The European Union was never an organic move towards super nationalism: it was in its essence nothing more than a political experiment. While early ideas to create a free-trade zone were productive, the experiment turned sour when Europe tried to form a monetary union out of fundamentally disparate fiscal policies. That experiment has now failed. What is particularly disturbing is the predictability of its failure and the denial of its leaders to accept it even in light of insurmountable evidence. Greece is in the midst of a severe depression, with debt/GDP on its way to 200%. Spain faces youth unemployment over 25%. Portugal has lost competitiveness. The banking system is demonstrably fragile. Yet, Brussels continues to takes unconventional steps to preserve a monetary union that stopped working for its people a long time ago.

The financial markets have now adopted Euro skepticism, but intellectuals saw this coming more than a decade ago. As early as the year 2000, Niall Ferguson and Laurence Kotlikoff had this to say in an article titled “Degeneration of EMU”, published in Foreign Affairs in March 2000.

History offers few examples of succesful adjustments of the scale necessary in certain European countries today. What it does offer are several examples of monetary unions disintegrating when fiscal strain became incompatible  with the unpleasant arithmetic of a single currency. In this respect, conventional measures of fiscal balances like debt and deficit ratios to GDP understate the magnitude of the eurozone’s problems. Generational accounting suggests the EMU could degenerate – not overnight, but within the next decade.

Right on cue, eleven years since the publication of that article, the idea of a monetary union is starting to degenerate.Ferguson and Kotlikoff weren’t the only ones who were skeptical – indeed, Brussels actions run contrary to the voice of the people expressed at virtually every major referendum. In its obstinacy, Brussels may delay the inevitable by increasing the size of the EFSF. Individual parliaments could make extraordinary decisions to keep the single currency alive. But, a union that ties the currency of Germany and Greece is never going to work for both Germans and Greeks. The single currency was a bad idea. It’s time for Europe to accept that and move on.

An orderly Greek default, likely won’t be particularly problematic for the global system. But, Spain and Italy’s affairs need to be handled with much more caution. Rather than preserving a failed political experiment, it’s time for the IMF to step in and limit the risk of contagion. To move forward, we need to return to the Peseta and Lira.


It’s not like me to feel sympathy for central bankers, but I do feel some for the current RBI chief, D Subbarao. The RBI has actually been a responsible central bank. It has stood up to intense government pressure, repeatedly and focused on its primary objective of price stability, while the government goes out of its way to ensure that we face multiple inflationary threats. India’s inflation problem is structural and brought about my an out of control government that doesn’t understand the root causes of inflation. Fiscal deficits unless tempered by economy-wide deleveraging are deeply inflationary. In its thoroughly flawed understanding of the world, the UPA government has viewed deficits in the US and Europe as a green signal to raise its own deficits. Aggregate demand did not fall in India and there was no deleveraging. There was however need for austerity and the need for increased competitiveness in light of a world that was sure to become more price competitive.

Instead, the government announced welfare projects that don’t raise productivity enough to justify the price tag, and continued to subsidize energy in a haphazard and fundamentally inflationary manner. The net result has been the age old wage-price spiral which has been spinning out of control. The RBI has needed to act, not because blunt monetary instruments are an effective tool in curtailing aggregate demand in India’s context, but because inflationary expectations have become so widespread that the currency itself is questionable. This government has confused solvency (measured by nominal debt/GDP) with sustainability. India’s fiscal deficit and current account deficit are fundamentally unsustainable.

The soft-spoken RBI governor has himself blamed the central government in his monetary policy statement.

 “The central government’s fiscal imbalances widened during April-July of 2011 reflecting, primarily, the impact of a decline in revenue receipts coupled with pressures from non-plan revenue expenditures on account of higher petroleum and fertiliser subsidies. The fiscal deficit at 55.4 percent of the budget estimates in the first four months of the current fiscal was significantly higher than that of 42.5 percent during the corresponding period last year (when adjusted for the more than budgeted spectrum proceeds).”

