A level Economics: Can India Inc extricate itself from China?

The Economist

China and India are not on the friendliest of terms. In 2020 their soldiers clashed along their disputed border in the deadliest confrontation between the two since 1967—then clashed again in 2021 and 2022. That has made trade between the Asian giants a tense affair. Tense but, especially for India, still indispensable. Indian consumers rely on cheap Chinese goods, and Indian companies rely on cheap Chinese inputs, particularly in industries of the future. Whereas India sells China the products of the old economy—crustaceans, cotton, granite, diamonds, petrol—China sends India memory chips, integrated circuits and pharmaceutical ingredients. As a result, trade is becoming ever more lopsided. Of the $117bn in goods that flowed between the two countries in 2022, 87% came from China (see chart).

India’s prime minister, Narendra Modi, wants to reduce this Sino-dependence. One reason is strategic—relying on a mercurial adversary for critical imports carries risks. Another is commercial—Mr Modi is trying to replicate China’s nationalistic, export-oriented growth model, which means seizing some business from China. In recent months his government’s efforts to decouple parts of the Indian economy from its larger neighbour’s have intensified. On August 3rd India announced new licensing restrictions for imported laptops and personal computers—devices that come primarily from China. A week later it was reported that similar measures were being considered for cameras and printers.

Officially, India is open to Chinese business, as long as this conforms with Indian laws. In practice, India’s government uses a number of tools to make Chinese firms’ life in India difficult or impossible. The bluntest of these is outright prohibitions on Chinese products, often on grounds related to national security. In the aftermath of the border hostilities in 2020, for example, the government banned 118 Chinese apps, including TikTok (a short-video sensation), WeChat (a super-app), Shein (a fast-fashion retailer) and just about any other service that captured data about Indian users. Hundreds more apps were banned for similar reasons throughout 2022 and this year. Makers of telecoms gear, such as Huawei and zte, have received the same treatment, out of fear that their hardware could let Chinese spooks eavesdrop on Indian citizens.

Tariffs are another popular tactic. In 2018, in an effort to reverse the demise of Indian mobile-phone assembly at the hands of Chinese rivals, the government imposed a 20% levy on imported devices. In 2020 it tripled tariffs on toy imports, most of which come from China, to 60% then, at the start of this year, raised them to 70%. India’s toy imports have since declined by three-quarters.

Sometimes the Indian government eschews official actions such as bans and tariffs in favour of more subtle ones. A common tactic is to introduce bureaucratic friction. India’s red tape makes it easy for officials to find fault with disfavoured businesses. Non-compliance with tax rules, so impenetrable that it is almost impossible to abide by them all, are a favourite accusation. Two smartphone makers, Xiaomi and bbk Electronics (which owns three popular brands, Oppo/OnePlus, Realme and Vivo), are under investigation for allegedly shortchanging the Indian taxman a combined $1.1bn. On August 2nd news outlets cited anonymous government officials saying that the Indian arm of byd, a Chinese carmaker, was under investigation over allegations that it paid $9m less than it owed in tariffs for parts imported from abroad. mg Motor, a subsidiary of saic, another Chinese car firm, faces investment restrictions and a tax probe.

A convoluted licensing regime gives Indian authorities more ways to stymie Chinese business. In April 2020 India declared that investments from countries sharing a border with it must receive special approvals. No specific neighbour was named but the target was clearly China. Since then India has approved less than a quarter of the 435 applications for foreign direct investment from the country. According to Business Today, a local outlet, only three received the thumbs-up in India’s last fiscal year, which ended in March. Last month reports surfaced that a proposed joint venture between byd and Megha Engineering, an Indian industrial firm, to build electric vehicles and batteries failed to win approval over security reasons.

Luxshare, a big Chinese manufacturer of devices for, among others, Apple, has yet to open a factory in Tamil Nadu, despite signing an agreement with the state in 2021. The reason for the delay is believed to be an unspoken blanket ban from the central government in Delhi on new facilities owned by Chinese companies. In early August the often slow-moving Indian parliament whisked through a new law easing the approval process for new lithium mines after a potentially large deposit of the metal, used in batteries, was unearthed earlier this year. Miners are welcome to submit applications, but Chinese bidders are expected to be viewed unfavourably.

In parallel to its blocking efforts, India is using policy to dislodge China as a leader in various markets. India’s $33bn programme of “production-linked incentives” (cash payments tied to sales, investment and output) has identified 14 areas of interest, many of which are currently dominated by Chinese companies.

One example is pharmaceutical ingredients, which Indian drugmakers have for years mostly procured from China. In February the Indian government started doling out handouts worth $2bn over six years to companies that agree to manufacture 41 of these substances domestically. Big pharmaceutical firms such as Aurobindo, Biocon, Dr Reddy’s and Strides are participating. Another is electronics. Contract manufacturers of Apple’s iPhones, such as Foxconn and Pegatron of Taiwan and Tata, an Indian conglomerate, are allowed to purchase Chinese-made components for assembly in India provided they make efforts to nurture local suppliers, too. A similar arrangement has apparently been offered to Tesla, which is looking for new locations to make its electric cars.

Some Chinese firms, tired of jumping through all these hoops, are calling it quits. In July 2022, after two years of efforts that included a promise to invest $1bn in India, Great Wall Motors closed its Indian carmaking operation, unable to secure local approvals. Others are trying to adapt. Xiaomi has said it will localise all its production and expand exports from India which, so far, go only to neighbouring countries, to Western markets. Shein will re-enter the Indian market through a joint venture with Reliance, India’s most valuable listed company, renowned for its ability to navigate Indian bureaucracy and politics. zte is reportedly attempting to arrange a licensing deal with a domestic manufacturer to make its networking equipment. So far it has found no takers. Given India’s growing suspicions of China, it may be a while before it does.

