Turkey’s Baffling Coup and why India never had a military dictatorship..

July 18, 2016

Last week saw yet another attempt to dethrone democracy in Turkey (it was more a case of demagoguery than democracy). There have been a quite a few already in its recent history. TYe government even tried to make Turkey coup-proof in 2006 which obviously did not work! But this recent one was baffling and amateurish at its best.

Dani Rodrik explains his bafflement:

Military coups – successful or otherwise – follow a predictable pattern in Turkey. Political groups – typically Islamists – deemed by soldiers to be antagonistic to Kemal Atatürk’s vision of a secular Turkey gain increasing power. Tensions rise, often accompanied by violence on the streets. Then the military steps in, exercising what the soldiers claim is their constitutional power to restore order and secular principles.

This time, it was very different. Thanks to a series of sham trials targeting secularist officers, President Recep Tayyip Erdoğan had managed to reconfigure the military hierarchy and place his own people at the top. While the country has been rocked by a series of terrorist attacks and faces a souring economy, there was no inkling of unrest in the military or opposition to Erdoğan. On the contrary, Erdoğan’s recent reconciliation with Russia and Israel, together with his apparent desire to pull back from an active role in the Syrian civil war, must have been a relief to Turkey’s top brass.

No less baffling was the almost amateurish behavior of the putschists, who managed to capture the chief of the general staff but apparently made no meaningful attempt to detain Erdoğan or any senior politicians. Major television channels were allowed to continue to operate for hours, and when soldiers showed up in the studios, their incompetence was almost comical.

Planes strafed civilians and attacked the parliament – very uncharacteristic behavior for the Turkish military outside areas of Kurdish insurgency. Social media were full of pictures of hapless (and apparently clueless) soldiers being pulled out of tanks and disarmed (and sometimes much worse) by civilian crowds – scenes I never thought I would see in a country that has come to hate military coups but still loves its soldiers.

:-) Events were like those seen in comedy movies..

Thus obviously bring to minds why Pakistan has had coups and India none. Here is an article looking at reasons based on Steven Wilkinson’s work:

The question why the Indian army never attempted to seize power has sometimes been attributed to the fact that it is a disciplined, highly professional army, steeped in proud 250-year old traditions inherited from the British. But this theory doesn’t work, because the Pakistani army was born out of the same traditions and that didn’t seem to stop it from assuming power.

Indeed, one could argue that it was precisely because the Pakistan army was such a highly professional force that there came a time when it felt it could no longer stand by and watch the country slide into chaos, and felt it was its duty to step in. So clearly this is a question one needs to look at more closely. Which is what political scientist Steven Wilkinson has done with his excellent new book, Army and Nation.

In order to understand what didn’t happen in India, it is perhaps useful to first look at what did happen in Pakistan. The military dictatorship in Pakistan has had an interesting pre-history. It begins in undivided India, where the largest single component of the army was drawn from the undivided Punjab. Hence at the time of Partition, of all the institutions that Pakistan inherited, the most substantive was its army.

Moreover, while in India the Congress Party was a highly evolved, durable organisation, in Pakistan the Muslim League was not much more than “Jinnah and his Private Secretary”. Hence, there was a dangerous structural imbalance in Pakistan, especially after Jinnah’s death in 1948.

Unlike Turkey, India did make progress on coup proofing the economy:

The Indian Army was born out of the same tradition as Pakistan’s. In British India, the army enjoyed a prominent position in Indian life, and even played a role in policy matters. The Commander-in-Chief, was also the de facto Defence Minister, and was the second most powerful person in the hierarchy after the Viceroy himself. But after Independence things began to change.

Prime Minister Nehru believed that the new India needed to re-think the role of the army, and initiated a policy that would firmly subordinate it to the civilian authority. One of the first things that happened after Independence, for example, was that Teen Murti House, traditionally the grand residence of the army chief, was assigned instead to the Prime Minister: a small matter by itself, perhaps, but a clear indicator of the way the wind was blowing.

Next came a series of budget cuts (resulting, among other things, in hefty cuts in army officers’ generous Raj-era salaries). And when India’s first army chief, Field Marshal Cariappa, publicly criticised the government’s economic performance, he was immediately rapped on the knuckles, and told not to meddle in matters that did not concern him.

Over the years a systematic programme was pursued to ring-fence the armed forces, and their influence in Indian society – a program that was given fresh urgency in 1958 by the military coup in next-door Pakistan (an occurrence that was worryingly praised by Field Marshal Cariappa, who had recently retired as Army chief). A highlight – or, rather, lowlight – of that ring-fencing programme was the appointment of Krishna Menon, a powerful, abrasive, leftist intellectual, as Defence Minister. It was an attempt to put the armed forces unambiguously in their place. Unfortunately, it also had the unintended side effect of leading to the stinging defeat of 1962, but that is a different story.

By the 1970s, the Indian armed forces had finally been rendered ‘coup-proof’ by a comprehensive system of checks and balances that had been put in place. And that might be considered to be one of the major achievements of the Nehru era: ensuring the durability of Indian democracy. It’s an achievement that is not sufficiently recognized; an achievement underscored by the fact that all our South Asian neighbours – Pakistan, Bangladesh, Burma and Sri Lanka– have experienced military coups, actual or attempted.

