Reality Check India

Mopping up the remaining free agents – the 6th pay commission

Posted in Uncategorized by realitycheck on August 16, 2008

Unless you are living in a cave – you cant help notice the full page ads from every Union Ministry tom-tomming its achievements. Yes, we are in “poll mode” – where economic sense is thrown into garbage. What use is “economic sense” if it cannot help retain power ?

Mr Manmohan Singh yesterday announced that his government (UPA led by the Congress party) has approved a “windfall pay revision” for central government employees. In fact, the UPA (led by the Congress party) has gone over and beyond the recommendations.

The windfall pay revision, announced on the eve of the country’s 62nd Independence Day, would be implemented from September 1, this year and the government employees would get 32 months’ arrears, that too with significant improvements over the Sixth Pay Commission recommendations.

Source: IE

Sure enough, almost all states are going to “follow” the 6th pay commission report and also go over and beyond it. (Pondy, TN, Haryana, do not fret – the list will be complete)

Even the 6th pay panel led by Jus (Retd) BN Srikrishna is stumped.

With an eye on the next general election, the UPA government gifted its 55 lakh employees an Independence Day pay bonanza of Rs22,131 crore – a move that left even the authors of the Sixth Pay Commission stumped.

With the Union budget already reeling under the combined burdens of oil subsidies, farm loan waivers and high interest costs, the cabinet decided to add to its fiscal woes by approving an average increase of 21% in the salaries of civil and defence staff, a figure that’s even higher than what the Pay Commission headed by Justice (Retd) BN Srikrishna recommended. “We had long discussions on facts and figures with the finance department and economists to see how much elbow room the government had and suggested the best possible increase. Now the government has decided to exceed that. All the best to them,” Justice Srikrishna remarked to DNA.

Source : DNA

If you are lucky enough to be a government employee : please use this calculator to compute your official salary gains http://6pc.in/

So, where does this fit in with our behaviour theory of Indian politics ?

Prima facie, it would appear that political gains from such an exercise are minimal. Will a heftier pay packet make a Yadav vote for the Congress when there is an alternative exclusively for his group in the form of Laloo and Mulayam ? Will a Dalit Jatav not vote for Mayawati because of a pay hike ? Will Tamil upper castes (maybe officially backward) vote for the Congress when the DMK and indeed the entire Dravidian movement is available for them. The answer is a big no ! These community leaders expect to be rewarded at the hustings for shielding their constituent beneficiaries from analysis.

The only catch is this : You see Desi people forget to say thanks ! Voters will mobilize for new benefits or to protect existing benefits under threat. They need prodding and constant reminders (and vote marshals) when they begin to take their benefits for granted. Enter the vote marshals. Vote marshals are the guys who knock on your doors – arrange free autorickshaws to the polling booths. They are the most understudied aspect of our political system. They do not mobilize for thanksgiving.

So whats the deal, if it wont dent group behaviour  ?

Despite Mandal, it is true that the Central government and many state governments especially in the north have significant free agents (voters without a narrower choice for their own group). Government employees of all kinds also have a tremendously greater fan-out in terms of organization (think about the dozens of Railways employees unions and associations, Posts pensioners associations). They also have extensive forward links with the rest of the economy – procurements / commissions from private vendors, a large and hopeful temp worker population (eg Neyveli Lignite, Railways, temp teachers,etc). Many media personalities today have a privileged past of high government access.

This is an exercise at mopping them up. Will it work ? Absolutely !!

To summarize in a few words :

The Congress party is an expert in creating RIVAL economic resources and extending benefits in exchange for association or affiliation. To access a resource, you need to be someone or know someone. It is the new feudal order after the British left on their own. This is the real class divide. This is why the really backward still break stones – they do not “know” anyone and they are certainly not “someone”. See Barbarindians post on a topic.

The BJP at least during the limited time we got to know it, attempted to create NON-RIVAL resources like the highways. Perhaps more significantly, it appeared to cap the policy of creating rival resources by “showing a bottom”. Remember the same DMK / PMK was clamouring for a no-data-based extension of rival benefits for their communities. The BJP was able to counter that, while it would have been dead easy to give in like the Congress. We also are aware that if the ecosystem is designed to encourage the creation of rival resources, the BJP and the Left also have to play that game. Otherwise, they will will face the same fate as any mutant.

