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Saturday, November 29, 2003

Why isn't Mayawati a reformer?

This is something that puzzles me. Why isn't Mayawati an economic reformer?

Shouldn't she be? Why doesn't she make divestment an election issue. Most public sector sector employees are upper caste, Brahmin, Rajput, Baniya types. It's understandable that a manuwadi party like the BJP is struggling to sell loss making PSU's, but why is Mayawati not kicking up a fuss? Why isn't she telling the dalits, that these inefficient upper caste employees are one reason they don't get proper health care? She should promise that if elected she will sell loss making PSU's and use the money for health care.

Why doesn't she say that the fertilizer subsidy should go? The dalits after all don't own land. The rajput types and now the Jats, Yadavs and Kurmis do. Why doesn't she say that get rid of the fertilizer subsidy and use it to provide dalits with proper education?

What stops her? Any thoughts?

Friday, November 28, 2003

Chandigarh Sleeps No Longer

Another interesting piece from the NYT about Chandigarh (at least interesting for me, since I knew nothing about it before). I can almost here Atanu coming to tell me now: this is all vacuous hype, this is no solution to India's real problems. This may well be, but the interesting point is that this kind of movement will be economically driven, by the steadily increasing wages in places like Bangalore, as the article itself indicates.

Thirty years after a "green revolution" turned the plains around this small city into India's breadbasket, a cadre of ambitious government officials, pricey consultants and local high technology entrepreneurs is trying to accomplish something almost as ambitious - transforming this sleepy farm state capital into the "technology hub of northern India."

"Chandigarh," glossy brochures declare to prospective investors, "the city with brains."

Chandigarh was designed and built by the Swiss-born modernist Le Corbusier in the 1950's as a replacement for the former Punjab capital, Lahore, which had been absorbed into Pakistan after partition. Now a city of 900,000 people, it is the joint capital of India's two most prosperous farming states and one of half a dozen cities and states furiously competing for the call centers and software parks that American and Indian companies are opening across India.

As tens of thousands of service jobs continue to flow to India from the United States and Europe, small cities like Chandigarh offer even lower labor costs than India's "first tier" technology hubs, places like Bangalore, Hyderabad, Bombay and Gurgaon, outside New Delhi.

Manisha Grover, a Bangalore-based consultant hired by Chandigarh to aid its marketing efforts, said those cities were running short of skilled workers. "It's maxing out," she said. "The pace of finding people is definitely slowing down."

Officials from Bangalore disputed that claim, saying the city's talent pool remained vast. But businessmen here said that wages were far lower in smaller cities like Chandigarh, where a starting call center operator makes roughly 7,000 rupees, or $150, a month. A starting worker in a "first tier" would be paid as much as twice that, they said.

US Protectionism Doesn't Only Extend to China

I still can't work out whether all this move towards protectionism is simply a way to stitch up the democrats - presumeably many working class voters demanding protectionism vote democrat, and doing it this way the Bush team rob them of a campaigning issue - or whether this is for real. Whichever way, the momentum is growing as this piece from the NYT illustrates:

Citing the need to protect local businesses, the state of Indiana terminated a software contract it had awarded to an Indian company--a move indicative of growing opposition to offshore outsourcing.

The cancellation is part of a new initiative, dubbed "Opportunity Indiana," to review the state's procurement process. Governor Joseph Kernan announced the program last week. The program's objective is to offer greater opportunities to local companies.

TCS America, a subsidiary of India's top-ranking software and services company, Tata Consultancy Services, was selected to upgrade the unemployment insurance computer system of the Indiana Department of Workforce Development earlier this year. TCS has won several contracts in the United States, with most of its annual revenue of $1 billion coming from North America.

A TCS representative said calling off the deal "was a decision for the state of Indiana to make, and TCS plans to abide by it."

Outsourcing to offshore companies, particularly to Indian companies, has raised the hackles of local groups that fear job cuts. A number of U.S. corporations have stationed their technical support facilities in Indian cities.

Earlier this week, Dell announced that it was diverting calls for tech support from its call center in India to its centers in the United States, after customers complained.

