Final Comments

• Some readers pointed out that many good things are already happening in India. In accepting that, I would like to remind them that such good things have been motivated entirely by the initial burst of capitalism forced onto India by the IMF. We have still no internalized full-fledged capitalism, which is primarily about justice and good governance. We should not be content with morsels of capitalism when we can but should have it fully. There are still millions of poor and illiterate people in India. The task has barely begun, and good governance is not even on the horizon.
• Some readers said they agreed with parts of this book but not with other parts. I suggest that such an approach is not logically consistent. I see this entire book as one piece. People have only one real choice: to either agree entirely with this book, or to disagree with it completely.While this may sound like the height of arrogance, the problem is that my recommendations have been derived exclusively from the principles of freedom and the value of life. The recommendations of this book flow as a mathematical proof would, being either completely right or completely wrong. There are no grey areas in this book; people can’t pick and choose. If you do, you will end up with a logically inconsistent model.
• The claim of impracticability doesn’t hold water at all, either. For example, it could be claimed that we simply won’t find enough high quality economists today to recruit into each State Government in India. But such an objection is a matter of detail. It may mean that we need to get there slowly, or it may mean that we need to bring back our economists who are forced to teach in Western countries today (or like me, help Western governments to even further improve their countries) instead of teaching (or working) in India. But it doesn’t change our destination. Matters of practicality can always be worked out if there is a will.

• Let any two believers in freedom come together with the aim of building a Freedom Team of India to an initial size of 1500 persons. I am happy to coordinate an electronic platform for this if it will help anyone.[v] Using this platform is purely optional – any platform will do.
• The Freedom Team of India (or whatever else it is called) will then need to agree on what the new India will look like and how its members will deliver the reforms if they were to ever come to power. I’ll be pleased if Chapters 2 and 6 inform the answers to some of these questions. But of course, the blueprint would entirely be the work of the Freedom Team.
• After that will come the question of who. Once ready, this group of 1500 should select outstanding leaders from among itself and form a new, ethics- and freedom-based political platform.
• Its leaders and supporters should then go from village to village, explaining the proposed policies to people.
• Finally, about 550 outstanding leaders should contest elections. With the right effort and good luck, a majority of them will hopefully get elected.
• After that it would be a matter of disciplined implementation of the planned reforms.
• It going to be that simple to change India!

Till now I have largely continued with the expositional tone of an Indian citizen because this book was started to support my political efforts of 2004–5 while I was still a citizen. After three failed attempts to establish a platform to reform India’s governance, I forfeited my Indian citizenship on 17 November 2005 upon acquiring Australian citizenship. I am now an overseas Indian citizen. I can therefore play only a limited role in India’s future unless India agrees to full dual citizenship in the future. However, the task I had started upon is still incomplete. Indeed, it has not even been started.

The final end of the State consists not in dominating over men, restraining them by fear, subjecting them to the will of others. Rather, it has for its end so to act that its citizens shall in security develop soul and body and make free use of their reason. For the true end of the State is Liberty. Baruch Spinoza (1632–77)

Health care

Some Important Non-Core Functions

Environmental Sustainability

But while population size does not cause wealth or poverty, it impacts the environment significantly.India’s large population has without doubt had an adverse impact on the environment, such as on our wildlife. In addition to creating a large population, Nehruvian socialism has also added to the depredations on India’s environment. Our socialist pirates – Ministers and officers charged with the responsibility of protecting forests and the environment – have personally looted our forests and connived with polluting industries to damage our environment.

• One of my earliest battles against corruption, in 1985–6, was an attempt to stop illegal felling in beautiful dense forests found in the Hojai subdivision of Assam. Trees were being cut illegally with the connivance of forest department officers, and possibly (almost certainly) of the Minster.
• One of my friend’s wealthy acquaintances in Delhi confided to me in the early 1990s how he made his wealth by illegal harvesting of native timber from Nagaland. The method he used was that of paying off Nagaland Ministers.

