Three years of CSR: Spending on the rise, yet hurdles remain

It is true that CSR rules enacted in April 2014 have created a buzz and that CSR spending is on the rise, but deployment of funds remains a matter of debate

Corporate social responsibility (CSR) rules, implemented in April 2014 under section 135 of the Companies Act, have generated a buzz for their innovative approach to social development, and helping channel funds from companies towards such activities. 

But even as annual CSR spend is on the rise, the impact on the ground and effective deployment of the funds remain a matter of debate three years on. 

CSR rules direct that companies with a net worth of Rs500 crore, a revenue of Rs1,000 crore or a net profit of Rs5 crore spend 2% of their average profit on social development activities like education, health and women’s empowerment. The money can be spent by setting up a CSR department within the company, a corporate foundation or by partnering with not-for-profits. 

“The law is unprecedented and communicates India’s commitment to resolving social problems,” said Caroline Boudreaux, founder of not-for-profit Miracle Foundation, which works with orphans. Unwilling to generalize, she said that some of the challenges her organization has come across are to do with the grassroots-level understanding of companies, which leads to friction when partnering with not-for-profits. 

“Impacting or changing a social problem is hard work and requires patience and experience… but often we have come across companies who hand over the CSR department/workload within the company to individuals who are either not exposed to or do not understand the nuances of any given social problem,” she said. But she hastened to add that since the law is new, the thought and approach to it are evolving. 

Sector experts feel that companies need to approach CSR more strategically to be able to address the root causes of problems rather than just throwing money at them.

“Even though we are seeing a steady increase in the amount of money being allocated by firms under CSR, there appears to be a disconnect in what the requirements on the ground are and what the companies are allocating money towards,” said Priya Naik, founder and CEO of CSR consultancy Samhita.

Citing corporate enthusiasm for Prime Minister Narendra Modi’s call to arms for a clean India—the Swachh Bharat Mission—Naik said companies largely focused on investing in infrastructure by building toilets without giving enough thought to the operations and maintenance of the infrastructure or even to issues such as laying of water and sewage pipes. This resulted in a number of toilets becoming unusable.

Another key challenge that has emerged is the fact that companies choose certain causes over others, not always based on the needs on the ground. Sonali Pradhan, head of wealth planning at Julius Baer Wealth Advisors India, believes a company’s CSR committee and board of directors are concerned about tangible benefits. She said firms should attempt to go beyond the usual suspects because while “many of these causes are critical, they also often end up being the causes that are already receiving support in different forms, including funds from other stakeholders like the government and not-for-profit donor agencies”. 

Pradhan added that some causes are also selected by companies because the gestation period for seeing benefits and quantifying them are shorter. 

The skewed selection of causes is a concern for not-for-profits as well.

Sanjay Daswani, senior director of resource development and communication at international not-for-profit Habitat for Humanity, pointed out that “often when we approach corporates, they tell us that though our work is great they cannot support it because housing is not a key focus area or is not clearly mentioned in the CSR rules”.

He added that affordable housing impacts a number of social challenges like sanitation, health, and education and that is why firms should be a little more flexible in their approach to CSR. 

For Adarsh Kataruka, director of CSR consultancy SoulAce, “The biggest problem in deploying CSR funds is the lack of credible not-for-profit organizations”. He said the CSR rules envisioned a partnership between companies and not-for-profits but this partnership has not taken off as expected due to a trust deficit as well as low capacity of not-for-profits.

Kataruka added that even though firms are willing and eager to work with not-for-profits, the 5% cap on overheads under the rules prevents them from doing so. 

“Human cost is justifiably the biggest cost for the not-for-profit sector because grassroots-level implementation is only possible by people. But companies view human cost as an overhead cost,” Pradhan added. 

Naik suggests that in the fourth year of CSR rules, all stakeholders should reflect and address some key questions, which will help them iron out the continuing challenges to effective deployment of CSR funds, and help create better impact. These include government agencies and not-for-profits looking beyond CSR funds at corporate expertise and how to leverage it and establishing accountability within companies as to who is the decision maker on CSR—the board of directors, the CSR head or a third party. Also, how the role of a not-for-profit is viewed—is it a service provider, a vendor or sector expert?

