My first novel, My Friend Sancho, is now on the stands across India. It is a contemporary love story set in Mumbai, and was longlisted for the Man Asian Literary Prize 2008. To learn more about the book, click here.
A year ago, one of us (AV) wrote a limerick that expresses a fundamental truth about politics. Here it is:
A neta who loves currency notes
Told me what his line of work denotes.
‘It is kind of funny.
We steal people’s money
And use some of it to buy their votes.’
We remembered this limerick now in the context of farm-loan waivers. This weekend, the Maharashtra government announced loan waivers for farmers in the state. A few weeks ago, the Uttar Pradesh government had also announced large farm-loan waivers. This is spreading to other states, and might end up as a Waiver Cascade (WC).
Beyond Moral Hazard
The most obvious unintended consequence of these waivers is what economists call Moral Hazard. Simply put, when farmers know that their loans are likely to be waived, they are incentivised to take loans they do not intend to return. (The same phenomenon applies in the case of the Too Big To Fail banks bailed out by the Fed in the US after the 2008 crisis.) This does nothing to solve the problems inherent in the system, and may even perpetuate them.
But this essay is not about farm-loan waivers per se. Nor is it about agriculture in India, which has been crippled by decades of bad policy. Instead, we want to talk about politics.
As we described in our recent essay on public choice economics, politicians come to power on the back of a) special interest groups and b) vote banks that they pander to. Once in power, they pay these groups back – with our money. Most governance amounts to a transfer of wealth from the people at large to special interest groups or vote banks. We call this Redistributive Bribery.
Farm loan waivers are an obvious example of this – the money to pay for the waivers does not fall from the sky, but comes from all of us. But practically all government action falls into this framework, whether or not money is directly involved. Most regulatory measures and government schemes follow this pattern, which is not hard to figure out if one thinks about who the beneficiary of each such action is.
To illustrate, here are four categories of Redistributive Bribery, with examples.
One: Direct Subsidy to a Vote Bank
Farm-loan waivers are an example of this. Farmers are an important vote bank everywhere, and this noble action for their benefit makes many non-farmers feel noble and compassionate. It probably hurts the farmers more than it helps them, by trapping them in a cycle of dependency, but that’s unintuitive and unseen.
Note that we are not picking on any party. Farm-loan waivers predate the BJP. Because the Congress has been the most successful party in our history, it has also done the most pandering. The BJP’s accusations of pseudo-secularism, which found resonance with many, was essentially a claim that the Congress was pandering to Muslim votebanks with measures like the Haj Subsidy. The Samajwadi Party in UP wooed the same vote bank with our money.
Another recent example is of Devendra Fadnavis announcing that his government will redevelop a group of chawls by building 16000 “affordable homes”. These come at the cost of Rs 16000 crore, at one-crore-per-home. You can bet that the beneficiaries of this largesse will vote for Fadnavis – and that those who the money is taken from won’t even notice.
There is no end to this sort of direct subsidy to vote banks. Free televisions, free laptops, free rice – they are all Redistributive Bribery.
Two: Direct Subsidy to an Interest Group
Interest groups spend lots of money getting their favoured politicians into office. Naturally, they want a return on investment. And politicians are keen to deliver, for they need funds for the next election also. It’s a cycle. And one of the two ways through which this happens is direct subsidies.
This can take various forms. Companies getting soft loans from Public Sector Banks, many of which turn into NPAs, is one example of this. So is the acquisition of land by the government to give to big businesses, such as in Gujarat, when then Chief Minister Narendra Modi helped set up the Nano plant. Some of this land can be got dirt cheap, as in the case of Modi’s Gujarat and the Adani group. The allocation of natural resources can fall under this category, as does the granting of government contracts for various things.
Having used the money of these interest groups to get to power, politicians then use that power to generate more money for the interest groups. That’s the whole game.
Three: Regulation to Favour Vote Banks
Wait, you say, surely regulation isn’t redistribution. Well, it mostly is, though in an indirect and unseen way. Consider Rent Control.
Rent Control is a regulation meant to benefit a particular vote bank: renters. But think of its long-term effects. It removes the incentives of property owners to look after their property, and buildings become dilapidated over time. It is a disincentive to new construction in areas where rent control is in effect. It distorts the market and reduces supply, thus driving up prices for everyone not already living in a rent-controlled property. Those lucky few enjoy the benefits paid for by the loss of many, most of whom don’t even realise what they’ve lost.
For all practical purposes, it is a redistribution of wealth from the many to the few. Indeed, think of other regulations that favour a specific votebank, and you’ll find that at its heart, it amounts to redistribution. Whatever the noble stated intent might be, it’s done for votes and is, thus, bribery.
Four: Regulation to Favour Interest Groups
Small traders and businesses have been a crucial support group for the BJP. No wonder, then, that the BJP opposes Foreign Direct Investment (FDI) in retail. Putting a cap on FDI is a great example of how regulation amounts to redistribution. Consider the effects of such a protectionist measure.
The more the competition, the more consumers benefit. When FDI in retail is not allowed, the market is less competitive than it would otherwise be, and consumers lose value. Maybe the goods they buy are not as cheap as they would otherwise be. Maybe they cost the same, but provide less value for money. All of us common people, consumers, citizens, are thus losing value, which has been redistributed away to a specific interest group.
(Again, it’s not just the BJP. Consider that Arvind Kejriwal, who also depends on this base for both votes and money, also opposes FDI in retail. There is only one plausible reason for such bad economics, which is that voters and donors need to be bribed. So much for being anti-corruption.)
It’s not just restricting FDI in retail: All protectionism, without exception, amounts to redistribution of wealth from the common masses at large to special interest groups. Another example is black-and-yellow cabs and auto unions lobbying the government against Uber and Ola. The ban on surge pricing in Uber came out of such lobbying, and we have seen the effects in Bengaluru: a shortage of cabs, as always happens with price controls. Consumers suffer, and the value they have lost has gone to that one interest group.
Concentrated Benefits and Diffuse Costs
All political parties engage in Redistributive Bribery. It is the oldest scam in politics — and perhaps even the basis of it. So why do we put up with it? We do so because while the benefits are visible, the costs are not.
When a poor farmer is given a loan waiver or a small trader is protected from rapacious multinationals, we all clap, feel compassionate and give ourselves a pat on the back for nobility. But we don’t see the full picture, because we cannot see the losses. If the government imposes tariffs on foreign producers of widgets, and domestic producers benefit from the reduced competition, we don’t see the value that all of us lose because of this. Indeed, it is not even possible to calculate it. The loss from much regulation and subsidy is often more than the gain, because incentives change for all involved. A positive-sum game becomes a zero-sum or negative-sum game.
Economists refer to this as ‘Concentrated Benefits and Diffuse Costs.’ To take the example from our previous essay on Public Choice, if Company A gets a subsidy of Rs 1.3 billion from the government, it has plenty of incentive to lobby for it. None of us common Indians will bother, because its only one buck each.
What’s the Plan of Action?
In theory, politicians are supposed to get elected by promising and delivering good governance. In practice, they bribe their way to power in the ways described above. They were meant to be angels, but are actually vampires. We’re stuck in a horror movie. What are we to do?
Well, we need to think more deeply about who pays for the costs of every government action. We all do. This includes the poorest among us, since everyone pays indirect taxes, and suffers from the absence of the better world that is not allowed to come into being. If this outrages you, express that outrage. There is nothing else to be done.
These are the opening words of Timothy Snyder’s book, On Tyranny: Twenty Lessons from the Twentieth Century. Snyder argues that we must not take democracy for granted. (The book was triggered by the rise of Donald Trump in the USA, but applies equally to us in India.) “The European history of the twentieth century,” writes Snyder, “shows us that societies can break, democracies can fall, ethics can collapse, and ordinary men can find themselves standing over death pits with guns in their hands. ”
Everywhere you look, perhaps in human nature itself, tyranny lurks. By understanding how it arises, we can pre-empt it. Snyder offers ‘twenty lessons from the twentieth century,’ and I read them with a deep sense of familiarity. All the lessons of the book apply to us, though in one important way, tyranny in the 21st century might actually end up being worse. I shall get to that, but first, here are some of the lessons.
Lesson number one: ‘Do not obey in advance.’ In authoritarian times, Snyder writes, “individuals think about what a more repressive government will want, and then offer themselves without being asked. A citizen who adapts in this way is teaching power what it can do.”
This reminds me of what LK Advani asked a group of editors after the Emergency of 1975: “You were all asked to bend — but why on earth did all of you crawl?”
Lesson number two: ‘Defend institutions.’ Both in the US and in India, we take refuge in the institutions that are meant to safeguard us. But who will safeguard the institutions? “Institutions do not protect themselves,” writes Snyder. “They fall one after the other unless each is defended from the beginning.” He adds that one common mistake is “to assume that rulers who came to power through institutions cannot change or destroy those very institutions—even when that is exactly what they have announced they will do.”
Consider, as a parallel, what Narendra Modi’s government is doing to our institutions, right from co-opting the RBI as a wing of the Finance Ministry, to using the CBI to carry out raids on political enemies. A friend in government recently told me, “We own the Supreme Court.” Indeed, institutional capture is central to the agenda of this government.
Lesson number three: ‘Beware the one-party state’. Lesson number six: ‘Beware of paramilitaries.’ Lesson number 17: ‘Listen for dangerous words.’ Lesson number 19: ‘Be a patriot.’ (As opposed to a nationalist.) All of the lessons are pertinent, but the one that struck me the most was Lesson number 10: ‘Believe in Truth.’
“To abandon facts is to abandon freedom,” writes Snyder. “If nothing is true, then no one can criticize power, because there is no basis upon which to do so. If nothing is true, then all is spectacle. The biggest wallet pays for the most blinding lights.”
Snyder cites the historian of Nazi Germany, Victor Klemperer, to describe the four modes through which truth dies and a post-truth world emerges. The first mode is “the open hostility to verifiable reality, which takes the form of presenting inventions and lies as if they were facts.” Snyder talks of the study that found that during the 2016 US presidential elections, “78 percent of [Trump’s] factual claims were false.” BWF (Bhakt Whatsapp Factories) probably achieve a higher percentage, but beyond the fake news sweatshops, there is much untruth in government spin as well—for example, during demonetisation.
The second mode is “shamanistic incantation.” Klemperer spoke of the “endless repetition” that served, in Snyder’s words, “to make the fictional plausible and the criminal desirable.” The constant painting of all political opponents as anti-national by default is an example of this, as are the false binaries that are employed. If you don’t support Modi, then you believe that “Bharat ke tukde honge.”
The third mode is “magical thinking, or the open embrace of contradiction.” Modi embodies this, by doing the precise opposite of what he had promised in the runup to 2014. He had promised “Minimum Government, Maximum Governance”, but what he is serving up is “Maximum Government, Minimum Governance.” On economics, Modi’s government, in its expansion of state power and disregard for individual rights, is to the left of Nehru. In both his authoritarianism and his dangerous economics, Modi is a true heir to Indira Gandhi. And yet, his followers keep seeing him as a break from the past.
The fourth mode is “misplaced faith.” As Snyder sums up Klemperer’s insight about the Nazis, “Once truth had become oracular rather than factual, evidence was irrelevant.” Much as I deplore labels and pejoratives, there is some logic to referring to Modi’s followers as bhakts.
“Post-truth is pre-fascism,” Snyder writes, but there is one important way in which this age of post-truth might be a permanent one. We live in a time of social media, which I believe to be a huge net-positive, but it does have this one bad effect of enabling echo chambers and alternate realities. Back in the day, we all got our information from mainstream media, and even if there were ideological biases, there was at least a consensus on facts. Those gatekeepers are irrelevant now.
We can now believe whatever we want to, and cocoon ourselves in with likeminded groups, often very large, that confirm our biases and worldviews. This leads to self-reinforcing loops that then polarises discourse. We each just live in our own version of the world, and the real world doesn’t matter anymore. It’s 1.3 billion reality shows.
This is scary, and I don’t know how we will ever come out of it.
A few days ago, a friend and I tossed a coin for some reason I don’t remember now. I called Heads. The coin fell Tails.
“It’s Tails,” he said. “You were wrong.”
“No, I wasn’t,” I said.
“Huh? You said Heads, this fell Tails. You were obviously wrong. And I was right.”
“No, I wasn’t. And no you weren’t. Right and wrong are not the only two options. We were both right. And we were both wrong.”
My friend shot me a bewildered look, and put the coin in his pocket. I later remembered that the coin had been mine.
I was hanging with some friends at a birthday party. They were my age. I have never been one for celebrating birthdays, but they seemed happy. At one point, we started talking about the present government of Narendra Modi, and I criticized one of his policies. My infallible logic shut everyone up. The undecided nodded their heads. The devout on the other side, who will be convinced by nothing, shifted uneasily in their chairs. Finally, the Birthday Boy said:
“Amit, You’re such a commie, man. You’re a Lutyens insider. You’re like a courtier of the Gandhi family.”
I sighed. For most of the adult life, I’ve railed against the Gandhis and the Congress, their decades of bad economic policy that kept Indians in enforced poverty, their hypocrisy when it came to liberalism (they were the ones who banned The Satanic Verses), and their pandering to different vote banks. When they were in power, people called me a right-winger, and assumed I must be a Modi supporter. And now that I was criticising Modi, for many of the same reasons, I was suddenly a commie and a Congressi.
