Learning To Govern

In India, governments run the electricity industry. Each state government has a local monopoly. The supply is inadequate almost everywhere. The rich keep generators which come on whenever government electricity goes off; the rest do without electricity whenever it goes off. This is not very different from much of Africa, where children studying under street lights are not an uncommon sight.

Paul Romer is an unusual economist. Most economists teach in universities or serve businesses and governments. Romer resigned his chair in Stanford and decided to try and change the world. To explain his ideas, he once showed a slide of children studying under a light in the parking lot of the airport at Konakry in Guinea in Africa, and asked: why do they do this? Why does every child in a developed country have electric light, and why not in every developing country? It is not because of cost; many poor people can afford it. It is because of the institutions that govern electricity generation and distribution — the rules that make it possible for companies to be formed and to run businesses that deliver electricity to everyone and make a profit out of it. Those rules and institutions flourish under developed-country governments; the governments supply clean, reliable administration.

This is a hypothesis; it can be tested. Romer devised a test. A developing country should import administration for a city from a developed-country government; it should give the latter a contract for a few years — long enough to set up an administration and get it running. Romer had an example. When the communists overran China, Hong Kong was on a 99-year lease to Britain. They could have occupied Hong Kong as well; but instead, they let the British run it. They ran Hong Kong exemplarily. They ran it so well that the Chinese imitated it and set up autonomous governments to run a number of port cities. These cities became new models. They attracted industry, churned out exports, and made China the world’s most successful exporter. They became the driving force for China’s amazing growth. Forty years ago, the Chinese were about as poor as Indians; today they are three times as rich.

Romer has been looking for ports in developing countries to try out his idea. It does not have to be an existing port; it can be built from the ground. He nearly found a site in Madagascar. But then there was political controversy, the president who had promised the site to Romer fell, and the idea fell through.

Giving Romer a port carries the suggestion that the government that gives it could not run it as well as Romer’s developed-country lessors. It is a blow to the pride of the government; the worse the government runs, the less likely it is to admit it to itself. Karachi, for instance, would be an ideal candidate — once a great and prosperous port, it is ruled today by gangsters. But would a Pakistani government have the guts to hand it over to Romer? No way; Pakistan would destroy Karachi before it tries something new.

Would any Indian government have the guts to hand over a port? Bombay was the pride of India. Paranoid Maratha parties chased non-Maharashtrians out of it; now it looks worse, and functions much worse, than it did under the British. Calcutta was a great industrial city; the communists started industrial strife that ran its industry to the ground. Today, they have lost power in Calcutta — 40 years too late. Mamata has won Calcutta. She has appointed 76 advisers for her 76 corporators. Every single one of them is a Bengali. Would she ever dare appoint Romer as the czar of Calcutta? No way; he is not a Bengali.

For that matter, would Manmohan Singh have the courage to hand over a port to Romer? He is very much aware of the problem. He has tried out a solution of his own; he has poured money into the metros to renovate them. It has made some difference to Delhi, which is in his bailiwick and has an honest, hardworking chief minister in Sheila Dikshit. But he has no control over any port, and he is too gentle to wrest it.

That leaves one chief minister who could do it: Narendra Modi. He has the guts to do it. He cares deeply about his state. He is aware of his state’s long coastline and its unimportance in India’s foreign trade. He has been trying to develop its ports and their road communications. He has virtually handed over two ports to industrialists — Jamnagar to Mukesh Ambani and Mundra to Adani — and both have been a success. He could call Romer, but would he?

The author is Consultant Editor of Businessworld.

ashok dot desai at gmail dot com