The fact that Pranab Mukherjee more-or-less achieved his fiscal targets last year was a function of only one variable: an unplanned 3G spectrum windfall. This year, he is guaranteed to miss his fiscal deficit targets. That means missing a 4.6% fiscal deficit target, in an already inflationary environment. Economists may debate the prudence of austerity measures in an economy such as the US which may be in a liquidity trap, but there can be no economist worth his salt who could possibly argue that India needs anything other than austerity. In an environment where tax revenues have been rising at about 25%, our finance minister manages to outspend those revenue increases. Insolvent state electricity boards and unfunded subsidies, mixed with non-productive welfare measures are a recipe for inflation.

Monetary policy can raise the cost of money and make it more difficult for the government to be reckless with its finances. In a lot of ways, the RBI is trying to impose discipline on the central government through monetary policy. However, rising productivity is the only path to prosperity and this government’s policies are consistently hampering rather than encouraging productivity. India’s underlying problem is a central government that believes events in the world have highlighted a crisis of capitalism, when they have in fact been caused by a problem of excessive debt. India is increasingly adopting the path of “license raj” policies masquerading as “regulation”, when the need of the hour is to minimize regulation, and sell under-performing state assets to the private market so that these assets are better utilized. There is no role for government in generation or distribution of electricity, in the production of oil and gas, metals and minerals and the sooner our government realizes that, the better our state finances will be. As FICCI and others lament Mr. Subbarao for increasing their cost of capital, they should really be thanking the man for trying to apply a monetary solution to an out of control fiscal problem. That fiscal problem threatens to raise the cost of every other factor of production and the hidden transaction costs that face businesses. The men who have termed inflation “temporary” for the last 18 months should be the ones that FICCI takes aim at.

Here is a useful summary of the Land Acquisition Bill, 2011.

Like many others, I welcome the Land Acquisition Bill. However, I would like to see a more coherent philosophy behind the bill. The purpose for which legislation is needed is to better define eminent domain and to ensure that when exercised, existing landholders get fair compensation. The current draft suffers from several flaws, some of which are fatal.

1. Land is fundamentally a state issue. The “one size fits all” solution of the federal government offends the basic structure of government that we have so far considered sacred. The federal government shouldn’t mandate compensation levels – it should instead make a recommendation and leave it to the states to decide what formula works best for them. The “fairness” of land acquisition in Gujrat and Bihar are fundamentally different, because these markets don’t suffer from identical information asymmetry. This will also create healthy competition between states and cause the formula to be reset from time to time.

2.  Fixed ratios don’t work. There’s been a lot of debate about the “4 times in rural areas” formula. Much of the debate looks at current prices, reflects the impact on current project costs and makes an assessment as to whether this is fair and workable, and settles the debate based on their assessment of the degree to which project costs will be affected. However, prices aren’t static – what leads to a fair price today, may well lead to an unworkable price tomorrow. Land, like all other inputs needs price flexibility for the market price to work. In fact, market prices are likely to adjust to this legislation itself, creating an inherent upward pressure on the price of land, which will then be further compounded by this legislation.

3. What is “market price” anyway? I’ve been trying to sell a piece of land for 6 months. I have about a 40% range of what my land MAY be worth. However, I’ll only know when it is sold. Since land is neither liquid, nor indexed, it’s impossible to assess “market value”. If that means creating a discretionary bureaucracy to deal with huge sums of money – let’s just legalize a mafia state.

4. Where is the necessary information infrastructure? We have no computerized system of land records. Property rights to most land in rural areas are based on oral agreements. Titles often aren’t clear. To add to this insurmountable problem, this bill ties in compensation for “landless labor dependent on the land” – for which there isn’t even a legitimate method of creating records. This renders the entire piece of legislation unworkable.

5. It ties together legitimate eminent domain issues, with development issues in a manner which clouds the issue and interferes with the market. The entire notion behind eminent domain is that the government uses coercion to acquire land. That act establishes the necessary condition for “adequate compensation”. To this, I can think of no sensible objection. However, the current legislation ties land for “private companies for public purposes” into the same piece of legislation. It begins by applying a sensible clause i.e. an 80% consent clause of affected families (ideally this should be landholders, since there must be a property rights distinction between those who own land and those who are merely dependent on it). However, the bill then applies the same compensation criterion to such land. There should be a fundamental distinction between land sold with consent, and land sold without consent.

