Classic

Rerun – Popular Will and Divine Will

As you ponder over the results of the elections in the five states, it is time to rerun an old post from over a year back: Popular Will and Divine Will

Essentially, I believe that the first fundamental lacuna of India’s democratic system is that a government’s performance at governance has nothing to do with its performance in the elections. Everyone can explain an election after the results are declared, but no one can predict it in advance. I believe that in India, a statement like “If you do X, your probability of returning to power in the next elections is Y” cannot be made for any values of X or Y. This applies to all X, whether X stands for “good” policies  or populist policies. Neither kind of X will have any kind of cause-and-effect relation on election results. 

The problem is not just the electoral system. It is also because no value of X will translate into any result on the ground. A politician can hatch a scheme whereby he can promise free colour TV to all voters. He may think that voters will get TVs and vote for him, while he gets kickbacks from the manufacturer. But given the corruption in the administrative mechanism, it is pointless to try and put this scheme in action. There is no guarantee that the TVs will reach the voters, and therefore there is no way to ensure that his constituents vote for him. 

Given this reality, if I were a politician, I would basically forget about trying to get reelected and concentrate on making money.

Very few politicians have tried to break out of this cycle, and I believe that the person with the greatest chance of succeeding is Modi.

This Time They Hit the Rich

One argument that is being made about the Mumbai attacks is that they are garnering so much attention because this time the rich were targeted. This argument contains multiple levels of silliness. 

Yes, there is a class divide in India. There is a divide between the literate and the illiterate. There is a divide between those who read English newspapers and those who don’t. There is a divide between cities and villages. Now, the whole point of a class divide is that those on one side of a divide feel greater kinship among themselves than with those on the other side. Readers of English newspapers like to read about the travails of other middle-class readers like themselves and don’t care much about farmers dying in Vidarbha. A citizen of Mumbai cares more about people dying in train bombings in his city than he does for deaths due to Naxalism or caste wars. That makes sense.

But if you try to stretch this standard argument to argue that this particular terror strike is getting more attention because it was targeted at the rich South Bombay types, that is where the argument snaps. The typical English speaker is far more likely to travel by train than be able to afford coffee at the Taj or Oberoi. He is much more likely to feel kinship with those who died in a train blast on July 11, 2006  than with those who died in the November massacre.  

There is a sliver of truth in the argument – in that it is true that the attacks got more attention in the West because Americans and Britons were killed.  But using the argument to explain why they have generated such an enormous outrage amont Mumbaikars involves lazy thinking as well as an active effort to avoid the blindlingly obvious.

Shameful Piece by the Economist

Five years ago, the Economist was cheering not only the invasion of Afghanistan, but also that of Iraq. Now, when it comes to India’s response to the Mumbai terror attacks, the Economist has declared  that we should not emulate the US “mistakes” like… the invasion of Afghanistan.  Worse still, now it turns out that the US incursions into Pakistan – the threat of which is the only thing that is keeping Pakistan in check, are also a bad idea.

This Time it is Different

I am usually contemptuous of attempts to link enormous tragedies to the writer’s minor personal misfortunes, but bear with me on this.  On 27th November, I was stuck in a hotel room in the United States, unable to return to Mumbai because my flight was cancelled due to the terrorist attacks. I had missed breakfast because I was glued to the television, and because it was Thanksgiving day and no restaurant was open, I faced the prospect of staying hungry throughout the day. I was also feeling exceedingly lonely and was desperately missing my two-month old infant son.   

My problems, needless to say, were trivial compared to what my city went through. The reason I am mentioning them is to explain why the incident of Karambir Kang, General Manager at the Taj,  losing his wife and two daughters in a fire while he was saving hotel guests caused me to burst into tears. 

It has been over a week since, and I am still seething. This is not the first terrorist strike on Mumbai or on India, and the way things are going, this will not be the last. But there was something different about this one. It is one thing to anonymously set off a few bombs and kill a couple of hundred people. It is quite another when 10 or 20 people, armed with guns and grenades, hold off the might of the Indian State. This is probably the greatest display of India’s military weakness since the defeat of 1962. 

More, Stronger, Effective

VK wants to know if I meant more, stronger or more effective regulations in the previous post.