"The difficulty we had with this contract was not with the company itself," Governor Kernan said in a statement. "After having a chance to discuss our vision of how the state should do business, and how we can provide better opportunities to Indiana companies and workers, we concluded that this contract did not fit in that framework. The procedures we had in place virtually knocked Indiana companies out of the running."

Thursday, November 27, 2003

Moore's Law As Applied To Humans

Sorry, I'm back. I've been keeping myself kinda busy over the last two weeks. On my travels I met what you could consider to be a pretty bright programmer: he writes spider programmes. Now if you were silly enough to want to sit in the first few rows of a concert from some mediocre but popular pop star, you would probably want to be cursing him: for his boss and his spider programme would already have the tickets. He works for an entrepreneur in a nameless but extremely large country, who buys up all the tickets for 250 dollars and re-sells them at around a thousand a go. He told me that at first this work was easy, but recently things have gotten more difficult. The concert organisers have tried to overcome the practice by having an image inserted to which you have to manually type some given response. Problem solved you might think. Well no: this is where ingenuity and globalisation come in to guarantee that 'real' entrepreneurship will not be thwarted.

His boss responded creatively: he contracted a hall with 200 workers in India. These workers spend their day typing the image responses manually into a data base. Currently they have entered something like 500,000 images. (It also occurs me that systematic spam must do something like this: the bacteria-antibiotic effect). The recounting of this story lead my Argentina blogging friend Marcelo to make the following highly perceptive observation:

The image of the wharehouse of people defeating the turing-test safeguards is extremely interesting. At the risk of sounding callous, I think that an interesting way of conceptualizing what's happening in India and China is that Moore's law is applying to humans: the capacity of a person you can rent for $1 is increasing fast, thanks to a bigger pool of people and better technology to teach and connect them. Of course the pool of people is finite, and eventually you start getting higher wages, but the principle is the same - and if stuff like MIT's Open Courseware works well, the trend might well continue.

Now I think he really has a point here. The internet skeptics are so busy being skeptical that they don't notice when the roof is falling in around their heads.

On my website deflation page I identify three factors which might be contributing to a global deflationary environment: OECD ageing, surplus labour in China (and now, increasingly, of course, India), and the falling price of information. Now I have never really been to clear where to go with this third one, it was more a case of reading Kurzweil and extrapolating what to me was the obvious. Now Marcelo has come along and put it very succinctly: Moore's law as it applies to humans. And like the other version of the law, the only remaining question is how long can this run till we hit specific physical limits. I think Kurzweil's answer would be: farther than you imagine.

Wednesday, November 26, 2003

The idea of a nation/state continued

A few days ago I was wondering about the idea of the nation/state. I wanted to get a better idea about what it means to people to belong to this particular political-economic arrangment. What do people (rightly or wrongly) expect that membership--the legal term is citizenship--will provide them. It was obvious to me that "the nation" meant to more people than just the Hobessian idea--providing security in return for allegiance and obedience. I wrote:

The idea of a Nation or in this case a State. It's obviously a complicated, imagined and for the purposes of this post a parochial and un-meritocratic, idea. The Shiv Saniks went on rampage because, in essence, they think that since Mumbai is a city of Maharashtra, it is legimitate for Maharashtrians to demand a certain amount of preference in how the resources (including jobs) of the state are allocated regardless of efficiency concerns. Basically, "I should get a job in Mumbai even though he will make a better gangman than me, because my name is Wadekar (Maharashtrian) and his is Kumar (Bihari)."

Amy Chua has an excellent article on something related in The Wilson Quarterly. She writes:

A World on the Edge
by Amy Chua

One beautiful blue morning in September 1994, I received a call from my mother in California. In a hushed voice, she told me that my Aunt Leona, my father's twin sister, had been murdered in her home in the Philippines, her throat slit by her chauffeur. My mother broke the news to me in our native Hokkien Chinese dialect. But "murder" she said in English, as if to wall off the act from the family through language.

