Ancient Indian society had 6 groups: priests/Brahmanas (5%), warriors/Kshatriyas (5%), merchants/Vaishyas (5%), farmers/Shudras (50%), workers/Dalits (15%) and tribals/Adivasis (7%). So Shudras (lower castes) are the majority. In 1979, Prime Minister Morarji Desai of the Janata Party government set up a Commission under a man called Bindheshwari Mandal to look into the welfare of Shudras. The Commission submitted its report in 1983. It recommended 27% reservation for backward Shudra castes (Other Backward Classes or OBCs) in government jobs. In 1990, Prime Minister V P Singh of the National Front government implemented the Mandal Commission's report.
Shudras are mainly farmers and are made up of many castes. Some castes are big ('forward castes') and others are small ('backward castes'). The Mandal Commission gave reservation to backward castes but not to forward castes. Each state/region has its own forward castes: Uttar Pradesh (Yadavs), Bihar (Yadavs), Haryana (Jats), Gujarat (Patels), Maharashtra (Marathas), Karnataka (Lingayats + Vokkaligas), Andhra Pradesh (Reddys + Naidus), etc.
In 1991, we started changing our economy from inefficient government-controlled socialism to efficient free-market capitalism. The process is still incomplete. We freed our industry from government control. But our agriculture and inputs to industry (land and labour) are still under government control. So today, even after 3 decades of economic reforms, only 25% of our people work in industry. But 45% of our people still work in agriculture – which produces only 15% of our economic output. So on the one hand, industry has not grown to employ farmers as factory-workers and take them out of agriculture. And on the other hand, our inefficient agriculture has kept our large number of farmers poor. The worst-affected people by this double whammy are the farmer-castes who do not have reservation – ie, the forward Shudra castes.
Due to these developments, the forward Shudra castes started demanding reservations in both education and government jobs. In 2016, Jats (30% of Haryana) launched an agitation to demand for reservation. In 2018, Marathas (35% of Maharashtra) did the same. In both cases, the state government succumbed and granted reservation to the agitating forward caste. And in both states, the case went to the High Court. The Bombay High Court upheld Maharashtra's Maratha reservation but the Punjab-Haryana High Court shot down Haryana's Jat reservation. So Marathas were happy with the ruling BJP in Maharashtra but Jats were furious with the ruling BJP in Haryana. As a result, BJP won the election in Maharashtra but lost the election in Haryana.
What does all this mean for India's politics? India's politics has always been known to be based on caste – which is the fundamental unit in the social system of an agricultural society. But BJP won this year's national election by beating the equations of caste politics. The most spectacular example of this was Uttar Pradesh – where it crushed the alliance of the two biggest castes (Yadavs + Dalits). This led many people to say that caste politics has ended and we have entered the era of post-caste politics. The elections of Haryana and Maharashtra have disproved this hypothesis. Caste may no longer be a factor in national politics – but it is still a factor in state politics.
And what does this mean for India's economy? It means that as long as our agriculture and inputs to industry are controlled by the government:
1. Industry will not grow
2. Agriculture will be inefficient
3. Farmers will be many and poor
4. Farmer-castes will be angry
5. They will demand reservations
6. And they will get it – because of their numbers
The only way to get out of this vicious cycle is to free our agriculture and inputs to industry (land and labour) from government control.
24 October 2019
19 October 2019
India's Economic Reforms and the States
India's government is a federal system – ie, a two-level system: centre + states. Since 1991, our media and economists have been talking about economic reforms (transformation from government-controlled socialism to free-market capitalism) and demanding economic reforms – which is a good thing. The problem is they demand these reforms from only one of the two levels: the centre – which is only 50% of the equation. They have completely forgotten the other level and the other 50% of the equation – the states.
An economic system needs 3 inputs to make products and services – land, labour and capital. Our economy is inefficient because our markets for all these 3 inputs are inefficient. So to make our economy efficient, we must reform our markets in land, labour and capital. Successive central governments have been reforming our capital market by reforming our financial system since 1991. The problem is the other two markets have not been touched – land and labour. Why?
Our Constitution has divided powers between the central government and state governments by assigning some areas to the centre (central subjects), some areas to the states (state subjects) and some areas to both (concurrent subjects). Land is a state subject and labour is a concurrent subject. So it is the state governments who must carry out reforms in our land market and labour market – ie, land reforms and labour reforms. So our media and economists must take a break from their obsession with the central government. They must start demanding economic reforms from the state governments – especially land reforms and labour reforms.
An economic system needs 3 inputs to make products and services – land, labour and capital. Our economy is inefficient because our markets for all these 3 inputs are inefficient. So to make our economy efficient, we must reform our markets in land, labour and capital. Successive central governments have been reforming our capital market by reforming our financial system since 1991. The problem is the other two markets have not been touched – land and labour. Why?
Our Constitution has divided powers between the central government and state governments by assigning some areas to the centre (central subjects), some areas to the states (state subjects) and some areas to both (concurrent subjects). Land is a state subject and labour is a concurrent subject. So it is the state governments who must carry out reforms in our land market and labour market – ie, land reforms and labour reforms. So our media and economists must take a break from their obsession with the central government. They must start demanding economic reforms from the state governments – especially land reforms and labour reforms.
17 October 2019
Conservatism Vs Liberalism: Society, Individuals, Government
A country has 3 basic entities: society, individuals and government. What are their relative importance? There are two fundamentally different views:
1. Society is more important than individuals and government (Conservatism)
2. Individuals and government are more important than society (Liberalism)
1. Society is more important than individuals and government (Conservatism)
2. Individuals and government are more important than society (Liberalism)
10 October 2019
Society, Government, Economy
Society is a system of people living together. For it to exist, the people must follow certain rules: don't cheat, don't steal, don't kill, etc. So society created a system to make these rules and enforce them. That system is called 'government'. So the purpose of the government is to make and enforce rules.
To live, people need many things – like food, clothes, houses, etc. People obtain these things by making and exchanging them with others. They do this as individuals, families or groups. These make up the economic system or the economy. So the economic system is made up of individuals, families and groups/companies. And its purpose is to produce goods and services, and sell them.
Thus in society, many different functions need to be performed. And society has developed a system to carry out each of those functions. For society to be efficient, each system must perform only its function – it must not perform any other function. If a system performs a function other than its own, then society will become inefficient.
So the government's job is making and enforcing rules – not making and selling products and services. That is the job of the economic system (individuals, families and companies). If the government tries to do the job of individuals, families and companies, it will lead to an inefficient society.
To live, people need many things – like food, clothes, houses, etc. People obtain these things by making and exchanging them with others. They do this as individuals, families or groups. These make up the economic system or the economy. So the economic system is made up of individuals, families and groups/companies. And its purpose is to produce goods and services, and sell them.
Thus in society, many different functions need to be performed. And society has developed a system to carry out each of those functions. For society to be efficient, each system must perform only its function – it must not perform any other function. If a system performs a function other than its own, then society will become inefficient.
So the government's job is making and enforcing rules – not making and selling products and services. That is the job of the economic system (individuals, families and companies). If the government tries to do the job of individuals, families and companies, it will lead to an inefficient society.
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