Category Archives: Public Policy

Peter Martin | Narendra Modi’s Soft Power Strategy | Foreign Affairs

India has long seemed unable or unwilling to become a major player on the world stage. But the country’s prime minister, Narendra Modi, is looking to change all that. In order to compensate for a small and weak foreign service, he is tapping into India’s considerable soft power: its emigrants, intellectuals, and yogis.

Modi began his premiership last year with a dramatic spurt of diplomatic activity. He has ratcheted up India’s engagement with its neighbors. His first overseas trip was to Bhutan; he visited Nepal twice in four months; and he worked to resolve territorial disputes with Bangladesh. He has courted China, Japan, and the United States through a series of high-profile bilateral visits. And he has energetically represented India at multilateral forums, most notably the BRICS meetings, the G-20, and the United Nations General Assembly.

But there are limits to what conventional diplomacy can achieve, especially given its weak institutional underpinnings in India. The Indian Foreign Service (IFS), the bureaucracy that staffs India’s top diplomatic institutions, is tiny for a country with global ambitions: a mere 900 people. Indeed, representing India’s 1.2 billion people is a foreign service that is roughly the same size as that of New Zealand (population 4.4 million) or Singapore (5.3 million). By comparison, the United States’ is around 15,000 and China’s around 5,000.

via Peter Martin | Narendra Modi’s Soft Power Strategy | Foreign Affairs.

via Peter Martin | Narendra Modi’s Soft Power Strategy | Foreign Affairs.


Institutions and Sustainability


I
nstitutions, whether political, social or economic ; set the context for individual and group behaviour and are meant to provide the resources individuals need to survive. How people act and live is shaped in large part by the social structures in which they find themselves.[1] Social Justice and Rewarding Courage,  is in part , a matter of ensuring that these institutions through its instruments of intervention and action do in fact satisfy basic human needs.

Many structural forces which are characterized by exploitation and lack of innovation tend to create a system in which people become trapped in a particular social situation. Structural violence often results, in the form of power inequity, poverty, and the denial of basic human rights. Basic human needs go unmet, and groups suffer from inadequate access to resources and exclusion from institutional patterns of decision-making.[2]

Many sustainability professionals are fearful about the scale of the challenges facing the world, but this uncertainty can help generate the energy required for courageous action. While the desire to concentrate on finding practical solutions is understandable, it makes sense at the same time to also recognise and step towards our deepest fears, which can feel akin to taking a leap into a bottomless abyss.[3] Former US President Bill Clinton illustrated some of the nuances of uncertainty and sustainability in his talk at University of Oxford in 2012. Bill Clinton said that the most important change that needs to happen to confront the sustainability challenges of our age is to raise the consciousness of the world’s population. He said it was a good thing that we did not know for sure whether the calamitous cocktail of climate change, resource scarcity, ecosystem degradation and population growth would lead to an end of civilisation as we know it.[4]

Creating Shared Values with Institutions

When the expression “sustainable development” was coined in the report of the World Commission on Environment and Development in 1987, it was defined as “… development to ensure that it meets the needs of the present without compromising the ability of future generations to meet their own needs” (WCED, 1987). From a legal perspective, sustainable development has been defined as “a comprehensive economic, social and political process, which aims at the sustainable use of natural resources of our planet and the protection of the  environment on which nature and human life as well as social and economic development depend…” (International Law Association, 2002).

The task of identifying a common framework for institutions to be effective in leading the path to sustainable world order is not easy. One important observation that could be drawn from available literature is that Institutions of any kind , now have to create shared values to achieve this task. Michael Porter and Mark Kramer has talked about creating shared value in business and corporate strategy in their award winning article in Harvard Business Review.[5] The article talks about purpose of corporation to be creating shared value and how to achieve that. In recent years business increasingly has been viewed as a major cause of social, environmental, and economics problems.

The question is how to transform the institutions to be being in virtuous circle of sustainable development. In this essay I propose a framework to which institutions should look into to bring that change and create shared value. The three wings of that change would be the following:

Sustainability and Education: Fostering organizations for sustainable economics and management .

Fostering Innovation : Fostering a culture of Innovation that is centred around driving business models  which bring in societal change.

Rewarding Courage: A focus on rewarding courage to stay the course in the times of adversity and uncertainty and even to take discomfort.

Three_pillars

Exhibit 1:  Three Pillared Framework for transforming the Institutions

Sustainability and Education

Education is a prerequisite for promoting the behavioural changes and providing all citizens with the key competences needed to achieve sustainable development. Education and training should contribute to all three axes of sustainable development, namely:

The Social perspective – education and training strengthen social cohesion by investment in human capital;

The Economic perspective – education and training contribute to building a knowledge society based on sustainable economic growth; and,

The Environmental perspective – education and training are crucial for changes in citizens’ behaviour on issues such as: consumption, transport, use of sustainable energies, etc.

