Yesterday I got a call from someone who wanted my advice. It was regarding his son who is in the 7th grade. The school required the parents to fill in a multi-page form with detailed information about the background of the student. The conjecture was that this information was going to become part of the permanent record of the boy. The form, I was told, required the parent to indicate – among other details — if the family belonged to scheduled caste, or scheduled tribes, or other backward classes.
The parent was struggling with one issue: should he somehow acquire from somewhere, with appropriate bribes, a certificate indicating that the family belonged to one of those SC, ST, or OBC? Why, I asked. Well, this goes on the permanent record and in the near future, when the question of college admissions comes up, his son would have a shot at the reserved seats, he said. I said that doing so would be ethically and morally wrong, and it may even be a criminal offense.
It depresses me that our society is so poor that it makes criminals of ordinary citizens. It all begins at the top levels, of course. For getting votes from particular segments of the population, the government has various entitlement programs. If you belong to a certain caste, you are entitled to this or that. As if the society was not divided enough, the divisions are legally strengthened and enforced. Instead of abolishing caste, the government cynically entrenches those divisions and hands out goodies depending on the caste of the citizen.
It has come to such a sorry pass that the government in some states has (indirectly) gotten into religious conversions: there are moves under way to reserve seats for people from “minority” religions – which is of course Islam. In effect, only a Muslim can occupy a seat reserved for a Muslim in an educational institution. And like the case where my associate was wondering if he should declare himself an SC or ST to allow his son to have a shot at those reserved seats, it would happen that people would convert to Islam just so as to have a better chance at getting into that school or to land that job. I suppose it is the pinnacle of secularism – the Indian variety – where the government gets into the business of promoting a specific religion so as to get more votes from that vote bank.
Shortages – the excess of demand over supply – can be engineered and predictably profited from. In the absence of shortages, the opportunity for excess profits (called rents) disappears. Monopolies can restrict supplies and thus extract rents from consumers who have no recourse. When the government gets into being a quasi-monopolistic supplier of goods and services, it can engineer shortages for profit.
There are shining examples of government monopolies (and government sanctioned oligopolies) and its attendant short supplies, high prices, poor quality and deep corruption. With liberalization, some of these have become history, and predictably the corruption, the rents, the shortages and corruption have disappeared. There is one very big sector where the government stranglehold still extracts blood out of the population: the educational sector.
The guy had worked hard. Not just the guy, his family had practically put everything on hold for the big event: the interview. They all worked hard to prepare him and spent months worrying whether he will get through or not. In the end, the big day came, and after the test followed by an interview, the guy got rejected. The entire family was devastated. The mother broke down in tears. Her three and a half year old son would not be unable to attend the lower KG school because his performance in the entrance test and interview was not up to scratch.
Imagine: a 3-year old kid being put through tests and interviews to get admission in kindergarten. It is surreal the way people consider this a normal state of affairs.
I am told that there are schools where you can pay an advance to reserve a seat for your yet to be born children. It is surreal. Supply constraints induced shortages do have that effect. Not too long ago, people used to apply for telephone connections for the households of their children – households that would materialize in ten years or so when the children grow up. The waiting time for a telephone connection was about that long.
Why was the waiting time that long? Because, the argument went, telecommunications is a vital sector of the economy. Therefore, the government had to be the monopoly supplier. Why? Because only the government could be trusted to provide such a vitally needed service. The result was long waiting times, shoddy service, corruption—and most damaging of all, astronomically high social welfare losses and an economy which had one of the lowest teledensities in the world.
The telecommunications story has a happy ending. The monopolization of the sector was ended, the private sector was allowed to enter, and suddenly you could get yourself a telephone connection within days, if not hours. Instead of bribing someone to please let you have a connection, the telephone companies fought to have you as a customer. Phone call prices (both local and long distance) used to be one of the highest in the universe; now India is one of the cheapest – if not the cheapest – places on earth to use a phone.
Private monopolies are bad. But I think that government monopolies are more damaging because they are more difficult to dismantle. Governments are made up of people, and it is very difficult for people to give up power and control. For in the end, it is power and control that motivates people in government to keep meddling in areas where the government has no business to be in. The story is very old: restrict supply, extract rent.
There is a reason why I am weaving the telecommunications story with the education story. The former can teach us a thing or two about why education in India is in shambles, and also suggests the solution.
This I will go into the next time. Stay tuned.