Archive for February 23rd, 2017

The battle for backwardness in India…

February 23, 2017

Prof Rohini Somanathan has a piece in Ideas4India:

We must also realise that no set of concessions granted by the central and state governments can lead us out of the current conflicts over reservations. This is because placing two castes in the same category does not give them equal status, but rather shifts scarce goods across them. No matter where a caste is placed in the scheme of things, there is always a better place to be. This is best illustrated by the Gujjar demands for reservations in Rajasthan in 2006. The Gujjars were already part of the OBCs but wished to be re-classified as an ST. The reasons were obvious. There were many literate OBCs who were competing with them for jobs and university seats but relatively few of the tribes had enough education to be rivals. The probability of entering elite institutions was therefore much higher as an ST. The Meenas of Rajasthan were the most influential within the STs and the new Gujjar demands led to violent clashes between these two groups. The Gujjars then pushed for compartmentalising the OBC quota to guarantee them a 5% share of reservations, but the Jats, who were OBCs in Rajasthan found this unacceptable. Finally, the category of Special Backward Classes was created, consisting of the Gujjars and four other groups and they were given a 5% quota. This, however, took the fraction of total reserved seats to above one-half and the courts stepped in to strike down the notification. Last September, in a similar move, the Nishads of Bihar petitioned to move from the OBCs to the SCs.
With hundreds of castes already labelled as backward, the most educated within them gain from reservations. This has widened inequalities within scheduled groups. In Bihar, for example, Dhobis and Musahars are both SCs, but 14% of Dhobis complete 10 years of schooling, while only 1% of Musahars do so. It is inconceivable that they will converge in social standing if SC quotas are our only means to equalise opportunities. In 2007, the Nitish Kumar government created a new group, Mahadalits, to help communities like the Musahars, but it was only a matter of time before the Dhobis and Chamars also wanted in.
Caste reservations first emerged to promote equal treatment in a society where untouchability was widely practised. They have now degenerated into a scramble for privilege and a catalyst for communal conflict. Many state elections are being held in 2017, including Punjab, Gujarat and Uttar Pradesh. Punjab has already announced OBC status for the Rajput Sikhs. It remains to be seen whether politics in the other states will also be dominated by lobbies for reservations or whether our leaders can focus on expanding the social and physical infrastructure that we so badly need. Only 15% of children in rural India have easy access to a high school, only 4% of villages have a primary health centre, and income transfers to the poor and the old are negligible for most families. The Indian State now has the capacity and the data needed for modern methods of redistribution – through public goods, social insurance, and progressive taxes. It is time to use these to move forward.
India’s political economy of development remains as interesting as ever..
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Vera Smith’s five reasons for central banks : Are They Any Good?

February 23, 2017

I doubt how many of today’s monetary scholars have read Vera Smith’s dissertation- The Rationale for a Central Bank? What must have been a must read some years ago is hardly part of any course these days. The thesis was written under Hayek’s supervision and looked at reasons behind formation of various central banks.  We take central banking for granted without looking at various ways in which they come in different countries.

Karl-Friedrich Israel has a piece in Mises Institute which looks at five reasons given by Smith for having a central bank. Smith gave these reasons during GOld Standard days. After many years, do the reasons remain valid?

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