Here are Some Reasons Why We Need More Government
Today, it is taken as axiomatic that ‘less’ government is good. That view is mostly based on actual experiences people have had with egregiously inefficient and poor public services, and forgettable experiences at government offices. It is also, in the case of a few, based on an ideological view that is based on the belief that ‘laissez faire’ is the best approach to the affairs of people and businesses. There is a ‘belief’ (unhampered by fact or common sense) that many services available in the West especially the US are provided by the private sector. This almost religious belief (ie again unhampered by fact or common sense, but driven by faith) remains intact and manifests itself when the adherents are back in the country of their birth, where they expound on the mystical properties and attributes of private enterprise.
But, the evidence from across the world is that, quite opposed to ideology and actual experience and intuition, government is present in almost every aspect of the life of the citizen. Almost every service essential to the life of the citizen is provided by, or substantially influenced by, or regulated by government agencies. Water supply, roads and public transport, sanitation and public hygiene, public health, police and law and order, and many more fall in this list. The ability and willingness of the private sector to provide some of these services is at best questionable, and the experience in most countries has not been encouraging. Many reasons are put forward for this reluctance of the private sector to step forward and provide these services, and the answer almost always has much to do with the cost of providing these services, and the willingness of people to pay these costs.
The first aspect relates to the distinction between public goods and other goods, and the difficulty in getting the private sector to provide these goods, efficiently and at reasonable cost. Some of the public goods alluded to earlier are public peace and tranquility, a sanitary and healthy environment, an efficient and safe public transport system, an environment conducive to citizens for leading happy and contented lives, and so on. While in parts of the US there have been experiments in privatising police and jail administration, fortunately these remain confined to diehard conservative bastions, and are not the rule. Most of these services therefore continue to be provided by the public sector. Private enterprise and the profit motive have not been known to be an efficient means of providing these public goods, as there is an essential conflict of interest embedded in the system of private enterprise that makes it impossible for this to be accomplished. This has been widely recognised in the writings of leading economists for a long time, and is correctly seen as almost axiomatic. We can find in the Western world a spectrum of cases relating to the provision of public goods and services, ranging from wholly government owned and operated, to heavily regulated by government but run by the private sector. Where the private sector comes into the picture, the public goods and services provided are generally more expensive. Of course, where government is both the provider and payor, there is an undoubted subsidy element that enables these good and services to be provided to the citizen for lower payment.
A second consideration relates to the provision of public goods that are not yet realities, but, will have a huge impact on public welfare. Public health requires the development of new ways of fighting infectious diseases, new ways off countering non-communicable diseases, better ways of protecting water supply and making it safer for people, and so on. Many of these projects require huge sums of money, long gestation periods to fructify, and are hence, unattractive to the private sector.
In India, government research labs are cited as examples of inefficiency, and the private sector is held up as an alternative that should be preferred. The presumption is that private management driven by the profit motive will ensure that resources are better used. But, the evidence from India and overseas, suggest that the private sector expects a return on investment in the near term, and not in the distant (and uncertain) future. Therefore the bias will be towards research projects and programmes that can be expected to yield returns in a shorter time frame. This, it has been found, leads to projects of immense long-term importance to the country and society being ignored to accommodate other projects expected to yield better returns quicker. In the US, the imagined Valhalla of private enterprise, it is widely held that the private sector, ie private pharmaceutical companies, carry out much of the research that leads to the development of new drugs and drug formulations, that prove to be of immense benefit to humanity.
What is less known is that much of the basic fundamental research is carried out in the labs of the NIH, which is publicly funded by the Federal Government. Further research is carried out in universities, again mostly funded by NIH research grants, by faculty and researchers. Many of these research teams leave the universities after they acquire IPR over their work, and join private companies or create new companies to monetize their work and cash in. While the pipeline of new drug entities and formulations that have emerged from private pharma companies is impressive, it is also a fact that they have been sold at exorbitant cost, to take undue advantage of patent protection that prevents competition for a long time period.
Another area that impresses outsiders is the enormous research output of the ‘information technology’ sector, founded on hardware innovations that built the giants of the earlier era like Texas Instruments, Intel, HP, IBM etc. What is not generally known is that many of these companies took to the market innovations that emerged from DARPA-funded research projects aimed at military applications. This generous funding on easy terms enabled the military industrial complex to bring in scientific talent from the universities and private sector, to work on projects of interest to this powerful and influential sector. It was a win-win arrangement, and resulted in many innovations, including the transistor, the internet, computers, software development etc. Much of the basic and fundamental research is still carried out in publicly-funded universities and labs even in the West, and that is something that must be done even in India if we expect to create the foundation for a vigorous scientific capability, capable of addressing the problems this country faces. Even today, the record of private companies in India in R &D is pathetic, with few patent filings emerging from private sector companies. Such R & D as is reported is mostly aimed at taking advantage of loosely drafted tax concessions.
