Making things matters. This is what Britain forgot

Ha-Joon Chang in The Guardian

The neglect of manufacturing and over-development of the financial sector is the cause of the economy’s decline, not fear of leaving the EU.

 

The production line at the Rolls-Royce factory in Derby. Photograph: Bloomberg via Getty Images

It’s being blamed on the Brexit jitters. But the weakness in the UK economy that the latest figures reveal is actually a symptom of a much deeper malaise. Britain has never properly recovered from the 2008 financial crisis. At the end of 2015, inflation-adjusted income per capita in the UK was only 0.2% higher than its 2007 peak. This translates into an annual growth rate of 0.025% per year. How pathetic this performance is can be put into perspective by recalling that Japan’s per capita income during its so-called “lost two decades” between 1990 and 2010 grew at 1% a year.

At the root of this inability to stage a real recovery is the serious imbalance that has developed in the past few decades – namely, the over-development of the UK financial sector and the atrophy of manufacturing. Right after the 2008 financial crisis there was a widespread recognition that the ballooning financial sector needed to be reined in. Even George Osborne talked excitedly for a while about the “march of the makers”. That march never materialised, however, and the share of the manufacturing sector has stagnated at around 10% of GDP.

This is remarkable, given that the value of sterling has fallen by around 30% since the crisis. In any other country a currency devaluation of this magnitude would have generated an export boom in manufactured goods, leading to an expansion of the sector.

Unfortunately manufacturing had been so weakened since the 1980s that it didn’t have a hope of staging any such revival. Even with a whopping 30% devaluation, the UK’s trade balance in manufacturing goods (that is, manufacturing exports minus imports) as a proportion of GDP has hardly budged. The weakness of manufacturing is the main reason for the UK’s ever-growing deficit, which stood at 5.2% of GDP in 2015.

UK trade deficit with EU hits new record



Some play down the concerns; the UK, we hear, is still the seventh or eighth biggest manufacturing nation in the world – after the US, China, Japan, Germany, South Korea, France and Italy. But it only gets this ranking because it has a large population. In terms of per capita output, it ranks somewhere between 20th and 25th in the world. In other words, saying that we need not worry about the UK’s manufacturing sector because it is still one of the largest is like saying that a poor family with lots of its members working at low wages need not worry about money because their total income is bigger than that of another family with fewer, high-earning members.

Another argument is that we now live in a post-industrial knowledge economy, in which “making things” no longer matters. The proponents of this argument wheel out Switzerland, which has more than twice the per capita income of the UK, despite – or rather because of – its reliance on finance and tourism.

However Switzerland is actually the most industrialised country in the world, measured by manufacturing output per head. In 2013, that manufacturing output was nearly twice the US’s and nearly three times the UK’s. The discourse of post-industrial knowledge economy fundamentally misunderstands the role of manufacturing in economic prosperity.

First of all, despite the relative increase in the importance of services, the manufacturing sector is still – and will always be – the main source of productivity growth and economic prosperity. It is a sector that is most open to the use of machines and chemical processes, which raises productivity. It is also where most research and development, which generates new technologies, is done. Moreover, it is a sector that produces inputs that raise productivity in other sectors. For example, the recent rise in productivity in the service sector has happened mainly because it is using more advanced inputs produced in the manufacturing sector – computers, fibre-optic cables, routers, GPS machines, more fuel-efficient cars, mechanised warehouses and so on.

Second, many knowledge-intensive services, such as research, engineering and design, that are supposed to be new have always been there. Most of them used to be conducted by manufacturing firms themselves and have become more “visible” recently largely because they have been “spun off” or “outsourced”. We should not confuse the changes in firms’ organisation with the changes in the nature of economic activities.

All of those supposedly knowledge-intensive services sell mostly to manufacturing firms, so their success depends on manufacturing success. It is not because the Americans invented superior financial techniques that the world’s financial centre moved from London to New York in the mid-20th century. It is because the US became the leading industrial nation.

The weakness of manufacturing is at the heart of the UK’s economic problems. Reversing three and a half decades of neglect will not be easy but, unless the country provides its industrial sector with more capital, stronger public support for R&D and better-trained workers, it will not be able to build the balanced and sustainable economy that it so desperately needs.

The Elite Opt-out - 'Government officials should send their children to government schools'

Manish Sabharwal in The Indian Express

Earlier this month, the Allahabad High Court gave the state chief secretary till the next academic session to require anybody drawing a government salary to send their children to only government schools. The order also specified that the promotions and increments of violators should be deferred, and required that any fees paid to private schools by government servants be deducted from their salary and paid into the state treasury. The judge felt this extreme step was the only way to improve government schools. Is this judgment absurd or wonderful common sense?

This judgment pulls me in two different directions because of who I am (son of government servants who sent me to a private school) and what I do (our company hires only 5 per cent of the children who come to us for a job because their schools let them down). Who I am believes this judgment is absurdity. What I do believes it is wonderful common sense. Why this divergence?

The first reaction is because this judgment violates the fundamental rights of all children of government employees by limiting where they can go to school based on their parents’ profession. I know my professional progress is a child of my private school education; I would not be where I am if I had been forced into a government school in Uttar Pradesh (where my parents are from) or in Jammu and Kashmir (where my parents worked). It’s also unfair to hold every present government servant accountable for the actions and outcomes of a small number of past and present education department bureaucrats. It hardly seems fair that the judgment should not be applied to past politicians who have grossly distorted government school-teacher recruiting, compensation and performance management, or past judges whose judgments have distorted the governance of educational institutions. The problem with holding the current government-employee cohort accountable for school outcomes is the long shadow cast by education policy decisions, where toxic effects show up only after a decade.

But my second reaction is rooted in a recognition of human nature. Wouldn’t Employee’s State Insurance hospitals improve if we forced government servants to use them and abolished their exclusive Central Government Health Scheme? Wouldn’t EPFO reform have happened years ago if every government servant was forced to deal with the organisation for their pensions? Wouldn’t ministers standing in line for security and boarding at airports have forced security forces to reduce lines by junking the meaningless stamping, and checking of stamping, of hand baggage tags and boarding cards? Wouldn’t there have been more urgency for power reforms if distribution companies were prohibited from creating VIP areas where power is uninterrupted? Wouldn’t we have better urban planning, housing and public transport if government servants were not given houses and cars and all their benefits were monetised instead?

Given India’s poor service-delivery outcomes; it’s certainly a tantalising possibility to subject government servants to the consequences of their actions. This judgment is obviously the product of an interesting mind — Justice Sudhir Agarwal — but it is also a child of broader trends in society and merely reflects the rising aspirations and expectations of millions of Indians. India’s poor and youth are no longer willing to be held hostage to poor government provision. They recognise that “elite opt-out” accelerates the decline of the public system because powerful and loud voices don’t care. My parents retired to Kanpur, where the fastest growing industries are private bottled water, private security, private generators, private healthcare and private schools; the poor in UP are buying what should be public goods because their rights as consumers are greater than their rights as citizens. India is reaching the point where government sins of commission (what it does wrong) are not as toxic as government sins of omission (what it does not do). Alexander Hamilton wrote that the courts are the weakest of the three branches of government because they control neither sword nor purse. India’s courts cannot sustainably fix public service-delivery. Government schools can only be fixed by politicians obsessed with execution, not inputs.

