The King of All Telecom Scams — Part 4

[Previously in this series: Part 1, Part 2, Part 3.]

To the rather distinguished list of superlatives about India — the largest democracy, etc. — we can add “India is the largest banana republic in the world.” The Wikipedia notes that “the purpose of a banana republic is commercial profit by collusion between the State and favoured monopolies, whereby the profits derived from private exploitation of public lands is private property, and the debts incurred are public responsibility.” Generalize “public lands” in there to mean “public resources” and you have a pretty good description of what we have going on in India.

How did India end up to be a banana republic? Was it inevitable? Was India endowed with so little social capital that it is ruled by a small band of especially corrupt politicians? What is striking is that the highest ranking members of the Indian political class come from a small group of families. The closest parallel that comes to mind is the mafia.

At the head of each mafia family, there’s a don, the godfather. These families fight it out for control of territory. Bloody battles are fought and power shifts from one family to another. Fortunes are made by the families, and regardless of who wins in any conflict, the losers are always the ordinary people who just pay “taxes” to keep from getting their knee-caps broken.

The most powerful family in India is the “Nehru-Gandhi” clan. A son or a daughter or an in-law takes over after the assassination of the don — which happens fairly regularly. (India shares this feature of family succession following assassinations with its neighboring Islamic states.)

Then there are the regional families. For example: M Karunanidhi is “the Leader,” the chief minister of Tamil Nadu. His eldest son, M K Azhagiri is the Union Minister in charge of chemicals and fertilizers. The Leaders’s younger son, M K Stalin (named no doubt in honor of the mass murderer), is a deputy in the TN government.

It would take too long to list out all the families that control India. Since the pattern is the same, when you’ve seen one, you’ve seen them all.

The succession usually goes to a spouse (or a mistress), son or daughter, or an in-law. No special skills are required. You can even be totally illiterate and the only skill you have is of milking cows and cooking. But if you are related to the king, you can be the chief minister of a state that is larger than a a few Western European countries combined. One day you could be a glorified bus driver and the next day you are deciding the fate ofhundreds of millions of impoverished people.

There is nothing in the laws of the universe which says that the offspring of someone extraordinarily skilled cannot be also exceptionally skilled. It is possible although not very probable. So also, it is possible that the most able leader in the land happens to be the daughter of the Great Leader. Unlikely but can happen.

You start to climb mount improbable (sorry Richard Dawkins) when you try to figure out how probable is it that the Great Leader’s daughter, and his grandson, and his grand-daughter-in-law, and his great-grandson are also the ablest leaders out of a population of around one billion people.

On analyzing this “running the country as a family-owned enterprise along the lines of a mafia family” I have to sadly accept that perhaps India lacks social capital. Lack of financial capital or physical capital can be fairly easily overcome by the simple expedient of borrowing from abroad. Social capital cannot be so easily imported. It has to domestic.

But let’s move on. The organizational structure to control a large economy like India has to be large and complex. However, to help in our understanding, we can model it as three separate — but inter-related and interacting — subsystems.

One of them is what we pointed to: politicians, usually grouped into mafia-like families. The second is a small set of large corporations. The third is a small set of big news and information companies which control information flow to the people.

Let’s briefly look at the small set of large corporations. India’s industrial structure is fairly small. How small? Only about 7 percent of India’s labor force is organized labor. The organized labor is partly in the public sector. The public sector is naturally controlled by the government. The families control the government, the government controls the bureaucracy, and the bureaucracy controls the public sector corporations such as the railways, power corporations, etc.

The private sector corporations are also controlled by the government, although indirectly. In a license-control-permit-quota raj, who gets to produce what, when, where and how much is determined through a bargaining process involving big corporations and the government. Big businesses cannot afford to antagonize the government, and the government (the families, really) depend on the corporations for part of the funding required to win elections. It’s a symbiotic relationship and it is not in the interests of either party to throttle the other. It’s a live and let live world.

The third important subsystem is the press. The press is actually a catch all for print, radio and TV. (The internet is not part of the press as I define it here.) The government controls radio, directly through ownership of “All India Radio”, and indirectly through regulation of private radio. It restricts private radio stations to broadcasting mindless fluff.

The government also controls private TV channels, aside from its own TV channel “Doordarshan.” Doordarshan is part propaganda, part government mouth piece, and part entertainment. You pay for what the government wants you to watch. The commercial TV corporations operate under government dispensation. They know which side of their bread is buttered and behave accordingly. In exchange, they are rewarded with public awards such as “Padma Shree” and “Padma Bhushan” for services rendered.

The newspapers that toe the government line are rewarded by the government. The government spends large amounts of ad money. The government taxes you, then uses part of it for promoting its interests by paying newspapers to print what it (the government) wants you to read. It’s something like the mafia sending you a bill for the bullet it will use to dispatch you to the great beyond.

One could object to this model saying that it is too simple. Yes, indeed it is. Merely because a system has a large number of components does not mean that it cannot be understood as a small set of mutually interacting subsystems. At the level at which we need to understand a car, our understanding that it has an engine, a power train, a steering mechanism and a body is sufficient for us to know how it works.

The telecom scam is the latest in a series of scams that has characterized the Indian economy. Every major process or event, including the biggest scams, have to have all three subsystems outlined above working in concert. The press was intimately involved in the decisions relating to who controls the government ministry; the ministry decided which corporations were to be awarded licenses.

It is probably the case that there must have been some quid pro quo between those who controlled the licenses and those who got the licenses. Selling spectrum licenses cheap to corporations (which then indirectly resell them for huge profits) is an easy way to extract some of the gains that use of telecommunications makes possible.

In the next part of this series, I will explore that last statement a bit more.

I will also like to quote some of the recent articles related to the telecom scam in a post so that we have some easy reference to the particulars of this case. I want to do that as part of the record for this blog.

See you later, alligator.
In a while, crocodile.

[Next: Part 5.]