Thoughts on economics and liberty

Tag: Breaking Free of Nehru

What Would I Do If I Became India’s Prime Minister? #3

The Freedom Agenda for India

First of all, we should be very reluctant to dismantle anything related to governance without fully understanding its impacts. For example, we should be extremely loathe to jeopardize our already weak justice and police systems. Being therefore wary of reducing any of the strengths we have built so far, my objective in this blueprint is to develop a constructive story which incrementally, but systematically, rebuilds, and then strengthens, the pillars of liberty in India. It is like re-building a road in small sections without disturbing the flow of the usual traffic.

To begin with, each of ‘my’ Ministers would be required to sign and publish a Ministerial Portfolio Contract with India upon being sworn in. These contracts, based on the party’s blueprint, would have been designed prior to the elections. The contracts would list the deliverables for which the Minister would be responsible in the first year. At the end of each year, Ministers would report publicly on their achievements. If a Minister fails to deliver upon significant commitments, he or she would relinquish his or her position and hand over to a second-in-command who would have been groomed for the job as part of the contract.

Raising Resources

Advancing freedom calls for a strong government capable of providing us with security, justice, law and order, and requisite social and physical infrastructure, to be paid for collectively by citizens through taxes. We also need our government to be efficient, i.e. to be able to maximize the benefits from each rupee it spends. Finally, we need the government to be effective, i.e. the products and services it delivers should be first-rate and achieve their intended objectives.
These three requirements for a government are very stringent and need appropriate resourcing and expertise. Meeting these won’t come cheaply. A cheap government is guaranteed to be ineffective since quality will become its first casualty. But today India has a cheap government. Only a little over 1/6th of our GDP[i] is spent on services provided by government, with at least a quarter of this being sucked out by corruption; so Indian governance runs on 1/8th of our GDP. This share of GDP is less than one-third of what most free countries spend. In this manner, by spreading thinly a very small amount of money over a very large number of public servants and a vast array of services, the quality of each service provided by our government is mediocre, even discounting corruption. There is no point in delivering services in a mediocre manner. Mediocre delivery also fails to include adequate checks on accountability. As a result, the tentacles of corruption are able to slither into every nook and crevice of the government.
We need the effective and high quality delivery of a few, well chosen services. My government will therefore not run thousands of socialist services and low performing welfare ‘programmes’. What it does choose to provide, though, will be of a first-rate, world-class standard. My government will provide the highest level of freedom practicable (justice, and law and order), and selected social and physical infrastructure, but only at market cost.
But even after cutting down frivolous socialist programmes, I expect that in the first two and a half years, when many such programmes will be phased out, and core focus rebuilt, my government’s expenses will increase significantly. I also expect tax revenues to lag significantly since the revenue system will need a vast amount of restructuring. Therefore, innovative solutions, compatible with freedom, will be found to tide over the funds constraints of the first two to three years. For those interested I have detailed some solutions to overcome this funds shortfall in the Online Notes.

Reforming Public Finance

Having set things in place to ensure that sufficient revenues are available for its first three years, public finance reforms will be given urgent attention. It is important to increase the tax base in India to a level that permits its governments to provide high-quality services. The basis of our taxes is our social contract, or Constitution, founded on an agreement between real people to pay taxes in lieu of services received. Public funds will therefore be raised by asking each real individual who is able to, to pay for the services the country provides that individual. Companies or associations of people will not be taxed in the longer term. Details of these reforms are provided in the Online Notes.

Building Capability to Govern

Most of this chapter deals with fixing our poor governance which is our Achilles’ heel. The reforms under this section are intended to attract Level 4 or 5 leaders into the political and bureaucratic wings of the government, and to develop them from within.

Enabling Public Servants to Represent People

Some honest members of India’s civil services who have been seeking knowledge actively throughout their life are very well-placed to bridge the divide between socialism and capitalism in India and to become initiators of change. Their knowledge of our operating environment as well as policy options available under a regime of freedom could prove invaluable to India. Public servants will therefore be permitted to resign to contest elections and to return to their earlier positions within two months of the declaration of election results should they be unsuccessful. This reform will improve the quality of the candidate pool in subsequent elections; particularly at the state levels.

