A LIBERAL BUDGET

 

The INDIAN LIBERAL GROUP (ILG) has presented a Liberal Budget in 2004. Online version is available here. A Word version (380KB) is available here.

 

We can do better than this

by Sanjeev Sabhlok (July-August 2004)

 

Today, on the way home, I was reviewing my learnings from over three years of working in Australia, and comparing what I did in India till end-2000, with what I do now, for a living.

 

My job as a project manager for safety in Victorian schools requires me to ensure among others things that pulley systems are installed in all classrooms to ensure that no teacher has to climb on a chair or table to hang posters or pictures on the walls of classrooms, and to ensure that every television set in the classrooms has a proper trolley to prevent teachers from injuring their backs.

 

The Victorian government spends close to a million dollars - three crore rupees, EACH! on some children every year (children with significant physical and intellectual disability). Small but beautiful playgrounds built for a few autistic children cost $200,000 (sixty lakhs) each.

 

While I work with and towards providing such unimaginable (in India) features and services to children in Australia, I happened to be Secretary of Education in a state in India where school buildings in villages either did not exist or were built of material such as bamboo that simply disappeared, or were built with fictitious cement (stolen by chief ministers and officials).

 

I live in a time warp. My life so far has been completely 'crazy'.

 

The developed countries are continuously advancing education, gaining huge productivity and technological advantages over the developing countries.

 

At this point, if India is ever to achieve parity (and we hope to achieve parity at some point in the future), we cannot achieve adequate competitive momentum with the target of 5 years of education among our masses. That would have sufficed for an industrial-type economy, 100 years ago. Not today.

 

This is very clearly a post-industrial age. Robots and computer-design are now making unskilled, stone-age humans irrelevant for most production. Today a single farmer with a wife in Australia produces more grain than nearly 1,000 Indian farmers. In another 20 years, that ratio would increase, if our farmers are unable to shift to the high-end of the market. Our 238 million ill-educated children will need to leave their villages and move on. Open markets will flood India with cheap grain. They need to be equipped with high quality education. Let us foresee the future. Competition across the world is rapidly changing. We need to upskill.

 

When our children do not even have a wall in a school let alone a television, and when over 200 children die in a single fire in a school, how do we have the audacity to say that India is shining? Beats me completely. How far are we from anything close to development! Is it not time that we call a spade a spade and stop thinking that we are busy catching up with the west.

 

23,80,00,000 BRAINS ARE ROTTING RIGHT NOW IN INDIA , at least 2.4 crores with IQ greater than 120:

 

When it is recognised in the liberal budget document that 238 million children (nearly 8 times the entire Australian population) in India in the age group of six to 14 were not in school as of January 2003, we also need to acknowledge that failure to equip these children - RIGHT NOW!  when they are growing -  with relevant skills will be our biggest failure.  At page 13, Gokhale is cited as having said, "I want our men and women ... to have opportunities to grow to the full height of their stricture." At page iii-a S.V.Raju says, "It is the task of a Liberal State to provide [all human beings] opportunities for growth." It is repeated at least twice that, "Man is the measure of all things". So, in addition to being unexploited diamonds, these 238 million children MUST be provided opportunities for achieving their potential. That is a liberal's commitment. They cannot wait.  All our children must understand how complex democracies function. All children must demand accountability from government whey they grow up.

 

The Liberal Budget - a good start

The Liberal budget of Raju's team has some excellent things in its favour. Throwing open the economy completely to competition is crucial. Taxing everyone through building a strong (primarily outsourced) taxation machinery and simplify the laws is crucial. A negative income tax should have been mentioned (eg. http://www.indiapolicy.sabhlokcity.com/debate/Notes/NIT-paper.PDF) as a planned 'weaning' off the EGS etc.  Building infrastructure is crucial - and is mentioned.

 

I notice some outstanding comments by different writers, but in the end the budget seems to be a mere tinkering around the edges. There is no clear vision in the Budget for the country.  We are talking of being satisfied in 2007 with five years of universal education in the country. This was achieved by Japan 120 years ago. 

 

We are talking of restraining budgetary spending to previous levels, with slight tinkering within the existing bucket, despite recognising the crucial importance of education.  If we keep in mind that India's budgetary spending proportions are merely calculated on the 'white' economy as a base, in reality our budgetary spending is far lower than even what is shown in the usual figures.

 

1. Raising revenue from sale of land

One major source of revenue seems to be missing from the Liberal budget. The sale of government land can prove to be a significant budgetary resource. Cantonements such as in Delhi, Pune, and many others, can and should be shifted outside the major urban area.  Government lands used for low-density construction for its employees needs to be at least partially sold off and multistoreyed buildings allowed to be built by private builders on lease to government if absolutely necessary; else, as elsewhere in the world, including Australia, government employees need to rent accommodation wherever they can find one, since their wages would be raised sufficiently - on par with the private sector -  to purchase or hire such accommodation.