Ofsted Rating Grades and The Consequences For Teaching

 Lucy Kellaway in The FT 

Last Monday a primary school headteacher took to Twitter and declared that Ofsted inspectors, who were due the next day, would not be let in. She invited teachers everywhere to join a protest in solidarity with Ruth Perry, the primary head who recently took her own life — her family attribute it to an Ofsted inspection that downgraded her school from outstanding to inadequate. 

Though the mass protest was called off and the inspectors duly admitted, the verdict online was damning and unanimous. End inspections! End Ofsted! — everything teachers are angry about seems to be crystallised in the tragic death. 

That morning I was in the cinema at a local shopping centre with my A-level students for a spot of business studies revision. On the screen was a question. Which was the odd one out: a) salary b) working conditions c) supervision or d) meaningful work? 

Most went for meaningful work, recognising that the others were “hygiene factors”, identified by the American psychologist Frederick Herzberg as basic requirements which, if inadequate, demotivate us and make us want to quit. Meaningful work, by contrast, is a motivator — it makes us try harder. 

So here we were: my colleague and I surrounded by teenagers in leggings and hoodies on a happy, productive day out, living proof of that motivator. Like every teacher I’ve ever met, we enjoy being with our charges (most of them, most of the time). We think helping them learn is as meaningful as a job can be. 

Yet the profession is in a sorry state. According to new figures from the NFER research body, recruitment is at least 20 per cent below target in many subjects, with vacancies running at twice pre-Covid levels. Worse, almost half of existing teachers are planning an exit within five years. 

The hygiene factors are all worsening simultaneously. Cuts in real pay and impossible workloads have brought teachers out on strike. Budget cuts in other services have left vulnerable children all but unsupported, turning us into de facto social workers. This inspection crisis seems like the last straw. 

On joining the profession I was taught to fear Ofsted. In previous schools I filled in endless curriculum spreadsheets in precisely the way the inspectorate is believed to favour — no opposition brooked — and watched supervisors trudge home every weekend to complete “Ofsted-ready” folders. I’ve lived through “mocksteds” — expensive, stressful and even more vicious than the real thing — designed to reassure stressed-out school leaders that they are prepared. 

In my current school, that call came not so long ago: Ofsted inspectors were on their way. At lunchtime one of my sixth-formers asked why her teachers were acting so oddly. Because we feel our jobs are on the line, I wanted to say. Because if we get the same treatment as Ms Perry, it will be a disaster for the school. Because we feel judged, on the back foot and exhausted — but are trying our best. 

I daresay I was acting pretty peculiar as the inspector stationed himself at the back of my class and started taking notes in an unnervingly deadpan fashion. In the end, it was without mishap. The process felt professional, the questions reasonable and the feedback fair. With hindsight, it strikes me the fear and loathing stems less from the inspection itself, than from the nonsense of summarising a complex school in a single grade — with so much at stake. 

Creating intense competition between schools may (or may not) have raised standards for students. But in many schools it has made life grim for teachers, especially senior ones. Schools bust a gut to have the best Ofsted grades and top the league tables, but those that make it can be unbearable places to work: hierarchical, workaholic factories. 

In these feted schools, where students get dazzling exam results, the teachers who quit are often not the worst, but the best. The more they are promoted, the more they are in the line of fire. A brilliant young teacher I trained with said recently that she envied me — not because of my inimitable teaching style, but because of my steadfast position on the bottom rung of the career ladder. I’m too junior to be much affected by Ofsted or bear responsibility for things outside my control. I am not entirely dependent on my teaching salary so can afford to resist the pay rise that comes with promotion. I’m largely immune from the hygiene factors — and left free to enjoy teaching average rate of return to my Year 11s. 

Changing hygiene factors is hard. The government is not fond of finding extra money. Reducing workload isn’t easy either. But sweeping away the Ofsted grades would allow teachers to remind themselves why they joined the profession: for the sake of their wonderful (and maddening) students, not a badge that says “outstanding”.

We won't trigger Article 50 until after 2017 – and that means Brexit may never happen at all

Dennis MacShane in The Independent


It is now eight weeks since we voted to leave the EU but it may be at least eight years before the UK is fully and totally out of Europe– if we finally leave at all. After a post-truth Brexit campaign, now the era of truth is dawning in Downing Street and they are discovering there was never any work completed by the Brexit team on what the costs of leaving the EU would be and how precisely it would be done.

The new Prime Minister, Theresa May, who is coldly pragmatic, has given the three Musketeers of Brexit – Boris Johnson, Liam Fox and David Davis – the task of getting us out of Europe as painlessly and quickly as possible. They are finding out that their two decades of demagogic condemnation of the EU and all its works is no preparation at all for turning Brexit into reality. Instead, there is the surreal sight of Liam Fox writing a letter saying that half the Foreign Office staff and responsibilities should be placed under his control. Ever since it was set up after Britain lost America at the end of the 18th century, the Foreign Office has been seeing off raids on its territory like these.

Having been told that leaving the EU would reduce bureaucracy and costs, there is the bizarre sight of Whitehall recruiters hiring lawyers expert in EU law on £5,000 a day and consultants from KPMG and Ernst and Young on £1,000 a day. The extra cost of negotiating Brexit is reckoned to cost £5bn – which taxpayers will have to pay for.

Fox has a name for unforced errors, as his abrupt dismissal as Defence Secretary in 2011 showed. He is finding out from the US Trade Secretary, and every other minister responsible for trade around the world, that no-one will talk to the UK about trade deals until we are completely outside the EU.

For years the Europhobes told us that the world would be queuing up to sign trade deals with Britain once we were out of Europe. Now Fox is discovering that it is illegal under World Trade Organisation rules to start negotiations with the UK as the EU has sole and exclusive responsibility for speaking for its member states on major trade matters.

