Ajay Shah on the Dangers of Digital Public Infrastructure on the Brave New World Podcast

Ajay Shah is an economist who has a Ph.D. in Economics from the University of Southern California, Los Angeles and a B.Tech. in Aeronautical Engineering from IIT, Mumbai[1][2]. He has held positions at the Centre for Monitoring Indian Economy (Mumbai), Indira Gandhi Institute for Development Research (Mumbai), and the Ministry of Finance, and now co-leads the Macro/Finance Group as a Professor at National Institute of Public Finance and Policy, New Delhi[1][2]. His research interests include policy issues on Indian economic growth, open economy macroeconomics, public finance, financial economics, and pensions[1][2][4]. In the past decade, he was extensively involved in the policy process in the reforms of the equity market and the New Pension System[1][2][4]. He has also authored a book titled “In Service of the Republic: The Art and Science of Economic Policy”[3].

Citations:

[1] https://financelawpolicy.umich.edu/speaker/ajay-shah

[2] https://www.theigc.org/people/ajay-shah

[3] https://www.mayin.org/ajayshah/

[4] https://www.ideasforindia.in/profile/ajay.html

[5] https://in.linkedin.com/in/ajay-n-shah

TLDR:

The increasing state control and use of technology in India raises concerns about privacy, freedom, and the potential for misuse of data.

Key Insights

State Power and Public Infrastructure

🌐 The dream of policy makers to have a phone booth in every village in India was considered a dream of the early days, but it was never achieved until private sector competence and efficiency came into play.

🏦 The Indian financial system is designed for complete state control, with little competition and stagnation in many areas.

📧 UPI is essentially like a PayPal for India, where people get a logical address and are able to move money from one to another, cutting across Banks.

🌍 Ajay Shah challenges the idea of a clean world where a government mandates technology, highlighting the benefits of public infrastructure like GPS in fostering innovation.

🌍 “State power is the Grand Problem of the universe today and I can see how many governments would like to amass more state power.”

🌱 We should make long-term plans with a 50-year horizon, not just a 10-year horizon, to rescale ourselves and reinvent our lives.

💰 “Inequality is a feature not a bug of the market economy.”

Government Control and Privacy Concerns

🤔 The use of the terms “public good” and “public infrastructure” may be a form of “brainwashing” to gain agreement without precise definitions.

🧠 The original motivation for the UIDAI system was noble, focusing on better engineering of government welfare programs, but it evolved into a universal system to track everybody, leading to mission creep.

📵 The use of biometric ID for government control raises concerns about privacy and freedom.

📊 The lack of data protection laws is a critical concern in the state’s increasing ability to harvest data and exert complete legibility over the people.

🛡️ The Data Protection Law in India is about enhancing state power, not protecting the individual.