Knowledge, Values, and Education are fundamental to all the changes that have been considered is a major transformation of human awareness. This shift in attitude and thinking, which is already underway, involves a new intellectual understanding One of the key initiatives that many universities around the world has taken,  is to foster student organizations who acts as agents for sustainability to bring in curricula change and motivate the academic and student community for sustainable development. One such organization is oikos , which with its chapters around the world is increasingly creating awareness on sustainability and coming up with tangible deliverables to bring in the change. My personal experiences as President of a oikos local chapter in New Delhi has been immensely fruitful in terms of generating a knowledge bank in the university and spreading the word on sustainability . While doing so there have been many instances when we were able to partner with a variety of organizations to create projects which would in future keep generating insights in the area of sustainability. Institutions today need to realize the fact that education right from the very beginning of one’s formal education and  has to absorb the true values of sustainable development.

If the positive changes and are to continue and intensify, the driving force will be an awakened, concerned, and mobilized global civil society. Governments and corporations will respond to voter and consumer demand, and a vibrant global people’s movement could inspire endless variations on the theme of sustainable development.[6]

Fostering Innovation

It has to be now understood well by all kinds of Institutions that the next phase of innovation lies in the fact that new business models need to be driven for societal change and not economic value added. In fact economic value should be drawn by designing new products and services which can bring societal change in turn generating economic value. Creative thinking has always been integral for improving well-being. (Lemelson – MIT Program, 2003 )

As the world’s largest democracy, with a diverse population of more than one billion, India has become a key testing ground for sustainable development. Most of the media attention has been focused on the country’s pockets of urban, English-speaking university graduates who are “piggybacking,” capitalizing on the Internet and decreasing telecommunications costs to capture hundreds of thousands of software and customer service jobs from overseas, at a fraction of American or European wages. The high-tech start-ups of Bangalore have been heralded in the press. Corporations such as GE and IBM have even opened R&D centres there, employing PhD-level engineers who are helping to invent and improve info tech, biotech and nanotech.[7] There are various case studies available similarly for China[8] and Africa[9] which talk about Innovation for Sustainable Development.

The proposed framework envisions a world where Science and Technology work more directly for social justice, poverty alleviation and the environment. This requires innovation which is transformative – reshaping social and power relations to allow innovation in new directions. It means innovation for sustainability, paying attention to ecological integrity and diverse environmental and social values. It means that the benefits of innovation are widely and equitably shared, and not captured by narrow, powerful interests. It means encouraging open and plural forms of innovation pathway – social and technical; high tech and low tech; those which are currently hidden, as well as those which are more commonly recognised. It means organising innovation in ways that are networked, distributed and inclusive, involving diverse people and groups, including those who are poor and marginalised. As a result, this is a world where all feasible directions for scientific, technological and wider social innovation are discussed as matters for legitimate political argument, just as in other areas of public policy. It is a world where scepticism over some particular innovation pathway can no more be excluded as indiscriminately ‘anti-innovation’ than opposition to any specific policy is generally ‘anti-policy’.  It is a world where a deliberate diversity of innovation pathways flourish and interact. What is needed is nothing short of a vigorous new critical glob al politics of innovation.[10]

Rewarding Courage

The recent global financial crisis and ensuing recessions placed a premium on strong, effective and “sustainable” leadership. Although people tend to measure wealth in terms of the dollar value of a portfolio, we believe it is better to measure wealth in terms of the real spending that the portfolio can sustain over the entire life of the obligations served by the portfolio. Sustainable spending[11], is an expression used  to gauge this true value of a portfolio. Jim Garland used the term “portfolio fecundity,” to describe much the same concept.[12]

Many people felt jubilation at the peak of the tech bubble, because they felt so wealthy. And they were—as long as they were inclined to liquidate their holdings and spend before the market lost its euphoria. If they were still investing (e.g., for some future retirement), those new purchases bought precious little yield! Reciprocally, people felt panic and dismay at the 2009 trough of the financial crisis, because they felt as if their assets had been wiped out. And they were—if they intended to liquidate and spend their assets immediately. But, for the buy and-hold investor, their real income was higher than at the 2007 peak!

Focus should be on creating enough incentives to rebalance into higher yielding assets after they’ve cratered, presumably funded from assets that have performed much better, we can systematically ratchet our sustainable spending ever higher. This ground is amply explored in asset allocation literature. Indeed, the essence of Tactical Asset Allocation (TAA) is an effort to rebalance into investments when they become most uncomfortable, and are therefore priced with a superior risk premium, to reward those who are courageous enough to invest at such times.

