Bureaucrats and chairocrats

Guest Columns by Sauvik Chakraverti,

The Newindpress on Sunday, 2007-2008

Bureaucrats and chairocrats

The profession of the bureaucrat has fallen into deep disrepute lately, and this is an international phenomenon. In academic circles he is increasingly viewed as a ‘‘budget maximiser’’, solely responsible for— and benefiting from — fiscal deficits, worldwide. In large swathes of the developed world, New Public Management is being implemented, in order to de-bureaucratise and bring economy and effectiveness into government expenditure.

In India, the top officialdom comprising the Indian Administrative Service (IAS) and other such constitutional bureaucracies lord over vast budgets but accomplish little of worth to society — not even functional streets and traffic order. In daily parlance, the word ‘‘babu’’ has come to replace the word ‘‘officer’’.

This is in sharp contrast to the high esteem that bureaucrats have possessed for millennia — from the mandarins of Ancient China to the ‘‘minutely just, inflexibly upright’’ personnel of the ICS, all the way to the Prussian officialdom Max Weber so admired. Bureaucrats today are viewed as a not so benign feature of a body politic. Why have things come to such a sorry pass? Some ideas emerge when we examine the life of Carl Menger, founder of the Austrian school of economists, who was a bureaucrat.

To understand the bureaucrat in Menger, let’s go back to the mid-19th century when the Hapsburgs were ruling Austria-Hungary and democracy existed only in the USA and France — the former successfully, the latter in a great deal of turmoil. In France, then, Frédéric Bastiat was writing that his ideas of free trade and laissez-faire would not make the state weak; rather, the state would emerge stronger if it stuck to just its basic role of protecting life and property. Bastiat lost the battle in democratic France; but, in imperial Austria, he would have found a sympathiser in Menger, whose bureaucratic instinct had led him to discover why markets should be free.

Menger studied political economy as part of his doctorate in law before opting for the imperial civil service. Here, he served first in the press department of the Austrian ‘‘Ministerratspräsidium’’, an office of high prestige in the Austrian Civil Service. One of Menger’s first duties was to write surveys on the state of the markets for an official newspaper, the Wiener Zeitung. In the course of his research, he found that real world markets differed greatly from what his professors had taught him. This led him to write his Principles of Economics (1871). As the Nobel laureate Friedrich Hayek acknowledges, ‘‘what constitutes the peculiarity of the Austrian school and provided the foundations for their later contributions is their acceptance of the teaching of Carl Menger.’’

This brings me to the crux of the matter: How could it be that a bureaucrat founded a school of thought made up of the greatest opponents to bureaucratic meddling the world has ever seen? The answer lies in the ethical values of traditional bureaucrats. The highest ethical value of a traditional bureaucrat, something Max Weber had emphasised, is ‘‘impartiality’’. It was this value of ‘‘impartiality’’ that powered Menger to develop ideas that would not have bureaucrats playing favours with businessmen, but let the market free. Justice would prevail, along with prosperity. Menger practiced what Bastiat preached.

In his Principles Menger also outlined a theory of the origin of money which showed how money was spontaneously born out of trade and not created by government. This singular and lucid contribution to our understanding of money has had a profound effect on all Austrians – right up to the present day.

In 1892 Menger was appointed to the Austrian Währungs-Enquete-Commission to discuss the currency. He asked for a return to the Gold Standard and outlined the step-by-step process by which this could be accomplished. The Hapsburgs were famous for the soundness of their currency because of the soundness of their economists: the word ‘dollar’ is derived from the ‘thaler’, a pure gold Hapsburg coin that was the most preferred coin in the early days of America.

We can see why every Austrian economist since has championed ‘‘sound money’’ – and why Hayek demanded the ‘‘de-nationalisation of money’’ when governments in the 20th century had taken their monetary meddling too far. It is also ironical that it was America that pulled down the Austro-Hungarian Empire after WW1 in their desire to spread democracy. And look what democracy has done to the US dollar, just a plain paper fiat money as it is today. America is where ‘‘budget-maximisation’’ has played havoc with the treasury – and top departmental heads are all ‘‘political appointees’’, so they are not bureaucrats in the traditional, apolitical sense. Traditional bureaucrats gave policy advice; they would never expend their intellectual energies running huge departments with massive budgets.

Another great Austrian, Ludwig von Mises, also understood bureaucracy and its limitations well. He wrote a slim, eponymously titled volume enunciating the differences between ‘‘bureaucratic management’’ and ‘‘management for profit’’. He opposed socialists who wanted to bureaucratise everything, warning that this would mean a graveyard for talented youth. The Austrian in Mises stood very firm to the teachings of Carl Menger.

If India has produced such a bureaucrat, it is Deepak Lal. After a stint in the foreign service, followed by a doctorate in Economics from Oxford, he worked for the planning commission — only to realise that this method of resource allocation cannot work. Ever since, he has been loudly advocating free markets. His latest book, Reviving the Invisible Hand, which deserves to be widely studied, calls for a liberal international order. However, in a recent interview, he regretted the fact that his former colleagues opposed economic reforms. In his view, IAS bureaucrats are quite keen on keeping their hands forever on the levers of power, and are stalling reform.

The word ‘‘bureau’’ refers to the desk upon which the bureaucrat does his work. Socialist democracy has turned the IAS into ‘‘chairocrats’’, where what matters is the chair and not the desk: kissa kursi ka. Different chairs have different black market values, and these are auctioned. The bureau doesn’t matter, for the work on it is never done.

Such a bureaucracy cannot be fundamentally shaken without the motive force of a powerful, charismatic politician: Weber had recognised this. If India is to change, we need charismatic free marketers in politics. Just as Nehru put his charisma behind socialism, we need political charisma today in favour of free markets. Only then will ethics inform the IAS.

The writer is the author of Antidote: Essays Against the Socialist Indian State and its sequel, Antidote 2: For Liberal Governance