2G and the real scam

Allegedly, the public exchequer has incurred a loss of several tens of thousands of crores of potential income from auctions on the 2G spectrum. And the controversy over this refuses to die down. No one seems to realize that the government does not own spectrum and has no rights to auction it in the first place. Most people seem to believe that the government owns everything by default. So let me play along and see where this logic leads.

To setup a shop (or pretty much anything) in India, one needs to acquire a license (or registration or whatever). As far as I know, these licenses have never been auctioned. Assuming a very modest figure of Rs 1 lac per shop license auctioned, and just half a million shops who could have paid this modest sum, that works out to a loss of 5000 crores.

Over 750,000 two wheelers were sold in India last year. Each of those had to be registered. These registrations could have been limited (with the added benefit of reducing road congestion and pollution) – say to 500,000 – and auctioned to raise revenue. Assuming a modest amount of an extra Rs 10000 per registration, that works out to a loss of 500 crores. Similar losses could be worked out for sales of other vehicles. Let us say the total loss on all vehicles is 2000 crores. Further the government could have made it mandatory to renew vehicle registrations every year (as a security measure). These renewals could also be auctioned (to reduce the incentive to keep using old vehicles, thus reducing pollution). Assuming a very small amount of Rs 1000 on average per vehicle registration and estimating the number of vehicle owners who would pay this amount at 20 million, the total loss works out to another 2000 crores.

The cricket world cup is coming up. The right to use cricket as a theme for advertisements could be restricted and auctioned. Just imagine the loss! Easily another few thousand crores.

Tens of thousands of people migrate into cities from rural areas or smaller cities and towns. Since these people obviously cannot afford to buy houses, they stay on rent (if not in illegal slums). The right to rent space could be auctioned (with the added benefit of reducing overcrowding of the cities). Another few thousand crores lost.

Enough of examples. Let me generalize. Any activity that results in any value to anyone could be restricted by the government and the rights to it could be auctioned, thus generating additional revenues. Assuming just 1% of GDP as the revenue that the government could have generated by auctioning rights to economic activity, that amounts to a loss of 70,000 crores per year. Aren’t auctions wonderful? They have such immense potential to generate revenue. Sadly, this incredible idea is woefully under-used by policy makers. And no one is complaining about this scam!

Enough of sarcasm! Suppose the license rights had been auctioned. Who would have paid the money? The telecom companies who would have had to remain in business by lowering their costs – paying lower salaries to their staff or by hiring less, increasing the prices for their services and by reducing their profits. Ultimately, it is the “common man” – that mythical creature worshipped by all policy makers – who would have paid for the license rights. And where would the money have gone? Ah it would have gone to the same place where government money usually goes – but really, that is rude of me. I should not dare to ask such questions. Of course it would have gone into welfare schemes for the common man – the NREGA (remember the pictures of smiling villagers carrying a couple kgs of mud on their heads?), the minimum support price for various foodgrains (wasn’t there a recent report about grains rotting in government godowns? never mind), the public distribution system (absolutely necessary since minimum support prices cause inflation), the right to be educated (in a school where teachers never turn up, but that’s OK, the children can atleast have fun) etc. These are all noble ideas with proven track records. They must be implemented at all costs. You see, the “common man” is too stupid to know what he should do with his own money. That money should be taken away from him – by means of taxes on all consumption, license fees on every service that he uses etc, etc. A portion of it should be used to subsidize higher education (after all, the bureaucrats and policy makers need to be educated, don’t they?). Another portion should be used to establish various government agencies (like the agency which calculated the loss to the exchequer in the 2G scam). Another portion should be used to fund events such as the Commonwealth Games (it is a matter of national prestige after all). Another portion should be allocated to muncipal agencies and the like (like the one that digs up the road in front of my house every 3 weeks). Another portion should be used to line the pockets of the entire government machinery (people are corrupt and selfish, what to do?). Another portion should be used to create TV and other media advertisements for welfare schemes. And then, whatever is left (if any) may be returned back to the common man who should be grateful and beholden to the government for thinking of his welfare. Where would he be if he were left to the mercies of the free market? Oh no. That is just unimaginable. He would simply be exploited by the capitalists and left without a home, education and health care if he had full control over all his money. Just imagine!

