Tuesday, August 10, 2010

Am I a socialist?

A reader, frustrated by my apparent duplicity, asked me how I can possibly say that RTE & Right to Food are worthwhile programs when my writings are predominantly libertarian in nature. I can only thank my reader, who goes by the name Dyslexic, for questioning the consistency of my beliefs. Without it, I would probably never have the opportunity of clarifying why I believe in what I do. I do now, and this is it.

Human beings are capital. A government’s basic duty is to maximize productivity of this capital, even at the cost of all other forms of capital like land and money. All schools of economic thought agree on this basic principle, but each goes about it in a different way. Libertarians believe in liberty and freedom of choice to be the foundation of human welfare. Keynesians believe in value maximization through government intervention where required, and Communists believe that human choice has no role to play at all. Here’s what I believe in,

1) The government should not limit industry and enterprise.
2) It should not own or manipulate the currency.
3) It should stay out of business.
4) It should do everything required to protect property and life from domestic and foreign aggression and finance it from tax receipts.
5) It should develop infrastructure, both physical & social, and finance it from tax receipts.

I know the social infrastructure part of 5 seems at odds with the first 4, but is it really? Physical infrastructure cannot be more important than social infrastructure like education and healthcare. Especially when inequality has reached frightening proportions and very little of it can be blamed on lack of initiative from the poor. In parts of the country which have been ignored, access to physical and social infrastructure is non-existent. The only thing one can find in abundance here is poverty. In these places, as in some developed parts of the nation as well, parents don’t send their children to school because 1) there are no schools and 2) even if there are, they need another earning member in the house. In this environment, making education a right is probably the only way to encourage parents to do the “right” thing. With poverty as widespread as in our nation, parents need all the encouragement they can get to send children to school. Rather than look at Right to Education as only a child’s right to be educated, I look at it as also the government’s right to demand that every child be educated.

The Right to Food has other roots. Have we ever wondered how we can have deaths due to, and suicides because of the fear of, starvation when every needy person has access to heavily subsidized food through the Public Distribution System(PDS)? Well, the answer lies in the unique way loans are structured in rural areas. When marginal farmers, farm workers or migrant workers take a loan from moneylenders, they are required to deposit their Ration Card & entitlement booklet with the lender. The money lender then draws food from the PDS using these cards and sells them in the open market, with the difference being treated as interest payment. When the loan is repaid, the Ration Card & booklet is returned. If the borrower cannot repay the loan, he/she literally starves to death or commits suicide to hasten the process. Right to Food proposes to tackle this menace by terming demand for such collateral as depriving the borrower of his/her Right to Food, making it a criminal offense. At the moment, its a civil matter.

Laws in India are seldom what they seem to be. To judge their suitability based on narrow interpretations of their motives is probably the biggest mistake one can make. An unrelated case that comes to mind is our DTAA with Mauritius. A recent article in the Business Standard had a finance ministry official lamenting the cost of the DTAA, pegging it at Rs. 2,000 crs. p.a. Such statements are common, and we wonder why the government puts up with the loss. Well, how about because the DTAA was not signed in isolation. It was signed along-with another treaty, one which gave the Indian Navy right to be positioned in Mauritius alongside French & British, both of which are former colonial rulers of Mauritius. This gives the Indian Navy unparalleled presence in the Indian Ocean. Now look at the Rs. 2,000 cr. cost of the DTAA. Doesn’t seem like much, does it? Then why are these statements made at all? Its about government allocations. The Ministry of Finance’s loss is the Ministry of Defense’s gain, but one it has never acknowledged officially. The day the MoD admits that it gains from this treaty, the MoF will be in a position to demand compensation to the extent of, well, Rs. 2,000 crs. p.a. So there.