Much of these incentives has to come from the policy makers of the world. Rebalancing into the most feared and loathed stocks, and out of the most beloved high-fliers, requires courage—even if we get a “raise” almost every time we do it! Andrew Ang of Columbia labels this “countercyclical investing.” He calls on long-term investors to institutionalize this kind of contrarian behaviour.[13] If we have the courage to do this, even though it creates discomfort and goes against human nature, it far better aligns our investments with the long-term obligations that they are intended to serve.

Institutionalizing a focus on sustainable spending, as a basis for gauging our investments over time, can help give us the courage to stay the course in adversity and even to take on more discomfort when it is most profitable—and most frightening—to do so.


[1] E. Franklin Dukes, “Structural Forces in Conflict and Conflict Resolution in Democratic Society,” in Conflict Resolution: Dynamics, Process, and Structure, ed. Ho-Won Jeong. (Vermont: Ashgate Publishing Co., 1999), 159.

[2] John Paul Lederach, Building Peace: Sustainable Reconciliation in Divided Societies. (Washington, D.C., United States Institute of Peace, 1997), 83.

[3] Jo Confino , For sustainability leaders, embracing uncertainty can be rewarding, The Guardian (July 2012)

[4] Jo Confino , Live blog from Oxford University: Day two on food, water and energy for all, The Guardian (July 2012)

[5] Michael E. Porter and Mark R. Kramer, Creating Shared Value: How to reinvent capitalism – and unleash a wave of innovation and growth. Harvard Business Review (January- February, 2011)

[6] Steven C. Rockfellar, Vision, Courage and Sustainability, The GEA Conference for a Sustainable Future (October 2003)

[7] William Bulkeley,  IBM to export highly paid jobs to India, China, page 1, Wall Street Journal, page 1, (December 15, 2003.)

[8] “China’s Second Wave: Country is Now Poised to Flood World Markets with High End Products Like Cell Phones and Autos,” by Jehangit Pocha, The Boston Globe, Page D1, January 2, 2004.

[9] Innovation for Sustainable Development , Local Case Studies from Africa, United Nations DESA, New York (2008)

[10] STEPS Centre (2010) Innovation, Sustainability, Development: A New Manifesto, Brighton: STEPS Centre

[11] Arnott, Robert D(2004) Sustainable Spending in a Lower-Return World, Financial Analysts Journal, vol. 60, no. 5 (September/October)

[12] Garland, James P., 2004, “The Fecundity of Endowments and Long-Duration Trusts,” Economics and Portfolio Strategy, September 15.

[13] Ang, Andrew, and Knut N. Kjaer, 2011, “Investing for the Long Run,” November 11. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1958258.

Bibliography

INTERNATIONAL LAW ASSOCIATION (2002) Legal Aspects of Sustainable Development. Fifth and Final Report of the International Law Association’s New Delhi Conference, London: International Law Association.

INVENTION AND INNOVATION FOR SUSTAINABLE DEVELOPMENT (November 2003)  Report of a workshop sponsored by the Lemelson-MIT Program and LEAD International,  London , THE LEMELSON-MIT PROGRAM, School of Engineering, Massachusetts Institute of Technology 

WORLD COMMISSION ON ENVIRONMENT AND DEVELOPMENT (1987) Our Common Future. Oxford: Oxford University Press.


The austerity question: ‘How’ is as important as ‘how much’ | vox – Research-based policy analysis and commentary from leading economists

Europe’s embrace of austerity has sparked a debate among economists. This column argues that the debate has gone astray. Until the critical principle – ‘how’ is as important as ‘how much’ – is embraced, the austerity debate in Europe will continue to be completely out of line with the real economic trade-offs.

 

The European debate on fiscal austerity has gone astray – focusing exclusively on the size of deficit reductions. What policy makers should really be focusing on is the budget tightening’s composition�(tax versus spending) and on the accompanying policies. Indeed, the title of this Vox debate – “Has austerity gone too far?” – reflects this inappropriate emphasis on size.

In our view, the essential question is not ‘how far’ governments go but of ‘how’ they go far enough.

Evidence on new taxes versus new spending cuts

Economists have engaged in some lively debates about how to measure and evaluate the effects of large fiscal adjustments episodes in OECD countries (Europe in particular). But a careful and fair reading of the evidence makes clear a few relatively uncontroversial points, despite the differences in approaches. The accumulated evidence from over 40 years of fiscal adjustments across the OECD speaks loud and clear:

via The austerity question: ‘How’ is as important as ‘how much’ | vox – Research-based policy analysis and commentary from leading economists.

via The austerity question: ‘How’ is as important as ‘how much’ | vox – Research-based policy analysis and commentary from leading economists.