The execution problem goes beyond schools. The Indian state has been designed for less complexity, scale and accountability than it faces. Going forward, the state must do fewer things, but do them well. It must retreat where the market works but act muscularly where the market fails. It must separate its role as policymaker, regulator and service-provider in all areas. It must create the hope of rising and fear of failing for the permanent generalist civil service and supplement them with specialist lateral entry. Fixing government schools is crucial to economic democracy; I work for a company that has hired somebody every five minutes for the last five years, but only hired five per cent of job applicants. You can’t teach kids in one year of vocational training at the exit gate of K-12 education what they should have learnt in the 12 years of school. An unskilled or unemployed Indian is not a free Indian. So — with all the hypocrisy of somebody whose turn for a government school education under this judgment is past — I hope the wonderful common sense that this judgment represents is upheld.

The rebirth of Japan

What's the story of the next decade?

The country's urge to reset its business culture is a lesson to Britain in finding the way back to prosperity

• 
• • Will Hutton
  • The Observer, Sunday 1 April 2012 
  • 
    

In some fields Japan is years ahead of the rest of the world. Photograph: Gina Calvi/Alamy

It is a small thing, but it says a lot about the country. At Tokyo's Narita airport, when you take off your shoes at the security screening check, the guard hands you a pair of leather slippers. The message is obvious: this airport cares for your wellbeing and recognises your need.

In Japan, taxi doors swing open automatically; toilet seats are electronically warmed and cleaned; and the extraordinary variety of food is presented exquisitely. There is a passion for satiating every imaginable human want and a joy in embracing the science, technology and innovation that might help deliver just that.

For 40 years, between 1950 and 1990, this passion was a key ingredient driving one of the most remarkable periods of growth in economic history. But for the past 20 years, Japan has been stricken by stagnation. In the late 1980s-90s, it suffered a financial crisis nearly as severe as our own. The economic model – the Ministry of International Trade and Industry guiding Japanese companies; the keiretsu networks of loosely conglomerated firms and associated banks; the great global brands – suffered an implosion.

Yet this remains a $5trn economy, the third largest on the planet. The Japanese themselves are desperate to recover the elixir of growth, and understand that economic conservatism – in Japan just as in Britain – leads to disappointment and heartbreak.

In 2009, the Democratic party of Japan was elected by a landslide, pledging a root and branch reform of every bureaucratic, corporatist and anti-democratic element in Japan's broken system. It also pledged to recast economic policy to serve the people. Despite some epic mistakes, notably its handling of the Fukushima nuclear disaster, it still holds an opinion poll lead over its rival, the Liberal Democratic party (LDP).

However, forces within the government are very much open to pondering where it should go next. Ten days ago, I was invited by the DPJ government to go to Tokyo to contribute to this ongoing conversation.

Cabinet members wanted to discuss what a 21st-century social contract might look like, respecting both necessary labour market flexibility and security. They wanted to understand the contribution that open innovation ecosystems and an entrepreneurial state can play in driving forward innovation and investment. Above all, they asked: how could Japan reinvent its stakeholder capitalism of the second half of the 20th century so that it was more democratic? And they thought there might be something in my ideas rehearsed in the books The State We're In and Them and Us. In short, how could Japan do good capitalism?

It is the question – not only in Japan but, I would argue, in Britain. In Japan the devastating earthquake in Tohoku 12 months ago has made it even more acute. Three hundred and forty thousand people are still without homes. At least 19,000 died. And the nuclear power station at Fukushima very nearly suffered a meltdown.

At the time of the crisis, Japan hoped that, with the DPJ in power, there would be a decisive change from the way such matters had been handled in the past – obfuscation, delay, inactivity and anxiety to protect corporate interests. Yet the new government bounced off the secrecy of Tokyo Electric Power Company, the bureaucratic ministries, a muzzled media and the enveloping tentacles of the employers' organisation, the Keidanren, as if nothing had changed. Prime Minster Kan became party to delivering inadequate and late information via the impenetrable state and corporate networks; many Japanese became devotees of BBC World News as the only purveyor of truth. Kan was forced to resign last summer.

But the Japanese electorate is not ready to return to the status quo. They know they need nuclear power which just 12 months ago provided more than a third of their electricity needs; but as power stations are being closed down for safety inspections local communities are vetoing their reopening. In May, the last nuclear power station operating will also be mothballed.

The terms for their restarting are tough. Local communities, fired up by a new citizen activism, want effective oversight, transparency of information and commitments to meet international safety standards. It is Japanese good capitalism, driven by citizen demands from below.

Faced with this new phenomenon, the LDP is at a loss, while the DPJ itself seems to be re-gathering its conviction that its reform agenda is the only way forward. At an open meeting in the Japanese parliament, I was struck by the interest DPJ MPs showed in discussing innovative ways of kickstarting credit flows – as anathema to the Bank of Japan and Ministry of Finance as they are to the Bank of England and Treasury.

The Bank of Japan has just expanded a version of the Bank of England's quantitative easing programme; but abstains from the activism it used to show in the great days of Japan's growth. The conclusions are obvious. Japan's financial system is broken; an activist state has to restart bank lending by assuming some of the risk – just as it must in Britain.

If Japan could reset its macroeconomic policy, there is an enormous pool of dynamic hi-tech medium-sized firms that could immediately grow very fast. Consultant Gerhard Fasol argues that in areas like LED lighting or mobile phone payment systems, Japan is 10 years ahead of the rest of the world. The Fujitsus and Toshibas of tomorrow are in the wings. What Japan needs is for the increasingly sclerotic giants to be challenged by these many insurgents, who need new institutions to support their ambitions to go global. A new entrepreneurial, accountable state could drive a second phase of powerful Japanese growth.

These debates are foreign to our primitive business culture, which undervalues service and innovation and scarcely thinks about a more productive capitalism. There is a long list of British companies that have tried to break into Japan's market and failed. Observers say the common theme is wholesale insensitivity to the need for service and innovation, the precondition for any success in Japan.

Britain and Japan are two island economies, both mired in private debt with stricken financial systems. Although Japan has a long way to go, it is becoming obvious, confirmed by last week's British budget, which of the two countries is most likely to create the 21st-century framework for growth and prosperity. The Asian story of the next decade will be Japan's renaissance and China's relapse.

