Monday 11 August 2008

Seeing beyond Stage One

As often, I open with a rather lengthy quote, this time from Basic Economics, by Thomas Sowell: “Both excellent service and terrible service can occur in the same country, when there are different incentives, as a salesman in India found: ‘Every time I ate in a roadside cafe or dhaba, my rice plate would arrive in three minutes flat. If I wanted an extra roti, it would arrive in thirty seconds. In a saree shop, the shopkeeper showed me a hundred sarees even if I did not buy a single one. After I left, he would go through the laborious and thankless job of folding back each saree, one at a time, and placing it back on the shelf. In contrast, when I went to buy a railway ticket, pay my telephone bill, or withdraw my money from a nationalised bank, I was mistreated or regarded as a nuisance, and made to stand in a long queue. The bazaar offered outstanding service because the shopkeeper knew that his existence depended on his customer. If he was courteous and offered quality products at a comparative price, his customer rewarded him. If not, his customer deserted him for the shop next door. There is no competition in the railways, telephones, or banks, and their employees could never place the customer in the center.’”

Dr Sowell is a Stanford professor. His main purpose of writing this popular economics book is to instruct us on ‘looking beyond Stage One’, that is, what is immediately visible. 

He repeatedly holds up the Socialist India economy as an example of what goes wrong when naive politicians decide policy; post-reform India illustrates how the market sets things right. 

The comment above is typical. In fact, I’ll go a step further, to complain that it is typical of how most western authors (and Indians writing for Westerns) that I’ve read tackle India – through illustrative examples rather than inclusive overviews. 

But that’s a different story. Let me try to apply what I have learnt from Dr Sowell’s books and go beyond Stage One on this comment.

Let’s take a closer look at the dhaba first. 

First, more likely than not, it’s illegal. It pays no taxes; it breaks all laws regarding hygiene, safety and labour regulations; encroaches on public land; steals electricity and water; bribes officials of every type; and keeps law-abiding entrepreneurs away through a mixture of muscle power and undercutting. 

Not surprisingly, there are no restaurant chains in India that come anywhere near the ones in the US in terms of number of outlets, leave alone turnover. 

Dr Sowell’s salesman doesn’t bother to see these. Or he thinks that all laws, taxes and rights (especially labour rights) are bad. If it’s the latter, that’s a totally twisted interpretation of the ‘free market’. Perhaps he wants a ‘free-for-all economy’, which is what exists in much of the Third World. Fat lot of good it does us.  

Our observant salesman also turns a blind eye to the hyper-exploitation brought about by hyper-competition. Or he would note that the waiter who gets him his rice plate and hot rotis is wears rags, is half-starved, and sleeps on the kitchen floor with the rats. Beside leftovers, he gets only a pittance from the dhaba owner, and is sometimes treated with demonic cruelty. 

Because he cannot send any money home, his sisters become prostitutes, spreading every type of STD among the truck drivers he serves. His brothers may take to petty crime, and, who knows, terrorism. 

There are enormous costs of all these, but these are beyond Stage One.

Let’s come to the saree shop now. Everything one says about the dhaba more or less holds true for the shop. It may be legally somewhat better, but you can be sure that it cheats heavily on taxes and payment for utilities. 

Also, it doesn’t strike our salesman that the shopkeeper who shows him hundreds of saris without making a sale is wasting his time. If businesses should treat all customers well (and profitable customers, better), doesn’t quid pro quo demand that customers return the favour by respecting the business’s time? Can one imagine wasting a lawyer or doctor’s time like this, or an economics professor’s? Would our selling friend treat his Western counterpart as callously as he treats his Indian cousin? How is it that (supposedly) wasting rupees makes all planners socialist fools, while wasting time paves the way to customer service heaven?

Of course, he doesn’t think it worthwhile to ask how much the weavers get on those sarees. And if that is a fair price, by which I don’t mean a simple thing: Would he had been ok if he were the weaver?  

Finally, let’s stop by the nationalised bank, the railway station and the phone company. 

As a loyal customer of the Bank of India, I can vouch that I have hardly ever faced any problem with the bank’s employees. Instead, I have found them most helpful, across branches and cities, in spite of having to serve several times the number of customers that MNC banks do. In fact, several nationalised banks run ad campaigns that talk about the excellent relation they have with their clients. Are they, and their (private sector) ad agencies, mad to show the opposite of real life?  

All the MNCs are interested is the HNIs or High Net-worth Individuals, that too in big cities. I don’t begrudge the choice. They have the right to their profits. 

However, they are under legal obligation to provide services to anyone who can produce a certain minimum deposit. MNC banks just don’t do that, mainly by behaving abominably with the ‘common man’. Would this discrimination be allowed in a developed market economy? 

Denial (more so, of something one is lawfully entitled to) is the worst form of customer service. Yet this denial goes unnoticed.  

For sure, the salesman’s experience may have been very different, but then he was the exception rather than the rule. It’s a pity that his comments are being used to tar a entire section of the banking industry. 

As for the ticket counter at the railway station and the phone exchange, the salesman was at the wrong place. 

Both these services are heavily subsided and essentially meant for the poor. That doesn’t mean they are out-of-bounds for the relatively well off, but it does mean that their standards are set to deliver a bare minimum. 

Would you expect taste and nutrition if you were standing in a soup line? Then why expect smiles and courtesy from these vastly over-extended services? 

Also, regular travellers will tell you that railway ticket clerks are not consciously rude. Besides, their work is boring, thankless, and futureless; and working conditions, plainly wretched.

I am not armoured by Indian Railways and BSNL. Nevertheless, who am I to judge them? Their main customers are probably grateful that they exist at all. 

Are salesmen’s rants and selective data (‘India voted so many times against the US at the UN, in spite of accepting so many million dollars in aid.’) enough for figuring out the choices and changes of a nation that houses every seventh human being? Are we being ultrasensitive if we dare suggest that that some coins may have other sides? Will great good come out of labelling everything from pre-Manmohan Singh days as wasteful Socialist populism? (Give a dog a bad name and hang him.) Are we sure that the West that seeks to open our eyes keeps its own eyes open? Finally, who loses most when they refuse to see beyond Stage One, they or we?

No comments: