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View: What India needs to do to get its own Yales and Harvards

The recent exit of Pratap Bhanu Mehta from Ashoka University has put the spotlight on the role of universities and academic freedom and expression in modern India. As we usher in private investments and effect policies to allow foreign universities to open campuses and raise the standards of higher education in the country, it becomes critical to understand how these institutions of higher education should be governed to create 21st century equivalents of Oxford and Harvard.

It will take more than financial resources to create high-impact institutions as the failed attempts in Singapore for over three decades and the recent attempts in Abu Dhabi and Suadi Arabia have demonstrated. Singapore has provided spectacular largesse and financial incentives for elite higher education institutions in the West to develop their kind in their country. The partnership between Yale University and National University of Singapore (NUS) to establish an undergraduate liberal arts college in the country is an outcome of such largesse.

However, because of the illiberal context of Singapore, Yale-NUS never emerged as a true counterpart of Yale University. Yale-NUS has prevented students from creating campus branches of existing political parties and cancelled events on criticism, dissent and resistance. As a result, Yale faculty and student opinion about the partnership tends to be generally negative.

The Yale Daily News fumed in one of its pieces: “Instead of being in loco parentis, Yale-NUS operates in loco regiminis – in the place of the state. This is hardly the foundation for a renewal of the liberal arts.” The illiberal contexts in which these borrowed institutions operate keep away academic scholars and excellence.

Professor Merton Miller (with whom one of the writers studied as a PhD student) from the University of Chicago wouldn’t attend any conference in Malaysia during former PM Mahathir Mohamad’s regime. More recently, for these very reasons, attracting top academic scholars to the Abu Dhabi campus of NYU is proving challenging despite lucrative financial compensation.

A useful lens to assess this issue is the work of Harvard economic historian Alexander Gerschenkron. He observed that the “intellectual climate” of late developing economies like India is markedly different from that of early developers from whom they borrow a backlog of technological innovations. As a result, the role of institutions (such as universities) and the values they embody (such as academic freedom) are very different in the context of the late developer.

In his astute commentary on the Yale-NUS partnership, Michael Montesano observes that the People’s Action Party (PAP) government views universities as arms of the state focussed on national development, with government officials even serving in positions of university leadership. This is in contrast to the United States, where classrooms are a “marketplace of ideas” that train leaders through wide exposure to robust exchange of ideas and discovery of truth through a “multitude of tongues rather than through any kind of authoritative selection”.

In turn, Montesano notes that academic freedom, an unquestioned value and a central feature of Yale, has a purely instrumental function in NUS: “Freedom has no value in its own right, and disciplines and expertise may be demarcated in ways that restrict scholars to what is in effect a spacious and exceedingly well-appointed academic pen.”

This is the very difference in the nature of academic freedom that is evident in the recent events at Ashoka too. Mehta dared to colour outside the lines. He chose to forget that he belonged to a liberal arts college in an illiberal context where the criticism of policies, politics and character of governments is unwelcome. As Arvind Subramanian noted in his resignation letter, “that Ashoka – with its private status and backing by private capital – can no longer provide a space for academic expression and freedom is ominously disturbing.”

Yet, such a space is a foundation for not just the renewal of liberal arts but building great universities. Free expression, debate and discussion promote dissemination of ideas, critical thinking and create homes for iconoclasts and radical innovations.

How can the vision and values of the institution be preserved and protected in an illiberal context where the trustees are not immune to the pressures of political power? The obvious answer is that the private donors, many of whom run businesses, must not accept decisive executive roles in university governance.

After all, their fiduciary responsibility is primarily to their shareholders and it will be foolhardy, and understandably so, for them to champion for academic freedom when political pressures threaten their core business interests. Somewhat counterintuitively, this very decision to cede power in university affairs will allow the university to flourish and create a world-class brand that they wanted to create and associate with in the first place.

However, business leaders can continue to provide a useful advisory role that will become increasingly relevant in the 21st century. Creating an expanded executive board that includes not only the founding trustees but also successor trustees appointed from amongst the alumni of the university, alumni fellows elected by the alumni of the college, ex-officio members from university leadership and faculty members would provide a more robust university governance.

Deepening relationships with faculty, students and alumni and institutionalising opportunities to receive input from various stakeholders will be critical. Clarity on delineation of roles between the executive board and the university leadership is important.

Academic scholars value academic freedom more than anything else. It is also academic scholars who understand academic freedom better than anyone else. They must be given a central role in the governance of the university.

(The writers are Professors at the Indian School of Business (ISB). Views are personal. Views expressed are of the author’s and not of www.economictimes.com)

China called finance apps the best thing since the invention of compass. But no longer now

When the coronavirus jammed up China’s economy last year, Rao Yong needed cash to tide over his online handicrafts business. But he dreaded the idea of spending long, dull hours at the bank.

The outbreak had snarled delivery services and made customers slow on their payments, so Rao, 33, used an app called Alipay to receive early payment on his invoices. Because his Alipay account was already tied to his digital storefront on Alibaba’s Taobao bazaar, getting the money was quick and painless.