I sighed again. Someone handed me a glass of water. I said, “Give me back my coin.”
I would, at this point, like to present to you what I call The Binary Fallacy. The term has been used randomly in many other contexts, but never in this specific sense. Here goes:
The Binary Fallacy is the ingrained, mistaken notion that there are just two options in any given situation.
This is a bit like a False Dilemma, but that is a fallacy that is contextual and constructed. It is often a tactic. The Binary Fallacy, I would argue, is an ingrained tendency in us. We have evolved to commit The Binary Fallacy. In fact, it was necessary for our survival.
Here’s a common situation evolutionary psychologists often bring up. You are living in prehistoric times. You are in the fields. There are dense bushes near you. You hear a sudden loud sound from the bushes, as if something is moving through them.
It could be a tiger. It could be nothing. You have two options:
a) You get the hell out of there.
b) You investigate what’s in the bushes, as it’s likely to pose no danger given your past experience.
There is no space for nuance here. A data scientist may stop and think, “Ah well, out of a sample size of 641 noises-in-bush heard over the last three years, two turned out to be tigers, which means there’s a .3% chance this is a tiger. In contrast to that, there’s a 13% chance that this is deer, and if so, there is a 54% chance that I will catch it and thus take care of my hunting needs for a week. Plus, I will gain satisfying sex from admiring tribeswomen (70%), and might even be next alpha male (22%). If I attribute a satisfaction score of 80 Happiness Units for hunting needs satisfied, 200 for sexual needs satisfied, 400 for alpha-male status and minus 10,000 for death by tiger, my expected value from exploring the source of the noise is minus 838. I should probably leave.”
Meanwhile, the tiger’s finished his lunch, and your genes aren’t going anywhere.
Here’s the thing: the world is fake news. It’s deeply complex, with millions of events coinciding every moment, sometimes independent, often with chains of connections to each other that the human mind cannot unravel. We cannot deal with all this complexity. If we tried to do so, we would freeze with bewilderment and indecision.
So we tell ourselves simple stories to make a complex world explicable. And over time, decision-making shortcuts, or heuristics, get programmed into our brain as the species evolves. This is necessary for survival. If we didn’t take cognitive shortcuts, the Decision Fatigue alone could kill us, leave alone the tiger.
So here’s the upshot: the guy who runs from the tiger will get chances to propagate his genes. Alternatively, in a safer environment, the guy who catches the deer will get to have more sex, so his genes go forward. The nuanced data scientist will either die by tiger or miss the deer.
At one level, The Binary Fallacy is a good thing. We need it to negotiate the world. Also, if you give great importance to outcomes, The Binary Fallacy makes sense. Outcomes are binary. Either something happened, or it didn’t. Either there was a tiger in the bushes, or there wasn’t. You can’t be half-pregnant.
But thinking in terms of outcomes is wrong. I learnt this when I spent a few years as a professional poker player. Poker teaches you to think probabilistically, and to ignore outcomes. For those of you who do not know the rules of poker, I will illustrate this with a coin toss instead of a hand of poker. (The example is taken from this essay I wrote on the subject.)
Let us say I come to you and propose the following bet: we will toss an evenly-weighted coin, chosen or vetted by you. If it falls Heads, I will give you 51 rupees. If it falls Tails, you will give me 49 rupees. You agree, and I flip the coin.
Now, your decision at this moment in time is correct. (In poker terms, it’s a Plus EV decision.) Your expected value from this bet is Rs 1 per toss. (51×50 minus 49×50 divided by 100.) But the outcome is binary. You will either win the toss or lose the toss, win Rs 51 or lose Rs 49. You will never win Rs 1, which is the actual value of the toss to you.
Now, this is a bit of a gamble if you just toss the coin once. But if I offer you unlimited tosses of the coin, it becomes less and less of a gamble. You might get unlucky and have a run of five consecutive tails when we start, but in the long run, you will make money because you made the right decision.
This is what poker players learn, and is also the key insight of the Bhagavada Gita: keep making the right decisions, and don’t worry about the fruits of your actions.
The Binary Fallacy militates against this, though. If your elderly aunt watches you make that bet with me, and the coin comes down Tails, she might be rather upset with you. “You were wrong to make that bet,” she might tell you. “Wrong, wrong, wrong. It’s no surprise that my useless sister has such useless offspring.”
But you weren’t wrong. Your aunt just committed The Binary Fallacy. She is the useless sister.
Here’s an example of what this means in contemporary terms. Let us look at classical liberals who supported Narendra Modi in the 2014 elections. Assume that they wanted economic reforms but were wary of social unrest caused by the Hindutva fringe. So how would Modi govern if he came to power? I’d say that there were many possibilities.
X percent of the time he’d carry out economic reforms and keep his Hindutva warriors in check on the social front. Y percent of the time he would carry out zero reforms and unleash communal forces. Z percent of the time he would carry out both reforms and a communal agenda. And so on, with many permutations and combinations.
Now, no one can say what those numbers would be, but X, Y and Z are definitely all more than zero percent. If Y happened, someone who hoped for X would not be proved ‘wrong.’ (And vice versa, of course.) His thinking may have been correct, even if the outcome went the other way.
This holds for almost any historical event. The recent US presidential election was so close that anyone who said Hillary Clinton would win was both wrong and right, just as anyone who bet on Donald Trump was both right and wrong. (Unless they exuded certainty, in which case they were both wrong.) Ditto Brexit or Macron or Goriaghaat.
This brings me to The Hindsight Bias, another tool in the brainkit natural selection gave us to build simple narratives for a complex world. The Hindsight Bias is our tendency to believe that a) whatever happened in the past was inevitable and b) that we knew it would happen. Therefore, someone who makes a fallacious prediction or carries out an action that leads to a bad outcome was… wrong. After all, he wasn’t right, and what other options are there?
(By the way, there were no elections at Goriaghaat. I just made that up to see if you were paying attention.)
Let’s take a mild deviation here from our main subject, and muse about both The Hindsight Bias and probabilistic thinking. Consider what would have happened – and this is a fascinating counterfactual – if Sanjay Gandhi hadn’t died in an air crash in 1980.
I think it’s fair to say that Indian history would have been very different. I’d also add that we couldn’t say in what direction, though I’d wager that we would probably be worse off. But the thing to note here is that the history we take for granted is a confluence of unlikely events that just happen to happen. When Gandhi flew off that June morning, he wasn’t guaranteed to die, for there is no such thing as destiny. (‘Destiny’ itself is a consequence of our urge for narrative and comfort, and yes, The Hindsight Bias.) There was a very small chance that the plane would crash, and he got unlucky. If there were a million parallel universes that diverged at the moment, he’s still alive in most of them.
The Binary Fallacy has poisoned our political discourse. Part of this is the nature of our times. Our senses are bombarded by more information than ever before. We need to simplify. Who has time for nuanced thinking?
Also, we have evolved in prehistoric times to think in terms of tribes, Our People vs The Other. Culture has gone a long way towards fighting off biology – and culture itself is a consequence of biology, for we have contradictory impulses – but our instincts are what they are. We form teams. And we take everything personally.
I hardly need to elaborate on this binarification. (I wrote a post about it a year ago.) All political discourse has become a matter of you are for us or against us. All arguments have only two sides. If I am against Modi, I am an AAPtard, Fiberal Congressi. If I am against Rahul Gandhi, I am a Sanghi who hates Muslims.
Once I protested at the violence carried out by gaurakshaks, and was asked why I didn’t protest when ISIS killed people in Syria. I have had Whataboutery thrown at me when I have criticized the stifling of free speech by this government, and been asked where I was when Muslims were the one doing the muzzling. Naively, I once produced links to pieces I’d written supporting the brave cartoonists at Charlie Hebdo, the Danish cartoonists, and Salman Rushdie (in the context of The Satanic Verses). But to reply to Whataboutery is foolish and futile.
The Binary Fallacy is ingrained in human nature. It is the nature of the beast. We are the beast; and we must also fight the beast. It is not simple.
A century ago, when India was still a British colony, some of our most prominent freedom fighters were lawyers: Gandhi, Ambedkar, Nehru, Rajagopalachari, Mookerjee and Patel, among others. It is fitting, then, that a few days ago, it was a lawyer who made an eloquent plea for freedom against a government that is arguably as oppressive, and certainly more powerful, than the British were. Remember the name: Shyam Divan.
Divan was arguing against the government’s recent decision to make Aadhaar mandatory for filing income tax returns. Previous challenges to this act, on the basis of the Right to Privacy, were held up in court, and Divan could not make that argument for technical reasons. Instead, he based his argument on a person’s ownership of his own body.
“My fingerprints and iris are my own,” he said. “As far as I am concerned, the State cannot take away my body. Others cannot act in a way that subjects my body to their interests.” Divan argued that the imposition of Aadhaar “completely takes away your political and personal choices. You are a dog on an electronic leash, tagged and tracked, your progress hobbled.”
A person’s body, Divan pointed out, could not be “nationalised.”
This is not a new argument. Divan cited both Enlightenment and modern-day philosophers during his masterful submission, and John Locke was among them. It should be intuitive that all humans own their own bodies, but it was Locke, in the 17th century, who gave the first clear articulation of this: “Every man has a property in his own person. This no Body has any right to but himself.”
What does it mean to own yourself? Well, there are three implications of this. One, for the ‘Right to Self-Ownership’ to have any meaning, you need to respect the corresponding right of others. This leads to what libertarians call ‘The Non-Aggression Principle.’ You cannot initiate violence against another person.
Two, all legitimate rights flow from this right to self-ownership. The right to free speech – for your thoughts are yours, and you should be free to express them. The right to property, which is a result of your labours, and of voluntary exchange. The right to interact with any other consenting adult in any way you wish – economic or personal – that does not hurt anyone else.
Three, because a situation where every person has to fend for themselves is unviable, and likely to be violent, the state is a necessary evil. It commits some violence on the people – for taxes are violence – but only to the minimum extent required to protect our rights. Note that these rights are not granted to us by the state, as if they are favours. Instead, we have these rights to begin with, and we have brought the state into being to protect them. The purpose of the constitution is to limit the power of the state, and not to be, in Divan’s words, “a Charter of Servitude.”
Here, then, are the two visions of the state. The old one, where the people are mere subjects, ruled by the state, for all practical purposes owned by the state. The modern one, in which the state is an instrument of the people, tasked only with protecting their rights.
Deep inside the belly of any modern state, though, is the old one waiting to spring forth. Governments consist of humans, who are corrupted by power. The state, with its monopoly on violence, has tons of power. Thus, states tend to grow endlessly, and become an ever-present parasite on its people.
Divan’s argument was based on personal autonomy and consent, and the attorney general of India, Mukul Rohatgi, was ready with a response. Indians do not have a right over their own bodies, he said, adding that there are “various laws which put restrictions on such a right.” This made for a shocking headline, but he was stating the obvious.
India is a country where you can go to jail for what you say or what you eat. There are countless restrictions on markets, which are basically networks of voluntary exchanges. (If two consenting adults can be put behind bars for engaging in an act that infringes on no one else’s rights, can they be said to own themselves?) There are laws against victimless crimes (like gambling and alcohol). And there is an arrogant condescension by the state towards common citizens, as if it exists to rule us, and not to serve us.
Our constitution paid lip service to individual rights, but did not do enough to safeguard them. It will not save us – and thus, nor will the Supreme Court. It is up to us to snap out of our apathy and declare, as that battery of lawyers did a century ago, that we will not be ruled any more, that we own ourselves.
The other day I was out at a restaurant with a friend. I thought we would go Dutch. At the end of the meal, the friend insisted on paying the bill. “Damn,” I said jokingly, “had I known I would have ordered dessert.”
Now, in the sense of that specific incident, this is not true because I am on a Keto diet and would not have ordered that dessert no matter what. (Sugar is evil.) Also, as a matter of courtesy, if a friend was paying, I would either order the same as always or even less. But my awkward quip reveals an important truth about us and our money. This was best articulated by the economist Milton Friedman, who once famously laid out the four ways of spending money.
One, you spend your money on yourself. (Example: you go out dining alone.) You will be careful both about the value you get, as well as on about not spending too much. In other words, you will both economize and seek value, and will thus get maximum value-for-money.
Two, you spend your money on someone else. (Example: you buy a proforma wedding present for someone you are not close to.) Here, you don’t care so much for value – as you are not the beneficiary – but you will certainly economize, as it is your money being spent.
Three, you spend someone else’s money on yourself. (Example: You are on a foreign trip for your company at a five-star, all expenses paid for.) You will seek maximum value for yourself, and won’t be so careful about economising, as it is not your money that is being spent.
Four, you spend someone else’s money on someone else. In this case, you will neither economise, for it is not your money spent, nor look for value, as you are not the beneficiary. It is in this fourth instance that the most money is likely to be spent for the least benefit.
This is government.
Some of us tend to think of government as this divine body run by angels where all good intentions are transformed into good outcomes. But government is really a collection of human beings, and human beings respond to incentives. Friedman’s Law of Spending, in other words, applies to them. And they are spending someone else’s money on someone else.
