their decisions’[v]. This advice holds the key.

We can begin by agreeing that planners should be allowed to continue doing a few things. There are genuine negative externalities from industrial pollution and hazards which bargaining may fail to address. For such cases an ad hoc line in the sand (regulation or tax) could potentially be helpful, although more efficient solutions might well exist in individual cases.

But it is on the matter of differences in taste and preferences and perceived conveniences or inconveniences, that planners must get out of the way. The view that there are ‘negative externalities’ from mere differences in perspective (preferences) is a category error that takes us down a public policy black hole. While some externalities are real and dangerous, others are merely a difference of opinion. One man’s meat is another man’s poison.

Our likes and dislikes must not be the business of government. Our act of living is not toxic. Our kitchens do not spew plumes of toxic smoke. And once public sewage systems are installed, our homes do not constitute a public health menace.

Not everyone cares if they get sunshine in their bedroom or even if they have a window. Some people would happily sleep in a bedroom without a window since they work in the CBD at night and want to come home to sleep in darkness and peace. And not everyone wants a big bedroom or an attached toilet. They may be on a minimum wage job in the CBD and are happy enough to climb the ladder of opportunity by living in a tiny room in the CBD. Likewise, some people can sleep through noise and may choose to pay the lower rents in apartments built in crowded, noisy streets.

Planners must not tell us what we can or cannot like or how we manage our money. Their interference in matters of preference is a direct attack on human liberty.

Instead, we must facilitate people to engage in commercial exchange to resolve their preferences.

Consider the following interested parties in the residential housing market:

  1. the developer or proponent;
  2. the land owner (sometimes the same as the developer);
  3. the immediate neighbours (generally five) who may experience a direct reduction in their property value from densification; and
  4. the broader community, which needs compensatory infrastructure to mitigate any significant negative effects from densification.

Notice that planners are conspicuously absent from this list, and for a very good reason: their preferences matter stuff all.

The first three parties in the above list are capable of resolving their issues through private bargains. The costs of doing so may be high but are not insurmountable. The fourth group in the above list can be dealt with by the councils charging a fee from developers. The resulting solution would mimic the market. In any event, there is no scope in this entire business of housing approvals for planners to weasel in their preferences and ‘visions’. The mental gyrations of our servants, the planners, must not be seen or heard during this entire process.

We don’t need planners’ glossy documents (paid by our taxes) to tell us what we should want. Presumably we should worry ourselves about sustainability, future proofing, community, amenity and other jargon – most of which even two planners can’t agree on. The plain and simple fact is that we the people (markets) are perfectly competent and capable of considering all these fancy factors and many more, in the blink of an eye. Markets make unbelievably complex calculations that balance an infinite variety of preferences, budget constraints and expectations.

Hayek had warned the West repeatedly about the slippery slope. In the case of planning, the bottom of the slope was reached quickly. Today we live in a full-fledged mad hatter world. No one can predict what will happen with a planning application. Sometimes the NIMBYs will win, sometimes the developers. But this we can guarantee – that the society will always lose. And that the mad hatters will get paid big bucks from our taxes regardless of the outcome.

It is not just one level of government we are talking about. The various levels of government squabble with each other at our expense. This is what Housing secretary Sajid Javid said in March to local governments – that he would be ‘breathing down your neck every day and night’ to ensure home-building targets were met[vi]. Really? Will Javid’s bad breath fix the housing problem?

Planners must limit themselves to matters of life and death and leave the rest to the people. We do need a method, though, to show the cats how to bargain with each other without involving a monkey.

But the NIMBY problem!

NIMBYs are said to be evil people. They first banish potential new residents to the outskirts. That’s not all, for living on the outskirts would be fine if high speed rail came into the CBD. But NIMBYs don’t like overhead rail lines and insist on pushing them underground at ten times the cost. The NIMBYs are perfect dogs in the manger.

But NIMBYs are not imagining things. They do have real property rights in their neighbourhood. After all, property is what the market thinks is property, not what some law dictates. Markets value the location and ambience of a property, and therefore, the entire package is property.

Some NIMBYs lose a lot from densification and it feels to them that their property rights are being confiscated. As a property-owning democracy, we must defend NIMBYs’ property rights.

The most important point about NIMBYs, however, is something quite different. This, only economists understand. But once this is more widely understood, it leads us to the light at the end of the tunnel.

There is no representative NIMBYs. They are all different. Some are so wedded to their lifestyle that no amount of monetary compensation would budge them, or at least that’s what they claim. Others can, however, be easily appeased by the provision of additional public parking facilities and a new public garden, and possibly a bit of money handed over to them outside the public gaze. Still others might be quite indifferent. There are old houses belonging to children of recently deceased residents who simply want to maximise the value of the land and divide the proceeds amongst themselves. And there are yet others (the YIMBYs) in the same area who want densification. After all, man is a social animal. Living closer together yields many benefits including better retail centres, restaurants and cultural avenues, more job opportunities, more baby sitters and nannies, more marriage partners, and more eyes to watch and hence greater safety.