This is really the choice in front of us. Rival or non-Rival economic goods.

——————————————

Thoughts on some posts in the Indian blogosphere

Barbarindians is on roll lately. I challenge you to find a comparable blog on Indian politics and society (post a link in the comments section). Seriously, I would like more reading options.

Some recent posts from his blog:

It is hard to find an example of a country where after the imperialistic/oppressive forces left, the whole bureaucracy, academia and armed forces establishment (also business) was kept intact. We are not saying this is bad per se. This is also just, if you really want to go ballistic on a part of your population just because they “cooperated” with the colonials, you ought to give them prior notice. But this warning was not given and it was well accepted that India would not erupt into a xenophobic violence against every supposed “collaborator”. But this is not a silly notion at all.

http://barbarindians.blogspot.com/2008/08/indias-real-class-divide-draft.html

On Crony Capitalism –

On the face of it, it would appear that crony-capitalism sometimes leads to great success. The Japanese success story, the relative success of South Korea, Taiwan or even Indonesia/Malaysia lends credence to this observation. Even the United States had their robber baron era. In the South-East Asian nations, crony capitalism was used as an exit route to realize economic gains while the Government maintained a populist front.

http://barbarindians.blogspot.com/2008/08/can-crony-capitalism-help-india.html

I enjoyed this post, because there has been very little debate on this subject. Can we do a Japan (Mitsubishi) or Korea (Daewoo, Hyundai) ? Will this model work here ? Who cares if illegal billionaires are created if millions can come out of poverty ?

Let us step down a couple of levels from Japan, Korea, and the robber-barons of the USA.

Now, let us try to analyze bottom up (always works in India)

Consider the “Roving Bandit / Stationary Bandit” theory as a starting point. (Google for it)

I just googled the names of some books and these links came up pointing to Google Books. I am not sure they contain all pages.

Why Botswana prospered ? – by Clark Leigh

Political economy of dictatorship – by Ronald Wintrobe (see Page 132)

The concept of stationary bandit nicely explains why many among the warring factions in Zaire in 1996 actually seemed to prefer the return of the kleptocrat Mobutu Sese Seko to life in his absence….

These books written by westerners seriously fall short of analyzing the Indian situation. Why should they, Indians should take up the task ?

So the questions :

Reality Check asserts that the Indian system is a legislature dominated by group interests propped up by a submissive judiciary. Is this true ?

Is our system creating stationary or roving bandits ? What is the trend since independence ? Are the stationary bandits of the Congress era converting themselves into roving bandits today ?

Are our state level politicians acquiring inter-state family interests ?

Are our politicians developing significant family interests in other countries ? (Are they settling their families abroad)

Can they leave for extended periods on very short notice ?

In the Indian scenario, we to break it down. We may have hundreds of stationary bandits – with interlinked interests – each with a limited geographical influence. A simple test whether this works will depend on how these revenue maximizing bandits are invested in their OWN area.

A crony capitalist with political connections from Tamilnadu acquiring coffee estates in Coorg or Rubber plantations in Wayanad or orchards in Hyderabad would be an example of a roving bandit.

A crony capitalist from Tamilnadu setting up a factory in his own district in an example of a stationary bandit. Vastly preferable.

Of course, the truth will lie in between. A crony roving bandit would siphon off significant insurance outside his zone and also maximize revenue from his own sphere.

So do I think crony capitalism will work here ?

I think crony capitalism will not work in India because of the limited area of influence of each player. Within a short period of time these actors will invest significantly outside their own areas of influence. They will also create insurance investments in estates, livable communities, and resources like granite and sand mining. This will in turn dampen their enthusiasm to maximize revenue from their own area.

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22 Responses

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  1. vikas vithal ghare said, on August 17, 2008 at 1:31 pm

    Is it necessary to give such huge pay hike to government employee?
    Instead of giving pay hikes government should use these money to create more employment ,to create good infrastructure’s, good education facilities in rural areas.