• Cost recovery: To the extent that polluters can be individually identified, external costs will be recovered from them directlyand polluters will be forced to repay the affected community. This can include mandatory requirements for polluters to clean up toxic spills, failure to do which would lead to imprisonment for extended periods.
• Pigovian taxes: To the extent that polluters cannot be individually identified, Pigovian taxes will be imposed on the activity that approximates most closely the activity undertaken by the polluters. A range of incentives-based solutions, such as trading of permits within limits to pollute, will also be used. In particular, carbon taxes will be imposed in a phased manner on electricity produced from coal. The revenue so collected will be used as follows:
  • to provide (compensatory) subsidies to companies to increase plantations and forests. These subsidies will be paid based on the actual growth of these forests confirmed through satellite imagery;
  • to fund Indian investors to build nuclear power stations while meeting the world’s highest standards of safety and security under international supervision; and
  • if funds remain, to fund industry and universities, based on demonstrable results, to increase research in non-polluting technology.

(Note dated 4 June 2011: I'm reviewing my earlier position on the concept of Pigovian taxes. It is possible, according to my current position, that these taxes are not an appropriate way to reduce negative externalities. See this.). 

School Education

• Schooling will cost child ‘A’ nothing if parents choose a school which charges their ‘A’ a fee equal to or less than what the government is prepared to fund that particular child.
• Schooling will be partially subsidized where parents choose a school which charges a fee for ‘A’ over and above what the government is prepared to fund that particular child.

• As a first step, my government will get completely out of school ownership and management. Over the course of the first 30 months, all government schools will be privatized. Their land,[ii] buildings and equipment will be sold at market rates through an open tender in which educationists working in these schools will be encouraged, through a (small) preference in the conditions of the sale, to form consortiums which can be registered as companies or societies, and make a bid. It is expected that such consortiums can create a persuasive business case to raise bank loans and buy the schools with repayments to be made from earnings made over the years.[iii]
• Funds raised from the sale of schools will form part of a one-off increase in government revenues to be used to offset the initial increase in core function expenditures.
• The following conditions would apply to the sale:
• • The school’s land cannot be sold for 50 years. The government would retain the right to acquire land from school owners for other public purposes where it becomes necessary to do so, upon payment of slightly greater than market value, after making suitable arrangements for the children affected.
  • The school’s land or buildings cannot be used for any primary purpose other than school education. School owners will be allowed to operate business activities approved by the (local government) council from the school campus after school hours. There is no incompatibility between having temporary shops or a small gym as a side-business operating in the school building after school hours so long as the funds raised from these activities by the school help to keep it solvent and keep its fees low, while also meeting the quality standards prescribed by the education regulator.
  • The consortium which buys the school will not disadvantage existing staff for up to five years from the time of purchase of the school on a similar sliding scale referred to earlier.
• Schools will not be protected from competition in any way. Practically anyone could set up a school anywhere, charge any fee and try to attract students. There will be no quotas or limits on the number of schools in an area, even if this may make it harder to raise loans. This openness is necessary to prevent monopolies of any sort arising in what should be a completely free market. So long as a school complies with quality requirements, through ‘deemed licensing’, it could be launched. Schools would self-assess against standards established by an independent association of educators nominated by the education industry, and notify the education regulator of their existence – that would amount to becoming a licensee. Stiff penalties would apply if a school was later found to have violated the standards. Schools would be permitted to enrol children only at the beginning of a school year and parents will not be able to change their children’s schools during the year unless there are exceptional circumstances.
• To prevent the financial collapse of schools through mismanagement, each school will be compulsorily required to purchase bankruptcy, fire, workers’ compensation and public liability insurance from the market, to be reinsured initially by the education regulator until the rates of school collapse are better assessed and private market premiums fine-tuned. If the buyers of a school turn out to be bad managers, or worse, this insurance will prevent the school from going belly-up and children from suffering.
• This model will create a competitive market for high quality schooling. Only the most efficient schools, fully accountable to the parents for the quality of education they provide, will survive. Poorly managed schools will be bought out by more efficient schools. There will be no barrier to the potential size of a consortium. An efficient consortium could potentially buy out all schools in the country. So long as even one other efficient competitor could set up a school in any place in the country, the size of the consortium would not matter.