Long Summary

• 00:00 🚨 India and other developing countries lack the public policy framework for state-controlled digital infrastructure, Ajay Shah discusses the dangers and concerns of mandatory biometric digital IDs for all citizens.
  • India and other developing countries lack the necessary public policy framework to administer state-controlled digital infrastructure, which is at risk of misuse and stagnation.
  • Ajay Shah's background in engineering and economics led him to work in various fields such as securities markets, pensions, and law, ultimately shaping his expertise at the intersection of economics, law, and public administration.
  • The speaker has been heavily involved in computer engineering and programming, shifting their work to Julia and being a part of the computer revolution, despite being viewed as a hardcore economist.
  • Indian chess players are making significant progress, and there has been an explosion in the level of skill in sports, possibly due to increased financial incentives and advancements in sports science.
  • The speaker discusses the potential dangers of digital public infrastructure, expressing concern about the use of terms like "public good" and "infrastructure" and emphasizing the importance of precise definitions and careful examination of government-owned systems.
  • The shift from biometric ID for welfare programs to a mandatory biometric digital ID for all citizens raises concerns about civil liberties, as most advanced democracies do not implement biometric systems.
• 12:19 🚫 The original goal of Aadhaar was to improve welfare programs, but mission creep has led to concerns about political economy, with government monopolies hindering financial inclusion and innovation in India.
  • The original motivation for the Aadhaar system was to improve government welfare programs, but there has been a mission creep leading to concerns about the nature of the political economy.
  • The speaker discusses the failure of government monopolies in providing telephone services and the subsequent success of private sector competition in bringing better technology and efficiency to India.
  • Financial inclusion in India is hindered by a system of complete state control and lack of competition, leading to stagnation and government control over every aspect of the financial system.
  • There are numerous anti-competitive barriers in the banking industry, leading to a lack of competition and a system where financial firms essentially operate as departments of the government, with little room for innovation or challenge.
  • Financial inclusion in India has not been successful due to bad regulations and low competition, unlike the innovations seen in the telecom industry.
  • Indian Finance is stifled by government approval processes, leading to a lack of innovation and competition, and the introduction of digital infrastructure has led to a gradual increase in coercion within the state.
• 22:01 🚫 The speaker discusses the coercion of the Adar biometric ID system in India and the lack of open standards and competition in the UPI payment system, which goes against the idea of being a free person and hinders innovation.
  • The speaker discusses the coercion and mandatory nature of the Adar biometric ID system in India, and how it goes against the idea of being a free person.
  • UPI is a payment system in India similar to PayPal, with a single company controlled by the government processing all transactions.
  • The UPI system in India was established with coercion, prohibiting private and foreign players, blocking innovation and creating government control.
  • Single standards and competition in the market are necessary for efficiency, and GPS is a public good that has facilitated innovation.
  • UPI is not a public good because it is rival and excludable, with non-banks being blocked from using the system and government discretion controlling industrial policy.
  • No open source or open standards in UPI, no RFC process or IETF involvement.
• 29:09 🚫 The speaker criticizes the design and adoption of digital public infrastructure in India, expressing concerns about government control, lack of consumer support, and hindrance to the development of advanced economies.
  • The speaker criticizes the design and adoption of digital public infrastructure, expressing concerns about the potential for government control and the complexity of financial services.
  • The UPI system lacks consumer support and anti-fraud procedures, leading to difficulties in addressing consumer complaints and fraud in the system.
  • Government control of anti-fraud systems in India is hindering the development of advanced economies, as financial firms should be responsible for choosing the right technologies and procedures, and the complexity and diversity of use cases in the country is a major concern.
  • India is incredibly diverse, with different social and economic contexts in each region, making it important for private individuals to come up with diverse solutions to meet the needs of the users.
  • India needs a market-based process of discovery, not design, in order to address the diverse needs of its population.
  • The speaker discusses the lack of top-down imposition in digital public infrastructure and the susceptibility of India to coercion due to its lack of state capacity.
• 38:37 🚨 The speaker warns of the dangers of digital public infrastructure controlled by the state, emphasizes the need for regulatory reforms in Indian finance, and advocates for caution in relying solely on technology to solve fundamental issues.
  • The speaker discusses the discomfort with digital public infrastructure being controlled by a state without adequate legitimacy, and the disappointment in the lack of privacy protections in the Adar system.
  • Fintech revolution in India is hindered by a central planning financial regulatory apparatus that prefers banks and limits non-bank reimagination of financial services.
  • The future of Indian finance lies in regulatory reforms and creating checks and balances, not in technological advancements like UPI.
  • The speaker discusses the potential dangers of digital public infrastructure, highlighting the importance of considering the societal impacts and processes involved in the design and implementation of such systems.
  • The need for a public policy framework and clarity around the role of the state, as well as the dangers of national champions and the importance of nurturing openness and competition in the digital public infrastructure.
  • The speaker emphasizes the need for caution in relying solely on technology to solve fundamental issues in finance and healthcare, and instead advocates for establishing proper regulation and public goods.
• 48:01 🔍 State legibility and coercion through digital public infrastructure could reshape society, highlighting the need for data protection laws in India to limit government access to data and create checks and balances on state power.
  • State legibility and coercion through digital public infrastructure could lead to unintended consequences and reshape society in fundamental ways, and the lack of data protection laws is a critical issue.
  • The need for data protection laws in India is crucial as the current laws only protect data from private firms, giving the government a free pass to access and use data, while the Western environment of data protection has created strong protections against state power and checks and balances for private data.
  • Data in the hands of the government is more dangerous than in the hands of a private corporation, and the Indian context should not be applied to a western conception of the big Tech problem.
  • Achieving freedom for the people requires checks and balances on state power, similar to the concept of a "shackled Leviathan" in Europe and North America, which suggests the need for the Indian State to limit its access to data.
  • The lack of data protection laws in the US is compensated by a well-developed common law system, while in India, the court system is strained and there are no limits on state power in terms of surveillance and data use.
  • Financial regulators have unlimited power to micromanage and control individual people and products, creating an unhealthy environment.
• 55:13 🚨 India's tech-driven image may not match reality, with a need for long-term planning, cautionary tale from China, and potential crisis in healthcare.
  • Introducing technology has unintended consequences and India's image as a fast-growing tech-driven liberal democracy may be getting ahead of the reality of being a large central planning welfare state with a sliver of innovation.
  • China's failed transition to democracy serves as a cautionary tale for India, which still has a long way to go in becoming a prosperous, liberal, advanced economy with a strong commitment to political and economic freedom.
  • The implications of humans living longer in the next few decades require a dramatic change in traditional cultural mores around the concept of old age.
  • We need to rescale ourselves and make long-term plans with a 50-year horizon, taking advantage of medical technology and science to pursue ambitious life goals.
  • There will be a crisis in labor-intensive healthcare in advanced economies, and the solution could be telemedicine, medical tourism, and assisted living in countries like India.
  • The speaker discusses the sudden rise of AI and expresses concern about the overuse of the term "artificial intelligence."
• 01:03:18 🚨 Assisted code systems like GitHub co-pilot can improve productivity for Indian software companies, but there are also dangerous applications in India, including potential harm from poor English writing and lack of Indian nuance in AI language models, exacerbating inequality in the labor market.
  • Assisted code systems like GitHub co-pilot can improve productivity for Indian software companies, but there are also dangerous applications in India.
  • English is the main language in India, and people who write poorly in English and rely on digital tools to compose emails may unintentionally convey the wrong message, causing potential harm as these tools become more widespread in society.
  • The speaker is concerned about the lack of Indian nuance in AI language models like GPT, which reflects a global internet average and may not capture local knowledge and nuances.
  • The speaker discusses the potential exacerbation of inequality due to technological transformations in the labor market in India.
  • India's labor market is flexible, job loss will occur but overall prosperity and GDP will increase, and inequality is a feature of the market economy.
  • The main issue in India is the need to create wealth, and the conversation was enjoyable and informative.

