Bhoo wears the thinking cap!

As if that is possible!

Price Vs Quality: A conundrum on inclusive growth

Posted by bhoo on August 13, 2010

A few weeks back – I had an argument with my close friend.  We were discussing the merits and de-merits of social welfare, and we are discussing the perils or advantages of giving away free TV by Government.

He was arguing FOR such social measures to bring up equality, etc.  He was pretty romantic in saying that it is better to have inclusive growth, otherwise social unrest will result – like in case of Katradhu Thamizh or Maoists, etc.

Just 2 weeks later, his tax deduction report came about, and his employers denied him some deductions that he claimed, and his tax was increasing by 3-4000 dollars.  He was all complaints and he was very upset.

I was very surprised – wouldn’t he think that that is a small contribution to the “inclusive growth”?  Wouldn’t he indirectly fund 4 more poor families to get TV at their home?  Shouldn’t he be happy that he was required to pay a trifle more tax?

Then it dawned on me – it was a revelation – He was talking about “other people” to be funding the “inclusive growth” not him, no, no, no.  He was not rich enough.  Others were richer, and they should be paying.  Oh, that explains it!

All the people who are talking of these words – behave very differently when it comes to their own money and taxes, and NONE seem to be willingly giving away taxes for these programs.

It is some other “rich people” who should pay – I am not rich!

Believe me – he belongs in any economic study to the top 2% of Indian wealthy.  But, according to him, only the top 0.5% should pay.  I am sure people who belong to the top 5% think that only the top 2% should pay, and so on.  Irrespective of where you belong, you want people richer than you to pay taxes, and not you!

Wow!  What a concept, this “inclusive growth hypocites” have.

I believe that inclusive growth should come from education.  I believe that inclusive growth should come from voluntary contributions.  I feel immensely thankful for the society for where I am.  I want to give it back.  I have taken some voluntary “giving back” as part of that.  And, I feel “giving back” will be with my time, and not necessarily money.  And, I will decide what and when and to whom I want to give back.  It is my choice – someone does not have a right in compelling me to give back.  That is all there is to it.  I have no questions about giving back – I have all questions about the compulsion vs volition.


2 Responses to “Price Vs Quality: A conundrum on inclusive growth”

  1. Bhoo,

    Well, its getting interesting. While writing my previous comment, I was particular not to use the term “Inclusive Growth” for the very reason “Price Control” is not the silver bullet that solves the issue . My discussion was mainly around why Prices has to be controlled until such time.

    I guess you are seeing my comment as “All or Nothing”. It is not. A few examples on which I feel price control is idiotic
    1. A friend of mine says the quality of Kingfisher beer in Mumbai is better than Chennai. The reason, the price of beer is controlled by TN Govt . The business man Malaya knows how to make profit in the controlled market. Oh no.. this is not the price control I was talking about.
    2. I don’t care about the movie tickets sold at whatever prices and I am not against Shopping malls.

    Azagu:: I am very much against price control in whatever form. Look at your statement: If there is a businessperson who knows how to make a profit at lower prices and if there is a market to be harnessed, he / she will do it. That is the entire rationale behind free-markets and competition. It does not need control.

    I will take another example: Exercising is good, and food control is good. We all know that. Lets enact a law from tomorrow that everyone needs to exercise from tomorrow. Why not? Let’s have heavy penalties for those who do not follow an exercise regime. How will you like it?

    I will take another very harsh example – that directly applies to you, Azagu. We all know that Indian IT export market thrives by lower salaries for Indian software engineers compared to those in say, USA. But, we know that the salaries for IT engineers in India is increasing. Let’s do some price control there. Say tomorrow, Indian Government thinks that Indian IT industry needs to be protected – can they enact a law that states that the maximum salary for IT engineers should be Rs. 10,000 per month? After all – software engineers should know how to make a living within Rs. 10,000 per month, if “business man in Malaya knows how to make profit in the controlled market”? After all there are millions of people who make a living at Rs. 10,000 per month. Why should it apply to “others” and not to us? All the people who talk these social principals want inclusivity, but sacrifice and control should include only “others” not “themselves”???

    However, I strongly feel that there are a certain areas that needs Price Control. A few examples

    1. Rental Market. I need not talk about this
    2. Education . The last I heard is that a college that was started a few years back is charging 15 lakhs for an MBA Seat

    So, indirectly, there should be a control on what a lecturer can make, but not on what a software engineer can make? What are you implying?

