The second secession

Even India's poor now feel their rights as consumers are higher than as citizens.

Written by Manish Sabharwal | Published: May 21, 2013 3:54 am

Even India’s poor now feel their rights as consumers are higher than as citizens. India is now banging against the limits of a flailing state

My parents retired to live in Kanpur,where people joke that a phone call can get you delicious boondi ladoos in 15 minutes,and a hot pizza in 30 minutes,but an ambulance takes an hour,and the police,two hours. Kanpur’s fastest growing industries are bottled water,private security guards,diesel generators and low-cost private schools. The rich and middle class had “seceded” from India’s public goods many years ago; the poor are now joining them in paying something to avoid something that is free. Why?

I make the case that this is because even India’s poor now feel that their rights as consumers are higher than their rights

as citizens. So,a mediocre private school is better than a free government school,because parents can demand teacher attendance. A private security guard may be poorly trained and dressed,but he has a whistle,waistline below 40 inches,and can be fired. Cheap power is a nice promise,but no power is the most expensive power. And drinking bottled water avoids lost workdays and expensive private healthcare. But these low expectations from the state are silly,dysfunctional and unsustainable. In fact,many of us in the private sector need to apologise for believing that “the grass grows at night while the government sleeps”,because the notion that the best state for job creation and poverty reduction is an invisible state is wrong; Waziristan in Pakistan and SWAT valley in Afghanistan have no state and they are not exactly hotbeds of entrepreneurship and prosperity. India is now banging against the limits of a flailing state. Lant Pritchett of the Kennedy School of Government at Harvard calls the malfunctioning Indian state “one of the world’s top 10 biggest problems — of the order of AIDS and climate change”.

Any modern civilisation stands on three legs; the government,private sector and civil society. Unfortunately,all three in India are struggling with birth defects; the government has an execution deficit,the private sector has a trust deficit,and civil society has a scale deficit. Civil society — despite India being the NGO capital of the world — is useful as a conscience keeper but has not inspired awe at its ability to execute with consistency,scale and outcomes. But since 1991,corporate India has executed breathtakingly in businesses where regulatory connections don’t matter: IT,seeds,logistics,hospitality,healthcare,consumer durables,retail,airlines and much else. They have not only outperformed public sector corporations,but also systematically destroyed most companies that flourished in the licence raj,because animals bred in captivity find it hard to live in the jungle. But a trust deficit arises because of crony capitalism in sectors like education,power,mines,infrastructure,airports,waste management,water,etc,where skills,sweat,courage and imagination are irrelevant compared to contacts. Contacts matter because manipulating government is not a skill,but a cost. It is no coincidence that the biggest business names to come out of Andhra Pradesh are infrastructure companies,and out of Uttar Pradesh are Ponty Chadha,Deepak Bharadwaj and Subrata Roy. Fixing crony capitalism is not about less capitalism but less cronyism,and this brings us to the role of the state.

Over the last decade,India saw a breathless legislation of rights by the state that has not delivered poverty reduction. If crony capitalism cannot deliver and legislating rights has not,what now? Political scientist Francis Fukuyama says a modern political order has a strong state,the state’s subordination to the rule of law and governance accountability. A strong state does not mean China — where 30 million people died of hunger in the 1950s and the one-child policy has led to 330 million abortions since the 1970s — but it does mean a state capable of executing its intentions. For example,the biggest mystery in skills reform today is how to get something done after everybody who matters in government agrees with you. This is mostly a question of institutional capacity,structure and incentives. However,Fukuyama’s next two components — subjecting the state to the rule of law and governance accountability — fail in India because of a lack of focus on what the state is not doing. After 20 years of economic reforms,the sins of state omission and execution are now more important and painful than the sins of commission.

India needs a new political narrative that recognises economic democratisation lies in making capitalism more competitive and the state less lethargic. This requires private job creation,physical infrastructure,GST,civil services and police reform,contracting skills among policymakers,powerful mayors,more judges,less legislation,better enforcement and a major reboot of our 3E (education,employment and employability) ecosystem. Unfortunately,despite broad agreement on what,a missing consensus on how has combined with an aversion to conflict to result in a policy drift and gradual surrender to entrenched interests. In 1856,Alexis de Tocqueville wrote that old regimes fall not when they resist change,but when they attempt reform and yet dash the raised expectations they have evoked. India’s problem is not dissimilar — politics is uninspiring because of the inability of the state to meet the higher expectations of citizens spoilt by a private sector that has ferociously conferred rights on consumers who,before 1991,were not clients,but hostages.

Aristotle talked about a Delphian knife; a shoddy article designed for both cutting and hammering and no good at either. The sofa bed is a modern equivalent. But so is the social enterprise. Flourishing private companies cannot substitute for a flailing state. The 2014 general elections will be the first national elections where first-time voters have no memory of pre-reform India. This is an opportunity to offer a fresh political narrative about fixing the state that moves from what to how. Those leaders that do will be rewarded. Voters have long known that we don’t live in an economy,but a society.

The writer is chairman,Teamlease Services

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