UPA’s self-serving welfarism is wrecking economy

“Who killed Cock Robin ? Not I said the sparrow” would be an apt reworking of the perceptive old English nursery rhyme as all of them tend to be. This one, with its detail on the aftermath of a murder, the funeral preparations etc. is almost like a repository of political comment dressed up to entertain children. And indeed there are several theories on what it refers to, death of a king, fall of a Government and so on.

Unlike the nursery rhyme, in which the sparrow boldly declares he killed the robin with a bow and arrow, our economic scenario tends to have no stewards, or as we like to say mai baap. We, especially, are not in the business of taking responsibility for a debacle. Whatever goes on in India is nobody’s fault, it just happens. This is axiomatic to our thinking.

Economically speaking, it is all ad hoc and short term, though our political masters like to pretend that they are working to a grand plan. If we take that intent at face value we have to conclude that the plan is just to stay in power. And failing that, to amass as much money as possible before being voted out. This comes in handy to get back in the game later and keep the patronage principle going in the meantime. The money bags help sustain out- of-power politicians forced to wait it out.

The collection of narrow-prism decision making, based on the loot potential in our economic arena creates a chaos of policy confusion, and mighty difficult, wasteful circumstances, on the ground.

The coal and mining scams that threaten to bring down the Central Government and walk it to the Opposition benches for at least one term, is a case in point.

The UPA is under fire on coal allotments and it lost its Goa Government to the NDA largely over perceived excesses in mining. Ditto the NDA Government in Karnataka, routed over its mining scandals. No doubt there were other factors, but squandering of natural resources to benefit a few is something of a norm in the Indian scenario.

If one considers the deeper reasons, it is likely to come to light that the Government is lousy at conducting business. Whenever it deals with assets it ignores market valuations and proceeds to cater to its own political principles of patronage and power. Consequently, after the fact, it invariably turns out that the people, the real owners of natural resources that belong to the nation, have ended up drastically short-changed.

The answer is not in trying to turn Government market savvy but in getting Government out of market operations altogether.

But this would need us to jump one way or the other. But since we come from socialism with its bias towards state ownership of both assets and enterprise, discarded long ago in other socialist domains, including Britain and most of Europe, we are confused. The market is viewed with suspicion, is constantly undermined and interfered with, and kept on a leash.

But ever since liberalisation began in 1991, the truth is that the contradictions between big government and market forces-led private enterprise has occasioned ever higher levels of corruption.

The market valuations are now well-known and kept in mind, even as restricted access and power play is used to enrich a few. There is no open competition. There is no transparency to speak of despite the charade of a seemingly professional tendering process.

In most cases, the discretionary power exercised and the interpretations used are enough to direct the outcome whether it be a defence contract or a land allotment.

And so we have the procession of scams which are a consequence of our policy confusion as much as greed and venality.

The 2G scam is another mess of undervalued allocations conducted by the Government. Perhaps it is because the Government places the value of all national resources at zero in the first place and so any addition above the line to its mind is positive enough. And if there is a political dividend from favouring some people over others isn’t that the name of the game?

Defence, of course, has always been the happy hunting ground of the powerful out to feather their nests with fabulous riches. It is not so much a market forces thing as high unit values of defence equipment, one of the largest military establishments in the world, and the wonderful world of commissions to incentivise everyone concerned. It is a perquisite for some. It goes with the territory, and will not vanish no matter what form of economic policy we are able to evolve into.

Ultimately, we will have to recognise fair valuation as a bedrock economic principle. We are doing it with oil — as in diesel and petrol and LPG gas — now. We are not doing it yet with our PSUs and a disgracefully-run Air India yet. Our Government’s self- serving food- for- vote welfarism is very bad economics but it doesn’t seem to care. Still, the unsustainability of our profligacy will force us to self- regulate. But the politician of today would rather send this particular postcard to the future.

Source : Niti Central