October 24, 2021

Minimum Government, Maximum Governance: How the Expanded Cabinet Passes this Test

The expanded cabinet made up of technocrats and subject matter experts is well timed for the zeitgeist in India.
Keywords: Classical Liberalism | Deregulation | Central Planning | Economic Growth | Rational Economic Calculations
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With the cabinet reshuffle exercise of Prime Minister Modi behind us, talks of minimum government and maximum governance have resurfaced and shot up to the fore. However, it is apparent that only a few commenters understand this rubric. An exemplar of this incomprehension was evidenced in television debates that indulged in an arbitrary comparison of the number of ministers in the present government vis-a-vis the previous ones and consequently proclaiming that the motto of minimum government has failed. 

The vacuity of some television commenters aside, the burgeoning middle-class in India, especially the young demographics oozing out from our megapolis across the country find an appeal in the ideology that produced thoughts analogous to ‘minimum government, maximum government’ i.e. classical liberalism (not to be confused with the colloquial usage of ‘liberals’). There is a palpable sense of the overwhelming support for high-tech innovations and wealth creation amongst this demographic, which is also harvested by the BJP in most urban areas across the country. While the Hon’ble Prime Minister perhaps infers these ideas from his long stints in governance, the BJP must be more assertive on its economic thinking. At the least, there is a need to situate this idea in the larger political economy theoretical backdrop, for the government and the ruling party owe ideological lucidity for the large following it commands, and consequently the ramifications of its understanding. Against this backdrop, there is a necessity to augment our understanding of ‘minimum government, maximum governance’ beyond the prevalent parochial interpretation, and therefore understand the driving elements of the ideology.

Minimum government and unintended consequences

Well-meaning policymakers often drag the government to areas beyond their mandate, historically this has been especially true in India. A gargantuan democracy that we are, most governments have tried to regulate walks of life that never should have been, and run businesses that should have been never forayed into. Amongst the many influential schools of thought in classical liberalism, a typical response from a Chicago School would be that if markets can do a better job, let them. Governments cannot comprehensively account for peoples’ self-interest and their human nature. Fundamentally, the belief is that a government failure is greater than a market failure. While many government schemes succeed, even well-meaning initiatives can have unintended consequences if it is beyond their mandate – as they say, the road to hell is paved with good intentions. Typically the unintended consequences of a hotchpotch policy like the Right to Education (RTE) is messy, even though well-intentioned. Beyond policies, the most common case is where governments run massive public sector companies, which with regulation, private players do much better. 

In line with this idea, it is in resonance with Prime Minister Modi’s motto ‘government has no business being in businesses’. In practice too, the government has done well with some disinvestment including an attempt to divest Air India. The Ministry of Cooperation is another step in the direction of letting people help themselves more efficiently.

The government would do well to continue the process of eliminating redundant bureaucracy, easing governance, and cutting the red tape for business activities. Further, the government could introduce comprehensive measures to review the outcomes of existing public sector units; something that Singapore has done effectively. There is hope that the new team of ministers actively scout for replicating policy measures that are successful in other parts of the world; this would indeed contribute to ‘minimum government’. This is the basic rationale behind the minimum government, next, we look at the ‘maximum governance’ part of the rubric.

Impossibility of rational calculation and maximum governance

Pathbreaking work by some economists in the 20th century, including Ludwig von Mises, demonstrated not only that central planning of economies is inefficient and less innovative, but it is also quite literally impossible to have centralized knowledge of all citizens’ preferences sufficient for rational economic calculations. Friedrich Hayek goes a step ahead and argues that even if knowledge is perfect, a planned economy fails calculability. Hayek’s Nobel-winning idea that a planned economy will inevitably lead to massive curbing of freedoms is highly relevant in India; some scholars posit that this is exactly what happened in early independent India. Prime Minister Indira Gandhi’s excess socialist planning of the economy perhaps led to the imposition of the emergency in India.

One needs to acknowledge that India is a country with deep multidimensional inequalities, and it is unrealistic to expect a strict libertarian policy in place. Except for anarchists, all the ideologies accept a role for the government, albeit in different levels of involvement. However, walking in the streets of a city like Bengaluru, one would sense the zeal for the creation of wealth through innovation. More often than not, the government is a hassle for their growth. Society in many parts of the country has truly changed tremendously in the recent past; and to have technocrats and subject matter experts as ministers is certainly a welcome step.

Hence, BJP has done well in bringing new and younger faces to ministries that are capable of comprehending these ideas. Holistically, these actions indeed constitute maximizing governance; we would do well not to merely compare the total number of ministers to the previous cabinets, but rather study the ideology and the potential of ministers to contribute to maximum governance. Finally, classical liberalism is a fluidic ideology, it allows a spectrum of views on economic, social, and political issues. The BJP has a golden opportunity to create an indigenuous classical liberalism thought that will be relevant for the zeitgeist in India.

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Kishen Kudur Shastry

Kishen Shastry KS is currently pursuing research in economics at the Jesus College, University of Cambridge. He has previously been a part of The Graduate Institute Geneva and Young India Fellowship, Ashoka University.

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