  1. Thanks for taking the time to respond in detail to my comments.
    At the risk of using up your blog space,I'll respond as below:
    The concept of natural rights arise from the fact that they negative rights.ie you should NOT kill or STEAL etc. Positive rights like you should eat or educate are unnatural and created from thin air (to use the monetary analogy!) Violation of natural rights results in a clear identification of the violator ;not so for the positive rights like RTE /RTF

    Only socialism can come up with such meaningless rights.Otherwise why not have even better rights: like the right to permanent prosperity and the right to an attractive partner?
    Nobody can get punished if rights such as these are conjured up,because nobody is personally liable for these states of human condition.Can one take Kapil sibal to court because Bablu in my neighborhood cant go to school because he prefers working in the cycle shop than sitting in a govt school?

    Does the lazy raging alcoholic have a right to food ?Ofcourse not.He has to earn his bread but not the right to free food.He may ,ofcourse,be feed by well meaning churches and dharamshalas -at no cost to the average citizen.

    The RTE being introduced is wrong at this abstract level.But coming to practical matters:The RTE defines schooling by size of classroom and playgrounds -which is absurd in a city like Mumbai .If you've read James Tooley's "The beautiful tree" which is an wonderful report on the fully private,small schools in shanties and slums in Mumbai,Hyderabad,Lagos(nigeria?) etc.Some of them even do not have govt recognition( aah the blessing of the allknowning regulator babu).Private schools dont need to mean swanky Podar international.They could be a hole in the wall outfit teaching kids to read and write from a rapidex book.They are accountable to the students and their parents.The parents are happy to send their children to such schools because they know that the kids WILL learn something useful -They actively avoid going to the govt school nearby where teachers play truant and learning is neglected.
    "Rather than look at Right to Education as only a child’s right to be educated, I look at it as also the government’s right to demand that every child be educated."

  2. continued:

    Actually,parents who dont send kids to school make a very sound decision in most cases.It is dire poverty which doesnt give them the luxury of sending their children to school -not some evil or ignorant intention. Also,really do kids benefit that much from schooling in our system? The rote learning and lack of practical training is basically a waste of time.Schooling for 16 years of life is an overkill.Kids are much smarter than that -only if we left them alone instead of indoctrinating them continuously.A shopkeeper's child learns much more about life and business at his kirana shop than sitting in geography classes. Children in the industrial revolution used to work -not because their parents were heartless and cruel,but because they were too poor and could do with every hand that could help.
    As an aside,the canard of population explosion is something that needs to be tackled at an intellectual level.The Ghulam nabi azads of the world think that the poor reproduce so much because they are bored and dont have a TV to entertain themselves.This is insulting to the poor on so many levels!

    Second,the RTE is all about maintaining the status quo.It reflects its distaste for the dirty word 'profit'.No Tatas or Infosys will be allowed to enter education while the Kamal naths and DY Patils and sundry politicians will be allowed to provide 'social service'.It is all a dirty racket and we know it.
    Some may question if the private sector has the monies to fund education -we need only look back at the origins of TIFR and IISc -all funded by the Tatas until the sarkar took over.
    The best the govt can do is,really,get out of the way.That is how it can improve social infrastructure.

  3. continued:

    Physical infra and social spending can be promoted by tax credits/benefits rather than taxation (the unholy education education cess for example).Let parents get complete tax credit on fees and school expenses (and medicine while we are at it). The govt can sell off the 100+ loss making PSU timepasses that exist to corrode our nation's fabric,eating away at our hard earned capital.Summary:RTE is a continuation of the Raj central planning in education that succeeded in making a literate india into an illiterate nation in 150 years (dont have the numbers -but we were much more literate in 1800s than 1930s -see Tooley and Dharampal)

    The right to food is another of these fanciful socialist words.It is lapped up by all of us because it is an attractive dream.