Let’s look at an illustration of this: the potholes of Mumbai. Now, there is a department in the local municipality that is supposed to look after our roads, and it does not do so well enough. This is not a consequence of the badness of the individuals involved, but of the system itself. These government employees are tenured and unaccountable. Also, they’re spending someone else’s money on someone else. They are likely to overspend and underdeliver. And indeed, every year our potholes get repaired before the monsoons, and in a few months, the roads are pockmarked again.
This is actually a best-case scenario. To begin with, a government is inefficient by inadvertent design. As time goes by, as a consequence of this design, it becomes dysfunctional by deliberate action. In the case of the roads of Mumbai, it is likely that the government servant involved gets work done by a contractor at a higher price than normal so that he can take a hefty bribe for himself. It is also likely that he makes sure the work is shoddy so that more repairs are required soon, necessitating more bribes for himself. That’s the ecosystem right there.
And indeed, that’s all government. Consider public education, where we spend more and more every year and get worse outcomes than low-cost private schools spending a fraction of what the government does. The real travesty here is that the government not only fails to provide quality education, but it puts up barriers for private players to do so. In truth, private entrepreneurs are far likelier to provide good services because their incentives are better. Their survival and their profits depend upon their providing value. Not so in government.
Government is India is bad at two levels. Level one, it spends other people’s money on other people, which is a hopelessly inefficient structure to begin with. Level two, it has become an instrument for individuals to prey on citizens in a parasitic way, making money not by providing value but by robbing others of value. The government is not much more than a legalized mafia, extorting hafta, and yet we behave as if those who avoid paying hafta are the ones in the wrong. Isn’t that perverse?
The great Frédéric Bastiat once said: “Government is the great fiction through which everybody endeavors to live at the expense of everybody else.” It’s a great game. Even if we cannot win this game, we should at least see it for what it is.
Like all technology, Artificial Intelligence (AI) will make humanity better off in the long run. But in the short run, it will cause much disruption, including mammoth job losses in India’s services industry. Futurist Ramez Naam and policy wonk Pavan Srinath join Amit Varma to talk about the Unseen effects of AI.
For decades, there has been a stricture in Karnataka that non-Kannada films cannot be dubbed into Kannada. The idea behind this was to protect the local film industry—but were the unintended consequences just the opposite? Pavan Srinath joins Amit Varma to discuss the Unseen effects of this ban on Kannada dubbing.
Rent control is a classic example of a regulation meant to help the poor that ends up hurting everyone. Alex Tabarrok joins Amit Varma to discuss how real estate in Mumbai would be so much cheaper if not for such government regulation.
It is a sad day for any democracy when MPs and MLAs sell themselves to the highest bidder. Horse-trading is monstrous. It was to prevent exactly this that the Anti-Defection Law was passed in 1985. But did it end up doing more harm than good to democracy? Barun Mitra joins Amit Varma to discuss the unseen effects of this famous legislation.
For decades now, India has either banned or heavily regulated futures markets in agriculture. The conventional wisdom is that futures markets can turn farmers into gamblers. But what if the Unseen Effect of such regulation is exactly the opposite? Karthik Shashidhar joins Amit Varma to chat about the unintended consequences of such well-intentioned but misguided regulation.
Mumbai is one of the most expensive cities in the world, and one of the reasons is that there is too little land and too much sky. Alex Tabarrok joins Amit Varma to discuss Mumbai’s insanely low Floor Space Index (FSI), a key reason why real estate here is at such a premium.
There comes a moment in some lives when a sudden, unexpected event makes you look at the world with greater clarity than before. It could be a happy moment: a childhood friend proposes to you, or you stumble into parenthood. It could be a sad one: you are diagnosed with cancer and told you have six months to live. It makes you look at the world differently, and some things seem so clear that you wonder why you did not notice them before.
In the life of our nation, the rise of Yogi Adityanath to the chief ministership of Uttar Pradesh might well be one such unexpected yet clarifying moment. I was stunned when it was announced; and yet, it makes so much sense that any counterfactual now seems absurd. It was, I have come to believe, a decisive and inevitable event in a conflict that has been simmering in India for at least a century.
The great battle that took place on our peninsula was not between the natives and our colonial overlords, but between a new way of thinking and an old way of existing. While the Enlightenment swept its way across Europe and the USA in the 18th century, its influence was felt in India only in the 19th. Liberalism, however one tries to spin it, was an import from the west, and it is ironic that many of our finest freedom fighters were influenced by British thinkers. The great early figures of our resistance – heroes of mine such as Naoroji, Ranade, Agarkar and Gokhale – were essentially British liberals.
Until Mahatma Gandhi, the freedom struggle was a battle between the British empire on one hand, and Indian elites inspired by Western ideas on the other. Gandhi did catalyse it into a mass movement, but his intellectual influences weren’t Indian either. He was more influenced by Ruskin and Tolstoy than any Indian thinker, and VS Naipaul once called him “the least Indian of Indian leaders.” By the time the British finally quit India, the liberalism of the Gokhale years had been replaced by the soft socialism that was then in vogue. Do note that both these strains, the early classical liberalism and the socialism that is so antithetical to it, were Western imports.
The constitution, intended as an operating manual for this new nation, reflected this. The commentator Nitin Pai, in an essay in Pragati, a magazine I edit, wrote: “On 26th January 1950, the Enlightenment […] was injected into the veins of Indian society in the form of a written statute. We are still dealing with the shock of that moment.”
‘Into the veins of Indian society.’ It is worth reflecting here that the state and society are two different beasts. This difference is a cornerstone of conservatism, which the Encyclopaedia Britannica defines as a “political doctrine that emphasizes the value of traditional institutions and practices.” Who were the Indian conservatives who would lead the fightback of society against the state?
The biggest manifestation of conservatism in India is what we call the Hindutva right. I used to be sceptical of it, as I consider ‘Hindutva’ to be an artificial construct, an insulting caricature of a great inclusive religion. But even if that is so, Hindutva is authentically conservative because it arises out of a nativism that is inherent in human nature – and consequently, rooted in our culture. (Culture can both mitigate and reinforce human nature, which is the whole struggle right there.)
Early Indian conservatives were more interested in social rather than political battles, which is why they didn’t play much of a role in the freedom movement. After Independence, the Nehruvian big state seemed to have subdued the Hindutva social project – but this was temporary. The journalist Rishi Majumder, who is writing a biography of the conservative leader Syama Prasad Mookerjee, describes in a forthcoming essay in Pragati how “the RSS, as well as other right-wing groups, organizations and movements, have thrived and grown through many years when the BJP was not in power.”
Much modern politics is the battle between these competing visions of the state. Should the state be a superstructure that imposes certain values, decided upon by elites, upon society? Or should it be a servant to society, protecting its traditions without judging them from the prism of other value systems?
Narendra Modi’s rise to power was fascinating because he embodied the hopes of people on both sides of that spectrum. Some classical liberals dismayed by Nehruvian socialism backed him because they saw the damage Nehru’s ideas had done to India, and wanted their values imposed from above. And the whole Hindutva movement, obviously, fell in behind Modi because his ascent was the culmination of their century-long struggle.
These two strands are incompatible. And now, with the rise of Yogi Adityanath, there is no more ambiguity.
Big Brother is watching you, and you have no protection. There has been much hype about how ‘Digital India’ will transform our lives, but there are unseen elements to it that should make you worry. Devangshu Datta joins Amit Varma to discuss why it is so alarming that there are no laws in India to protect privacy and defend against data theft.
Jawaharlal Nehru once said that profit is a ‘dirty word’. He wasn’t alone in his distrust of the profit motive, which is effectively banned in education in India. Amit Varma chats with education reformer Parth Shah on why this thinking is misguided, and might be responsible for the pathetic state of education in India.
Healthcare in India is in a dismal state, and so is the state of medical education. Pavan Srinath joins Amit Varma to discuss the role of the Medical Council of India in this mess. Is it a responsible industry watchdog helping keep standards high—or is it a part of the problem?
For any shopper in India, there is no acronym as comforting as MRP: Maximum Retail Price. When you see that on any packaged good, you feel assured that you won’t be ripped off. But is it really that simple? Prithwiraj Mukherjee joins Amit Varma to discuss the seen and unseen effects of MRP.
On September 18, 2016, a group of terrorists attacked an Indian army brigade headquarters near the town of Uri in J&K. Nineteen people died, and there was immense pressure on the Indian government to retaliate. The prime minister, Narendra Modi, eventually launched what he described as ‘surgical strikes’, meant to be a show of strength and resolve. Defence analyst Pranay Kotasthane joins Amit Varma to discuss the Seen and Unseen effects of these surgical strikes.
A few days ago, the magazine Pragati relaunched under my editorship. This was the editorial I wrote to mark its return.
One of my babies on that space: a section called Brainstorm, which aims to “create a space where diverse minds can discuss big issues in a respectful way.” The first such discussion, on ‘The Future of the Indian Republic’, is underway. Here’s my intro post to kick that discussion off. You can read all the essays in that discussion here
The other day, an internet troll sent me a love letter. “Why have you blocked me on Twitter?” he demanded to know. “You claim to believe in the freedom of expression. You are a hypocrite.” After that he said a few colourful things about my family. I think he wanted me to copulate with them.
I am an absolutist when it comes to free speech, and this friendly troll was wrong. Indeed, I find that there is no concept as deeply misunderstood today as the right to free speech. These misunderstandings exist on all sides of the political spectrum. Thus, I find myself duty-bound to write this brief primer on the philosophical origins of free speech, to illustrate what I understand it to be.
The earliest conception of individual rights came from the 17th century Enlightenment philosopher, John Locke. Locke held that the most fundamental right of all, the one from which all others emerged, was the right to self-ownership. After all, it is practically self-evident and beyond argument that, right from birth, all of us own ourselves.
All individual rights arise out of this right to self-ownership. The right to life. The right to our thoughts, and thus to our speech. The right to our actions, which also results in the right to property. And so on. Freedom, another misunderstood term, means a condition in which these rights are not infringed.
All of our rights are contingent to our respecting the corresponding rights (and thus, freedom) of others. My fist stops where your nose begins, as that old saying goes. Libertarians also call this the non-aggression principle, where aggression is defined as infringing someone’s rights. You may do anything as long as there is no coercion involved.
By this reckoning, all voluntary interactions between consenting adults are kosher, as long as they do not infringe on anyone else’s rights. This holds true, as I often point out, whether those interactions happen in the marketplace or in the bedroom. Both the left and the right are thus incoherent when they support one kind of voluntary exchange but not the other.
In accordance with the non-aggression principle, the core question I ask myself in any situation is: Where is the coercion? Looked at this way, many of the questions that keep getting raised about free speech answer themselves. Am I infringing on the rights of the troll I block? No, because there is no coercion involved. He is still free to say whatever he wants, but he is not entitled to my time and attention. Is a college within its rights to withdraw an invitation to a speaker? Yes, it’s their property, and the speaker can still express himself elsewhere.
When it comes to our actions, there is much that we can do that can harm others. But it is very hard to breach the non-aggression principle with words alone. As that old adage goes, “Sticks and stones may break my bones, but words will never harm me.” Recognising this, the first amendment of the US constitution protects free speech in absolute terms. Obviously, words can be used to incite physical violence, and that is a reasonable limit of free speech. The US Supreme Court, in a famous case (Brandeburg vs Ohio, 1969) set the standard as “imminent lawless action.”
The Indian constitution, sadly, does not protect free speech. Article 19(2) lays out caveats such as “public order” and “decency and morality”, which are open to misinterpretation and, thus, misuse. This is a pity, but our democracy is a work in progress, and is made healthier by a free exchange of ideas.
For that reason, I was alarmed when I read Arun Jaitley’s quote last week about free speech being “subordinate to the needs of the sovereign state”. That is the wrong way around, and I would argue that a healthy nation needs an open exchange of ideas, for which free speech is indispensable. That is why, if I were asked to compare Arun Jaitley and Umar Khalid, I would say that it is Jaitley who is anti-national, and a threat to our great republic.
Appearances can be deceptive. I saw two Bollywood films recently that evoked different reactions in me. One was supposed to be gritty, realistic and well-researched, but actually showed completely ignorance of the world it was set in. Another had a small story at the start of it that seemed outlandish, the product of an imagination gone wild, but was spot on. Sometimes the most obvious truth can be a falsehood; and the most surreal story can be true.
Let’s start with the believable story. Shah Rukh Khan plays a bootlegging gangster in Raees, a film directed by Rahul Dholakia, who had made the acclaimed Parzania ten years ago. Raees looks real, and some reviews called it well-researched, but this is a façade. The writers seem to have no actual knowledge of the criminal underworld and the political economy in Gujarat. While the film is full of implausible events, one particular arc gives it away.
You would imagine that a man who sells alcohol would be the enemy of the man who wants alcohol to be banned. So when a sanctimonious politician plans to carry out a Darubandi Yatra (pro-prohibition march) through Gujarat, Raees Alam, our hero bootlegger, warns him not to bring it through his area. He fears it will affect his business. This seems intuitive and natural. These men are working at cross-purposes, right?
Well, in the real world, these men are allies. Prohibition is the greatest boon to a bootlegger. It is the main reason he exists. And a politician who supports prohibition should be his greatest ally. He should support him to the point of funding him, and even share his profits with him. This is best illustrated, in economics, by the concept of Bootleggers and Baptists.
