Disruptions, for what joy?

Mindset change is the most important prerequisite for any intervention to succeed, shows survey

I went to renew my driving licence last week, with all supporting documents, including the all-important and pervasive Aadhaar card.  Since the regional transport office had moved to more spacious premises 10 km from the city and now claimed to be fully online, I expected the process to be smooth and quick. Perish the thought. It took longer than it did at the old congested office five years ago and needed recourse to time-honoured means, which cost twice as much. Petty corruption is alive, thank you, and thrives on new purple and green diet in place of the old red and yellow bits. As Jean-Baptiste Alphonse Karr observed over 150 years ago, “plus ça change, plus c'est la même chose” — the more that changes, the more it remains the same. 

That little instance notwithstanding, we live in times of constant change, some of it disruptive even, a period of ever-increasing universal entropy as it were. Without this, we will be in an equilibrium, a stasis with no progress possible. Joseph Schumpeter called the “process of industrial mutation that incessantly revolutionises the economic structure from within, incessantly destroying the old one, incessantly creating a new one” the ‘gale of creative destruction’ in Capitalism, Socialism and Democracy (1942). That pithy description captures the essence of economic progress under free markets. 

Closer to our times, Gordon Moore of Fairchild Semiconductors and Intel made a postulation named after him, now modified to state that the semiconductor chip performance would double every 18 months. Moore’s Law, though not a physical one, is hailed as the driving force of much recent productivity and economic growth. 

Both these formulations, based entirely on observed phenomena, have no infinite validity. Mr Moore now says that in view of the rapid onset of saturation, his law may not hold good after a decade or so.  That should inject a note of realism amongst analysts who predict a limitless future. 

Given the widespread experience of such disruptions leading to growth, we tend often to invest any disruption with similar potential. Initial setbacks are dismissed as transient, a necessary cost for buoyant tomorrows. Political leaders who deliberately upset the established order are especially prone to make claims that their actions presage great good change. 

That, of course, is not entirely or always true.  Donald Trump’s actions on global trade, environmental conservation or affordable health care are plainly regressive, as is Brexit.  Recep Tayyip Erdogan’s constitutional “reform” will most likely push Turkey back in time.  At home, we are told that government initiatives such as demonetisation, agriculture loan write-offs, change of financial year, fixed-term legislatures and simultaneous elections, and the goods and services tax (GST), are all harbingers of positive development in the near term. 

Some of these could be patently disruptive, but not necessarily positive changes. Six months on, the initial slowdown after demonetisation may have disappeared, but Demonetisation and Black Money by C Rammanohar Reddy and Demonetisation Decoded by Jayati Ghosh et al persuasively contend that notebandi has curbed neither corruption nor black money.  This column argued last month that “All that loan waivers do … is …to restore farmers to the unrewarding stasis, with the vicious circle ...  The distress continues, possibly gaining momentum”. Proposals to change the financial year are invariably accompanied by the rationale that they are more in sync with the agricultural calendar and thus necessarily beneficial.  Trouble is, this point can be and has been batted back and forth, leading to a surmise that it matters little one way or the other.  I had suggested in these pages that under one-nation-one-election idea in the prevailing dominance of the Bharatiya Janata Party (BJP) “only one party will benefit… Simultaneous elections would leave the BJP in a …heads-I-win-tails-you-lose situation”. 

Why do some of these supposedly game-changing interventions lead to underwhelming outcomes?  Two reasons suggest themselves.  First, they were meant to serve some other unstated purpose.  The rather emphatic assertion of Demonetisation Decoded that the “aim [of demonetisation] was … to project the leader as an extraordinary person who can take such bold and unimaginable decisions” may well be right on target. 

The second and more important reason is the resourcefulness shown by individuals and institutions likely to be affected by the change in guarding their flank.  Driving licence renewals may be superficially simplified, but by keeping the number of counters restricted to the same old number and by assigning dates for renewals beyond the grace period after expiry, the petty bureaucracy ensures that its powers and avenues of gain through agents remain intact.  The long-drawn negotiations and the resulting rather complex mechanism for the one genuine reform-oriented disruption, GST, demonstrates the agility of vested interests in protecting their turf.  Times without count we have bought more complex procedures in the name of simplification. 

A recent survey by ComMutiny, an NGO working with youth, showed that mindset change is the most important prerequisite for any intervention to succeed.  But that is far easier said than done, as the less than satisfactory reception to many innovations show.  Some disruptions could be downright dysfunctional.  Not all new lamps for old contained the magical genie, as Aladdin was to ruefully discover.
 

The writer is an economist and Founder-Director of Institute of Rural Management, Anand