Now the way to break the NIMBY cartel should be obvious. We should avoid taking the extremist NIMBYs head on, and work, instead, with other residents.

Proposed market-based remedy

As a first step, a local council would need to do some homework. It would need to decide upon an area, let’s call it a growth zone, within which higher density would be permitted if the council receives money to build compensatory infrastructure. The council would then prepare something like a precinct structure plan that includes a full suite of noise mitigation measures, additional parking and parks, better sewage and storm water to fully mitigate the effects of densification on the average resident of the community. The council would consult with the community during this process.

Let’s assume that £10 million will fund the required compensatory infrastructure to accommodate 1000 additional medium to high density dwellings. A ‘bond’ would then cost £10,000 per dwelling.

The council would then impose the following two requirements on developers.

Requirement 1: Approval from immediate neighbours: Developers would need to provide written consent from the immediate neighbours of the property they want to develop. Any monetary or other bargains must occur behind the scene. A more sophisticated version of this process could involve the government creating a platform for two-sided auctions (including combinatorial auctions) in which developers and residents can express their preferences anonymously. Developers will then be able to prioritise development in lots where the immediate neighbours are happy with less compensation.

Requirement 2: Purchase of bonds: Planning applicants would be required to attach the requisite number of bonds to their application. Obviously, the total amount that developers would be willing to pay the immediate neighbours would be limited by this requirement to compensate the broader community, but since developers would know the bond price in advance, they would construct their negotiations accordingly.

Once these two requirements are fulfilled, planners would dutifully approve the planning permission. Everyone could then live happily ever after. The end.

There are, of course, many details that need to be added to this proposal and many questions that need to addressed, but this summary should provide assurance that a market-based system can indeed work.

Conclusion

The current planning system is not fit for purpose. It is arbitrary and whimsical. It either attacks NIMBYs’ property rights or the economic and physical liberty of new residents who want to live closer to where the jobs are. Its central planning approach is fundamentally impossible and imposes a huge cost on society.

The proposed market-based remedy involves low cost bargaining with immediate neighbours and funding compensatory infrastructure for the affected community. Almost everyone can live with its outcomes. The consequent economic boom in the UK should take everyone by surprise.

Is this remedy politically possible? This can be sure that developers will love it for it opens up huge development opportunities and eliminates planning uncertainties. More importantly, most residents in NIMBY-infected areas will love it. Only a few recalcitrant NIMBYs and ‘visionary’ planners will object. Both of them can be safely ignored.

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[Word count including title and executive summary but excluding the entry number/ name/ address, footnotes and this sentence:  2,992]

Endnotes

[i] Nationwide Building Society. Data available at:  https://www.nationwide.co.uk/~/media/MainSite/documents/about/house-price-index/downloads/uk-house-prices-adjusted-for-inflation.xls. [Accessed 12 September 2018].

[ii] Press Association. (4 March 2018). ‘Nimby’ councils failing to build enough homes will lose planning powers, says Javid. The Guardian. Available at:

https://www.theguardian.com/politics/2018/mar/04/nimby-councils-homes-lose-planning-powers-sajid-javid [Accessed on 12 September 2018].

[iii] Coase, R. (1959). The Federal Communications Commission. The Journal of Law & Economics, 2, pp.1-40.

[iv] Hayek, F. A. (1960). The Constitution of Liberty. Chicago: University of Chicago Press.

[v] Hayek, F. A. (1960). The Constitution of Liberty. Chicago: University of Chicago Press.

[vi] Press Association. (4 March 2018). ‘Nimby’ councils failing to build enough homes will lose planning powers, says Javid. The Guardian. Available at:

https://www.theguardian.com/politics/2018/mar/04/nimby-councils-homes-lose-planning-powers-sajid-javid [Accessed on 12 September 2018].

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A 2016 paper by Forum for Electoral Integrity, Lok Raj Sangathan, and Nalaya India on electoral reforms

Someone had forwarded this paper to me a couple of years ago. It missed my attention but I chanced upon it today. Given shortage of time, I’ll publish it here now, but review and comment when I find time.