Appointments of Cabinet Secretary and Ministerial Staff

The ball of bureaucratic accountability will be set rolling by reducing the current exclusive reliance on the bureaucracy for policy advice and implementation. To signal this change the Cabinet Secretary will no longer be a public service position. This will mark the divide between political representatives and the bureaucracy, between the agent and sub-agent. This position will henceforth be held by an MP in the rank of Minister of State without voting rights in the Cabinet. The incumbent public service Cabinet Secretary will be offered a redundancy package; or, alternatively, reverted to his or her state cadre. Ministers will also be empowered to appoint a small team of political ministerial advisers on short-term contracts which will run concurrently to the Ministers’ appointments.


Compensation for Peoples’ Representatives

Being committed to a squeaky clean government, I cannot afford the luxury of Cabinet colleagues being paid poorly. As an interim measure, my Cabinet will significantly increase the salary of members of Parliament. State Governments will also be funded for similar increases for their assemblies and councils. The monthly wage of MPs and MLAs would go up from the current Rs 33,000 to, say, Rs 3,50,000, with proportionate increases for Ministers. There will also be an annual adjustment based on the cost of living. Simultaneously, all perquisites and indirect benefits will be abolished.

A system of performance bonuses for all MPs and MLAs will be introduced:
  • For every 1 per cent increase in per capita GDP growth beyond 5 per cent per annum, all our representatives will get a one-off 5 per cent bonus.
  • For every 1 per cent permanent reduction – defined as a reduction sustained for two years – in the number of people below the poverty line, MPs and MLAs will get a permanent 1 per cent increase in their base salary. Once the negative income tax system is fully established, the entire reduction in poverty will be incorporated permanently into the base salary.
  • For every ten ranks that India rises on a sustained basis of two years in Transparency International rankings, there will be a 5 per cent one-off bonus.
  • There will be a permanent 20 per cent increase on base salary upon India’s becoming the world’s least corrupt country for two years in a row.
  • The sum of these bonuses will be limited to a total of 50 per cent of the base salary in any given year.
A virtuous cycle of morality will thus be established which will not only eliminate poverty but overcome the vicious cycle of corruption established by Nehruvian socialism. Legislation will also be introduced to create a genuinely independent Political Representative Incentives Commission charged with research on, and making recommendations on the following:
  • a compensation mechanism for peoples’ representatives that will eliminate all reasonably foreseeable incentives for corruption, or will otherwise promote the freedom of citizens; and
  • any matter related to the mechanisms of political representation, such as electoral laws.
The Commission would consult widely with the community and look at international best practice. The recommendations of the Commission, made at its sole discretion and whenever it considers fit, would bind the public exchequer, i.e. there will be no voting on its recommendations. This will eliminate the dilemma faced by political representatives who find the public or media unsupportive when they vote for an increase in their own salaries. Such lack of public support creates strong incentives for subterfuge through a host of ‘perquisites’ and underhand dealings. The independent commission will bring sanity into a matter as fundamental and important as this.

High Priority Electoral Reform

Interim electoral reforms based on the arguments outlined in Chapter 4 would be introduced in Parliament; things such as:
  • repeal of the requirement in the Representation of the People Act for Indian political parties to swear allegiance to socialism;
  • removal of limits on political fund raising and expenditures subject to stringent disclosure. These disclosure requirements will include third party audits and audit by the Election Commission. There would be penalties of up to Rs 10 crores and jail terms of up to three year for failures to accurately report on and declare all receipts and expenditures related to political purposes. Penalties for making unauthorized political expenditures on behalf of another person would be increased to Rs1 crore along with a jail term of up to one year;
  • state funding of elections (being retrospectivefor the elections that would have led to the formation of my government) would be introduced. Candidates who secure more than one-twentieth of the valid votes polled will be reimbursed Rs 25 for each vote polled on a formula linked to the population and geographical extent of the constituency, normalized to an assumed 100 per cent voting rate. Surveillance will be strengthened through video cameras in polling booths and other security measures taken, as well as very significant penalties imposed, on people who engage in booth capturing; and
  • the security deposit for elections would be increased to Rs 5 lakhs from the current Rs 10,000, and forfeited when less than one-twentieth of valid votes are polled by a candidate. This lower forfeiture limit will allow many more candidates to contest, while the much higher security deposit will deter non­-serious candidates.
There is clearly some arbitrariness in these numbers which will need to be fine-tuned over time to ensure that the gate is kept open for serious candidates but shut out for frivolous ones.

