Mohandas Pai, the well known businessman and public intellectual, lamented in a recent tweet that “this is a total failure of the political leadership. We elect them to rule over us but they are handing over this power to unelected officials like tax officials, RBI…We want our MPs to rule over us, not the Deep State officials.”
This reminded me of something Yashwant Sinha had said way back in 2004 during a seminar on regulatory independence vs Parliament.
He told the gathering that while ministers are held to account by Parliament, no one holds the regulatory agencies to account for the mistakes they make and for which the ministers pay the price.
I asked Sinha if this was not like the master-servant relationship in tort law where the master is liable for any damage caused by the servant for an act done in the line of duty. There’s a lot of case law on this.
More recently a similar question was raised by Paul Tucker, former deputy governor of the Bank of England and now a professor at Harvard. In a highly applauded book called Unelected Power he questions the enormous power that is wielded by the officials of the British central bank.
But well before he asked the question, it was answered in 1932 by the all powerful Governor of the Bank of England, Montagu Norman. Asked then exactly what Mr Pai has asked now, namely, the relationship between the Reserve Bank of India and the government of India, he famously remarked that the RBI should be like a “Hindoo wife” who advises but does not either insist or act independently.
Tarzan and Jane
And that’s the crux of the problem: delegation of power, and whether such delegation is administrative or policy. This is true of all regulatory agencies. The problem arises when administrative delegation is turned into policy making.
Indeed, that’s why the government must remind the regulatory agencies “Me Tarzan, you Jane.”
This is what Pai wants Tarzan to tell the tax officials and the regulators that they can’t subvert policy by incompetence and mala fide intent because when they do that, it’s the government and the legislature that are answerable. But that brings us right back to the master-servant problem. An iconic newspaper owner once told a small group of us employees that if a reporter filed a wrong or half-wrong report, it was he who the ministers called.
That didn’t stop him from hiring and using reporters. But we got the message: be careful in your supervision.
And this is what’s missing in governance today: adequate but light touch supervision.
One other major problem is the presence, in almost all sectors, of government companies. Since regulators are appointed by the government, delegation doesn’t really happen. So when Pai complains that there is too much delegation, it’s actually the opposite. These guys are still acting for the government but pretending they are independent. They are an exemplification of Norman’s Hindoo wives.
There is of course another massive problem: subversion via rule making. I have been saying this for a long while now to no avail.
The problem is this. Government makes policy. Legislature makes the necessary laws to give that policy legitimacy. But to give the policy effect, it’s the bureaucracy that makes the rules.
It is exactly here that the problem lies because the primary concern of the bureaucracy is to avoid accountability. In order that no blame should attach to it, it makes rules to protect itself. And this defeats both the government’s policy and the legislature’s intent.
Add to this pervasive incompetence and insensitivity and a mindset that regards illegal gratification as an entitlement of its employment contract. What you get is the core cause of Pai’s frustrated rage.
Reform proof
So can our bureaucracy be reformed? The answer is a big no, perish the thought because once it’s done protecting itself, it protects the ministers. Indeed, in many ways, because the ministers depend so much on the bureaucracy, the master-servant relationship gets reversed.
So we go back to the unelected power problem. My solution remains what it was in 2014 when Modi became Prime Minister: abridge the rule-making power of the bureaucracy by closer supervision.
But how is this to be done? One way is to make a law that forbids frequent rule changes.
A rule once made should be left unchanged for at least 15 years. That’s how it is in well run countries. Basically, if the policy or the law don’t change, nor should the rules. Or if a change becomes unavoidable, it must be done transparently.
There can be other ways, too. But the objective must be to remove the machine gun from the monkey’s hands.