6. When did the Ministry of Rural Development start making policy decisions for Urban affairs? There is simply no need for any clause other than compensation upon the exercise of eminent domain (i.e. without consent) in urban areas.

7. Applicability when private companies acquire land on their own exceeding a seemingly randomly chosen size ceiling doesn’t make sense. You can introduce limited constraints on such acquisitions, but certainly sweeping rules such as these should not apply to the acquisition of land by private companies without government assistance, particularly in Urban areas.

8. The bill create a 20% interest in land to be paid based on “future appreciation”. It’s impossible to accurately assess the value of land and this makes freehold property in itself conditional. This is a dangerous path to go down, and this clause should be revoked as a mandate. If the parties agree upon such a clause voluntarily, that is of course entirely acceptable.

So while this is likely a well-meaning piece of legislation, it requires a lot more work before it can become effective. Once again, the shape and structure of the legislation is one of “command and control” and to empower a corrupt, inefficient bureaucracy to grease their palms further by leaving several issues in the process of land acquisition to their discretion. While the concept of adequate compensation is important, we must not introduce rigid, one size fits all, centralized concepts to battle a fundamentally complex problem. That makes information asymmetry worse, not better.

Corruption and waste, inflation, political control over the institutions our democracy depends upon are all symptoms of an outdated ideology ruling our lives. Socialism failed us a long time ago, so we initiated economic reforms. But, while doing so we retained the bureaucracy, legal structure and mentality of a socialist state. Nearly all of India’s current problems find their origins in ideology. To approach corruption as a disease misses the point. Corruption is a symptom. The disease is socialism.

As I watch a stuttering, stumbling government come up with a new ridiculous explanation for the problem of inflation every week, I’m struck by its outstanding ability to ignore reality. The reality is that inflation is neither new nor temporary. One of the key explanations is both profound and simple: the demand side of our economy is a story of capitalism, the supply side hasn’t been rid of the shackles of socialism. Consequently, we see soaring demand and an inadequate supply side response. Our demand isn’t constrained by permissions at every level or an artificial cost of transacting, but most manufacturing activity in India still require a string of permissions, greasing of palms and overcoming poor infrastructure. Why should an individual need the permission of his government to create goods and services and employ fellow members of his society? Our peculiar form of market socialism allows us to demand goods and services, but makes it difficult for people to supply them to us.

We rely on a mixture of british-era and socialist-era laws that are incompatible with the basic entrepreneurial drive and ability to take on risk that capitalism depends on. Businesses in India are too often formed out of favor because as a society we have accepted bizarre socialist arguments for what are market transactions. Through bunker mentality, paranoid socialist policies we artificially suppress the value of our natural resources. Our wonderfully complex, thoroughly inefficient, ultimately self-defeating oil-pricing mechanism is a great case-in-point. ONGC bears the brunt of an oil subsidy that the government doesn’t really bother to fund. Consequently, at $100 oil, ONGC has a cost of production of a little over $40, pays $50 to the government and manages to keep $10 for itself. Put another way, GOI directly eats up over 80% of ONGCs profits. If this isn’t ridiculous enough the government also randomly changes how much ONGC should pay. It then taxes the remaining $10 per barrel of profits. The net effect is that ONGCs overall production has barely changed over the last 10 years, with hardly any major finds. Quite what the exploration benefit would be to ONGC , I do not know! Ultimately, we ensure that our biggest oil producer doesn’t go looking for new oil and that we  suppress the value of an enterprise that holds current reserves of about 10.2 billion barrels of oil to… $50 billion. By any measure a company with similar reserves in a deregulated oil sector would be valued at closer to $300 billion. If this isn’t ridiculous enough, the government subsidizes and simultaneously taxes the end-product in a way where we pay higher rates for a liter of petrol at the pump than our counterparts in America do. Our oil and gas policies are symptomatic of a confused, muddled government always on the lookout for a short-term fix, never looking for a coherent philosophy to run the state.

