Trust this invisible advice

Dr Singh completes half his term. Imagine Milton Friedman assessing him

Dear Dr Singh: As you have doubtless heard from the press, I have entered the Great Beyond and have had the privilege of meeting up with the father of our profession, Adam Smith (if I remember correctly, you earned a prize named for him during your university days). As it happens, one of our first topics of conversation was about your grand country — a country of so much promise and potential, a country unnecessarily cursed with widespread poverty, a country where we all hope you will leave behind a legacy of freedom and prosperity. If you remember, Adam Smith had been an early opponent of the East India Company (a state-sponsored monopoly house) which did so much economic damage to your country and incidentally to Britain, which would have been much better off with India as a prosperous trading partner rather than as an impoverished dependency. Monopolies and quasi-monopolies, be they state-owned or state-sponsored, work arduously to stifle economic competition to the detriment of large numbers of people and for the benefit of a select cozy oligarchy. I don’t need to tell you this. Your government has been trying against great odds to dismantle state monopolies. You have had some success in the airlines and telecommunications industries but you are still struggling with coal, electricity distribution and so on. Where you have succeeded, prices have dropped, employment has shot up, consumers have benefited, wealth has been created, citizens are better off. Where you have been held back, the country too seems to have been held back.

You may be aware that Prof Mahalanobis (who, whatever his personal views, kept an open mind) was keen to get me involved in economic policy-making in your country. I don’t want to sound too conceited, but I wish that had happened. Honourable gentlemen like Harrod and Domar got involved. Markets were not just neglected, they were despised. Citizens were denied ‘licences’ to exercise their economic and entrepreneurial freedoms. Needless to say, the few who obtained licences got rich at the cost of the larger nation. There was a southern Indian gentleman with a long polysyllabic name who was your finance minister (Ed: T.T. Krishnamachari) who imposed a tax rate of 97 per cent on income. I could have told him that such a tax rate was a guaranteed prescription for poverty. From the days of the emperor Diocletian it has been time and again proved that rapacious tax rates lead to poverty like night follows day. Luckily, you now have a more pleasant-sounding southern Indian finance minister in your cabinet (Ed: P. Chidambaram). He is the beneficiary of burgeoning revenues as a consequence of reasonable tax rates.

One of the extraordinary experiences I had when I visited your country was my meeting with yet another southern Indian, Mr C. Rajagopalachari. I wrote then as follows: “It was exciting to find a man with such philosophical depth, emotional concern, and analytical clarity about the problems facing India.” I would particularly commend to you the writings and thoughts of this great countryman of yours. If I may, let me take the liberty of suggesting that you should take upon yourself the mantle of getting rid of each and every remaining vestige of the tyrannical ‘permit-licence Raj’ as he called it, a Raj that arguably did even more economic damage to India than any foreign dispensation. I call upon you to fulfill Rajagopalachari’s vision and free Indians from their residual shackles.

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One of my unforgettable memories during my visit to your country was to see the quantum, variety, quality and exuberance of India’s human talent. I wrote about it then and had advocated greater public investment in human capital development rather than in steel plants or hotels. India has done a reasonable job with investments in technical higher education and this has paid off not only for the individual beneficiaries of this education but also for the country at large. The pathetic educational opportunity available for the poorer citizens of your country, especially at the primary and secondary stages, is a tragedy and a shame. While your cabinet colleagues send their children and grandchildren to elite private schools of their choice, poor families have to send their children to government-run schools where I am told that unionised teachers often don’t bother to turn up!

In my book Free to Choose, I recommended for my own country the introduction of ‘school vouchers’ where all parents (irrespective of race, class or location) would be entitled to send their children to the school of their choice. The government would then reimburse the schools. This increases choice for parents and children and forces quality improvement for all. I strongly urge you to go in for a voucher-scholarship programme. It is economically more efficient than throwing good money after bad in the state sector. Of course, if parents choose well-run private English medium schools, some linguistic chauvinists in your parliament may object. All I can say is that if poor parents make this choice, they would only be imitating your parliamentary colleagues and the illustrious Nehru-Gandhi family. Surely imitating such persons should be viewed as a patriotic act, not one to be condemned.

If the mandarins of your education ministry tell you that you cannot do this because under your Constitution education is a state subject and not a federal one, please note this is one more irrelevant red herring intended to delay action, but with no substance. The central government seems to have no difficulty starting and supporting elite Kendriya Vidyalayas for the benefit of government employees. There is nothing in your Constitution that prevents your government from offering vouchers for scholarships or bursaries to your children and their parents. Just do it. You will go down in history as the individual who literally educated all of India’s children! Converting them from barefoot beggars or suppliers of sweat labour to educated, skilled human beings is a truly worthwhile cause. With best wishes from Adam Smith and myself, Sincerely yours,Milton Friedman.

The writer is chairman, Mphasis