The regulatory economist Bruce Yandle first coined the phrase ‘Bootleggers and Baptists’. It describes how regulations evolve, and how the different interest groups that benefit from them become unlikely allies. For example, take a Baptist who preaches that alcohol is evil, and makes sure it is banned. Where there is demand, supply will spring up, so enter the Bootlegger.
Bootleggers and Baptists share a symbiotic relationship. In Yandle’s words, “Baptists flourish when their moral message forms a visible foundation for political action. […] Bootleggers, who expect to profit from the very regulatory restrictions desired by Baptists, grease the political machinery with some of their expected proceeds.” In other words, not only are their incentives aligned, they might sometimes be overtly hand-in-glove as well, with the Bootlegger funding the Baptist.
Look at the regulation around you, and you will see Bootleggers and Baptists everywhere. Every government regulation on free markets benefits a specific interest group at the expense of the common people. These interest groups then funnel some of their gains back into politics, in the form of donations to the very politicians who create, perpetuate and expand these regulations. It is a vicious cycle in which the common man gets shafted.
Let’s move on, now, to a better movie. Akshay Kumar’s entertaining Jolly LLB 2 gets a few details wrong about the legal system, but the most outrageous story in the film is actually true. Jolly LLB, played with impeccable comic timing by Kumar, takes on a case at the start of the film on behalf of a man who’s been declared dead by his family so that they can take his property. All government papers say he’s dead, and the judge refuses to believe that he is alive. He needs proof that he exists, and he eventually gets it by throwing a shoe at the judge. (This scene was censored, so you won’t actually see it, just the commotion afterwards.) The cops have to record his name as they arrest him, and boom, that becomes the proof that he’s looking for.
Surreal, eh? You haven’t heard the half of it. This story is actually all a true story – and if anything, understates it. Its inspiration is surely a gentleman named Lal Bihari, a farmer from Azamgarh in Uttar Pradesh. Lal Bihari was born in 1951 – and was told by a government officer in 1976 that he was dead, and that his land now belonged to his cousins. “But I am here before you,” he said, as reported in Open magazine. ““You know me. I have met you before.” But nothing doing, he had no proof that he was alive.
That’s only where the story begins. Lal Bihari renamed himself Lal Bihari Mritak (dead man), and went about proving himself alive. To do this, he organised his own funeral (Munnabhai style), applied for compensation for his ‘widow’, threw stones at a police station so that he would get arrested and his existence would be recorded, kidnapped his cousin, and finally, stood for election.
He took on VP Singh from Allahabad in 1988 and Rajiv Gandhi from Amethi in 1989, but dead men don’t win elections, and he didn’t either. By this time, he found that there were many others in the ranks of the walking dead, and founded the Uttar Pradesh Mritak Sangh, an association of legally dead people. At last count, they had 20,000 members, of whom four had managed to come back to life. One of them was Lal Bihari. From 1994 he was no longer Mritak, and when he really dies, I bet the authorities will be, like, been there done that.
You can’t make this shit up, right? Bollywood filmmakers should learn this lesson from Jolly LLB and Lal Bihari Mritak: real life has all the great stories you need. Just dig into that.
A few years ago, a photo studio in Ahmedabad offered its customers free passport photographs. There was no catch, no small print. It was a free lunch. Amit Varma is joined by Mohit Satyanand, as they explore how this free lunch transformed financial regulation in India. They also discuss how bad incentives can lead to corruption becoming a cultural phenomenon.
Here’s the video and transcript of a keynote speech I gave at the Asia Liberty Forum on January 11, 2017 in Mumbai.
Note: In this conference, the word ‘liberal’ was used in its classical, European sense, not in the American one. I’ve used it in the same sense in this speech, almost interchangable with ‘libertarian’, though I usually prefer not to use the word as it means so many things to so many people.
Before I start, I want to congratulate Parth Shah for 20 years of CCS. Parth, I’ve lost count of the number of young people I have met to whom you’ve been a teacher and a guide, and there is one thing common to all of them: not only do they respect you enormously, but they also love and adore you even more than they respect you. That’s remarkable. Thank you for existing!
I’ve started on a happy note, but I’m afraid that the rest of my speech will contain both sadness and anger, and maybe a little hope. The topic of my keynote speech today is “Freedom in India.” Now, I’m not going to talk about the history of what I call this ongoing freedom struggle in India: most of you know that story too well. Instead, I want to share my personal feelings about where we stand today.
I think the quest for freedom in India that all of us care about so much is at an important crossroads. We face challenges we did not face before. We have opportunities we did not have before. And to understand the road ahead, I think there are two things we have to do. One, we must come to terms with Narendra Modi.
Let me first lay the context for why Modi became such an attractive figure for many freedom-loving people before 2014. Eric Hoffer writes in his book The True Believer, which is a book about the rise of mass movements, that they are driven by frustration. Modi tapped into different kinds of frustrations during his rise to power. Among them were classical liberals who cared for freedom – both personal freedom and economic freedom – and were frustrated by nearly seven decades of state oppression that had kept hundreds of millions of people in poverty for much longer than they should have. The reforms of 1991, we must remember, were a product of circumstances, and were not driven by political will. They did lift millions of people out of poverty, but they were limited and half-hearted, and once the balance-of-payments crisis was over, they more or less stopped. We still remain largely an unfree country. In the 2016 Index of Economic Freedom, India was still at a miserable 128 – eight places lower than 2014, by the way. This is trivial – most of you know this.
Modi appeared, to many of my friends, as a beacon of hope. The Congress was – and is – feudal party ruled by a repugnant family that has harmed India immeasurably, and most regional parties were focussed on narrow identity politics. Modi is a master of optics, and as he built himself up as a national leader, he became a bit like a Rorschach Inkblot Test – you could see in him what you wanted to.
No wonder many classical liberals fell in behind him. They were willing to give him the benefit of the doubt for the Gujarat Riots of 2002, and put that down to incompetence rather than collusion. They were sick of the status quo, and he represented a hope for change. As my friend Rajesh Jain put it, he was “a lighter shade of gray.” At least he made the right noises – his slogan ‘Minimum Government, Maximum Governance’ was music to my ears.
Now, a party on the campaign trail is like a young man wooing a woman: he’s on his best behaviour, and he’ll tell her just what she wants to hear. But governance is like what happens after marriage: the girl find out the truth about the guy: he farts all the time, he snores like a hippopotamus getting dental surgery without anaesthetic, he surfs porn all night, he beats her up, indeed, he beats her up day after day after day – and very often, she rationalises this, because she made this choice, and there seems to be no alternative.
Let’s take a brief look at how the Modi government has performed. The first thing we learned about Modi is that he is no reformer. Under him, government has grown bigger and more authoritarian. The welfare schemes he once criticized have grown, and some of them have been renamed and he has pretended that they are his ideas. He has not carried out any of the reforms he promised to, including low-hanging fruit like privatising non-performing public sector units that no one would have fought for. Indeed, he has shown us that he is actually a true heir of the Congress party: he has the economic vision of Nehru, and the political instincts of Indira Gandhi. And I mean both of those as a criticism.
Like Nehru, Modi has a top-down, command-and-control vision of the economy. To him, society is a machine to be engineered: he considers himself a better engineer than his predecessors, but he is an engineer nonetheless. And like Indira, he uses power as a tool to oppress and harass his opponents, and to clamp down on dissent, and to reward his cronies.
For two years between 2014 and 2016, Modi carried out almost no reforms, despite making some noises in the right directions: remember, he is a master of optics. But then, in November last year, he showed his true colours as an authoritarian social engineer. There is a thought experiment that I sometimes throw to my friends: It’s the morning of November 8, 2016, and you are the prime minister of India for exactly one day. In that day, you have to enact exactly one policy which, without breaking the law or going against the constitution, harms the people of India the most. The maximum damage to the maximum people. What are you going to do?
Think about this and let me know if you come up with an answer better than what Narendra Modi actually did. Allow me to break down for you what Demonetisation actually did. Modi essentially took all 1000 and 500 rupee notes out of circulation. Now, a 1000 rupees is equal to around 15 dollars. It is not really a high-denomination note. Modi had perhaps not bought anything from a store in two decades, so he didn’t realise that these notes are not used mainly for as unit of storage, as high denomination notes are in some other countries, but as a medium of exchange. Common people use these notes. So much so that 86% of the currency in use consisted of these notes. 86%!
Let me share some more figures with you. Before November 8, 97% of the transactions in this country were cash transactions. Contrary to the blatant lies of the government, only 53% of all Indians had bank accounts. That’s 600 million people without bank accounts. How do you think they stored their money? Yes, you could notionally go to a bank anyway and exchange this money for new notes, but you need a government ID for this, and again, despite the lies spread by the government, 300 million people in India had no form of government ID at all. And even those who did have bank accounts could deposit their money after standing in a queue for hours, but had limits placed on withdrawals. Get this, they were not being allowed to withdraw their own money!
I wrote at the time that it was the largest assault on property rights in the history of mankind, a point that my friend Barun Mitra reiterated in his excellent speech yesterday. The opportunity costs were huge – people spent hours in queues begging for their own money, and could not use either their time or the money they had productively. Much of the economy is informal, because of structural failures of the state itself, and it came crashing down. Migrant workers across the country were laid off because there was no cash to pay them, and they went back home. Farmers could not sell their produce or buy seeds for the next harvest. Truckers lined up on roads with nowhere to go and nothing to carry. Thousands of businesses across the country shut down.
In all this, the rich got away. The government kept changing the goalposts for why they did this. First, they said it was to counter black money. But a finance ministry estimate, based on thousands of income tax raids in the past, shows that only 6% of black money is kept in the form of cash: the other 94% is in gold, real estate and foreign accounts. Even that 6% was laundered. You see a reflection of this in automobile sales. They have plummeted for two-wheelers and three-wheelers, but SUV sales are steady. The rich got away.
The government also said that Demonetisation would kill fake currency. Well, their own estimate showed that only one in 4000 notes was fake, a perfectly acceptable figure, and the usual way of tackling this, practised across the world, is to phase out old notes. The government also said that terrorist activity would be hurt by this, but cross-border attacks have actually gone up in this time. Yes, criminal activity has been affected, but that’s because ALL business has been affected. You do not cure a cold by cutting someone’s head off.
So there was no benefit, and the cost is incalculable. Some more figures: According to the All India Manufacturer’s Association, in a report released last month, employment is expected to fall 60% by March, and revenues will come down by 55%. And the IMF released a forecast that said that India’s GDP will grow by only 6.6% this year, a full percentage point lower than last year. Let me tell you what that number means. My friend Nitin Pai of the Takshashila Institution recently estimated that with every 1% rise in the GDP, 2 million people come out of poverty. Two million people. That is the opportunity cost of Demonetisation in just the short term: those two million people trapped below the poverty line because of one man named Narendra Modi. This is both a humanitarian disaster and a moral outrage.
Now, the question here is, all these classical liberals who supported Modi in 2014, have they seen the light now? This is a man who doesn’t give a damn about liberal principles, and is taking the country backwards. Friends of mine who are here tonight have invoked The Road to Serfdom to describe what is happening, and some talk of creeping fascism. But what do our classical liberals have to say?
My friend the economist Suyash Rai said an interesting thing to me a few days ago. He said, “Mujhe communist se dar nahin lagta, mujhe classical liberal se dar lagta hai.” (“I am not scared of communists, I am scared of classical liberals.”) There are too many people who pay lip service to freedom but support this oppressive regime. There are a number of reasons for this: Some of them invested too much emotionally in Modi, and will rationalise anything he does. Others have been co-opted into the establishment, with Padma awards or seats on the Niti Aayog or Prasar Bharti or the RBI Board of directors, and now that they are finally establishment intellectuals, they ain’t gonna give it up.
I met one of them the other day and said to him, “Isn’t modern technology wonderful?” He said, “Why?” I said, “Bro, this is the first time I’ve seen a man without a spine stand up straight.”
But leave aside the narrow compulsions of weak men without principles. What are the lessons I draw from all of this? Lesson number one: You can never depend on politicians to advance your principles. David Boaz once said, “There are only two political philosophies: liberty and power.” These are necessarily opposed to each other. Those who enter politics lust for power. If your ideas or your support seems useful to them, they will pretend to be on your side, but when they’ve gotten what they wanted, they will spit you out. Their incentives come firstly, from the special interests that fund them, and secondly from the people who elect them. And that brings me to lesson number two.
Lesson Number Two is that policy advocacy is mostly useless. If you want to make an impact on the political marketplace, you need to attack the demand side, not the supply side. You need to go to the people!
I said earlier in this talk that there are two things that people who care about freedom have to take into account today. One, we have to come to terms with Narendra Modi. Two, we have to understand this political marketplace. And the most important thing to understand about India is its changing demographics.
India is rapidly growing younger and younger. The average age in India today is 27, and 60% of the country is born after the liberalisation of 1991. This is both a problem and an opportunity.
Here’s the problem. These young people are growing up in an India that needs 1 million jobs every month – 12 million jobs a year – to accommodate this new workforce. These jobs aren’t there. One of the reasons Modi won in 2014 was that he promised to create these jobs. He hasn’t delivered; he can’t deliver The government can’t create jobs, it can only enable job creation. But the reforms that would make this happen – labour reforms, ease of doing business reforms – simply aren’t happening.