The murder of a relative is horrible for anyone, anywhere. My father's grief was impenetrable; to this day, he has not broken his silence on the subject. For the rest of the family, though, there was an added element of disgrace. For the Chinese, luck is a moral attribute, and a lucky person would never be murdered. Like having a birth defect, or marrying a Filipino, being murdered is shameful...


It's an excellent article. Read it if you haven't done so already.

Tuesday, November 25, 2003

YES, finally

The Indian Express writes:

Lifer for 12 in Gujarat massacre case

Press Trust of India

Ahmedabad, November 25: The Nadiad sessions court on Tuesday sentenced 12 people to life imprisonment and three to two years' rigorous imprisonment for massacre of 14 Muslims of Ghodasar area in the rural part of the district during post-Godhra communal riots on March 3 last year.

Sessions court judge C.K. Rane had on Monday announced the conviction of 15 and acquittal of 48 in the case and had reserved the sentencing for Tuesday.

Should have given them death, though.

More social science research?

A few days ago on my way to work, I glanced at the book a fellow passenger on the train was reading. It was a 12th grade book and the subject was nuclear physics. It had diagrams of protons, neutrons, and electrons orbiting the nucleus and all that sort of stuff. After a bit, I asked the teenager why he was reading nuclear physics. He said that it was required. But, I asked, was he interested in the subject. No, he wasn't but he was in the science stream and therefore he had to learn that. Did he study any economics, psychology, history? No, that was not part of his curriculum.

I went back to my newspaper. On the op-ed page of the Business Standard of 18th November was Prof Kirit Parikh's opinion: Needed -- Indian institutes of social sciences. "We need toset up institutes of social sciences on the same high standards asthe IITs," said the sub-title. The piece started off with the observation that the returns to R&D are very high in areas of science and technology. Admitting the excellent results of insitutions such as the IITs, CSIR, ICAR, etc., he noted that the number of researchers per million population was not very impressive for India compared to other countries. In the mid-1990s, he reported, India had 150, Japan 4,900, Singapore 2,300, Korea 2,200, Mongolia 900, and China 450. Very interesting.

Then he went on to write:

We have had strong political support for science and technology. A strong case can be made for government support for research, for basic research, for crop variety research, for birth control or for environmental research, for defence or research related to critical so-called dual-use products and research in special areas that require the concerted efforts of many institutions. ...

... We need social science research to promote good governance. Economic and political research can help identify policy options and alternatives. It can also assess the costs and benefits of alternatives that help in selection of policies... social science
research is as important for development as scientific and technological research..."

With due respect to Prof Parikh, I would have to disagree. Mind you, I am not disagreeing with him on the importance of research. Some of my best friends are researchers. I am questioning the wisdom of spending resources on research when we have not yet neither learnt nor used what is already available for free in any well-stocked library.

Let me use an analogy. Suppose I have a very large stock of very nutritious basic food sitting at home unused. Suppose my family is starving. Further suppose that I am broke. And now suppose I decide to go out and spend money on buying expensive food which will be delivered in a few months to feed my family with. Would you call me stupid or what?

The stock of knowledge that is available for almost free is stupendous. We have yet to apply even a little bit of that in our policy making. We don't teach those fundamentals to our kids. They grow up to be intellectually uni-dimensional morons who cannot have an innovative idea in their heads. And then we propose that more research be done at more ivory tower institutions spending scarce resources that have a very high opportunity cost.

Coming back to that teenager: he will probably be able to rattle off the value of the electrical charge of an electron from memory. Or tell you the chemical structure of a sugar molecule. But he would not be able to solve a simple problem involving some degree of problem solving abilities. He probably has not the faintest clue about how markets work or how people interact. Imagine going easy on the structure of the atom bit, and giving him a bit of understanding of the prisoner's dilemma. Knowing the structure of an atom is important, but it should not be more than an afternoon's work at best to get that across. However, understanding what the prisoner's dilemma is and then considering the implications of that would take a lot of time and would teach
very valuable skills to the student.

