Cab guys’ tales

I travel to and from work in the company-provided cab. It’s a fairly convenient system, offering you flexible timings, and routings that aren’t too bad. The overhead in terms of time of traveling by cab is about 15-20 minutes for a 40-minute journey, so I take it on most days.

Given a choice, I try to sit next to the driver – maybe that’s the most comfortable seat in an Indica, and it definitely is the best seat in a Sumo. On most occasions, I chat with the driver as he drives me, but sometimes I don’t have the opportunity – since the driver is too busy chatting on his mobile phone. Yeah, company rules forbid that, but I guess no one really complains, so these guys get away with being on the phone a lot of the time.

Most of the time, the conversation is about loans, and repayment. Most of it is about informal loans that people have lent each other. The amounts these guys lend each other – seen as a percentage of their income (which I’m guessing based on what one cab guy told me last year) is humongous! They make loans to each other of the order of a few months’ salaries, and it seems like these loans are in perpetual transition – between the cabbies and their friends.

I hear them shout, strategise, pacify, ideate, about these issues. And sometimes after they’ve hung up I talk to them about this. One conversation comes to mind. So there was this cabbie whose family had lost a lot of money by “investing” it in a chit fund. It was an “informal” (i.e. unregistered fund), and in the previous “round”, his family had invested and made a good return. So in this “round”, more members of the family invested in the fund. And the fund manager decamped with the money!

I remember telling him that it was a bad strategy putting all their investments with the same guy, and tried to explain to him the benefits of diversification. He replied saying that he didn’t want to invest in the chit fund (the one he lost money in) but family members forced him to invest along with them, calling him a “traitor” when he tried to diversify!! Strange.

Back then, I didn’t know how exactly chit funds work else I would’ve also told him that it was an especially bad idea for people from the same family to invest in the same chit fund. If you think about how a chit fund works, you are basically betting on the desperation for money among the other “members” of the fund. You are betting that someone else in the pool needs money so badly that they’re willing to forego a higher “discount” which will then come into your kitty. So with members of the family all putting money in the same fund, they were just betting against each other! So even if the fund “manager” hadn’t decamped, it’s unlikely they would’ve got a particularly significant return on their investment.

 

In Perpetual Transition

This post has nothing to do with Ravi Karthik’s blog. It has everything to do with Bangalore’s roads. I can’t recall a single instance in time in the last 15 years when all roads in Bangalore have been in “normal state”. Maybe ever since the KR Market flyover started, there has been one part of the city or the other that has been dug up. And the digging is only increasing. Earlier it would be a handful of places in the city that were dug up. Now, it is tough to find two points over 5 km apart such that you don’t have to take a diversion of some sort to travel between them.

The optimistic among us think that things will become better as soon as these projects get completed. However, what we forget is that there is a small but powerful section of society that survives on the city being in transition. Road-builders, bridge-builders, road-diggers, road-fillers, and all these sundry people make their living based on the premise that the city will be in perpetual transition. And given how critical income from such activities is for their survival, they resort to lobbying and paying “rents” to relevant people in the government to ensure their cash flows continue.

The problem here is one of a small concentrated set of big winners, and a large uncoordinated distributed set of small losers. And the small set of winners can successfully get together and lobby and have things their way, because the other set is too disjointed to do anything about it.

The other (and in my opinion, the bigger) problem is that thanks to lobbying, the government has a natural disposition to spend more than to spend less. And all the spending comes from taxpayer money. So you have the road projects in Bangalore that you think you don’t need. You have the free TVs and Mixies and whatnot in Tamil Nadu. And you have rice and wheat given to the (supposed) poor at rock-bottom prices. And where does the money for all this come from? Your taxes!

I hope sooner rather than later people realize that the only solution to corruption is less government. The problem, however, is that the government has no incentive to reduce its own size – for in that case the kickbacks and ┬árents that it (to be precise, people who are part of government) can potentially extract come down. You might institute acts like FRBM (fiscal responsibility and budget management, which seeks to put a cap on government spending) but with such a cap in space, what is the guarantee that the government will actually spend that limited money on what is necessary, and not what gives rents for its officers and employees?

Political parties may have different ideologies, and may appear to fight about every little thing. But this is one thing they agree on – that the size of the government be large – that way they all get to (in turns) have a share of the (rental) pie. This equilibrium is stable and I don’t know how we can snap out of this. And till then, our taxes will continue to flow out. And the cities will be in perpetual transition.