Some friends alerted me to this important comment in the MINT on how India’s farmers are rationally expecting another loan waiver and refusing to pay off their loans. Before the last general elections, they got a loan waiver. You can’t blame them for hoping to get another now. Their expectations have been set by the ruling dispensation. There must be better ways to run a nation that was once a great civilisation. Some cannot be bothered or perhaps they are too bothered that its fall from its greatness remains an unfinished task. The Chairman of the State Bank of India did not mince words on the deteriorating credit culture in rural India. That is a solace, if it can be called that.
Given this, Niranjan is right to warn of a structural slowdown in the country and wonder politely if the stock market is getting things right. Of course, optimists would pit David Pilling against Niranjan. But, I think there are better ways to run a nation than to depend on unlikely heroes to bail us out on each occasion (a reluctant Prime Minister in the 1990s, a poet-Prime Minister in the new Millennium and the Supreme Court now)
I personally think that Raghuram Rajan has finally zeroed in on why the politician-reformer is a rare species. The reason is that the environment does not allow him to thrive. The public does not or cannot grasp costs of acts of omission and commission that are yet to manifest themselves. Hence, any action taken to prevent a calamity or improve things might be viewed with disfavour since it involves upfront costs. Improvements may not happen. At least in such cases, there is a sliver of hope. But actions taken to prevent worse situations are doubly tricky. If the actions succeed and the worst outcomes are avoided, people will have no idea of what they were saved from but they will only remember the costs they paid. No wonder we are predictably irrational.
That is why it is rare for any politician or leader to stand out. There is another reason too. We are still governed by survival instincts. Survival chances are higher if you hunt and stay with the pack rather than stray from it. I remember reading in Jason Zweig’s ‘Your Money and Your Brain’ that our brains have not developed much since our hunter-gatherer days. If so, we must be already thankful that, as a race, we have come this far.
Raghuram Rajan’s piece confirms a bleak prognosis for tough economic reforms in India. The public in India cannot be bothered (‘Kolaveri’ of Dhanush is more important to them than the policy kolaveri of the UPA government) while politicians go about looting the nation in the name of the poor. India’s imported crude oil basket price is up 11% this year. Japan has re-joined the money printing race with vigour. Policy rates in the once-developed nations are plumbing new lows while the central banks launch monetary liquidity into the stratosphere. Mix Middle East politics and bombs, oil can go a lot higher. India’s petroleum minister rules out deregulation of diesel prices. If he said anything else, he would face the wrath of the Indian ‘Aam Aadmi’s who own SUVs that run on diesel.
I wonder why terrorists bother to hurt India when we can do a far better job of it ourselves.
This post originally appeared at The Gold Standard and is posted with permission.