The government said these bonds were the least bad option in a menu that comprised only of bad options. It was probably right. In any case no one had any better ideas.
That said, some wrinkles do need to be removed, especially in respect of the incumbent government’s access to the names of the buyers of these bonds, and who they gave the bonds to.
This is a privacy issue which the late Arun Jaitley had repeatedly emphasised while defending these bonds. Ironically, that’s the precise thing that is missing. Only the government knows who bought how much worth of bonds and who they were given to.
But no government has absolutely any right to know who gave what to whom unless the entire donor-recipient list is made public and it thus becomes common knowledge.
All too often the need for reform is argued from a fairness point of view or a transparency point of view or a moral point of view. But none of these can induce change.
Indeed, there lies the rub. What we have here is a perfect combination of Russell’s Paradox and Nash Equilibrium.
Russell’s Paradox asks if there is a village in which the barber shaves only those who don’t shave themselves, who shaves the barber?
This was essentially a mathematical paradox which has since been resolved in mathematical terms. But it’s basic insight remains valid in matters of governance and politics.
And the Nash Equilibrium happens when, in a system which has many participants, no participant in a system wants to unilaterally change his strategy as long as the others don’t change theirs.
In politics and governance this leads, in seafaring terms, to the equivalent of the doldrums. Without an external push — reviving wind — the ship stays perfectly still.
The barber paradox is very important in the context of election funding because the government will not shave itself. Perish the thought. The benefits are too huge.
The Nash equilibrium is important because as long as the Russell’s paradox obtains, no one will want to change his or her strategy. In short, the paradox locks the equilibrium in.
Therefore, in its current manifestation, the system is entirely stable. It will not reform itself unless — and this can happen — there arises an existential threat to the beneficiaries of the system.
And none is in sight. So until such a threat comes along, live with it.