Oh, did I get back to sarcasm after starting the last para with “Enough of sarcasm!”. Sorry about that. The real scam here is much, much larger than a few thousand crores. It has been in operation for decades (centuries?). And it is primarily a moral scam, not a monetary one. It is perpetuated by people who seek to derive their self esteem second hand – not from their personal achievements but from a claim to altruism (however tenuous), not from producing value but from distributing the value they have not produced. People like Raja are not responsible for the scam. People who support the system that makes Raja inevitable are.

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Independence? day

Another anniversary of India’s independence is approaching. And there are children on the streets, at traffic signals, selling paper flags to anyone who wants to celebrate the occasion. Wonder what they do on other days? They sell a lemon and two (or is it more?) chillies tied with a string to anyone who wants to ward off evil spirits. So what exactly are we supposed to celebrate? Independence? Whose independence? From whom? More than 60 years ago, thousands of people gave their lives to achieve political “independence”. What did they achieve? They replaced British rule with democracy. Some of the British rulers were doubtless oppressing a people willing to be oppressed. But others were rendering a service – the white man’s burden. After “independence”, India’s government was led by men of the second kind – British educated socialists who resented the white man’s burden because they wanted to make it their own. They were men with a “noble” purpose; to teach the uneducated masses how to live – by taking control over their lives. These men had “noble” dreams, but their dreams were not dreams of what they would do with their lives; they were dreams of what they would do with other people’s lives. That meant that no one else would be allowed to dream. This was supposed to be independence. Inevitably, this “independence” has produced the worst kind of dependence imaginable. The politician is dependent on the poor, the uneducated, the superstitious, the irresponsible and the incompetent for their votes. And it is in his interest to let them remain as they are. And these people are dependent on the politician for favors or promises of favors. This dependence is the essential and defining feature of the kind of unchecked democracy that India’s leaders established after independence. The modern intellectuals call this dependence “corruption”. But the manifestation of the essential nature of a system is not corruption. Unchecked democracy is corrupt to begin with.

There is no such thing as political independence. The concept of independence is properly restricted to the realm of a person’s mind. A man’s thoughts, wishes, desires can be independent – of the judgements of other people. Like all virtues independence applies to individuals, not to a collective. And like many other such concepts, this one too has been stolen by collectivists to disguise their true goals. What the Indian political leaders fought for was not independence – of any kind. What they fought for was sovereignty – the state of affairs when a country is governed by people of the same race, religion or culture that have historically occupied it. There is nothing particularly desirable about sovereignty as such. Some of the most oppressive places in the world to live in suffer from sovereignty. It does not matter whether a country is governed by natives or not. What matters is the system of government.

The proper socio-political goal is freedom, not some meaningless independence or a tyrannical sovereignty. Freedom to believe and express one’s ideas – without being censored by the government or by thugs (M.F. Hussain); freedom to marry the person of one’s choice – without being murdered by one’s family or community (honor killings); freedom to develop a technology and market it – without having to buy the rights to do so (3g auction); freedom to buy land and use it for any purpose – without having to rely on the government (Tata Nano); freedom to contract with people on mutually agreeable terms – without being tied by labor laws; freedom to spend one’s money as one chooses – without having it confiscated for subsidies and hand-outs; freedom to run a school – without having to declare it as a non-profit; freedom to start a political party – without having to swear by socialism…

When will India become free? I am not holding my breath (remember the lemon and chillies?). And I am not going to celebrate “independence” day either.

