A couple of telling anecdotes about the state of the educational system in India. A few weeks ago I was in Nagpur at my sister’s place. One evening, a friend of hers showed up. She (the friend) was struggling with her daughter’s admission to a medical college. She would have a fairly decent shot at getting admitted into this particular medical school if she got 180 marks or above. However if she did not get that, but got 160 or better, the school was demanding Rs 600,000; and, if she only got 140 marks or better, the price for admission was Rs 1,200,000. For Rs 3,000,000 (Rs 30 lakhs), she would have a seat even if she fails the qualifying exam.

People cope, somehow. When faced with severe shortage, they are willing to pay seemingly impossibly high prices. The monumental struggle to somehow gain access to the limited seats in educational institutions that middle-class Indians have to face is stunning to behold. The pity is that this shortage is entirely man made, a manufactured shortage. The persistence of this shortage can only be explained by understanding that those who have engineered it gain immensely from it. It is a bureaucratic and political racket that has its own logic and compulsions. All sorts of shady businesses have evolved to cater to its needs. Academic corruption is one such business, as illustrated by the next anecdote.

A friend, Anil (not his real name), who I had gone to school with came over one evening to my sister’s place to visit with me. My sister’s son had just finished his 10th grade exams and Anil started discussing his son’s 10th standard exams with her. Anil said that he had “to do some fielding” in his son’s case. What the heck was that, I asked.

It seems that he got an anonymous call a week or two after the exams. The caller said that Anil’s son was not doing too well in two subjects, and offered to have it taken care of for Rs 25,000. Anil was apprehensive, like pretty much all parents, that his son may have not done too well in some subjects. Not willing to take the risk of having his son fail, he agreed to pay the amount. Did the caller say which subjects, I asked. No, all this is very urgent and one does not go into the finer details, said Anil.

The 10th grade board exams are critical. Parents are willing to be party to deep corruption because they are unwilling to risk failure. The number of seats in good junior colleges (11th and 12th grade) are seriously limited. Miss a good junior college and you may end up not getting to a decent college. Your life can be ruined if you don’t get good grades in the 10th board exam; and if you are afraid that the grades will not be good, you could try to ensure that by paying some shady operator who would fix the grades. That is called “fielding.”

Corruption is a basic fact of life in India. It is fairy simple to understand why this is so. India is a socialistic economy. Socialism is short for “shortages.” Shortages imply high price. Generally the list price is far below the “market clearing price” and the gap between the two is bridged through a payment in “black.” The degree of socialism in a sector is correlated with the amount of shortage, and the amount of shortage is correlated with the amount of corruption. It is an unholy trinity: socialism, shortages, and corruption.

In a recent report (from the World Bank or some such organization) claimed that the education sector was the most corrupt. The amount was around Rs 27,000 crores (or US$6 billion) per year, and it was more than the figure for corruption in politics, bureaucracy, police, organized crime, etc. (I don’t have the reference handy and will update this later. So don’t quote me for now.) I am not surprised at all.

Corruption is a corrosive and it poisons the blood of the economy. But it is a symptom of a deeper problem: shortage. Most shortages are engineered. One way to manufacture an artificial shortage is to declare something illegal. The US experience with prohibition epitomizes this. The resulting shortage gave rise to massive corruption. Another way to manufacture shortage is to exercise monopolistic control in the supply of goods and services. The government of India is a past master in this variety of manufactured shortages.

Monopolies are capable of tremendous damage to an economy. Over the centuries, people have figured that where possible, monopolies must be broken, and if for some reason they are dictated by economic logic, then monopolies have to be regulated so as to mitigate some of the harm they would otherwise do. The regulation of monopolies naturally falls as one of the roles of the government. Clearly, the government cannot be expected to break up or regulate a monopoly business if the government itself is the monopoly supplier.

The lesson is then clear. The government of India must get out of the business of education and it must constitute an independent regulator which will make the rules for the private sector provider of educational services. Furthermore, the education sector will gain immensely from allowing foreign institutions to do their business in India. Corruption will be a thing of the past as soon as the shortages disappear.

It is time to stop the insanity of government mandated shortages. If logic is insufficient to persuade us that corruption is a consequence of shortages, there are many significant examples in recent history where this was demonstrated. When will the masses rise up and revolt against the socialism in the education sector?