Freedom Ministry and a New Constitution

A new Freedom Ministry and Department will be created at once, charged with promoting our freedoms. It will be headed by a Minister for Freedom. The Prime Minister and the Minister of State for Cabinet would be served by this Department as well, which would deal with political affairs (excluding internal security) and advise Cabinet onthe extent to which all new laws and regulations proposed are compatible with freedom. It will also deal with matters that fall across more than one department, such as general principles of recruitment to the public services and subjects not allocated to other departments.
  • The Indian Policy Office (IPO) would form its core advisory area comprising policy professionals with demonstrated capability to analyse policy in relation to economic impacts and impacts on our freedom. The IPO will, by and large, hire new analysts through open competition, including Indians currently teaching economics and finance in the world’s top universities – these people will be hired on short or medium term contracts and paid salaries comparable to what they are currently drawing abroad. The idea is to suck back top class policy talent of Indian origin currently sitting abroad.This office will function as a division of the Department but will retain significant independence in its advice. The Minister for Freedom would provide the Cabinet with the IPO’s original advice, as well as his or her own comments and recommendations.
  • A separate division of this department will review all existing laws to assess their compatibility with freedom.
  • The department will coordinate all legislation required by this blueprint, particularly a new Public Administration Act and Superannuation Act by the ninth month.
  • In Chapter 3, we saw how a new Indian Constitution can be fast-tracked. Processes to create a new Constitution will be put in place by the Department, such as convening a new Constituent Assembly with the approval of all the states within six months. The draft Constitution so prepared will be put to a referendum within six months of its completion. The task of translating the existing Constitution into relevant Acts would also be co-ordinated by the Freedom Department to ensure that, subject to the referendum being successful, the new Constitution would be able to take effect on or before the first day of the thirty-first month of my government.
  • Surveys will be commissioned by the Freedom Minister through an independent organization to assess citizens’ views on the level of corruption and service delivery in various departments. Results would be published quarterly and inform the public self-reviews of Ministers as well as confidential performance reviews of secretaries.

[Note: This is an extract from my book, Breaking Free of Nehru]

[i] GDP = Gross Domestic Product. It represents the total value of production in a country.

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What Would I Do If I Became India’s Prime Minister? #2

At the outset, let me confirm  that if I ever become Prime Minister of India, I would deliver a set of policies and programmes that would shift it entirely out of its current orbit of mediocrity, corruption and filth. My blueprint will return to us our innate freedoms taken away by our tribes, our kings and by Nehruvian socialists. These policies would take India into the spaces of the mind never before visualized in India, where each Indian could aspire to become dramatically better off and the country made anew and entirely corruption-free. Indeed, free.

But let me rewind! How would I become a Prime Minister in the first place? I could attempt to become one by joining an existing populist party and work my way up the chain of grubby politics. But as the tenor of this book shows, I will never join parties which I see as India’s enemies. Corruption and freedom never go hand in hand. Equally, no existing political party will have me as its member for I do not meet the minimum qualification of having well known ancestors, lots of black money and links to the mafia. It appears that my grand thought-experiment is likely to prove abortive!

People I Am Willing to Work With

All this posturing doesn’t mean I am a reluctant politician who believes that writing a book will solve India’s problems. At the same time, I can’t enter politics if the very purpose of achieving ethical liberalism is defeated at the first step. So, if not these political parties, whom could I work with? There are essentially two options: (1) I could start my own party and have good people join me; or (2) I could join a small, existing party which is broadly aligned with my views, and tweak its policies and character to meet my standards. Either way, the conditions for my participation in political processes will be the same. So let me record them. I hope you will agree with these conditions, in which case we will be two of us. Even if two of us out of a billion is not a big number, two is more than one, and the trend will be in the right direction! Freedom can do with two people in place of one.
The people with whom I would be willing to work with must have impeccable ethical standards, grounded in freedom. That is the bare minimum. They must be wholly committed to the advancement of freedom and fully understand the philosophy and logic of freedom. The group or party would follow the highest standards of internal democratic decision-making and public disclosure of all sources of its funding and expenditures. In addition, the leaders of the group would need to meet the following criteria:
  • They must be extremely competent and able to formulate clear headed policy on complex issues, consistent with the logic of freedom.
  • They must be capable of dealing with challenging problems were they to become future ministers, without panicking and running for shortcuts or politically expedient solutions.
  • They must be at least Level 4, if not Level 5, leaders – people who are very superior[i] and therefore humble enough to listen to others and assimilate and build on the feedback they receive from others. They must be willing to admit mistakes, and willing to change their mind on the basis of new evidence.
  • They must be team players, willing to work in any capacity that the party asks them to, recognizing that groups or teams comprising expert individuals are generally wiser than isolated geniuses no matter how brilliant.
  • They must be willing to consult with citizens widely on all policy issues.
  • They need not be perfect (no one is), but they must be transparent about themselves and willing to expose their lives and minds for public scrutiny.
  • Over and above these qualities, these people will need to have lion hearts and an unwavering determination to overcome the greatest adversity in order to achieve their goal.[ii]
I have no doubt that thousands of such outstanding people exist in India. You are perhaps one of them; so I could potentially work with you. But why would any such person join me, given that I have not a spare paisa in my pocket, and political parties need thousand crores of rupees to succeed? I believe that good people will join me because of my clarity of vision and strategy that will help to deliver much better lives for them and for their children. It is in the self-interest of Indians to embrace my ideas, particularly if they do not want to be:
  • known as the third generation in independent India that stood by, doing nothing to fight the plague of corruption that racks the vitals of this country;
  • left alone in India in their old age with their children having abandoned the country; or
  • killed prematurely by pollution, poverty, ignorance, disease or potholes.