Of course countries can negotiate small market openings. Spain has spent eight years negotiating a deal to export plums to China. The UK has spent just as long trying to get India to lift its 150 per cent tariff on Scotch whisky – so far, without success. The Indians are willing to let Scotch be imported duty-free but in exchange they want visa-free access for Indians to come to the UK. Over to Dr Fox to solve that conundrum.

When she was Home Secretary, Theresa May tried to abolish visa-free travel arrangements with Brazil, but was slapped down by David Cameron who judged the good relations with Brazil was worth the risk of some over-staying by Brazilians who came to London and then disappeared into the black labour market. The same dilemma faces UK exporters who have been told by all EU leaders, not just the wicked Eurocrats, but nationally elected leaders in Germany and France that there is no question of having access to the EU Single Market for 500 million middle class consumers without allowing those consumers the right to travel, live and work – the same rights that more than a million Brits in Spain enjoy too.

No-one in Europe wants to ”punish” Britain but no EU leader dare deny his or her own citizens the rights that Brits take for granted in order to give the UK a special privileged status.

The Mayor of London, Sadiq Khan, has sensibly said that there is no point in beginning the initial withdrawal negotiations – the so-called 'Article 50 procedure' – until there is clarity on who will be in charge of Europe. In 2017 there are elections in France likely to produce a new president next May and right-wing challengers have called for the relocation of the Calais frontier to UK territory. Angela Merkel will have done 12 years as German Chancellor at the time of the federal elections in September 2017 and may decide to stand down rather than go on and on and on to the kind of unhappy career end of Helmut Kohl.

But Khan, a shrewd EU watcher, is right to say that inserting a rushed UK withdrawal into a crucial election year in both France and Germany is not smart.

He also has to speak for London and the $120tn volume of business in trading and clearing euros, which only takes place in London because we are in the EU. London is home to 350,000 French citizens alone, as well as hundreds of thousands other European professionals, and removing their right to live and work freely in the UK will send a disastrous signal around the world that London is no longer Europe’s hub for financial transactions.

In any event, Article 50 negotiations are not even foreplay to the main event. They only cover how to share out between Brussels and London the responsibility for paying the pensions of Brits who work for the EU and will now be dismissed, as well as existing retirees like Stanley Johnson, father of Brexiteer Boris.

Once Article 50 talks are over, Jean-Claude Piris, the EU’s former chief lawyer, reckons it will take at least eight years to write out any kind of satisfactory UK-EU deal on trade access and the rights of British citizens living in Europe. Pascal Lamy, the former WTO director general, also dismisses the idea that a final EU-UK trade deal is achieveable without years of negotiation. It has taken the EU and Canada eight years to agree a relatively modest trade deal which now has to be ratified by all 28 EU national parliaments. Any UK-EU deal would also have to be agreed by national parliamentarians from Ireland to Bulgaria.

To be sure, the 23 June vote must be accepted and respected, even if two million young citizens and two million Brits in Europe were denied a vote by the inefficient jobsworths at the Electoral Commission. But it is not the last word. There has been a major new surge led by young activists who refuse to accept, as with general elections, that a change in UK policy is impossible.

Theresa May is the leader of Tory MPs and most of them – like her – were Eurosceptic but not in favour of the Ukip-Johnson-Fox agenda on Europe. She returns from her Alpine walking holiday to find that her predecessor, David Cameron, has handed her mission impossible: to pull the UK out of Europe without huge economic damage and political anger.

Farage, Johnson and Fox have won their 15 year-long battle to obtain a vote for Brexit. But Britain is not out of Europe. And as the UK public realises the damage to their future that isolation represents, there will be a re-think.

May is no Europhile, but she does not want to lead a Britain that become poorer and weaker in wealth and status, with the ever-present shadow of Scotland leaving the UK too. The Europhobes who brought us Brexit may not have the last laugh.

The Untold and Unofficial History of Pakistan

By Hamid Bashani

Part 1 (In Urdu)

How to blame less and learn more

Mathew Syed in The Guardian

Accountability. We hear a lot about it. It’s a buzzword. Politicians should be accountable for their actions; social workers for the children they are supervising; nurses for their patients. But there’s a catastrophic problem with our concept of accountability.

 Consider the case of Peter Connelly, better known as Baby P, a child who died at the hands of his mother, her boyfriend and her boyfriend’s brother in 2007. The perpetrators were sentenced to prison. But the media focused its outrage on a different group: mainly his social worker, Maria Ward, and Sharon Shoesmith, director of children’s services. The local council offices were surrounded by a crowd holding placards. In interviews, protesters and politicians demanded their sacking. “They must be held accountable,” it was said.

Many were convinced that the social work profession would improve its performance in the aftermath of the furore. This is what people think accountability looks like: a muscular response to failure. It is about forcing people to sit up and take responsibility. As one pundit put it: “It will focus minds.”

But what really happened? Did child services improve? In fact, social workers started leaving the profession en masse. The numbers entering the profession also plummeted. In one area, the council had to spend £1.5m on agency social work teams because it didn’t have enough permanent staff to handle a jump in referrals.

Those who stayed in the profession found themselves with bigger caseloads and less time to look after the interests of each child. They also started to intervene more aggressively, terrified that a child under their supervision would be harmed. The number of children removed from their families soared. £100m was needed to cope with new child protection orders.

Crucially, defensiveness started to infiltrate every aspect of social work. Social workers became cautious about what they documented. The bureaucratic paper trails got longer, but the words were no longer about conveying information, they were about back-covering. Precious information was concealed out of sheer terror of the consequences.

Almost every commentator estimates that the harm done to children following the attempt to “increase accountability” was high indeed. Performance collapsed. The number of children killed at the hands of their parents increased by more than 25% in the year following the outcry and remained higher for every one of the next three years.

