यह एक ऐसा स्थान हैं, जहाँ पर हम राजनीति और नेताओं पर एक खास नज़रिये से बातचीत करते हैं, जो हमारी भिन्न स्तरों के नेताओं के साथ आमने सामने हुई चर्चाओं और उनके साथ किए गए शैक्षणिक और ज्ञानवर्धक कार्यक्रमों के अनुभवों पर आधरित होगा । हम आशा करते हैं, कि यह ब्लॉग हमारे प्रजातंत्र के अनछुए और प्रेरणादायक पहलुओ पर प्रकाश डालेगा और संभवत हम सभी को हमारी डेमोक्रेसी को जीवंत रखने के लिए व्यक्तिगत स्तर पर प्रयास करने के लिए रास्ता दिखायेगा ।

Saturday, 31 May 2008

MYSTERY OR CAPITAL OR MYSTERY OF POLITICAL AWARENESS

The Maid
Recently I read an article in the TIME magazine about the state of the American economy and a section on the crisis in the housing market struck me as strange. The author wrote that the benefits from tax deductions on home-mortgages accrued to the wealthiest 16% of taxpayers. Instead, those tax benefits could have been given to expenditure that might have delivered higher economic growth. "A factory, a software program…". In short, anything but a house, for "a house just sits there". And this was what was strange- to say that a house just sits.

It reminded me of one of my conversations with my maid. She had mentioned that she had a small house in Calcutta. On enquiring if she gets some rental income from it, I was told that she never gives her house on rent since it was too risky. In Delhi, she continued, there are rental agreements and they are binding (I didn't want to tell her of the rental scams that I'd heard of). Moreover, even if we had rental agreements there, the tenants don't leave when asked to. Instead they demand money for vacating and even get support from the local politicians. It's probably the strata of society she lives and moves in, pardon me for sounding so bourgeois, but you'll agree this section of uneducated are less aware of their rights and do not qualify for being a part of one or the other social movements that work for the rights and entitlements of the less fortunate and deserving.

Anyhow, the conversation, in turn reminded me of a chapter from a book titled The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else by Hernando de Soto . The book seeks to explain why developed countries have been able to grow rich while developing countries have not - an age-old question asked by the Physiocrats, Adam Smith in The Wealth of Nations and then by Karl Marx, among others. The answer, according to de Soto lies in making capital productive. If property rights are well-defined, then assets can be converted to capital, thereby increasing productivity. The difference lay not in the types of goods each was endowed with but that these physical goods lived the same lives everywhere but in the West they lead a parallel life. They could be used as collateral to get loans that can be used to engaged in production and generate income.

According to de Soto, "...most of the poor already possess the assets they need to make a success of capitalism. Even in the poorest countries, the poor save. … But they hold these resources in defective forms: houses built on land whose ownership rights are not adequately recorded, unincorporated businesses with undefined liability, industries located where financiers and investors cannot see them. Because the rights to these possessions are not adequately documented, these assets cannot readily be turned into capital, cannot be traded outside of narrow local circles where people know and trust each other, cannot be used as collateral for a loan, and cannot be used as a share against an investment." He continues, "…dead capital exists because we have forgotten (or perhaps never realized) that converting a physical asset to generate capital—using your house to borrow money to finance an enterprise, for example—requires a very complex process. It is not unlike the process that Albert Einstein taught us whereby a single brick can be made to release a huge amount of energy in the form of an atomic explosion. By analogy, capital is the result of discovering and unleashing potential energy from the trillions of bricks that the poor have accumulated in their buildings."

I remember thinking at the time of my conversation with my maid if only our property rights (PRs) were better defined (characterised by ownership, exclusion and transferability). This is not to say that we don't have PRs but they aren't well defined. In other words, an economic good would have the attributes of rights to use, rights to exclude others from using, and the right to transfer the good to another AND their enforcement. If only we had better land titles, a well-functioning rental market, free access to the credit market, better enforcement agencies, better… if only.


Is that, then, the difference between developed and developing countries? The fact that the former are able to assign economic and social values to goods while the latter cannot get beyond the natural/ physical values of the same goods? Or is it that they have better legal institutions that will uphold these values and integrating them within one system rather than several unconnected and uncoordinated schemes? That they have corruption free law agencies that will uphold the rights of their citizens? That would only establish the neo-classical economics propounded in textbooks! Not the capitalism that exists in the West today.

In my opinion, there is a thin line between the two extremes of laissez faire and communism and it is that which differentiates developed from the developing. Developed countries, too were feudal and monarchic; In fact, de Soto maintains that the past of the Western countries is the present of the developing ones. Yet with the move to democracy they were able to remain centralised enough for governments to know that they can only uphold the rights of the citizens. Yet they are decentralised enough to realise that they are only the caretakers- not the endowers. Our country follows neither a communist nor laissez faire model; we have confused the two and failed to move coherently through the spectrum (communism-socialism-capitalism-laissez faire).

India, not unlike many other developing countries, didn't really move away from a feudal society. There always seems to be someone in a position of the "endowers". Local goons, politicians, bureaucrats, the lot of them- all of them project the image that were it not for them we would not get water, electricity, etc. People have the right to own economic goods (for example, houses) yet they are not able to exclude others from expropriating benefits from the same. It seems to me that there is "they" - some who believe, and are treated such, that they have the power to endow as they please. And we all know it takes two to tango so there is the "we", as a collective, who chooses to remain in the complacent position of takers? We got our Independence but we never really regained our freedom. We need to be more proactive and participative. We need to ingrain in ourselves the fact that each of us has certain rights and it is up to us to uphold them without causing another to forego. From among the five mysteries that de Soto lists, one would conclude that India is shrouded not so much in a Mystery of Capital as much as a Mystery of Political Awareness.

