Inquilab Zindabad ? No ! _____ (fill in the blanks) Murdabad .

What is common between a park demolition and a raise in bus fares. Well, something profound , I believe. Because in the last one month, I dare suggest that these were the two most important events in the world (NSA be damned ; as if that was a surprise)

The park issue was the first and it happened in Istanbul, Turkey.  The government had planned to demolish the Taksim Gezi Park and use the space to reconstruct the historic Taksim military barracks. About 50 environmentalists occupied the Park in protest. The police , predictably evicted them. That snowballed into massive nationwide protests and a huge Occupy Taksim Square movement started.  The issue of demolition of the Park has now given way to a protest against all sorts of unrelated issues and drawing crowds numbering in the tens of thousands. It is now an anti government protest without a coherent theme or leaders. A big section of the population is just protesting without a clear understanding of what they are protesting against and what the solution is. This mind you, in a country where the President Erdogan has won repeated elections with a strong mandate.

In Brazil, the government decided to raise some bus , train and metro fares. A few protested, notably the  Movimento Passe Livre (Free Fare Movement). The police broke up the protests. Again this has snowballed into a nationwide protest movement, involving millions of people. The government quickly withdrew the bus fare hike, but the protests have snowballed into something bigger - a whole range of issues, including protests against the Football World Cup and the Olympics all scheduled to be held in Brazil in the near future.  If Brazilians are protesting against football, something serious is happening. Again this is in a country where Dilma Rousseff won a resounding mandate in the elections and is the chosen successor of the extremely popular Lula.

As of today, both these protests are going on. You can see parallels with the Occupy Wall Street movement in the US and a few other places. In all these protests, there is no coherent theme, there is no leadership organising the protests. But these protests have been massive, cover a whole range of grievances and are significantly aided by social media.  They largely cover the middle class, not the poor. They tend to die down because they are not coherent and not "organised". But they are symptoms of a deep underlying problem.

This is a profound sociological change and one that should be researched deeply.  I believe the underlying issue is economic. Despite a big economic improvement globally across the last two decades, there is deep resentment. Large swathes of the population do not believe that there is a bright economic future ahead of them. This, despite the fact that the future is significantly brighter than what our parents, grandparents and forefathers ever had. And that is the problem governments and societies cannot ignore. There is no easy solution, and aspects of the solution will be different for different societies. But the root of the solution is economic. We have to have economic growth.

PS - In the title of the post - Inquilab Zindabad means Long live the revolution, in Urdu, a favourite phrase of protests of the past in the Indian subcontinent. Murdabad means "Down with".

Cash transfers instead of subsidies

India is embarking on a major revamp of its social security system - replacing subsidised food, fertiliser, fuel, etc etc with direct cash transfers to the bank accounts of the "poor". Is this good or bad ?

The current system involves heavily subsidised foodgrain, fertilisers, fuel, etc being made available to ration card holders through the public distribution system. This suffers from a whole host of problems. Bribery, corruption, pilferage, etc ensure that only a fraction of the stuff ends up in the hands of the targeted people.  In some areas like fuel, cooking gas cylinders are widely misused and the diesel subsidy lands into the pockets of rich car owners. The waste is so incredible that something ought to be done.

The solution proposed is to eliminate all subsidies progressively and instead simply transfer cash by electronic transfers to bank accounts of the target population. Initially it will cover various anti poverty schemes, then extend to cooking gas and kerosene and only finally to food and fertiliser. The Aadhar scheme is intended to enable foolproof identification. This way middlemen and cheats are largely eliminated. The poor use this money to buy their requirements from normal shops selling products at market prices.

The scheme has lots of advantages. Firstly corruption will go down, although it will not be eliminated. The middlemen taking cuts will be put largely out of business. The country's subsidy bill will drastically fall - as the waste will significantly reduce. The entire rotten public distribution system can be disbanded (although it works quite well in states like Tamil Nadu and Chattisgarh).  Today's technology can ensure that fraud and stealing can be drastically reduced.

However, my worry is that once cash reaches the intended family, what will they use it on. The problem is that their buying behaviour is not predictable or controllable. Undoubtedly many men will use this money to drink . Families will use this money for atrocious causes such as dowry, or  to show status. The brilliant book, Poor Economics, draws on extensive research to prove how their decisions might not seem rational. Research shows, even with present incomes, the poor could spend 30% more on food, if they cut out liquor and tobacco.  When they buy food, the choices are not based on calories or nutrition, but on taste and style. On the medical front, they shun expenditure on low cost preventive measures like mosquito nets or chlorine tablets, even when provided free, and instead go to the local quack for a costly useless injection.

Of course, it is not for me, or anybody else, to prescribe what any individual wishes to spend money on. But I certainly have a problem if my tax rupees  go to fund drinking liquor.

Cash transfers have worked in some other countries, notably the Bolsa Familia in Brazil. But this is a conditional transfer scheme - they get a small amount of money ($12 a month) if  the children stay in school, mothers attend pre natal care, etc etc. India plans to give some $70 a month or so as a straight dole.

On balance cash transfers appears a good thing, but it is not an altogether perfect solution and needs to be implemented with care (not gunghoism). It is wise to recall how Kamaraj in the 1960s raised the literacy levels in Tamil Nadu. With great insight he introduced the mid day meal scheme. Families sent children to school so that they could have a square meal. I doubt the move would have been that effective if he had instead given cash for them to buy a meal.

Wealth and Morality are not mutually exclusive

Not for nothing is Archbishop Desmond Tutu widely known as "South Africa's moral conscience". The Nobel Peace Prize Winner in 1984, Archbishop Tutu was one of the leaders of the anti apartheid struggle in South Africa. He headed the Truth and Reconciliation Commission after the fall of apartheid which so enabled South Africa to move on from the past and not start a war of vengeance. He speaks often in defence of moral positions. 

So when he wrote a piece in the Financial Times, I sat up and read. He argues in his piece that you don't have to lead a life of austerity to be moral or spiritual. Being wealthy is not a crime (its often made out to be by those who claim to speak for the poor). "It is fine to make a living; we are meant to enjoy abundant lives. The conflict comes when we separate ethics and economic progress and when we equate the latter with happiness", he says.

There's a beautiful statement in his piece.  "Shareholder responsibility is not only to make profits. How they are made also matters." Beautifully put.

I'll leave you to read the article yourself. Its not earth shattering or a blindingly  novel idea. But I believe he has stated very well, with all his moral authority, that yes, you should strive to be wealthy, but be careful of how you become wealthy.

In early stages of a career wealth seems to be everything. That's the goal to aspire for. As you grow older, you may realise that wealth is a necessary, but not sufficient, condition for happiness. You may or may not be religious, or even spiritual. But you have to be "moral" to attain a degree of happiness. Those who age, without this realisation, have grown older, but no wiser. It may appear that they have the trappings of happiness, but in reality, they do not.

The opposite is equally true. To condemn wealth and say that it is a barrier to morality, or even spirituality, is sheer bunkum. Glorification of poverty is one of the greatest sins that people can make. Unfortunately many activists do so stridently. They should listen to Archbishop Tutu.

I've often felt that the world needs moral leaders. In the ancient world, the Pope performed that function (alas often appallingly). Leaders, tainted by religion, are now too narrow to be moral world leaders. In the modern world, there are no moral leaders. The closest to having that aura would be Nelson Mandela, but he is an old man now. Archbishop Tutu is somewhat in that mould, even though much of America vehemently criticises him for his strident opposition to Israel's policies on the Palestinians. The world needs more men (and women) like them.

