PM IAS SEP 06 EDITORIAL ANALYSIS

Gorbachev, macro-economics, and Gandhi

(UPSC Main Syllabus: GS 1: redrawal of national boundaries, decolonisation, political philosophies like communism, capitalism, socialism)

Context:

Gorbachev, who passed away recently, has been hailed for his role in ending the ideological conflict between communism and capitalism, and also bringing down the Iron Curtain and ending the Cold War between the North Atlantic Treaty Organization (NATO) and the Soviet Union.

History repeats itself:

• Gorbachev lived to see history return with a vengeance. NATO is expanding eastwards; Russia is threatened: Ukraine is its battleground.
• On the economic front, Russia has not recovered from the shock it got from Boris Yeltsin’s “big bang” capitalisation imposed by U.S. economists. Perversely, an unintended effect of the big bang is the return of authoritarianism under Vladimir Putin. Gorbachev had favoured a slow transition to a “mixed economy” like the Indian model and had approached Rajiv Gandhi for advice.

A mixed economic system is a system that combines aspects of both capitalism and socialism. A mixed economic system protects private property and allows a level of economic freedom in the use of capital, but also allows for governments to interfere in economic activities in order to achieve social aims.

Led by a triumphant United States, and economists in U.S. think tanks, the World Bank and the International Monetary Fund, the wave of opening domestic economies to international flows of trade and finance swamped Russia; Economic (LPG) reforms reached India in 1991.

LPG reforms (Liberalisation, Privatisation and Globalisation):Liberalisation resulted in several economic reforms which reduced the tariffs and made policies less constraining.Privatisation refers to transferring business from a government to a privately owned entity.Globalisation refers to expanding commercial activities globally and the growing interconnected news of economies and societies.This policy aimed to build foreign reserves and move towards a higher economic growth rate. Also, it proposed to convert the Indian economy into a market economy, free of restrictions and incentivise private players in all sectors of the economy.

Standard of living and growth:

• Overall life expectancy is a good measure of the well-being of a nation’s citizens. When all citizens are well-nourished, when public health systems function well, and when violence in society is low, an average person lives longer.
• International comparisons reveal that GDP per capita is an insufficient contributor to longevity. Many countries with substantially lower incomes outperform the U.S. in life expectancy. Cuba is one place above the U.S. in longevity tables even though its income per capita is just 14% of U.S. incomes.
• Between the big bang capitalist reforms of the Russian economy in 1991 and 1994, life expectancy fell from 64 to 57 years. 6.7% of the Russian population ‘disappeared’ from suicides, alcohol poisoning, homicides, and heart attacks brought upon by despair with joblessness and hopelessness, created by wholesale privatisation of the economy and disruption of social safety nets.
• The Russian deaths were caused by the imposition of an economic ideology that claimed that everyone will be better off with the aid of some mysterious hand when the state is pushed back, the economy is deregulated, and capitalist spirits are let loose.

The term “invisible hand” first appeared in Adam Smith’s famous work, The Wealth of Nations, to describe how free markets can incentivize individuals, acting in their own self-interest, to produce what is societally necessary.

Ideological wars:

• The 20th century was a violent period in human history: with two gory world wars, many wars for independence from colonialism, and a long Cold War which brought the world to the edge of a nuclear holocaust. Gorbachev helped to bring the world back from the nuclear precipice.
• The 20th century also witnessed ideological battles among economists: communism, socialism, and capitalism; the role of the state vis-à-vis private enterprise; the rights of nations to resist the “Washington model” and shape their own economic models to fit their needs. While Russia was tragically overrun by global capitalism, China took its own course with remarkable results.

Ideas of capitalism:

• The capitalist model that spread around the world after the fall of the Berlin Wall is founded on a few fundamental ideas.
• One is the ideology of “property rights” trumping human rights. In capitalism, whoever owns something has the right to determine how it will be used; and whosoever owns more shares in a property must have a greater say.
• Whereas the democratic principle of “human rights” requires that every human being, black or white, or whether billionaire or pauper, has an equal vote in governance.
• The shift in balance from democracy to capitalism in the last 30 years is made vivid by the creation of international tribunals who adjudicate disputes between foreign investors in countries and the governments of those countries. Global trade rules, and national financial and trade regulations too, have veered too much towards the needs of financial investors, making it easier for them to enter and exit countries whenever they will, while stopping human migrants from searching for better opportunities across national borders.
• Ideologies of elected governments and free markets were the joint victors of the ideological war between the West and the Soviet Union. The two victors are now clashing with each other even in the West.
• Another core idea of capitalism is Hardin’s “Tragedy of the Commons”. It says that communities cannot manage shared resources; therefore, common property must be privatised for its protection.
• With the operation of the mechanism of ‘cumulative causation’, wealthy people become more wealthy. When a public resource is privatised, those who already have wealth can buy it; and in bidding wars, those with more wealth will win and become even wealthier.
• Thus, when capitalism is unleashed, inequalities will increase, as they have in Russia and around the world since the 1990s.