Government Intervention in the Economy

Statue of Liberty Gaeilge: Dealbh na Saoirse

Statue of Liberty Gaeilge: Dealbh na Saoirse (Photo credit: Wikipedia)

Economy is akin to the freeway, though on the freeway there is a speed limit and traffic signals to regulate the traffic. And of course police to book the offenders. The economy, too, should have limits, regulators, and the law to book offenders.

If we base our analysis on methodological individualism, subjective rationality and inherent unpredictability of economic system to properly analyze the Government role in society we have to conclude that, beyond the point of maintaining the basic framework of law and order, government’s role in society is very limited. One single intervention is unlikely to produce a solution to deep-rooted economic and social problems and thus policy makers often try to build a variety of policy, policies that work on market demand and market supply.

Economists have referred innumerable times to the “free market,” the social array of voluntary exchanges of goods and services. But despite this abundance of treatment, their analysis has slighted the deeper implications of free exchange. One of the most lucid analyses of the distinction between State and market was set forth by

In his book The General Theory of Employment, Interest and Money (1936), John Maynard Keynes set forth a series of theories that have come to be known as “Keynesian economics,” whose major implication for the public and for governments was that recessions and depressions are not simply natural events that will eventually correct itself, but rather a problem that must be solved by direct government intervention in the economy, by deficit spending and other measures.. He pointed out that there are fundamentally two ways of satisfying a person’s wants: (1) by production and voluntary exchange with others on the market and (2) by violent expropriation of the wealth of others. The first method Oppenheimer termed “the economic means” for the satisfaction of wants; the second method, “the political means.” The State is trenchantly defined as the “organization of the political means.”

Economists usually make a common mistake, that extensive modeling, statistical and empirical coverage of events is enough for proper design of any system. Economics is a social science and the effects of intervention cannot be calibrated / forecast with great accuracy , people’s behaviour is subject to change as one can infer that from the ‘law of unintended consequences’. If we live in such undetermined and unpredictable world, with limited knowledge and limited ability for proper economic analysis, one cannot be sure about the policies that are being proposed.


Internationalization of India: Of Trade and Connectivity

India Day Parade an event for PHD’s & Politici...

India Day Parade an event for PHD’s & Politicians? Open Letter to Editors of all Indian News Papers in USA (Photo credit: davemakkar)

India Gate

India Gate (Photo credit: aroris)

Why should low-level of connectedness to the world should be a concern to Indian policymakers? Let’s start with ,traditional computable general equilibrium models (CGE) which peg the benefits of complete merchandise trade liberalization at about 0.5% of GDP, more advanced models with a consideration to all policy levers would shoot the number by a high margin. Also accounting for benefits from economies of scale , product and service differentiation, increased competition , normalizing risk, and generating and diffusing knowledge should push the potential gains well past 1% of global GDP, to 2-3%, or maybe more. Also, foreign direct investment offers an avenue for internationalizing even the provision of some “nontradables” ,  and there are substantial gains available from increasing the cross-border mobility of capital, information and people as well.Two decades of reform aimed at opening up the economy have roughly tripled India’s indicators of trade exposure, compared to our past, there has been a significant progress in this regard. That’s the good news. But the bad news is that India still ranks quite poorly in terms of many measures of the intensity of cross-border integration. In terms of measures of inward FDI stock as a percentage of GDP, India still figures in the bottom 10% of the countries. On Information Technology connectivity front India does a bit better, all thanks to Internet but India does substantially worse in terms of trade in publications and print material, intensity of short-run tourist flows and medium-run university students.

India figures in bottom decile of the fifty countries in terms of the extent to which it encourages FDI, according to OECD‘s FDI Restrictiveness Index. So although India has opened much more in past , a lot need to be done. The big problem here is not Manufacturing as one might say , where many barriers have been eliminated, sector where foreign investment is still very much restricted is business services. Take for example the classic case of FDI in multi-brand retail. Opposition to liberalizing FDI in this sector raises concerns about employment losses, unfair competition resulting in large-scale exit of incumbent domestic retailers . Based on international evidence, we suggest that allowing entry by large international retailers into the Indian market may help tackle inflation especially in food prices. Moreover, technical know-how from foreign firms, such as warehousing technologies and distribution systems can improve supply chain efficiency in India, in particular for agricultural produce. Better linkages between demand and supply have the potential to improve the price signals that farmers receive and also serve to enhance agricultural and other exports. Similarly the foreign universities bill also turned out to be a car with square wheels. Indian tertiary education system needs  internationalisation of higher education and policy makers should put in place a policy framework to address the various concerns, if it wants to reap the benefits.