Let us take a step back. One of the most well-established human biases is called the fundamental attribution error. It is about how the sense-making part of the brain blames individuals, rather than systemic factors, when things go wrong. When volunteers are shown a film of a driver cutting across lanes, for example, they infer that he is selfish and out of control. And this inference may indeed turn out to be true. But the situation is not always as cut-and-dried.

After all, the driver may have the sun in his eyes or be swerving to avoid a car. To most observers looking from the outside in, these factors do not register. It is not because they don’t think such possibilities are irrelevant, it is that often they don’t even consider them. The brain just sees the simplest narrative: “He’s a homicidal fool!”

Even in an absurdly simple event like this, then, it pays to pause to look beneath the surface, to challenge the most reductionist narrative. This is what aviation, as an industry, does. When mistakes are made, investigations are conducted. A classic example comes from the 1940s where there was a series of seemingly inexplicable accidents involving B-17 bombers. Pilots were pressing the wrong switches. Instead of pressing the switch to lift the flaps, they were pressing the switch to lift the landing gear.

Should they have been penalised? Or censured? The industry commissioned an investigator to probe deeper. He found that the two switches were identical and side by side. Under the pressure of a difficult landing, pilots were pressing the wrong switch. It was an error trap, an indication that human error often emerges from deeper systemic factors. The industry responded not by sacking the pilots but by attaching a rubber wheel to the landing-gear switch and a small flap shape to the flaps control. The buttons now had an intuitive meaning, easily identified under pressure. Accidents of this kind disappeared overnight.

This is sometimes called forward accountability: the responsibility to learn lessons so that future people are not harmed by avoidable mistakes.

But isn’t this soft? Won’t people get sloppy if they are not penalised for mistakes? The truth is quite the reverse. If, after proper investigation, it turns out that a person was genuinely negligent, then punishment is not only justifiable, but imperative. Professionals themselves demand this. In aviation, pilots are the most vocal in calling for punishments for colleagues who get drunk or demonstrate gross carelessness. And yet justifiable blame does not undermine openness. Management has the time to find out what really happened, giving professionals the confidence that they can speak up without being penalised for honest mistakes.

In 2001, the University of Michigan Health System introduced open reporting, guaranteeing that clinicians would not be pre-emptively blamed. As previously suppressed information began to flow, the system adapted. Reports of drug administration problems led to changes in labelling. Surgical errors led to redesigns of equipment. Malpractice claims dropped from 262 to 83. The number of claims against the University of Illinois Medical Centre fell by half in two years following a similar change. This is the power of forward accountability.

High-performance institutions, such as Google, aviation and pioneering hospitals, have grasped a precious truth. Failure is inevitable in a complex world. The key is to harness these lessons as part of a dynamic process of change. Kneejerk blame may look decisive, but it destroys the flow of information. World-class organisations interrogate errors, learn from them, and only blame after they have found out what happened.

And when Lord Laming reported on Baby P in 2009? Was blame of social workers justified? There were allegations that the report’s findings were prejudged. Even the investigators seemed terrified about what might happen to them if they didn’t appease the appetite for a scapegoat. It was final confirmation of how grotesquely distorted our concept of accountability has become.

Neoliberalism has brought out the worst in us

An economic system that rewards psychopathic personality traits has changed our ethics and our personalities

• 
• • Paul Verhaeghe
  • theguardian.com, Monday 29 September 2014 09.00 BST

'We are forever told that we are freer to choose the course of our lives than ever before, but the freedom to choose outside the success narrative is limited.' Photograph: Lefteris Pitarakis/AP

We tend to perceive our identities as stable and largely separate from outside forces. But over decades of research and therapeutic practice, I have become convinced that economic change is having a profound effect not only on our values but also on our personalities. Thirty years of neoliberalism, free-market forces and privatisation have taken their toll, as relentless pressure to achieve has become normative. If you’re reading this sceptically, I put this simple statement to you: meritocratic neoliberalism favours certain personality traits and penalises others.

There are certain ideal characteristics needed to make a career today. The first is articulateness, the aim being to win over as many people as possible. Contact can be superficial, but since this applies to most human interaction nowadays, this won’t really be noticed.

It’s important to be able to talk up your own capacities as much as you can – you know a lot of people, you’ve got plenty of experience under your belt and you recently completed a major project. Later, people will find out that this was mostly hot air, but the fact that they were initially fooled is down to another personality trait: you can lie convincingly and feel little guilt. That’s why you never take responsibility for your own behaviour.

On top of all this, you are flexible and impulsive, always on the lookout for new stimuli and challenges. In practice, this leads to risky behaviour, but never mind, it won’t be you who has to pick up the pieces. The source of inspiration for this list? The psychopathy checklist by Robert Hare, the best-known specialist on psychopathy today.

This description is, of course, a caricature taken to extremes. Nevertheless, the financial crisis illustrated at a macro-social level (for example, in the conflicts between eurozone countries) what a neoliberal meritocracy does to people. Solidarity becomes an expensive luxury and makes way for temporary alliances, the main preoccupation always being to extract more profit from the situation than your competition. Social ties with colleagues weaken, as does emotional commitment to the enterprise or organisation.

Bullying used to be confined to schools; now it is a common feature of the workplace. This is a typical symptom of the impotent venting their frustration on the weak – in psychology it’s known as displaced aggression. There is a buried sense of fear, ranging from performance anxiety to a broader social fear of the threatening other.

Constant evaluations at work cause a decline in autonomy and a growing dependence on external, often shifting, norms. This results in what the sociologist Richard Sennett has aptly described as the “infantilisation of the workers”. Adults display childish outbursts of temper and are jealous about trivialities (“She got a new office chair and I didn’t”), tell white lies, resort to deceit, delight in the downfall of others and cherish petty feelings of revenge. This is the consequence of a system that prevents people from thinking independently and that fails to treat employees as adults.