It’s no surprise then all the recent agitations in India have been centred around reservation in government jobs: The Jat agitation in Haryana, the Patidars under Hardik Patel in Gujarat, and so on. And this will get worse. Artificial intelligence will now decimate jobs in the service industry, where we’ve done relatively well recently. And automation will mean that the window for becoming a manufacturing superpower because of cheap labour will be closed to us forever. So there is a coming crisis.
Now, how are we to sell our ideas in times such as these. Classical liberal notions like spontaneous order and the positive-sumness of things are unintuitive and hard to sell in the best of times, but even more so in times of scarcity. I used to think that rising prosperity will end identity politics in India, but no, identity politics is on the rise, and we are becoming tribal again. No wonder populism is winning.
But there is also an opportunity here. These young people are not bound up in the dogmas of the past. They are not necessarily believers in the religion of government. If we manage to get out there in the marketplace of ideas, they will be more receptive than any generation before them. And that is the principle challenge before us. How can we get into the culture? How can our ideas be part of the discourse? Understand this: the prime minister of India in the year 2050 could be a 15-year-old girl who is sitting in a small town in India somewhere at this very moment, doing her boring homework. How can we reach her with our liberal ideas? Can we shape the way she thinks about the world? Can we package our ideas in an empathetic way that appeals to her emotions? Can we get her off Snapchat? Can we reach her on Snapchat?
In another two or three decades, this demographic tide will reverse itself, and we will become a rapidly ageing country. Will we still be poor or illiberal then, or will we be a beacon of freedom for the world? I can’t answer that – and I don’t even have any specific answers as to how we can get there from here, but I thought it important to highlight the challenges we face. Things are not rosy, freedom is not on the march. But we have to try, and I know this: just by the size of the battlefield alone, this battle for freedom in India will be the most significant freedom struggle in the history of humankind. And we can only win it on a full stomach. It’s time for dinner, guys, thank you for listening to me.
The first three weeks of Donald Trump’s presidency have been frightening. This is because he seems to be that one politician who actually intends to do what he promised on the campaign trail. He’s hitting out at immigrants, attacking free trade and it looks like he’ll build that wall, with his own tiny hands if he has to. But even an unhinged demagogue must get some things right, if only by accident. In the middle of this carnage, Trump’s appointment of Betsy DeVos as education secretary is a move in the right direction.
DeVos has been demonised by the Democrats, who tried to block her appointment, but their attacks were mostly personal ones that did not focus on the substance of what she proposes to do in office. For decades, DeVos has been a proponent of School Choice. This would transform education in America, and would show a way forward to other countries, including India. I’ve been writing in favour of School Choice in India for many years, so let me break down what it means in an Indian context.
Education in India, as we know, is in an abysmal state. The government devotes vast amounts of money to it, but outcomes are terrible. A recent Annual Status of Education Report (ASER), described by the government itself as “pretty depressing,” showed that 52% of students in Class V were unable to read a Class II textbook. As much as 58% of Class VIII students could not do simple division, and teacher absenteeism was rampant. Teachers are not the problem, though, but a symptom of it. The problem is incentives.
Government schools are guaranteed their funding, and their teachers, who are paid many times what teachers in budget private schools get, are more or less tenured. They have no reason to aim for excellence and try to provide quality education. How does one make them accountable, and make sure that our money is better spent? One answer is school vouchers.
Under a voucher system, the government, instead of giving money to government schools, gives vouchers to parents. Parents decide what is the best school for their children, and submit the voucher there. That school then gives the voucher to the government and gets the money.
This changes the incentives for government schools and their teachers. They have to perform now, and deliver quality education, or parents will take their kids elsewhere. Competition brings accountability. This also empowers parents with choice. They are the people who should decide what is best for their children, and not a distant, unaccountable government. In a nutshell, the state funds schooling, not schools.
Vouchers are only one piece of the puzzle, of course. They are pointless if there are harsh entry barriers for private players in education. For 70 years, we have had insane regulations in place that disallow or disincentivise private schools, especially for the poor. If a school provides budget education to children in a slum, why should it matter if its playground isn’t big enough? Let parents decide what they value.
As it happens, there is a vast informal economy of budget private schools, and poor parents vote with their feet. Organisations like the Centre for Civil Society have long documented how thousands of poor parents in slums and villages across India prefer to pay to send their kids to a budget private school rather than to a free government school. This speaks volumes.
Private schools are demonised, but contrast their incentives with those of government schools. In a marketplace with no entry barriers – which India is not – the profit motive is the best incentive. After all, you can only make a profit by delivering value to others. When I was growing up in the 1980s, telecom, airlines and education were all government monopolies, and delivered abysmal service. Today, two of them allow private players to compete freely, and because of competition and the profit motive, we the people are better off. But not education, which is so important for our nation’s growth.
When you fight against the system, of course, the system fights back. The status quo is always fiercely defended by the special interests that benefit from it. (Since they are beneficiaries of the status quo, they also have the money to spend on it.) In the US, for example, teachers’ unions are the biggest opponents of education reform, as the current system give them power and privilege without accountability. They happen to be prominent donors to the Democratic Party who, as a result, oppose School Choice.
As an illustration, consider that the sanctimonious Elizabeth Warren actually advocated school vouchers in a book she wrote in 2003. She changed her stance when she joined politics and realised who the most influential donors in the Democratic Party were. That’s the whole game of politics right there: special interest groups purchasing politicians to benefit at the expense of the common people. It’s ironic, then, that Trump should be on the right side of this issue.
The history of humanity is the story of an Expanding Circle: one in which the world gradually gets more and more globalised, and the movement of goods and labour becomes more and more free. But recent years have seen the rise of populists who, among their many follies, are suspicious of immigration. America, a land built by immigrants, just elected a demagogue who prefers walls to bridges.
In Episode 4 of The Seen and the Unseen, Amit Varma discusses Immigration with Shikha Dalmia. Are the demagogues right about immigration being a bad thing? Do immigrants take jobs away from locals? Are they a strain on resources? Should we build yuge walls?
There are two kinds of diversity in India, one good, and one not so good. Our greatest strength is our diversity of people and cultures and languages. But one of our great weaknesses is our diversity of taxes, across states and regions. We have so many different kinds of taxes that the cost of compliance is the most daunting cost for many businesses, and corruption is out of control. Also, taxes create friction in trade, and the costs are borne by consumers and businesses alike. It’s a negative-sum game.
The Goods and Services Tax (GST) was supposed to be the panacea that would get us out of this mess. While India has been one country since 1947, it hasn’t been one market, and the GST was expected to get us to that promised land. It has been many years in the making, though, and has become more and more convoluted in the process of political and bureaucratic negotiation. Thus, while the Seen Effects of a perfect GST would normally be excellent, the potential Unseen Effects of the GST in its evolving form could be quite messy.
In Episode 3 of The Seen and the Unseen, Devangshu Datta takes Amit Varma through the nuances of the GST and their possible implications.
On November 8, 2016, India’s prime minister Narendra Modi announced that 500- and 100-rupee notes would cease to be legal tender from midnight that day. This removed 86% of the cash from circulation, an unprecedented event in human history. Demonetisation, as it was then called, or DeMon or Notebandi as it is also known, had humanitarian and economic effects that might take years to play out. In episode 2 of The Seen and the Unseen, Amit Varma is joined by Suyash Rai, an economic analyst from Delhi, as they examine whether demonetisation achieved any of its intended effects, and try to come to terms with some of its unintended (but foreseeable) consequences.
Both Varma and Rai have been early critics of this demonetization, and have written extensively on the subject. Some of their pieces:
As Donald Trump raised his tiny paw and took the presidential oath this Friday, I had just finished reading an outstanding book that, I thought, explained Trump as well as many other leaders on the world stage today. In ‘What is Populism?’ Jan-Werner Müller, a Princeton professor, lays out all the ingredients from which you can cook up a populist movement. I was struck by how closely our own prime minister, Narendra Modi, matched Müller’s definition. Consider the following characteristics that characterise populists, as defined by Müller.
One, they claim that not only do they represent the people, but that whoever does not support them is, by definition, not part of ‘the people’. Müller says this is “the core claim of populism: only some of the people are really the people.” As Trump put it in May last year, “the only important thing is the unification of the people— because the other people don’t mean anything.” Think of how the BJP treats Muslims and Dalits as second-class citizens.
Two, populists are not just anti-pluralism, but they’re also anti-elite. Müller writes, “Populists pit the pure, innocent, always hardworking people against a corrupt elite who do not really work (…) and, in right-wing populism, also against the very bottom of society.” Think of Modi’s railings against the “Lutyens elite” as an example.
Three, they portray themselves as victims even when they are in power. As Müller puts it, “majorities act like mistreated minorities.” Modi still rants against the elite even though he is now their leader, and paid BPJ trolls still call journalists ‘presstitutes’ even though they control much of the media. Trump, who has been a crony capitalist insider all his life, is a classic example of a pig calling the pigsty dirty.
Four, populist parties tend to become monolithic, “with the rank-and-file clearly subordinated to a single leader.” Trump decimated the Republican Party on the way up, just as Modi is now the Supreme Leader within the BJP, which once had multiple leaders of stature.
Five, populists pride themselves on their “proximity to the people.” Modi being a ‘chaiwalla’ is a key part of his narrative, and as that famous photoshopped picture of him sweeping a floor shows, the common-man element is important to him. As it is, indeed, to other populists. Hungary’s Viktor Orbán and Venezuela’s Hugo Chávez both hosted shows similar to Modi’s Mann Ki Baat.
Six, populism is simplistic, so populists can only think in simplistic terms, which leads to “an oversimplification of policy challenges.” Modi’s Demonetisation is an example of this, as is Trump’s attribution of America’s job losses to immigration and outsourcing.
Seven, they populists tend to believe in conspiracy theories, which “are rooted in and emerge from the very logic of populism itself.” Indeed, the RSS’s view of history is itself a sort of giant conspiracy theory.
How do populists behave once in power? Müller outlines three things that they tend to do.
One, they “colonize or occupy the state”. They fill up all the institutions with their own people, co-opt those that are independent, and reshape the system to their will. Think of Modi’s appointment of incompetent cronies to the Censor Board and FTII, the replacement of the Planning Commission with Niti Aayog, and the recent virtual demotion of the RBI to an arm of the finance ministry.
Two, they “engage in mass clientelism: the exchange of material and immaterial favors by elites for mass political support.” Think of the sops Modi offered before the Bihar elections, or the ones expected in the next couple of budgets leading up to important elections.
Three, they shut down dissent in civil society, starting with NGOs. Müller writes, “rulers like Vladimir Putin in Russia, Viktor Orbán in Hungary, and PiS in Poland have gone out of their way to try to discredit NGOs as being controlled by outside powers (and declare them ‘foreign agents’).” Sounds familiar?
Modi fits Müller’s populist template so precisely that he seems like a bot generated by a populism machine, and not an actual person. It made me wonder: if a near-identical form of populism persists through vast stretches of time and geography, does it then reflect something innate in human nature?
I’ll leave you with a pleasant thought, though. Here’s why I think both Modi’s and Trump’s populism will ultimately fail. The narratives of populism, based on some of the people being all of the people, only work in broadly homogenous societies. The USA will be a minority-majority country by the middle of the century (ie, whites will be less than 50% of the population), and a Trump won’t be possible then. As for India, our diversity is our greatest defence against creeping fascism. Populism might work at the state level, but nationally, we are too diverse. That puts a ceiling on how much support Modi can get, which I believe already peaked in 2014, when he could be all things to all people. I think he already senses this. How will he respond?
India has a panoply of laws that prevent corporations from getting into farming, and which prevent farmers from escaping agriculture, by virtue of not being able to sell their farm land for non-agricultural purposes. The Seen Effect of this is that they are protected from exploitation by rapacious capitalists. But are the Unseen Effects worse?
Amit Varma is joined by guests Pavan Srinath and Karthik Shashidhar, who explain that a key reason why Indian agriculture is in such a dreadful state today is the bad laws governing it set by different governments.
Every December, I like to meet the high and mighty of the world and ask them about their New Year Resolutions. Last year I met Donald Trump. “I’m going to control my foot in 2016,” he told me. “It keeps going into my mouth. It’s like my foot has a mind of its own. What to do?”
“You could try building a wall between your foot and your mouth,” I suggested. “A really yuge wall, like, I know you’ve seen a lot of walls, and this will be the best.”
He rubbed his minuscule hands together, deep in thought, and offered me an orange.
This year, I decided to go closer to home. I dropped in to meet my old friend Narendra Modi. “Wassup, Vallabhai?” I said. It’s an old joke between us.
Modiji gave me a warm hug. “It’s so good to see you after so long,” he said. “I mean, it’s good that it’s been so long since I last saw you. What brings you here?”
“An Uber,” I said. “Listen, I just dropped in to ask what your New Year Resolutions for 2017 are. What new things are you going to do?”
Modiji sat back, and a grim look came over his face. “I have made many resolutions,” he said. “First of all, I need to finish my war against black money. I thought demonetisation would do it, but my own damn IT department did a study that showed that only 6% of black money was kept in the form of cash. Even that was converted from old black money into new black money through new black markets. So phussss.”