  2. mystery said, on August 18, 2008 at 11:17 pm

    RC wrote:

    That ecosystem already exists. It is called democracy.

    RC wrote:

    You might like this blog

    http://www.offstumped.nationalinterest.in

    (if you are not aware of it already)

  3. mystery said, on August 18, 2008 at 11:19 pm

    RC wrote:
    We also are aware that if the ecosystem is designed to encourage the creation of rival resources, the BJP and the Left also have to play that game. Otherwise, they will will face the same fate as any mutant.

    …………………………………………………………………………………………….

    That ecosystem already exists. It is called democracy.

    RC wrote:
    Barbarindians is on roll lately. I challenge you to find a comparable blog on Indian politics and society (post a link in the comments section). Seriously, I would like more reading options.

    …………………………………………………………………………………………….

    You might like this blog

    http://www.offstumped.nationalinterest.in

    (if you are not aware of it already)

  4. realitycheck said, on August 19, 2008 at 9:45 am

    >> That ecosystem already exists. It is called democracy. >>

    Democracy is just a word.

    At best we have 15% democracy in India.

    I am aware of Offstumped. Anything else ?

  5. murali said, on August 19, 2008 at 4:38 pm

    As Dr.Spear observed:There has been an yearning for indian unity without the power to achieve.India is different from the monolithic chinese civilisation or the compact nation states of Europe.We all hope for a united and a fair india

    But given its diversity,this might be a dream.Even the ideal Rama Rajya was limited to a small part of North India.The Brahmana-Kshatriya cohesion does not mean anything in crony capitalism/quota politics.

    Perhaps the small kingdoms meant atleast you could not be a roving bandit for long.

    Thanks RC for your insight..

  6. murali said, on August 19, 2008 at 4:52 pm

    Brahmana-kshatriya cohesion relates to the ideology of governance based on ethical values.I am all in favour of a liberal democracy.

  7. Barbarindian said, on August 19, 2008 at 11:00 pm

    Thanks for the kind words RC. You are on top of my reading list, wish you wrote more often too.

  8. Vinod Sharma said, on August 20, 2008 at 12:07 pm

    Those who think that the Pay Commission is going to get votes to the government have obviously no idea that no matter which government is in power, a pay commission has to be set up after every 10 years. Government servants know that and the non-poltical mechanics of the commission only too well. No one will vote Congress only because of the pay commission report.

    Try this blog http://vinodksharma.blogspot.com

  9. murali said, on August 20, 2008 at 12:38 pm

    RC,
    Is it not a fact that the upper castes are a text book case of olson’s theory in the years after independence.Because of historical reasons and the fact that they were in the forefront during the independence struggle,they monopolised all powers at the centre to exclude those who were hostile to them after independence.Is it any wonder that DMK/PMK are hitting back.

    Olson is not taking into account cultural/kinship factors which play an important role along with economics.The upper castes have embraced the service sector,but what is in it for the dravidians.Quotas/Public Sector jobs are a psychological necessity for the numerically larger and powerful backward castes who fear they will be reduced to hewers of wood and drawers of water in an open regime.

    Did not Congress encourage such tendencies with regard to foreign companies when the brahmanas were the prime beneficiaries.Nirad Chaudhri pointed out that both Aryans and Dravidians were rapaciously acquisitive and materialistic.

  10. realitycheck said, on August 20, 2008 at 3:06 pm

    >> Is it not a fact that the upper castes are a text book case of olson’s theory in the years after independence. >>

    Sure. The group ‘upper castes’ itself needs enumeration for this to be meaningful. You have to throw in big landlords into this group.

  11. murali said, on August 20, 2008 at 3:44 pm

    RC,
    The kashmiris do not care for india.In a different way,if vanniyars,gounders,thevars,mudaliars,kammas do not care for the idea of india,what do you do.