More important, though, is the serious damage to people’s self-respect. Self-respect largely depends on the recognition that we receive from the other, as thinkers from Hegel to Lacan have shown. Sennett comes to a similar conclusion when he sees the main question for employees these days as being “Who needs me?” For a growing group of people, the answer is: no one.

Our society constantly proclaims that anyone can make it if they just try hard enough, all the while reinforcing privilege and putting increasing pressure on its overstretched and exhausted citizens. An increasing number of people fail, feeling humiliated, guilty and ashamed. We are forever told that we are freer to choose the course of our lives than ever before, but the freedom to choose outside the success narrative is limited. Furthermore, those who fail are deemed to be losers or scroungers, taking advantage of our social security system.

A neoliberal meritocracy would have us believe that success depends on individual effort and talents, meaning responsibility lies entirely with the individual and authorities should give people as much freedom as possible to achieve this goal. For those who believe in the fairytale of unrestricted choice, self-government and self-management are the pre-eminent political messages, especially if they appear to promise freedom. Along with the idea of the perfectible individual, the freedom we perceive ourselves as having in the west is the greatest untruth of this day and age.

The sociologist Zygmunt Bauman neatly summarised the paradox of our era as: “Never have we been so free. Never have we felt so powerless.” We are indeed freer than before, in the sense that we can criticise religion, take advantage of the new laissez-faire attitude to sex and support any political movement we like. We can do all these things because they no longer have any significance – freedom of this kind is prompted by indifference. Yet, on the other hand, our daily lives have become a constant battle against a bureaucracy that would make Kafka weak at the knees. There are regulations about everything, from the salt content of bread to urban poultry-keeping.

Our presumed freedom is tied to one central condition: we must be successful – that is, “make” something of ourselves. You don’t need to look far for examples. A highly skilled individual who puts parenting before their career comes in for criticism. A person with a good job who turns down a promotion to invest more time in other things is seen as crazy – unless those other things ensure success. A young woman who wants to become a primary school teacher is told by her parents that she should start off by getting a master’s degree in economics – a primary school teacher, whatever can she be thinking of?

There are constant laments about the so-called loss of norms and values in our culture. Yet our norms and values make up an integral and essential part of our identity. So they cannot be lost, only changed. And that is precisely what has happened: a changed economy reflects changed ethics and brings about changed identity. The current economic system is bringing out the worst in us.

Clearing projects is not the Cabinet’s job

by Swaminathan Aiyer in Times of India

The rupee has bounced back, the stock market has soared, and finance minister Chidambaram is smiling again. This will not last, because there’s no clear strategy to remedy the economy’s structural weaknesses.

One big structural problem is the creation of ever more laws, rules and regulations. Every new rule has admirable aims like inclusivity, environmental preservation and fair land acquisition. But no law ever provides finance for staff and expertise required to implement the new regulations effectively. This overloads a bureaucracy already collapsing under old commitments. Some district collectors say they have to oversee 3,000 schemes.

No new law does cost-benefit analysis. Yet good governance requires laws that provide enough financial and administrative resources to actually work. Otherwise, we get unending delay, cynicism and corruption.

Don’t confuse this with policy paralysis: that’s a separate problem. Even when policymakers want to proceed, rules and regulations produce delays that are not merely long but cannot even be quantified or provided for. For example, the POSCO steel project in Odisha has not started despite a dozen years of effort backed fully by the chief minister. An NTPC official recently said it now took 12 years to clear and acquire land for a new coal mine. This is why, despite having the third largest coal reserves in the world, India has become a massive coal importer.

Yes, we need rules sensitive to inclusion and the environment. But they must also be designed for clearance within reasonable, predictable periods. Alas, we see no sign of this.

Chidambaram said in a recent interview with the Financial Times, “What is keeping investors out is the experience and the fear that we cannot implement a project on time…The Japanese, for example, if they have a start date, they also have a finish date... But in India they run into delays of months or years…the foreign investor is frightened by that kind of delay.”

This frightens the Indian investor no less than the foreigner. The most frightening phenomenon is that of Indian investors saying that they would rather invest abroad than in India.

I recently met a medium-scale businessman who said that earlier too, rules and regulations made honest clearances impossibly long. But quick clearances were possible through bribes. However, the recent anti-corruption mood and fear of the courts and CAG meant that, even after making payoffs, clearances did not come. The businessman said he was switching to Africa, which was highly corrupt but allowed investment to go ahead after payoffs.

To end the investment drought, the Cabinet has often met to clear projects worth lakhs of crores. Do not cheer. The very fact that projects galore cannot proceed without Cabinet intervention is a serious structural failure.

In any good system, the Cabinet makes policy, and project-by-project implementation is done by the ministries. If rules and regulations make it impossible for ministries to clear projects, the answer cannot be Cabinet meetings that guillotine the scrutiny process. Rather, the scrutiny process must be overhauled thoroughly so that clearances occur predictably within a fixed time frame, without Cabinet rescues.

RBI Governor Raghuram Rajan says repeatedly that we must slash red tape and unnecessary regulation. But where is the action? The government keeps coming out with more new laws, rules and regulations. Not a single legislative or administrative effort aims to ruthlessly prune red tape.

The problem is worst in infrastructure, without which the rest of the economy simply cannot grow sustainably. Historically, infrastructure was funded almost entirely by the government. A decade ago, the government ran out of money because it has so many other commitments. The private sector and public-private partnerships were seen as the solution. The boom in such deals was accompanied by accusations of crony capitalism.

However, constant delays have converted those crony deals into financial quicksand. Many supposedly top cronies are going bust. The stock market price of Reliance Infrastructure is down from a peak of Rs 2,584 to Rs 396 today, GMR from a peak of Rs 131 to Rs 21, GVK from Rs 85 to Rs 7, Lanco Industries from Rs 113 to Rs 18, and Lanco Infratech from Rs 84 to Rs 6. Several of these companies are sick, on life support from banks.