Cheating at school exams

I just happened to land on this post about the prevalence of cheating in school exams. Somehow, I had forgotten about this particular aspect of school life and the numbers came as a shock even though they shouldn’t have. From the post

According to a private research, 68% of middle class students and 75% of high school students cheats in general during exams. Why cheating is so high? We talk of controlling corruption, where the root lay? The only way to find out the root of the problem is to analyze this problem from the standpoint of a student. What rational he uses to decide whether to cheat or not?
(bad grammar in original)

From my own experience those numbers seem about right – perhaps on the lower side which is not surprising given that not everyone who cheats will admit to cheating. Most of my classmates at school cheated. I would put the figure at around 80% of the boys (I don’t know what the figure was among the girls – I suspect it would be significantly lower). It was considered helping each other. The few students who did not allow others to copy were regarded as selfish – particularly in middle school (5th – 7th standard). Even I succumbed to the pressure to allow “friends” to copy answers from my answer sheets in middle school. I did get over that by high school though – partly because I grasped that cheating does not in fact help anybody and partly because the pressure to allow others to cheat was lower in high school – a no cheating stand was not looked down on as selfish (I certainly was a long way away from grasping that selfishness is a virtue at this point).

The surprising thing is that those numbers are not as bad as they seem. In junior college, I was in a section of students who were all preparing for IIT JEE. I don’t know anyone there who cheated or even copied assignments. Ironically, this honesty did not last in IIT itself. There were atleast a few cases of cheating in IIT exams. Copying of assignments was routine.

I am glad that I never copied an assignment or an answer in an exam, but the variation of the prevalence of copying matches very well with my own estimate of the importance of those exams. Even though I was under some pressure from my parents to study and excel (in terms of marks and rank) in school, I always knew that most of the exams and half the subjects (Hindi, Social Studies and Biology in particular) were of no importance to me. In junior college, on the other hand, everyone knew that the competition was fierce and one had to do one’s best to get into a good college. The goal was worthy and the studies were interesting. I put in disciplined and sustained efforts in those two years – I have never worked with that sort of discipline before or after that. I think the same is true of most of my friends as well. In IIT, I still had some pressure (self-imposed) to do well (in terms of grades) but atleast half the courses in each semester were boring. Most of the assignments seemed pointless.

My reading of the trend seems to be that students copy when they do not care – either about the studies or about the significance in their own lives. The prevalence of cheating is an indicator of how poorly designed the education system is (of course, that is hardly a novel conclusion!). More importantly, it indicates that most people (atleast in my generation) have no intrinsic respect for abstract principles like honesty. While self-interest tends to make people honest (as in junior college), in situations where there is no immediate self-interest (having to study courses in engineering when you want to get into finance or consulting), there is no incentive for honesty. My generation does not believe in virtues or principles or philosophy – only in concrete results. If honesty pays, they will be honest; if it seems pointless, they don’t give a damn. They call it being pragmatic. What they don’t realize is that by not believing in any philosophy, they have never developed any identity and so their behavior is determined by the world around them. They are driven entirely by incentives, not by motives. All that someone has to do to enslave this generation is to arrange the incentives conveniently. It has always cracked me up when people write that this generation is going to reform India, because it is pragmatic and not dogmatic. After thinking through this post, this reform thing cracks me up even more. This generation is the most malleable ever in the last few decades.

Book Review: The White Tiger

Aravind Adiga’s “The White Tiger” is a story of a man, Balram Halwai, born in some village in north India who goes on to become a driver in Dhanbad, robs and murders his employer and establishes a cab business in Bangalore. The story is narrated in the form of a letter written by Balram to the premier of China (Weird literary device, that). The only noteworthy thing about the novel is the utter ugliness of the story, the characters and the life it portrays. The language is crude and vulgar, well suited to the tale. There is not much of a story.

