Wednesday, February 15, 2017

Tuesday, February 14, 2017

Economic power to people instead of trying to over-regulate

In conversation with Dr JP Narayan, Founder, Lok Satta Party, Hyderabad.

Q1: What does freedom mean to you?

Dr. JP Narayan: The freedom for each of us means several things. The first and the obvious one is the right to do whatever we feel like doing in our lives to enjoy life in the full measure, as long as someone is not hurt. That is self-evident. The second is the economic freedom: that I do whatever I like in terms of economic activity or professional pursuit in life. The third is the political freedom that includes freedom of speech, freedom of association, freedom of organization, freedom to protest and so forth. The fourth is,to indulge in intellectual athleticism. Just because you have constitutional freedoms, if your potential is not fulfilled and you cannot reach the level that you are capable of reaching, only because you didn’t have the opportunity, then that is not full freedom. In a society, where you deny people basic education, you can pretend that there is freedom. But that freedom is vacuous. Therefore, the ability and the opportunity to indulge in intellectual athleticism means the freedom to fulfill your potential. That means the opportunity to grow. And for all these freedoms to be exercised, we require quality public discourse. Unless you create an enabling climate to be able to exercise your freedom fully, and if there are implicit or explicit threats in society or in media or in politics, then what freedom you have normatively on paper does not mean much. Therefore, an enabling climate is an integral part of freedom.All these together constitute freedom for me.

Q2: Is there anything holding you back from achieving that kind of freedom?

Dr. JP Narayan: As I said before, if we take the freedom to do whatever you please, the government is intrusive unnecessarily in a variety of ways. Such intrusion does not allow us to do whatever pleases us. Now, I do not drink personally but if a government imposes prohibition as part of a policy, then government is deciding what you should eat or drink. If the government tells you, you should not eat meat then your personal freedom is affected. In India today there is a certain climate because of certain taboos to try and dictate what individuals do in their personal lives. Therefore, the fundamental precept that you can do pretty much what you like as long as someone else is not hurt, that is violated. If your food, dress, drink — all these are decided by the state then freedom is definitely imperiled.

The second is economic freedom. While since 1991, we made rapid strides in delicensing and restoring economic freedom to the bulk of the people, still there are too many economic restrictions in this country which are hurting us. And even the recent demonetization demonstrates how freedom is restricted. While the policy is perfectly legitimate,its implementation has been illiberal and arbitrary. If you have rationing of currency, then all the freedoms that are guaranteed by the constitution are meaningless. Your life and livelihood are seriously imperiled as you don’t have currency, because all the freedoms, particularly the economic freedoms are exercised through the currency of money. If that money is not available, if that medium is not available in adequate measure for no fault of the people, then certainly that freedom is impinged.

But even otherwise, there are still too many restrictions and too much of corruption and too much of an incompetent, arbitrary-raj continuing which undermines our economic freedom. In terms of political freedom, normatively all the political rights exist. Our constitution is sound; we have Supreme Court and other constitutional organs. But unfortunately, often times, the way that they are exercising their jurisdiction is less than adequate. For instance, for long, people did not have the right to form cooperatives, though it is implicit in the Constitution in Article 19(1)(c). Lok Satta has been in the forefront of the struggle to recognize that constitutional freedom explicitly and therefore the 97th amendment of the Constitution came into place. There are many restraints on our political freedoms because there are threats on a day to day basis, either by using authority or by using the muscle power on the street to prevent you to exercise your freedoms- freedom of speech, freedom of assembly or freedom of protest.When rule of law is not properly and fairly enforced, our freedoms are diminished. And we have made no serious efforts to build and maintain an effective system of rule of law.

Then as I said before, if you have no ability to fulfill your potential, you have no opportunity to grow to the extent that your potential that is endowed by nature, then all freedoms are meaningless. In India, we have arguably one of the worst outcomes in the field of education and the potential of most of our children is unfulfilled. Most of the freedoms cannot be genuinely exercised by the bulk of the children of this country.

