November 25, 2006

Ebay for Democracy: A Revision

The Kodikulam story gets more bizarre by the day. In a post in India Uncut related to my previous post, Ebay for Democracy, Amit Varma has added an update based on an alternative explanation of the auction of seats on the village council, offered by Nilu. Nilu suggests that the auction is motivated by caste and not market forces. According to him, the auctioned seat is reserved for the Dalits. The winning candidate, a Dalit, was allegedly forced by the upper caste folks in the village to pay a fee for the seat. Nilu further contends that the fees for the seats — reservation prices for the auction, I presume — on the council are graded, inversely proportional to the position of the candidate in the caste hierarchy. Apparently, it's a common practice for filling various government positions in many Tamil Nadu villages.

I was a bit puzzled by Nilu's explanation, because my understanding is that there is a direct correlation between caste and class status in Indian villages. How could the Kodikulam village rationally expect to fetch a higher price for a seat reserved for the poor Dalits than, say, for one reserved for the relatively well off Thevars, the dominant caste in that part of India? Rs. 200,000 could well be the life-time earnings of a Dalit farmhand. Would it not be too risky to bid it all on the uncertain earnings from a seat on the village council, bribes included?

I dug a little deeper and found more fascinating details of the story in the Indian Express. It seems that the seat in question is indeed reserved for the Dalits. It's held by Ms. Balamani, a poor Dalit woman. What was auctioned, however, was not the seat, but the right to control Balamani! The highest bidder would retain the right to use her as a rubber stamp, and expropriate all the commissions that she would earn while she held the post —

...While T Madhivanan was the hot favourite with his offer of Rs 2 lakh [Rs. 200,000] till this morning, another farmer, Karuppusamy Ayyavu Thevar (36), surprised everyone with his offer of Rs. 2.16 lakh [Rs. 216,000] and ‘won’ Balamani...

To a country that is used to seeing heads of states elected, only to be the rubber stamps for their real bosses who might be in political exile, this should not come as a surprise. For Ms. Balamani, who has been excluded from the best part of the spoils, the reservation of the seat for Dalits should seem pointless. Mr. Thevar is most likely to fall short of his expected earnings from the investment by at least Rs. 16,000. He would do better to pay heed to the winner's curse, the next time he bids in an auction. Those in the current Indian government, who want to institute caste, community, and gender based quotas in everything from university admissions to cricket, should take note of the story, too. This is how the quota regime and other forms of market intervention can be hijacked to entrench perceived and real social inequities. Amazing lessons in the power of the market forces that even a Ph.D in economics would find worthwhile to learn!

Milton Friedman too would have loved to hear this story, if he were alive. It's the ultimate tribute to the man, beating easily the Salon article that I referred to in my earlier post on his demise. Commenting on political corruption in India during the heydays of the License-Permit Raj, Milton and Rose Friedman wrote:

"We shall not soon forget the tongue-lashing one of us received from a prominent, highly successful and extremely literate Indian entrepreneur-physically the very model of the Marxist caricature of an obese capitalist-in reaction to remarks that he correctly interpreted as criticism of India's detailed central planning. He informed us in no uncertain terms that the government of a country as poor as India simply had to control imports, domestic production, and the allocation of investment-and by implication grant him the special privileges in all these areas that are the source of his own affluence-in order to assure that social priorities override the selfish demand of individuals." [Source: Free to Choose-A Personal Statement by Milton and Rose Friedman, Harcourt Brace Jovanovich, New York, 1980, pp54]

What could be better than an auction for corruption to please this man with such unshakable faith in the market? By the way, could someone please post the current asking price for a backward caste birth certificate in India?

1 comment :
  1. I am surprised how such a nugget of a post can go without a comment. Unless the truth is that your readers are speechlessly intimidated by your erudition and brilliance.
    Yes, I confess, I am, too, but not speechlessly so. I tend to get a bit talkative, like after the initial loading dose of a fine single malt.

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