RE: US and its government.

[Charudatt <charu@iced.com>]

I don't have the answers to these questions raised by Utkarsh, but they
do make me think and I have a few thoughts to add

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	BDP India[SMTP:bdp.india@mailexcite.com] wrote

	I would like us to go more in details of how do we want the
government to bring changes we propose.

	<stuff deleted>

		 Another point to mention that even if government wants
to get out of a industry, it has to be heavily involved as a refree in
the initial phases of deregulation. That is what people will ask when we
will say deregulation and getting the governement out of various
industries.
I agree. When we analyze deregulation and the attendant layoffs and
dislocations in US industries we should take into account that the US
has a substantial social safety net in the form of unemployment
insurance in many states, and federal welfare and food stamp programs,
so that people who are unemployed do not starve. To my knowledge (and
hose of you who know better please correct me if I'm wrong) we don't
have a similar safety net in India to cushion the shocks likely to be
caused by, say, the closure of a steel plant. It occurs to me that
hungry people will do desperate things- both the French and Russian
revolutions can be traced to being sparked by food riots. 

Off the top of my head I'd say that laid off workers would have to be
given some kind of severance package and subsistence allowance. There
are problems that would have to be solved: how can we guarantee that the
payments are in fact paid out and not stolen by intermediate officials
in the case of a public sector enterprise or in the case of a private
enterprise whether the payments are made at all? If the payments are
made, how do we stem the activity of organized gangs going in and
grabbing a cut? What can be done towards re-training workers for other
job skills?

	Congress has been working over 3 years to deregulate the Utility
industry, and had ordered to deregulate last year. But with arguments
from various groups, they have backed out from deregulating it
indefinately at this point. 
I'm not sure this is true (at least in Massachusetts). I understand that
electric consumers are now in a position choose their generating
company, but no suppliers have stepped forward to offer competition to
current suppliers to domestic consumers. Commercial consumers OTOH, are
in fact being pursued by various generation companies. 

The problems many consumer groups have with the deal is that the
government is guaranteeing a 10% rate drop for 1 or 2 years by paying
off the current suppliers with public money. Subsequently rates are
expected to rise after this period, without regulation.

	Here I am trying to bring up two points. First even though
government has to get
	out, government has a very important and involving role in
maintaining free markets. I think details of how do we propose
government involvement in such free markets in India  has to be part of
our manifesto.
I think this is a very complex problem and I don't know if it can be
summarized in a digestible form that would succinctly fit into a
manifesto, though I would be thrilled if someone could accomplish this
and if anyone has any ideas, I want to hear them.

	Secondly, we need to have a plan. I think I have mentioned it
before. Once you get
	government out of any industry, it brings layoffs. If the effect
spills over from
	one industry to another, recession, inflation and unemployment
do follow. And if
	a government does not have a plan, all the talk of deregulation
is not very attractive. We know as what Russia has gone through. One
could say that because India has some private enterprise, effects will
not be that harsh. But as a thinking voter I would not count on it till
the "ideal" political party can tell me details of their plan.
A starting point for this discussion could be the safety-net I mentioned
earlier.


	Having said that, I would like to discuss as what steps will a
government take in
	India to privatise banking. Going forward I would like to bring
up issues which matter to average middle class citizens of India. I
think average citizens goes through hell even to get their own money out
and deposit in a bank. Any takers.
	IF we all agree that banking industry is fine in India the way
it is today, then we can move on.

I think the US model is a good starting point- banks can purchase
deposit insurance if they meet audit requirements in terms of risk and
reserves. Independent annual or semi-annual audits could be mandatory
and a risk index should be publicly available. Penalties for fraud must
be very severe- directors of banks involved in it go to jail. An
interesting case study might be the US savings and loan collapse and
subsequent bailout for examples of what to do and what not to do.


-Charu