Tuesday, July 18, 2006

Reforms For Attaining Global Power

In a series of research papers and lectures since 2004, I have argued that the World will become Tripolar, some time between 2035 and 2050. This conclusion is based on growth scenarios that show the Indian economy attaining 70% of China’s size by the time the World becomes Tripolar, even though we will start closing the gap with China from the middle of the next decade. An assumption underlying these scenarios is that reforms would continue at the average pace of 1991 to 2004. The only obstacle to India becoming a global power is the quality of its governance.
A highly competitive media has finally started exposing the grave deterioration in governance. The recent episode in which employees of the city Jal Board, brazenly sent citizens to jail for demanding the water supply that they are entitled to, is just a tip of the iceberg. ‘Public servants’ routinely threaten those under their purview, with the severest punishment under the law that they administer, even for minor errors in paperwork. Anyone who is caught in the spider web of any official rule or regulation becomes a victim, to be harassed mercilessly. Anyone outside the net is free to act as if there is no law, as long as he is willing to pay the bribe when caught.
It is very important for the public and the media to understand that,
(a) This is not a recent phenomenon that can be blamed on the current/previous government in any State, depending on ones political predilection. Governance has been deteriorating, almost unnoticed, over the past four decades.
(b) The deterioration involves every layer/level of government from the humblest functionary in the tehsel/ ward office to the legislators in the State. The rot, a loss of motivation and absence of public purpose (a corruption of motivation), is systemic and requires institutional reform. It cannot be solved by one or two honest and well meaning Ministers/CMs/PM.
(c) The government is like a hollow shell. The demands imposed on it are now far in excess of its capabilities, even if every member could be forced (magically) to carry out, honestly and sincerely, his assigned job. Yet the public’s response to every new problem is to demand a new law or program, ignoring the fact that most old laws lie unimplemented and that myriads of programs with similar objectives exist on paper.
The solution is a, “New Development Paradigm” with the following elements:
First, the incentive for political professionals whose primary objective is to maximise personal profits through creation of a political monopoly, must be reduced. For instance, the electoral system must be reformed to change the incentives for spending and collecting money privately. The benefit-cost ratio for public financing of elections accompanied by compulsory auditing of accounts is likely to be better than for any existing development program.
Second the police system and the judicial system must be reformed and strengthened to re-establish the rule of law and equality under law. This is both a social and an economic imperative. Feudal relations, for instance in tribal areas, cannot be transformed into competitive markets unless there is rule of law. Personal security and equality under law is essential for choking of recruitment of Indians by those who use terrorism as an instrument of State policy against India.
Third, the role of the State must be redefined, restricted to and focussed on, those activities that only the government can do and must do (provide public and quasi public goods, equality of opportunity and a social security floor). For instance, urban planning and national water management are vital economic functions that government(s) must fulfil and be accountable for. This must be complemented by reform of laws, rules and regulations to free the people and their organisations – entrepreneurs, non-profit/NGO, co-operatives and companies - to operate in and compete to provide everything else. One reform that is critical for attaining global power is that of the education system. We must promote competition through free entry of non-government institutions, subject to modern professional regulation that ensures provision of authentic information about the quality and costs of education to parents/ students.

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