    3. Prices of Food , Medicine etc.

    4. From your blog – Prices of bus tickets. There are people living in city whose daily income is less than Rs.100-/-

    So, Azagu: You are saying, we will live in a dream world of providing for bus tickets below costs? Who is paying for it? Why don’t you volunteer to pay extra tax? Do not take tax breaks and break your head on tax savings? Because, that tax is what is paying for the subsidies. I know the argument – I am not rich enough – there are people richer than me – they should pay. That is an argument that I can never take. It is nothing else but – “inclusiveness at a sacrifice exclusion of myself”. Others should take effort to be inclusive – but, do not include me in the sacrifices. Isn’t is hypocricy?

    Businessmen should learn the art of making profit within controlled prices but software engineers need not learn the art of living within Rs. 10,000 per month?

    Price Control is tricky problem and it is not a battle where one wins and the other loses, but it has to be a win-win.

    I believe you got something wrong on Inclusive growth. Inclusive growth is
    1. Not Robbing Peter to pay Paul : No, it is not about free TV’s
    2. Not business / individual giving away a percentage of profit as charity.
    3. It is about giving opportunities to benefit from growth and contribute to the growth. To benefit you have to contribute, to contribute you have to benefit – it is a vicious cycle that has to be broken. A few broke this cycle and a vast majority is struck,

    On your friends concerns, I stand by him. When the industry that accounts for about 6% of the Country’s GDP, which contributes to 33% of exports is not happy on Govt ending the tax holiday and wanted it to continue. I don’t see anything wrong in your friends concerns, as long as it is legal to get tax exemption and as long as the tax that has to be paid is paid. I and your friend will get tax exemption because I have to buy my family the small pop-corn for Rs.70 with a smile in my face :). I havent heard of any company that paid 5% more tax than the Goverment’s Slab.

    I haven’t heard of any individuals either. Companies have the stated object of making money for the shareholders. Many individuals I know claim to be inclusive, and they are not willing to pay even 1 penny towards social causes. But, “others” should pay. We can make all sorts of hypocitic statements with others’ money.

    Can you Clarify on your logic Boo : You say you will decide what to give back but you wanted your friend to give money . Is it just because he is talking about Inclusive growth?

    I am not saying that compelling others to “give” is good, Azagu. If you say that inclusive is good, “you” should be ready to contribute. It is like praying to tirupathi with a friend’s mottai. It is a joke! You want to pray – you do mottai – not ask others to do mottai for your prayer. Very simple.

    Having said all this, I believe that inclusivity comes from education and not from donation, Azagu. It is an eternal question. If someone is hungry – do you want to give him fish or do you want to teach him to fish. 2 romantic (impossible) answers: a) Teach him to fish – Look at it from the perspective of the hungry man – he sees you having a fish, he is hungry, and he wants it now! Period! He does not want to listen to your lecture on how to fish. b) Give him the fish – for every person who holds 1 fish, there are at least 5 people who are without fish. So, how can we give fish? How can that solve the issue So, both the answers are imperfect. Both are impractical. But, in the long run – what makes sense is for everyone to fend their own fish. That is what makes sense to me. I do not mind sharing my extra fishes with someone – but, I need to feel good about it. I also feel that I will make very less impact on inclusivity if I focus on distribution. I think bigger impact will be made if there is higher production. I believe heart to heart into it. Intrinsically, even that act of giving is selfish – even if I do not attract publicity, I will at least have a benefit of personal satisfaction. But, you cannot compel the world to have the same value. No!

    And you know what, the tax holiday is a kind of price control to enable the industry to grow.

    Absolutely understood. Tax holiday is certainly a price control given for the industry to grow – and so is subsidies. I am not questioning those – in those kinds of situations, the public money is invested in return for long term returns. So, it is a question of: What is the return in the long term for the country. Price control, particularly in education – may satisfy a short-term goal, but what is the long term impact? Do you want people to make money in education so that competition intensifies and people deliver value, or do you want to price control – and make it like India’s railways or Public buses – where there is inclusivity, but generally a lower quality for everyone.

  2. hola sobrino. Me encantu00f3 ese relato de Caracas en su du00eda. Click

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