The third dimension of the problem of government work and services in India is related to the mismatch between the resources available and the task. That this is indeed the real source of the problem and not any imagined inability of the public sector to perform these tasks is borne out by the experience in other countries. Widely held views about government services, especially in India, are based on the image of a ‘bloated’ government sector, with too many people with very little to do. (This is admittedly true, with too many clerks and people filling the ranks, and too few of the technically qualified people needed to run modern government services.) Before we look at what it is that the government employees actually are supposed to do, let us first look at some numbers. I searched various websites of government in India to get an idea of the total number of government employees in India, and found it difficult to get such a number. However, in a site that compared the size of government manpower across countries, I found that, in 2016, India had 21.2 million people working for the Central and State Governments. I noticed that the corresponding figure for the US, with a quarter of the population of India, is 22.5 million. Using a simple multiple, this means that the US has four times the number of government employees as a proportion of population in comparison to India. When we factor in the dominance of clerical staff in India to others, this difference in proportion is even starker. When we look at specific sectors, the ratio is often even higher in the case of the US in comparison to India. For example, the US has around 70,000 judges and magistrates, whereas the number for India in the year of comparison was around 17,000!
I recall listening to a talk by Prof. Mohan Gopal, former Director, NLS in Bengaluru, and former senior member of legal services at the World Bank, where he argued that, in terms of case filings and disposal, the figures for India are not significantly different from those for the US. Given the anecdotal evidence of cases dragging on for years, and magistrates and judges adjourning cases for any reason and showing little interest in bringing cases of litigation to a closure, this finding may appear surprising and counter intuitive. Such examples of data throwing up conclusions that are quite at variance with public perceptions are to be found in many domains and sectors. That only points to the need for more reliable and authentic data, and not to the fact that such data is erroneous.
Municipal services in India’s towns and cities are known for their inefficiency and dysfunctional character. That is put down to way things are done in India, the laziness of Indians, and the general poor work culture. But, while these may all be partly true, there are other aspects that need to be taken into account as well. Mumbai is a city of around 20 million, more than double the size of New York. Mumbai ranks 31 in the list of the 100 richest cities of the world, with New York ranking 2. New York has a GDP estimated at around $ 1 trillion, while that of Mumbai is around $ 150 billion. New York has a head count of 450,000 in its various municipal services, including the police force, whereas the number for Mumbai is less than 100,000! Given the huge size of Mumbai, and the massive population to be served, how is it possible to deliver a broad range of municipal services to any reasonable degree of efficiency with such inadequate manpower? The scale of the problem may vary as we discuss smaller cities and towns, but the essential nature of the problem remains ie wholly inadequate resources to accomplish the tasks before the local government.
We have considered three aspects of public goods and services that need to be provided by the public sector. These relate to the inability of the private sector to provide public goods and services on a sustainable basis to citizens, the unwillingness and hence, inability of the private sector to allocate resources to long-term projects of value to the community, and finally the aspect of matching resources to the task, which is a matter of adequate provisioning to enable the public sector to carry out its tasks well.
However, there is another aspect that is relevant to all countries, which have an unequal distribution of wealth and income among different sections of the population. The market alone cannot be left to determine prices and hence, access to these goods and services, as large numbers and important sections of the population may get left out, without access to these services that are essential to carry on their lives and work. These considerations are more important in India, where a large section of the population lives below, or close to the poverty line. It is the duty of the government to ensure that all sections are provided the basic services and wherewithal needed for a life of dignity. In rural areas, basic services like public health, roads and transportation, protection for the environment, primary and secondary education etc. need to be provided and made accessible at reasonable cost. In urban areas, reasonable quality municipal services such as drainage and sewage, water supply, electricity, garbage removal and treatment, police and law and order, public health and sanitation, primary and secondary schools, public transportation etc. need to be provided at reasonable cost. These must be provided at a cost that enables those with an income of less than $ 10 per day to access them. That is the challenge before the government sector here in India. If we consider the public healthcare delivery system, it must be capable of providing for the healthcare needs of this section of the population, at a cost that is meaningful to them. It is this challenge that is rarely considered when comparing private and public hospitals. The average cost of providing for an inpatient in a public hospital will astound management pundits, who will wonder whether it is indeed possible to do anything at those costs. But that is what public hospitals are accomplishing day after day. That is the reason wards are overcrowded, why bed linen looks dirty, why waiting rooms are crowded, why staff appear rude and ill tempered. When the average cost per in-patient including free meals and milk, nursing attention, doctors’ attention, medicines, surgical intervention if needed etc. are all provided at a few rupees per day, there are bound to be a few shortcomings. Still, patient outcomes in these overcrowded hospitals lacking even ‘basic’ facilities are not much different from better-funded private hospitals. That should make us think.
The debate on the subject whether we need more government services or fewer needs to consider these aspects I have outlined in this article. This is not a debate that should be approached from an ideological or doctrinaire point of view. In purely practical terms, for the reasons outlined in earlier paragraphs, I believe we need more government and not less.