    We do not care much for western imperialism.The powerful backward castes are like stationary bandits who supported brahmanas.Now they are aspiring to be roving bandits.They have never cared much for equality as owners of land and strongmen of their areas.Why should they support a modern idea of india.Even in US and England,the economic conservatives are among the most racist.Winston Churchill,Reagan,Christian fundamentalists among Republicans,racists in the Atlantic Establishment

  12. rc said, on August 21, 2008 at 2:50 am

    >> The kashmiris do not care for india.In a different way,if vanniyars,gounders,thevars,mudaliars,kammas do not care for the idea of india,what do you do. >>

    Murali,

    I can make my point much easier now.

    Actually, Vanniers, Naidus, Mudaliars, Thevars are no different from Brahmins when it comes to the “idea of India”. You can extend the same to Yadavs, Vokkaligas, Reddys, Velamas, etc.

    The only difference is these groups which ideally should be part of the “free agent voters” are unreasonably chained to benefit-protectors.

    Your question would be “Why are they tied to benefit-protectors ? Why cant they overlook them and vote on issues ?”

    – This is the root of the trouble. There may be a few who would – but rational people would always vote for their benefit-protectors. I personally dont like to adopt western theories of group behaviour to India, but Olsen is an exception.

    – There are complex inter-group dynamics at play. If Group-1 shows a tendency to overlook protectors, Group-2 will gladly occupy its space. So there is a reward for playing along and a penalty for defection.

    The real whammy that will lay this country low is that the social justice platform is used for these games and the court meekly surrenders. It would not be so bad if for example “petrol pump allocation” or “PDS” were to be hijacked for this.

  13. murali said, on August 21, 2008 at 5:16 pm

    RC,
    I agree with your analysis.But why have marathas taken so long to join the party?Till today,there are fair opportunities for all in admission to educational institutions in maharashtra.

    Similarly the vokkaligas and lingayats have not been vociferous in demanding reservations in iits.Reddys are a forward caste in AP.Reddys are numerically small but an influential landed caste.They are unique in a way.The reddys are related to kapus in roughly the same way as the marathas are related to kunbis.Who knows even they may start clamouring for quotas if chiranjeevi becomes popular.

    The sons of the soil,the agriculturists,feel they have a divine right for seats and jobs,as fair recompense for back breaking work on the agricultural fields.Particularly when the exploited see the life styles of babus/netas they want their share of fun.The marathas/reddys can also claim backwardness on being sons of the soil.The mudaliars/gounders/kammas have set the precedent.The virus was bound to reach maharashtra.Why should they be deprived of the goodies?Stationary bandits from TN/AP were extending their tentacles elsewhere.It was only a sense of dharma that was holding marathas and kannadigas back.The people of these states too have been conquerors in the past.It was only a matter of time before a virulent sub-nationalism broke out when they could see TN/AP prospering on account of linguistic nationalism while their territories were being encroached by outsiders.These soft hindutva states will have to contend with linguistic nationalism from its dominant castes.

  14. murali said, on August 21, 2008 at 5:22 pm

    Thakurs like VP Singh and Arjun Singh are achieving their objective of balkanising india.

    Infact both the mudaliars and thakurs dislike the idea of india.And why should they?Whey should they give up their land and power for an uncertain future?

  15. murali said, on August 22, 2008 at 4:46 am

    RC,

    it might look that i am obsessed with personalities like Veepee,Arjun,Karu/ramadoss.The dynamics of modern society are very complex indeed.The industrial/post industrial societies bring cataclysmic changes and these affect mudaliars/thakurs as well.But these are felt more intensely by power groups who had priviliged positions earlier.Like mudaliars.When you bring in linguistic issues,there is inevitable conflict as perceptions of the past,present and vision for the future do not coincide.Veepe can only see the corruption not the development or empowerment.He cannot tolerate the new power structure where there is no place for feudals like him.The new moghuls are the corporates.Something similar in the case of mudaliars.The power of democratic politics marginalises the likes of VP or old mudaliars.