 

2. Poverty removal

The continuing of schemes like EGS (proposed in the liberal budget) is a disaster. I don't agree with the Liberal budget at all on such things. At the least we need to recognize clearly that a negative income tax (eg. http://www.indiapolicy.sabhlokcity.com/debate/Notes/NIT-paper.PDF) can be used to 'wean’ people off the EGS etc.

 

3. School education

 

Making it our highest priority

We just do not spend money as a nation on educating our people. We do not polish our billion gems to let each individual become a Narayana Murthy. We let their brains rot and give them stones to break with a hammer on our road-sides due to our misplaced concepts of development.

 

I would have liked one single underlying focus: 12 years of education for ALL in five years. No tinkering at the edges of public finance. Privatise school education, fund it by public funds, and make it a HUGE industry. Monitor it carefully, but fund it. If such clarity requires us to borrow, we should borrow. If that requires us to raise taxes, we should do that. Japan spent its entire energy in educating its people between 1870 and 1890. India needs to do that right now. No more dithering with silly economic ideas while the country continues to rot and destroy its only genuine wealth.

 

A fairly high level of education is the basic driver of modern post-industrial economies. Even agriculture is based on significant technology today. No one can even be a plumber or electrician in the West without high school education. On top of that there is advanced vocational learning and apprenticeship. People cannot properly deal with extremely complex modern technology - and innovate at the technological frontier, without a strong grasp of basic science. A country in the 21st century that believes in mere functional literacy is courting disaster. No one needs unskilled labour any more.

 

Let us therefore set ourselves one major goal as a nation - providing 12 years of education to every child as rapidly as we possibly can. We have people waiting to become teachers - paid by private schools. We need to ramp the whole thing up. It can be done.

 

We would not let our own children study only for four years. For them we want a Harvard education. Why do we hesitate in educating every Indian child up to at least year 12? How many Narayana Murthys do we discard into a rubbish heap each year?

 

Education has been clubbed with human development and welfare in the Liberal Budget. That's not an appropriate word. We do not 'develop' our diamondsWe ruthlessly and selfishly mine them. We invest in mines. We borrow money to build our mines. We do that because we know that we will obtain a decent return for our effort.

 

Education is not merely "an important area for human development" (page 18 of the Budget). Human brains are our national diamonds. We must ruthlessly and aggressively "exploit" and mine, these brains - therefore, educating a child is not the same as providing it health care.

 

It is in my selfish interest to educate all Indian children so that a good number will be able to provide my own children - and grand children, with employment. By educating a child we actively liberate wealth for the nation.

 

By the way, as we all know, the poorly educated and illiterate also reproduce rapidly - and increase poverty and squalour. The choice is clear.

 

As a nation we can be penny wise and pound foolish (conservative in fiscal policy, and fail to educate this generation of children) or educate and succeed, with higher incomes and lower population growth rates in the future.

 

I'm convinced that an explicit statement on 12 years of (voluntary) education for every child in India, going forward, is crucial. Bringing this issue into bold perspective with a 'blatantly impossible' target of 12 years of education would pull the current debate out of its idle reverie of 'India shinin g'. Moving towards this target would set off boldly the imperative for private, quality control and management of education.

 

The Liberal flagships would then be: "Greater competition + greater competence = success", "The stone age is history."

 

Resources for education

I suggest we consider this 'crazy' sounding suggestion in the light of where we need to go in the next 20-30 years. There's no harm, and possibly much to be gained by seriously considering the possibility of funding and creating high-quality education for the 238 million children cited in the liberal budget. I believe (no sure evidence, just a gut feel) that properly managed, this investment will have a positive NPV over 30 years.

 

A good number have IQs above 120 but these kids need to be educated. Not every child so educated produces wealth. But a significantly large proportion do so. And do so in great disproportion to the costs of their school education.

 

I did notice a significant increase in education in the Liberal budget, but what galled me was that we fail to recognise very boldly and clearly that our population is our greatest resource (provided we educate it significantly). That is why talking of spending as a percentage of GDP (6%) simply does not send the one single message we need to send.

 

On thinking later, it became clear to me that we should not have to raise taxes to educate people to year 12. It is this generation that will pay for their education, through higher earnings in the future (OECD studies confirm that an increase of one year of average education increases GDP growth significantly, almost by 1% - I suspect that increasing each year of education on such a low base as in India would increase GDP growth even more significantly).

 

It struck me therefore that we should simply be seeking HUGE long term loans, many billions of dollars on 30-year-repayment periods, and convert almost the entire country into a school. If we miss this generation - as we have missed the previous ones, we will be forced once again to provide them with a hammer to break stones for the next 40 years of their life, or to do some such horrendous stone-age thing. This is neither a way to eliminate poverty nor a way to build roads.