Q&A

Q1: What are the key concerns regarding India’s digital public infrastructure, particularly in relation to state power and control?

A1: The digital public infrastructure in India, built on the biometric authentication system known as Adar, lacks a clear public policy framework, raising concerns about misuse and potential stagnation. This infrastructure has the potential to increase state power and control over citizens, as seen in the mandatory use of Adar for various services, leading to coercion and harassment. Additionally, the lack of privacy protections and data protection laws allows the government to observe and utilize data without proper restrictions, emphasizing the need for regulatory reforms in these areas.

Q2: How has the transition in India’s telecommunications industry impacted technological advancements and phone usage?

A2: The telecommunications industry in India transitioned from a state monopoly to a competitive sector with private foreign companies, which led to significant advancements in technology and widespread phone usage. Previously, state-owned entities such as BSNL and VSNL held monopolies on telephone services and international telecom. However, the introduction of private foreign companies brought competition, efficiency, and technological progress, resulting in increased access to phone services across the country.

Q3: What are the concerns raised about the Unified Payments Interface (UPI) in India, and how is it controlled in the context of industrial policy?

A3: The Unified Payments Interface (UPI) in India, often likened to PayPal, has become a pivotal component of the digital public infrastructure. However, concerns have been voiced regarding its status as a public good, given that non-banks have been blocked from utilizing the UPI system, and the government controls it as part of its industrial policy. This control has led to the blocking of innovation from private and foreign players, creating challenges in allowing diverse mechanisms in the financial system.

Q4: What is the significance of local knowledge and the role of market-based processes in addressing India’s diverse needs in the context of digital infrastructure?

A4: The diversity and varying social and economic contexts in India’s computer systems Present a significant concern, particularly concerning UPI and its lack of anti-fraud measures. Ajay Shah emphasizes the need for a market-based process of discovery rather than central planning to address these diverse needs. This approach requires firms to think, innovate, compete, and experiment, emphasizing the importance of local knowledge and understanding in developing solutions that adequately serve all individuals.

Disclaimer

Note - This content is generated by AI, we believe it is accurate, but we don’t claim any liability of inaccuracies in the AI generated content.

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