An Oxfam report of 2021, titled ‘India Inequality Virus’, has found that as the pandemic stalled the economy, forcing millions of poor Indians out of jobs, the richest billionaires in India increased their wealth by 35 per cent.

Way forward :

The time has come to reform economics. Principles of equity and ethics, and fair sharing of power and resources, must constrain unbridled drives for efficiency and productivity to increase the size of the economy that have become the thrusts of economic policies globally.

Alternative forms of capitalism that benefits society:

Reforms in capitalism has been suggested by many economic thinkers like Klaus Schwab-

Stakeholder capitalism:

• Stakeholder capitalism is a system in which corporations are oriented to serve the interests of all their stakeholders. Among the key stakeholders are customers, suppliers, employees, shareholders and local communities. Under this system, a company’s purpose is to create long-term value and not to maximize profits and enhance shareholder value at the cost of other stakeholder groups.
• Supporters of stakeholder capitalism believe that serving the interests of all stakeholders, as opposed to only shareholders, is essential to the long-term success of any business. Notably, they make the case for stakeholder capitalism being a sensible business decision in addition to being an ethical choice.

Gandhi’s ethical economics

• New models of cooperative governance are required to realise the promise of humanity’s shared commons. With his concepts of perestroika and glasnost, Gorbachev wanted to save common citizens from being oppressed by powerful people. His successors, ill-advised by economists, handed over the Russian economy to unbridled capitalism. Oppression by the state was replaced by exploitation by capitalists.
• Perestroika refers to the reconstruction of the political and economic system established by the Communist Party. Politically, contested elections were introduced to reflect the democratic practices of Western society and allow citizens to have a slight say in government.
• Economically, Perestroika called for de-monopolization and some semi-private businesses to function, ending the price controls established by the government for the past seven decades. The goal was to create a semi-free market system, reflecting successful capitalist practices in the economies of Germany, Japan, and the United States.
• The term Glasnost means “openness” and was the name for the social and political reforms to bestow more rights and freedoms upon the Soviet people. Its goals were to include more people in the political process through freedom of expression.
• Though both reforms looked progressive, they had unintended consequences.

Conclusion:

• India’s policymakers should heed history’s lessons. Concepts of free trade, financial freedom, and privatisation, promoted by macroeconomists, are not good solutions for India’s billion citizens struggling for resilience in their lives.
• India’s policymakers seem obsessed with increasing the size of the economy. The shape of an economy matters more than its size for human well-being.
• India’s economic governance must be guided by Mahatma Gandhi’s calculus, with principles of human rights and community management, to realise the promise of our commons, and provide “poorna swaraj” to all citizens.

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Editorial 2 : Funding public education

Context:

A few days before India celebrated the 75th year of Independence, Union Minister of Education said in reply to a debate in the Lok Sabha that people should let go of the idea that universities must be funded only by the government. His remarks are only a corollary to the General Financial Rules of 2017, which encourage all autonomous bodies to maximise generation of internal resources and attain self-sufficiency.
This raises the question of funding of public education.
 

National Education Policy (NEP), 2020:

Major provisions of NEP:

School education:

• Universalization of education by 2030 through 100% GER (Gross Enrollment Ratio) from pre-primary to secondary.
• Open schooling system (no admission requirements like NIOS) for out-of-school children.
• (5+3+3+4) curriculum system replacing existing 10+2 system.
• Teaching in mother tongue up to class 5 with no imposition of any language.
   

Higher education:

• Broad-based, multi-disciplinary, holistic UG(Undergraduate) education with provisions of a flexible curriculum, integration of vocational education, multiple entries and exit points with respective degrees, and also undergraduate programs in regional languages.
• Academic bank of credits (ABC) to enable transfers of credits between institutions
• HECI (Higher education commission of India) as umbrella regulator except for legal and medical education.
• Promotion of multilingualism in schools and colleges.
   

Other provisions:

1. No strict separations between arts and sciences, between curricular and extracurricular activities, and between vocational and academic streams.
2. To establish a National Mission on Foundational Literacy and Numeracy.
3. Reform in Assessment of Board Exams. Setting up a new National Assessment Centre, PARAKH (Performance Assessment, Review, and Analysis of Knowledge for Holistic Development).
4. Special priority is given to socially and Economically Disadvantaged Groups.
5. A separate Gender Inclusion fund and Special Education Zones for disadvantaged regions and groups;
6. A transparent process for recruitment of teachers and merit-based performance assessment.
7. Ensuring availability of all resources through school complexes and clusters.
8. Setting up of the State School Standards Authority.
9. Setting up of Multidisciplinary Education and Research Universities.
10. Setting up of the National Research Foundation (NRF)
11. Expansion of open and distance learning to increase GER.
12. Teacher Education – 4-year integrated stage-specific, subject-specific Bachelor of Education
13. Multiple mechanisms with checks and balances will combat and stop the commercialization of higher education.
14. The Centre and the States will work together to increase the public investment in the Education sector to reach 6% of GDP at the earliest.