If everyone did a Worrall Thompson, maybe Tesco wouldn't be too big to fail

Tesco's poor results have led it to review its practices. The self-service tills used by Wozza may be a good place to start

• 
• • Marina Hyde
  • guardian.co.uk, Friday 13 January 2012 21.00 GMT
  • larger | smaller

Illustration by Otto

Sad news for Tesco, which this week discovered an unexpected item in its bagging area. The rogue element has since been identified as "awful Christmas sales and a profits warning", and the company's chief executive Philip Clarke now appears to be having problems removing this item before continuing with Tesco's hitherto unstoppable rise. I do hope he has to wait a long time for assistance.

Britain ceased to be a nation of shopkeepers some time ago, as the local independent stores had the life bled out of them by the supermarket giants. But we're a nation of shoppers, and perhaps this two fingers to the daddy of them all is our retail version of the Arab spring. Watching the suddenly humble Clarke promising to address product quality, customer service and "longstanding business issues" rather put one in mind of a besieged dictator. "Wait!" is the despot's reaction to increasingly volatile protests. "I am literally just about to introduce a raft of democratic reforms!"

It will take rather more than Clarke's needy mea culpa to reverse the perception that Tesco stands for everything that is monolithic, mercilessly expansionist, and machine driven. Tesco is a place that people more principled than myself probably manage to avoid entirely, but into which most of us feel compelled to go fairly frequently because it's nearby, or because it has effectively shut down any alternatives.

For a long time, criticism of it was crushed by that pat little assertion that it was "what the people wanted". Tesco executives and their defenders appeared to be graduates of the Richard Desmond school of debate, which is to paint anyone who questions your methods as snobs or enemies of enterprise. They acted as if everyone criticising Tesco must have the luxury of shopping at Waitrose or M&S, when this week's evidence has revealed that they might just as easily get their goods at Aldi or Lidl.

Thus the unthinkable has happened. And now that Tesco appears to be not so much what the people want, what precisely does it have going for it?

Its expansion has certainly told us little we did not already know about this septic isle, merely throwing into even sharper relief the iniquities of such institutions as council planning departments. Countless ordinary citizens have tales of their applications to make minuscule home improvements being rejected, while mock Tudor Tesco superstores are waved through with as many clock towers and metal-effect weather vanes as their architects care to spike them with. Since the 90s, 200 have been plonked down like spaceships, pulling customers off high streets with their seemingly irresistible tractor beams. Yet we now discover that these behemoths are among the "less potent" parts of Tesco's enterprise. Whether scarcely 15 years of rapacious profits was worth leaving a blight of potential white elephants scattered across the countryside, only time will show.

But it is in the area of employment, and its effect on customer service, that the Tesco modus operandi has been most pernicious. There are few sights in modern retail more pathetic, in the true sense of that word, than that of the lone, low-paid human charged with overriding technical glitches in the banks of self-service tills that have already claimed the jobs of countless check-out assistants, knowing that they will soon enough claim theirs. (Eighteen months ago, Tesco began trialling a stall with no manned checkouts at all, merely the single overseer.) Given the Japanese government is investing heavily in technology that could provide robot care for the elderly, it seems a likely bet that Tesco hopes one day to have its shelves robotically stacked, and even the automated till supervisors replaced by customer service droids. A similar process of dehumanisation has been afoot in car plants, but few of us have the occasion to pass through those very often. Nowhere is the rise of the machine at the expense of human employment more evident than in supermarkets such as Tesco. It is an everyday dystopia.

What is to be done? Oddly enough, perhaps one mad answer lies in the other Tesco-related story of the week. Just possibly – and obviously entirely unwittingly – shoplifting chef Antony Worrall Thompson has suggested an act of civil disobedience. If a critical mass of shoppers were to decide to do a Wozza for moral reasons, then the robotic scanners would become less economically viable than human checkout workers. Pilfering from Tesco would become a political act. However, if your preference is for grandiose schemes that won't involve accepting a police caution before embarking on psychiatric treatment, perhaps we could get up a campaign for a sort of Tesco Tobin tax, in which some tiny percentage of every penny spent in one of their out-of-town stores would be dedicated to reviving Britain's denuded high streets.

That, of course, is about as likely to happen as one of Tesco's machines accepting you've placed your 25g packet of parsley in the bagging area. Alas, Britain's biggest retailer is such a massive part of our economy that it presumably won't be long before someone is explaining that it is too big to fail, in keeping with the vogue for the most rampant capitalists becoming socialists in their many hours of need.

Putting Growth In Its Place

It has to be but a means to development, not an end in itself

Jean Dreze ,  Amartya Sen

Is India doing marvellously well, or is it failing terribly? Depending on whom you speak to, you could pick up either of those answers with some frequency. One story, very popular among a minority but a large enough group—of Indians who are doing very well (and among the media that cater largely to them)—runs something like this. “After decades of mediocrity and stagnation under ‘Nehruvian socialism’, the Indian economy achieved a spectacular take-off during the last two decades. This take-off, which led to unprecedented improvements in income per head, was driven largely by market initiatives. It involves a significant increase in inequality, but this is a common phenomenon in periods of rapid growth. With enough time, the benefits of fast economic growth will surely reach even the poorest people, and we are firmly on the way to that.” Despite the conceptual confusion involved in bestowing the term ‘socialism’ to a collectivity of grossly statist policies of ‘Licence raj’ and neglect of the state’s responsibilities for school education and healthcare, the story just told has much plausibility, within its confined domain.

But looking at contemporary India from another angle, one could equally tell the following—more critical and more censorious—story: “The progress of living standards for common people, as opposed to a favoured minority, has been dreadfully slow—so slow that India’s social indicators are still abysmal.” For instance, according to World Bank data, only five countries outside Africa (Afghanistan, Bhutan, Pakistan, Papua New Guinea and Yemen) have a lower “youth female literacy rate” than India (World Development Indicators 2011, online). To take some other examples, only four countries (Afghanistan, Cambodia, Haiti, Myanmar and Pakistan) do worse than India in child mortality rate; only three have lower levels of “access to improved sanitation” (Bolivia, Cambodia and Haiti); and none (anywhere—not even in Africa) have a higher proportion of underweight children. Almost any composite index of these and related indicators of health, education and nutrition would place India very close to the bottom in a ranking of all countries outside Africa.

Growth and Development

So which of the two stories—unprecedented success or extraordinary failure—is correct? The answer is both, for they are both valid, and they are entirely compatible with each other. This may initially seem like a bit of a mystery, but that initial thought would only reflect a failure to understand the demands of development that go well beyond economic growth. Indeed, economic growth is not constitutively the same thing as development, in the sense of a general improvement in living standards and enhancement of people’s well-being and freedom. Growth, of course, can be very helpful in achieving development, but this requires active public policies to ensure that the fruits of economic growth are widely shared, and also requires—and this is very important—making good use of the public revenue generated by fast economic growth for social services, especially for public healthcare and public education.

The minority of the better-off forgets that even after 20 years of growth, India’s among the world’s poorest nations.