Naik of Samhita concluded that for better impact on the ground “the intent of a said CSR initiative needs to be viewed holistically and get reflected in all the processes and actions of that CSR activity”.

France, Japan plan mission to bring back pieces of Mars moon Phobos

France, Japan plans to launch a probe in 2024 to recover pieces of Mars Moon Phobos and bring them back to Earth, says chief of National Centre for Space Studies

France and Japan want to recover pieces of a Martian Moon and bring them back to Earth, the head of France’s National Centre for Space Studies (CNES) said on Thursday.

The Martian Moons Exploration project would launch a probe in 2024 destined for Phobos, the largest and closest of two moons circling the Red Planet.

Paris and Tokyo signed a preliminary agreement on Monday, and will make a final decision before the end of the year, CNES president Jean-Yves Le Gall told AFP.

“It’s a very important mission because — besides the Moon — it would be the first time samples from the satellite of a planet would be brought back to Earth,” he said by phone.

Slightly egg-shaped, Phobos is 27 kilometres (17 miles) in diametre from end-to-end.

Analysing its composition would solve a long-standing question as to its origins.

One theory holds that the oblong moon is an asteroid captured by the gravitational pull of Mars. Another says that it is left-over matter from the Red Planet’s creation event.

Landing on Phobos will also provide another vantage point for observing Mars, only 6,000 kilometres (3,700 miles) distant.

Getting there poses fewer challenges that landing on Mars, a graveyard for several failed missions.

“It should be twice as easy because the probe will not have to go through the Martian atmosphere,” Le Gall said.

The Japanese partner for the project is the Japan Aerospace Exploration Agency.

Phobos — closer to its planet than any other moon in the solar system — is approaching Mars by about 2 metres (6.5 feet) every century. Scientists expect the moon to be pulled apart in 30 to 50 million years.

In 2011, a Phobos-bound probe launched by Russia — it’s first interplanetary mission in 15 years — failed, with pieces falling into the Pacific two months later.

In 2020, the joint Europe-Russia ExoMars mission will launch a rover tasked with finding traces of Martian life, past or present.

NASA’s Curiosity rover has been criss-crossing the planet for more than three years.

The American agency has plans for a manned trip in the next 10-15 years, with a similar project also being pursued by US billionaire Elon Musk.

US ‘mother of all bombs’ killed 36 ISIS militants in Afghanistan

US military’s largest non-nuclear bomb killed 36 Islamic State militants but no civilian death took place, say Afghan officials

As many as 36 suspected Islamic State militants were killed in Afghanistan when the United States dropped “the mother of all bombs,” its largest non-nuclear device ever unleashed in combat, the Afghan defence ministry said on Friday.

Thursday’s strike came as US President Donald Trump dispatches his first high-level delegation to Kabul, amid uncertainty about his plans for the nearly 9,000 American troops stationed in Afghanistan.

The deaths have not been independently verified, but ministry spokesman Dawlat Waziri said no civilians were harmed in the massive blast that targeted a network of caves and tunnels.

“No civilian has been hurt and only the base, which Daesh used to launch attacks in other parts of the province, was destroyed,” Waziri said in a statement.

He was using an Arabic term that refers to Islamic State, which has established a small stronghold in eastern Afghanistan and launched deadly attacks on the capital, Kabul.

The 21,600-pound (9,797-kg) GBU-43 bomb, which has 11 tons of explosives, was dropped from a MC-130 aircraft in the Achin district of the eastern province of Nangarhar, bordering Pakistan, Pentagon spokesman Adam Stump said on Thursday.

The device, also known as the “mother of all bombs,” is a GPS-guided munition that had never before been used in combat since its first test in 2003, when it produced a mushroom cloud visible from 20 miles (32 km) away.