Policies explicitly aimed at boosting internationalization should be backed up with policies aimed at improving the domestic business environment. Another major challenge facing the investment flow is corruption, diverting long term commitments ( like FDI) to short term capital flows which makes it necessary for the government to tackle it. All of this should suggest that there is tremendous potential for further policy measures to increase the internationalization of the Indian economy and, more importantly, Indian welfare.


Some Interesting Public Policy Issues

Wikipedia

Wikipedia (Photo credit: Octavio Rojas)

The old RBI Building in Mumbai

The old RBI Building in Mumbai (Photo credit: Wikipedia)

India Against Corruption HQ logo

India Against Corruption HQ logo (Photo credit: Wikipedia)

The SOPA Act in The United Sates: The Stop Online Piracy Act (SOPA) is a United States bill introduced by U.S. Representative Lamar S. Smith (R-TX) to expand the ability of U.S. law enforcement to fight online trafficking in copyrighted intellectual property and counterfeit goods. The bill promises to protect intellectual property market and corresponding industry, jobs and revenue, and to bolster enforcement of copyright laws, especially against foreign websites.

Anti Corruption Body Formation in India (Lokpal Bill):Government failure to propose a strong Lokpal Bill

which is new anti corruption activism in India. It lacks teeth to bite the corrupt and is faulty in many ways.

Reserve Bank of India‘s monetary policy:
Keeping in mind the sustainability of Indian Economy and the growth prospects so that fiscal consolidation takes place , it becomes very difficult for RBI to curtail Inflation in India. Inflation in Asia’s third-largest economy hovered over 9% for 10 straight months to September. A depreciation in the rupee, which has fallen about 11% against the U.S. dollar since April, has made imports costlier, aggravating the inflation problem. While the RBI have persistently raise the rates 12 times in 18 months till September of 2011 as an anti-inflationary policy stance, while completely ignoring the supply side economics. What was need to focus on the supply side economics and not only demand side economics.

Lack of a National Integrated Logistics Policy in India: While roads have improved and express highways created, delays at check posts along the way due to heterogeneous state taxes and regulations have limited efficiency gains.

Infrastructure Finance in India: While delays in implementing infra projects due to land acquisition , environment and other issues are well recognised in India, one area where a solution could have been forthcoming much earlier relates to accessing long-term funds needed for investment. India needs to develop long term debt markets and deepen corporate bond markets. This in-turn calls for strong insurance and pension sub-sectors.

Attracting Foreign Investment and Foreign Investors in India: India needs Modern Retail. There could be an argument about FDI in retail , but there is really no debate about the need of Modern Retail Technology . Cold-Storage and faster movement of perishable commodities along with better ways of Supply Chain Management will help farmers and Consumers. All this could be done without FDI , but the entry of Carrefour, Walmart and Tescos of the modern world will accelerate the process.

Energy and Power Sector: No country have higher growth without adequate power. India is especially facing enormous power problems. Bank lending to the sector is at all-time high, but some projects that have borrowed money are stalled because of land, raw material and infrastructure issues. Some states are not in a position to buy power from private generators because they have not raised the power tariffs for a decade are now unable to raise it because of political pressures and vote bank politics.

Dismal Scene and Negligence for India’s Agriculture Sector: There have been hardly any reforms in agriculture. Marketing laws are outdated. Distribution and logistics from the farm to food-bowl are full of inefficiencies and corruption. The cost a consumer pays is too high and cost the farmer gets is too less. This exaggerates the problem of food inflation. The APMC (Agriculture Produce Market Committees) monopoly run by state governments does not allow retailers to buy directly from the farmers.

Labour Reforms: Labour laws must be reformed so as to restore the employer’s right to lay off workers upon adequate compensation to them. In context of India, firms with 100 or more workers have no legal way to exit since they cannot lay off the workers. This works as a major barrier to entry of new firms on a large scale , as they hesitate to enter into a world that no exit doors.

Opaque Political Funding giving rise to more of Politico-Corporate Corruption: Corporate contributions to political parties are shrouded in secrecy, which give chance to more corruption. Electoral compulsions for funds in countries like US and India become the foundation of the whole superstructure of corruption. Transparency in the ways that companies engage in , manage and oversee the political funding, especially in case of India is a first step to cleaning up the corruption problem. Both companies and political parties need to take a lead in this.