And in recent times you see that in politics, media and the society, public discourse has become extremely coarse. It has become very vulgar and violent in expression. It has become intolerant and it is not accepting dissent and there is no reasoned argument based on evidence. Coarse discourse certainly undermines both our political freedoms and economic freedoms. Every society must constantly be vigilant to make sure that freedom is truly available to the people. Take the United States, the way Mr. Donald Trump has risen, the way a certain coarseness has taken hold of the discourse there shows that even in a mature democracy there are some problems with operational aspect of freedom. Certainly India too is going through such a phase. Unless we are all alert and alive to these problems we will not be fulfilling our constitutional mandate and we will not be ensuring true freedom to all the people.

Q3: What do you think is the greatest challenge to the freedom in the society?

Dr. JP Narayan: The challenge stems from three sources. One is the constant struggle between state power and citizens’ liberty. That is why we have separation of powers and federalism — both horizontal and vertical dispersal of powers. But in India, this dispersal of powers is inadequate. The reason why we insist on dispersal of power is, there will be no single focus of power and therefore abuse of power can be curtailed. As long as power is highly centralized in the hands of the Prime Minister and the Chief Minister, there is always a problem. The second threat is economic decision making. The government’s arbitrariness in making laws, sometimes questionable laws, constitutionally unsound laws or policies. For instance, this whole business of rationing currency, this whole business of denying people’s own money to them which is a fundamental blow to the economic freedom of the people. The arbitrariness of the governments in the office and the inability of the courts and the people to distinguish between the legitimate and illegitimate role of the government are fundamental problems because our institutions have not matured enough, and our constitutional authorities are not able to protect the citizen’s freedom. Third challenge is the coarse public discourse. A climate of intolerance and a willingness to attribute evil motives to all dissent instead of engaging in a healthy debate is always a problem. We all have right to disagree with each other. Only logic and facts must dictate our conclusions, not prejudices. And we cannot attribute malice to our critics. If we disagree with them, let us argue, let us debate, and if finally agreement is not possible, let us agree to disagree. But, just because you disagree with me I cannot assume that you are evil or bad or you are not a patriot. Such vilification is a very dangerous trend, and of late that tendency is visible in our country.

Q4: If given a choice,what is that one way you would think a government can make its citizens more free?

Dr. JP Narayan: A government must curtail its own powers-in a variety of ways. One way is dispersal of power- decentralization of power vertically and deconcentration of power horizontally, giving more and more economic power to people instead of trying to over-regulate,clearly defining the government’s role and sticking to that well. We have in India an expansive role of a government coupled with extreme incapacity to deliver. This is a very dangerous combination- low level of capacity to deliver and excessive role played in a variety of sectors which are not the governments’ businesses. The single mantra is let the government limit its role and disperse power as much as is humanly possible.

Q5: What would your ideal society be like?

Dr. JP Narayan: I don’t know if there is an ideal society, but the way out I look at it is in terms of hierarchy of needs. First order is survival — as an individual and as a species. Human beings are not unique in that sense. But there are higher order requirements for human beings. Maslow said in one way;we can build on that and identify a hierarchy of priorities or principles in human life.

Therefore, after basic issues of survival are taken care of, the way we should organize a society is to ensure that there is harmony of two kinds.

(i) Harmony in nature — Increasingly in 21st century we are realizing that humans cannot do whatever pleases us and undermine nature. Healthy and happy life demands harmony in nature.

(ii) Harmony in society- Within a nation or over the planet we are in a global village today.Unless there is a harmony in society across caste, region, religion, skin color, language, nationality across all these boundaries, unless we are all able to find the capacity to live in harmony with each other, and at peace with each other — not merely in peace but at peace with each other –we cannot live a happy life. Harmony is important within a society, it is important across societies.

Then the third order of priority is the larger concept of freedom. There are two elements in freedom — the political freedoms that we discussed and the freedom to give full play to the creative potential of every individual human being.True freedom means giving every individual an opportunity,and creating conditions in which most of the avoidable suffering is eliminated. Only then can human beings actually have a meaningful life.

