Why don’t govt policies work?

As the Modi government nears the end of its second term it is telling the country how well its economic policies have worked. The Opposition on the other hand is saying how badly these policies have worked.

We can define success as achieved when a policy benefits at least half the people it was meant to help. Benefit can be defined as making them better off than before. In financial terms, when the bang per buck is 50 per cent.

Incumbent governments focus on the successful part. Opposition focuses on the failed part.

If you leave aside politicians, the question we should really be asking is why government policies don’t work. Not of any particular government but all governments.

The standard answer is faulty policy design. But why is policy design faulty? How can all policy designs have been wrong for 77 years?

The answer is blindingly obvious: those who design policies don’t know what they are doing. If they did, we would probably have a higher success rate.

So why do those who design policies don’t know what they are doing? One major part of the answer is well known: the top-down approach. This has been discussed continuously for half a century.

Expertise, excellencies

But lack of accountability is again just one part of the story. A far bigger problem is that all our governments have been asking the wrong people to design policies, namely, the generalist bureaucracy.

Barring maybe 20-25 per cent of them, Indian bureaucrats and politicians are totally lacking in even the minimum expertise that their jobs require. Of those around half manage to get by because of diligence, intelligence and commitment. It’s only a small fraction that’s truly deserving of the work it is assigned.

This is in sharp contrast to the other arms of the state. Just look around. It’s no coincidence that institutions like the RBI, SEBI, TRAI, IRDA etc deliver a higher success rate than their masters in the parent ministries. It’s like pilots taking instructions from the cabin crew.

This is in fact the biggest challenge India faces, regardless of the political parties in power. Remember Lalu Yadav as rail minister? He achieved loading targets by overloading over the repeated protests of professional railway people that this was bad for the tracks.

These examples — of cabin crew telling the cockpit crew what to do — can be multiplied many times over. True, it happens in all democracies but in India we have a double whammy: both the political and the administrative leadership is clueless.

Both learn on the job by using the old maxim. In the case of bureaucrats it is when in doubt confuse and confound. In the case if politicians it is bash on regardless.

Jawaharlal Nehru recognised the need for special expertise way back in 1951. So in 1952 he set up a new service called the Industrial Management Pool. After 10 years or so the ICS men killed it by simply ignoring it.

The same thing happened to the Indian Economic Service which was set up in 1961. I know because in 2011 Kaushik Basu who as the chief economic adviser was the head of this service asked me to write its history to celebrate its diamond jubilee. It turned out that there was nothing to write about.

The service is still there but on Ajit’s liquid oxygen. The liquid will not let it live and the oxygen won’t let it die. And it’s regarded as a lower form of civil service.

India’s expertise challenge

Filling the expertise gap has been the Modi government’s biggest challenge. Since 2014 it has tried hard to find the right people to frame the right policies.

But there’s still a huge gap, which isn’t going to diminish if governments rely only on those who the government recruited. Let’s face it. These guys are not the sharpest pencils in the box. They are where they are because recruitment is a lottery based on pure, blind luck.

And of course there are structural reasons that make policies fail. One of the most important reasons is the civil servants’ obsession with fairness without knowing what it actually means. They need some economists and judges to teach them before they design a policy, not after the thing is challenged intellectually and judicially.

I have been suggesting for a long time that what we need is an Indian Policy Management Service. Currently the PMO is performing this function in a not very satisfactory way because it is staffed on the same rotational basis by the same learn-on-the-job civil servants. What we need is a permanent service with specialists with far higher intellectual attainments.

After all this is how RBI, SEBI, TRAI, even IRDA etc work. And this is why they outperform the government so consistently in devising policies that work. Surely after 77 years we can learn a lesson from that.

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