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Elections sans Integrity-Democracy in Deep Distress

[Paper based on deliberations at Delhi Roundtable held on 17 June, 2016: Jointly organized by Forum for Electoral Integrity, Chennai; Lok Raj Sangathan, Delhi and Nalaya India, Chennai]                                                                         

Backdrop

Country’s track record of timely and efficient elections has given considerable prestige and legitimacy to India’s democratic polity and its politicians who are the beneficiaries. But the moot question is what kind of people gets elected? Are they ‘leaders’ or ‘dealers’?  Nearly a third of elected representatives face serious criminal charges such as murder, rape, abduction and offences relating to moral turpitude.  Almost all of them have amassed wealth much beyond their known sources of income!

Successive governments did not lift a finger to set right things. However Supreme Court intervened and in its judgment in March 2003 directed all candidates contesting elections to file affidavits before the Returning Officers stating their criminal antecedents, assets and liabilities. This was meant to curtail criminal and money-power in elections. The same court on 09 July 2013 struck down Section 8 (4) in the Representation of People’s Act (RP Act) allowing MPs and MLAs to continue to be elected representatives even after they get convicted for criminal offences.  On 5th July 2013 Apex Court decreed that ‘Freebies shake the root of free and fair elections to a large degree’ and directed the Election Commission (EC) to frame guidelines for election manifesto.

But all these have come to naught and the rot is deepening. We saw this glaringly in Tamil Nadu Election-2016 where money-power and freebies were in full flow. Role of money-power is described by EC itself in its order rescinding election in Aravakurichi and Thanjavur assembly constituencies: “decision is based on the Commission’s assessment about the vitiated atmosphere in the constituencies created by the illegal use of money-power to allure the electorate by unethical and unlawful means resorted to by the candidates and the parties.” The word ‘vitiated’ appears at several places in the Order. What was written of these two constituencies was applicable mutatis mutandis to almost the entire state!

EC’s Model Code of Conduct-2014 (MCC) on Freebies directs Political Parties and Candidates to “avoid making those promises which are likely to vitiate the purity of the election process or exert undue influence on the voters in exercising their franchise”. Also in the interest of transparency, level playing field and credibility of promises, manifestos should “reflect the rationale for the promises and broadly indicate the ways and means to meet the financial requirements for it”.

Election Manifesto released by the AIADMK Party on 05 May 2016, just 10 days before the polling date, was in total violation of the Supreme Court Judgment and the MCC. Earlier DMK party had issued Manifesto with some freebies. EC did not take any action on these blatant violations except issuing a belated and weak Notice to these parties that too on the representation from civil society. No further action was taken, polling proceeded and government was installed in power. Post-poll surveys clearly revealed that the massive freebies in the Manifesto were the clincher.

Added to these was the serious matter of seizure of huge cash of Rs. 570 crores at Tiruppur just two days before election (around mid-night on 13/14 May 2016) that had raised suspicion of humungous electoral bribing. The totally unbelievable story of this money (supposed to belong to SBI) moving from Coimbatore to Vizag is yet to be fully investigated. On the orders of the Madras High Court CBI is looking in to it. But since this happened in an election-bound state under the virtual administration of EC it is their responsibility to ascertain facts and initiate stringent action.

Why the rot?

Major factor is the attitude and approach of political parties who are a law unto themselves. These entities have failed to bring about inner party democracy, transparent funding and functioning as well as merit-based selection of candidates free of criminal and corruption taint. The Political Parties (Registration and Regulation of Affairs) Bill, 2011 drafted by Association for Democratic Reforms is in cold storage. What is worse, political parties do not even want to be considered as ‘public authorities’ and have willfully defied the RTI Act. They liberally field criminals and corrupt as candidates seeking election. They indulge in electoral corruption of alarming proportion that includes individual bribing and vote-buying as well as mass inducement through lavish showering of fancy/consumer goods as freebies in the election manifesto. All these have made the electoral field an uneven cesspool.

Being controlled by these very political parties Central Government is averse to any change. Proposals from EC are pending for decades. Though all kind of reforms are being brandished to make India a super-rich and super-clean country there is not even a whisper about electoral reforms to clean-up and enrich India’s democracy which is our greatest asset. Most glaring instance is rendering the SC mandate of filing of Affidavit by the candidates into a damp squib because Government has failed to amend rules to disqualify corrupt and criminal elements at the thresh-hold. Political parties continue to field these politicians who become MPs/MLAs even after filing false affidavits about their criminal record and illegal wealth! And most of them get elected!

Constitutional mandate and Supreme Court judgments hold EC squarely responsible for conducting fair and free elections, which is a basic feature of the Constitution. For this Commission is vested with legal (RP Act) and plenary powers (Article 324 of the Constitution). Yet EC is finding itself between a rock (political parties) and a hard place (government).  For instance though Section 58A of RP Act empowers EC to countermand election for ‘booth capturing’ it has not been extended to ‘vote capturing’ through bribes and freebies. Bullied by political parties and disheartened by government’s indifference, EC has compromised on electoral integrity. Result is the sharp diminishing of India’s democracy. However in TN Election-2016, exercising plenary powers, EC rescinded elections in two constituencies due to widespread bribing of voters. EC also issued Notices to the two major political parties on the lavish promises of freebies in their election manifestoes. One has to be thankful for small mercies.

