Kerala’s Economy: Crouching Tiger, Sacred Cows

 

Kerala’s Economy: Crouching Tiger, Sacred Cows

Edited by Sunil Mani, Anjini Kochar and Arun M. Kumar

DC Books

Price: Rs. 195

 

This book contains articles which relate to the Economic development of Kerala. I have posted those facts and thoughts which I found interesting.

 

Statistics

 

The state has created 12% of all new non-farm jobs in India over the 1998-2005 period, no mean achievement for a state that is home to only 3.5% of the county’s population.

 

The state’s poverty ratio is now 12.72 per cent, down from 60 per cent in the early seventies. Its per capita income, at Rs 22,000, exceeds the national average. If remittance income is included, per capita income is 60 per cent above the national average.

 

The contribution of agriculture to the state’s GDP fell to about 20%. The major portion of the state’s GDP is driven by services. While the service sector grew by 13.8% in 2005-06, industry and power grew by a mere 1.3% and agriculture by 2.5%.

 

Contributions

 

An author, Arun M. Kumar calls for attention in the following five areas- nurturing a culture of entrepreneurship, making Kerala more attractive for non-Keralites, making it easy to do business in Kerala, creating a stimulating educational environment for the college going population and by involving expatriate Keralites so as to promote development.

 

Another author M N V Nair, talks about ‘patronage dispensation’ which he says is the philosophy of governance pursued by the elites, who consists of political functionaries, administrative bureaucracy, organized business, community and caste organizations and trade unions. He goes on to say that this ‘elite’ lives off the ‘influence peddling’.

 

K. Pushpangadan and M. Parameswaran talk about the ‘virtuous cycle of human development’ which facilitates rapid growth; as Kerala’s progress is in contrast to the accepted notion that ‘economic growth precedes human development’. ‘The authors suggest that the linkage is that human capital development resulted in migration that brought in remittances to the state which in turn facilitated economic growth.’ They posit that ‘dependence on remittances carries the risk of external shocks.’

 

Sunil Mani talks about the infocommunications sector in Kerala. He says that ‘Kerala has the highest teledensity (telephones per thousand people) among all Indian states.’ ‘Residential customers in Kerala get electricity at the cheapest rates in India’ writes V. Santhakumar.

 

My conclusions

The book portrays a growing picture of Kerala Economy. The authors suggest several measures to sustain this growth. It is a good read for those who want to get an in depth analysis of the economy of Kerala.

The Political Economy of Singapore

 

The Political Economy of Social Control in Singapore
Christopher Tremewan
1996

Excerpts

“Singapore has been widely seen as an economic miracle, a veritable and contentment.”

“The Singapore state is the exclusive or major provider of infrastructure (utilities, communications, media, industrial estates, port and airport services) and of social services (housing, health and education). It is the country’s largest employer, it sets wage levels, regulates labour supply and controls all unions. It is the main actor in the domestic capital market, runs giant state enterprises, a trading company and joint ventures with foreign capital. It also directs the apparatus of state coercion: the police and the internal security organizations, the courts and the prisons and a large military force.”

“..many people are constantly aware of the political limits on personal behaviour imposed by the state.”

“..the singular characteristic of social control in Singapore is its success in producing political loyalty and cooperation among the majority of the population.”

“The wealthiest ten per cent of Singapore households take approximately 30 per cent of total income, while the poorest 10 per cent are left with 2 or 3 per cent of total income.”

“Neither the inequality nor the comprehensive system of social control in Singapore are obvious to the casual observer.”

“The increased consumption of the services and consumer goods has had the ideological effect of Singaporeans believing that they have more control over their lives rather than less.”

“the main political effect of the housing policy was the production of a working class dependent on wage labour to pay for it. The former was achieved through the physical destruction of all other forms of cheap housing and through forced settlement.”

Conclusion

Though Singapore has achieved great growth rates, I wonder if there is ‘freedom’ in that country. Or are high growth rates alone sufficient? Read this book to know more.