Alipay had helped Rao a few years before as well, when his business was just starting to expand and he needed $50,000 to set up a supply chain.

“If I’d gone to a bank at that point, they would have ignored me,” he said.

China was a trailblazer in figuring out novel ways of getting money to underserved people like Rao. Tech companies like Alipay’s owner, an Alibaba spinoff called Ant Group, turned finance into a kind of digital plumbing: something embedded so thoroughly and invisibly in people’s lives that they barely thought about it. And they did so at colossal scale, turning tech giants into influential lenders and money managers in a country where smartphones became ubiquitous before credit cards.

But for much of the past year, Beijing has been putting up new regulatory walls around so-called fintech, or financial technology, as part of a widening effort to rein in the country’s internet industry.

The campaign has ensnared Alibaba, which was fined $2.8 billion in April for monopolistic behavior. It has tripped up Didi, the ride-hailing giant, which was hit with an official inquiry into its data security practices just days after listing its shares on Wall Street last month.

This time last year, Ant was also preparing to hold the world’s biggest initial public offering. The IPO never happened, and today Ant is overhauling its business so regulators can treat it more like what they believe it is: a financial institution, not a tech company.

In China, “the reason fintech grew that much is because of the lack of regulation,” said Zhiguo He, who studies Chinese finance at the University of Chicago. “That’s just so clear.”

Now the question is: What will regulation do to an industry that has thrived precisely because it offered services that China’s state-dominated banking system could not?

With Ant and other big platforms cornering the market, investment in Chinese fintech has fallen in recent years. So Ant’s chastening could make the sector more competitive for startups. But if running a big fintech company means being regulated like a bank, will the founders of future Ants even bother?

Zhiguo He said he was mostly confident that Chinese fintech entrepreneurs would keep trying. “Whether it’s hugely profitable,” he said, is another question.

For much of the past decade, if you wanted to see where smartphone technology was making China look most different from the rest of the world, you would have peered into people’s wallets. Or rather, the apps that had replaced them.

Rich and poor alike used Alipay and Tencent’s WeChat messaging app to buy snacks from street vendors, pay bills and zap money to their friends. State media hailed Alipay as one of China’s four great modern inventions, putting it and bicycle sharing, e-commerce and high-speed rail up there with the compass, gunpowder, papermaking and printing.

But the tech companies didn’t enter the finance business to make it easier to pay for coffee. They wanted to be where the real money was: extending credit and loans, managing investments, offering insurance. And with all their data on people’s spending, they believed they would be much better than old-fashioned banks at handling the risks.

With the blessing of China’s leaders, finance arms began sprouting out of internet companies of all kinds, including the search engine Baidu, the retailer JD.com and the food-delivery giant Meituan. Between 2014 and 2019, consumer credit from online lenders nearly quadrupled each year on average, by one estimate. Nearly three-quarters of such platforms’ users were under age 35, according to iiMedia Research.

Last year, when Ant filed to go public, the company said more than $260 billion in credit was being extended to consumers on Alipay. That meant Ant alone was responsible for more than 12% of all short-term consumer lending in China, according to the research firm GaveKal Dragonomics.

Then in November, officials torpedoed Ant’s IPO and got to work taking apart the plumbing that had connected Alipay with China’s banks.

They ordered Ant to make it less convenient for users to pay for purchases on credit — credit that was being largely funded by banks. They barred banks from offering deposits through online platforms and restricted how much banks could lend through them. At some banks, deposits offered through digital platforms accounted for 70% of their total deposits, a central bank official said in a speech.

In a news briefing last week, Fan Yifei, deputy governor at the central bank, said regulators would soon be applying the full Ant treatment to other platforms.

“On the one hand, the speed of development has been astonishing,” Fan said. “On the other hand, in the pursuit of growth, there have arisen monopolies, disorderly expansion of capital and other such behaviors.”

Ant declined to comment.

As Ant and Tencent scramble to meet regulators’ demands, they have pared credit services for some users.

One big hit to Ant’s bottom line could come from new requirements that it put up more of its own money for loans. Chinese regulators have for years disliked the idea of Alipay’s competing against banks. So Ant instead played up its role as a partner to banks, using its technology to find and assess borrowers while banks staked the funds.

Now, though, that model looks to Beijing like a handy way for Ant to place bets without being exposed to the downside risks.

“If problems arise, it would be safe, but its partner banks would take a hit,” said Xiaoxi Zhang, an analyst in Beijing with GaveKal Dragonomics.

When Chinese regulators think about such risks, it is people like Zhou Weiquan they have in mind.

Zhou, 21, makes about $600 a month at his desk job and wears his hair in a swooping, reddish-brown mullet. After he turned 18, Alipay and other apps began offering him thousands of dollars a month in credit. He took full advantage, traveling, buying gadgets and generally not thinking about how much he spent.

After Alipay slashed his credit limit in April, his first reaction was to call customer service in a panic. But he says he has since learned how to live within his means.