Why this dismal state of affairs? Because the teachers themselves are clueless uni-dimensional card-board cutouts. They are as capable of entertaining an original thought as I am capable of holding a tune. It does not surprise me in the least that the
Indian educational system is a sad mockery of an institution that forms the bedrock of any sustainable society.

Is there a way out? I think there is. What we have to do is to actually create the curriculum ourselves. We have to create the content, then. After that, we have to use tools that are fortunately available from information and communications technologies to deliver the content. And I have a sneaky feeling that all this can be done profitably.

George Bernard Shaw had once remarked that when he wants to read a good book, he writes one. I think our desire to have a well-educated society must motivate us to educate our society well.

The education debate

Tsqaured: yes I think I misunderstood. Sorry about that. I also think you are right that Indian taxpayers wouldn't mind paying up if they knew that the money was being transparently and effectively used for primary education.

So I think, it might be worth charging a primary education cess like the National Highway Program. A few rupees surcharge on everybody's tax return, 1% in new VAT etc etc and use the money exclusively for primary education/mid day meals. Pass a law if need be, so that the government cannot use the money in their general budgeting.

However, I oppose giving any tax breaks to anybody, mostly for reasons pointed out by the Kelkar committee--lack of transparency and price distortion. All social objectives should be funded directly by government so that the Public Accounts committee can review it. I am not sure if such special purpose vehicals fall under the purivew of the CAG, but I can find out. If they do, all the better.

I agree with tsqaured that for all intents and purposes primary education will have to be funded by public money. No NGO, however, savvy can be expected to raise the sort of money we need. Since government money is going to have to be used anyway why shouldn't the government be involved in the running of schools?

The broader point I am trying to make is that primary education is the responsibilty of the government. What is the need to outsource it to NGO's or the private sector? What incentive does an NGO have to run a school properly? What oversight exists? Why wouldn't they just siphon off the money? (it happens). There are good dedicated NGO's and there are bad corrupt NGO's. I would have supported the private sector entering the education sector funded by government vouchers, however there seems to be some bad news about vouchers lately. Besides, I am having second thoughts about vouchers in general.

So the solution, if government is not doing its job properly is to make it do it properly, not bypass it. Easier said that done, you say. True but I just don't see any other way. I might add this is source of all my disagreements with liberatarians. The government has all the incentive to provide elementary education. By some estimates the return on primary education is 15%. If Vajpayeeji was my fund manager I would want him to invest my taxes in primary education. Besides, there is parliamentary and possibly auditor oversight, Public Interest Litigation, pressure of press and civil society not to mention the prospect of being booted out in the next election. A self interested citizenry would make use of all this tools to make its government deliver. The trick is get government down to the right level. Panchayats have been very effective in running their village schools. Sitting in Delhi its difficult.

So you ask, if everything should be so hunky dory why has the country not done better. Well, ideology, illiteracy, religion, caste, languange complicate the picture not doubt. But there is increasing evidence that the electorate is willing to reward good governance. Witness Chandrababu Naidu and now, hopefully, Shiela Dixit.

Involving the private sector in school education

In comments to a previous post, both Tsquared and Vivek, raised interesting points on involving the private sector in school education, which I thought are worthy of more discussion and so I've moved the discussion to a new post.

Tsquared and Vivek raised the following points:
- There will be transmission/distribution losses and poor efficiency as well compared to the private sector, if the goverment is to invest in education directly.
- Channeling government funds into education through the private sector (through tax-credits, vouchers and other mechanisms) can help in overcoming the T&D losses as well as in increasing operational efficiency.
- Primary education must be available free (or at very very nominal cost) for everyone to benefit, especially the poor.

Vivek raised a relevant question on why private companies would want to invest large sums of money in education (apart from gaining from the tax credits they would get for doing so), especially if the schools were non-profit schools. I think we need to clarify what we mean by non-profit here (and in general). Non-profit organisations are mostly not (and should not be) organisations with no means of raising revenue except through large grants from the government or donor agencies. Any organisation subsisting purely on such grants, will be in trouble if the grants dry up - and they almost always will at some time. The Non-profits must find a way to generate some recurring income in return for services it offers, to cover most of the operational costs at the least (see this recent report on Action Aid's fund-raising strategy - Action Aid are offering tangible value in return for your and my money, though they're still terming it as "Donor Benefits" for marketing reasons). Non-profit doesn't mean non-profit-making, but only non-profit-distributing. The Non-profit must aim to make profits, only the profits can't go out of the non-profit entity as dividends or any other means to the trustees or any other individuals or organisations involved in running the Non-profit.

