Books

RISE OF ROBOTS: Technology and the Threat of Mass Unemployment by Martin Ford. Brilliance Corporation, New York, 2015.

BASIC INCOME: A Transformative Policy for India by Sarath Davala, Renana Jhabvala, Soumya K. Mehta and Guy Standing. Bloomsbury Academic, London and Delhi, 2015.

THE Economic Report of the President is an annual document prepared by the White House’s Council of Economic Advisers (CEA) that provides the U.S. Congress with an overview of the nation’s economic progress. Deep inside the pages of this year’s report (released in February) was buried this remarkable nugget: a CEA study estimated that low-paying service jobs (those paying less than $20 an hour) faced an 83% chance of being automated, with those in retail, fast-food and construction particularly susceptible. While total jobs lost to automation are hard to quantify – estimates range from 9% to 50% – it is clear that the elements for a complete transformation of the job market are fully in place.

Martin Ford, a Silicon Valley entrepreneur with over twenty-five years of software design experience, skillfully chronicles this process in Rise of Robots: Technology and the Threat of Mass Unemployment. A simple question lies at the heart of this book: ‘Can accelerating technology disrupt our entire system to the point where a fundamental restructuring may be required if prosperity is to continue?’ (emphasis in original)

Ford’s book is a compact and accessible guide to the future of work. He argues that robots and the ongoing revolution in big data and machine learning will render humans obsolete, irrespective of the colour of one’s collar, level of educational attainment, or functional specialization. He outlines several economic trends suggesting that the American economy is headed in this direction. Productivity gains accrue increasingly to investors and firm owners while wages for the typical worker are stagnant and in some cases, even declining. The share of corporate profits in national income is rising steeply even as labour’s share continues to fall. The term ‘jobless recoveries’ has now entered the lexicon, with both the quality and quantity of job creation declining in the aftermath of the recession, along with falling labour force participation rates and increasing economic inequality. Unemployment continues to be rife among recent graduates, with fully half of all STEM degree holders failing to find jobs in those fields.

Ford asserts that information technology is fundamentally to blame. The acceleration in computing power has allowed companies to become exponentially more productive with disproportionately small teams. In turn, economic crises wreak havoc among middle-skill, middle class jobs leaving only low wage jobs and high-skill professions intact, and weakening consumer demand as a result.

Ford misses a few steps in this analysis. First, if he is right about the power of automation to evaporate jobs – and given his expertise in Silicon Valley, he is likely to be correct about the trend, if not the magnitude – then it is possible that American policymakers may respond to this offshoring of jobs to the ether with protectionist legislation that forces firms to improve hiring practices. Second, there is a glaring lack of sustained discussion regarding the industries that will spring up around producing, maintaining, and disposing the hardware and software components multiplying across the economy. If at least a sizable minority of the low skill jobs displaced by automation can be absorbed by service-adjacent employment, the future of work will look distinctly less dismal. Finally, Ford emphasizes the widening gap between productivity growth and worker’s compensation and suggests that advances in information technology are to blame for wage stagnation. This line of reasoning understates the role of regulatory decisions such as falling overtime protections and an inflexible minimum wage ceiling that have eroded labour standards across the American economy. Despite such minor sins, the first half ably captures how the blistering pace of technological change is in very real ways altering the economy.

It is in the second half, where Ford conjures a dizzying array of real-world examples to make this transformation come alive, that the book begins to falter. Several potentially transformative innovations, from online education to 3D printing to autonomous cars, come with the same caveats to explain their lack of ubiquity: a low return on investment, an inability to scale efficiently, and prohibitive costs. As these qualifications echo across chapters, it is difficult to remain impressed by the tremendous hype surrounding these new technologies.

Towards the end, Ford includes an interesting summary of the challenges facing China and India. He identifies a common predicament of several emerging economies, namely, a marked decline in manufacturing’s share in the national output at a time when there is a dramatic increase in new entrants to the labour force. A more generous reading of this dilemma and even Ford’s characterization of the peculiar set of economic forces powering this change suggest that this is a shared concern for several advanced economies as well, albeit on a lesser scale. His answer is elegant, and as old as the 15th century humanist Thomas More who first suggested it: an unconditional basic income (UBI) paid to all adults irrespective of other income sources. Doubtful of technology’s ability to resist the tenets of Moore’s Law, and frustrated by partisan gridlock, Ford seeks to disrupt the very foundation of the wage-labour relationship.