Now, my friends on the left often try to point out that unapologetic capitalists like me lack compassion. I jokingly tell them that capitalists like me want everyone to eat a 5-course meal every night, while they want the government to make sure a few hundred million people feel eternally indebted to the government for ensuring that they get their slice of bread! The reality is that a nations wealth is a function of its ability to produce stuff. We need to encourage, reward and celebrate those who produce a lot. We have enviable resources in this country, which lay waste in the hands of a thoroughly inept political order which wants to control all resources and lives in some paranoid delusion about the dangers of opening up our markets. I don’t much care if ONGC produces our oil, or if Exxon does. My only concern is our ability to produce more of it. There is no reason for us to endorse mass poverty as national policy. We need to attract foreign capital, improve the quantity and quality of available jobs, unshackle the private sector in oil and gas, in the distribution of power, in education, in healthcare, in pricing and in politics. We need to celebrate success and ensure that we’re all given a fair crack at the whip.

Government can play a pro-active role in administering a social security system for our poor. It can play a positive role in protecting the environment by taxing carbon emissions. It can ensure the rule of law and the enforcement of private contracts. It can provide justice to any individual who is discriminated against. It can provide for the common defense. It can delegate powers to state governments to zone our cities, plan our development and finance our infrastructure. It can provide financial assistance to provide an education system that rewards merit and not family wealth. Other than that, the government needs to get out of the way. It needs to set rules of the game and punish those that violate these rules, but it simply has no place in trying to tell businesses how much they should produce or how much they can export or taxing products arbitrarily or in trying to control natural resources. We must redefine our social contract to focus on the individual and redefine the role of government. We need local government with constraints on its power.

There is no contradiction between a free-market, low tax economy and a compassionate society. We collect 10.2% of GDP as tax revenue, while simultaneously suppressing GDP through ridiculous government policies. It’s time to expand the base and put far greater resources at work to educate and provide for our poor, while allocating greater funds to build our infrastructure. It’s time for another green revolution. It’s time for a 20% corporate tax rate. It’s time to get rid of the dividend distribution tax. It’s time to shift the post on our tax slabs. It’s time to bring back taxable money stashed away in Swiss bank accounts. It’s time to deregulate our SEBs, oil and gas, metals and minerals. It’s time for a constitutional amendment granting powers to sack under-performing government employees. It’s time for transparent tendering of all public private partnership contracts. It’s time for the sale of resources to the private market. It’s time for a balanced budget and low-inflation fiscal policy. Our independent institutions have given us a functional electoral system and a solid banking foundation. It’s time to empower independent institutions and get government out of the way. In the words of Dr. King, “let freedom ring”.

Barkha Dutt has been the face of modern television in India. “We the People” was an articulate expression of the middle class. It was the first time we really started to talk about what we want from society and government.  The format and the content of the show “elevated the debate”. Her sincerity drew increasingly large audiences and the show fast became the benchmark for intellectual debate. Yet, years later, the architect of “We the people” thinks of the voice of the people as little more than a mob and defends a status quo that may already have been rejected.

The fallout from the Radia tapes appear to have defined Barkha’s outlook. On the receiving end of the sorts of allegations that are commonplace in the mass media, her defense centered around the irresponsibility of those who questioned her motives. She seems determined not to make false charges against anyone, but that is fast turning NDTV into a platform for speeches, rather than a place where difficult questions are asked. While the Radia tapes do not imply that she is “on the take” as some have suggested, they do suggest that she has grown comfortable with the political system in a way that clouds her judgement. The real story was that of a political lobbyist who was playing power broker to seek to influence political appointments. Yet she was looking at Nira Radia as nothing more than a source, while Radia was in fact the real story.