Former Afghan president Hamid Karzai condemned the use of the weapon on Afghan soil.

“This is not the war on terror, but the inhuman and most brutal misuse of our country as testing ground for new and dangerous weapons,” he said on social media network Twitter.

At a village about 3 miles (5 km) from the remote, mountainous area where the bomb was dropped, homes and shops appeared unaffected by the blast, a Reuters witness said.

Residents said they saw militants climbing up and down the mountain every day, making occasional visits to the village.

“They were Arabs, Pakistanis, Chinese and local insurgents coming to buy from shops in the bazaar,” said resident Raz Mohammad.

On Friday, the village was swarming with Afghan and international troops, as helicopters and other aircraft flew overhead.

The strike was part of a joint operation between Afghan and international troops, Afghan President Ashraf Ghani’s office said in a statement.

“Afghan and foreign troops closely coordinated this operation and were extra cautious to avoid any civilian casualties,” it said.

American officials said the bomb had been positioned for possible use in Afghanistan for “some time” since the administration of former president Barack Obama.

The United States has steadily intensified its air campaign against Islamic State and Taliban militants in Afghanistan, with the Air Force deploying nearly 500 weapons in the first three months of 2017, up from 300 in the corresponding 2016 period

The insecurity of inequality

In our globalized world, inequality cannot be left to markets and local communities to solve any more than climate change can

Global inequality today is at a level last seen in the late 19th century—and it is continuing to rise. With it has come a surging sense of disenfranchisement that has fuelled alienation and anger, and even bred nationalism and xenophobia. As people struggle to hold on to their shrinking share of the pie, their anxiety has created a political opening for opportunistic populists, shaking the world order in the process.

The gap between rich and poor nowadays is mind-boggling. Oxfam has observed that the world’s eight richest people now own as much wealth as the poorest 3.6 billion. As US senator Bernie Sanders recently pointed out, the Walton family, which owns Walmart, now owns more wealth than the bottom 42% of the US population.

I can offer my own jarring comparison. Using Credit Suisse’s wealth database, I found that the total wealth of the world’s three richest people exceeds that of all the people in three countries—Angola, Burkina Faso and the Democratic Republic of Congo—which together have a population of 122 million.

To be sure, great progress on reducing extreme poverty—defined as consumption of less than $1.90 per day—has been achieved in recent decades. In 1981, 42% of the world’s population lived in extreme poverty. By 2013—the last year for which we have comprehensive data—that share 
had dropped to below 11%. Piecemeal evidence suggests that extreme poverty now stands at 
just above 9%.

That is certainly something to celebrate. But our work is far from finished. And, contrary to popular belief, that work must not be confined to the developing world.

As Angus Deaton recently pointed out, extreme poverty remains a serious problem in rich countries too. “Several million Americans—black, white and Hispanic—now live in households with per capita income of less than $2 per day,” he points out. Given the much higher cost of living (including shelter), he notes, such an income can pose an even greater challenge in a country like the US than it does in, say, India.

This constraint is apparent in New York City, where the number of known homeless people has risen from 31,000 in 2002 to 63,000 today (the true figure, including those who have never used shelters, is about 5% higher). This trend has coincided with a steep rise in the price of housing: Over the last decade, rents have been rising more than three times as fast as wages.

Ironically, the wealthy pay less, per unit, for many goods and services. A stark example is flying. Thanks to frequent flyer programmes, wealthy travellers pay less for each mile they fly. While this makes sense for airlines, which want to foster loyalty among frequent flyers, it represents yet another way in which wealth is rewarded in the marketplace.

This phenomenon is also apparent in poor economies. A study of Indian villages showed that the poor face systematic price discrimination, exacerbating inequality. In fact, correcting for differences in prices paid by the rich and the poor improves the Gini coefficient (a common measure of inequality) by 12-23%.

The better-off also get a whole host of goods for free. To name one seemingly trivial example, I can’t remember when I last bought a pen. They often simply appear on my desk, unintentionally left behind by people who stopped by my office. They vanish just as often, as people inadvertently pick them up.