If we have these broad principles in mind — survival, harmony and opportunity — and if we pursue these principles in our society, in our state and as individual human beings, then I think such a society is safe, free, harmonious and happy. That is my broader vision for humanity and that is why I keep telling people — ‘I do not know if there is a God, but I believe there is sin; and the two greatest sins are unfulfilled potential and avoidable suffering’. We must eliminate both these sins.

Q6: Who do you think holds the key to bringing such a society about?

Dr. JP Narayan: Often times, we overstate the importance of state.Those who are critics of the state as well as the players of the State exaggerate the importance of the state. While state is important, ultimately it is society and it is the market. So ultimately State, Society and Market- there must be a harmony among these three forces and each must play its role. All my life, I have fought for institutional change in the state system because that is one of the key enablers to promote both freedom and happiness in the society. But it does not mean that state is the only enabler, nor is it the most powerful enabler. Right now, in Indian conditions the state seems to be the most problematic institution. But I think we must recognize that the culture of the society, the society itself, the way the society is organized, whether the society accepts diversity or not, whether society is hierarchical or non-hierarchical, egalitarian in its approach from family to the nation or in egalitarian in unquestioningly accepting inequalities by birth — these things shape a society as much as the state itself.

It is also not enough to have free markets. Do people really have reasonable access to market or is market access denied to a large number of people– by denial of education,or access to market network and credit system. A free market operates only when people have both the freedom and the opportunity to participate in the market in a productive manner.

I think all these three — state, society and market –must be in harmony. The people who believe too much in the state power may end up being fascist; the people who believe too much in society’s power may end up being extremely traditionalist and obscurantist; the people who believe in too much market power may become extremely laissez faire, accepting extreme inequalities without recognizing that market access itself could be a mechanism by which a society can deny opportunity to the bulk of the people. I think a balance and harmony among these three great forces- state, society and market is the key to enduring prosperity, stability and happiness.

Courtesy: Spontaneous Order

Saturday, February 4, 2017

Arun Jaitley's Political Funding Reforms is Not Perfect, But it is a Step Forward

The proposals on reforming political financing are the biggest talking points of Budget 2017. Finance Minister Arun Jaitley proposed reducing the ceiling for cash payments to political parties to Rs 2,000 and the issuance to electoral bonds.

News18's Tushar Dhara spoke to Dr. Jayaprakash Narayan on the implications of the proposals for electoral democracy and campaign finance. JP, as he is known, is a former IAS officer from Andhra Pradesh and the founder of the Lok Satta movement, which later became a political party. He has worked on campaigns to clean up election financing including framing the Disclosure of candidate details, and the disclosure law (2003), Political funding reform law of 2003 in the wake of Tehelka expose, Right to Information Act and Lokpal Act, among others.

Here is what he said:

It’s a step forward, but a small step forward. We must understand the background to this to appreciate what this means. In 2003 during the Tehelka scam, cash was given to political leaders. George Fernandes was among those accused, then BJP President Bangaru Laxman had to leave his job. So those in public office received cash, and even if there was no proof of quid pro quo, the implication was that cash was exchanged for favours.

At that time we canvassed with everyone, including Arun Jaitley who was the law minister, L.K.Advani, who was deputy prime minister and the home minister and the President [of India] who was in opposition, Dr. Manmohan Singh, who was Rajya Sabha leader of Congress party and other, we told them, let us do one small thing: create a window for honest expenditure in political parties, because the big issues of political reform, vote buying or black money would take time to address. The moment you take cash it is tainted, particularly if you are in office. All parties agreed.

Congress appointed a committee headed by Dr. Manmohan Singh to look at party finances. The then NDA accepted the recommendations and the report of the Congress party’s internal committee, which is a rare occurrence. The UPA and NDA unanimously enacted this law, which mandated personal and corporate tax exemption to all political contributions to the donors (100% exemption subject to a ceiling in case of corporate, 5% of net average profits of the year), whether you give as cash or cheque there is no extra liability. The idea is if I am not paying one rupee extra by way of tax, why should I give cash, I may as will give a cheque. The parties must show this and there must be disclosure and of course above 20,000 rupees must be by cheque and below by cash.

