Housefull Economics

The Truth About Markets-Varkets

Our weekly explainer on economics using lessons from popular culture. In Installment 38, Sridevi’s awe for private-sector brands reveals a fundamental truth about the marketplace.

In English Vinglish, Sridevi and her niece celebrate Manhattan in a window-shopping whirlwind of brands – “To your left is Prada, To your right is Zara. Giorgio Armani, Thank God it’s Friday!”

Tsk tsk, you say. So much love for greedy private-sector capitalists. What have we come to? Thank goodness this kind of consumerism is absent in the areas of our lives that really matter.

Now, instead of Sridevi in Manhattan, imagine a random lady shopping in Chennai’s Mylapore. You stop her and ask, “Should our government spend more on schools?” I’ll bet you my Prada to your Bata, the answer will be “Of course, yes.”  How can one possibly vote for lower government expenditure on schools? Schools are too important to leave to the private sector. Only the government can take care of our education.

She’s a personable lady, this Shashi, and puts down her bulging shopping bags to talk to you. She teaches in a government school, believes in patriotism, in governments that look after their citizens, and in mothers who look after their children. In fact, she has two kids of her own. Obviously, you assume they go to Shashi’s school.

Wrong.

As much as 87% of Shashi’s colleagues in Tamil Nadu send their children to private schools. It’s not just government school teachers, who are a privileged lot: across the nation, rickshaw pullers and factory workers are sending their children to private schools. Over 40% of our nation’s children now attend private schools, paying fees their parents can ill afford, when government schools are free for all. “Government schools are so bad”, a friend once told me, “they can’t give that education away for free.”

This ‘free’ education is actually very expensive. In a detailed study of Delhi schools, an NGO called Praja calculated that it costs the government over Rs 50,000 a year to put a child through their schools. Budget schools in the same locality charge Rs 5000 a year. Annual school assessment studies have shown that the private schools do at least as good a job of teaching kids as government schools, and often a better one — at a fraction of the cost. Our taxes would be better used if we recognise this fact. And yes, Shashi might have to restrict herself to window-shopping, like Sridevi, because private school teachers are not paid nearly as well as government employees.

The world over, the holy cows of public spending are education and health. When we vote in public discourse, we all believe that the government must provide dispensaries and hospitals. But when we vote with our feet, and our pockets, we take our sick family members to private medical establishments.

Several years ago, on the Delhi-Nainital Highway, I rescued a motorcyclist and his pillion rider from a hit-and-run accident. He was bleeding profusely from a shoulder wound, and faint with shock. She, it turned out, had suffered from a concussion. I drove them to the nearest town, of Gajraula. Through a haze of pain, he repeatedly appealed to me, “Government Hospital mein nahin le jaana.

He is not alone. Of the total health expenditure in India, by governments, personal expenditure and charity, over 66% comes from people’s pockets. As with private schools, the percentage is climbing. Government resources are not the primary problem. Lack of accountability, corruption, the security of a government job, all lead to deeply ineffective institutions.

“The system is so deeply broken that even some of the basic things like moving money and spending money become a complicated task,” Yamini Aiyar of the Center for Policy Research recently said at a conference on public finance. “Bihar, for instance, in 2016-17 spent just 54% of its approved budget for the year. Health issues in Bihar require massive expenditure, yet the state is able to spend remarkably little.”

In health and in education, and in telecom and air travel, for that matter, our citizenry has voted with their feet for the delivery and accountability of the private sector. Now we need to stop making a song and dance about the government’s holy duty to provision what private players can do better, and cheaper. Our policy makers have no incentive to give up the patronage such massive public programs offer. The pressure will have to come from us, by abandoning political correctness to say loudly what our behaviour has already demonstrated – government does a shitty job of providing services.

Now watch that video of Sridevi again. Have you ever seen anyone show such enthusiasm for government products or services?

Please share

About the author

Mohit Satyanand

Mohit is an entrepreneur, investor, and economy watcher. He is Chairman of Teamwork Arts, which produces the Jaipur Literature Festival, and has business interests in food processing, education, and a wide range of start-ups.