It's all about incentives: A lesson to India from El Salvador

“Incentives drive everything”, said Mr. Nayib Bukele, in an extraordinary speech explaining how he turned El Salvador from the world’s most unsafe country, to the safest country in the western hemisphere, all in about five years.

Mr. Bukele said, “When I began with my mission of clamping down on crime, a renowned group of intellectuals told me that such a hard stance on crime is not a good idea. In fact, it will shock the GDP leading to shrinking of about 20%.

I asked How? They said, while crime is an issue, it also contributes to GDP. A thief steals, but he goes to the showroom to buy a motorcycle in white. In a society like El Salvador, crime is a high contributor to economic activity. If you suddenly put a stop to crime, there'll be a great shock to the economy, contagion risks of that might be difficult to control."

As the crowd laughed, Mr. Bukele added, "This is how these intellectuals sound smart. They come up with these theories, jargons and concepts that sound intelligent on paper, but in truth are as dumb as they come."

"In truth", said Mr. Bukele, "Incentives drive everything". He paused to say, "Let's say there's a tomato seller on the street. He's not doing anything revolutionary, or something big. He's just getting tomatoes from a Hub and selling them on the street, making about $20 a day. He's only living a normal life, working really hard to just get by."

"Now what happens if after a hard day at work, this tomato seller gets stopped by a gang member and gets robbed off those $20? He worked hard to get the those tomatoes, sold them on his stand. All for this? How do you think he'll process this happening? Moreover, how motivated will he be to keep selling tomatoes as an honest man, and not join the gang instead?".

As the crowd went silent, Mr. Bukele asked, "What do you think happens from then on?"

"Now consider that as this happened, the next day the tomato seller sees that his robber just got caught by the police and sent off to the (now famous) El Salvadorian Jail. What will he be motivated to do now? Will he still join the gang? Na. My guess is that he'll get back to selling tomatoes like an honest, hard working man".

"It's all about incentives. If you let something bad happen without recourse, you're incentivising people to drop their good work and take the easy way. And in reality, THAT wrecks the entire society".

This is obviously BRILLIANT. No wonder Mr. Bukele is a great leader who has literally changed the destiny of El Salvador, which, from the crime capital of the world, is now a country objectively much safer than United States. But what it also leaves is a very important lesson for India; a country where we're incentivised to ALWAYS do the wrong thing.

Do you remember that corrupt judge who was caught with hoards of cash in Delhi? What happened to him? He got transferred to Allahabad. Even the news has died down now. How will India ever get its incentives right?

That's an existential question for all of us.

Mr. Nayib Bukele - President of El Salvador.

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