“Sub-prime rates in India are given to the highest rated industrial group… You and I don’t get sub-prime rates. Somebody like NTPC may get a sub-prime rate or Tatas… I am only speculating.

That’s P Chidambaram, our smart Finance Minister reassuring his countrymen that the sub-prime wreckage won’t hurt India much.

Except of course, that sub-prime rates are not below the Prime Lending rates, but above.

Subprime lending, also called “B-Paper”, “near-prime” or “second chance” lending, is a general term that refers to the practice of making loans to borrowers who do not qualify for market interest rates because of problems with their credit history. Subprime loans or mortgages are risky for both creditors and debtors because of the combination of high interest rates, bad credit history, and murky financial situations often associated with subprime applicants. A subprime loan is one that is offered at a rate higher than A-paper loans due to the increased risk. (source)

To be fair to Chids, I too was fooled by the “sub” in sub-prime till my brother explained to me that what was “sub” about it was not the rate, but the quality of the borrowers. But I am a mere blogger, not the country’s finance minister.

I have a review of Arun Shourie’s book in the latest edition of Pragati. I had titled it “The Parliamentary Kleptocracy”, but Nitin changed it to “First Past the Post”. It starts:

When India celebrates the diamond jubilee of its independence, it will have as its president a person who, when she was running a bank, took money from women depositors, distributed most of it to her relatives as loans and, according to the RBI, did pretty much nothing to recover the money, thereby causing the demise of the bank. This fact will be celebrated as a victor for women. To understand how India managed to accept a person in the Rashtrapati Bhavan who in any mature democracy would be in jail for fraud, it is important to read Arun Shourie’s latest book.

Comments welcome here.

No Shruti, reducing the proportion of women will not improve the lot of women. Yes, the “price” of women will go up, but the price will not be paid to women. It will be paid by men to fathers of women. You don’t have to theorise about this. We know what happens when the sex ratio declines. It has been happening in Punjab, where men have been alleviating the shortage of women by purchasing them from Bihar. Strangely, an increase in the price of women has not resulted in an increase in the quantity supplied. This is probably because the price of a woman will never go up so much that it pays for the 20 years of bringing her up, so all sales of women are distress sales.

Yes, there is a problem in the future if female foeticide does not stop. A world with fewer men than women is tolerable for both men and for women. A world with fewer women than men is not tolerable, neither for men nor for women.

But no, we shouldn’t try to use the police to stop the practice, simply because it will be futile. It is a simple matter for the doctor to find the sex of the child, and it is an even simpler matter for him to convey this fact to the parents. Back alley abortions are also trivial to perform. Unless you start policing every single clinic and the police are incorruptible, you aren’t going to be able to stop it.

The practice will however stop when people stop being dependent on their children to look after them. It will stop when people live on jobs rather than business or on land so that it is less important that someone continue after them. It will also stop when it becomes acceptable for daughters to take care of their parents or when it becomes acceptable for daughters to continue after their parents.

Proximately, it will stop when it becomes socially unacceptable to abort girls and when not aborting girls becomes a sign of modernity.

All this will happen in a generation, but till then, let us accept that there will be a problem regardless of what we do. There will be a generation when there will be more men than women in certain communities and there will be problems of social instability and violence. Just as glib calls to prevent this problem through laws will not work, glib assertions that demand and supply will take care of the problem will not work either.

I will most probably have a review of Arun Shourie’s latest book “Parliamentary System” in the next issue of Pragati. In that book, Shourie is contemptuous of popular sovereignty. He proposes a Presidential system because that will apparently reduce the influence of popular moods. I take issue with much of his logic in the review, though I support the Presidential form.

But since doing the review, I’ve had another thought. Was adopting universal franchise right from independence a bad idea? Of course, I am not the first person to have this idea; many others have had it. Nani Palkhivala used to say the same. But I always used to dismiss the idea, because it rests on the assumption that voting is a duty you perform for your nation rather than something you do in your self-interest. Even assuming that educated voters have a better grasp of issues and are more “qualified” to judge the candidates (an assumption I am doubtful about) I am highly sceptical of the argument that they will use these superior powers to elect candidates who will do good for the country rather than just for themselves.

But now I have found two plausible reasons why starting off with a limited franchise was a good idea:

1. It reduced the size of constituencies. Smaller constituencies means better control over representatives
2. Because the voters were rich, confident of their rights and peers the idea that governments existed for the “people” rather than the other way round could be established.

The two points need to be taken together. When you have a small group of people, democracy works much better. Everyone can participate, voice their views and come to a decision. In large groups, voting every five years is the only job for the average individual. Power gets delegated to the “representatives” and very soon they become rulers. This problem gets worsened when you have poor and illiterate people who are unaware of their rights.

So the hypothesis is that limited franchise led to the development of a tradition of good governance which stayed stable even when voting was expanded. When the barons got together and got King John to put his seal on the Magna Carta -for themselves but not for the laymen under them – or when the property owners established the United States, they also established principles of good governance and actually practised them. Yes, the principles and practices were only for themselves, but when the poor started demanding the same rights for themselves, they had a running vehicle to hop onto rather than one whose engine needed priming.

Anyway, this is a hypothesis and I am not fully convinced of it. This is not an argument for restricting frachise now (I am not even sure it would have been a good argument for restricting it in 1950). I do not know if these allegedly positive aspects outweigh the negative effects of disenfranchising large numbers of people, but it does give us an idea for how to improve governance.

There will soon be a massive redesign of this site. I have not yet finalized the details, but what is for sure is that the blog will no longer be located at http://www.ravikiran.com, but at http://blog.ravikiran.com/. So if you have bookmarked my blog, please update the bookmark. There is no hurry; I will remind you many times till the changeover is done and till then both links will be valid. You do not need to change the permalink to any individual post, and you do not need to change the URL of the rss feed. Thank you!