Child-based funding:

• School will bill the government each month (or quarter), seeking reimbursement against eligible vouchers (eligibility below) for each child, by name.
• By the thirtieth month, my government would have allotted a unique identification number to each child in India between the ages of four and eighteen, in preparation for this program. This number would be linked to a database which records key biological features[iv] of the child and photographs of his/her parents, to prevent potential falsification of records commonly done by illegal immigrants to India.[v] A new identification number would thereafter be allotted to each child who subsequently reaches the age of four. This database will be linked to the previous year’s income tax return of the child’s parents,and would generate a voucher of a specific value, linked to that income and to the expected educational costs for a child of that age. Vouchers will therefore differ in value. Children of poor parents will get vouchers of a much higher value than children of wealthy parents.
• Children would go to a school selected by their parents. Parents would pay an amount over and above what the government voucher reimburses the school for each of their children separately. Poor parents would of course not pay anything since they would have high-value vouchers. Richer parents will pay a top-up amount.
• This higher allocation for poorer parents is a crucial part of the model. The system today does not provide genuine equal opportunity even though it is based on the socialist ideology of equality. The quality difference between government and private schools is therefore quite vast, and does not allow children from rural areas or slums to prosper. My government’s policy would make schools in rural areas or slums extremely attractiveto potential school owners, since children with predominantly high-value vouchers will attend such schools. Therefore schools in economically backward areas will be able to afford much higher salaries for teachers, and potentially attract even better teachers than schools in urban areas. In this manner, all schools will be able to provide a robust quality education at the minimum.
• An annual adjustment would be applied to the value of a child’s voucher after the income of the child’s parents is declared to the tax office. Excess payments made for the child to the school would be recouped through the parent’s future taxes.
• The voucher system will be managed by a range of private service providers under strict conditions of accountability. The independent education regulator will monitor the quality of these providers and ensure the overall integrity of the voucher system. Stiff penalties will apply if preventable fraud is detected at any level.
• Schools would be required to report a child’s death or transfer from the school within one month to the voucher service provider. Should it be found that a school has charged the government for a child who was no longer studying there, the school will face financial penalties including potential withdrawal of the school’s license and criminal prosecution of the school owners.
• Education departments and directorates, as well as inspectorates of schools, would be mostly disbanded by the end of the thirtieth month; many of their teaching and non-teaching staff would have been, by then, employed by the larger consortiums. The social infrastructure department, which will manage the overall budget for school education, will work with the independent education regulator to ensure that minimum outcome standards of educational attainment are met by each school, and that vouchers are administered properly.