“So what are you going to do then?”
“Well, I was told that a lot of black money is kept in the form of gold and real estate. So I will tackle them both. First, I will demonetise gold. I will declare that from now on, gold is aluminium. And boom, in one blow there will be no more gold in the country. Until I declare something else to be gold.”
“Er, this is not how it works,” I said. “You are not God. You can’t just pass a law and change the world like that.”
“You know nothing,” he said. “I am the Badshah of Jumla, and the Emperor of Spin. I am the King of Narrative, and I always win. Did you notice that I just rhymed? That’s what happens when you read Rhyme & Reason every week in the Times of India.”
“You can read?”
“No, a babu summarises it for me. Not Bajrangi. Anyway, so after gold, I will tackle real estate. I will demonetise real estate, Mitron, I mean, Amit. All land holdings of more than 100 square feet will no longer be legal. I will kill black money, I’m telling you.”
“No, you won’t, Modiji, you’ll devastate the poor people of this country all over again. How will you win elections like that?”
“I have a plan for that. All this land that will now belong to the government, I will redistribute it among the people of India. I will deposit one acre of land into every Jan Dhan account.”
“Modiji, oh my god, who has been advising you? You can’t deposit land into Jan Dhan bank accounts.”
“Yes, you can. Only, it won’t be actual physical land. It will be digital land. India needs to move beyond real estate into a landless economy. Everyone will be a homeowner.”
“But how will they withdraw this land?”
“We won’t let them withdraw it. Can you imagine the chaos if people start withdrawing land from Jan Dhan accounts? Amit, you also na, what all you say!”
I sighed, and offered him the orange I’d saved up for a year. “It is vegetarian, isn’t it?” he asked. “I mean, it’s not a steak or something?” To be fair it did look kind of weird.
“So what are your resolutions besides killing poor people, I mean, black money? Any plans of exercise, diet etc?”
“I have already started an exercise regime,” he said proudly. “Look!” He pointed outside the window, where three babus in safari suits were doing on-the-spot jogging. “I have delegated my exercising.”
“Er, ok,” I said. “And any plans to diet? You’re so full of yourself, you must surely be overweight.”
“I will go on a Vedic diet that made our ancients extremely healthy.”
“What do you mean, healthy?” I said. “They’re all dead.”
Modiji glared at me. “Amit,” he said, “your humour is terrible. I must save India from the likes of you. I am going to send all Amits to Pakistan.”
He threw the orange at me, and I lost consciousness. When I came to, I was on a flight to Islamabad. Amit Shah sat besides me, squirming in his middle seat.
“What the hell did you just do?” he barked at me. “Why couldn’t your name have been Arun, dammit?”
This is the script of a musical play starring Arnab Goswami and a few eminent world leaders. At the start of the play, Arnab is at the front of stage, while Donald Trump, Vladimir Putin and Narendra Modi stand behind. There’s also a chorus of 30 cows, spread out among the audience.
Arnab: Hello and welcome! I’m Arnab the magician. It’s time now for an awesome competition. The strong men of the world are here, all set to go. Who’s the most macho of them all, the nation wants to know.
30 cows: The nation wants to know! The nation wants to know!
Arnab: There will be all-out attack, and no surrender. Please welcome, from the US, our first contender.
Donald Trump strides out on the stage.
Trump: My name is Donald Trump, I name buildings for a living. If you troll me on Twitter, I’m most unforgiving. I love India, mitron, and cricket most of all – especially Rahul Dravid, because he’s such a wall. I eat Mexicans for breakfast, and Moslem Men for lunch. When it comes to immigrants, oh boy, I pack a punch. My ego is so yuge, the biggest in my class. Oh, before I forget, I’m gonna kick China’s ass.
Vladimir Putin now walks on.
Putin: My friend Donald, poor guy, he never understands that no macho man can ever have such tiny hands. While Donald’s been busy laying luxury resort foundations, I’ve been killing millions, and conquering nations. You must have seen that picture of me bareback on a horse. After the shoot was over, I ate it with no remorse. When my wife wanted a new purse, I wrestled a crocodile. In front of me, with good reason, Donald is servile. He’s a little man, with little hands, and a little something in his pants. I’ve been saying it all along, you can’t be macho with a little dong!
30 cows: A little dong! A little dong!
Trump: My hands are small, you see, only to compensate. It’s because the size of my dong is very very great. I have even appeared in a movie made by Playboy. I’ve always been the biggest bully with the biggest toy!
Arnab: Stop this nonsense, change the subject, I’m feeling nauseated. I’m a middle-aged Bong with a tiny dong, and my ego is deflated. That’s why I’m always so aggro, it’s a kind of compensation. But the TRPs are great, and hey, I do it for the nation. Anyway, Mr Putin, you cannot win this way. Is there perhaps something else that you would like to say?
Putin: I’m more macho than this fool Trump, that’s all I have to say. After all, for many years, the man’s been in my pay. I now rule two countries, I am such a stud. If you mess with me, my friend, I will drink your blood.
30 Cows: Drink your blood! Drink your blood!
Arnab: Mr Putin, I am impressed, you meet all the criteria. Now tell me something, did Netaji really die in Siberia? Or maybe, oh my goodness, could he still be alive? Anyway, you win the trophy, c’mon, gimme five.
Modi strides forward.
Modi: Wait a minute, Arnab, what’s the freakin’ hurry? I’ll give you a tight tamacha, your vision will be blurry. This Russian fool, he think he’s cool, well, here’s the truth that pinches: See my chest, it is the best, all of 56 inches!
30 cows: 56 inches! 56 inches!
Modi: Killing people, invading countries, all that’s so old school. (And oh, my friend, Donald, your hands are miniscule!) Massacres are child’s play, when you’re off your rocker. But can you reach into every pocket, and empty every locker? I’ve just pulled off a surgical strike against the poor of my nation. No more cash for them, unless they give the BJP a donation. We’re going cashless, I am matchless, Arnab, you silly clown: Give these men ghagra cholis, and give me the crown!
Arnab: Mr Modi, most impressive, but you’re still a pretender. Hold your horses, because you see, there is one more contender. Men, you see, beneath their bluster, can be quite weak. But here comes a fine lady who never turns the other cheek.
Mamata Banerjee enters the stage, wearing a sash that says, ‘Most Macho Person.’
Mamata: Hello boys, I’m pleased to meet you, ridiculous wimps. You behave like such gorillas, but you’re really tiny chimps. You boast about how strong you are, and about your brains. You’d be bawling on the floor if you ever went through period pains. Mama’s here now, and she’s gonna whack your asses with her magic broom. So get up, get out, and when you get home, tidy up your room. Trump, Mr Macho, eat a nacho. Putin, so potent, you look like a rodent. Modi, have you realized that you will be demonetised. Mama’s here!
30 cows: Mama! Mama! Mama! Where is my Pajama? Mama Mama Mama!
I am a great admirer of Mahatma Gandhi, but the man had some strange views. In Hind Swaraj, written shortly after he turned 40 in 1909, Gandhi tore into some of the symbols of the modern age. “Hospitals are institutions for propagating sin,” he wrote. “To study European medicine is to deepen our slavery.” He railed against the railways, saying “it is beyond dispute that they propagate evil.” He argued against lawyers, despite being one himself, saying they had “impoverished the country.” But here’s a thing to note: despite these personal views, he never once suggested that railways, hospitals and lawyers should be banned.
There is a notion being spread these days that is as absurd as the ideas above: it is the notion that there is something wrong with using cash, and that we should head towards being a cashless society. This is nonsense. A cashless society would be a disaster for India. Here’s why.
One, a fully cashless society would mean the end of privacy. There would be a digital trail of every action you take through your purchases and transfers. If you buy AIDS medication or a porn magazine or book a hotel room for a romantic alliance, this information can be accessed by the government – or any hacker with the requisite skills – and used against you. India has no privacy laws, and data protection is also a big worry – every week we hear stories of some some big hacking or the other, from the Congress in India to the Democratic Party in the US.
Two, a fully cashless society could mean the end of dissent. The government can use any data it gathers against you. (Even if you commit no crime, there is much you may be embarrassed by.) What’s more, they could make any opponent a pauper with one keystroke, freezing your bank account while they investigate alleged misdeeds. Just the fact that they have this power could have a chilling effect on dissent. Those in government now may well salivate over this, but tables turn fast, and when they are in opposition, would they want their opponents to have such power over them?
Three, a fully cashless society endangers freedom. Cash is empowerment: ask the young wife who saves spare cash from her alcoholic husband; or the old mother who stuffs spare notes under her mattress for years because it gives her a sense of autonomy. Indeed, in a misogynist country like India, cashlessness would hit women the hardest.
It is a myth that an advanced society must necessarily be cashless. In Germany, a country which knows the perils of authoritarianism, more than 80% of transactions are in cash, as citizens safeguard their privacy and freedom. Even in the USA, 45% of transactions are in cash. Note that Germany and the USA actually have the banking and technological infrastructure to enable cashlessness. In India, 600 million people have no bank account, and less than 20% of all Indians have a smartphone. Internet penetration is iffy, as is power. (By ‘power’, I mean electricity, not the government’s control over you.) Trying to make India cashless is akin to putting a bullock cart in an F1 race, and whipping the driver because he’s too slow.
It is true that many technologies imperil our privacy, like any app we download on our phones, for example. But those actions are voluntary, and we can choose to avoid them. That is the crux of the matter. My objection here is not to cashlessness per se, but to the coercion implicit in the currency swap of November 8 and its aftermath. A cashless society would only be good if we evolve towards it, not if we are forced into it.
At the moment, the common Indian is wary, for good reason. Digital payments involve transaction costs, are unreliable because of infrastructure issues, and hey, who would trust an Indian bank after what the RBI just did? The beneficiaries of forced cashlessness are not consumers, but vested interests like banks and payment companies. Indeed, this might even be the largest redistribution of wealth from poor to rich in the history of humanity.
The BJP itself continues to take cash donations and shift goalposts. When the demonetisation was announced, they said it was meant to attack black money and counterfeit currency. Once it became apparent that those reasons were nonsense, the government tried to change the narrative into one about a cashless society. Within a fortnight of that, they are already backtracking and saying they meant ‘less cash’ when they said ‘cashless’. The truth is this: demonetisation was a humanitarian disaster that is crippling our economy, and no matter how many times Modi and gang try to rationalise it, it cannot be done. One day, these men will stop trying. When they cannot justify any more, they will distract.
Last Tuesday, I went to watch ‘Dear Zindagi’ at a movie theatre near me. Before the film started, two old men came and sat in front of me. One was a short bald man with John Lennon glasses who looked like Ben Kingsley, and was wearing a hoodie over what appeared to be a dhoti. The other was a white-haired man with a flowing white beard and a flowing white robe. The bearded man nodded to me as he sat down, and then turned and said to his companion, “Mohan, I’m really looking forward to seeing Alia today. Such a good actress. Almost as if she was trained in Shantiniketan.”
“Yes, Robida,” said Mohan. “I can think of all kinds of non-violent acts she and I could do together.” Both men chuckled.
Just then, the national anthem started playing. I stood up, as did everyone else in the hall – except these two men.
It was the morning show and the hall was half empty, which I suppose was good, otherwise some macho self-righteous fool would have wanted to display his patriotism by asking these two men to stand up. But no one said anything. The anthem got over and the screen went blank. As I sat down, the bearded man turned around and caught my eye. I couldn’t help asking him, “Hey, I don’t mean to intrude, but why didn’t you guys stand for the anthem? Aren’t you proud of being Indian?”
Mohan turned around and gave me a kindly look through his Lennon glasses. “It was an act of civil disobedience,” he said. “And we were showing our love for this country, and our patriotism, by sitting.”
“I’m sorry?” I said. “The patriotic thing to do is to stand. We must honour our country.”
“And what does it mean to honour our country, young man? First of all, ask yourself, what is our country? Is India equal to the national anthem? Or the national flag? Or are there certain values that our country stands for that are more important than these symbols?”
I didn’t know what to say, so like any young person in these times, I said something random. “Freedom. We would never had the chance to stand for a national anthem before 1947. So I stand today to celebrate freedom.”
Mohan giggled, as if the gorgeous Alia had just landed up beside him in a slinky leotard and started tickling him. “Freedom! And how do you define freedom? We did not become a free country when the British left. Yes, we got political independence, but that isn’t freedom. Oh no, the freedom we fought for was the freedom of individuals to live their lives without oppression. Basically, to not be forced to do anything. The Supreme Court has made it compulsory to stand, which is why Robida and I kept sitting just now. There is nothing as unpatriotic in a free country as coercion.”
I gaped at him as he continued: “All we did in 1947 was replace a British empire with an Indian empire. We retained most of the laws in the archaic Indian Penal Code which the British had framed to subjugate us, including laws againstfree speech, homosexuality and even women’s rights. The state censors films, bans books, as if we are infants and not adults. I have a friend who started a university in British times without needing a license,” – he glanced at Robida – “and today, to start or run a business, we need to beg or bribe brown babus. Robida once told me that the British occupation of India was the ‘political symptom of our social disease’. That disease is now terminal.”