We referred to this process as “growth-mediated” development in our 1989 book, Hunger and Public Action. This can indeed be an effective route to a very important part of development; but we must be clear about what can be achieved by fast economic growth on its own, and what it cannot do without appropriate social supplementation. Sustainable economic growth can be a huge force not only for raising incomes but also for enhancing people’s living standards and the quality of life, and it can also work very effectively for many other objectives, such as reducing public deficits and the burden of public debt. These growth connections do deserve emphasis, not only in Asia, Africa and Latin America, but also very much in Europe today, where there has been a remarkable lack of understanding of the role of growth in solving problems of debt and deficit. There is a tendency to concentrate only on draconian restrictive policies to cut down public expenditure, no matter how essential and no matter how these policies kill the goose that lays the golden egg of economic growth. There is a neglect of the role of economic growth in economic and financial stability in the European debate, with its focus only on cutting public expenditure to satisfy the market and to obey the orders of credit rating agencies.
Yet it is also important to recognise that the impact of economic growth on living standards is crucially dependent on the nature of the growth process (for instance, its sectoral composition and employment intensity) as well as of the public policies—particularly relating to basic education and healthcare—that are used to enable common people to share in the process of growth. There is also, in India, an urgent need for greater attention to the destructive aspects of growth, including environmental plunder (e.g. through razing of forests, indiscriminate mining, depletion of groundwater, drying of rivers and massacre of fauna) and involuntary displacement of communities—particularly adivasi communities—that have strong roots in a particular ecosystem.

The European debate focuses only on curbing public spend, ignoring the role of economic growth in financial stability.

India’s growth achievements are indeed quite remarkable. According to official data, per capita income has grown at a compound rate of close to five per cent per year in real terms between 1990-91 and 2009-10. The more recent rates of expansion are faster still: according to Planning Commission estimates, the growth rate of GDP was 7.8 per cent in the Tenth Plan period (2002-03 to 2006-07) and is likely to be around 8 per cent in the Eleventh Plan period (2007-08 to 2011-12). The “advance estimate” for 2010-11 is 8.6 per cent. These are, no doubt, exceptional growth rates—the second-highest in the world, next to China. These dazzling figures are, understandably, causing some excitement, and were even described as “magic numbers” by no less than Lord Meghnad Desai, who argued, not without irony, that whatever else happens, “the government can still sit back and say 8.6 per cent”. 

India does need rapid economic growth, if only because average incomes are so low that they cannot sustain anything like reasonable living standards, even with extensive income redistribution. Indeed, even today, after 20 years of rapid growth, India is still one of the poorest countries in the world, something that is often lost sight of, especially by those who enjoy world-class living standards thanks to the inequalities in the income distribution. According to World Development Indicators 2011, only 16 countries outside Africa had a lower “gross national income per capita” than India in 2010: Afghanistan, Bangladesh, Cambodia, Haiti, Iraq, Kyrgyzstan, Lao, Moldova, Nepal, Nicaragua, Pakistan, Papua New Guinea, Tajikistan, Uzbekistan, Vietnam and Yemen. This is not exactly a club of economic superpowers.

Bangladesh and Nepal do not have India’s per capita income but have vastly improved indices.

Having said this, it would be a mistake to “sit back” and rely on economic growth per se to transform the living conditions of the unprivileged. Along with our discussion of “growth-mediated” development, in an earlier book, we also drew attention to the pitfalls of “unaimed opulence”—the indiscriminate pursuit of economic expansion, without paying much attention to how it is shared or how it affects people’s lives. A good example, at that time (in the late 1980s), was Brazil, where rapid growth went hand in hand with the persistence of massive deprivation. Contrasting this with a more equitable growth pattern in South Korea, we wrote “India stands in some danger of going Brazil’s way, rather than South Korea’s”. Recent experience vindicates this apprehension. Interestingly, in the meantime, Brazil has substantially changed course, and adopted far more active social policies, including a constitutional guarantee of free and universal healthcare as well as bold programmes of social security and economic redistribution (such as Bolsa Familia). This is one reason why Brazil is now doing quite well, with, for instance, an infant mortality rate of only 9 per 1,000 (compared with 48 in India), 99 per cent literacy among women aged 15-24 years (74 per cent in India), and only 2.2 per cent of children below five being underweight (compared with a staggering 44 per cent in India). While India has much to learn from earlier experiences of growth-mediated development elsewhere in the world, it must avoid unaimed opulence—an undependable, wasteful way of improving the living standards of the poor.

India’s Decline in South Asia

One indication that something is not quite right with India’s development strategy is the fact that India has started falling behind every other South Asian country (with the partial exception of Pakistan) in terms of social indicators, even as it is doing so well in terms of per capita income (see table below).

Seeing its neighbours, India’s poor could well wonder what economic growth has got them.

The comparison between Bangladesh and India is a good place to start. During the last 20 years or so, India has grown much richer than Bangladesh: per capita income was estimated to be 60 per cent higher in India than in Bangladesh in 1990, and 98 per cent higher (about double) in 2010. But during the same period, Bangladesh has overtaken India in terms of a wide range of basic social indicators: life expectancy, child survival, fertility rates, immunisation rates, and even some (not all) schooling indicators such as estimated “mean years of schooling”. For instance, life expectancy was estimated to be four years longer in India than in Bangladesh in 1990, but it had become three years shorter by 2008. Similarly, the child mortality rate was estimated to be about 24 per cent higher in Bangladesh than in India in 1990, but it was 24 per cent lower in Bangladesh in 2009. Most social indicators now look better in Bangladesh than in India, despite Bangladesh having barely half of India’s per capita income.

No less intriguing is that Nepal also seems to be catching up rapidly with India, and even overtaking India in some respects. Around 1990, Nepal was way behind India in terms of almost every development indicator. Today, social indicators for both countries are much the same (sometimes a little better in India still, sometimes the reverse), in spite of per capita income in India being about three times as high as in Nepal.

To look at the same issue from another angle, Table 2 displays India’s “rank” among South Asia’s six major countries (excluding tiny Maldives), around 1990 as well as today (more precisely, in the latest year for which comparable international data are available). As expected, in terms of per capita income, India’s rank has improved—from fourth (after Bhutan, Pakistan and Sri Lanka) to third (after Bhutan and Sri Lanka). But in most other respects, India’s rank has worsened, in fact, quite sharply in many cases. Overall, India had the best social indicators in South Asia in 1990, next to Sri Lanka, but now looks second-worst, ahead of only Pakistan. Looking at their South Asian neighbours, the Indian poor are entitled to wonder what they have gained—at least so far—from the acceleration of economic growth.

India and China

One of the requirements of successful growth-mediated development is the skilful use of the opportunities provided by increasing public revenue. There are interesting and important contrasts in the policies followed by different countries in this respect. Since China is often cited by advocates of a single-minded focus on economic growth, it is interesting to compare what China does with what India has been doing. China makes much better use of the opportunities offered by high economic growth to expand public resources for development purposes. For example, government expenditure on healthcare in China is nearly four times that in India (after adjusting for “purchasing power parity”—the gap is even larger otherwise). China does, of course, have a larger population and a higher per capita income than India, but even as a ratio of GDP, public expenditure on health is much higher in China (about 2.3 per cent) than in India (around 1.4 per cent).

