Thursday, April 10, 2008

It Can Be Done Here

Shyam Ponappa / February 02, 2006

If we get more than just the macroeconomics right: organizing & managing ourselves in India

Developed economies did not just happen, they were shaped and built with much effort. We tend to lose track of this in our scramble for prosperity. America, for instance, went through a wave of regulation in response to its robber barons a century ago. America’s markets experienced wrenching changes as they shifted from the laissez faire of the 19th century through strong government intervention, before reaching “pure capitalism” after Reagan. Europe has a strong element of government regulation and state ownership along with its democratic traditions. To reap the benefits of collaborative human endeavour—i.e. realise our full potential—we too must make the effort to organise ourselves. Just getting the macroeconomics right is not enough.

Apprehensive about our inherent disorganisation and indiscipline? Just think how well we can function in other people’s systems when we choose to: in Europe, America, and elsewhere in Asia. It is only in India that we indulge ourselves, saying we are “like that only”.

And the downsides of continuing in our shambolic ways? The human cost of not raising living standards sooner for many people. An environment where “rubbish marks the boundary between domestic and public space”, says Barbara Harriss-White of Oxford in India’s Informal Economy - Facing The 21st Century (2002). And the spectre of possibly spiralling Indonesia’s way, raised by Devesh Kapur in “India’s Promise?” in the Harvard Magazine last year ( ).

Just How Do We Get There?

Privatise, say the neo-liberals. Apply the mission-mode to PURA (provide urban amenities in rural areas), says President Abdul Kalam. Public-private partnerships, says the CII. All good, all necessary. But are they sufficient?

For what, you might ask, for it depends on what you want: the chaos of a profit-maximising, winner-take-all capitalism (after Thatcher and Reagan)? Or a social-democratic egalitarianism akin to parts of Europe? In making such comparisons, we must also bear in mind the stage of development of our markets and polity. It makes little sense to mimic strategies from developed economies without their context, discipline, and preparation. “Institutions cannot be built without recognizing where the country is…,” say Edward Glaeser and Andrei Shleifer of Harvard, discussing America at the end of the 19th century in The Rise of the Regulatory State (

Nor is it sensible to copy isolated initiatives from Europe, where they have “civic duty hardwired into their souls”, to quote a Briton praising Austria’s trains in “Yo, Jeeves!” by Rob Blackhurst in the International Herald Tribune, October 6, 2005.

Why Not Just Privatise?

Just as elections are not synonymous with democracy, privatisation is not synonymous with efficiency. Our experience of power and telecommunications so far proves it. Electricity distribution in Delhi, for instance, is still a hopeless mess. Our disinclination to pay higher tariffs handicaps privatisation further.

Some think our telecommunications sector has done very well because of its growth. But what of our need for quality services comparable with infrastructure elsewhere, to be as productive as others? When and how shall we get broadband services everywhere, transfer phones easily, or get prompt service on call?

What we need is ubiquitous, reliable broadband at reasonable prices, and the energy/power to use it. If these needs were met, we could have huge gains in productivity and sheer convenience. Just imagine if people all over India had high-speed lines and what that could do to productivity, over-urbanisation, and fuel savings—provided they had the electricity to run their devices! Many could work from wherever they were: lawyers, engineers, business people, scientists, teachers, hacks … It would enable classes for children like in, say, rural Nebraska. It would facilitate health and social services, farm extension, wholesale and retail, reading and information access, etc. This hasn’t happened with privatisation, perhaps because our expectations are so low and we are so inured to shoddy quality that we accept mediocrity readily.

Why Not The Mission-Mode?

A mission-mode approach has worked for breakthroughs (as with ISRO, the Delhi Metro), but it is not a substitute for well-designed, integrated systems. To try to build a nation with mission-mode initiatives is like erecting buildings without proper structural support. Special projects are alright provided we have a bedrock of good systems, but we need those systems.

Institutional Framework for Investment & Competition

Modern markets need conscious and skilled organisation. Market institutions do not develop spontaneously after privatisation, as Devesh Kapur and Ravi Ramamurti report in “Privatization in India”, and the consensus is to first establish an institutional framework for competition (see ). They cite failures in Eastern Europe, former Soviet countries, and British Rail. Our experience in power and telecommunications confirms this.

So, this is what our helmsmen must do apart from the macroeconomics:

Systems: We inherited a colonial system designed to exploit India, and have continued with it. Its aim was and is to collect revenues for the government. Its philosophy is that government is the master and owns everything. People are tolerated while they are productive. Our version of democracy has changed this from merely tolerating people to manipulating them as the means to political power.

We have to build the systems and institutions we need, with the requisite interdisciplinary skills (economics, law, management: organisation, finance, strategy; and technology, together with solid project management). We must redo “the myriad zoning laws, investment regulations, tariffs, and tax codes...” that Bill Lewis, founding director of the McKinsey Global Institute, decries in The Power of Productivity, to create an enabling environment.

We must learn about designing and setting up systems from others, just as we learn science or engineering from many sources. We need to absorb and adapt know-how on management, organisation and systems to our purposes. While importing privatisation in vacuo is inadvisable, concepts such as integrated systems and institution building through multidisciplinary, collaborative action would be very beneficial. So would internalising the simple yet hard-to-get-right principles of directness, objective and task orientation, discipline, collaboration, and ethical dealing.

Why are our efforts at reform so mangled? Because we have never really tried systematic reforms before. Take telecommunications: we began privatisation in 1994—with the Indian Telegraph Act of 1885 and the Wireless Act of 1933 as the primary laws! The first Trai Act came out in 1997. Is it surprising that such efforts fail? It would be amazing if they worked.

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