If it is more,  well how much more? Which country has escaped a crisis by having more regulations? Of course, India can avoid the crisis that comes about when growth rate drops from 9% to 7%, if we are willing to accept a steady growth rate of 3%. The point is to manage crises without accepting stagnation in return. Now, I don’t accept that the US is a libertarian Mecca, but obviously, many of you think that it is close to one. But it also so happens that the US is one of the most prosperous countries in the world. It has experienced fewer and shallower crises than the rest, and has recovered from them faster than others. If you think that having few regulations is bad, then how do you account for this result? If you think that having more regulations is the answer, then how do you account for every other country in the world?

If it is stronger, well “stronger” presumably means having stricter punishments for the same crime. But you can’t punish an action if it is not a crime in the first place.  It was not a crime for companies to borrow from abroad, so unless you make it illegal, you can’t increase the punishment. 

If it is effective, is it something like what libertarians and communists supposedly say when their preferred systems supposedly fail? Just as a libertarian system has not yet failed because a truly libertarian system has not yet been tried, regulations have not yet failed because truly effective regulations have not yet been tried. What is an effective regulation? Whatever, in retrospect, could have prevented the last crisis.  If a regulation fails to prevent a crisis, then, by definition,  it is not effective, which means that effective regulations have not yet been tried. 

The challenge is to be able to predict in advance which regulations will be effective and to put in place a political system that has the will to impose only those regulations and not the other. So far, no one has figured this out.

Thatz Why We Need Strong Regulations

Okay, so why are Indian companies in trouble in spite of Palaniappan Chidambaram’s ironclad assurances that Indian markets are so well-regulated that we are insulated from the crisis?

It is because our financial sector is so well-regulated that we do not have a decent corporate bond market.  So, Indian companies that wish to borrow end up borrowing in foreign currency from global markets. In other words, we have regulated our financial markets so well that we are more tightly coupled with the evil deregulated financial markets than we should have been.

The solution, of course, is more regulation. It always is.

The Country of the Blind

I had started this post in May this year and it had remained in  a draft state ever since. The topic I intended to cover has been covered in the post I made in reply to Ritwik today, so there is no  reason to complete this one. But I liked the start I had made. Here it is, broken links, outdated information and all. 

The saying goes that “In the kingdom of the blind, the one-eyed man is king”.   To contest the saying, H G Wells wrote a  short story titled “The Country of the Blind“. It  describes the travails of a sighted man who stumbles into a valley of blind men and tries to use the advantage his eyes give him.  He fails because the country has been organized in such a way that his eyes give him no advantage at all.

Continue reading →

Ayyo!

Ritwik Priya, having decided that he is not going to nitpicky wars with me, has decided to write a series of posts summarizing his text books. But he finds himself unable to avoid taking a swipe at me:

Thus, when Ravikiran asserts here and here that retail investors in India are stupid and hence the EMH may not hold for India, it makes me wonder if he understands the EMH at all. As long as the idiot retail investors in India (or elsewhere) are idiotic in their own randomly distributed ways, the EMH would still hold. The argument is simple – the overestimations of the positive idiots will cancel out the underestimations of the negative idiots. The only problem arises when idiocy is systemic – when idiots make mistakes that are very similar to each other.

The problem with Ritwik is that he balances his undoubtedly sound knowledge of theory with an utter lack of common sense. 

Continue reading →

WTF?

[Raj] Thackeray’s successes evidently left an impression on 1,900 employees of Jet Airways, who were fired last week thanks to the global financial crisis. They rushed to Thackeray’s office. He thundered that no Jet Airways flight would leave Mumbai until the employees were rehired.

If an Indian politician said that a generation ago, it might have been empty bluster. Today, the threat was taken seriously enough that the airline’s chairman, Naresh Goyal, held telephone discussions with Thackeray. After Thackeray’s and others’ lobbying, the employees were rehired the next day. (Anand Giridharadhas/IHT)

What is it about these Indian journalists joining foreign publications? Are lobotomies compulsory?

Get in Line Along With Everyone Else

OK, Aravind Adiga, author of The White Tiger, which, to go by common consensus, seems to have won an undeserved Booker, has said:

So, where’s this Shining India everyone’s talking about? It was time someone broke the myth…

The last time I checked, there is a huge queue of people waiting to bust the myth of Shining India and collect their publisher’s advance. Why does every single one of them feel the need to pretend that he is the first one to bust the myth?