A non-trivial example is taxation. Rather than paying the most in taxes, the wealthiest people are often able to take advantage of loopholes and deductions that are not available to those earning less. Without having to break any rules, the wealthy receive what amount to subsidies, which would have a far larger positive impact if they were allocated to the poorest people.

Beyond these concrete inequities, there are less obvious—but equally damaging—imbalances. In any situation where, legally, one’s rights are not enforced or even specified, the outcome will probably depend on custom, which is heavily skewed in favour of the rich. Wealthy citizens can not only vote; they can influence elections through donations and other means. In this sense, excessive wealth inequality can undermine democracy.

Of course, in any well-run economy, a certain amount of inequality is inevitable and even needed, to create incentives and power the economy. But, nowadays, disparities of income and wealth have become so extreme and entrenched that they cross generations, with family wealth and inheritance having a far greater impact on one’s economic prospects than talent and hard work. And it works both ways: Just as children from wealthy families are more likely to be wealthy in adulthood, children of, say, former child labourers are more likely to work during their childhood.

None of this is any individual’s fault. Many wealthy citizens have contributed to society and played by the rules. The problem is that the rules are often skewed in their favour. In other words, income inequality stems from systemic flaws.

In our globalized world, inequality cannot be left to markets and local communities to solve any more than climate change can. As the consequences of rising domestic inequality feed through to geopolitics, eroding stability, the need to devise new rules, redistribution systems, and even global agreements is no longer a matter of morals; increasingly, it is a matter of survival. ©2017/Project Syndicate

Kaushik Basu is professor of economics at Cornell University and a former chief economist of the World Bank.

A brief history of time

The sun will eventually run out of fuel, ending time and space as we know it, but hopefully not for extraterrestrial émigrés

The rapid global spread of the Industrial Revolution that is leading to anthropogenic climate change through an explosion in growth, exploitation of natural resources, and population, would likely be reversed by increasing use of Artificial Intelligence and demographic transition to below replacement birth rates.

In an era where humans are overloaded with information 24x7, if a reasonably informed member of the species were to encapsulate our history in a thousand words to a pen pal in another world, it might consist of about a dozen major epochs as follows:

Our understanding is that Time began with the Big Bang and the origin of the Universe about 13.77 +/-0.059 billion years ago. Time was measured in nano seconds. We don’t know why and how this happened and whether this was a one-off event. From the beginning of time, the universe began expanding, forming stars, galaxies, solar systems and planets, including our own. Oceans and continents were formed, triggering continental drift and plate tectonics. 

Life on Earth is estimated to have originated over four billion years ago in the oceans. Again, nobody has a clue as to why and how this happened, whether this was endogenous or seeded from extraterrestrial sources. Living matter was measured at the molecular and subcellular level till about 1.5 billion years ago.

The Golden Age of Evolution saw the multiplication and global expansion of animal, plant and insect species from the original unicellular organism through reproductive processes, sexual differentiation and speciation, with amphibious creatures making the first crossing over to land.

The Reptilian (Limbic Brain) Revolution, marked by the emergence of complex motor movements, occurred around 300 million years ago. The Golden Age of Reptiles lasted till the end of dinosaurs around 64 million years ago. 

The Mammalian (Emoting Brain) Revolution occurred some 200 million years ago, culminating in the emergence of frugivorous, brachiating ape-like creatures around five million years ago. 

The Homo Sapiens (Bipedal and Neocortex) Hunting Revolution culminated in the emergence of modern humans around 200,000 years ago. With humans came logical and self-conscious thought, the capacity for good and evil, and complex interpersonal communication that put them at the top of the food chain as peripatetic hunter-gatherers, albeit at very low densities. This was aided by the controlled use of fire, fabricated tools and the domestication of the wolf into the modern dog. 

The climate on our planet has seen sharp fluctuations. The end of the last Ice Age around 10,000 BC marked the global expansion of humans and the Neolithic Revolution. With agriculture and domestication of farm animals came permanent settlements, a surge in human population through demographic cycles of high birth rates punctuated by catastrophic events, and the emergence of complex cooperative forms of social organization, and trade and exchange through barter. 

Proto-historic civilizations began with villages, populous riverine urban settlements, grand public monuments, complex hierarchical societies facilitated by the origin of the state, kingdoms, early empires, and religion; use of bronze and copper in tools, weapons, artefacts and art; pottery, textiles, and handicrafts; invention of astronomy, money, the wheel and irrigation. Transport was limited by animal traction on land, and by wind and human traction on water. Recorded history began with the invention of writing and the emergence of the classical civilizations of Greece, Persia, Egypt, China and India.

With the Iron Revolution came early empires and civilizations which, with the notable exception of the Chinese and Indian that lasted into modern times, yielded to transcontinental empires, namely Pax Romana, Arab, Turk, Mongol and European, facilitated by the invention of the horse stirrup, gunpowder, major advances in road, bridge, stone architecture and use of wind energy, including ocean-faring vessels, leading to the discovery of the New World. Till very recently, however, most people never left their place of birth, except for traders, religious preachers, scholars, rulers and roving armies and navies. Material life, even of the ruling classes, remained at very basic levels.

The current epoch began with the Enlightenment and Industrial Revolution in Western Europe around 17th century AD, incorporating scientific advances in the Middle East, China and India. This culminated in a virtuous cycle of accelerating growth and innovation based on inanimate energy; a new system of cooperative mass production and mobility of people, goods, services and knowledge based on a new concept of industrial time that replaced natural cycles; and major architectural advances through the use of structural metals (iron and aluminium alloys) and nano technology. The second age of transcontinental empires culminating with Pax Britannica paralleled the decline of old world agricultural civilizations in the Middle East, India and China through growing divergence in technology and per capita incomes before converging again through the global spread of the virtuous cycle unleashed by the Enlightenment and Industrial Revolution. 

Peering ahead into the current epoch, the rapid global spread of the Industrial Revolution that is leading to anthropogenic climate change through an explosion in growth, exploitation of natural resources, and population, would likely be reversed by increasing use of Artificial Intelligence and demographic transition to below replacement birth rates. With the nation state in terminal decline, beginning with regional unions, such as the European, and effective governance shifting to local institutions, a loose global federation could emerge, tending to greater global integration accelerated by extraterrestrial contact. 

The Star Trek evolution of the human species could occur in the distant future on the lines of the eponymous science fiction serial, marked by Artificial Intelligence, end of death as we know it and migration of humans to other planets/solar systems where they further evolve through technological advances, including the end of agriculture as man breaks free of the constraints imposed by the Neolithic Revolution. Alternatively, a catastrophic event, man-made (such as global warming or nuclear war) or natural (such as a comet/meteor that wiped out dinosaurs), could destroy the human species, even all life on earth, before their evolution into extraterrestrial civilizations. 

The sun will eventually run out of fuel, extinguishing life on earth as it expands into a Red Giant after about five billion years, and evolving into new-generation stars before it is consumed into a black hole. This would end time and space as we know it, but hopefully not for extraterrestrial émigrés.

Rich Keralite, poor Kerala conundrum

Despite an inflow of Rs1 trillion, Kerala is one of the least industrialized states in India and has one of the highest unemployment rates in the country. Why?

Kerala, which gets more than Rs1 trillion in remittances from its emigrants, has an empty state treasury. Despite this large inflow of money, Kerala is one of the least industrialized states in India and has one of the highest unemployment rates in the country. Why?

The quantum of remittances that flowed into Kerala is almost three times the money that flowed into Maharashtra, four times the inflow into Tamil Nadu and almost 10 times the inflow into Gujarat in the form of foreign direct investments. While these states have managed to build a strong, growing economy, why is it that the huge cash flow into Kerala has not turned into productive investments in the state?

According to studies by the Centre for Development Studies, Thiruvananthapuram, conspicuous consumption is the hallmark of a Kerala emigrant. The majority of remittances that flowed into Kerala over the past several decades have only been used to build dead investments like palatial houses and owning depreciating assets like automobiles and consumer goods. Kerala clocks one of the highest sales of luxury cars in the country and is the biggest consumer of gold. Although the profile of the Kerala emigrant has changed over the years, from low-skilled and illiterate to more educated professionals, the tendency to spend their hard-earned salaries on ostentatious living continues. 

Behavioural economics could provide an explanation for this sad state of affairs in Kerala.

Professor Richard Thaler of The University of Chicago Booth School of Business put forward the concept of mental accounting to explain how humans deal with money. Mental accounting refers to the tendency of people to separate their money into separate mental accounts based on a variety of subjective criteria, like the source of the money and intent for each account. Unlike what was believed so far, money is not fungible, that is money does not easily move from one mental account to another. The propensity to spend is influenced a great deal by which mental account the money belongs to. So, the money one gets as bonus is spent differently from the money one gets as salary. Or, in other words, the decision on where the money goes or where it is spent depends greatly on where the money comes from.

How does the theory of mental accounting explain the life of a Kerala emigrant?

Let us take the example of nurses from Kerala. Close to 60,000 of them work in places like the US, Europe and the Gulf. The median salary of a nurse in India is about Rs2.5 lakh per year. The median salary of a nurse in the US is about $71,000. The median salaries of nurses in any of these countries comfortably allow them to fit into the middle-class lifestyle of that country.

But the moment an emigrant nurse lands in Kerala, a huge transformation happens. Thanks to currency arbitrage, a salary that would have allowed the person to enjoy the lifestyle of a middle-class household in the country of work, now suddenly gets transformed into an income equivalent to one of the highest-paid professionals in India. This is more like a windfall gain. How does this sudden increase in the perception of one’s income affect one’s spending behaviour?

A 1994 study by Hal R. Arkes, Cynthia A. Joyner and Mark V. Pezzo has shown that people have a greater marginal propensity to consume from windfall earnings than money earned through normal work. Another study in 2009 by John Beshears and Katherine Milkman found that people are more likely to spend windfall money on non-routine purchases. A 2012 study in rural Tanzania by Lei Pan and Luc Christiaensen has shown that money earned through windfall gains is more likely to be spent on non-basic consumption of goods like alcohol and tobacco than basic consumption goods or education. So, it shouldn’t come as a surprise that the windfall gains the Kerala emigrant receives from currency arbitrage are spent on building palatial houses and buying luxurious consumer goods.

Windfall gains normally happen when someone gets an unexpected monetary gain by winning a lottery or getting an unexpected inheritance. Windfall gains are normally transitory in nature. The windfall gains of a migrant Keralite too are transitory. They happen only when he is in India, away from his place of work. Only on those occasions does the mental account look far bigger than normal. Once he goes back to his place of work, he goes back to his normal self.

This insight that where the money goes depends on where the money comes from is a universal insight that guides one’s financial behaviour. It was also found in the behaviours of Indian mutual fund investors and the millions who opened new bank accounts under the Pradhan Mantri Jan-Dhan Yojana (PMJDY).

The government of India is focusing a lot on building a robust infrastructure for direct benefit transfer. No doubt this infrastructure will ensure that the money meant for the poor will no longer be gobbled up by the corrupt middlemen. But this is only half the job done. The government needs to ensure that the money that reaches the poor does not end up in liquor consumption or other wasteful expenditure.

It is here that the learning from the behaviour of the emigrant Keralite—that the source of funds or any perceptions about the source of funds affects one’s spending pattern—holds a lesson for policymakers. How does one frame the source of the money in our direct benefit transfer programme so that the money received goes into the education of the girl child or for buying healthy food for the whole family?

Markets cannot deliver healthcare, education

Good healthcare needs other social institutions and structures such as public trust, enforceable professional ethical codes, public delivery systems and tight regulations

 In the early 1990s, I joined a small team charged with developing a business, of providing loans to hospitals, clinics and doctors for the purchase of medical equipment. Within six months, it was apparent that the economics of the hospitals and clinics was fragile.