Further Reading

1) Singapore Diary-Part 3 By E Pradeep

2)On Singapore-Binu Ninan

Bimal Jalan’s Future of India

The Future of India
Bimal Jalan
Penguin Book
Price: Rs 250

Bimal Jalan, one of India’s well known economists and a former governor of the RBI has brought out the relationship between politics, economics and governance and their consequences in a very perspicuous way.

He emphasises the need for more participation in democracy, as the benefits which can be derived are high. He says that “Corrective action is feasible only if there is more effective political participation by the ordinary citizen-in short, fuller practice of democracy.”

He has tried his best to unwrap and unravel the morass of bureaucracy.
“Political parties are now subservient to their leaders, and not to the people who sustain them.”

“The selection for the civil service posts at all levels of government at the centre and states is truly independent of political interference.” He recognises and posits absolute transparency in the selection of civil servants, but he goes on to say that “While politicians are free to overrule the advice rendered by civil servants, the advisory functions of the bureaucracy are expected to be performed without regard to their impact on the private interests of politicians and the party in power.”

“Political leaders deliver what civil service unions demand by way of pay, security of service, leave, working hours and creation of jobs. In their turn, civil servants deliver what the politicians want in terms of power and favours. The casualty is the public interest.” The knot between the politicians and the bureaucrats is tight and one cannot live without the support of the other.

Bimal Jalan has brought out the adverse impacts of delays in judiciary, a very integral part of the constitutional framework of a country and brings to our notice the growing disjuncture between politics and economics.

Jalan on coalitions: “These coalitions are always more interested in influencing the distribution of wealth and income in their favour rather than in the generation of additional output which has to be shared with the rest of the society.”

He has enumerated the problems that have befallen the public delivery systems like lack of accountability, fiscal stringency etc.

On corruption:
“Corruption is a major hurdle in growth, development and poverty alleviation.”
“Corruption is also an important cause of fiscal drain and higher inflation in developing societies.”
“Thus, another economic effect of corruption is that it further aggravates inequality in an already unequal society.”

One of the main reasons for the proliferation of bribes is that “If administrative rules and regulations are complex and involve multiple agencies acting at cross purposes, then the public has no option but to purchase the required permits, licenses and registrations by paying bribes.”

Thus, Bimal Jalan has brought out the main causes of the underperformance by India in the economic, social and political spheres. He has also put forth remedies which seek to enhance the efficacy of the government. It is a book which deserves to be read by all those who want to know India or change India.

The Economics of Innocent Fraud

The Economics of Innocent Fraud
John Kenneth Galbraith
Pocket Penguin 26
Price:Rs60

This book reveals the unacknowledged grip of the private sector on public life and considers our increasing tendency to accept blindly legal, legitimate, ‘innocent’ fraud.

I have put down some excerpts which I think have immense relevance in today’s world.

Some of the innocent frauds are
1) “Consumer choice shapes to the demand curve.” “Belief in a market economy in which the consumer is sovereign is one of the most pervasive forms of fraud.”

Galbraith talked about how consumers were lured into believing that they are the king. I remember being taught in school that in today’s market, the consumer is the king and that he is the price maker, etc. He compares the tactics employed by corporations in affecting the choices of the consumer to that of political parties’ propaganda during the time of elections. There is so much monies being pumped into advertising, brand image, etc that very often it is these multinational companies which we lovingly call as MNC’s, who determine our purchasing patterns.

And because all these managers and CEO’s in the top are from good business schools, he has rightly written “Economics as taught and believed lags well behind the reality in all but the business schools”. The present day teaching and understanding of economics contrasts widely vis-à-vis the reality.

2) “The composition of the GDP is determined not by the public at large but by those who produce its components.” “Good performance is measured by the production of material objects and services. Not education or literature or the arts but the production of automobiles, including SUVs.”

Presently, the major concern by the planning institutions and committees are how to increase their respective economy’s GDP growth. Though India is growing with close to 8% GDP, large numbers of people are dying due to lack of health and food, and more sadly some are killing themselves because of the unfavourable situations they face.