    The problem in India is its central planning in food.The only commodity that perhaps has no godfather among netas is cooking oil -it is a highly competitive and pretty free market .Farmers dealing in it are savvy and follow global trends.And consumers benefit.Nidhi Nath had an article in Economic times how the price of cooking oil continued to fall while sugar and wheat kept going thru the roof.
    People can and will be able to feed themselves if left alone.
    The moneylenders hard handed tactic : here the govt can help.By enforcing laws especially bankruptcy laws.We need tort laws not feel good laws like RTF.No wonder our supreme court decided that 500 Rs per person was more than enough in Bhopal -our sarkar turned away the US trial lawyers who landed in India in 1984 to help Indians sue UC.We got screwed by our sarkar and not the UC.
    The PDS is the problem,not the solution.Farmers are net importers of food -we dont recognize this.
    All redistributionist ideas are based on good intentions,but faulty understanding of economics and human nature.
    Human beings are self interested,but not selfish all the time.They help each other.Like the schools of yesteryears were funded by philantrophy and student fees,competition will lower fees and make schooling a reality -only if the sarkar steps aside.

    We dont need to get there in one jump.But we can stop the waste.The PSUs that bleed the nation's money can be shut down to fund good roads and improve the court system for a start. Food and education can take care of themselves.They are every man's basic desires ,but not rights.

  4. Well, in a way, you rebut your own contentions. I agree that these aren't natural rights and they cannot be enforced, then why the angst? If it's about nomenclature, then its easy to look beyond it.

    But let's look at specifics. Do you believe that Bablu, as a minor, is in a position to decide where his long term interests lie? Because, if that's the view, it turns the very concept of adult franchise on its head. After all, if he is smart enough to decide his future, then why not the nation's?

    Also, Bablu may take a decision based on his current reality which demands that he earn a living. But if he is reasonably assured of basic needs, his perspective may change. Examples of raging alcoholics and other such groups, who are a very small & insignificant minority, only prove the existence of outliers. Of the possibility that some undeserving people may benefit. In reality, though, I believe that there would be more Bablus, who will derive significant positive value from such initiatives than raging alcoholics.

    Now looking at your RTE example. All instances that you mention are great except that we don't have enough of them in the interiors. What about villages where there are no schools, public or private. As things stand, before and after RTE, there is nothing that stops private societies and trusts from opening these schools. All that the RTE has done is provide a commercial reason for these schools to be opened in areas where people aren't in a position to pay for education. I would contend that with the compensation in place, there is scope for more private schools to be opened. Yes, they have to comply with certain infrastructure norms, but if you step out of the cities, you will realize they aren't all that daunting. Real estate is cheap, and most villages will willingly hand over land for a school. All they need is the assurance that they will get a school and not just a shell.

    As for the need for education, I do read Sauvik's blog and know where you are coming from. Firstly, under RTE, the suggested period of elementary education is 8 years. And nothing, absolutely nothing, can convince me that its better to have an uneducated child than to have a child whose education is at a variance with our ideas. I would love it if children were taught the right economic theory, but no education cannot be the alternative to the "right" education. A shopkeeper's child may learn a lot more, but RTE does not preclude his right to still do it. It just tries to provide him with an alternative to his current occupation and leaves him with the right to decide which way he should go.

    About the profit motive playing a part in education, well it can, but not when you're trying to educate people who cannot, and will not, pay for it. Then where is the profit. Whether for-profit institutions should be allowed to exist for higher education, the answer would be a whole-hearted yes. But profit needs revenues, and in the interiors, there are none. The only alternative is charities and there is nothing, before or after RTE, that stops private charities from providing it. In fact, by paying the school on a per-child basis, RTE actually encourages them. I know a family in Nashik that operated an Anganwadi in a village nearby. They did it from their own money as a gesture of goodwill for the people who had embraced them and helped them settle when they returned from the US. Till last year, they could afford to serve only one village because of the cost involved. With RTE, though they needed to form a trust and get their school registered, they are eligible for per-child compensation from the gram panchayat. They will never make a profit, but since their cost has come down, they are now looking at a few more villages to replicate the model.