<Spoiler warning>

 Balram born in a poor family in a feudal village wants to make something of his life. He goes to Dhanbad, takes driving lessons from some taxi driver and is able to find a job as a driver (actually an all-purpose servant) in the household of a landlord from his own village. He is expected to behave like a feudal servant. The landlord’s son, Mr Ashok, who has recently returned from America is the only person to treat him with any sort of respect. There is another driver in the household, Ram Persad. Balram resents his seniority, and upon discovering that Ram Persad is actually a Muslim pretending to be a Hindu for the sake of his job, threatens to expose him. Ram Persad escapes and Balram becomes the senior servant. Mr Ashok goes to Delhi to bribe some minister and takes Balram with him. Mr Ashok’s wife, Pinky madam, wants to return to America and is angry with Mr Ashok for having lied to him about his intentions to stay in India. One day, after Mr Ashok and Pinky madam have got drunk, Pinky madam runs over a child on the streets of Delhi. Mr Ashok and his brother get a signed statement from Balram stating that he is the only one responsible. The matter, however is never investigated by the police as there are no witnesses. This is the last straw for Pinky madam and she leaves her husband and returns to America. Before leaving, she gives some money to Balram, who spends it on a prostitute. Mr Ashok sinks into a depression and starts drinking. Balram who has until then worked honestly, starts drinking and stealing. One day, as Mr Ashok is going to some minister’s place to bribe him, Balram murders him and runs away with the bribe to Bangalore, where he establishes a cab business, catering to call-centers.

</Spoiler warning>

The story serves as a prop for Aravind Adiga to describe the feudal village life, rigging of elections, corruption among the socialist leaders, the brutal repression of the poor by the landlords, superstitions, family burdens, treatment of servants, abysmal living conditions in the city slums, etc. By making Balram the narrator, Adiga seeks to present a poor man’s perspective of modern India. For Balram, human life is and always has been all about class conflict – a struggle between the rich and poor, each class seeking to defeat the other. At several places, there is a mention of the cliched idea of two Indias – a modern, Western, rich India and a feudal, poor one.

There can be no doubt that most of Adiga’s descriptions are accurate. This should be no surprise to anyone who has looked at a slum in any Indian city. The motives and ideas that he gives to his characters are questionable. He describes the poor (in the cities) as living in anticipation of an insurrection. Really? There is a naxal threat in several places in rural India, but insurrection in the cities?

Finally, the book seems quite pointless. Why describe that which everyone knows and sees if you have nothing new to say? The wikipedia entry on Aravind Adiga says “At a time when India is going through great changes and, with China, is likely to inherit the world from the West, it is important that writers like me try to highlight the brutal injustices of society (Indian). That’s what I’m trying to do – it is not an attack on the country, it’s about the greater process of self-examination.” First, the great changes seem to be over. After a decade of some much needed economic reforms (in the 90s), India seems to be settling back into a slumber. The political situation has already hit rock-bottom and there are no signs of any improvement. Yes, there are brutal injustices and everyone knows it. With Adiga having nothing new to say, “The White Tiger” comes across as poverty porn (a phrase coined after the release of the movie Slumdog Millionaire, which I haven’t yet watched).

Abu Azmi’s brother hands out cash?

The Times of India reports

Mumbai: It was meant to be a grand procession, planned by Samajwadi Party candidate Abu Asim Azmi from the Bandra-Kherwadi signal to the collector’s office where he was to file his nomination papers for the Mumbai North-West Lok Sabha constituency on Monday. But it turned out to be a damp squib as TV channels began airing visuals of Azmi’s brother Shahid “distributing’’ cash among some people in the crowd.
    The TV visuals prompted Election Commission officials to conduct an inquiry into the incident although Shahid Azmi denied the charge.

So the Election Commission is worried about candidates handing out their own (presumably) money to voters. But no one is bothered when candidates of all parties make promises to hand out other people’s money to voters (search for the manifestos of various parties to see what I mean)!

Property Rights and Philosophy – Applied Philosophy – 2

In an eminently readable article in The Objective Standard, Raymond Niles presents the history of the electric grid in America, the formation of state enforced monopolies and the unending stream of problems that has plagued the industry ever since. The thesis of his article is that the problems would not have arisen if the property rights of the utility companies had been recognized. From the article,

“In many cities, if not most, some form of bribery was required to persuade city officials to grant permission to build and operate an electric grid. Because electric utility systems could not be built without using the city streets, city officials were well positioned to coerce money and other terms from utilities. In Chicago, such extortion became an art form, perfected by members of the city council known as the “Grey Wolves.”