All higher education institutions (HEIs) will be restructured into 3 categories:

1. Research universities focus equally on research and teaching.
2. Teaching universities focus primarily on teaching.
3. Degree-granting colleges primarily focused on undergraduate teaching.

The NEP’s vision:

• The NEP 2020 envisaged that it would “promote increased access, equity, and inclusion through a range of measures, including greater opportunities for outstanding public education.”
• It also provided an assurance that the autonomy of public institutions would be backed by adequate public funding. The NEP noted that public expenditure on education in India was nowhere close to the 6% of GDP envisaged by the 1968 policy, reiterated in the 1986 policy and 1992 review of the policy.
• So NEP 2020 endorsed a substantial increase in public investment by the Central and State governments to reach 6% of GDP at the earliest- the level of public funding which is “extremely critical for achieving the high-quality and equitable public education system that is truly needed for India’s future economic, social, cultural, intellectual progress and growth,” noted the committee.
• In contrast, the expenditure on higher education by the Centre and the States taken together nosedived from 0.86% of GDP in 2010-11 to a measly 0.52% in 2019-20 (Budge Estimates, or BE). Centre’s expenditure on higher education dropped from 0.33% of GDP in 2010-11 to a mere 0.16% in 2019-20 (BE). As a percentage of the total receipt, the allocation for higher education fell from 1.49% to 1.04% during the corresponding period.
   

Consequence of privatisation:

• Higher education in India is already highly privatised. Most private higher education institutions are run on a self-financed basis, a euphemism for full cost-recovering institutions.
• Besides, private tendencies have also penetrated deeply into public higher education. The thrust for resource mobilisation, internal revenue generation, cross-subsidisation, resource use efficiency, cost reduction, accelerated cost recovery and enhanced user charges may further exacerbate the trend.
• The most obvious consequence would be a substantial increase in fees and other charges from students. The idea that higher education could be funded fully by the students or their parents out of their savings or through bank borrowings appears grossly misplaced in the Indian context.
• The NEP 2020 envisages enrolment in higher education to be nearly double by 2035. Considering the fact that the social and economic elites, the rich and the affluent, have already crossed a gross enrolment ratio of 100%, the future growth in higher education has to come from the socio-economically disadvantaged groups. Would these people be able to afford full-cost recovery from their higher education institutions?
   

Way forward:

Suggestions to improve the National Education Policy :

1. For the NEP to move forward, India needs a robust institutional mechanism and large-scale capacity building to create enthusiasm among stakeholders.
2. Directorates of education have to be strengthened in order to ensure that the policy permeates to the district and zonal level educational clusters.
3. To help children to realize their full potential, India requires effective strategies to physically equip teachers and students with better tools in the classroom, increase access to laptops and other gadgets, install interactive whiteboards and provide fast and reliable internet access.
4. India also has to lay emphasis on vaccination of the young and old, this will facilitate the faster reopening of schools.
5. The state and national boards across the nation will have to start with pilot programs. The creation of master trainers should be done, and they have to train principals and teachers in urban and rural areas.
6. Providing the necessary financial resources:
7. A special purpose vehicle (SPV) needs to be created to ensure NEP funds are available and that the implementation process is not delayed.
8. India also needs to promote private philanthropy for funding both public and private higher education institutions.
9. New and additional forms of tax incentives and other forms of incentives need to be evolved.
10. In order to implement the NEP, research, evaluation and documentation are essential along with coordination and convergence of the policy and programs connected with the NEP.
11. Building consensus among stakeholders is the first principle. NCERT, SCERT, and Boards should together work towards reforming the curriculum, the syllabus, and associated assessments.
12. We need agreement among stakeholders on what are the core and essential competencies that must be assessed through various systems of assessment. To enable this, we need contextualised learning standards, competency frameworks and assessment processes for all subjects.
13. This will also enable equivalence across Boards. Currently, it is practically impossible to compare performance across Boards.
     

Conclusion:

Higher education in India may have had its failings, but it has served the nation rather well. It has played a critical role in sustaining the $2.8 trillion economy that India has become today. But for enhanced investment in higher education, our vision of a $5 trillion economy and the aspiration of becoming a high-income developed country could be jeopardised.