TT Epaper
The Telegraph
 
CIMA Gallary

MODERNIZING POPULISM

- The cellphone could have novel uses

I devoted two columns to the prime ministerís complaints against his contemporaries that they were unfair to him. Prime ministers come and go; their views and othersí views of them are mere bubbles in the air. But the prime ministerís ideology is not going to go away. Even if he retires as he promised, he would be followed sooner or later by another populist.

The media cater to the middle classes, which have always harboured sympathizers of the Bharatiya Janata Party and which are even more gung-ho over it because of its theatrical leader, Narendra Damodardas Modi. Even Kiran Bedi has endorsed him. Few people would remember how Kiran Bedi became a popular heroine. She led the police contingent in the Republic Day parade in 1975; Indira Gandhi was surprised to see her raise her sword to salute the president, and invited her to tea the next day. In 1977, Jarnail Singh Bhindranwale and his followers killed Nirankari Baba Gurbachan Singh. That led to riots. Kiran Bedi was in the posse at India Gate that was trying to control Sikh rioters; she took away a lathi from one of them and confronted them. The picture of her single-handedly facing the violent men was on front pages and made her famous.

During the troubles that ensued, the police fired on and killed a number of Sikhs, some of whom were followers of Bhindranwale. He took refuge in the Golden Temple in Amritsar with hundreds of armed supporters. Pakistan saw a golden opportunity in the troubles, and began to collect Sikhs, arm them and send them across the border. Sympathetic Sikhs overseas began to fund those terrorists. The combination of Pakistan and terrorism was a serious threat. Indira Gandhi was a tough and decisive prime minister; she was the leader who had surgically removed rampaging Pakistanis from what is now Bangladesh. She did not wait for things to worsen; she sent the army into the Golden Temple and cleared it of Bhindranwale and his terrorists. That led to riots; many Sikh rioters were killed by the police and the army. In revenge, Indira Gandhiís Sikh guards killed her. No one wants to remember that awful phase of Indian history. But whether in those years or later, there was never a whiff of communalism about Kiran Bedi. If she now supports Modi, it cannot be because he is a Hindutwit; it has more to do with the unsatisfactory leadership of the Congress.

The middle class is in Modi's thrall; Kiran Bedi is just one of them. But not all secularists will follow Kiran Bedi. For they now have a choice. The Aam Aadmi Party offers a modernized version of secularism; secularists who are fed up with the Congress can move to AAP. Predictions of the Congressís demise are premature: both the Congress and the BJP have a substantial number of loyalists, who will continue to give them a significant number of seats. If the Congress is wiped out in the next general elections, the next government will probably be led by Modi-led Hindutwits or Kejriwal-led secularists. If the latter prevail, we will still have to suffer Congress-style populism. If the Hindutwits do, they might be less populist, but they are unlikely to reverse the Congressís programmes. Thus, whoever wins, we are stuck with populism. There is a point in asking how to make it less corrupt and more efficient.

Populism is the new face of socialism. Socialists believe in taking from the rich and giving to the poor. The Soviet model, which involved expropriating or extirpating the rich, became unfashionable; instead, the Western welfare states turned to taxing the rich. Nowadays, even capitalist countries do that; the only difference between them and socialist countries is that they nurture private enterprise, since it is the milch cow that permits transfers to the poor. India too follows this model. The only difference is that its subsidies to the poor are conditional: that they must eat wheat and rice, that they must go to public works and work under terrible conditions, that they must send their children to jails called government schools, and that they must go when sick to dangerous government hospitals.

Now it is possible to give up these tortures. The way to do it is to create a new currency. A very high proportion of the population has a cellphone. The government should decree that all adults should have a basic cellphone capable of storing and transacting money, and give cellphones free to the few who do not have one. It should regulate cellphone numbers so that every adult has one (he may have more, but only one would be used by the government). That number would be known to the Reserve Bank of India, which would use it as an account number. The adult should be able to use his cellphone to transfer money from his account to anyone elseís by entering a few words and numbers. The account would enable him to hold money in a safer form than currency notes, and to make all monetary transactions, however large, without having a bank account. The RBI can then discontinue its protracted and unsuccessful attempt to open bank accounts for all the poor.

Once everyone has access to this electronic cash, the government can use it to transfer all its subsidies through cellphone accounts. All subsidies in kind should be abolished: no further buying, storing and selling of foodgrains through a leaky food distribution system, no NREGA, just an unconditional transfer of money. It would be like a negative income tax. Income tax can be universalized: everyone who does not get an income subsidy would pay income tax.

Once it has created this mechanism for direct subsidy, the government should get out of supplying services. It should privatize all schools, hospitals and power stations, and give people vouchers which they can use to pay the costs of any school, hospital or power supplier of their choice.

Mobile cash would eliminate the need for bank accounts. Banks would have to borrow cash from mobile holders. Each bank should be made to offer a small number of options like mutual funds combining different levels of liquidity, risk and returns. And banks should convert their loans into hundis ó marketable debt or equity certificates ó and sell them in the market. Apart from investing in mutual funds, people would be able to buy the hundis of businesses they know, and lend without paying bank charges. Banks would earn their living, not by managing peopleís cash, but by selling amelioration of investment risks.

And finally, the government must guarantee zero inflation: it must adjust its fiscal and monetary policies in such a way that the retail price index has no long-term trend, upward or downward. That would guarantee the value of money, and eliminate the need to invest in order to protect oneself against inflation. Zero inflation would make the rupee a strong currency; the age of chronic devaluation would be over. All the world would want to come and invest in India; Indian entrepreneurs would have access to the cheapest money. With low costs, they would be internationally competitive: they would conquer the world.