NDTV’s coverage of the Anna Hazare movement spoke to the growing discord between the voice of the people and Barkha Dutt’s views, as they have evolved. NDTV’s first instinct was to question the size of the crowd. In one particular clip, the ticker read “about 2000 people gather at Ramlila ground”, while the live reporter herself pegged the number at 35000! Once the movement grew so large that numbers were no longer questionable, the debate moved to questioning the legitimacy of what was clearly a mass movement. While the seemingly obvious center for debate was whether the government was losing legitimacy through its inability to respond to the voice of the people , the debate was instead channeled into an abstract, theoretical debate about democracy itself.

The underlying question of whether civil society should actively oppose an insincere attempt by the government to tackle a menace that has engulfed every layer of Indian society had an obvious answer. The debate was fundamentally binary. Through rampant corruption in programs such as NREGA, the PDS system, sarva shikha abhiyan, etc we grease the palms of bureaucrats in the name of welfare, out of our hard earned money. Too many of us are forced into a corner in an attempt to comply with labor laws that are incompatible with the demands of our economic structure. We face systemic corruption that forces us make a false choice between efficiency and propriety when we should legitimately be able to demand both. We have every reason to be outraged, and if you aren’t, you are standing up to preserve a deeply immoral status quo.

Ultimately, NDTV was doing little more than to promote the government line. The artificial debate that the government sought to raise about democratic principles was dangerous precisely because the underlying issue was one that was binary. The fact that NDTV was playing along led many to question the merits of our parliamentary system and raised questions that went far deeper than anything the movement aimed to raise. That we would accept a grand compromise was never in question. Anna was always going to lose our support if the government was seen to have heard our voice, with action and not mere words and platitudes.

In the final days of the movement and once the grand compromise between the people and our government had been struck, Barkha Dutt’s shows were remarkable in content and substance. There was even the odd glimpse of her sincerity in her attempt to push an outraged Mani Shanker Ayer in a live debate. Her shows appeared balanced and spoke to a nuanced narrative which was now reality: “we the people” had spoken and our voice had been heard by the government, while preserving the supremacy of parliament. This was now a time for nuance and she delivered in style.

We now stand at an inflection point, facing serious questions. For democracy to function, we need our institutions to work. The fact that the vast majority of us have flouted the law in order to get something done undermines democracy. However, when violations of the law are that pervasive, it isn’t a question of individual or even social morality, it’s a question of why the system is promoting immoral behavior. The fact that court cases last a generation doesn’t allow democratic checks and balances to function. That the system is all too often prone to influence cannot be denied. That “influence” spreads wide in Indian society, as things stand. To see the back of nepotism, cronyism and the abuse of power, we seek a truly independent media which reflects the voice of the people and seeks to engage civil society in a legitimate debate about the path forward.

It is evident that the distribution of natural resources in particular, but also the award of construction and power projects and various licenses issued by the state have involved significant sums paid as bribes. Simultaneously, we have no shortage of instances where the books are cooked for a wide range of reasons. We know that there are vast sums of un-taxed money stashed away in tax havens. We know the Mauritius route has played a role in the way our stock market has rallied. That order has been called into question by the voice of the people. Now that the crowds have returned to their armchairs and the politicians have returned to missing sessions of parliament, it’s time for a serious debate.

There is plenty of blame to go around and we need to arrive at a just way of tackling a problem that implicates some of those who have contributed immensely to society. As a society we need to weigh the alternatives before us. It’s evident that mixing a ‘license raj’ mentality with the greed and animal spirits that capitalism promotes leads to a system of cronyism. We now need to define the role of government in our lives. A failure to have this debate in the light of day will only serve to legitimize fringe voices such as Baba Ramdev’s and distorted views such as a death penalty for corrupt officials. For the serious debate that lies ahead, journalists need to reflect the voice of the common man, while channeling it with the moderation that is required for society to progress. A nuanced debate is now required.

As I write this, NDTV is conducting a debate on Om Puri appearing before parliament under a parliamentary privilege motion, pushing a ridiculous line of argument perpetuated by a bunch of politicians. The debate simply doesn’t live up to the magnitude of the questions that now face us. A more honest, but all too often impassioned debate at another TV studio is increasingly representing “we the people”, while its architect has seemingly grown comfortable with the corridors of power. We the people are now ready for change, but, we need the fourth estate to channel the debate keeping in mind the intensity with which we expressed our discontent.

