Atanu Dey On India's Development

The Three-ring Anti-corruption Circus in in Town

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As some of you may have noticed, I have been away. That is why this blog has been dormant. Oh I have not been physically absent. I was only mentally away, taking a break to learn some economics. I was teaching a couple of courses for the Summer term at UC Berkeley. I am sure that teaching is the most rigorous and effective way to learn something. It is impossible to teach the fundamentals without coming away with a renewed appreciation and understanding of what really matters. What did I re-learn this time around? Lots of very interesting stuff, but one thing stands out.

In his book, The Fatal Conceit, F A Hayek noted that “the curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” A study of development economics can be seen as a series of depressing lessons on how people afflicted with fatal conceit meddling in areas that they don’t understand end up making a mess, and the resulting needless misery and suffering of untold millions of absolutely innocent victims.

A proper study of economics teaches humility. We are limited beings: our rationality is bounded, our knowledge finite, our information local, our comprehension imperfect. Attempts at the grand design to reach the commanding heights are guaranteed to fail. Look behind any economy that has failed to develop, and you will see the dead hand of powerful ignoramuses throttling the living.

India figured prominently in the development economics course as a case study of how a potentially rich country has been engineered to be desperately poor. It is a demoralizing tale of how people are trapped into poverty because of their bad luck of having been born into system which is designed to be poor.

India’s poverty is engineered, it is by design.

Two fun facts about India stand out starkly. First, India is a very poor country, and second, India is a very corrupt country. But note that while the average Indian is definitely poor by contemporary world standards, the average Indian is not any more morally bankrupt than the average human. Although I don’t have any hard evidence, I am convinced that Indians are at least average when it comes to honesty, intelligence, diligence, social capital, and the rest of it. So how do one explain India’s poverty and corruption? Is one the cause and the other the consequence? Which came first? Or is there another hidden variable which is the cause of these two?

It is my belief that the hidden variable is India’s lack of freedom. The stress is on “hidden” — Indians don’t know that they are really not free. There is a lot of talk about India having attained freedom in 1947. But all that is really cheap talk. With regards to freedom, India is no more free than it was under the British Raj.

The evidence is overwhelming that India’s political leaders are uniformly corrupt. It cuts across political party lines. Public corruption is not contained in some specific geographic region. It is not bounded by linguistic or religious divides. The percentage of criminals in the various state and central legislative bodies far exceed that in the general population. What’s more, that percentage has been increasing with time. And the magnitude of the corruption has also been increasing. The average corrupt deal was in tens of crores of rupees a couple of generations ago — small change compared to the deals these days which is counted in billions of dollars.

If Indians are not characteristically uniformly dishonest, how is it that India’s politicians are so acutely dishonest? Perhaps the system selects the most dishonest and the least principled.

Here’s how it works. The rewards of political power are enormous. Without loss of generality (as economists put it), let’s consider the position of an MP (member of parliament.) As an MP, a person has the opportunity to make $1 billion. Mind you, there’s no compulsion to actually make that amount of money — merely the opportunity. Now let’s ask who is likely to become an MP? Contesting the elections are A, B, C, and D. Of the four, Mr D is competent, honest, and hardworking. The rest are venal incompetent criminals. Mr D will not steal a penny if he were to become an MP, and therefore he cannot afford to spend more than whatever he can raise from his supporters. But A, B and C — they will make a $1 billion if elected. So they are willing to spend quite a bit of future loot, and this they can raise that from their cronies who will in essence be making an investment, the return on which they are assured post the elections.

The corrupt can outspend the honest in any elections because the former will recover the expenses (and more) upon assuming office. It should not come as a surprise that India has degenerated into a kakistocracy — rule by the most corrupt and the least principled.

It is the opportunity to make billions of dollars as an official of the government that is the proximate cause of the criminalization of the government. In turn, the proximate cause of the opportunity to make billions is that the government has control over vast areas of the economy. Being in government gives one immense discretionary powers — to grant or deny licences, to block and prevent legitimate economic activity, to extract rents wherever possible. The more powerful the government, the less power the people have. The larger the government, the less freedom the people have.

Dr Manmohan Singh was made the prime minister — not because of his competency as an executive (as evident as the testicles of an elephant) or his character (which is notable due to its absence) but because of his moral pliability and his ability to obey orders from his superiors without question. Removing him would be of little use because surely there are others who are equally compromised and would be happy to fill the chair.

Dr Singh rose to the top not because the people chose him but because the system is such that it selects the most corrupt. His boss is the most corrupt, and he in turn appoints corrupt officials. Dr Swamy has trained his guns on P Chidambaram as his next target. (Dr Swamy, hats off to you.)

The circus is in town. It is a three-ring circus. There’s Dr Singh’s boss as the Lion Tamer in the center ring below the big top. (Pardon the pun.) She takes home the biggest share. The side-show in ring number two is Civil Society — led by Anna Hazare. They are the dog and pony show. And in ring number three are the chimpanzees and the monkeys — the Dutts, Sardesais, etc — who pretend that they don’t belong to the circus but in truth are the ones who clean up the horse-shit and elephant droppings. (Where the elephants fit into this scheme, I leave it to the diligent reader.)

Everybody loves a good circus. It is a good distraction from the harsh realities of life — prices are rising, poverty is deepening, cities are increasingly becoming unlivable.