The cost structure of the sector was such that even the most efficient hospital or clinic required a high volume of patients to even break-even. And most patients had neither health insurance nor the personal capacity to pay for healthcare services. The entire system worked on the elemental human principle that when your father or daughter gets ill, you do what the doctor says. You figure out how to pay and if that means you have to beg or borrow, then that’s what you do.

Eight years in this business gave me a unique view into the private healthcare sector. Most of the owners of the hospitals and clinics, who were often doctors themselves, wanted loans. To convince me that there was no risk in lending to them, they would share their real financials with me, including the details of their revenue stream. Of course, none of this could be found in their statutory filings and financial statements. Revenue stream details meant patient numbers and their certainty.

One cold winter afternoon, in a small town in Punjab, over delicious kebab, a doctor was explaining to me how he would have no trouble repaying the large loan for an MRI system. Since I seemed unconvinced, he called up his hospital and, in his colourful Punjabi, instructed the staff: “From now till 6pm, anyone who comes with a headache and no cold, or a backache, should be referred for an MRI scan to Jalandhar, till you hit eight, because brother here says that eight per day is break-even for the loan repayment.”

The modus operandi could be less or more crude than this, but across the country it was about the same. Testing had little to do with the actual need of the patient. It was instead directly related to the commercial desires of the hospital or clinic. There were other large-scale malpractices too. For example, hospitals and scan centres would give “referral fees” to outside doctors who would refer a patient for a procedure. This was basically a bribe to prescribe a test procedure irrespective of the clinical condition. In those eight years I did come across honest doctors and hospitals, but the list was short.

The great Kenneth Arrow, who died in February, seemed to speak directly to my personal experience through his seminal paper Uncertainty And The Welfare Economics Of Medical Care. Arrow’s paper gave a widely accepted framework, which also explained my experience. Some of the matters from this framework, which I witnessed every day and you can see today, are: When healthcare services will be required is uncertain; that is, you don’t know when and what illness will strike. It is unclear that a given therapy will lead to a sustained positive outcome, or a cure. You can’t shop around and switch doctors like soap. And the doctor has enormously more knowledge than the patient, creating a relationship in which there is a grossly uneven distribution of power.

The implication of all this is quite direct: Markets, driven by the profit motive, cannot deliver good healthcare services. Good healthcare needs other social institutions and structures such as public trust, enforceable professional ethical codes, public delivery systems and tight regulations. Unfortunately for our country, none of this seems to be working. Greed and commercialization have subverted and trumped all ethical codes, regulations, and even basic humaneness.

The past 15 years of my work in education have given me an inside view into a similarly sordid scenario. It is now clear in India and elsewhere that private schools on an average do not deliver better learning outcomes than public schools. Despite this, private school enrolments have grown, and many believe in the false notion that more private schools will help improve education in India.

Education is even more complicated than healthcare. For example, the relationship between actions and outcomes is even more unpredictable. The actual outcomes and gains are visible only after many years. Educational goals are far more complex than therapeutic goals. The education of an individual also has public aims, children can’t keep switching schools, and schools have much greater power than children and parents. Clearly, education is not a service that can be delivered through a profit-motivated market.

But over time, we have allowed education, like healthcare, to be overrun by the commercial motive. Unscrupulous elements polarize the social composition of schools even more, and exploit their power to coerce people into paying for poor education. Superficial markers like uniforms, the promise of “English medium”, frequent testing and rote-based focus on examinations are used to attract fee-paying students.

The weakness of the public school systems compounds the problem. Fund-starved governments, by not increasing the allocation to education, are worsening the situation. The real need is to strengthen public education and also encourage truly philanthropic initiatives. This requires a substantial reform of policy and regulatory frameworks, and implementation with integrity. India’s much vaunted demographic dividend will otherwise turn into a severe social and economic shock.