The RTI Act may not apply to information with private corporations but it can help contain the state-corporate nexus.

As Table 1 illustrates, China has much higher values of most social indicators of living standards, such as life expectancy (73 years in China and 64 years in India), infant mortality rate (16 per thousand in China and 48 in India), mean years of schooling (estimated to be 7.6 years in China, compared with only 4.4 years in India), or the coverage of immunisation (very close to universal in China but only around two-thirds in India, for DPT and measles). While India has nearly caught up with China in terms of the rate of economic growth, it seems quite far behind China in terms of the use of public resources for social support, and correspondingly, it has not done nearly as well in translating growth into rapid progress of social indicators. While there are also, undoubtedly, other factors behind the China-India contrast, the differing use of the fruits of growth for social support would seem to be an important influence in this contrasting picture.

It is not at all our purpose to argue that India should learn from China in every respect. India has reasons to value its democratic institutions. Even with all their limitations, these institutions allow for a wide variety of voices to be heard, and facilitate significant opportunities for various forms of public participation in governance. There are, of course, many failings of Indian democracy (which we have discussed in our writings), but there are big democratic achievements as well, and also the hindrances can be addressed through democratic battles to remove them. If China officially executes more people in a week than India has done since Independence (and this is true of a shockingly large number of weeks every year in China), this comparison, like many others involving legal and human rights of citizens, is not to India’s disadvantage. If there is something to learn from China, especially about how to ensure that the fruits of economic growth are more widely shared, then that is a case for learning from what there is to learn, not a case for blind imitation.

Not even one of the 315 editors and senior leaders of the print and electronic media in a survey were SC or ST.

The China-India contrast does, however, raise another interesting question: could it be that India’s democratic system is a barrier to using the fruits of economic growth for the purpose of enhancing health, education and other aspects of “social development”? In addressing this question, there is some possibility of a sense of nostalgia. When India had a very low rate of economic growth, a common argument coming from the critics of democracy was that democracy was hostile to fast economic growth. It was hard, at that time, to convince the anti-democratic advocates that fast economic growth depends on the friendliness of the economic climate, rather than on the fierceness of political systems. That debate on the alleged contradiction between democracy and economic growth has now ended (not least because of the high economic growth rates of democratic India), but a similar scepticism about democracy seems to be now emerging, suggesting an alleged inability of democratic systems to pursue public health, public education and other socially supportive arrangements.

It is important in this context to understand how democratic decisions emerge and how policies get adopted. What a democratic system achieves depends greatly on the issues that are politicised, which contributes to their advancement. Some issues are extremely easy to politicise, such as the calamity of a famine—and as a result famines tend to stop abruptly with the establishment of a democratic political system. But other issues—less spectacular and less immediate—present a much harder challenge. Using democratic means for remedying inadequate coverage of public healthcare, non-extreme undernourishment, or inadequate opportunities for school education demands more from democratic practice—more vigour and much more range.

India-China comparison tends to focus on the horse race of relative rates of overall growth.

Authoritarian systems can change their policies very quickly, when the leaders want that, and it is to the credit of the Chinese political leaders that they have focused so much on social interventions in education, healthcare and other supportive mechanisms to advance the quality of life of the Chinese people. But authoritarianism does not, of course, provide any kind of guarantee that the social commitments will emerge (they clearly have not in North Korea or Burma), or that they would invariably be stable and non-fragile (there have been sharp variations in the past even in China, including its having the largest famine in world history during the failure of the Great Leap Forward initiative). Even China’s commitment to broad-based public healthcare has had ups and downs, and came close to being undone: the coverage of the rural cooperative medical system crashed from 90 per cent to 10 per cent between 1976 and 1983 (when market-oriented reforms were initiated), and stayed around 10 per cent for a full 20 years. During this period of abdication of state responsibility for healthcare in China, the progress of health-related indicators (such as life expectancy and child survival) slowed down sharply. This led eventually to another U-turn, around 2004-5, when the rural cooperative medical system was rebuilt, with the coverage rising again to 90 per cent or so within three years (Shaoguang Wang, ‘Double Movement in China’, Economic and Political Weekly, Dec 27, 2008).

You call this education? A government school in Lucknow. (Photograph by Nirala Tripathi)

There is, in fact, no real barrier in India in combining multi-party democratic governance with active social intervention. But what would be needed is much greater public engagement with the central demands of justice and development through more vigorous democratic practice. The development of the welfare state in Europe has many lessons to offer here. As it happens, public debate is quite powerful in India, but the range of engagement has often been quite limited. The India-China comparisons tend to concentrate mostly on the horse race of relative rates of overall economic growth rather than the variations in mediation for development. Underlying this dialogic narrowness, there is a social picture. A big part of the Indian population—a fairly small minority but still quite large in absolute numbers—has been doing very well indeed, through the process of high growth alone; they do not depend on social mediation. In contrast, more vigorous mediation would be very important for other Indians—many more, in fact—whose lives are affected by ill health, undernourishment, lack of healthcare and other deprivations.

Power Imbalances, Old and New

The neglect of elementary education, healthcare, social security and related matters in Indian planning fits into a general pattern of pervasive imbalance of political and economic power that leads to a massive neglect of the interests of the unprivileged. Other glaring manifestations of this pattern include disregard for agriculture and rural development, environmental plunder for private gain with huge social losses, large-scale displacement of rural communities without adequate compensation, and the odd tolerance of human rights violations when the victims come from the underdogs of society.

But China makes much better use of growth to extend public resources for development.

None of this is entirely new, and much of it reflects good old inequalities of class, caste and gender that have been around for a long time. For instance, the fact that not even one of the 315 editors and other leading members of the printed and electronic media in Delhi surveyed recently by the Centre for the Study of Developing Societies belonged to a scheduled caste or scheduled tribe, and that at the other end, 90 per cent belonged to a small coterie of upper castes that make up only 16 per cent of the population, obviously does not help to ensure that the concerns of Dalits and adivasis are adequately represented in public debates. Nor is India’s male-dominated Lok Sabha (where the proportion of women has never crossed 10 per cent so far) well placed to address the concerns of women—not only gender issues, but also other social issues in which women may have a strong stake. A similar point applies to rural-urban disparities: a recent study found that rural issues get only two per cent of the total news coverage in national dailies.
Some of these inequalities are diminishing, making it easier for disadvantaged groups to gain a voice in the system (even the proportion of women in the Lok Sabha, abysmally low as it is, is about three times as high today as it was 50 years ago). However, new or rising inequalities are also reinforcing the vicious circle of disempowerment and deprivation. For instance, the last 20 years have seen a massive growth of corporate power in India, a force that is largely driven—with some honourable exceptions—by unrestrained search for profits. The growing influence of corporate interests on public policy and democratic institutions does not particularly facilitate the reorientation of policy priorities towards the needs of the unprivileged.