References:
http://www.imf.org/external/pubs/ft/fandd/2001/03/desoto.htm
http://www.nytimes.com/books/first/d/desoto-capital.html

Thursday, 29 May 2008

My Conversations with "Aam aadmi"

Auto drivers
Since I don't have a car, I use autos to get around. These are the times when I'm either haggling over the fare or preaching about the necessity of lane-driving or when I've given up on both, wondering whether traffic lights add or take away chaos to our already chaotic lives.

But sometimes I travel in autos with drivers who have interesting and insightful observations that would put the best of our policy makers and bureaucrats to shame. One such driver insisted that despite the Metro Rail's intention to reduce traffic on the roads, auto drivers have not experienced a decline in passengers; definitely not near metro stations or on those routes. He reasoned that while the metro may make economic sense for a single commuter or even two, it is not so for three or four commuters . He said that since a ticket costs anywhere between Rs. 10 to 15 it is usually more expensive for 3 commuters. Further, since one had to either walk to the station or take an auto or cycle rickshaw there was an added cost.

Moreover, it is "inconvenient" to have your luggage checked at the metro station. Surely those taking the metro to the inter-city railway stations for outbound trains could be expected to carry more than a briefcase or a purse. As if all this weren't dissuasive enough, one finds that not all stations are equipped with escalators and parking facilities are practically non-existent.

Does all this imply that a public transport facility that is meant to cater to the masses actually does not experience economies of scale? Not really. I would be ignoring the dimensions of time and distance if I agreed to the well-reasoning auto driver.

The fares that he quoted would hold for short distances but not for long journeys like from Rohini to Central Secretariat, not to mention the time it would take for the auto to make the same journey. Once the metro is completed it will connect Delhi with all its suburbs and benefit the thousands who commute to Delhi for work. Moreover, parking is planned for two-wheelers, the owners of which are being targetted to use the metro system. As regards luggage, it is expected that the daily commuters would be mainly those commuting to and from work.

One will have to wait and watch if this policy decision withstands the laws and assumptions of simple economics or does economics, once again, not reflect the real world.

Friday, 23 May 2008

Indian Parliament: Unicameral or Bicameral?

Most democracies in the world, barring a few African nations have a bicameral parliament: a first and second chamber or an upper and lower house. So, is India's parliament bicameral or unicameral? Bicameral, you'd say since India's parliament has two houses: the Rajya Sabha and the Lok Sabha, the Upper and Lower houses respectively. But does having two houses necessarily translate in to bicameral strength? While many of us know about the composition and functioning (or otherwise) of the Lok Sabha, what is the extent of understanding of the Rajya Sabha? The first is composed of members on the basis of representation of states (with 12 nominated members) while the latter is composed almost entirely of elected representatives, with a couple of seats filled by nomination.

Arend Lijphart, a world renowned political scientist who had put forward a schema for analysing bicameral strength, maintains that the method of selection is just as important as, if not more than, the constitutional powers. Direct elections confer a sense of legitimacy that nominations and appointments does not. So, by this definition, one could conclude that India's bicameral parliament is really unicameral.

However, there is another dimension to legitimacy that must be considered. Meg Russell, in her analysis of the reforms of the House of Lords in the UK, says that in addition to the composition and method of selection, one must scrutinise the reason for existence of the second chamber. The purpose of a bicameral parliament is, apart from other things, the second chamber keeps a check on the first. This means acting as a constitutional safeguard and ensuring that legislation is thoroughly scrutinised. In India, however, this translates in to the Rajya Sabha giving a mere nod to Bills originating in the Lok Sabha, since more often than not the house is dominated by the ruling party. The Constituent Assembly saw many opposing views, one of which was that the Rajya Sabha would be "a cog in the wheel of progress" and that there was no need for an Upper House. But the dissenting view, that which was the dominant one at the end, was that a second chamber was absolutely essential.

Shri Gopalswamy Ayyangar maintained that "The most that we expect the second chamber to do is perhaps to hold dignified debates on important issues and to delay legislation which might be the outcome of passions of the moment until the passions have subsided and calm consideration could be bestowed on the measures which will be before the Legislature; and we shall take care to provide in the Constitution that whenever on any important matter, particularly matters relating to finance, there is conflict between the House of the People and the Council of States, it is the view of the House of the People that shall prevail. Therefore, what we really achieve by the existence of this second chamber is only an instrument by which we delay action which might be hastily conceived, and we also give an opportunity, perhaps, to seasoned people who may not be in the thickest of the political fray, but who might be willing to participate in the debate with an amount of learning and importance which we do not ordinarily associate with a House of the People."

Except in the case of Money Bills, both Houses enjoy equal powers; a Money or financial bill can originate only in the Lok Sabha and be presented to the Rajya Sabha for approval. The latter can detain the bill only for 14 days, and none of its suggestions are binding. In other words, the Rajya Sabha is constitutionally allowed only to delay legislation on financial matters rather than initiate it. In case of other bills, the Ministry of Parliamentary Affairs decides in which house non-financial bills are introduced. This obviously depends on the Minister's preference and it is more likely that a government bill is allocated to the Lok Sabha where it stands a higher chance of approval. So while the Rajya Sabha has "equally" strong powers it is hardly ever called upon to exercise them and we wouldn't be far from the truth to say that the Indian Parliament is unicameral in essence.

Monday, 12 May 2008

What this blog is about

At Democracy Connect, we believe that elected representatives can be powerful agents of social change in a democracy. And yet, despite their focus on development issues, they are often handicapped by a lack of professional expertise, management support and even relevant information. Our aim is to bridge this gap.

This blog will hope to provide an inside look at our experiences growing this idea, and how the political and policy-making environment in India works. Looking forward to your contributions!