Within the Anna Hazare movement lies the political opportunity of a lifetime. This is the time for Rahul Gandhi to step up to the plate, to take ownership of the Jan Lokpal and pass it. To replace a stuttering, stumbling prime minister and to knock the sails out of the opposition ship. To strike a grand bargain with Anna Hazare and the rest of civil society. In one shot, Rahul Gandhi could take over the cult of Anna. Rahul Gandhi could use all of civil society’s anger and transform it into becoming the most popular political leader in modern Indian history. India craves a young, dynamic voice that wakes up this zombie government. Rahul Gandhi has the power to transform a nation with one dramatic, photogenic swoop. The cameras are already waiting.

Which begs the question – why isn’t he doing that? To that question, there are unfortunately only cynical answers.

The current debate that grips civil society represents some members of civil society falling for the age old tactic of “divide and rule”. Indeed, the very notion that a non-violent people’s protest can somehow be undemocratic contradicts the basic tenets of democracy itself. The argument itself originated from repeated lectures from government ministers on the virtues of parliamentary democracy. The resulting debate has to some extent turned a very real debate in which everyone is in broad moral agreement into a more fractured representation of civil society, where we are instead debating political theory.

The current debate is completely divorced from reality. The reality is the context that led to this debate in civil society. Let’s remember the stakes involved here. Close to $1.5 trillion locked away illegally in Swiss bank accounts speaks to the sheer scope of the problem before us. The well exposed political nexus speaks to the lack of sincerity in the efforts of our legislators. Let’s be under no illusions of the scale of the problems we are facing. 2G, CWG, Aadarsh, Yedyurappa, Swiss Banks, YS Reddy speak to a form of crony capitalism that is morally reprehensible. Let’s not get caught in legalese when we’re faced with an indefensible state of affairs.

There are moments in history, which aren’t about the specifics. There are moments which aren’t about agreeing on every specific provision of a bill. There are times when the moral question that faces society is far more important than an individuals conception of every specific provision of a piece of legislation. Anna Hazare has captured the moral conscience of a nation, let’s not undermine and fracture that with a debate on legalese. It’s time for civil society to unite in order to demand better governance from our political representatives.

We have a key government minister, Kapil Sibal arguing essentially that one bill won’t make any difference to corruption. If our lawmakers have such little respect for the laws they make, that’s a bigger threat to democracy than any dharna. Be under no illusions: this is a high stakes game that does pit our political classes against civil society at large. As the political class tries to divide us, we must stand united for a brief moment, before we return to being argumentative Indians once more.

There are few examples in history when a single bill inspires a mass movement. In a lot of ways, the ‘Jan Lokpal’ bill is India’s Civil Rights Act moment. The movement has captured the imagination of the all too cynical middle class and has led to a direct, heated confrontation between civil society and government. As is often the case in these movements, civil society itself is divided primarily on the question of methods, while the government alternates between trying to woo the leaders of the movement and crackdown on them. As is always the case, the government appears dramatically out of touch, while a charismatic leader has achieved nothing short of cult status within the civil society movement.

As the movement has gained momentum some have questioned whether the notion of fasting and organizing mass demonstrations amounts to ‘blackmail’. In a parliamentary democracy, it’s the role of government to legislate, they say. Others argue that empowering an ombudsman with too much power creates a super institution that wields too much power without the responsibility that comes with needing to seek re-election every few years. Interestingly, it isn’t just the government that proposes these arguments, even seemingly well-meaning members of civil society seem to resist the idea of an independent anti-graft agency. Some of the criticism smacks of competitive NGO jealousy, but the entire debate is completely futile.

I’ve never known everyone to agree on every aspect of any legislation. The theoretical fantasy debate of what a perfect bill would look like does not have one answer. It’s time argumentative Indian’s stop picking holes in every argument and apply the more logical criterion of whether the spirit of the new legislation is required and reasonable. On that score, there has been and can be no criticism. The civil rights act was not an outcome of well-meaning politicians alone, and this bill won’t be delivered through government goodwill either. To expect those in power to pass legislation that curtails their own power is naive.