In the case of 20,000 rupees, the exception has become the norm, 65%-80% of the collections of parties are shown as below 20,000 rupees. But there is another important thing. When that law was enacted Mr. Advani directed his party, the BJP - and his word was the last word in the party – now that we have created this window let us not take cash, they did the honourable thing. Instantly, and I have it on good authority because Mr. Jaitley himself told me, the contributions fell by 80%-90%, even though the BJP was the ruling party. That is the point the Finance Minister was making in his Budget speech. The fear is that there will be retribution if I make a contribution to a party. While it is perfectly legal to fund any party I like if I like their ideology, given India’s political economy there is fear of retribution. If it is known that I have funded the Congress, the BJP may attack me and arrest me and if I fund the BJP the Congress will do it. This is a genuine fear.

[In Budget 2017] What Mr. Jaitley has done is two things: 20,000 rupees has been reduced to 2000 so that it becomes harder for parties to pretend that millions of people gave 2000 rupees each. The second is that he created a structure, the bonds mechanism, by which the contributions are tax exempt, but who has given the money is not disclosed to the public, because I can give bearer bonds to any party of my choice and they will redeem it without disclosing the identity. So it is transparent funding without revealing the identity so that I am not subject to harassment. It is a uniquely Indian phenomenon.

Mr. Jaitley’s point is valid. In a country where the vast amount of funding is through black money, at the most 3%-5% is going as contribution to parties, the rest of it candidates are spending on vote buying etc, finding a legitimate window for tax exemption is the first thing. While the source may not be revealed the expenditure is revealed. It is not perfect, but a step forward. Mr. Jaitley himself is not claiming it is perfect. At least it will take away the incentive to give cash, because of the fear of retribution. To that extent I am fully supportive, because I understand the context.

But...the real thing is, take the present round of elections in UP, Punjab, Uttarakhand, Manipur and Goa. They are talking about Rs. 10-15,000 crores being spent. This is in one set of assembly elections comprising 20% of India’s electorate. In the past 11 years since 2005 the total amount shown as contributions to political parties is only Rs. 11,000 crore!

Then there are Lok Sabha elections, local government elections, in a cycle of 5 years the expenditure of parties and candidates for vote buying is Rs 1 to 1.5 lakh crore. In 5 years you’re not showing more than Rs. 5-6000 crore as party funding. So this is a miniscule issue. The real issue is: how do you eliminate vote buying? That cannot be through public funding. The problem of Indian elections is not campaign finance, it is vote buying and illegitimate expenditure, which can only be addressed by radically transforming the nature of politics. For instance a proportional election system, where each vote is not valued that much. Direct election of a Chief Minister or Governor, I go for the whole state with my agenda, my popularity, and my track record.

The BJP is talking about one nation, one poll. Frankly, that is not a big reform. That will not change anything. But, we can use it as an opportunity to go for direct election of the head of government. The benefits are the following:

Number one, if I am contesting for an assembly seat, spending 5-10 crores on a seat makes sense, because if it pays off I can get back the money in multiples. But if you’re contesting for head of government of Andhra Pradesh, Telangana or UP, spending 4000 crores is outrageously risky. Therefore the system will shift to the personality of the candidate rather than vote buying.

Number two is proportional representation. I don’t see that happening right now because the BJP gains from the current first past the post system. Earlier the Congress was the beneficiary. BJP will not accept it right now. But if proportional representation is accepted then the marginal vote, which is so important in FPTP, will not be so important. So you go for share of the vote rather than a few more votes. For instance, in Germany only if a party gets X% of the vote will it get representation, but once you get that X% your seats are in proportion to your votes. The seats are in proportion to the votes and I don’t have a fear whether I am getting more votes in Varanasi, Gandhinagar, or in Hyderabad.