Issues & Posers

We need to look at India post Liberalisation, Privatisation & Globalisation regime starting from early nineties. No doubt the country has made great strides in many fields and is now being heralded as world’s fastest growing economy. 25 years down the line we are in the grip of a market economy. Rich have become richer, black economy has boomed and there is extreme poverty and inequity.

In these years, election technology and management has advanced with EVM’s, IT solutions and vast array of observers, surveillance/raiding teams and Para-military forces. But democracy has decayed. Among the three players in the election field, rule-less political parties are going from strength to strength, rule-bound government is indifferent and EC is paralysed. Another key and powerful player, judiciary is treating election in a casual manner and would not decide election-petitions for ages, making it a mockery.

In all it turns out that election is a mere exercise to facilitate political parties to capture and retain power by fair or foul means.  Fundamental principles of democracy such as electoral integrity and level playing field do not seem to have much space in the scheme of things.

We are seeing this happening right before our eyes. In TN politicians bought people’s votes and became MLAs. In many other states MLAs sold their votes to money-bags to make them MPs (Rajya Sabha). MP (Lok Sabha) election is no better. Grassroots elections (Panchayats and Urban Local Bodies) are even worse. India’s ingenuity for jugad has morphed world’s largest democracy into world’s biggest Satta Bazar!

What needs to be done?

Post-TN Assembly and Rajya Sabha elections a Round Table of eminent activists, senior politicians, and civil society leaders along with representatives from the EC was held at Delhi on 17 June 2016. The Round Table was attended by leaders of political parties, former senior civil servants, delegates of activist organisations, representatives of the Election Commission of India and others.

Prominent among the participants are: Justice Rajinder Sachar (PUCL), Com D Raja  MP (Communist Party of India), MG Devasahayam (Forum for Electoral Integrity), SY Quraishi, former CEC, Prof Jagdeep Chokkar (Association for Democratic Reforms), YP Anand (former Chaiman, Railway Board), Raghavan Srinivasan (Lok Raj Sangathan), Prakash Rao (Communist Ghadar Party of India), Dr Sanjeev Chhiber (Naya Daur Party), Dr ND Pancholi (Citizens for democracy), Prof Bharat Seth (former Professor, IIT, Mumbai) , Suresh Babu (Naalaya India), Rajarajan (Gandhi Initiative for Social Transformation), Ms. Sucharita (LRS), Ms. Renu Nayak (Purogami Mahila Sangathan),  Dr Venkatesh (Committee for Judicial Accountability & Reforms), Shri Mohammed Arif  (Welfare Party of India), Dr. M D Thomas, (Institute of Harmony and Peace Studies), Shri Amit Kumar (National Alliance of People’s Movement), Adv Vishwajit Singh (Reclaim India) and representatives from Election Commission – Dr. NC Swain and Shri SK Rudola.

Wide-ranging discussion took place among participants, particularly in the light of recent experiences in the Tamil Nadu assembly elections. Several concrete suggestions emerged from the Round Table which have the potential to bring about far-reaching changes in the electoral system that can pull India’s democracy out of its deep distress. These are:

  1. Selection process of candidates by political parties to contest elections should undergo a paradigm change. India needs a system wherein people can select and elect their representatives who can be recalled if they don’t perform or indulge in corrupt practices.
  2. We need to develop mechanisms at the level of the constituencies where an elected Constituency Committee will involve the electorate in the process of selection of candidates. In open meetings of this Committee, merits of potential candidates should be discussed and selection made. These selected candidates will be known and trusted by the people.
  3. As of now electoral arena is totally biased in favour of the established parties who have a permanent symbol that can be easily recognized by the voters. Since this is not available to smaller parties who want to enter the fray to provide alternatives they are put at tremendous disadvantage. Either all registered parties should be assigned permanent symbols or none. Every party should get different symbol for different election. This could usher in level playing field which is the biggest bugbear in today’s elections.
  4. Political parties should submit their draft manifestos to the EC within seven days of announcement of election. Only on its certification by EC that it is MCC compliant can the parties make it public. Mind-boggling freebies in the election manifestos in violation of MCC should be electoral offence punishable with de-recognition and disqualification of the concerned political party from contesting elections.
  5. Corporate funding should be banned since it brings undue influence of money power. This was done for a brief period in the late 1970s. It was again permitted under the plea that they have as much right to fund elections. This ban should be brought back.
  6. The present first-past-the-post system is an anachronism wherein an individual/political party polling hardly 25% votes get elected and rule the roost. India should adopt the German model of list-based proportional representation system.
  7. Present election expenditure limits is very high and works in favour of the money-bags who are only interested in capturing power and against those with ordinary means who have public interest at heart.
  8. What is worse, there is no limit to expenditure by political parties. In the event well-endowed political parties with deep-pocket and corporate support indulge in extravaganza and bribing thereby totally screwing the electoral field. This must be put an end to immediately.
  9. To prevent criminals from getting elected, MCC must demarcate political activists from criminals. For this purpose Section 8 of the RP Act needs to be amended. It may not be foolproof but at least there can be a check.
  10. The appointment of Election Commissioners should be by a Collegium rather than being left to the whims of the government of the day.
  11. Media, particularly the vernacular TV that reaches almost every home and hearth is playing havoc to the electoral process. By their tirade and over-reach they effectively block emergence of any alternative outside the established power-wielding ‘cash-rich’ parties. This is so because these media is being controlled by big corporate houses and political parties themselves. It is they who decide the winner through opinion polls and creating non-existent ‘waves’ about a particular party or messiah. This is detrimental to the very foundation of democracy. EC should rein them in and ensure equal access to media for all players.
  12. Party politics has drowned good governance. EC has power for about two months to control the parties. EC should have power throughout and not just at the time of elections.
  13. People may be accepting cash-for-votes since they know that they will not get anything after the elections. So they feel take whatever is given before the elections. Political parties are reportedly funded by mafia and it is their money which is used to bribe the voters. EC should take action to stem this before, during and after the elections.
  14. Mafia-money used for bribing voters is accumulated and stacked over a period of time and it is not possible for EC to unearth it in a time-period of two months. This is the responsibility of Income-Tax department and Enforcement Directorate. EC should evolve a mechanism to involve these agencies over longer period instead of doing fire-fighting at the nick of time.
  15. Election petitions should be finally disposed of and the guilty candidates disqualified within six months as stipulated. This is possible only if Fast-Track courts are set up with streamlined process and continuous hearing. In the alternative EC can be vested with this authority since it already enjoys the status of Supreme Court.
  16. There is need for an all India non-government body, whose main objective would be to oversee the process of political integrity. This body should go into the whole issue of political funding. It can check the character and experience of the proposed candidates and can keep a watch on the entitlements of elected representatives. This body can work with EC to bring about political and electoral integrity.
  17. People-at-large are ignorant about the basic tenets of democracy and the purpose of holding periodic elections. They think it is just about political parties capturing power. Massive education and awareness building is required to undo this. Democracy and electoral process should be made part of the school and college syllabus in all streams of studies.

Consensus: Election Commission should act as Catalyst

Consensus is that due to near-total lack of electoral integrity, India’s democracy is facing serious decay. Neither political parties nor governments are willing to take the necessary remedial steps to pull democracy out of this morass by ensuring stringent standards of electoral integrity.

But all hopes are not lost because “We, the people, who gave ourselves the Constitution” have not given this responsibility to the government or political parties but to the EC.  People have also bestowed the Commission with legal and plenipotentiary powers.  In a catena of judgments Supreme Court has further strengthened it by ruling that “conducting free and fair elections is the basic feature of the Constitution” and this is the responsibility of EC. It is therefore imperative on the part of EC to function as a catalyst to rally the forces and ensure electoral integrity by all means and not remain tied to the apron-strings of the government.

As of now EC does not consult the people, the sovereign and the real stakeholders who give power to the politicians. Instead they pander to the political parties, who are only interested in grabbing power by fair or foul means. EC is not placed there by “We, the People” to bring political parties to power and allow them to do whatever they want. EC is there on behalf of the people to sustain democracy and make it vibrant. So, EC must initiate a country-wide discourse wherein people across-the-board should be involved. Civil Society Organizations that includes everyone except those governed my military laws can assist the Commission in this task.

Conclusion

EC is not a subordinate entity of the government. They represent “We, the people” to ensure electoral integrity. In that capacity EC, after extensive public consultation, should seek a fresh RP Act incorporating all the above suggestions as well as the provisions of the draft Political Parties Bill-2011. Sooner this is done the better for India’s democracy!

 

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What planners think. A review of a talk by Nicole Gurran

I’m trying to understand the minds of urban planners. I came across this talk by an Australian academic in the field of urban planning, who has a book, “Australian urban land use planning: Principles, systems and practice“.

She’s also got an article here: Affordable housing policy failure still being fuelled by flawed analysis.

Also had a look at her work here: Planning, government charges, and the costs of land and housing

Nicole is @Planosopher on twitter.

To understand her mind better, I’ve extracted sections of the the transcript, below – and have included a few of my comments in blue. I’ve not had time to provide more detailed comments.