Higher Education

• Tertiary institutions will charge full fee virtually from everyone barring the few to whom they give scholarships. By the government not funding tertiary institutions, significant tax revenues currently allocated to higher education will be released for more essential purposes, even as the quality of university education and infrastructure is significantly boosted by the open market fee charged by universities.
• Those admitted to a course by any recognized tertiary education provider will be loaned money for 15 years at a low rate of interest by the government to attend that course:
• • An Indian citizen (not overseas citizen of India or permanent resident), who gains admission into an approved tertiary institution in India will be eligible to borrow from the government all fees charged by that institution, as well as the cost of necessary books and equipment and modest living costs.
  • These loans will bear a low interest – around 1 per cent more than the (variable) Reserve Bank rate. The repayment would be through the income tax system after the student gets a job and starts earning above three times the level of the poverty line. This loan will enable all meritorious persons in India to pursue higher education.
  • Even after India becomes completely free there will remain some tendency on the part of some students to leave the country after being educated at the taxpayers’ expense. Such students may not return the loan and also pay taxes to other countries which did not invest a rupee in their education, but potentially not repay their loans to India. Where similar schemes operate elsewhere, as in Australia, an international agreement will be sought by those countries to ensure these loans are refunded to India. Either way, a system to monitor departing students will be established. Passports and immigration officials will be given access to the database of student loans. Students who leave India – even on a temporary visit – will need to furnish a bank guarantee equivalent to the amount of their currently outstanding loan plus the present value of all costs incurred by taxpayers on their school education. This guarantee would be forfeited should they fail to return within the stipulated time. Those without proof of this guarantee will be turned back at the immigration check and not permitted to leave India.
  • How will these student loans be funded? The basis of this loan model is that income streams from university students are far more secure than houses or land. Almost all university graduates will earn well, making it a trivial task to recover their loans through the tax system. Therefore, a rolling debt model will be used. From the thirty-first month, ten-year bonds will be issued equal in today’s real value to the student loans expected to be issued (not repaid) that year. Prudent investors in India, including banks, will buy these bonds.
  • The bonds will be retired after ten years using multiple-year recoveries from students who would by then be in the workforce, noting that not all bond repayments will be met from student loan recoveries in a particular given year. Apart from mismatches of timing between student earnings and the face value of the bonds, the residual costs of administering this programme will have to be paid by the taxpayer as well, plus the difference in interest costs between the effective rate of the bonds and the Bank rate and a write-off for defaults. This amount will form a subsidy for higher education. The justification for this small subsidy is that it provides an equal opportunity – to those selected for higher education – to complete their courses. With efficient management, the subsidy will be reduced considerably.

Tertiary Sector Privatization:

•  As with schools, there is no reason for the government to manage the delivery of tertiary education. Indeed, there is even less reason, since no bureaucrat can teach an Einstein or tell him how to manage his discipline. Let experts manage their own institutions. All government universities, technical colleges and the like will be sold off by the thirtieth month on the same pattern as schools, and accredited by imposing on them a few conditions necessary to demarcate them as institutions of tertiary education. These institutions will become for-profit corporations with shares traded on the stock market. Their sole business objective would be to provide tertiary education and they would use their lands for the primary purpose of higher education for 999 years.
• They will have operational independence. They would set their own salary structures to attract distinguished academic professionals and, consequently, bright students. They would determine the type and quality of tertiary education services they wish to deliver, the mix of courses to offer and other things that universities do. The competitive market will then deliver the best mix of options for students. Not one rupee will be spent on any ‘educational planner’ to predict the demand for graduates in specific areas. Only that much higher education will be provided as the market needs and will bear.
• The reason why universities won’t jack up their fees to astronomical levels upon privatization is because of their critical need to attract customers – in this case, high quality students. High quality students, like any other self-interested person, will look for good quality but low cost education and force the fees down to competitive levels.
• Will some academic disciplines be ousted from the teaching agenda by this model? Doubting Thomases will argue that privatization will affect the supply of courses in arts and philosophy. But this argument is without basis. Modern private sector corporations recognize the great value of liberal education in broadening the perspectives of managers. Indeed, arts graduates do better in modern businesses than technical graduates because innovation, entrepreneurship, leadership, people management and strategic thinking have little to do with technical skills.
• In this manner, the freely operating tertiary education market will decide what courses are needed for India. I imagine we would get a hundred Indian Harvard Universities in a few decades through this model.

Some First-Order Core Functions

A good government needs to deliver high quality outputs in at least three ‘first-order’ core areas, of defence, police and justice. These functions must be carried out outstandingly well and, if necessary, to the detriment of all other functions. If funds run short, a government can always provide incentives to citizens to take up relatively secondary things like infrastructure through a range of innovative ways by transferring property rights over roads, airports, or railways. I have outlined key elements of reform in these first-order core functions in the Online Notes.[i]

Second-Order Core Functions: Infrastructure and Equality of Opportunity

Poverty Elimination