3) “Here is the paradox. The word ‘work’ embraces equally those for whom it is a clear pleasure with no sense of the obligatory.” “Also those who, having wealth and well-being, seize the rewards of leisure, personal friendship, public concern and expression and do not work at all.” “Just because leisure is an acceptable alternative for the affluent, it can still be morally damaging for the poor….Therefore, while idleness is good for a leisure class in the United States and all advanced countries, it is commonly condemned for the poor.”

In India too, scholars have pointed out that it is owing to the indolence of the workers that they remain poor.

4) “The corporate management illusion is our most sophisticated and in recent times one of our most evident forms of fraud.” “Ownership, the stockholder, is routinely recognised, even celebrated, but all too evidently is without any managerial role.” “Capitalism having given way to management cum bureaucracy, an appearance of relevance for owners is contrived. Here the fraud.” “An accepted fraud.”

Textbooks and other media of teaching refer to the shareholders as owners of a company and who are entitled to suggest changes in policies. Reality shows that all what is happening is a huge puppet show, wherein the strings are being pulled by the management.
Moreover, in Galbraith’s words “It is also not surprising in an economic system where those favoured have freedom to fix their own reward.” What motivates the present generation to become managers is mainly the fact that, fat chunks of salary paid to the CEO’s and the CFO’s.

5) He talks about the entrenched corpratocracy within the public sector and especially its influence on major policy decisions in the foreign affairs and battlefield decisions.

In India, much of the public expenditure is innocently siphoned off to the defence sectors. Where as priority areas like education and health are conveniently put off for later on the premises that the government lacks funds!

6) “It is that the future economic performance of the economy, the passage from good times to recession or depression and back, cannot be foretold.” “The men and women so engaged believe and are believed by others to have knowledge of the unknown; research is thought to create such knowledge.” “The financial world sustains a large, active, well-rewarded community based on compelled but seemingly sophisticated ignorance.”

“On Wall Street, economists had not confined themselves to passive, unfavored reward. Instead they chose to forecast what most rewarded those requesting the research. Also they indulged in well-publicized prediction that was favourable to their personal holdings-prediction molded to serve personal gain or to protect against personal loss. A blight on professional economics; a fraud close to home.”

Some people involved at the lower and middle layers may be innocently harming the populace but the managers know.

Thus this book serves as an eye opener to those in the corporate world, to those planning to enter these MNC’s and to those questioning minds. Try to read this book to get more insights into this ‘real’ dismal world. Please post your views on this aspect of fraud that is innocent.

Freakonomics in the morgue?

Freakonomics has become a cultural phenomenon and here in India, the book is always associated to good economics. Is it so?

Look at what Ariel Rubenstein has to say:

“Describe Freakonomics as a typical work of academic imperialism. Furthermore, Freakonomics expresses the aspiration to expand economics to encompass any question that requires the use of common sense.”

“What have we learned about Levitt? He is a smart guy with connections in the municipality. What is the connection to economics? None.”- On Levitt’s tales of the big city.

“Like prostitutes, the skill required of economists is “not necessarily ’specialized’”

“Levitt is correct when he says: “Information asymmetries everywhere have in fact been mortally wounded by the Internet.” (6 The curious reader can roam the Net and discover, for example, that there are some who harbor doubts regarding the (superfluous) story about the fellow who claimed to have defeated the Ku Klux Klan using a trivial tactic.”

“The grocer wages a struggle for survival against the big supermarket chains and hopes for a large bill. The economist struggles for his professional advancement and wants his findings to confirm his hypothesis. In economics, there is no tradition of checking data and repeating experiments.”

“This is perhaps the central contradiction in the book: On one hand, a recognition of the limitations of statistics, and on the other hand, using it as a magician’s box.”

“Who knows, maybe Levitt, who exposed cheating teachers in Chicago, will succeed in catching terrorists through the databases of rental car companies. But if he does, it will not be due to his professional skill as an economist but due to his personal talent.”

To read his Freak Freakonomics fully, go here.

Please post your Freaky comments too!