  5. I doubt whether the British actually turned a literate population into an illiterate one by establishing schools. They sucked our population dry, increased poverty and put people in a situation where education was a luxury. That was the primary reason for dropping literacy and not the fact that they established schools. Yes, they probably didn't establish enough schools, which is what's happening now.

    Given the freedom given under RTE, I would expect just the opposite of what you state to be facts. I believe that it promotes competition, but lays the ground rules for it. I believe that the government will get more bang for its buck, and its only their buck that pays for education in these places.

    The government certainly needs to get rid of the PSUs, but not to fund revenue expenses education & healthcare. These are capital assets which need to be replaced with capital assets like physical infrastructure, including that used for schools and hospitals or used to retire capital account liabilities. Revenue account expenditure
    should and needs to be funded from revenue receipts like taxes.

    The public distribution system is a problem and recognition of the fact exists. There are suggestions of a voucher based system, but also realization that it will need to wait for the UID to come into existence. As of now, the ration card is not just an entitlement certificate, it serves as proof of residence for many.

    Most of your comments are very city centric. They reflect in-depth knowledge of your immediate surroundings, which colors your views about India in general. This is my perspective and I may be completely wrong. this is clearest in your suggestion that tort laws can replace the elements of RTF. How can one expect a poor farmer, on the verge of starvation to take advantage of tort law. Do you really expect him to go to a lawyer and file suit against the moneylender? Or will be be better off just registering a criminal compliant with its higher probability of immediate action.

    If we turn every argument into one about corruption, then we are only left with the choice to abolishing government. There is corruption in defense,law enforcement, infrastructure building... everywhere. Thats a separate issue, to my mind, and needs to be dealt with separately. Just as one does not expect the government to step away from protecting life and property just because its system is corrupt, condemning them away from any initiative for fear of corruption cannot work.

  6. And you're welcome to use as much of my blog space as needed. I enjoy nothing more than a good debate.

    Thanks and regards

  7. The question about Bablu is an interesting one -which questions our arbitrary assignment of adulthood.A person doesnt become adult by merely attaining 18yrs of age (16 in the last generation).We have people who are 28 yrs old and still dependent on papa for sustenance today -they arent adults except physically.If Bablu is able to decide that he can stand on his own -trying to earn a livelihood and be responsible for himself,then he is indeed an adult -even if he is 13 or 14.But that was not my original point -it could have been Bablu's adult guardian who made the decision to not send him to school. I would rather trust Bablu's father rather than some babu in delhi to make that decision for him.
    secondly,though my examples are from the city,Tooley also finds that more than a quarter of schools in the rural areas are also private.cheap ,affordable and accountable too.
    The Nashik example precisely proves the point that there is no need for the govt to run schools .If they want to subsidise such good doers,it may be a good thing -except it has unintended consequences (a scamster running an NGO for example).
    if there are no schools in the rural outback,it cannot be solved by throwing money at it -which is what building a govt school is akin to.there are govt schools in rural bihar and easter UP -with no teacher or learning happening.why does that happen? because there is no accountability ? public choice theory tells us why trying to imagine an accountable govt institution is a chimera.the biharis dont send their children to waste time in these schools because they know it is a deadend.RTE continues to throw good money after bad(ofcourse in the name of the poor)while damaging the private,accountable ones -by creating typical babu regulations like school size and playground requirements.
    central planning doesnt work.schooling isnt an exception. Here is a nice report http://www.livemint.com/2010/06/24233124/Law-threatens-lowcost-private.html

    tort reform doesnt need to include slick city lawyers etc.improving the enforcement of law and order is a very bottom up process too.
    in somalia,there is the xeer system -rural,nomadic,and compensatory instead of punitive.it is worth studying.just like a tort system.people evolve such solutions on their own.they really dont need guidance from some all knowing state.

    btw,i was in nashik area too for most of my childhood,down in HAL township.