    But the seeds of discord start bearing fruits.The groups replacing them have little vision except in proportional representation in the seats of power.Men like karu/ramadoss,who are moreover interested in their clan/caste etc.Neverthless they have populist appeal.The only vision they have is of sharing the spoils of power.The really backward have no traditions of leadership.So,who is going to bell the cat?The present status quo suits the ruling class.The only persons distraught seem to a (relatively)small segment of educated professionals.Others are not dissatisfied with the arrangement.Particularly the big business,media who have their ears close to the ground

    The persons who are dissatisfied do not make up a critical mass.The others whom you want to be a part of the middle class set more store by their primordial loyalties tied to ‘benefit protectors’.What is the incentive for them to give up these’protectors’.As Olson says,the efficiency of the state decreases.So who cares.Let us all go down the drain together.

  16. reason said, on August 22, 2008 at 10:27 am

    I did not understand your summary on why crony capitalism will not work in India.

    The business class itself has been working itself into the ‘system’ – the way IT services companies with billion dollars in annual profit and huge cash still want tax holidays, and SEZ, and free land.

    Ratan Tata in particular is now coming across as a very bad example of this Indian businessman. His group raised humongous debt to buy out companies outside, and spent huge money on honoring pension obligations when buying Corus. But he wants the socialist control of land to bail him out so he can make profitable cars at a hundred thousand rupees?

    There are some statements attributed to him in this rediff report, that look stupid – and surprisingly stupid.
    http://specials.rediff.com/money/2008/aug/22slde2.htm

    “We want to understand why Tatas are unwanted in West Bengal. I hope West Bengal does not get characterised as a troubled spot in India,” he said.

    He said: “It is for the people of West Bengal and Kolkata to decide whether we are unwanted or accept us as a good corporate citizen. If it is the latter, then it is good.”

    What is in it for a small time land owner or landless labourer who lost his settlement, to either like or dislike Tata and his car. what stupidity. And what audacity.

  17. murali said, on August 22, 2008 at 1:00 pm

    I think the real issue is whether we can have a sustainable and modern society.Modern in the sense of being a society which uses the fruits of industrialisation.This means that every ‘group’ must give some of their old habits.The ‘upper castes’ for all their faults have taken the decisive step.It is more difficult the backward castes to make the change:1)Because of their innate conservatism 2)The position they are being catapulted into is somewhat unfamiliar territory.in the sense that for a few hundred years they have not been in leadership positions.Also the democratic experience in a`post industrial age will be a bumpy ride in our society.

    But still we can be optimistic that the wisdom of an ancient civilisation which has survived will ‘somehow’ pull through.

    RC,
    Barb argues that all reservation is immoral.His viewpoint seems more logical.Reservation for SCs was introduced by the British.Also there is a natural distinction between the landowner/labourer.Will it not be better if this surplus labour is absorbed in industry/services.

  18. realitycheck said, on August 23, 2008 at 4:54 am

    Murali,

    Here is my take on this :

    >>Barb argues that all reservation is immoral.His viewpoint seems more logical.Reservation for SCs was introduced by the British. >>

    The best rationale for reservations (which is the narrow interest we are talking about) is that every one needs a share of government sinecures. If you concede that – then you cannot be against all reservations.

    The right way is to CONTAIN the system and build checks in it. The best way is to monitor each component to prevent monopolization of the entire group.

    >> affect mudaliars/thakurs as well.But these are felt more intensely by power groups who had priviliged positions ea >>

    See, thats the thing. Once we buy into the idea that “human beings belonging to these groups” are the culprits – the political forces have already won !

    The goal must be to free the political system.

  19. realitycheck said, on August 23, 2008 at 4:59 am

    Reason,

    >> The business class itself has been working itself into the ’system’ – the way IT services companies with billion dollars in annual profit and huge cash still want tax holidays, and SEZ, and free land. >>

    Exactly ! This is an example of complete failure.

    Korea was able to use Hyundai and Daewoo to contribute back into large infra projects (kor-rail).

    We are not able to bring these guys around. Walk around the IT corridor of Bangalore and Chennai and we can admire the chaos, filth, and utter lack of public amenities and spaces. Why are we not able to convince an Infy or TCS to fund a mass transit system ?

    I think Barbarindians post was :
    * Can crony capitalism work for India ? *

    I think :

    * Crony capitalism works for crony capitalists !! *

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