“What is that disease?” I asked.
Robida gave me a sad smile. “That disease is having the mentality of subjects. What does a democracy mean? It means that the people are the rulers, and the government is there to serve us. But our governments rule us instead of serving us, and we are happy to be ruled. If we are going to play ‘choose your ruler’, what is the point of being free?”
“Look around you,” said Mohan, “and think of all the different kinds of coercion in your life. These days, I am told, you even have to queue up to withdraw your own money. You are even being forced into a cashless society, which will be the end of freedom, for the government will control all your money and can shut you down anytime. That would have been such a wet dream for the British.”
“Ouch” said Robida, “here comes the part of the film I really hate.” The censor certificate flashed on the screen.
“Alia!” exclaimed Mohan, and turned around. The film began, and I lost myself in the anaesthetic comfort of everyday pleasures.
This is the 33rd installment of Lighthouse, my monthly column for BLink, a supplement of the Hindu Business Line.
November 2017. This is an excerpt from a screenplay of a musical play performed recently at the Kala Natak Academy, inaugurated by the prime minister Shri LK Advani. It stars Narendra Modi, Arun Jaitley and a chorus of 30 cows. While reading it, please sing it in your head with a grand dramatic voice.
[Silhouette of Narendra Modi sleeping on a bed. Loud snores emanate. At the foot of the bed, a minion sits. Loud footsteps are heard. Arun Jaitley enters the room.]
AJ: Modiji, Modiji!
Chorus of thirty cows: Modiji, Modiji!
Minion, thrusting his arms out towards Jaitley: Do not wake him, Do not shake him. He is sleeping, he spent all of last evening weeping, for this nation, the creation of a Hindu god in a Himalayan location. Do not wake him! Please forsake him!
AJ: He must be woken! My spirit is broken! Forget the nation, I’m out of ration. I have no cash. The supreme leader has obliterated my stash, it’s all trash. He could have let me know at least. Oh, the beast!
[There is a loud grunt, and Modi rises, and then gets out of bed. He is wearing only his Modi kurta.]
Modi: Oh here you are, my little one. I am lohpurush, you’re a brittle one. As for your notes, why don’t you… write on them? As for your notes… a blight on them! You have been rather slow, lately. Don’t you see the plan, Jaitley? Like me, you must learn to see far. What happened to my churidar?
30 Cows: Churidar! Churidar!
[Minion scurries off to fetch churidar.]
AJ: You say you want to attack black money. Are you being funny? This won’t hurt black money, truth be told. Hoarders keep their wealth in real estate and gold. In benaami investments and banks that are offshore. Why did you let go of the panama chors? The IT department found only 6 percent of black money is held in cash. So stop talking trash.
30 cows: Talking trash! Talking trash!
[A minion brings a churidar. Two burly bearded bare-chested men wearing harem pants appear and lift Modi by the armpits as he tries to peel on his churidar. Jaitley continues:]
AJ: More than 90% of the cash out there is white! Those who have earned it feel it is their right. Their right to spend as they please, to save as they please. It’s their money, not yours to seize! 600 million people have no bank accounts! 300 million have no ID, and this is tantamount to theft from the poor, into the pockets of the rich. A reverse Robin Hood displaying a kleptomanic itch.
[Modi has put on his churidar, and the burly bearded bare-chested men in harem pants disappear under the bed. Modi is tying the naada of the churidar. Jaitley continues:]
AJ: Modiji, I have to tell you, this will cost you votes. As much as 86% of the money in use was 500 and 1000 notes. Cash was used in more than 90% of all transactions. This has set off a series of destructive chain reactions. Farmers are screwed, workers are screwed, small businesses are shutting down. A recession is a best-case outcome, the worst is a meltdown. And after all this, you accuse me of not looking far. Modiji, how long does it take you to wear your churidar?
30 Cows: Churidar! Churidar!
Modi: Jaitley, you must understand, my churidar is tight. And you’ve missed the point completely, clearly you’re not bright. The poor do not matter: Let their blood splatter, let the economy shatter, ignore the presstitute chatter. I am the ruler of this nation, this is my domain, with a treasury to fill, an army of bhakts to maintain. This move is genius, such a lovely redistribution. The people’s wealth is now the government’s, a perfect solution. I don’t really care about a little collateral damage. If there are riots, well I’m sure, the army will manage. Besides, my PR is quite superlative. I happen to have complete control of the narrative!
30 Cows: Narrative! Narrative!
AJ: Modiji, you must remember, India is democratic. Right now the BJP feels much like the Titanic. We’re sinking sinking sinking! What on earth were you thinking? Optics has its limits, and no matter what you call it, the narrative won’t work when you hit people on their wallet. It’s clear that all this power has gone to your head. If we don’t get rid of you, this party will be dead!
[Rajnath and Sushma walk in, holding a chair on which Advani is sitting.]
Modi: What do you mean? What is this crap? I am the Supreme Leader. I’ll declare an Emergency, and put you all in a feeder. Forget the aam junta, they are all kambakhts. I’ll drown out their voices through my sweatshop of trolling bhakts. The people are an instrument, a way to feed my pride. I don’t give a damn how many poor folks have died.
Sushma: And that is why, Modiji, you have got to leave. Politicians should serve the people, not rule them till they grieve. You made a big mistake demonetising those notes. Now we have to dethrone you to somehow save our votes.
[The burly bearded bare-chested men in harem pants emerge from under the bed, put a bag around Modi’s head that says ‘Garbage Disposal’ and carry him off. Rajnath and Sushma lower the chair, and Jaitley helps Advani on to the bed.]
Advani: I’m so glad to be on top, this is my rightful place. Because of that fool Modi, I am now a moderate face! I saved his ass once, and that led to my downfall. The moral of the story: The higher you rise, the harder you fall.
So I put up the tweet above yesterday to illustrate a point I’ve had to make repeatedly about the demonetisation: When the humanitarian costs of a particular move are so huge, it is pointless to even discuss the economic impact. I often quip, if Modi killed the poorer half of the country, some ‘respectable’ economist in his pay would publish a sober, reasoned argument that hey, India’s GDP per capita just went up, this is good for the economy. (And they wouldn’t disclose their affiliation while doing so, but leave that aside for the moment.)
Similarly, if Modi was just to announce that all money in everyone’s bank account was to be confiscated by the government, no doubt certain economists would pop up to point out the long-term economic benefit of this: the fiscal deficit wiped out, more money available for infrastructure spending, and of course, an end to black money. But such a rationale would not just be besides the point, it would be immoral—for obvious reasons.
The thought experiments above are not very far from what is happening. The legitimately earned wealth of tens of millions of people has been eroded, businesses have shut down, the economy’s come to a standstill and the death toll is rising every day. It’s heartbreaking—and yet, we have sober economic arguments going this way or that way.
Frankly, I believe that a recession is inevitable, and that the economic costs of this will far outweigh any economic benefits, as is always the case with such social engineering. But that argument of mine is besides the point, because the moral costs make it moot. Lives are being lost, livelihoods are being destroyed, and taking a neutral stance, or making ‘balanced’ arguments, is, in my view, is as odious as actively supporting the butchery that is underway.
In 1958, Chairman Mao ordered that that all sparrows over China should be put to death. It was hailed as a necessary step by a strong leader. Farmers were suffering because sparrows tended to eat their grain seeds. For the good of the nation, they had to be protected. Thus began The Great Sparrow Campaign. A countless number of sparrows were indeed wiped out—but there were unintended consequences.
Sparrows ate locusts, and once the balance in the ecosystem changed, locusts proliferated and destroyed China’s crops. There was famine, hunger, starvation: no less than 45 million people died in the three years following Mao’s orders. At the start, Mao exhorted them to bear with the inconvenience. But then the pain piled up.
Mao’s infamous Great Leap Forward included plenty of edicts besides the death warrant to sparrows. They all stemmed from the delusion that the leader of a country, as if he was God, could redesign an entire society to conform to a master plan. The 20th century is full of cautionary tales that warn against such delusion, such as the communism of Mao and Stalin, and the fascism of Hitler. Yet, we do not learn.
Narendra Modi’s demonetisation of old 1000 and 500 rupee notes is one such monstrous folly. It is a blunder in every imaginable way. It doesn’t achieve its intended purpose. And its unintended consequences could devastate the lives of the poor, and cripple our economy.
Modi claims that this move is an attack against black money and corruption. This is not true, and here are four reasons why. One, as per a recent estimate, only 6% of black money is kept in the form of cash. Two, new 2000 and 500 rupee notes are on the way, and a black market for conversion from old to new is already thriving. Three, as various economists have pointed out, this attacks the stock and not the flow of black money. To strike at black money and corruption, you need to strike at their root causes.
Corruption and black money are a consequence of big government, of one set of individuals having discretionary powers over the actions of others. If Modi was serious about tackling black money, he’d bring about institutional changes that would take us towards the minimum government he had promised in his 2014 campaign. Instead, government keeps getting bigger, controlling more and more of our lives. More government = more corruption.
The fourth and most compelling reason is this: these aren’t really high-denomination notes. Modi has probably not bought anything from a store in 15 years, so he imagines that the poor do not use these notes. Well, consider that the last time a demonetisation took place in 1978, a 1000 rupee note, in terms of purchasing power, could buy goods worth Rs 12,000 today. Rich people did hoard their black money with it, but the poor did not use them. (The move failed nevertheless.)
A Rs 500 note today, by contrast, is the equivalent of a Rs 50 note in 1978. These notes constitute 85% of the money in circulation, as opposed to 0.6 in 1978. Over 90% of the transactions in India are cash transactions, and more than 90% of the cash in India is not black money. This is everyday currency.
This is why the consequences of Modi’s move are so severe. According to an RBI note from March this year—and contrary to the government’s PR—only 53% of Indians have bank accounts. How do you think the other 600 million store their savings? Over 300 million people have no government ID, and there are crores of people stuck without a way to convert their hard-earned cash. Even if they did have accounts, there are reports that the government will take six months to print enough replacement notes. Every day the death toll goes up, but rural suffering and anger cannot be captured by bare numbers.
Apart from all the individual suffering, our economy is being eviscerated. Cash is integral to most of the economy. Farmers are being unable to sell perishable produce, to buy grains for the new harvest or to pay labourers. Transporters are unable to transport goods across distances. Commerce has shut down in many places, with small businesses going bust. In some places, the barter system is back, as if we’ve gone centuries back in time.
This is not an issue of implementation. Even if implementation was perfect, this would be a historic blunder because social engineering never works, and carries moral costs because of its unintended consequences. When people have to queue up to withdraw their own money, on which limits are placed, it is an attack on property rights that is more out of the Communist handbook than any right-wing philosophy. Indeed, Burkean conservatives and Hayekian libertarians alike would be aghast at Modi’s actions, as he propels India towards the Soviet Union so admired by Nehru, with its state oppression, artificial shortages and infamous queues. But Chairman Mao would approve.
We live in an age of grand delusions, so it is appropriate to invoke the name of Muhammad bin Tughlaq. When Narendra Modi recently announced the demonetisation of 500 and 1000 rupee notes, I instantly thought of Tughlaq, as did many others, if Twitter memes were anything to go by. Tughlaq was a 14th century sultan of Delhi who overestimated the extent of his knowledge and power, and committed a number of legendary blunders, most famously shifting the capital of his kingdom from Delhi to Daulatabad. Modi’s recent edict also involves daulat, and, indeed, a shifting of capital.
To begin with, one must give credit where it is due. Modi is a brave man. Firstly, prime ministers, once in power, are tempted to not do anything which can carry unpredictable adverse consequences. Just play it safe and be a gradualist, one step at a time. A move like this, with all its unintended consequences, requires courage. Secondly, this specific move harms the small traders who operate in a cash economy and have been the BJPs backbone for decades. Modi has taken the risk of alienating them.
That said, courage does not always go hand in hand with wisdom, and this move is a mistake at multiple levels. It is also an illustration of a mistaken mindset on multiple levels. Here are four things I’d like you to consider.
One, think about the stated intent of the move: to eliminate black money and reduce corruption. While it is true that it will bring much existing black money into the white economy, it is merely a reboot. New 500 rupee notes will soon be introduced, as will 2000 rupee notes, and after a month or two of adjustment, life will go back to normal. Also, a vibrant black market has already sprung up offering to exchange old notes for new notes at a fee. Guess where the profits will go.
The larger point, though, is that most truly rich people don’t keep their wealth in the form of cash, but in the form of real estate, gold, deposits in foreign bank accounts and other benaami investments. They will be largely unhurt. This brings me to my next point.
Two, it is the poor who will be hurt the most by this. A large chunk of India’s economy, especially at the bottom of the ladder, is a cash economy. Small traders and businessmen deal in cash for convenience, and pay their workers that way. I pay my domestic help in cash, and her savings are entirely in 500 and 1000 rupee notes. Yes, she can go to a bank and convert them, but that requires an ID, and not all poor people have IDs. Also, there is the significant transaction cost of doing so, as well as the opportunity cost of the time spent. (In case you wonder what kind of poor people have plenty of cash but no ID, google your way to an excellent tweet storm by Twitter user @AmbaAzaad that outlines the kinds of poor folk who are likely to be hurt by these.)