The growing influence of corporate interests on public policy is not reorienting policy priorities towards the unprivileged.

It is important to recognise the influence of elements of the corporate sector on the balance of public policies, but it would be wrong to take that to be something like an irresistible natural force. India’s democratic system offers ways and means of resisting the new biases that may emanate from the pressure of business firms. One instructive example both of a naked attempt to denude an established public service and of the possibility of defeating such an attempt is the long saga of attempted takeover of India’s school meal programme by biscuit-making firms. The “midday meal” programme, which provides hot cooked meals prepared by local women to some 120 million children, with a substantial impact on both nutrition and school attendance, had been eyed for many years by food manufacturers, especially the biscuits industry.

A few years ago, a “Biscuit Manufacturers’ Association” (BMA) launched a massive campaign for the replacement of cooked school meals with branded biscuit packets. The BMA wrote to all members of Parliament, asking them to plead the case for biscuits with the minister concerned and assisting them in this task with a neat pseudo-scientific precis of the wonders of manufactured biscuits. Dozens of MPs, across most of the political parties, promptly obliged by writing to the minister and rehashing the BMA’s bogus claims. According to one senior official, the ministry was “flooded” with such letters, 29 of which were obtained later under the Right to Information Act. Fortunately, the proposal was firmly shot down by the ministry after being referred to state governments and nutrition experts, and public vigilance exposed what was going on. The minister, in fact, wrote to a chief minister who sympathised with the biscuit lobby: “We are, indeed, dismayed at the growing requests for introduction of pre-cooked foods, emanating largely from suppliers/marketers of packaged foods, and aimed essentially at penetrating and deepening the market for such foods” (Hindustan Times, Apr 14, 2008).

The bigger battle is still on. The BMA itself did not give up after being rebuked by the Union minister for human resource development. It proceeded to write to the Union minister for women and child development, with a similar proposal for supplying biscuits to children below the age of six years under the Integrated Child Development Services (ICDS). Other food manufacturers are also on the job, and despite much vigilance and resistance from activist quarters (and the Supreme Court), they seem to have made significant inroads into child feeding programmes in several states.

Similar concerns apply in other fields of social policy. For instance, the prospects of building a public healthcare system in India are unlikely to be helped by the growing influence of commercial insurance companies, very active in the field of health. India’s health system is already one of the most privatised in the world, with predictable consequences—high expenditure, low achievements and massive inequalities. Yet, there is much pressure to embrace this “American model” of healthcare provision, despite the international recognition in the health community of its comparatively low achievement and significantly high cost.

Rosy picture Himachal leads the way in social indices. (Photograph by Tribhuvan Tiwari)

However, recent events have also shown the possibility of fighting back, not just in terms of winning isolated battles against inappropriate corporate influence, as happened with the biscuits lobby, but also in terms of building institutional safeguards against abuses of corporate power. The Right to Information Act, for instance, though not directly applicable to information held by private corporations, is a powerful means of watching and containing the state-corporate nexus, as the biscuits story illustrates. Regulations and legislations pertaining to corporate funding of political parties, corporate social responsibility, financial transparency, environmental standards, and workers’ rights also have an important role to play in disciplining the corporate sector.

The Case for a Comprehensive Approach

The need for growth-mediated development has not been completely ignored in Indian policy debates. The official goal of “inclusive growth” could even claim to have much the same connotation. However, the rhetoric of inclusive growth has gone hand in hand with elitist policies that often end up promoting a two-track society whereby superior (“world-class”) facilities are being created for the privileged, while the unprivileged receive second-rate treatment, or are left to their own devices, or even become the target of active repression—as happens, for instance, in cases of forcible displacement without compensation, with a little help from the police. Social policies, for their part, remain quite restrictive (despite some significant, hard-won initiatives such as the National Rural Employment Guarantee Act), and are increasingly steered towards quick fixes such as conditional cash transfers. Their coverage, in many cases, is also sought to be confined to “below poverty line” (BPL) families, a narrowly defined category that tends to shrink over time as per capita incomes increase, which may even look like a convenient way of ensuring that social welfare programmes are “self-liquidating”.

In Delhi, Rs 30 a person a day can get a kg of rice and a one-way bus ticket three stops down.

Cash transfers are increasingly seen as a potential cornerstone of social policy in India, often based on a distorted reading of the Latin American experience in this respect. There are, of course, strong arguments for cash transfers (conditional or unconditional) in some circumstances, just as there are good arguments for transfers in kind (such as midday meals for school children). What is remarkably dangerous, however, is the illusion that cash transfers (more precisely, “conditional cash transfers”) can replace public services by inducing recipients to buy health and education services from private providers. This is not only hard to substantiate on the basis of realistic empirical reading; it is, in fact, entirely contrary to the historical experience of Europe, America, Japan and East Asia in their respective transformation of living standards. Also, it is not how conditional cash transfers work in Brazil or Mexico or other successful cases today.

In Latin America, conditional cash transfers usually act as a complement, not a substitute, for public provision of health, education and other basic services. The incentives work for their supplementing purpose because the basic public services are there in the first place. In Brazil, for instance, basic health services such as immunisation, antenatal care and skilled attendance at birth are virtually universal. The state has done its homework—almost half of all health expenditure in Brazil is public expenditure, compared with barely one quarter (of a much lower total of health expenditure) in India. In this situation, providing incentives to complete the universalisation of healthcare may be quite sensible. In India, however, these basic services are still largely missing, and conditional cash transfers cannot fill the gap.

Poor initiatives Jairam and Montek discussing the poverty line at a press conference. (Photograph by Jitender Gupta)

The pitfalls of “BPL targeting” have become increasingly clear in recent years. First, there is no reliable way of identifying poor households, and the exclusion errors are enormous: at least three national surveys indicate that, around 2004-05, about half of all poor households in rural India did not have a “BPL card”. Second, India’s poverty line is abysmally low, so that even if all the BPL cards were correctly and infallibly allocated to poor households, large numbers of people who are in dire need of social support would remain excluded from the system. In 2009-10, for instance, the official poverty line in Delhi was around Rs 30 per person per day. This is just about enough to buy one kilogram of rice and a one-way bus ticket that would take you three stops down the road. Third, BPL targeting is extremely divisive, and undermines the unity and strength of public demand for functional social services, making a collaborative right into a divisive privilege.

The power of comprehensiveness in social policy is evident not only from international and historical experience, but also from contemporary experience in India itself. In at least three Indian states, universal provision of essential services has become an accepted norm. Kerala has a long history of comprehensive social policies, particularly in the field of elementary education—the principle of universal education at public expense was an explicit objective of state policy in Travancore as early as 1817. Early universalisation of elementary education is the cornerstone of Kerala’s wide-ranging social achievements.

