The Hindu Business Line : Slow reforms, in the usual messy democratic way

The Budget ahead may be planning for the 12 months, but The Next Decade looks at the unfolding future. For the upcoming fiscal exercise some clues may be had from Economics for Lawyers, considering that the country's finances are handled by a lawyer. The Culture of the New Capitalism explores the spectre of uselessness.

Too tense thinking about the Budget Day that is rapidly closing in? If yes, try switching to a longer horizon, with India: The Next Decade, from Academic Foundation (www.academicfoundation.com). The book, edited by Manmohan Malhoutra, brings together some 40 essays that explore `the big forces that would be at work over the next 10 years'. These are grouped into four sections — democracy, economy, society, and `India and the world'.

In the intro, the ed writes: "Unsung until recently, partly on account of China's much more dramatic progress, India's `stealth economy', as it has been dubbed, has lifted hundreds of millions out of poverty and put the country on the path of transformation... Is India's rise inexorable or could India once again disappoint?" Despite many failings our democracy has proved to be a success story, Malhoutra declares. "Reform would come slowly, but in the usual messy democratic way."

The book opens with the text of Sonia Gandhi's speech at the Ninth Indira Gandhi Conference of November 2004, on the theme after which the current compilation has been named. "No government has a monopoly on wisdom," she concedes. "We will need the help of our best minds to identify obstacles and opportunities and to articulate a truly national agenda to take India forward."

In the next essay, Manmohan Singh cheerfully notes, "Gone are the days I would spend sleepless nights worrying about debt rescheduling." He cautions: "Looking into the future is always a hazardous enterprise. This has, however, not deterred soothsayers and forecasters from doing so and my tribe of economists have followed suit with their sophisticated models and statistical tools." India 2015, as Singh sees, "will be a nation of capable and empowered men and women, well-fed and gainfully employed, modern and rational, and actively engaged with the world."

Contrary Outlook

A contrary outlook is the bleak scenario that Pratap Bhanu Mehta paints — of weak market forces. Incomes are so low for most of India's population that even if markets are completely liberalised, `competitive markets in a wide range of social and public services would not materialise,' he says. Sadly, again, "the Indian state is much less accountable to its citizens than is either desirable or expected."

Yogendra Yadav subjects Indian democracy to an audit, and pronounces that the single biggest failure of democratic politics lies in the non-fulfilment of the promise of material well-being. "Far from ensuring a life of equal and reasonable comfort for everyone, it has not succeeded even in providing the minimum needs of the people," he rues. "A combination of political amnesia and cognitive paralysis on the question of poverty poses the most important challenge to the ethical impulse underlying the Indian enterprise today."

Neera Chandhoke's essay reports about the findings of a survey. The general consensus, one learns, is that the government is the problem. "Instead of trying to make the state deliver what it has promised through constitutions, laws, and rhetorical flourishes, policy makers and advocates of civil society organisations would rather establish a parallel system, which can substitute for the state in areas of service delivery." But there is one problem, again: People surveyed "repose little hope in the ability of civil society agents to negotiate their problems." Towards the end of the book is Radha Kumar's observation that India needs to leverage soft power such as education and entertainment, tourism and Diaspora, to resolve foreign policy issues.

"India is currently fortunately placed to expand economically," concludes Kumar.

That is a positive note to wrap with.

Creating surplus through trades

When a lawyer wields the reins of the economy, as in our case, you can bet he would have read Richard A. Ippolito's Economics for Lawyers, from Princeton University Press. "Most textbooks do not give the right amount of detail that is important for legal applications," states the author in the intro. "In price theory, for example, most books devote lots of space to the discussion of special cases to the general rules, a practice that has little application and serves to distract and discourage students trying to learn the basics of economics, often for the first time."

Instead, learn by doing, exhorts Ippolito. His book doesn't assume any prior knowledge of economics or mathematics beyond algebra. Chapter 1 is about `indifference curves,' explained differently, in a chapter titled `Finding the optimal use of a limited income'. It ends with `economics in a short story' — an autobiographical essay by Truman Capote about `poor folk who live in Alabama in the midst of the Depression'.

Key characters are Buddy and his underprivileged adult cousin Miss Sook Falk. They decide to make pecan fruitcakes. "After collecting their spare dimes, nickels, and pennies, they set out collect their supplies — some at the store, where real money is required, and some that require climbing over fences to collect pecans that have fallen from trees in a local orchard. But the critical input to the fruitcakes is more difficult to come by — legally anyhow."

So the duo goes to Mr Haha Jones, `who has some clear stuff in used-over bottles'. He demands two dollars for the stuff. But looking at all the small change that Buddy is counting, Mr Jones strikes a deal - he gives the bottle in return for a fruitcake when it is made. "Buddy and his cousin laugh, dance, and sing their way off his property with their prize." They decide to make a special fruitcake for Mr Jones, with `an extra cup of raisons'!

"Most everyone tries to make economics too complicated," laments Ippolito. "The essence of all economics is contained in the trade between Miss Sook Falk and Mr Haha Jones. It's all about creating surplus through trades. If you keep this in mind, economics will never be hard."

The spectre of uselessness

These are `unstable, fragmentary social conditions' in which, to survive, you need to face three challenges, says Richard Sennett in The Culture of the New Capitalism, from Orient Longman (www.orientlongman.com).

The first challenge is of time: "How to manage short-term relationships, and oneself, while migrating from task to task, job to job, place to place." The second concerns talent, because in the modern economy, many skills have a short shelf life; "in technology and the sciences, as in advanced forms of manufacturing, workers now need to retrain on average every eight to twelve years." And the third challenge is surrender, meaning, `how to let go of the past'.

A chapter titled `Talent and the spectre of uselessness' speaks of interesting estimates of `upward mobility of children of unskilled labourers into the lower middle class' — around 20 per cent in the UK and the US, 15 per cent in Germany, and 30 per cent in China. Yet, the skills economy leaves behind the majority, says Sennett. "More finely, the education system turns out large numbers of unemployable educated young people, at least unemployable in the domains for which they have trained." A spectre, we are getting used to, already?

Three forces

The first of the three forces that shape `the spectre of uselessness' is the global labour supply, with jobs leaving high-wage countries such as the US and Germany, and migrating to `low-wage economies with skilled, sometimes overqualified, workers.' Such capable workers are good at problem-solving, `especially when something goes wrong with job routines'.

The author mentions as example Indian call centres, where `stretch-learning' is emphasised. That is, `to have so much information in one's head that one can answer most conceivable questions quickly, thus enabling a rapid turnover in calls.' These workers can be quite entrepreneurial, finds Sennett. They start small businesses which sub-contract call centre work from the larger firms.

Macroeconomic reads, to warm yourself up for the Economic Survey coming next week.

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