Three, let’s go back to the larger issue of corruption and black money. What is the root cause of corruption? As Lord Acton famously said, power corrupts. The more power you give one set of individuals over another, the more corruption you will have. In my classical liberal worldview, the only legitimate function of the state is to protect the rights of its people. However, our government is orders of magnitude larger than it ought to be. The people who run the country, ostensibly and comically called public servants, are like rulers, and we, their subjects to be brutally exploited. To end corruption, you need to vastly reduce the power that government gives one set of people over another people.
And what is black money? When a government is a thousand times larger than it should be, a rent-seeking parasitic beast that sucks the lifeblood of the people without creating any value, it is natural to be disdainful. The so-called cash economy at the bottom of the pyramid is incredibly productive, for people can only create value for themselves by creating value for others. Unlike government. Of course, much of this cash isn’t even black money per se, and even when it is, it is surely better off being put to productive use than being sucked away as hafta by the one legal mafia that rules us, and their cronies.
I am not saying that we should not pay taxes: it is the duty of every citizen to do so. But consider that if the government took only the taxes it needed to serve us, instead of to rule and exploit us, this mindset of evasion would not exist. And here’s the irony: Modi knows this! One of his campaign slogans in 2014 was ‘Minimum Government, Maximum Governance’, and he unleashed much rhetoric, correctly so, about how Jawaharlal Nehru and Indira Gandhi’s statist policies had impoverished our country. And yet, under his prime ministership, the government has only grown, and we pay higher taxes than we did before. This is because, at its heart, his political philosophy is the same as Nehru’s and Indira’s, which brings me to my next point.
Four, Modi, like Nehru and Indira, is a top-down thinker who believes that an economy and a country can be run from above, as if the government is a proxy for god. This is, in the words of the great Austrian economist Friedrich Hayek, a fatal conceit. Hayek also wrote at length about the limits of knowledge, which should be a lesson in humility for all politicians. The unintended consequences of Modi’s edict involve many unknown unknowns, and I feel that he has not been respectful enough of the poor people potentially at the receiving end. Will they be respectful of him in 2019?
I am a hawk when it comes to India-Pakistan relations. We have been suffering from cross-border terrorism for decades, and need to take a hard line towards our enemies. Every day our soldiers risk their lives for the country, and we must honour their service. For this reason, it infuriates me when people within India commit acts against the national interest. Expelling Pakistani artists from Bollywood is one such anti-national act.
To win a war, we must know our enemy. Here, it is both correct and incorrect to say that Pakistan is that enemy. Like India, Pakistan is many things, and contains multitudes. For the sake of analysis, let’s break it down and look at three different Pakistans, and consider, as economists would, their interests and incentives. (One can drill down deeper and say that there are as many Pakistans as there are Pakistanis, but let’s keep it simple.)
One, there is the Pakistan military establishment, which nurtures various militant groups. The military will always be hostile to us, because the conflict with India is the source of its power and influence. Two, there is Pakistan’s political establishment. The only thing politicians care about is getting to power and staying there. In a democracy, politicians depend on the people for their power, but Pakistan is no more a true democracy than General Raheel Sharif is my aunt. The political class in Pakistan has always been at the mercy of the military establishment.
Finally, there is Pakistan’s civil society. Their interests are the interests of people everywhere, including in India. They want to be prosperous and happy, and to enjoy the good life. Conflict is not in their interest: war of any kind is a negative-sum game, and everyone is a loser. But Pakistan’s civil society is weak compared to the military. Their interests are opposed to each other, and Pakistan’s economy is in such a dire state because their military and political establishments have always kept their own interests ahead of that of the people.
The power of the military and civil society are inversely proportional to each other, because influence within a country is a zero-sum game. The stronger the military, the weaker civil society—and vice versa. Since the military establishment drives the conflict with India, it is in our interests to weaken them. One path to this, it follows, is by strengthening Pakistan’s civil society. How do we go about it?
One way is trade. For civil society to be strong, it helps to be prosperous. (This is one reason why military dictatorships are more likely in poor countries.) Trade is a win-win game, so by keeping trade lines open with Pakistan, we benefit ourselves, and empower Pakistan’s people. The greater their dependencies on trade, the fewer their incentives for conflict.
Another way of changing these incentives is by cultural exchange. There is much rhetoric and brainwashing, on both sides of the border, that demonizes the other side. But the more cultural exposure Indians and Pakistanis have to each other, the more we realise how much we have in common, and the less we get taken in by the rhetoric. If you nurture the constituency for peace in Pakistan, you reduce the constituency of hate. And as the people shift, so do the incentives of the politicians. Banning Pakistani actors from working in Bollywood, for whatever tokenistic reasons, raises the temperature and helps their military establishment. Why would you help the enemy?
None of this is new thinking in foreign policy circles. In terms of trade, India unilaterally gave Most Favoured Nation (MFN) status to Pakistan in 1996. And while I am usually critical of Narendra Modi, his handling of the post-Uri fallout has been pitch-perfect. In his speech at Kozhikode, he took a hard line when he spoke of avenging the deaths of our soldiers, but also chose to pointedly address the people of Pakistan directly. “Ask your leaders,” he said, “both our countries got freedom together, so why does India export software and your country export terrorists?” He added, “That day is not far off when the people of Pakistan will get in the fray to fight against their leaders.”
This is clever on Modi’s part, but chest-thumping pseudo-nationalists, including many in his own party, do not understand these nuances. This is something that happens often with Modi. He talks the high road, but his minions walk the low road. (He often talked the low road as well while campaigning, but let that be for now.) I’ve often wondered why he allows this. Is he trying to be all things to all people? Is it some good-cop-bad-cop strategy? Whatever be his strategy on Pakistan, this too is a matter he must resolve.
At one point in the presidential debate earlier this week, Hillary Clinton said, “Mental health is one of the biggest concerns.” She was not referring to her opponent, but those words would have been apt in that context. Mental health is indeed a huge concern when it comes to Donald Trump. No candidate in US history has been so unhinged. Not only is Trump incapable of deep thought, he appears incapable of rational thought. His rare coherent sentences seem accidental, like the broken clock that is right twice a day. Even his hairstyle seems to reflect that the neurons below are firing in unusual ways. Indeed, his speech patterns are what you would expect from a malfunctioning AI bot. I’m not sure Trump would pass the Turing test.
Why, then, are so many Americans supporting him?
One possible reason proposed by the columnist Glenn Reynolds, which I have touched upon in an earlier edition of Lighthouse, is that a large number of Americans are closet racists, bigots, misogynists and nativists, but kept their preferences hidden because they seemed unacceptable in polite society. (Preference Falsification.) Social media allowed them to discover others like themselves, find enormous amounts of data that would feed their confirmation biases, and build progressively larger echo chambers. At the appropriate tipping point, along came Trump, articulating these basic instincts and bringing them into the mainstream. And boom, you have the Trump wave, in what social scientists would call a Preference Cascade.
I think there is much truth to this. I would also like to propose another reason: we are a species that relies on stories for explanations of the world around us, and Trump tells simple stories.
The world is complex and mysterious, and we make sense of it through stories. All our myths and religions evolved out of the need to find stories that would a) explain the world; and b) comfort ourselves. We have modified these stories as new evidence has popped up (eg, science), but have also stuck to older stories (eg, religion) for all kinds of reasons, from custom to the force of inertia to their beguiling simplicity. This last point is important. The world is so complex that simple stories appeal to us precisely because they stop us from feeling overwhelmed and helpless. Where did that tree come from? God put it there. Why was there an earthquake? God was punishing us for our sins. And so on.
Trump sells simple stories. Imagine a middle-aged white man in small-town America who has seen jobs disappear and incomes stagnate for years. If Hillary Clinton or Jeb Bush or Paul Ryan explain to him why he is in this state, their complex explanation of a complex phenomenon will typically contain a mix of jargon, empty phrases and tired bromides, and might even be incomprehensible. Trump, on the other hand, will keep it simple. “You are losing your jobs because our government ships them overseas” is his anti-trade spiel. “You are losing your jobs because immigrants are coming in here and taking them away” is his anti-immigration spiel. Both of these explanations are wrong, but whether they are true or not doesn’t matter. What matters is that they are simple.
Once people buy into these stories, they are so invested in them that they are not going to accept deeper explanations. And they don’t trust politicians anyway, regarding them, with some justification, as smooth-talking, power-hungry, sociopathic slaves to special interests. Trump made a fool of himself in this recent debate, but he did worse in many of his earlier debates during the Republican primaries, and that didn’t hurt him. His followers judge him on different parameters than pundits and conventional politicians do. Substance is irrelevent, and facts don’t matter. Stories matter.
I don’t believe Trump tells these simple stories because he is a master politician. I think he tells them because he is a simpleton. His ideas are mostly dangerous and wrong, and if there is any first principle he believes in, it is an infallible belief in his own excellence. He has already destroyed his party, and he will damage his country if he comes to power. Will he be president?
I have a pessimistic view and an optimistic view. My pessimistic view is that polls are underestimating his support, just as polls underestimated the Brexit vote, because of preference falsification. So he will do better than his polls indicate. My optimistic view is that demographics are against him, and he has antagonised many black, hispanic and female voters, whose numbers are too large for him to win. He won in the multiway Republican primaries because the floor of his support was high; he will lose in the November election because its ceiling is too low. That’s the story I’m telling myself, because much as I find Hillary Clinton deplorable, I’d prefer a bad president to a mad president.
There are few things as satisfying as being macho on social media, and this is quite the season for it. After the terrorist attack in Uri, every Righteous Internet Patriot (RIP) wants our government to teach Pakistan a lesson by going to war. I have two things to say about this: One, it is the worst of all available solutions; Two, it is the best possible stance to take. Let us unravel that.
War is a solution that would be worse than the problem. Let’s look at this conflict using the metric of human lives. A rational aim of any solution would be to minimise the loss of Indian lives. What is the cost we currently bear through Pakistan-sponsored terrorism?
In a reply to an RTI petition this July, the government of India stated that 707 Indian lives have been lost to terrorism since 2005. Over 11 years, that comes to 64 deaths a year. If the status quo is maintained, with the usual empty diplomatic posturings, this figure should not rise too drastically. But what if, in an exasperated search for closure, we go to war?
A modern war with modern weaponry could cost us tens of thousands of lives, and maybe millions if it turns nuclear. (This does not take into account downstream effects on survivors, the economy, the environment and so on, all of which would blight the future.) Whatever the precise number, the cost of war would be orders of magnitude worse than even the long-term cost of the status quo. For any rational person, therefore, war is off the table.
This creates an obvious problem. If the rational course for India is to avoid war no matter what happens, then Pakistan can keep escalating with impunity. They could kill hundreds of Indians a year, or even thousands, confident in the belief that because we are rational, because we can do the math, we will be restrained. So what are we to do?
The field of game theory contains an insight to this dynamic. The game most relevant to two nuclear powers is called Chicken. Here’s an illustration: two cars are racing towards each other, and a crash is imminent. (Mutually Assured Destruction.) The driver who loses his nerve and swerves first loses the game. Now, every rational driver will swerve before he crashes into the other guy. So a surefire way to win the game is to convince the other guy that you are irrational, prepared to die, and will not concede. (One way of doing this is by breaking the steering wheel and throwing it away.) Your opponent, if he is rational, must swerve.
Pakistan has played this game brilliantly with a so-far rational India. Their venal generals and mad mullahs, the world believes, are capable of going nuclear at any provocation. India’s rationality and restraint is applauded in diplomatic circles—but we’re being pwned in the geopolitical sphere by Pakistan.
One way out is for India to portray itself as equally irrational, and show a willingness to go nuclear—even if we actually remain rational and intend to avoid war. Richard Nixon did this during the Cold War in 1969, when he ordered the US army to full war-readiness, and sent 18 B-52s loaded with thermonuclear weapons towards the Soviet border, where they flew around in pretty oval patterns for three days. The Soviets, who weren’t exactly ballerinas themselves, were spooked. Nixon called this ‘the Madman Theory’.
Recent Indian prime ministers would have had a tough time portraying themselves as mad men. (Imagine Manmohan Singh letting off an evil laugh.) But Narendra Modi seemed to be suited for the role – until he became PM. Ironically, the rhetorical belligerance that Modi articulated towards Pakistan while on the campaign trail has been replaced by a subdued, reasonable demeanour on the world stage.
Modi cares deeply about how the world views him, and wants to be seen as a mature statesman. Sadly, he has succeeded. This is reassuring to those of us who fear excessive military adventurism—I live in Mumbai and would be bummed if Pakistan nuked my beloved city—but is counter-productive when it comes to dealing with Pakistan. If Pakistan’s generals saw Modi and his minions as unhinged reactionaries driven by bigotry, Islamophobia and a virulent nationalism, they might back off. But regardless of how he is regarded in JNU, his image on the global stage is exemplary. On all his foreign visits, he comes across as an avuncular dove, a personable connoisseur of the photo-op.
Our conflict with Pakistan will not be ended by diplomacy. China supports Pakistan, America needs Pakistan for Afghanistan reasons, and all diplomatic manouvering on this subject is just theatre. To get Pakistan to stop poking us, we have to play the game. Modi has so far been a master of optics – and playing Chicken with Pakistan is his greatest challenge yet.