But the show can’t go on. We have to bring this to an end. There’s a way out and I will go into that in my next post. I promise.

  • Shankar

    Changing the system is going to be a long and very hard process, a reality most of us fear to face, so we take comfort in daily trivialities and murder-rape-crime soap operas on TV.

    The current state of affairs is a stark indication of the failure of our so-called democratic system since it was always weighted against the common man and towards a coterie of powerful people in control. This works because our constitution allows it.

    I don’t really see any way for change other than whole sections of society taking up arms and going on witch-hunts to cleanse society of the crooks and to create a new form of governing the country. This is assuming India remains one country.

  • Shyam Reddy

    Dr Manmohan Singh was made the prime minister — not because of his competency as an executive (as evident as the testicles of an elephant)—–This made my day.Thanks Atanu

  • AP

    Herbert Stein’s Law: If something cannot go on forever, it will stop

  • Venkat

    Superb post, as always Sir!!
    Had this been facebook, I would have pressed “Like” in every line of the post!!
    Anna has managed to bring people together for fighting against the govt, but I am afraid he has got his priorities wrong :(

  • ST

    Interesting blog!

    Any comment on Amartya Sen’s book on relationship between Freedom and Development?

    How to change? Only through a well thought plan followed by proper action.

    Also take a look at: cgpi.org. What do you think? Do they have a good approach?

    –ST

  • Abhijat Mitra

    So Atanu, what is the solution ? If the corrupt will always come to power as you have shared above, they are the ones who will have the least incentive to bring down the size of the govt/govt power.

    This has the inherent ‘conflict-of-interest’ with the corrupt. Ditto with all political parties.

    So do you have a solution ?

  • kevin

    hey atanu, you do not seem to believe in the idea of a lokpal institution at all. I agree there have to be other reforms but as we see that independent bodies often do a good job of keeping the govt in line like EC,SC CAG and so lokpal would be one such body. Also the cpib (corrupt practises investigation bureau) of singapore and icac of hong kong seems to doing a good job of keeping corruption at a minimum..I would really love to read your views on these as you have always praised these countries in your posts..

    PS: I have read a lot of your posts..your views are really good and make a lot of sense…looking forward to read more.

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  • Comrade

    Welcome back, Atanu. I discovered this blog a couple of weeks back.

    Just placed an order for The Fatal Conceit and The Road To Serfdom. I’ll be on the lookout for more book recommendations.

  • pankaj

    Atanu, if we go deeper then we will see that india does not have a Great culture ultimately it is the culture that determines the status of nations,all the countries at the top are having a great progressive culture eg europe/north america/east asia,even singapore’s Lee kwan had told that singapore owes it success to its culture.

  • Bhole Baba

    “Needless misery and suffering of untold millions of absolutely innocent victims” — even if the victims were innocent (and they rarely are) their parents were certainly culpable of willful child abuse through procreation. Now go ahead and unleash the pro-natal commie drivel. Won’t change reality.

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  • Adarsh

    @Pankaj, wow, you’re so misinformed.

    India does not have one culture, we have so many varied diverse cultures if you can open your mind and have a look.

    As for Singapore, I think you should come down here to have a look for yourself. The success of this nation is not because of some great culture. In fact there is no “Singapore culture” at all. There are three diverse and very different racial groups here, Chinese, Malay and Indian. Their cultures are hugely different from each other. It was not culture that brought this country together, but well thought out long-term national policies, long term planning and most of all, accountability. The country is run like a private company.

  • Ranger

    Atanu, can you suggest a few books that must be read by every Indian conservative ? (or every Indian, for that matter..)

  • Suhit

    Welcome back. Looking forward to your next post. How do you break the virtous circle of corruption?

  • Rajorshi Pal

    Atanu Da,I have just started reading your blog.I came in acquaintance with your writings after reading TRANSFORMING INDIA borrowing it from a friend.I have been highly encouraged and inspired by your book and blog.For youngstars like me you are the perfect guide.Being a student I am not able to dedicate much time and effort to read all your previous blogs.All the books that you have mentioned earlier are much more technically related to economics which,being a student of science stream is difficult for me to understand.Can you please mention more books like TRANSFORMING INDIA that can quench my thirst

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  • Siddhartha

    Most of the communities in the entire Indian sub-continent(such as Bengali) succumbed in ‘Culture of Poverty’(Oscar Lewis), irrespective of class or economic strata, lives in pavement or apartment. Nobody is genuinely regret ed or ashamed of the deep-rooted corruption, decaying general quality of life, worst Politico-administrative system, weak mother language, continuous consumption of common social space (mental as well as physical, both). We are becoming fathers & mothers only by self-procreation, mindlessly & blindfold(supported by some lame excuses). Simply depriving their(the children) fundamental rights of a decent, caring society, fearless & dignified living. Do not ever look for any other positive alternative behaviour(values) to perform human way of parenthood, i.e. deliberately co-parenting children those are born out of ignorance, extreme poverty. It seems that all of us are being driven only by the very animal instinct. If the Bengali people ever be able to bring that genuine freedom (from vicious cycle of ‘poverty’) in their own life/attitude, involve themselves in ‘Production of (social) Space’ (Henri Lefebvre), initiate a movement by heart, an intense attachment with the society at large is very much required – one different pathway has to create, decent & rich Politics will definitely come up. – Siddhartha Bandyopadhyay, 16/4, Girish Banerjee Lane, Howrah-711101.

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