The second book under review focuses exclusively on this policy idea. The idea of the UBI has enjoyed something of a renaissance in recent years, with experiments underway in Finland, Netherlands, Canada and Kenya. It enjoys popular support across both the left and the right in the United States (it helps that past proponents have included Martin Luther King Jr. and Friedrich Hayek), and more recently, has found resonance in the op-ed pages of Indian business dailies. Against this backdrop, Sarath Davala, Renana Jhabvala, Soumya Kapoor Mehta and Guy Standing’s Basic Income: A Transformative Policy for India provides an excellent overview of the real-world challenges of implementing a basic income scheme and its potential as a tool of poverty reduction.

The authors argue convincingly that India’s welfare regime continues to suffer from poor implementation, clientelism and inefficient targeting. In particular, the authors single out the Public Distribution System and the Mahatma Gandhi National Rural Employment Guarantee Scheme as emblematic of the issues plaguing India’s welfare and social policies. Using empirical evidence collected by past studies, the authors show that staple foods promised by the former fail to reach the poor and often suffer from shortages, while the latter creates poor quality assets and disincentivizes the training of unskilled labour. The authors contend that a universal and equal sum paid to individuals can improve both social equity and administrative efficiency.

In the chapters that follow, the authors present the results of two modified randomized control trials (RCTs) conducted in Madhya Pradesh, funded by the United Nations Children’s Fund (UNICEF) and overseen by the Self-Employed Women’s Association (SEWA). Even with small grants, amounting to 30% of monthly expenditure for families living at the poverty line, the authors are able to ascertain four clearly positive effects.

First, they find the basic income had positive welfare effects. Among villagers residing in the basic income villages, the consumption of nutritious foods like pulses, fresh vegetables and meat shot up by 1000%, 888% and 600% respectively. Compared to the control villages, nearly twice as many households that did not previously possess latrines had one at the end of the evaluation period. There was reduced incidence of illness as preventive actions like regular food intake and medication became normalized across villages. There was a strong positive impact on school enrolment and attendance, especially among female students, with suggestive evidence for improvement in school performance.

Second, the basic income resulted in more equitable development. With individualized payments, welfare for marginalized groups improved significantly as they began to exercise agency within their households and the community. Third, it spurred economic activity. Villagers worked harder than before, with the number of adults engaged in two economic activities (own-account farming with small business on the side) in basic income villages being significantly higher compared to control villages. Both wheat production as well as investment in storage facilities increased as villagers sought to provide food security to the community. Fourth, it reduced indebtedness. The propensity to save increased in basic income villages over the pilot period, and in several cases villagers were able to escape from bonded labour and reduce dependence on moneylenders for funds. Cash, quite literally, became cheaper.

Taken together, these results powerfully demonstrate the benefits of unconditional transfers and emphasize the ‘transformative’ potential of this unorthodox welfare policy. The authors make an effort to anticipate and disarm several conventional critiques of a universal basic income – that if given a chance, people will spend the extra cash on alcohol or drugs, that they will lose all incentive to work, and so on.

The authors do not, however, manage to convincingly vanquish the ‘external validity’ bogey that has long loomed over RCTs. In brief, this critique argues that policymakers must account for factors like political systems and public institutions that may influence the success or failure of interventions. Given India’s vast economic and geographic disparities, these results should be treated with extreme caution – if anything, the successful examples from this book should inspire more such field experiments across the country.

Further, it is doubtful that shifting the burden of funding and implementing such a scheme from external actors like UNICEF and SEWA would be as smooth as the authors make it out to be. The book provides several object lessons in the difficulty of carrying out field surveys in India, and is a testament to the authors’ and enumerators’ commitment to ensuring that the pilot schemes were implemented according to the original research design. Though innumerable challenges exist in the implementation of the simplest government schemes, yet the authors afford little space to discuss the feasibility of retooling the state or district level bureaucracies to deliver cash. The authors wisely advise against dismantling current delivery mechanisms before instituting a UBI and suggest that there be a brief overlap to enable the transition. But where will the additional state capacity to manage unconditional cash transfers in addition to Byzantine welfare schemes, even if temporarily, come from?

Finally, the book does not provide details regarding the cost of implementing a monthly cash transfer. For this policy to be considered a valuable and feasible alternative to current methods of welfare provision, a clear cost-benefit analysis needs to be conducted to examine the cost of providing cash compared to PDS or other mechanisms.

All told, both Martin Ford, and Jhabvala et al. have presented nuanced yet powerful arguments for reconsidering income redistribution in an age of capital-biased technological change. For readers interested in the forces reshaping the fabric of modern society and the arsenal of policy responses at our disposal, both texts will serve as an excellent resource.

Saksham Khosla

Research Analyst, Carnegie India

 

HALF LION: How P.V. Narasimha Rao Transformed India by Vinay Sitapati. Penguin Viking, New Delhi, 2016.

P.V. Narasimha Rao is India’s best forgotten prime minister, victim of the worst kind of politically induced amnesia. Sitapati’s book, based on privileged access to Rao’s papers, is a serious attempt to dispel the pall of forgetfulness and restore to Rao his achievements. In the process, Sitapati writes a political biography that is rare in India. He remains very close to his subject – inevitable since a large part of the narrative actually grows out of the papers that Rao preserved about crucial events. The book, however, never descends to hagiography though the tone is sympathetic and sometimes justificatory. Overall, it is a fine book that will stand the test of time and likely serve as a benchmark to establish Rao’s place in the history of independent India.

There are three key elements in the assessment of Rao. First, and the most talked about, is the way Rao opened up the Indian economy through a series of crucial reforms. Second, and this brought to Rao the greatest ignominy, his handling of the crisis in Ayodhya when the Babri Masjid was pulled down by a mob of Hindu fundamentalists. And third, the least discussed of Rao’s achievements, the manner in which he altered the direction of India’s foreign policy in the aftermath of the end of the Cold War. Sitapati discusses all three – they are unavoidable in any report card of Rao’s prime ministership – and through his discussion, a fourth theme emerges. Rao, when he was the helmsman, was a superb navigator. He knew the waters, had long charted them and knew precisely how to navigate the ship of state through waters often uncharted by any previous prime minister and inevitably choppy. This book thus is also about the importance of navigational skills on the part of a prime minister who, either by choice or circumstances, was forced to adopt a programme of radical change. Rao’s skills in this regard were Machiavellian (the adjective is being used here advisedly and not necessarily in its pejorative connotation).

The polarity between choice and circumstances is deliberately posed because it is never clear from Sitapati’s reconstruction of Rao’s crucial policy decisions as to which of the two drove Rao. Perhaps this is just as well, since Rao, and Sitapati’s book makes this point most effectively, did not always see situations and human beings in stark black and white terms. Ambiguity was Rao’s other name and, possibly, this is what made him such a skillful and adept navigator.

As is now well known, Rao was pitchforked into the prime ministership after Rajiv Gandhi’s assassination and found himself facing an economic crisis. India was on the verge of defaulting on its debt repayments, since the foreign exchange reserves as they stood in June 1991 could at best pay for only an additional two weeks of imports. The immediate crisis was averted by the decision (a well kept secret at that time) by transferring 21 tonnes of gold to the Bank of England and getting dollars in return. The other, though less important, problem facing Rao was that his government did not command a majority in Parliament. Rao had to fix the economic problem but could not do it without support from both within his own party and the Opposition. This called for serious navigational skills. Rao managed to do this partly by appearing to take the Opposition into confidence (Sitapati describes occasions when Rao actually dissembled with the Opposition on critical issues), by telling his own party men, wedded as most of them were to socialism, that he was only carrying forward the policies of Rajiv Gandhi and finally, by selecting a group of ministers and bureaucrats who he could persuade to prepare an agenda of economic reforms and also be the fall guys if things went seriously awry. The most important of these was Manmohan Singh who was told by Rao, ‘If the policies succeed, we will take the credit. If it fails, you will have to go.’

The point about continuing Rajiv Gandhi’s policies was again, typically, only partly true but it helps to contextualize a question often posed regarding the economic reforms: how far were the latter a product of a crisis and pressure from the IMF and the World Bank? Sitapati demonstrates, convincingly, that since the time of Indira Gandhi’s second premiership there had been several proposals to reform the economy by drastically reducing state controls. It could be added that there was actually a paper circulated – known as the M document after its author Montek Singh Ahluwalia – that argued for the urgency of reforms and provided a programme for it. The point that Sitapati correctly emphasizes is that no prime minister before Rao had enthusiastically pushed for the reforms that economists within the government, from Rakesh Mohan to Ashok Desai to Ahluwalia, had proposed and advised. This is where the crisis of 1991 and the pressures from the IMF and the World Bank became crucial. It convinced Rao that he had to get the reforms done if the Indian economy were to survive and grow. Both Rao and Manmohan Singh were reluctant reformers but they could work in tandem: Singh to work out a feasible and phased policy of reforms and Rao to navigate that policy through choppy political waters. Political skill and not a little deceit made the reforms possible and unshackled the Indian Prometheus.

If Sitapati’s handling of the economic reforms is just short of masterly, he is somewhat on the back foot on Rao’s handling of the Babri Masjid crisis. Sitapati’s contention is that Rao was caught in a constitutional bind. He could not impose President’s Rule in UP to ‘pre-empt violence’ that would set a dangerous precedence; he could not send central forces in since law and order is a state subject. He thus waited, possibly for a clearer signal. And yet, as Sitapati points out, no one, not even those who condemned him for prevarication and inaction later, within and without the Congress, actually recommended President’s Rule. That wisdom emerged only after dusk. The other factor was that Rao was constantly being assured by the leaders of the Sangh Parivar (with whom he had a back channel conversation going) that the mosque was in no danger. The master of deception was actually deceived. Sitapati does not make enough of this irony. There is another important point to note in this context. If the demolition of the mosque is one very significant moment in India’s history of sectarian strife, the other is the pogrom against the Sikhs in 1984. It so happens that during the killing of the Sikhs, Rao was the home minister and he did precious little. Rao is thus implicated in both the shameful incidents. The parallel with Nero resonates except that Rao did not fiddle, he pouted. What demands explication, and we are still left guessing, is what view Rao had on these issues and of his own ineffectiveness. Intriguing, since Sitapati clearly regards Rao as India’s most reflexive politician, someone who invested great energy into reviewing his choices.

On foreign policy Rao faced fewer constraints, even though the situation was problematic. Sitapati writes that so far as foreign policy was concerned ‘Narasimha Rao could write his own script.’ The problem was to turn the ship around on its own axis. During the Cold War, the rhetoric of non-alignment notwithstanding, India’s foreign policy had a pronounced pro-Soviet tilt. After the fall of the Berlin Wall such a foreign policy became largely non-realistic. It was Rao’s achievement that he successfully manoeuvred the new orientation. In the process of doing so, he neglected the neighbourhood. There were no breakthroughs with Pakistan. There is reason to argue that Rao was not interested in making breakthroughs. His attitude seems to have been the opposite of the adage: ‘Take care of the pennies and the pounds will take care of themselves.’ He believed that if India could establish good relations with the powers that be (read the US and Israel), the neighbourhood would look after itself. He thus left problems to fester.

On the human side, Sitapati portrays a man who was enormously learned, who knew ten languages, but was ruthless and selfish so far his family was concerned. In private and in public, the means and ends problem troubled neither Rao nor his conscience. Scruples were clearly not on the top of his priorities. Hardly surprising that even for those who take a positive view of his achievements, it is difficult to like Narasimha Rao. He remembered slights and hit back when least expected. He was a shameless user of human beings. He knew his own weaknesses and, more, the vulnerabilities of his friends and enemies. A man, Sitapati’s biography would suggest, best kept at arm’s length. Did he have any friends?

If Rao was half lion, what was the other half? He could be the fox, he could also be the devil. Even as a lion, he was without the grace and the dignity of the king of the forest, a lion without a mane. In the epigraph to the book, Sitapati invokes the story of the Narasimha avatar. Like the latter, Rao will also be perpetually ambiguous as will be any assessment of him in spite of Sitapati’s commendable efforts to shift him away from a lurid light.

Rudrangshu Mukherjee

Vice Chancellor and Professor, Ashoka University, Sonipat

 

* For reasons of full disclosure it needs to be stated that Vinay Sitapati is an Assistant Professor at Ashoka University.