So if the government was to tell any private sector company that if it set up a trust to run schools (and got some tax credits just for setting up the school) and if the school makes profits, then the company that set up the trust and runs the school is eligible for more tax credits based on the profits, with the profits used to set up more such schools. Incentive for profit can thus be built in. When we say private sector company, it need not be just a company in the legal sense - the same tax credits (in the form of grants from the government) could as well also be offered to Panchayats that decide to invest in setting up a local school and operate it profitably.

Now the challenge is to address the issue of how a school can make "profits" if it is not to actually charge fees (or only charge very nominal fees) from its customers (the students/parents). I think we must look at alternative models whereby the school creates value for some other set of customers who will pay for that value, by leveraging the non-paying customers(students/parents). To provide an analogy, when we watch a free-to-air television channel, we as the viewers pay nothing to the broadcaster. The broadcaster leverages us (the audience) to deliver value to advertisers who pay the broadcasters for aggregating the audience they want to communicate to. Let me emphasise that I'm not for one moment saying advertisers paying the school for aggregating an audience of children is the model for schools - the above analogy is just to show how there are working models with one set of non-paying customers who demand quality and in return help create another set of paying customers.

I have been thinking about such models for a few years now and have described one possible model in the context of undergraduate education in a previous post where a college can generate additional revenues by leveraging its students.

Monday, November 24, 2003

On rural telephony

There is a thought provoking article on rural telephony on the current issue of Business World:

"Policymakers have been tinkering with the noble goal of universal service for some time now. Historically, the incumbent Bharat Sanchar Nigam (BSNL) has been responsible for it, receiving subsidies through the access deficit charge. When telecom was privatised in 1997, the rural obligation was included in the licence conditions for private players. That didn't work out at all - the private basic operators chose to ignore the obligation and pay the fines instead. Also, as the definition of rural connectivity asked for a mere point of presence, or village public telephones (VPTs), some basic service providers created the VPTs without giving the actual connection. The result: while private basic operators promised to put up 98,000 phones, they have set up just 12,000.

So the National Telecom Policy 1999 announced the setting up of a Universal Service Fund (USF) in April 2002. This fund gets 5% of the revenue share of all private telecom players. Companies are invited to bid for rural tenders and the winner is the operator that asks for the least subsidy from the fund. Thus, the USF expects to disburse $2 billion over the next five years.

On paper, the model appears flawless. It is based on a competitive model of bidding (the tenders are auctioned); the financial burden is equally spread (all private players contribute to this fund) and the selection is based on parameters other than cost. The model works on the principle that if the losses incurred in rural telephony are adequately covered, then companies will eagerly do their bit for rural India."

Dhawan goes on to cite the example of Bangladesh to demonstrate that universal access is indeed possible in the South Asian context and talked to n-Logue which has an alternate vision of what can be done to achieve universal access.

Brad had posted a story on his weblog sometime back which quoted TRAI as claiming that it expects the country's phone user base to cross 70 million by March. At that time, I commented that the million PCOs in India go a long way towards meeting the needs of the rural poor. Now I am not so sure. It would be interesting to look at how those PCOs are distributed geographically.

But any which way you look at, the existent incentives to jumpstart rural telephony is not working. But I guess the good thing is that at the rate at which we are going, we are poised to add 20 million telephone lines in a year's time.

Incidentally, TRAI rolled out its new recommendations on unified licensing regime sometime back. Hindu Business Line is not too impressed.

NYT had an article a few days back on Chandigarh's efforts to become a service sector hub in Northern India (via GigaOm). I am not very familiar with the city. But worries about the resource pool capping out sound justified.