Less well known, but no less significant, is the gradual emergence and consolidation of universalistic social policies in Tamil Nadu (see ‘Understanding Public Services in Tamil Nadu’ by Vivek S., PhD thesis, 2010, Syracuse University, and the literature cited there). Tamil Nadu was the first state to introduce free and universal midday meals in primary schools. This initiative, much derided at that time as a “populist” programme, later became a model for India’s national midday meal programme, widely regarded today as one of the best “centrally sponsored schemes”. The state’s pioneering efforts in the field of early child care, under the ICDS, has made great strides towards the provision of functional anganwadis (child care centres), accessible to all, in every habitation. Tamil Nadu, unlike most other states, also has an extensive network of lively and effective healthcare centres, where people from all social backgrounds can get reasonably good healthcare, free of cost. NREGA, another example of universalistic social programme, is also doing well in Tamil Nadu: employment levels are high (with about 80 per cent of the work going to women), wages are usually paid on time and leakages are relatively small. Last but not the least, Tamil Nadu has a universal public distribution system (PDS), in both rural and urban areas. Tamil Nadu’s pds supplies not only foodgrains but also oil, pulses and other food commodities, with astonishing regularity and minimal leakages.

Protests against Vedanta in Orissa

Himachal Pradesh began this journey much later than Kerala and Tamil Nadu, but is catching up very quickly. This is most evident in the field of elementary education: starting from literacy levels similar to the dismal figures for Bihar or Uttar Pradesh around the time of India’s Independence, Himachal Pradesh caught up with the highest-performing Kerala within a few decades. This “schooling revolution” was based almost entirely on a policy of universal provision of government schools, and even today, elementary education in Himachal Pradesh is overwhelmingly in the public sector. Like Tamil Nadu, Himachal Pradesh has a well-functioning pds, providing not only foodgrain but also pulses and oil and covering both “BPL” (Below Poverty Line) and “APL” (Above Poverty Line) families. Himachal Pradesh has also followed comprehensive principles not only in the provision of essential social services (including schooling facilities, healthcare and child care) but also in the provision of basic amenities such as roads, electricity, drinking water and public transport. For instance, in spite of adverse topography and scattered settlements, 98 per cent of Himachali households had electricity in 2005-6.

It is perhaps not an accident that Kerala, Tamil Nadu and Himachal Pradesh also tend to have the best social indicators among all major Indian states. For instance, a simple index of children’s health, education and nutrition achievements clearly places these three states at the top (Dreze, R. Khera, S. Narayanan, 2007, ‘Early Childhood in India: Facing the Facts’, Indian Journal of Human Development, 1(2), Jul-Dec 2007). Despite wide historical, cultural and political differences, they have converged towards a similar approach to social policy, and the results are much the same too. There is a crucial lesson here for other Indian states, and indeed for the country as a whole.

A Concluding Remark

We hope that the puzzle with which we began is a little clearer now. India’s recent development experience includes both spectacular success as well as massive failure. The growth record is very impressive, and provides an important basis for all-round development, not least by generating more public revenue (about four times as much today, in real terms, as in 1990). But there has also been a failure to ensure that rapid growth translates into better living conditions for the Indian people. It is not that they have not improved at all, but the pace of improvement has been very slow—even slower than in Bangladesh or Nepal. There is probably no other example in the history of world development of an economy growing so fast for so long with such limited results in terms of broad-based social progress.

There is no mystery in this contrast, or in the limited reach of India’s development efforts. Both reflect the nature of policy priorities in this period. But as we have argued, these priorities can change through democratic engagement—as has already happened to some extent in specific states. However, this requires a radical broadening of public discussion in India to development-related matters—rather than keeping it confined to simple comparisons of the growth of the gnp, and naive admiration (implicit or explicit) of the high living standards of a relatively small part of the population. An exaggerated concentration on the lives of the minority of the better-off, fed strongly by media interest, gives an unreal picture of the rosiness of what is happening to Indians in general, and stifles public dialogue of other issues. Imaginative democratic practice, we have argued, is essential for broadening and enhancing India’s development achievements.

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Jean Dreze is Visiting Professor, Department of Economics, Allahabad University. Nobel laureate Amartya Sen is Lamont University professor and Professor of Economics and Philosophy at Harvard University.

What Leads to SUCCESS - 8 STEPs from TED

The relentless pursuit of productivity is socially divisive, environmentally destructive and doesn't make us any happier

Happiness: the price of economic growth

• 
• • Andrew Simms
  • guardian.co.uk, Monday 1 August 2011 21.00 BST
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Family and friends ranked highest in a survey of what mattered most to people. Photograph: Alamy
Last week, on the same day that we learned economic growth in the UK was running at a miserly 0.2%, the Office for National Statistics launched a new programme of work on measuring human well-being. The latter was the result of a month-long survey in which the public were asked what mattered to them. To barely disguised yawns, the answers that came back were, "family, friends, health, financial security, equality and fairness in determining well-being", according to national statistician Jill Matheson. So we were caught on one hand between a low-grade, generalised fear that people weren't buying enough stuff to keep the economy going, and being told on the other hand something we already knew deep down: that a better quality of life stems not from consuming more, but from a range of mostly immaterial things. Crucially, in a society like the UK, enjoyment of these does not correlate in any positive, straightforward manner with economic growth. On the contrary, some policies used to promote growth can directly undermine a range of the factors that do contribute to well-being, such as the time we need to spend with family, health, equality and fairness. Depending on how it is pursued, economic growth can be jobless, socially divisive and environmentally destructive. It can, in other words, be "uneconomic growth". In a quite extraordinary intervention, as part of the government's desire to cut spending on public services, Oliver Letwin, the coalition's policy minister, recently suggested that "fear" of losing your job should be used to increase the productivity of workers. This approach appears to be wrong on so many levels that I first thought it had to be a spoof. It will do nothing for growth; it chronically misunderstands how to get the best out of people; it contradicts the prime minister's own public conversion to the importance of well-being at work and, perhaps most importantly, it misunderstands real productivity. In professions like health and education, if you drive out costs (ie people) you get a worse service. Quality of care and nurturing depends to a huge degree on attentive human contact in a convivial context. Subject people to old-fashioned Taylorist production-line management, coupled with the intimidation of a threatened job loss, and nobody wins. It is wrong, also, because buried in this conundrum, may also be the secret of how, in the long term, we align our livelihoods and lifestyles with the limited planet on which we depend. This is about designing an economy of better, not more. And that suggests fundamentally rethinking what we mean by efficiency and productivity. An economy that is more based on services, and in which we are sharing, repairing, recycling, reusing, learning, collaborating and coproducing services (that's the jargon, at any rate – it just means give and take) is one in which, ultimately, we may have more people doing fewer things in formal paid employment. In that context, we might have more time for "family, friends, health", and all the things that do add to our well-being. The big objection is that growth is needed for jobs, and that these are what we need for financial security. On one level, yes, of course. However, financial security is also a function of equality and fairness, and given other economic problems (such as that many of the jobs created in a push for growth alone do not deliver financial security) as well as environmental constraints, there may be more reliable paths to find security. Inequality both creates insecurity and raises a society's costs in relation to health problems, crime and almost everything else. Redistribution of income and access to employment, therefore, compared with generalised, unequal and resource-hungry growth, can be quicker, less destructive and a more effective way of delivering security. A sensible approach to enhance economic activity in a way that met many needs would be to take Vince Cable's suggestion of another round of quantitative easing, but instead of just spraying a general injection of cash via the banks (who take a cut) into the economy, to channel it into the productive low-carbon economy – a sort of green easing. Sadly, that doesn't look likely to happen any time soon. For now the captain of this ship insists we're all heading south, when there are all kind of indicators telling us that our real needs can only be met by going north.