Historically, the government built infrastructure with long delays. The government met the resultant cost escalation through tax revenue. But when the private sector entered big infrastructure, after taking large loans, it found that even modest delays made projects unviable, and long delays could bust a company. This structural problem cannot be overcome by emergency Cabinet clearances. It needs a totally new system of predictable, reasonably rapid clearances that make Cabinet rescues completely unnecessary.

Iraq War: 'we have to face the truth and admit we failed'

Andrew Gilligan, who reported from Baghdad throughout the invasion of Iraq, highlights the failures of the British military as well as those of the politicians.

British forces transfer authority over Basra to the Americans in 2009 Photo: AFP/GETTY

By Andrew Gilligan

10:00PM GMT 09 Mar 2013

On the last day of Britain’s combat mission to Iraq, 30 April 2009, we lowered the flag with characteristic verve and style. In the morning, at our base in Basra, there was a deeply affecting service in honour of our military dead. It took 29 minutes to read out all the names.

In the afternoon came a more upbeat ceremony. Air Chief Marshal Sir Jock Stirrup, chief of the defence staff, said British forces had made an “outstanding contribution to the transition of Iraq.” They pulled out, he said, with “their reputation intact.”

Brigadier Tom Beckett, commander of 20th Armoured Brigade, the British formation, said: “We leave knowing we have done our job, and done it well. We leave with our heads held high.”

Gordon Brown, the prime minister (though sadly too busy to make it down himself) had earlier said that British troops remained “the best in the world” and had made Iraq “a success story”. The leaders’ very need, of course, to say such things showed that they were no longer quite true.

The Basra event was telling in one other way. Newspapers and broadcasters had known about it for some time, but were strictly forbidden from even mentioning that it would take place until afterwards. If the victory ceremony has to be kept secret on security grounds, what does that tell you about the victory? 

Iraq was a huge blow to the moral and international standing of this country. It changed, probably permanently, the relationship between the people of Britain and their leaders. I, for one, can never see our government – or our feeble democratic institutions, which did so little to prevent the disaster – in quite the same light again.

But, less widely understood, Iraq was also a military humiliation for the UK. In the debacle that was the war, and above all the occupation which followed, one group of people – Britain’s military leadership — got off far too lightly. And because we never faced up to this, the humiliation continues, right now, in Afghanistan and in Whitehall. One cherished part of the country’s self-image – the power and reputation of our armed forces — is now at serious risk.

For years, the top brass has been essentially exempt from the kind of criticism dished out to other public-sector leaders. All the failings of Iraq and Afghanistan are blamed on conniving politicians or cheese-paring bureaucrats. But evidence from those conflicts shows some of our generals, admirals and air marshals to be rather too much like, say, NHS managers for comfort.

Iraq’s greatest disaster was not the deceit beforehand, or the brief phase of “major combat operations” which began 10 years ago next week. It was the occupation which followed. That was when the vast majority of victims — perhaps 190,000 of them – died. If the occupation had gone better, the politicians’ lies would have been forgiven by now. And it was during the occupation that Britain’s brass fell down on the job.

The key evidence is hundreds of pages of official interviews, conducted by the Army itself with those in charge of the operation. A full set of classified transcripts, leaked to The Sunday Telegraph in 2009, painted a disturbing picture of complacency and misjudgment at senior levels.

Major-General Graeme Lamb, commander of 3 Division in the first months of the occupation, told his interlocutors: “It is easy to become fixated by the enemy. Securing military victory over the enemy is probably not a reality.”

Instead, Lamb favoured “soft effects,” such as improving the lives of the local people, which “really wasn’t that difficult and didn’t require that many experts. Once you knew what you needed to do, you then dispatched the nearest captain with the 'find me 100 trucks’ order and it all worked.”

With apologies to Lamb — who went on to high command in Afghanistan — the enemy surely was quite important. And sending out a captain with a hundred trucks did not “all work”. Basra’s infrastructure remained in ruins, partly because there were not “that many experts” — indeed any at all – and because security was never satisfactorily tackled by the British.

Instead, the British preferred to make deals with the enemy, the Iranian-backed Mahdi Army militia commanded by Muqtada Sadr. In the classified interviews, Major-General Andrew Stewart, the overall British commander, described how he “evaded” and “refused” American orders to confront Sadr, saying: “I was trying to achieve the same result through different means – trying to neutralise Sadr through the use of local Iraqis and succeeding.”

He did not succeed. Sadr was not a solution to the insecurity, but its key source. By 2006, Basra was in anarchy. By the following year, the policy of negotiation had led Britain to what was essentially a surrender. To the intense frustration of many British officers, we secretly signed a deal that we would not enter Basra in return for a promise that Sadr’s forces would stop attacking us.

It kept the body count down, which was all that mattered in London. But it also abandoned Basra to the Mahdi Army, who swaggered through the streets closing down video shops and enforcing headscarves on women.

The tragedy — as many of the classified interviewees recognised – was that Britain’s part of Iraq, the Shia south, was not like the centre of the country. Brutalised by Saddam, Iraqi Shias supported the invasion and might have been prepared to back the occupation. But Britain’s failure to improve infrastructure and security alienated them.

It is true that, by the time we left, the situation in Basra had dramatically improved. But that was due to an Iraqi- and US-led military offensive, Charge of the Knights, in which we took virtually no part.

Constrained by their surrender agreement, the British, theoretical guardians of Basra, stayed in their secure base on the outskirts until the closing moments, as the Iraqis and Americans drove the Mahdi Army out of town. By that stage, such was both nations’ contempt for Britain that they didn’t even tell us they were coming until the last minute.