Wilkinson explains how this ‘coup proofing’ was implemented, through a package of carefully thought-out measures, ranging from diversifying the ethnic composition of the armed forces to setting up rugged command and control structures, re-casting the order of precedence between civil and military authorities, paying close attention to promotions, disallowing army officers from making public statements, creating a counter-balancing para-military force, and topping off this entire effort with little touches like ensuring that retired chiefs of staff are usually sent off as ambassadors to faraway countries.

At some level it is all about politics and political institutions. Whether they see the role of the army in a democracy as a threat or as a welcome, goes onto shape things for foreseeable future.

Gold standard in Daesh (Islamic State of Iraq and the Levant)

July 18, 2016

This news came somewhere in early July but forgot to blog about it:

Daesh have began recently the use of a gold dinar as their currency standard for commercial trade, denouncing the usage of paper currency printed by US’ ‘crusader Federal Reserve institution’.
According to Al-Masdar News, oil merchants in Deir Ez-Zor, Syria, were instructed to use the gold dinar if they were to conduct oil purchases from Daesh-held oil plants. The Daesh gold dinar is proclaimed to have a value that equals 190 US dollars.
Hmm… No other details are there on the mechanics of the currency regime. What is Daesh? It is Arabic name of dreaded organisation ISIS.
This blogpost argues how the idea shaped earlier in 2015:
From an historical perspective, the picture that Daesh paints about the gold standard is rosy and oversimplified. I must give them credit, however, for presenting a much better description of the prevailing balance of US dollars outside of US borders acting as the global reserve currency, and how these things are tied to rates of American borrowing that are unsustainable. Daesh is certainly not the only group making this argument- their hatred for the US Federal Reserve is most notably shared by libertarians in the USA, an interesting overlap the video never explicitly addresses. Daesh then offers its own solution- a return to real gold and silver coinage and not fiat notes- which it claims will bring down the American financial empire. Let’s look at the  history to understand the problems of gold coinage and see what Daesh offers, if anything, as solutions.
Interesting bit..

Learning economic theory in pictures….

July 15, 2016

Economic Sociology Blog points to great set of pictures which pretty much sum up all there is to economics.

Click here to see them (need a facebook account).

Superb..

 

How India’s concretising cities are becoming heat islands..

July 15, 2016

There is little doubt that most of us mention about the huge heat factor in India especially during summers. But taking a look at temperatures, one would see near similar temperatures across years. One big factor is our heat toleration has declined considerably thanks to air conditioners everywhere. The second bit could be this construction madness with concrete being used everywhere:

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McKinsey Global Institute — Using economic analysis to take on society’s biggest issues..

July 15, 2016

Here is a short write up and video discussing how MGI is using economic analysis to discuss society’s biggest issues. I hope they do not limit at just economic tools and use other ideas as well. We are all getting this economic thinking trap which is as big a problem as any.

It all is ironical though to see likes of McKinsey getting behind all these issues. Many would say they are in their own ways responsible for many of the woes they are now talking about.

Economists in India – endangered species?

July 15, 2016

Shankar Acharya has a piece in BS lamenting the decline of India’s economists in policy space. AS BS has now become a paid site, one can’t freely quote from the article anymore.

So let me discuss the piece briefly. He says two things. First,  good economists have disappeared from India’s universities/colleges from 1970s onwards. Second, they have disappeared from India’s policy as well from 2000s onwards. The second is more ironical given we had an economist PM at the helm. He quotes a long list of (distinguished) names who were present both in academia in 1950s and 60s (only few of these would be familiar to today’s students) and in policy circles in 1990s and 2000s (most should be familiar).

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You sound cooler if called a behavioral economist instead of a psychologist…

July 15, 2016

Adam M. Grant of Wharton School has a piece highlighting this dilemma. He is a psychologist but is often introduced as a behavioral economist on order to sound cooler and be heard.

He says this change in events is ironical as most contributions to so called beh eco comes from psychologists:

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The dangers of external economic advice

July 14, 2016

Given the debate on economic advisory in India (and elsewhere), one obviously wonders how global should economic advice be? Here too much of discussion is biased as Global or International advice essentially means advice coming from US based think-tanks and universities.  Globalisation should also mean that the US (and rest of the west) be open to hearing  views from other countries, but that of course is a joke. The rest of the world is hardly good enough to advice the best in the world. But how is it that those based in rest of the world are not even seen worthy of advising their own economies? Is it possible that experts based in US ivy league think-tanks and universities will know about most economies in the world?

The usual discourse in media is how external economic advice helped save some of the countries from an impending economic disaster.  One thing which is missing in such discussions is how the external advice has brought ruin as well.

Peter Bauer in this tribute to Prof B.R. Shenoy points how Indian govt’s second five year plan was equally supported by the distinguished external experts. He warns against relying too much such expertise:

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Why and when did the Treasury embrace regular and predictable issuance?

July 14, 2016

In this interview, Garbade explains how govt started predictable debt issuances. What is debt issuance? Well, govt issues bonds to meet its expenses. One way to borrow is whenever govt is short of funds, it announces it will borrow via so and so bond. This is the unpredictable bit which will create problems in markets. Govt is the prime borrower and any such sudden announcement will lead to scrapping of funds. If the market is facing crunch it will lead to higher interest rate for the govt itself.

A better way is that the govt forecasts its borrowing well in advance based on estimate of its income and expenses. It then uses the borrowing figure to work out a predictable calendar of borrowing in the coming quarters/years. This way market is well prepared to work out the funds available and plan accordingly.

But how did this thinking on predictable issuance start in US? This is what Garbade tells us:

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Why do people oppose innovations?

July 13, 2016

Calestous Juma of Harvard’s Kennedy School has written this book: Innovation and Its Enemies: Why People Resist New Technologies.

He summarises the book findings here. The crux is why do people oppose innovations?It is simple, to avoid going out of business:

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How Goans get around a monsoon ban on fishing (remembering Lin Ostrom..)

July 13, 2016

Aaron Savio Lobo of Scroll has a piece on the topic.

Goa and the west coast states ban fishing during this period. The government in order to supplement the demand supplies frozen fisheries via mobile vans. These fisheries are brought from AP and TN where time of ban is different.

What is interesting is how the local Goan fisher people have worked around the ban using their local knowhow. This is what Prof Lin Ostrom would strongly approve as well (though Prof Ostrom just brought to limelight what was always known to local people managing commons):

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Perceiving and managing business risks: differences between entrepreneurs and bankers

July 13, 2016

I have always wondered what differentiates the two –  entrepreneur and banker.

Here is an interesting paper by D.K. Sarasvathy, , Herbert A. Simon and Lester Lave which point to probable differences:

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Learning/thinking about statistics using examples from cricket…

July 13, 2016

Anantha Narayanan of cricinfo is helping me think through statistics like very few have. His previous two articles trying to figure consistent batsmen and consistent bowlers were superb. The main idea behind both was to look for  measures other than the popularly used  average to measure performances of batsmen and bowlers.

In his third piece, he digs deeper to evaluate bowlers. There is always this criticism that some bowlers top averages by taking most wickets against weak opposition. This is usually targeted against Murali in particular . This is biased in many ways as even Warne took most wickets against English sides whose record against spin was always poor.

So, he tries to figure quality of wickets and even quotes economics:

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Revisiting the tax compliance problem using prospect theory

July 12, 2016

R. Kavita Rao and Suranjali Tandon of NIPFP have this interesting paper.

Should one file or not file a tax? What are the behavioral implications?

The paper presents a model for tax compliance based on prospect theory wherein an individual makes the decision whether to file, and declare a certain amount of income, or to not file based on a set of policy parameters as well as his/her preferences. The paper poses the question- at what incomes would individuals choose to file a return and answers the same using a model based on prospect theory. Further, simulations are presented to illustrate the impact of changes in tax rates, penalty and audit probability on the individual’s preference to file. The results from the simulation show that for different values of policy parameters there exists crossover income at which individuals would choose to file a return. Given all else, at the exemption threshold of 0.1 million, individuals would choose to file a return at incomes greater than or equal to 0.6 million.

Hmmm…

One would like to also read on an experiment verifying the model..

Ben Bernanke is one of the most dangerous persons walking the planet….

July 12, 2016

David Stockman has a hard hitting piece on central banking community with special brickbats for Ben Bernanke.

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The silent role of India’s credit rating agencies in the bad loan crisis

July 12, 2016

Praveen Chakravarty a Senior Fellow at IDFC Institute, has this ouch piece on the topic (HT: Ajay Shah Blog).

He says with all the mess of NPAs etc in Indian economy, what were credit rating agencies doing all this while?

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Why India’s policies continue to be of the 10%, by the 10% and for the 10%?

July 11, 2016

Dr YV Reddy revisits the 25 years of reforms.

He usually has the most meaningful things to say. Unlike other such interviews who glorify the whole thinking behind 1991, his view is far more nuanced.

He says we suffer from this tyranny of 10%. On reading just the headline, one thought he referring to our obsession with 10% growth. But what he means is how policy space is being cornered by the 10%:

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Bangalore vs Hyderabad tussle moves to zoos..

July 11, 2016

Bangalore is not just losing investments/MNCs to Hyderabad due to its ever decking infrastructure, it is losing its prospecive zoo animals as well.

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How a thirst for good coffee and competiton has transformed Bangalore’s cafes

July 11, 2016

Superb article by Sandhya Soman in TOI, Bangalore. There is an interview of Mr. V Siddhartha of Cafe Coffee Day in the print edition. He narrates the story of how the idea of Cafe Coffee Day germinated may years ago in 1870 when his family agreed to plant coffee crop apart from others in 1870. He discusses this briefly in Soman article as well.

Coming to Soman article, she looks at the way coffee came to Bangalore. How today it has become interesting competition between old and new cafes:

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Do MBA programs drive inequality?

July 11, 2016

Kynn Parramore has a piece in Evonomics:

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