The alternative is a government bill that will impose strict penalties on whistle blowers if they can’t prove their case, that will keep virtually every important institution and every major scam out of the purview of the Jan Lokpal and that will essentially do nothing to fight corruption. As an ineffective, out of touch political establishment fights hard to suggest that there is no “magic wand” to fight corruption and that no legislation can fight such a pervasive problem, it’s time that civil society stops its own bickering.

The only alternative to the Jan Lokpal is a bill that may actually make things worse. We can’t rely on the supreme court for every case, and we can’t rely on the lower courts for anything. Legal recourse may not be an all encompassing solution, but politics is a game of signals. Empowerment and standing up for what is undeniably right is ultimately a function of law. The civil rights act did empower many more blacks to no longer take the abuse that was hurled their way. It’s time that honest, upright taxpayers don’t need to accept an abusive, incompetent, wasteful and downright corrupt government any longer. This is our chance to demand that from our elected representatives.

I started with a comparison to the Civil Rights movement and I’ll finish with a reminder of a timeless message from Dr. King.

 Human progress is neither automatic nor inevitable… Every step toward the goal of justice requires sacrifice, suffering, and struggle; the tireless exertions and passionate concern of dedicated individuals.

If we don’t act, we soon lose the right to complain.

First things first – I have no idea what the actual size of the 2G scam was. CAGs method of arriving at “loss to the exchequer” is one way of doing so. It isn’t the only appropriate methodology, however. The underlying aim of policies that are concerned with “public goods” such as spectrum can’t be written off. On that, Kapil Sibal is quite right. Indeed, the problem the 2G scam points to isn’t primarily economic. It isn’t about what the exchequer lost; you could even argue that under-pricing of spectrum amounts to a transfer from the public sector to the private sector, which would aid overall economic growth. The bigger lesson from 2G is that we have a government that actively cherry picks winners and losers. Often behind closed doors, often without any sound justification and often with kickbacks, deals that lead to private gain for ministers and corporate honchos. Indeed, 2G is a story that’s repeated over and over again – in mining, in oil and gas, in state contracts for bus stops, display boards and roads! What 2G points to is a deliberate policy stance since liberalization where governments have sought to distribute public goods to private players without a transparent policy framework.

What 2G really points to is cronyism. Or worse. The primary merit of a capitalistic society lies in the efficiency it brings in allocating scarce resources and the role it plays in promoting freedom. Free-market capitalism is amoral, but it’s just in that it rewards efficiency and skill and severely punishes a lack thereof. What we have when a state gets involved is a system which leads to gain for select individuals based on favor in high places is an immoral allocation of resources. There’s no merit to an economic system which doesn’t promote optimal utilization of scarce resources.

This is a confused, muddled state which isn’t acing for you and me. Think of our current oil policy. We first tax oil, then subsidize it, then asks public sector enterprises (with considerable minority shareholders) to foot the bill for a subsidy that is structurally under-funded according to a random formula that is often revised with no justification, and then we throw in a confused and conflicting approach to pricing in oil and natural gas. That tells you everything you need to know about policy framework in India. Even “progress” lacks any true meaning. We finally manage to dismantle the APM on petrol. But, price rises are still stalled till after key elections and other political events by remote control! If that wasn’t enough, we actually actively encourage consumers to make the switch from using petrol engine vehicle to using diesel engine vehicles!

So Mr. Kapil Sibal, when you attack the CAGs figures on loss to the exchequer, I respect your viewpoint. But when you start to defend first come first serve as a legitimate policy stance, you cross that dividing line that separates those of us who believe in a just society, from those who believe in preserving the status-quo of cronyism, waste, illogical discretionary powers and a ‘license raj’ mentality in the 21st century.