People would join me because they agree with me. For instance, I am not asking anyone to be corrupt, or to do any wrong thing. Instead, I am asking people tobecome the leader they want India to have and in doing so, make India, their own country, into the greatest country on earth. Surely, that is something worth doing?

The Freedom Team of 1500 People

In the end, everything great must begin with the right people. As Jim Collins noted, First Who, Then What.[iii] It also matters a great deal what these people believe in. They must stand for freedom, else there is no point in coming together. Now, why 1500? This is the number of leaders India needs to kick-start a freedom movement. This number is roughly equal to three outstanding leaders for 550 constituencies. That way, if one of them can’t contest the elections at the last minute, two others will be ready to stand up. And if that second one is killed by the mafia, then the third will rise. Whoever is left will contest the assembly elections. In this manner a good Prime Minister can be found for India and the message of freedom also taken to the state assemblies. So initially we have the simple task of finding only 1500 exceptionally good and competent people to form the Freedom Team of India.[iv]
No one has to find 1500 people at one go. Just finding one more leader will do.There is great power in civil society. If you think you meet the criteria specified above, then your next job is to find one more person like you. When only good people are allowed to join and to continue, the Freedom Team will strengthen quickly. No person of poor moral character should be allowed to join; or if selected by accident, allowed to continue. Hopefully, among a billion people, 1500 good people (50 per cent of them being women) should be easy to find. This group can then formulate a blueprint which they can take to the people of India and finally, after contesting elections, get the mandate to implement. I have suggested a process by which this can be done in the Online Notes,[v] but I will now skip straight to my blueprint.

[Note: This is an extract from my book, Breaking Free of Nehru]

[i] I had outlined the 1970s state of knowledge on this subject in an article, ‘Who is a Superior Person?’ published by the Maharashtra Herald on 21 March 1982. The fundamentals haven’t changed even with modern leadership theory.

[ii] Indian politics can be very frightening. My encounter with ‘baby’ politics was in a contest with a Congress-I supported candidate for the position of secretary to the student council of DAV College, Jullundur, in 1978–9. A well-known gangster called Jarnail Singh, who had reputedly murdered a few people, met me in a dhaba (a country restaurant) near the college and asked me to withdraw (a school friend of mine, who later joined the IAS a couple of years after me, was a middle-man for this intimidation, and can vouch for this). I chose not to withdraw. My supporters also created a defence strategy. In the end, for various reasons including lavish parties thrown by the Congress-I supported candidate to the small group of students entitled to vote in the restricted elections, I lost.

[iii] Collins, Jim, Good to Great, Harper Business, New York, 2001.

[iv] If interested, please join the Google group called Freedom Team of India I have started, at [].

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What Would I Do If I Became India’s Prime Minister? #1

The other day, a globally admired Indian business personality came to Melbourne [I have since disclosed that this personality was the well-known Narayana Murthy who talks big but DOES NOT puts his money where his mouth is]. I knew this person had expressed considerable frustration with the Indian political and bureaucratic system. I asked this person after his speech whether he had any plan for India to move in the direction he visualized. On his replying he had one, I asked him to outline it for the benefit of the audience but he parried my request. I later wrote to him but got no response. Either there was no plan, or if there was one, it was a well-guarded secret.