===TRANSCRIPT==

I’ve been researching housing for 15 years and I’m here to tell you that the solutions to the housing problem are really simple.

The housing market has come a competitive sport where the winners make the most money and the losers are first home buyers and low-income renters.

We need to think about housing not as investing in real estate but as investing in community. [Sanjeev: Who is doing the “investing”?]

The good news is there are ways to redesign our deeply unequal housing system. First we need to know how we got to this point.

One of the great success stories of the 20th century was to even things up through decent housing for the poor and by making home ownership possible for working Australians. In the first 20 years after World War II we nearly doubled our housing stock and built more than 100,000 public housing units by the mid sixties. 71 percent of Australians owned their own home supported by a flexible private rental market and a public rental safety net.

You would start on the housing ladder by renting, maybe sharing, when you left home and buy your first house when you were ready to settle down it was a reasonable expectation that families on ordinary income could save for a home deposit within a couple of years, so that by the time they retired the loan was paid off and financial security guaranteed.

Things began to change in the 1980s. Economic growth, dual income households, financial deregulation which loosened up lending, and later lower interest rates all increased the amount of money people could borrow and pay for housing. Tax tricks like negative gearing created a new type of investor – the mum and dad landlord able to out bid first home buyers from the market.

And by the turn of the new millennium house prices were rising much faster than incomes. The politicians’ solution was to release more land for housing by up zoning near railway lines in the urban fringe and calling for more houses and apartments to be built. The story was that more new homes would make renting and buying affordable once again. But that didn’t happen because the government had defunded public housing, turning to the private sector to increase housing supply. [Sanjeev: the private sector is generally more efficient, so that’s good policy. Further, the social housing sector is massively rorted given the perverse incentives in place. ]

Total public sector involvement in new house building fell from 12 percent in the mid 80s to 2 percent today and although we’ve built more homes than ever in the past five years fueled by the latest housing boom, prices have continued to rise well beyond what most first home buyers can afford.

So we have a generation increasingly stuck in insecure rental tenure we have more new houses but homeownership rates have fallen, permanent homes are converted to Airbnb-style holiday rentals housing tourists [Sanjeev: why can’t people chose the highest and best use of their land and property?] while local teachers and nurses are forced to the urban fringe. At the very bottom of the market low-income workers and students crowd in substandard and precarious share accommodation. [Sanjeev: 90 per cent of this problem is directly due to massive planning restrictions that prevent small houses from being in locations closer to jobs]

The profit to be made in residential real estate has blinded us to the true value of home and a community where everyone has a decent place to live. [Sanjeev: unclear what “value” means in this case. Likely to be extremely subjective. This approach seems to show no understanding of cities mainly as markets for labour.]

Australia has been infected by a global contagion known as the financialization of housing the more money to be made on housing the more we’ve wanted to invest and the more dependent on property wealth we’ve become.

With houses converted to money making assets, access to home has become deeply unequal.

I have an idea … to redesign our housing system to better meet the needs of the 1.3 million Australians who are currently missing out.

FIRST STEP: INCREASE PUBLIC HOUSING

First, we’ll fix public housing which has been stigmatized by 30 years of disinvestment and neglect the idealism of the post-war years that pedestrian-oriented estates in the outer suburbs, the modern high-rise towers in the city was matched by a belief that public housing could be a genuine stepping stone or even alternative to ownership.

This was a time when public housing was as essential to the city and to city building as public architecture. But this idealism was lost in the 90s when governments began to turn to the market for affordable housing and social housing became the tenure of last resort.

In other countries government’s use the market to cross subsidize housing for lower-income people.

  • In Hong Kong, nearly 50% of all new homes of public rental housing or affordable home ownership – [are] financed through development on public land.
  • In the UK public grant and planning requirements mean that nearly 30 percent of all new homes are affordable.

But in Australia social housing is woefully underfunded. New initiatives aimed to attract private investment into affordable housing projects but without proper public investment these projects will not get off the ground.

So, rather than turn our remnant public housing into real estate we revive and extend social housing as part of purpose-built mixed- income rental communities providing secure leases to people across the income spectrum.

This would be a genuine alternative to ownership beyond the current private rental treadmill. But even if we fix renting many Australians will still want to own.

Our research at the University of Sydney shows that our key workers – our teachers, nurses, police will travel more than 100 kilometres from city jobs in order to buy a home of their own.

STEP2: INCREASE SUPPLY OF AFFORDABLE HOMES

So in episode 2 we increase the supply of homes that these essential workers can afford. 

This is where urban planning comes in. Well planned and designed communities are valued highly by the market.

