[Dec 2007, Volume 4 Quarterly Issue] Pdf File size - The IIPM Think ...

MORE MARKETS, LESS GOVERNMENT
managed by the executive. At the point
of delivery it is handled by government
offices and workers. Leaving aside defence,
judicial service and policing, we
are left with a bewildering variety of
services that touch our everyday life.
Need for them has appeared gradually
with the evolution of governance and it
was expedient for the government of the
day to start producing them. But taking
stock today, there is no strategic, technical
or logistical reason why they can not
be produced outside the government. On
the other hand there is an important
connection between these services and
the political system. As I reason below
their marketisation can improve our political
system significantly. Further, for
one class of services marketisation can
directly alleviate deprivation, i.e. in spite
of the political system.
We expect three types of gain from
these changes. More important are social
and political. There are of course
economic benefits, though they come
with adverse side effects which need to
be addressed. In the social area, delegation
can produce a significant dent on
corruption. As long as government is the
sole producer and provider, the delivery
person can seek private money for service
or speed. Replacing government by
markets in governance can disable a
large field of rent-seeking. Leaving that
paid to police, bribes the public pays are
to local, state and central government
workers for governance services of this
kind. They can be mostly eliminated by
moving them to the market and keeping
the markets competitive. Improvement
in the political system can come as a direct
result of mitigation of corruption.
Note that service at a government office
can be as easily sped up by bribe as
by show of political power. Those with
right political affiliation easily jump
service queues. Also, politicians reward
people by getting their work done or
sped up in return for vote or allegiance.
This kind of favour is extremely valuable
because certain services are indispensable
for business, property, jobs, pension,
healthcare, litigation, reputation or even
freedom. Government workers who
oblige politicians in this game expect reciprocation.
Generally the return is
through rewards related to their career—promotions,
suitable placements
and protection. This creates a second
round effect on work culture as promotion
gets detached from merit. It reinforces
poor governance and allegiance
to the political system.
Through repeated feedback the nexus
intensifies the corruption of politics. The
nexus itself becomes a stable feature
rather than occasional. Given this stable
relation, politics and political affiliation
have emerged as the surest way of ‘getting
things done’. Politics is now widely
perceived as a tool for benefiting oneself
rather than the community, country or
nation. This image of politics leads to
adverse selection in politics. Relatively
competent people--- sure about their
ability--- tend to stay away to avoid the
stigma. At the same time those who have
the taste and the ability to manipulate,
subvert and criminalise tend to join politics.
Obviously, we do not choose from
among the best of Indians when we vote
in elections. This leads to governments
formed of the less competent and the
corrupt. Reform that snaps the tie between
politics and provision can have
noticeable effect on the nature of our
politics. We can also expect some direct
effects on deprivation in spite of the
apathy of the political system. Services
like forestation, land recovery, bunding,
dredging and de-silting of rivers, arid
area programs etc. have direct impact on
income and quality of life below and
around the poverty line. These services
are under-produced in the present system
and their production can be significantly
increased by marketisation.
On the economic side, we expect improvement
in efficiency. Inefficiency of
the present system shows as poor quality,
Improvement of effi ciency would reduce cost and
generate either taxpayers’ saving or release budgetary
resource for worthwhile projects. These overall gains
will be attended with dislocation for some
failure to deliver in time or to deliver at
all. Cost far exceeds what is technically
required. Part of the resources are
drained through bureaucratic and political
delay, inappropriate technology
and overstaffing. Improvement of efficiency
would reduce cost and generate
either taxpayers’ saving or release budgetary
resource for worthwhile projects.
These overall gains will be attended with
dislocation for some. The most pronounced
short run effect is that the government
has to persuade some employees
to retire. Some retirees would find
employment in new outfits and others’
retirement has to be financed from cost
saving. If we go for this variant of reform,
THE INDIA ECONOMY REVIEW
37