I mention this incident to suggest that we need to get out of our chronic habit of criticizing without taking action. We need to outline our preferred methods which will bring about the change we want. We need to spell out our proposals in sufficient detail and share them with everyone else. Then we must engage in an open discussion; there is not much point in marking our proposals ‘top-secret’ and locking them up in a safe. This chapter is my blueprint to unleash India.It is my resistance to the cult of mediocrity and corruption foisted on us by Nehruvian socialism. Contrary to all appearances, I do not claim special wisdom. All I ask is that my plan be considered with an open and critical mind, just as I would examine similar plans from you and others. While examining our plans in this manner, we could ask questions, such as the following, to ensure that we are on the right track; in particular that we are all aspiring for freedom and not some dangerous thing like equality:
  • Will the implementation of our plans enhance the levels of freedom and its obverse, justice, in India?
  • Will our plans help us in creating a government that is not only efficient and effective but also fully accountable?
  • Will our plans encourage us, the citizens, to take responsibility for ourselves and to stop depending for everything on the government?
My blueprint requires 70 per cent of the reform to be led by high-quality political representatives and the remaining 30 per cent by a dramatically improved bureaucracy. Of course, nothing will happen without people like you getting actively involved and providing the mandate as well as the leadershipIndia needs. The immediate purpose of this book is therefore to make you a leader; nothing less than that can work. If you too hide behind the bush, as have millions of others before you since 1947, then India isn’t going anywhere far – I can assure you of that! 
This chapter is structured around a super-sized thought experiment which asks: what would I do if I became India’s Prime Minister? Such a thought-experiment is familiar to many of us from school days when we wrote essays on such grandiose themes. But adults don’t write essays of this sort, wary of being perceived as arrogant. This hesitation to start from the top, by looking at the big picture and working one’s way down to the detail, is unfortunate. Anyway, for whatever it is worth, here is my plan.
To be continued
[Note: This is an extract from my book, Breaking Free of Nehru]
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In-depth exploration of the IAS and other services #2

No Expectation to Deliver Results

So high is the raw talent of its recruits that the IAS could have been a world-beating Ferrari given some care and fine-tuning. Unfortunately, it has been used so long as a rundown phat-phati (auto-rickshaw) by politicians and senior officers within the service that it has begun to see itself as a smashed up auto-rickshaw. It has lost faith in itself, and lost sight of its original mission. Its members were among the brightest in India at one time, and they had great ideals upon joining the service. But that is all gone. They no longer have confidence in their ability to make a difference.
Before leaving the service I met a large number of senior civil servants across India in the year 2000 and approached many of them with different reform suggestions. I was appalled at the all-pervasive sense of helplessness even at the highest levels – a feeling that nothing could ever change. A good number of honest senior IAS officers were also desperate to get out but didn’t know how to. And so these people plod on today, fulfilling the motions of work – things like filling out TA/DA forms, chasing after their ‘pay slips’ and car loans and other bits and pieces of paper in the Personnel Ministry, local Treasury and Accountant General’s offices; aware that unless they spend their time in such trivial pursuits, even their future pensions won’t be given to them, as their fellow-bureaucrats in the Accountant General’s offices are renowned for losing all records of their very existence!
What happens is that from the first day of their working life, when they join as sub-divisional magistrates, there is no expectation placed upon them to perform outstandingly and to innovate. The main advice they get from their seniors is to ‘be practical’ and to ‘manage’; which is the code for ‘let the corrupt carry on with their work’ and ‘stay put’.
Now, people generally – and I’m not referring here to civil servants alone – learn either ifthey want to, or if they are likely to be kicked out for non-performance. Since Indian civil servants are promoted without any requirement to deliver any results at all, leave alone world-class results, there is no incentive for them to challenge themselves, having been recruited. Life in the IAS thus becomes a long and never-ending holiday. I remember organizing a two-week mid-career training program for IAS officers in Mussoorie in mid-1994. Experts were invited from all over India to discuss their insights with these officers. One guest, the CEO of a major public sector IT company, spoke with a stammer. Upon hearing him speak, a number of IAS officers simply left the lecture mid-way – just walked out! More problematically, many participants repeatedly missed other lectures too; and used these two weeks as a holiday instead of as a learning experience. I don’t blame them either since the heterogeneous mix was designed by young bureaucrats like me, a person completely ill-equipped at that stage to train others. In that way, India’s civil servants fiddle away like Nero did while India’s misgovernance burns out of control. They will never take responsibility for anything that has gone wrong with India – of that one thing I am sure.
And yet, there exist, even within this run-down service, a few exceptional people who have gone out of the way to educate and improve themselves. But after doing that, many have left the IAS or hope to leave as soon as they can. The service is unfortunately a complete dead end for such people. No one is ever going to let them apply their knowledge, anyway.
[Note: This is an extract from my book, Breaking Free of Nehru]
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