In Sydney as in other major cities these high market prices now exclude first homebuyers on average incomes. Inclusionary planning fixes this by preserving affordability. The idea is simple: When land is rezoned or we invest in new infrastructure like a new rail line land values rise benefitting owners but not renters. Inclusionary planning fixes this by clawing back from some of this benefit for the local community requiring affordable homes to be included as part of future development.

The homes are dedicated or sold at discount prices to lower income first home buyers or to social housing associations so the builders are paid for the housing and the land costs absorbed as part of the larger development.

This idea of inclusionary planning is standard in cities throughout the world in London, New York, San Francisco. But so far – aside from small pilot schemes – Adelaide in South Australia is the only city to properly do it here.

We can also help people do it for themselves. The old-school housing co-op has been reimagined as new generation co-living projects which completely bypass the commercial development process. Groups of like-minded people design and commission their homes, collectively saving the developers’ premium from the project cost.

Take Vrijburcht in Amsterdam – one of my favorite examples.

The 52 apartments in this project were designed and commissioned by their owners who not only built wonderful homes at a lower cost but also created a thriving community.

STEP 3: MOVE PEOPLE TO THE REGIONS

But fixing the housing problem is not just about building lower cost rental housing or helping first homebuyers into ownership – as important as those things are.

We need to fundamentally rethink where and how we accommodate our growing population.

Australia is one of the most urbanized nations in the world with 40% of our population living in Sydney and Melbourne alone – and rising. We can’t keep squeezing this growth into towers above railway stations and the ever-spreading urban fringe.

Expanding the geography of housing opportunity in Australia must be the long-term plan. We can already say urban refugees bringing creativity and entrepreneurialism to regional towns like Beechworth in Victoria and Wellington in New South Wales and revitalizing former industrial cities like Geelong and Newcastle.

These efforts need support through quality transportation and telecommunications through decent hospitals, education, research, arts facilities – the ingredients every city and town needs to grow.

Australia is dividing into a nation of those with housing wealth and those without. From a country where achieving the dream of homeownership was possible for most Australians to a society obsessed with property speculation as competitive sport.

But it‘s not too late to change our path. The solutions already exist. Rebuilding social housing as part of mixed-income rental communities, affordable home ownership, a regional renaissance.

But to realise their solutions we need to recalibrate our thinking about housing. Rather than potential profit we need to revalue homes for their purpose as a place to live.

==END OF TRANSCRIPT==

 

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Gurcharan Das concluded that Britain’s colonial prosperity was NOT founded on the exploitation of India

I’ve been sporadically writing on this issue and have never had time to sort out all relevant facts. [see my posts here and here. And, of course, Naoroji’s book makes a strong case. And Shashi Tharoor has been jumping up and down about this issue.]

But this extract from India Unbound by Gurcharan Das is worth noting. I’ll include it in the SBP training manual. In any event, I believe it is a total falsehood that British rule harmed us so much that we are unable to recover from it. British rule doesn’t hamper India. It is socialism that does.

Gurcharan’s conclusion:

“Britain did not become poorer after losing India. Instead, it enjoyed shocking prosperity in the 1950s and 1960s, at the very rime that it was losing its colonies. So did France, Holland, and other colonialists. The fact is that Britain’s colonial prosperity was not founded on the exploitation of India.”

Extracts from his analysis:

scholars mostly confirmed my uncle’s classic analysis of India’s poverty. Britain’s trade policies, they agreed, had encouraged the import of manufactures and the export of raw materials. And by heavily taxing the farmer, Britain contributed to the stagnation of Indian agriculture.

As the years went by, however, a new generation of historians emerged who began to challenge the classic picture. These serious scholars expended great time and effort interpreting the historical data. One of them concluded that the land tax had not been exorbitant—by 1900 it was only 5 percent of the agricultural output, which was less than half the average per capita tax burden. Another agreed that there had been a “drain of wealth” from India to Britain, especially in the nineteenth century, but it  was only 1.5 percent of GNP every year. The revisionist historians argued that India’s payments to Britain were for real military and civilian services and to service capital investments (which increased India’s wealth). Also, the overhead cost to maintain the British establishment—the so- called home charges—was in fact quite small. If India had maintained its own army and navy, it might have had to spend more money. They conceded that India did have a balance of payments surplus which Britain used to finance its part of its deficit, but they said that India was partially compensated for it through the import of gold and silver into India. Only a part of that precious metal was minted  for coinage and most went into private Indian hands. Indians have always been mesmerized by gold and silver. Even the Roman Pliny had observed this, and had called India the “sink of the world’s gold.”