Yes, we can

To many, the year gone by was a bad year. Natural disasters took their toll - the earthquakes in Japan & New Zealand, the floods in Thailand, Brazil and the Philippines,  Irene slapped the US earlier in the year, and just as the year was slipping by, Thane kicked Tamil Nadu. Unemployment remained rampant in the developed world ; there is nothing more demoralising than losing your job and not having a hope of getting another one. Large parts of Europe are in crisis. Austerity measures are hurting badly, especially in Greece, and now Italy. Inflation has hurt people in China and India and growth slowing down in both countries is ominous. The Arab world had a new spring, but winter seems to have set in somewhat prematurely.  You could be forgiven for ushering in the new year in a somewhat sombre mood.

But there is every reason to look forward with hope. Adversity often brings the best in man. We can find strength that we did not even know we possessed. The Euro zone will hold together and the crisis will pass. Belt tightening will be required, but with courage and fortitude, there will be less suffering. Joblessness in the developed world will start to reduce as a slow recovery happens . There is no better a mood lifter than getting and holding a job. Inflation will ease in India and China - signs are there already and more and more people can lift themselves out of poverty. An encouraging part of the world is Africa. Long abandoned as a basket case, many countries are showing good growth and the Asian achievement of lifting people out of poverty is slowly, but surely, being replicated in Africa.


The year ahead is going to see significant elections in France and the US and a generation change in leadership in China. Each one of these is going to be momentous - none more so than the change looming in China where for the first time, such a change is going to happen without a strongman like Mao or Deng lording over it. Perhaps a leadership change might happen in India too.

We can look forward to 2012 with hope. I am surmising that the worst is over economically. The upturn might be slow, but upturn it is going to be. We can do much better this year and when the time comes to ring out the year, we can be in a much more cherful mood than we are today. Yes , we can.

Toothbrushes and mobile phones

There are more people in the world today who own a mobile phone than a toothbrush. This may startle you, but its true, at least according to 60secondmarketer.com. There are 4 bn mobile phone users in the world. The annual sales of toothbrushes is 3.5 bn.

This won't surprise you if you read the excellent book, Poor Economics, by Abhijit Banerjee and Esther Duflo. My good friend Ravi, who often comments on this blog, very kindly gifted it to me and it makes fascinating reading.  It was named as the Financial Times Business book of the year. As the byline says, its a book about rethinking poverty and the ways to end it. The book destroys many myths about poverty and provides fascinating insights into the behaviour of the poor. Its no surprise then that they would rather own a mobile phone than a toothbrush.

One of the big insights is that things that make life less boring are a priority for the poor. The  quote from Oucha Mbarbk, a poor Moroccan villager sums it all up "Oh, but television is more important than food !" In country after country, the researchers have tried to analyse why the poor eat so little, and sometimes bad food, even when they have the money. Food spending is actually declining in a poor country like India. Its because food is not a priority !

Another fascinating area of research is health. The largest killer of children in world is actually diarrhea. Two cheap and easily available miracle drugs can save the 2 million children who die of diarrhea before their 5th birthday - chlorine bleach and a rehydration solution of salt and sugar. And yet many do not use it even when given free. They want an antibiotic or an intravenous drip. Prevention is frowned upon. An expensive cure, often in the hands of a quack is preferred. 

Another deep insight - poor are like hedge fund managers; they live with huge amounts of risk. They manage this by a typical hedging strategy - diversifying activities. A striking fact quoted from one survey - the median family had three working members and seven different occupations. And you would expect that in a high risk enviroment, insurance in some form or the other would be popular. Wrong. Nobody seems to want insurance.

The book is full of amazing tidbits of research. For example , in Kenya, one of the largest levers for ensuring prosperity for your child was actually giving her deworming tablets. Children who were given deworming tablets for 2 years instead of only 1 year earned 20% more every year for their entire lifetime !!

There is , of course, no silver bullet for eradicating poverty. You mustn't expect one from this book. But it offers many fascinating insights that would make anybody think again about poverty. I heartily recommend anybody with an interest in this subject to read this book.