“For young people who really love spending to excess, this is a good thing,” Zhou said of the clampdown.

China’s brisk recent economic growth has most likely made officials more comfortable with reining in fintech, even at the expense of some innovation and consumer spending and borrowing.

“When you consider that household debt as share of household income is among the highest in the world right now” in China, “then more household debt is probably not a good idea,” said Michael Pettis, a finance professor at Peking University.

Qu Chaoqun, 52, was thrilled a few years ago to find he had access to $30,000 a month across several apps. But he wanted even more. He started buying lottery tickets.

Soon enough, Qu, a takeout-delivery driver in the megacity of Guangzhou, was borrowing on one app to pay his bills on another.

When his credit was cut by almost half in April, he fell into what he calls a “bottomless abyss” as he struggled to pay his outstanding debts.

“People inevitably have psychological fluctuations and impulses that can bring great harm and instability to themselves, to their families and even to society,” Qu said.

President Xi expresses frustration over officials waiting for his instructions to implement policies, says

President Xi Jinping, who assiduously built the image of being “core” leader of the Communist Party of China (CPC), is frustrated with the officials for waiting for his instructions before acting, according to a recently published book by the ruling party.

The book, published by the CPC Central Party Literature Press last month, for the first time made public Xi’s angry remarks, providing a rare glimpse into his meetings which otherwise were shrouded in secrecy.

Xi, 68, had expressed frustration over the lack of initiative among officials at an internal meeting in January and complained that too many waited for instructions from the top before acting.

“Some only get moving when they receive written edicts issued by the leadership and they would do nothing without such instructions,” Xi told a plenary meeting of the Central Committee for Discipline Inspection – CPC’s top-anti corruption body, Hong Kong-based South China Morning Post reported on Sunday.

“My written instructions are the last line of defence. If I didn’t hand out instructions, would these officials do any work?” said Xi, who has emerged as the most powerful Chinese leader after the party founder Mao Zedong.

He complained in the January meeting that some officials were good at paying lip service but “don’t walk the talk”.

His outburst is contrary to his defence of China’s one-party system and top-down approach for successful implementation of policies in comparison to the countries under democracies.

The book, titled Xi Jinping’s Selected Remarks On Comprehensively Governing The Party Strictly (2021 version), also showed that Xi has pushed back against criticism of his tight grip over the party.

It revealed that three years ago he had told another CCDI meeting: “Some have said that the centralisation (of power) by the party in the past five years has gone very well, and the next focus should be about promoting democracy within the party.

“These weird comments are made by people who are either confused, have ill intentions or are dirty themselves,” he said.

Xi heads all the three power centres, the CPC, the military and the Presidency, and unlike his predecessors, he has the prospect of life long tenure in power following the constitutional amendment doing away with two five-year-term limit for the President.

Since Xi took over power in late 2012 he had launched a massive anti-corruption drive in which over 15 lakh party officials including over 50 top generals of the People’s Liberation Army (PLA) were punished.

The crackdown also helped him to quickly consolidate his power and sent shivers down the bureaucracy which in the last two decades was credited to build the massive infrastructure in the country handling billions of dollars helping China to become the world’s second largest economy after the US.

Observers say that the post-anti-graft crackdown of Xi, the bureaucracy has shown signs of slowdown, often requiring reprimands from the leadership to push hard for the implementation of the policies and projects.

The written orders had become an increasingly important part of the leadership’s top-down monitoring in recent years and suggested this had made officials more risk-averse, analysts said.

“Instructions from inpidual party leaders are more compelling than party policies or rules because they address specific problems to designated offices or the people in charge,” said Ling Li, a professor specialising in Chinese politics and law at the University of Vienna.

The practice was strengthened by a party directive passed in 2019, which specified under what circumstances cadres should seek instructions from their seniors when making decisions, she told the Post.

“It also stipulates that those who have received personal instructions from Xi Jinping are required to report on the progress of their work in implementing these instructions,” she said.

Xi’s reliance on written instructions to govern and his tight grip on the bureaucracy have led Chinese officials to become less inclined to take risks, said Dali Yang, a political scientist with the University of Chicago.

“Xi and his colleagues give lots of written instructions and it’s natural for people to wait for them. With the anti-corruption fight and political indoctrination, Xi has successfully placed the entire party under (his) control but that has also made everyone very cautious too,” Yang said.

State media and officials are often keen to emphasise Xi’s personal involvement in key policies, such as the decision to build artificial islands in the disputed South China Sea and China’s response to the Covid-19 pandemic.

In the last three years, almost every important policy readout, including the introduction of a sweeping national security law in Hong Kong, or meetings on Xinjiang has referred to Xi.

The centralisation of power under Xi has led local officials to go through the motions without doing anything risky, said Kyle Jaros, an expert on China’s sub-national development at the University of Notre Dame in the US.

“For local officials, the best way to remain politically in bounds … [is] to gain express higher-level approval – and hence political cover – for major new policy programmes or decisions,” he added.