The revisionists’ most serious challenge was to the nationalist thesis that Britain had deliberately deindustrialized India. They agreed with my uncle that Indian industry declined in the nineteenth century. They calculated that India enjoyed 17.6 percent of the world’s industrial production in 1830, while Britain’s share was 9.5 percent. By 1900, India’s share had declined to 1.7 percent while Britain’s had grown to 18.6 percent. But this decline, they argued, was caused by technology. The machines of Britain’s industrial revolution wiped out Indian textiles, in the same way that traditional handmade textiles disappeared in Europe and the rest of the world. Fifty years later Indian textile mills would have destroyed them. India’s weavers were thus the victims of technological obsolescence.

Handlooms all over the world gave way to mill-made cloth, and weavers everywhere lost their jobs no less than in India. Unfortunately, there were more weavers affected in India because India was the largest maker of textiles in the world. This is not to take away from the great misery and enormous suffering caused by their impoverishment. If the British Raj had been sensitive to their plight, it might have erected trade barriers in India. This might have cushioned the impact and Indian handmade textiles might have survived for a period. (It is true that the British government did put up barriers in eighteenth-century England against Indian textiles.)

After 1850, Indian entrepreneurs began to set up their own modern textile mills. By 1875, India began to export textiles again and slowly recaptured the domestic market. In 1896, Indian mills supplied only 8 percent of total cloth consumed in India; in 1913, 20 percent; in 1936, 62 percent; and in 1945, 76 percent. Both British and Indian capitalists made large profits during the First World

War. While the British businesses remitted their wartime profits to England, Indian businessmen reinvested theirs in new industrial enterprises after the war. Thus, Indian industry began to grow rapidly after the war. G. D. Birla, Kasturbhai Lalbhai, and a dozen other entrepreneurs built  significant industrial empires in the interwar years. Manufacturing output grew 5.6 percent per annum between 1913 and 1938, well above the world average of 3.3 percent. The British government finally provided tariff protection from the 1920s. This helped industrialists to expand and diversify. The Birlas went beyond textiles and jute into sugar, cement, and paper. Hirachand, the construction magnate, diversified into shipping; Shri Ram, in the north, went into sewing machines; and Tatas, in Bombay, started an airline which later became Air India.

By the Second World War, the pre–First World War supremacy of British business was broken and Indian entrepreneurs were now stronger and in a position to buy out the businesses of the departing foreigners. The share of industry in India’s GNP doubled from 3.8 percent (in 1913) to 7.5 percent (in 1947). The composition of India’s trade also changed—the share of manufactures in its exports rose from 22.4 percent (in 1913) to 30 percent (in 1947), while the share of manufactures in imports declined from 79.4 percent to 64 percent. Industrial employment, however, did not grow in tandem. Modern industry could not make up for the loss in jobs suffered by handloom weavers.

Indian nationalists have exaggerated the economic importance of India to Britain. They thought that the Indian empire was hugely profitable. They got the idea from Cecil Rhodes, the great imperialist of the nineteenth century, who used to say, “The Empire is a bread and butter question … [we] must acquire new lands for settling the surplus population of the country, to provide new markets for the goods produced in factories and mines.” Churchill was a leading exponent of this view in the twentieth century. Conservatives certainly believed it, but even the left wing of the Labour Party thought so. Bevin told the House of Commons: “If the British Empire fell … it would mean the standard of life of our constituents would fall considerably.” The truth is that the Indian colony was not terribly profitable to Britain. After the crude period of exploitation in the eighteenth century was over, Britain’s rising prosperity in the next century owed more to its free trade with the “new world” and to its investments in America. If there was a “drain,” it was by the transfer of dividends by English companies from America. Certainly, a few Englishmen became very rich from India—the owners of the tea and indigo plantations, the shareholders of the East India Company and other commercial firms, the employees of the managing agencies, the railway builders, the civil and military personnel, and others connected with India. But the profit to Britain as a whole was meager.

My uncle’s prediction also turned out to be wrong. Britain did not become poorer after losing India. Instead, it enjoyed shocking prosperity in the 1950s and 1960s, at the very rime that it was losing its colonies. So did France, Holland, and other colonialists. The fact is that Britain’s colonial prosperity was not founded on the exploitation of India. In the end, whether Britain impoverished or enriched India is really an academic question. What is more relevant is why the forces of global capitalism in the second half of the nineteenth century and early twentieth century did not release widespread growth and development in India, as they did, for example, in Japan. The rapid building of railways and canals and the simultaneous expansion of foreign trade should have acted as a strong engine of growth. India had an experienced merchant class which had begun to develop modern industry.

By 1914, India had the world’s largest jute manufacturing industry, the fourth-largest cotton textile industry, the largest canal network, the third-largest railway network, and 2.5 percent of world trade. Fifty years earlier, Karl Marx had predicted that the introduction of railways and modern factories into India would transform the subcontinent. Why didn’t it happen?

 

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