• guardian.co.uk © Guardian News and Media Limited 2011

If we care about the BBC, we must fight to defend it

 

Johann Hari

The Tories' plan to scrap impartiality would mean Sky mutating into Fox News

There is a scandal in British politics that is passing almost unnoticed in the night. It will alter the ecology of our politics - and our culture - in ways that will damage us for decades to come.
 
There is one thing most British people think we do best: broadcasting. A recent ICM poll found that 77 per cent think the BBC is an institution to be proud of, and 63 per cent say it is good value for money. This makes the BBC by a long way the most popular public institution in Britain - yet both main political parties are lining up to happy-slap Auntie. The link between the licence fee and the Beeb is about to be broken by a Labour government, and a Tory government will sweep in and widen the gap, while unleashing a snarling pack of Fox News-style hounds across the rest of the channels. And for what? To win the favour of a foreign right-wing billionaire.
 
Let's start with the good news. The BBC works. For just £2.60 a week, the British get a package of the best television and radio in the world. We get the best comedies, the best drama and the best news. There's a reason why we have won seven of the past 10 international Emmies, and the BBC News website is the most popular on earth. As soon as he took power, Nicolas Sarkozy asked how he could make French broadcasting more like ours. It is a model for the world of how to create journalism that isn't contaminated by either corporate advertisers and proprietors on one side, or state ownership on the other. Three independent polls have found that a large majority of Brits would happily pay more for it.
 
Of course we can all find some parts of its output we don't like. I can't stand Jeremy Clarkson, Andrew Neil's blatant editorialising, Chris Moyles, or bogus questions about whether Gordon Brown is popping pills. A right-wing bias still seeps into a lot of its news coverage: see the new book Newspeak by David Edwards and David Cromwell for details. But other people will loathe the parts I love - In Our Time, Start the Week, EastEnders, Question Time, Lauren Laverne, Mark Kermode, BBC4. It's a package: it's impossible for every part to delight every individual. But when there are so many riches, we almost all find something to enjoy: a London Business School found that 99 per cent of us use it every week.
 
Far from becoming outdated, the BBC model is more necessary than ever. Commercial television is losing its ability to produce quality programmes, fast. Advertising money is leaking away to the internet: this week, for the first time, online advertising overtook TV ads in Britain. Revenues are expected to fall by 20 per cent in the next decade, and to continue spiralling after that. As more of us get digital packages that make it possible to record programmes and fast-forward through the ads, it will only get worse. Budgets for shows on commercial channels are in freefall. We won't get good programmes for nothing again. The BBC is the simplest answer, and we are overwhelmingly happy to pay it.
 
So why would our politicians start trashing this system? Rupert Murdoch has long despised the BBC, for the simple reason that although it works well for us, it works badly for him. He can't step in and make a profit by providing his import-filled alternatives, because we're happy with what we have. So he has launched a long campaign through his newspapers to delegitimise the BBC. They relentlessly present it as poor value, biased to the left, and bloated. It's not working with the public: the BBC is 9 per cent more popular today than a decade ago. But he is determined to shrink the BBC to a feeble service like PBS in the US, producing worthy programmes watched by a handful.
 
Despite losing the public argument, Murdoch has another way to exert influence: his newspapers have long applauded the politicians who most serve his interests, and savaged the politicians who lag behind. It's part of a long pattern that stretches across continents. In the debate about The Sun's endorsement of David Cameron this week, many naive observers have acted as if the newspaper is a pressure group with only the interests of the British people at heart, rather than the arm of a corporate machine acting bluntly in its own self-interest.
 
The Labour government began the bidding for Murdoch's favour by proposing - for the first time - to break the link between the licence fee and the BBC. From now on, a chunk of it will be given to other broadcasters like Channel 4 and regional news providers. At first it sounds like a small and reasonable step - it will go to support valuable programming - but it begins a process that will bleed the BBC. You won't be able to see so clearly where your money is going. Gradually, more and more money will be dispersed from the BBC by a Tory government eager to keep Murdoch's favour, and the corporation will shrink back. As it provides less easily traceable value, it will be harder to defend the license fee itself - and Murdoch will win.
 
The Tories then upped the bidding. This summer Ofcom - Britain's broadcasting regulators - found Murdoch's BSkyB guilty of effectively pricing other companies out of the pay-TV market. David Cameron responded by saying he will quietly put Ofcom to sleep, scrapping most of its regulations. Then he gave Murdoch another bauble he has craved for decades: he is going to scrap all the political impartiality rules covering British television (except on the BBC). If Cameron succeeds, Sky News will mutate into Fox News, pumping its poison 24/7. Murdoch duly endorsed the Tories.
 
This quid pro quo is unspoken - there are no meetings in darkened rooms - but Murdoch is quids in nonetheless. His son James Murdoch has been at the forefront of trying to rationalise these grabs for profit. He called the impartiality rules "an impingement on the right to free speech". This is based on a basic error. Your right to free speech - which is the closest thing I have to a sacred belief - doesn't include the right to speak wherever you want. I don't have a primetime show on BBC1 to expound my views, but that doesn't mean I'm being censored. Your right to say what you want doesn't entail a right to say it on the public airwaves. They are a shared public resource, and it is right to regulate them in the public interest.
 
James Murdoch then claimed the BBC "penalises the poorest in our society with regressive taxes and policies". This is hilarious. If James Murdoch is against regressive taxes, why has News International - which makes billions - paid no net taxation in Britain for more than a decade? Why do his newspapers vehemently oppose moves to tax the rich more and the poor less?
After this argument belly-flopped, he claimed the only "guarantor of independence [in broadcasting] is profit". Perhaps he should visit Italy, where the Prime Minister, Silvio Berlusconi, owns half the TV channels, and makes them support his political campaigns.
Enough. We can't tolerate a clandestine campaign to trash one of our great national institutions, just so a foreign billionaire can make more profit. Where are these politicians' spines? Where is their patriotism?
 
j.hari@independent.co.uk [j.hari@independent.co.uk]

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