Three needless deaths in an illegally constructed basement in Old Rajinder Nagar, Delhi, of aspiring civil servants who were studying for their UPSC exams has roused the editor of The Print. In this piece Shekhar Gupta highlights the inherent hypocrisy underlying India’s decades long public policy that schools & colleges should be ‘not for profit’. Before we get into that, let’s highlight the mental model Mr Gupta uses to explain how wasteful public policy can be in India. He writes:
“The idea of broken-window economics, or the broken window fallacy, is credited to a 19th-century French economist and parliamentarian, Frédéric Bastiat. He used an imaginary shopkeeper, James Goodfellow, as an example. You break a window, hire a carpenter to fix it, he buys bread from what you pay him and pays the baker, and so on. Bastiat said this wasn’t a virtuous cycle. It is the broken-window fallacy. What is missed here is opportunity cost.
In this case, Mr Goodfellow has his shop and window, and the people in the chain have their jobs. and he could buy his son shoes and himself a book with the same money. That would be a virtuous cycle.
See how this plays out in our lives. We give subsidies for power, our grids are broken, our utility companies are broke, producers aren’t getting paid and banks who lent them money are struggling. Everybody is broke while the country has a power surplus. Our power is unreliable, goes off too often and the voltage fluctuates, so we invest in generators, inverters and voltage stabilisers, buy enormous amounts of diesel and burn it to pollute the air.
This worsens our air, which is already polluted because we burn our garbage, the combination of free power and water leads to stubble burning, and so on. The solution is to buy air purifiers for our homes, which cost more than air conditioners. All these — generators, stabilisers, inverters and air purifiers — make up our massive broken-window economics….”
Mr Gupta then goes on to explain that what’s happening to education in India is an example of broken window economics. To be specific, many of our so called ‘not for profit’ schools and colleges either have teachers who don’t turn up or are so incompetent that when they turn up, they can’t impart education good enough to help their wards succeed in competitive exams. This in turn creates the (wasteful) business case for a ‘coaching’ industry. The coaching industry in India in turn charges students billions of dollars (Mr Gupta’s estimate is around $4bn per annum) but does not deliver results – less than 0.2% of the students are able to succeed in these highly competitive exams to enter the public services or get a seat in a good engineering or medical college. To make things truly tragic, not only do these coaches teach their fee-paying wards in unsanitary & unsafe conditions such as those seen in the underground basement in Old Rajinder Nagar where the 3 UPSC aspirants perished, this entire racket is seen as a sign of how much progress we are making as a nation.
Calling out the hypocrisy inherent in how India’s moneyed class which resides in Mumbai behaves, Mr Gupta writes: “This, in our ridiculous system where it isn’t legal to make profits from education. You run universities, colleges, schools but pretend you make no profits.
The coaching business has no such issue. Many are also either listed on stock markets or headed there. How broken does our governance have to be — and how incredibly touching our hypocrisy — that you can’t make profits from giving young Indians education, but can earn thousands of crores giving the same graduates of the same tuition?…
The other way to understand the size and power of the business is simply to look at the front pages of your big daily newspapers across the country. These coaching centres have marketing budgets to buy acres and acres of that expensive real estate on newsprint, advertising not just their successful ‘students’ but their ‘teachers’.
Each is painted as a star. And each one’s name is suffixed with a ‘sir’. Or in the rare case of a woman ‘teacher’ (about one in 50 by my cursory count), ‘ma’am’. I suppose it is an early blooding of our future rulers in the ‘sir-ing’ or ‘ji-huzoori’ culture…
If the system wasn’t in such shambles, why would literally lakhs of young people hang around in cities for ‘coaching’?…
The main reason the coaching business has crossed Rs 30,650 crore in size (take GST of Rs 5,517 crore at 18 percent as the base) and is booming is that our public education system is broken.”
So what should be done? Mr Gupta says that we need to learn from how China addressed a similar racket which was flourishing in the Middle Kingdom until 2021: “See how Xi Jinping addressed it in 2021. He demolished his entire tuition and coaching industry overnight. Reasons given: It was straining the finances of families, causing inequality, wasting families’ time and taking young people away from more fun things.
Everything, including coaching centres for China’s famed UPSC equivalent, Gaokao, was banned. There was to be no tutoring for profit, no IPO listings, no share sales, limits on online learning, no mergers, acquisitions, franchises, foreign collaborations. End of story.
Overnight, Chinese edtech companies lost more than $1 trillion on the stock markets…”
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