Of course, you could say that without enough troops, and without enough political commitment, the British Army made the only choice it could. That is one of the reasons why Mr Blair’s deceits beforehand ended up mattering so much: because he could not admit he was planning a war, the forces could not prepare properly for either it or the aftermath. And afterwards, public disgust at the lies sapped will to resource the occupation.

As it happens, the military leadership was culpable there, too. In the run-up to the war, top-level figures in the defence establishment privately told journalists, including me, of their scepticism that Saddam was a serious threat. None was ever prepared to go on the record. Only in their memoirs — or at the Chilcot inquiry, when a stampede of brass wore out the carpets to dump on Blair – did the public learn of these brave warriors’ doubts.

Nor, with one or two exceptions, did they speak out against the years of disastrous procurement and kit that contributed to Britain’s Basra reckoning. Some soldiers only had five rounds of ammunition. The very first British casualty of the war, Sergeant Steven Roberts, died because his unit didn’t have enough body armour.

^{Sergeant Steven Roberts from Bradford, West Yorkshire, who was the first British armed forces personnel to be killed in the Gulf War in 2003.}

Underlying the failed Basra strategy, too, was a flawed British assumption that they were good at counter-insurgency. We understand the natives, the generals would tell you — unlike those brutal, clumsy Americans. But smiles and handshakes could never alone have worked. Even previous peace support operations, such as Bosnia, had only been resolved by the use, or threat, of sufficient force.

The Americans were indeed appallingly brutal, to begin with, but they learned, and they changed — and, unlike us, they didn’t give up. They did surge men and resources; and in the end, helped by the overreach of their enemies, they did at least in part prevail. Both countries suffered political humiliation in Iraq. But only Britain was defeated militarily.

The clear lesson from Iraq was that you should do something properly, or not at all. But in Afghanistan, Britain’s generals repeated the same half-baked, penny-packet approach, the same self-delusion about their rapport with the locals, and drew the same contempt from their American allies.

General Benjamin Freakley, the main US commander in southern and eastern Afghanistan at the beginning of Britain’s campaign, admits that he was “scathing” to the British about their efforts in Helmand province. He said he warned especially strongly against Britain’s “disastrous” tactic of sending small groups of soldiers to far-flung “platoon houses,” sitting ducks for the Taliban. The practice was finally changed, but not before dozens of British lives were needlessly lost. These were operational decisions, nothing to do with British politicians — some of whom, indeed, were aghast at their generals’ recklessness.

The irony of Iraq is that an operation intended to strengthen the Anglo-US “special relationship,” the bar to which the British diplomatic and military establishment so desperately clings, did the exact opposite.

Basra cost us much respect in the Pentagon. In the leaked Iraq interview transcripts, the British brass complain that the overall US commander, General Rick Sanchez, never visited and never called: he didn’t, they complained, even install a secure phone link with them. Britain’s chief of staff, Colonel JK Tanner, likened the Americans to “a group of Martians”, saying: “Despite our so-called 'special relationship,’ I reckon we were treated no differently to the Portuguese.”

Soon, in Afghanistan, we will declare victory and leave. But it seems unlikely that we will leave much lasting trace of our presence, or much in return for the 440 British lives so far sacrificed there. And unlike the politicians of Iraq, the generals have moved on, reputations unsullied, to more lucrative work.

General Lamb, for instance, has recently taken to the media, extravagantly praising a dictatorial Arab regime which paid his lobbying company £1.5 million to “support [its] stance before the international community”. The Iraq war sandblasted the credibility of the British government, the intelligence agencies, and the diplomatic corps. But with the forces there is still, perhaps, an unwillingness among the media and public to confront reality; still a strong wish to believe that Britain is the best, the undefeated.

But for the sake of the self-respect and the very future of those forces, still among the proudest assets of this country, it is essential that they, and we, face the truth and learn the lessons.

Overcome by a sense of betrayal

Prem Shankar Jha

The Hindu

 

People are beginning to believe that democracy, in which they had faith all these years, is part of the problem and, therefore, cannot be part of the solution

The torrent of anger that erupted all over the country after the 23-year-old physiotherapy student in Delhi — whom the media named ‘Nirbhaya’ — was raped and thrown out of a moving bus has obscured a profoundly disturbing anomaly: the rape was a criminal act committed by individuals. But most of the anger of the public has been directed at the government. Barring a few lapses, the Central and State governments acted promptly, and with commendable efficiency. The Delhi police captured the alleged rapists within hours and the government spared no expense in its attempt to save her life.

The police also showed an uncharacteristic restraint in dealing with the protesters. To control the crowds with a minimum of violence, policemen put themselves repeatedly in harm’s way. A constable, P.C. Tomar, laid down his life doing his duty. Many others were injured.

The Delhi High Court and the State government took the pent up grievances of women’s associations and other human rights groups to heart and acted speedily to meet their demands. The former set up five special courts to hear the backlog of rape cases. The Lt. Governor made it mandatory for police stations to register all complaints of rape and other crimes against women. So why did the media and the public spare no effort to shift as much of the blame as possible on to the shoulders of the state?

 

Smouldering anger

The answer is that the rape acted as the trigger for an older, and deeper, anger in people — one that has been smouldering for years in their hearts. This stems from a profound sense of betrayal. Democracy was meant to empower them. Instead, in a way that few of them understand even today, it has done the exact opposite.

Empowerment requires the rule of law. People feel empowered only when they know that they have rights, and that the institutions of government exist, first and foremost, to enforce them. The rule of law is, however, only another name for justice. Empowerment therefore requires justice. The bedrock from which the anger that erupted on December 17 sprang is the denial of justice. In spite of being a democracy for 65 years, the Indian state has not been able to create something that people value even more than material benefits: a just society. It has achieved this unique feat by making both its elected legislators and its bureaucracy, not to mention its lower judiciary, immune to accountability. It has therefore become a predatory state that the people have learned to fear.

The hallmark of the predatory state is the universality of extortion. In India, we regularly lump extortion together with bribery under the generic title of corruption. In doing so, even the most ardent of reformers inadvertently conspire with the predators to hide the true, ugly, face of our democracy. Bribery and extortion are, in fact, two entirely different forms of predatory behaviour, and have markedly different effects upon the relationship of state with society.

Bribery is voluntary. The bribe giver chooses to give money or favours to influence a choice, steal a march over rivals, or hasten (sometimes delay) a decision. Bribery harms the economy and society cumulatively over a period of time by preventing optimal choice, increasing cost and lowering the quality of the product or the service rendered. But it has limited political impact because it is a voluntary transaction between consenting adults and the injustice it does is confined to a small circle of rivals.

Extortion is an entirely different form of predation. It requires no contract; no negotiation; and therefore no element of consent. It is a simple exercise of brute power by an employee or representative of the state over the citizen. Its commonest form is to deny the citizen the services to which he is entitled until he agrees to make a ‘private’ payment to the functionary in whom the power of the state is vested. Every act of extortion is a fresh reminder to the citizen of his or her impotence. This becomes complete if he or she is denied redress for the abuse of power.

In India this has been all-but-denied not simply by law but by the Constitution itself. Article 311 of the Constitution reads: “No person who is a member of a civil service of the Union or an all India service or a civil service of a State or holds a civil post under the Union or a State shall be dismissed or removed by an authority subordinate to that by which he was appointed.” It makes it clear that this injunction applies to not only civil but criminal cases as well. For the Central services, the empowered Authority is the President of India; for the State civil services, it is the Governor. This has meant that no prosecution can by initiated without the permission of the Central or State government. As the dismal experience of the Central Vigilance Commission has shown, in civil cases this permission is rarely given.

 

Complaints against police

One set of figures illustrates the impunity with which civil servants can break the law. According to the National Crime Records Bureau’s annual report Crime in India 2007, between 2003 and 2007 citizens filed 282, 384 complaints of human rights abuses against the police. Of these only 79,000 were investigated; only 1,070 policemen were brought to trial and only 264 — less than one in a thousand — were convicted. All but a handful stayed on at their posts, free to wreak vengeance on those who had dared to complain against them. It is therefore a safe bet that the actual number of such abuses is at least 10 times the number reported. It helps to explain why a girl who filed a complaint of rape with the police in Lucknow about two months ago was raped by the Station House Officer, then repeatedly by the investigating officer, but could not muster the courage to get the latter caught, and report the former till she felt empowered by the protests in Delhi.

The Constituent Assembly lifted Article 311 almost verbatim from a clause in the Government of India Act 1935 whose purpose was to protect British civil servants, notably the police, from incessant harassment by sharp-witted Congress lawyers. But the 1935 Act did not put the civil servant above the law. This was because he could be held accountable, as Edmund Burke had shown, by the British Parliament. In independent India, however, this restraint was destroyed by the progressive corruption, and criminalisation, of the political class that it now serves.

The root cause of both is the lack of any provision in the Constitution for the financing of elections. In Britain where the average constituency covers 380 square kilometres and has around 60,000 voters this is a nuisance. In India where the parliamentary constituency covers 6,000 sq km and holds 1.3 million voters it has proved a catastrophe.

In the 1950s, the need for funds was met to a large extent by the rising industrial class and by the Princes. But when these two began to desert the Congress in favour of the Swatantra Party and the Jana Sangh in the 1960s, Indira Gandhi banned company donations to political parties and abolished the privy purses. After that the only way in which political parties could stay in the game was to break the law.

Over the ensuing decades, two sets of predatory networks have developed to finance, or otherwise influence, elections. The first is of criminals who provide the muscle to intimidate voters; the second is of local money-bags and power-brokers who rally support for candidates belonging to one or the other party in exchange for favours when it comes to power.

As these have become more entrenched, they have virtually eliminated intra-party democracy at the grass roots and progressively reduced the number of constituencies in which State and Central party leaders can bring in fresh candidates chosen on the basis of merit. In the current Parliament, for instance, at the last count 159 MPs had criminal charges pending against them. Another 156 are second generation ‘princelings’ whose parents established the clientelist networks that now serve them. The State Assemblies are even more closed to new aspirants: 44 per cent of the MLAs in Bihar, 35 per cent in West Bengal and 30 per cent in Gujarat face criminal charges. The proportion of ‘pocket boroughs’ is also higher in the States than at the Centre.

 

Predatory state

The perennial need for money lies at the roots of the predatory state that India has become. Today, its ruling class consists of corrupt politicians who are served by an extortionate bureaucracy and police that are shielded from public wrath by nothing less than the Constitution of India.

In earlier decades, people’s anger was held in check by their faith in the democratic system. They therefore gave vent to their demand for accountability in the state by turning out to vote in ever larger numbers and regularly overthrowing incumbent governments. Only in recent years has it begun to dawn on them that democracy has become a part of the problem and cannot therefore be part of the solution. The protest is therefore moving closer to the borders of revolt. This has been apparent in the Maoist uprising that began in 2005, and has driven the state out of large parts of 83 districts in the country.

The Anna movement last year was another turning point because it was the first time that the urban middle class took to the streets. December’s mass protests in Delhi were the second time. History teaches us that this is the point at which the state usually begins to crumble. Were this to happen in India, it would not lead to the emergence of a more just and accountable Indian state but to its disintegration.

There is still time for our Central and State leaders to remember that no society that has lost its sense of justice, and, therefore, its moral legitimacy, has survived for long. But they are beginning to run out of it.

 

(The writer is a senior journalist)

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