 

ie., I have tried to suggest that there is NO resource constraint for educating ALL our children to age 18. Sell land, borrow, or raise taxes. But let us not lose one more generation.

 

At http://liberalpartyofindia.sabhlokcity.com/policies/SBP-policy-education.doc - which we discussed a few weeks ago, we have said the same thing: "SBP believes in strongly strengthening the school education sector in India through increased public funding - with a radically different management methodology, while phasing out public funding of higher education." I now see some need to revise the details of that policy document.

 

Ensuring quality

The government has absolutely no business in the provision of education, whether school or university. Funding is a different matter, and we have discussed this in the past. "The current government's 'promise' to make primary education compulsory is incredibly regressive" (Mohit Satyanand) - and I fully support that view if the government were to actually provide that education, or penalise parents for not sending children to school.

 

Mohit has said, too, that "expenditure on good education has a high return on investment" - I fully agree. So let us agree on the following formulation:

 

"The Liberal budget provides for opportunities of voluntarily self-development to all children to age 18 through private, high quality schooling, that is certified by independent bodies. Funds for this purpose will be provided directly to parents through vouchers to be redeemed by the private school chosen by the parent." (Parth, I do think now that vouchers for such a more general purpose are viable; my doubts related to a pilot that competes with existing elite private schools, but maybe that would be viable too - have not thought this through).

 

I have mentioned (a) the complete privatisation of school education (b) monitoring of education (to ensure quality).

 

The restructuring of the bureaucracy and ministries that I am advocating will get rid of inefficiencies in the system through abolition of irrelevant bureaucratic control - and educational policy could become a part of the infrastructure ministry, for instance, that deals with the work of about 30 existing ministries. The detailed change management plan would of course have to be worked out in great detail.

 

4. Corruption and Competence

The other CRUCIAL aspect -- control of corruption, did not find much mention. I couldn't agree more that minimising opportunities of corruption - by minimising the role of government, is a significant deterrent to corruption - and that has been captured in the liberal budget.

 

I believe that we should be talking more specifically about the reason why 100% of our politicians and up to 80% of our bureaucrats are corrupt - in terms of completely lacking basic integrity. Simply minimising opportunities of corruption is no good. It will only eliminate some corruption. The bulk of the corruption is due to the fact that we pay our politicians close to zilch, 10 times less than Zimbabwe even.

 

Some of the books I purchased in my trip to India early this year have started arriving by ship. I am sharing with you extracts from two chapters of an outstanding book by C P Srivastava, called "Corruption - India's enemy within".  If anyone feels that the proposed "cabinet decisions" I had put up at http://liberalpartyofindia.sabhlokcity.com/cabinet.html were in anyway unjustified, please read these two chapters at http://www.sabhlokcity.com/cps-1.doc (unfortunately this document is pretty large (886KB) since I had to insert some images of graphs).

 

It is extremely important that liberals understand the basic principle: "The erosion [of civil service salaries] was a consequence of a deliberate policy followed for a long time under the mistaken impression that impoverishment of the higher bureaucracy was an essential ingredient of a socialistic pattern of society. (Report of the Fifth Pay Commission, Vol III. Govt. of India Publication. New Delhi, 1997, para 105.5, p. 1574)" 

 

We need to immediately budget for a minimum 10-fold increase in the salaries of all our legislators, and for a state funded electoral process that provides Rs.10 per vote polled to the party that polled the votes.

 

Having said that, I cannot agree with existing members of the IAS being rewarded for their incompetence and corruption by their salaries being raised further. However it is important that the budget explicitly "path" (used as a verb) a complete restructuring of the government as an essential component of reform (the proposals under "Cabinet decisions" talk about this restructure at great length).  We need to introduce a completely new public services management act, that will rid us of incompetents and corrupt at one go. The honest, and competent members of the civil services could potentially increase their salaries by 3-5 times. The others would have to be ejected.

 

But please try to consider what I've been saying since 1998, (see http://www.indiapolicy.sabhlokcity.com/clearinghouse/corruption.html) and what has been also said by Srivastava with a lot of data. This reform will not be significant expenditure in the budget, but has to be a basic plank of reform.  

 

5. Local Government reform

The Manningham Council asking residents near my house of their opinion on improving the beautiful park that sprawls just outside my house. I live in an ordinary part of Melbourne, but there is a beautiful parkland just outside my house, and they want to make it even better! And they ask residents for their opinion. What a difference from the Indian approach. This country is surely shining.

 

Do Delhi residents, for instance, have a hope of receiving such a letter in their lifetime?

 

Do our ministers and bureaucrats realise how far we are from becoming a modern, 'shining' India?

 

Do we, the liberals, realise that?