Monday, November 30, 2009

On capitalism and the State

On capitalism and the State by Sauvik Chakraverti
Posted: Mon, Nov 30 2009. 9:17 PM IST

India’s bureaucracy is wasteful and cumbersome. Instead, we need a truly capitalist public administration

The idea of the “State” is a metaphysical concept, like the Pharaoh. Classical liberals preferred to talk about “government”, that too “civil government”. This was the subject of John Locke’s two treatises of 1690, where he famously said: “Where there is no Property there is no Justice.” In India, we just have our State; we possess nothing that could be called “civil government”. Our elite bureaucrats are part and parcel of the huge State Failure we see around us, and all the corruption. As we move away from central economic planning towards capitalism, we need to think of what kind of State as well as what kind of government we must install.

All the great classical liberals, from Locke to Adam Smith to Frederic Bastiat to Ludwig von Mises, with the sole exception of Gustave de Molinari, believed that a civil government was not just necessary but also vital. But such a government, to them, existed only to act against the lawless, and that too in full accordance with the “due process” of law. Such a law-abiding government comprised magistrates, policemen, judges, jailors and hangmen—nothing more. Yet, in India today, we also need certain services to be provided by the local government—services such as garbage removal, for instance. How would such a service be delivered in a capitalist society?

Capitalist public administration is based on the principle that the government does not “produce” the services it “provides”. Thus, it opposes bureaucratic organizations in this field. If we look at how garbage collection is being provided today by the socialist Indian Administrative Service (IAS), it is all bound up in bureaucracy. It sets up a “department” with many rungs, recruits thousands of sweepers, buys hundreds of trucks, and so on. There is probably a very big jharoo tender—jharoo being the Hindustani word for broom.

Under capitalist public administration, the entire department would be sacked. There would be just one civic official who would “contract out” the work to private companies. Thus, the market would “row” the boat; the civic officials would only “steer” it. This manner of thinking about public administration is called “new public management”, or NPM. This is now a major movement in practical public administration. There have been many successful experiments in NPM worldwide. These are not particularly new ideas either; they have been with us from the Thatcher years—what she called her “next steps programme”. Ideas of “education vouchers” and “food stamps” also fall within the ambit of NPM solutions—though I myself prefer to stress the importance of garbage collection.
In the West, NPM came to the fore at a time when government budgets needed controlling. Thatcher’s 3Es slogan for her government was “economy, efficiency and effectiveness”. We in India, too, face a spiralling government deficit. In all our cities and towns, huge bureaucracies have been set up which contribute nothing towards improving our lives or our urban environs. These must be sacked and the system of government service delivery drastically reformed. Further, if we save money by contracting out garbage collection, we will have more left over for building roads. In my book, roads and garbage collection must be top priority for all urban local governments—and both must be provided non-bureaucratically.

In my honest opinion, the IAS officials are part of the problem. Further, they control all the academies of public administration here. They are the practitioners; they are also the academics. This is intellectual incest. And they are quite clear as to what kind of ideas they will oppose: After I lectured a group of them on NPM, one IAS officer told me, nonchalantly: “We are knowledge-proof”. Theirs is one huge collective effort to ignore principles, to ignore teachings. They refuse to see their own failures. And they want to continue practising their witchcraft upon us forever. Mention must also be made of land records—the first basic task of any district administration, a task that is no longer being performed. We no longer have “a law of the land”. Our socialist public administration is, therefore, in dire need of drastic reform.

The socialists erected the huge big centralized State—while neglecting “government”. They worshipped their Pharaoh and enjoined upon all of us to do the same. We now need to demolish this metaphysical idol and think in terms of urban local self-government, one that is non-bureaucratic, economical, efficient and effective. We need to think in terms of “subsidiarity”—wherein the local government handles most things, and the central State handles just defence and international relations. In other words, we need to invert the pyramid.

Of course, while IAS sticks its head in the sand, the market is marching ahead. There are many advertisements these days of entirely new cities being built by private developers. In these “company towns” there will be no elections, nor any bureaucracy. There will only be city managers using NPM—because this is cost-effective, provides the required services excellently and maximizes profits for the developer. Competition between cities will surely result in failure for the IAS-run cities. Perhaps then they will learn.

Sauvik Chakraverti is an author and columnist. He blogs at Comments are welcome at