I’d like to end with a few simple suggestions on the path forward. I would suggest the emphasis should be on achieving the following goals:

1) Press the accelerator on disinvestment. There is no credible evidence to suggest that the public sector is more efficient than the private sector in any sphere. There is no need for ONGC, SBI, IOC, BPCL, HPCL, Coal India etc. to be public sector enterprises. Sell them. Just the institutions named above would raise well over Rs. 500,000 crores. Use part of that money to clear the debts off and subsequently privatize SEBs, savings the exchequer huge sums annually, and leading to a huge inflow for funds.

2) Use auctions to sell public goods. If the government is worried about high pricing of public goods leading to high costs for consumers, then either a) don’t create an artificial scarcity of the resource, as with spectrum, or when a) isn’t possible because the resource is scarce (b) initiate direct cash subsidies utilizing ‘aadhar’ to the underprivileged. But, a transparent auction in all cases is a must.

3) Get rid of discretionary powers of the state in the process of tender of public-private-partnership contracts. Impose strict penalties on delays.

The points above aren’t difficult to achieve and would hugely aid the welfare of the average Indian. The points above aren’t driven by ideology, but by pragmatism. I would like the state to go much, much further, but I think on the above points there can be general agreement within society. They would also aid removing structurally inflationary elements from the budget. While hoping the Lokpal will lead to a change on corruption may be popular, the real answer lies in a new approach to the role of government itself. It’s time we learn the true lessons that 2G ought to have taught us.

India’s going through turbulent times. A nation that just a year ago appeared to be looking at itself and the world with new confidence has been forced into a mode of uncomfortable introspection after a series of corruption related exposes. One news organization more than any other (TIMES NOW) has relentlessly kept the pressure on the government. A movement led by a charming Gandhian has captured the imagination of hundreds of thousands, if not millions of Indians. India isn’t new to controversy, but a civil society movement that’s grown in scale to the point that the India Against Corruption movement led by Anna Hazare has, is a new phenomenon.

The response to the Hazare movement demanding adoption of a controversial Lokpal bill has been fascinating. Anna has undoubtedly been accepted by one and all as a man of great integrity, and nobody questions his motives. As a consequence, the discourse hasn’t been limited to the usual blame game and posturing between political parties (though, we have needless to say, had our fair share of politics as usual). Instead, a more mature debate has ensued – with passionate voices on either side. The debate centers around the legitimacy of a campaign led by an unelected group of people within the context of parliamentary democracy and the use of tactics such as a fasts to try and pressure the state.

On the one hand, a group of eminent lawyers and intellectuals argue that the tactics employed by the Hazare group create a dangerous precedent and the insistence on a particular draft of the Lokpal Bill amounts to blackmail. They also argue that civil society doesn’t have a unanimous view on the issues involved, so for any group to claim its representing the view of the “masses” is facetious. On the other hand, activists suggest that the seriousness of the issue and the reluctance of the government in particular and political parties in general to address the issue calls for a mass movement. They argue that legislators will still draft the bill itself, but debate should focus on a draft bill that is more serious about battling corruption.

While the debate often gets fairly heated, within it resides a basic respect for the status quo. Nobody is suggesting an overhaul of the system itself. Though the state continues to try to muzzle the voice of this intriguing civil society movement, Jantar Mantar isn’t going to be India’s Tahrir square moment. India is battling on the fringes, hoping that a new bill will mitigate a problem so rampant that almost everyone who supports the movement has their hands at least a little dirty.

Despite the idealism of its leader, this is, in the ultimate analysis an issue specific battle. This isn’t a battle that calls into question the political process itself, let alone the philosophy of government. In the continuing saga of a maturing democracy, I suspect we need to confront more philosophical issues. There are no Republicans here to suggest that we might find our answers in small government. There is little or no appreciation of individual liberty or personal privacy. We are still, according to our constitution a socialist republic. The reality is a form of central control where the powers of the state aid corporatism and crony capitalism, not the common man. While the Hazare movement has been an outstanding first step in enriching our democracy, it’s time we start to talk about the philosophical foundations of the role of government as well. A broken system usually needs more than a little tweaking.