The way forward...
The paradigm shift of the politico-economic system in India from a laissez-faire setup (pre-independence) to that of a modern social welfare system (post independence) and then to the present “liberalised economy” [which in my view actually translates to “Yes, we want capitalism(but won’t admit it) albeit with socialist goals”(“socialist and secular” being added vide The Constitution (42nd Amendment) Act, 1976 to the Preamble of the Constitution of India*], has left indelible impressions on governance and business in the country.
I call these models “politico-economic” because I believe the kind of economic system your country follows largely determines your policies and kind of laws that you legislate, and vice versa. They have a symbiotic relationship with one another. Which takes precedence is probably a chicken-or-egg debate. Moreover that is not what I wish to discuss here.
The era of the modern social welfare state, in my opinion (as opposed to conventional notions), is fading. I believe what is fast replacing it, is creative capitalism (features of which, though central to the topic, shall not be discussed in this post). I am not saying that welfare is not the motive of this new system. What is changed is that economic growth is accentuated and welfare is a desireable, but not the intended outcome, as opposed to the former, where welfare is the motive and the State and its policies are the means to attain it.
The fact that we do not acknowledge/are not aware that the era of the modern social welfare state is on the verge of being booted out is probably because of the fact that the shift has been swift; the changes not being a result of any one specific incident (such as the Great Depression of 1929 which made many countries react to the changed circumstances and choose between the right and the left).
Coming back to India... In these changed circumstances, we are somewhere between the shackles of the past and the needs of the future. So are our policies. Let me take the example of my favourite Momo vendor to put forth my case, because that is what inspired me to write this post. The need of the welfare state of ensuring public health, necessitates the issuance of licenses for any vendor to sell roadside food. There are, of course, other licenses and permissions that have to be taken from the authorities by the vendor to legally run such a business (whether these are actually taken, or dispensed with by bribing the authorities is a different issue). But the sheer number of formalities, permits and licenses, along with their procedures are so boggling and intimidating, the idea of opening a roadside food outlet would be dismissed by most people.
Under the garb of being a welfare state and therefore having the policy of permits issued by the health departments of Municipal Corporations, a lot of people would have lost out on a lot of opportunities – not because they would not have been able to provide food of good standards, but simply because of the procedural rigmaroles involved in the entire process.
One may argue that there is a strong need for such a system to ensure public health, and that may well be the case. Well, in August 2006 I contracted typhoid, a water borne ailment. I scanned my memory to remember where exactly I’d had water from a source that could be contaminated. Then it struck me... a couple of days before, I’d had gol gappas from the chaat shop which supposedly has a permit from the health department of the Municipal Corporation of Delhi.
One may still argue that this was an isolated incident, and that such a system is necessary in order to ensure the quality of food being served at such outlets. That is again, another debate that I do not wish to discuss here.
I wish to address a larger issue.
I believe that in order to move ahead, you must give your citizens freedom. This is an era where the state is diminishing its responsibilities and private participation and engagement in business is the best way of ensuring economic prosperity. The State must engage itself in a minimum set of activities which lie at the core of governance. It must act as a regulator and may engage in business. It must simplify procedures and do away with unnecessary licenses. What the government started in 1991 (doing away with the license raj and liberalizing the economy) must not stop, but continue.
Clearly, that is not the case in India as yet. We are surely headed there, but we need to be there faster.
A mere glance at the 2007 Index of Economic Freedom published by The Heritage Foundation and the Wall Street Journal would indicate where we are. Ranked at 115, we have been categorized as “mostly unfree”. The ratings were made on parameters such as business freedom, trade freedom, fiscal freedom, government size, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labour freedom. What this really means is that people in India are not as free, economically, as compared to nations like Singapore, United States, Australia or Hong Kong.
I’m not saying that economic freedom is the only way of attaining economic growth, rather, it is a major factor contributing to it.
I began this post by saying that the policies and economies are interrelated. I believe the way forward is following a policy that enables your citizenry do be economically free.
* The five-year law syndrome!
I call these models “politico-economic” because I believe the kind of economic system your country follows largely determines your policies and kind of laws that you legislate, and vice versa. They have a symbiotic relationship with one another. Which takes precedence is probably a chicken-or-egg debate. Moreover that is not what I wish to discuss here.
The era of the modern social welfare state, in my opinion (as opposed to conventional notions), is fading. I believe what is fast replacing it, is creative capitalism (features of which, though central to the topic, shall not be discussed in this post). I am not saying that welfare is not the motive of this new system. What is changed is that economic growth is accentuated and welfare is a desireable, but not the intended outcome, as opposed to the former, where welfare is the motive and the State and its policies are the means to attain it.
The fact that we do not acknowledge/are not aware that the era of the modern social welfare state is on the verge of being booted out is probably because of the fact that the shift has been swift; the changes not being a result of any one specific incident (such as the Great Depression of 1929 which made many countries react to the changed circumstances and choose between the right and the left).
Coming back to India... In these changed circumstances, we are somewhere between the shackles of the past and the needs of the future. So are our policies. Let me take the example of my favourite Momo vendor to put forth my case, because that is what inspired me to write this post. The need of the welfare state of ensuring public health, necessitates the issuance of licenses for any vendor to sell roadside food. There are, of course, other licenses and permissions that have to be taken from the authorities by the vendor to legally run such a business (whether these are actually taken, or dispensed with by bribing the authorities is a different issue). But the sheer number of formalities, permits and licenses, along with their procedures are so boggling and intimidating, the idea of opening a roadside food outlet would be dismissed by most people.
Under the garb of being a welfare state and therefore having the policy of permits issued by the health departments of Municipal Corporations, a lot of people would have lost out on a lot of opportunities – not because they would not have been able to provide food of good standards, but simply because of the procedural rigmaroles involved in the entire process.
One may argue that there is a strong need for such a system to ensure public health, and that may well be the case. Well, in August 2006 I contracted typhoid, a water borne ailment. I scanned my memory to remember where exactly I’d had water from a source that could be contaminated. Then it struck me... a couple of days before, I’d had gol gappas from the chaat shop which supposedly has a permit from the health department of the Municipal Corporation of Delhi.
One may still argue that this was an isolated incident, and that such a system is necessary in order to ensure the quality of food being served at such outlets. That is again, another debate that I do not wish to discuss here.
I wish to address a larger issue.
I believe that in order to move ahead, you must give your citizens freedom. This is an era where the state is diminishing its responsibilities and private participation and engagement in business is the best way of ensuring economic prosperity. The State must engage itself in a minimum set of activities which lie at the core of governance. It must act as a regulator and may engage in business. It must simplify procedures and do away with unnecessary licenses. What the government started in 1991 (doing away with the license raj and liberalizing the economy) must not stop, but continue.
Clearly, that is not the case in India as yet. We are surely headed there, but we need to be there faster.
A mere glance at the 2007 Index of Economic Freedom published by The Heritage Foundation and the Wall Street Journal would indicate where we are. Ranked at 115, we have been categorized as “mostly unfree”. The ratings were made on parameters such as business freedom, trade freedom, fiscal freedom, government size, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labour freedom. What this really means is that people in India are not as free, economically, as compared to nations like Singapore, United States, Australia or Hong Kong.
I’m not saying that economic freedom is the only way of attaining economic growth, rather, it is a major factor contributing to it.
I began this post by saying that the policies and economies are interrelated. I believe the way forward is following a policy that enables your citizenry do be economically free.
* The five-year law syndrome!
posted by sanyal at
4:37 AM
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