Having observed the city’s refusal to grant Yerkes a longer and more secure franchise, Samuel Insull stepped forward with a new idea; he proposed regulation of the electric utility industry at the state level. Instead of challenging the government’s control of the rights-of-way and the corruption it entailed, Insull accepted the government’s involvement and sought a seemingly superior and less arbitrary form of it.”

There are several aspects of this history that deserve analysis.

The motivation of the state officials:
It is notable that it wasn’t the state officials who wanted or proposed state regulation. They were merely exploiting an opportunity to extort money from others achievements – achievements which they could not have hoped to equal but were in a position to control. They either did not know or did not care that a system of extortion is unsustainable – that their victims could not continue to operate under extortion. They did not even have the vision to institutionalize their extortion into a system of regulation.

The motivation of the innovators:
The innovators like Insull were men who had the vision to build large profitable systems. They were driven by their desire to translate their vision into reality and were prepared to overcome any obstacles that others might put in their way. They had the foresight to realize that they could not survive under constant extortion and to seek a “seemingly superior and less arbitrary form of government involvement”.

The motivation of the regulators:
The regulators – the people who propose regulation or attempt to improve it or rid it of corruption – are usually motivated by a genuine but misguided desire to improve the workings of government. They do not necessarily want to expand the role of government, they don’t even see it as an issue. They don’t realize that a system of regulation is fundamentally corrupt – or if they do, they see no way out of it.

The growth of regulation:
The growth of regulation described in the article follows a familiar and tragic pattern. Innovators come up with a vision for a better future – a vision that if put into reality will give them large profits and improve the quality of life of all who deal with them. People in positions of political power see an opportunity to extort money by putting obstacles in their path. The innovators who rarely understand the political issues involved attempt shortcuts to get rid of the obstacles. The worthier innovators attempt to find long term solutions to the obstacles and legalize the process of extortion. Controls breed more controls with time.

This familiar pattern is not inevitable. It is important to realize that the people responsible for the growth of regulation are the innovators. Any significant change in the workings of a society – whether for better or worse – is initiated by its better men – the men of vision who can dream of something new and the men of action who can turn the dreams into reality.

Property rights form the backbone of any political system. Men cannot deal with each other effectively without holding clear, legally recognized title to the products of their efforts. Men cannot plan long range if their actions are controlled by the whims of regulatory boards. But a political system needs a foundation – an understanding of man’s means of dealing with reality, an understanding of the purpose of man’s life, an understanding of men’s interactions in a society and an understanding of the purpose of a political system. This foundation is philosophy. Without this foundation, any political system – whether it be democracy in India or theocracy in Iran or fascism in China – is headed in the same direction – towards chaos. As I mentioned in my previous post in this series, philosophy is difficult. But the first step in understanding and applying it is acknowleding that it is real – that it plays a pivotal role in the life of every man and that it can be discovered and understood.

Civil Service and The Constitution (Part 1)

In an article in The Indian Express, Meeta Rajivlochan says that civil servants should “owe allegiance to the constitution first and foremost”. She goes on to say

“Overt neutrality and strong commitment to the Constitution and the rules of the land make a bureaucrat function much better”.

and concludes

“It is the danger of relinquishing a commitment to the Constitution of India in favour of a more personalised commitment  (political, religious, cultural or otherwise), and not corruption, which is by far the greatest malaise facing the civil service today. Corruption merely undermines the moral integrity of the individual. Abandoning of political neutrality undermines the entire structure and logic of bureaucracy.”

Meeta is right that corruption is not the greatest problem with the Indian state. She is also right in her identification of the problem. But she misses out on its cause. The idea that civil servants should be committed to upholding the constitution comes from the idea of rule by laws, not by men. But an implementation of that idea is only possible if laws are objective, principled and limited. The Indian constitution grants parliament almost unlimited powers to enact laws. It is this that allows politicians and thus the bureaucracy to get away with anything. It is this that breeds corruption.

(Part 2 will take a more detailed look at the Indian Constitution)

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