Thursday, December 22, 2005
India and socialism - 3
Although I have an inherent dislike for Leftist economists, yet I can not help but cite the following article for the reader to peruse: Hunger amidst plenty by Jean Dreze. In this article, developmental economist, Jean Dreze talks about how the total increase in "average per-capita expenditure in rural areas was not even ten per cent higher in 1999-2000 than in 1993-’94" in spite of the fact that Indian economy saw one of the highest rates of growth at this time.
I am assuming, out of professional courtesy and intellectual honesty, that Dr. Dreze is not making up the facts when he presents them before the discerning public. It is true that India is a poor country. It is also true that we are more poor not because of our lack of capabilities to improve the opportunities for out people. Over the past 50 years, we have followed policies that reward slackers in the name of being helpful to people. The nexus between the babus in the government offices and corrupt industrialists have given rise to something akin to crony capitalism.
Many leftists cite the facts mentioned above to justify how globalization has really not helped India. I would like to ask the question whether globalization is responsible for non-equitible distribution of resources amidst rural Indian population? If the government of India has failed to do its job, why blame the new economic boom in urban areas for that? It is ironic that the new revenues generated by businesses in urban India has not been dispersed among the rural constituents. Would not the government do its job better if they stop investing the hard earned revenues in loss making public sector enterprses in order to support few hundred thousand employees? This single action by GoI can free up funds from a swamp that keeps on taking without giving anything back in return.
My objection is not to the various issues raised by the leftists while demanding that the government show more concern for the poor. Many times, leftists raise concerns in the areas that really need attention. It is right for them to criticize guys like me who always see the lotus in the pool of mud. Sometimes we forget about poor people after going through some mind boogling new statistics about the way Indian economy is growing. The euphoria of finally seeing a lazy elephant get up and start running at a speed never thought to be possible takes over our mind. For too long Indians have castigated themselves for all the problems in their society. We have always looked inwards without any self-confidence till even a few years back. Therefore, it is not surprising that at the first glimpse of a break from the past, our new generation is filled with a sense of confidence that borders on cockiness. This is good in many ways. However, this is also disturbing at some levels.
My distaste for the leftists is because of the solutions suggested by them to solve the problem of poverty in India. Recently, GoI started a scheme called Rural Employment Guarantee Scheme (REGS). One of the architects of this scheme is Dr. Jean Dreze himself. This scheme is scheduled to be implemented in a phased manner in all the districts of India. I have not studied the details about the scheme yet. As far as I know, the basic concept of this scheme is to pay one person from each family of rural folk a salary of 100 days in return for some menial work like digging up canals, firming up local reservoir walls etc. The authorities selected by GoI to implement the provisions of the bill are the state governments, panchayats (village level government administration), and non-government organizations. Many economists like Dr. Surjit Bhalla have already expressed doubts about the financial viability of the scheme.
Judging from the past experience, does anbody think that schemes like this can ever solve India's problems? Haven't we already seen what a colossal waste earlier schemes like Jawahar Rozgar Yojana were? The current scheme, in my opinion, will enrich a small number of contractors and farmers in the villages without ever doing anything for the real poor. Some basic questions that need to be considered are - who will provide accountability for the way money is spent? How can we make sure that every Rs. spent actually ends up with needy? Most of the times, money like this ends up lining the pockets of the landlords, bureaucrats, and the politicians. We all know what a wonderful job they do in sharing their new found happiness around?
Some other important points to consider are: who will pay for this? It is rumored that the entire budget for this scheme annually is Rs. 40000 crores annually. This is a sheer waste. No way is this money going to be used for improving rural infrastructure, education, health, sanitation etc. This money is only going to perpetuate the myth of the "mai-baap sarkar" among the minds of common folk in India. If families can improve their condition by not getting education and not working hard, what is the incentive for them to send their kids to school and earn an honest day's wage? Are we really creating more jobs for rural folks with schemes like this? These schemes are nothing but a clever way to hide unemployment. A welfare, nanny state breeds inefficiency.
The worst part of this hare-brained scheme is what would happen if the same Rs. 40000 crores is invested by GoI in different infrastructure projects in rural areas every year. This will stimulate the economy in real sense of the word and create actual wealth. Construction industry will create jobs. Other industry will seriously start investing in manufacturing units located in rural areas. This will provide employment for rural folks who do not have land and prevent the migration to cities. Imagine what the rise of agro-based industries located right in the heart of rural landscape will do to the prices fetched by the crops of the farmers. Eliminating middle-men will increase the wealth of the farmers. Productivity as well as the connectivity of the rural economy will go up leading to better conditions of living.
At this point, I would like to conclude this series that I have written about India and socialism. It is imperative for the right thinking Indians to get their act together and prevent the leftist political thought from completely overtaking our system. The way our economy is progressing, I do not forsee much support for the leftists in the near future. In spite of the fact that many Indians are poor and can not even afford two square meals a day, I do not believe that the solution is a protected and closed economy. The role of state should be limited to providing basic necessities for its citizens like clean drinking water, food for nuitrition, basic education, health, and good infrastructure. It should not transcend the barriers and be responsible for probviding its subjects with job security and employment benefits. India has a bright future. This can only be achieved by government concentrating its efforts in improving the infrastructure of the social sector, implementing a liberal but wide taxation scheme and providing encouragment to private enterprise spurred on by the efforts of the entrepreneurs, the investors, and the industrialists.
¶ 11:08 AM I am assuming, out of professional courtesy and intellectual honesty, that Dr. Dreze is not making up the facts when he presents them before the discerning public. It is true that India is a poor country. It is also true that we are more poor not because of our lack of capabilities to improve the opportunities for out people. Over the past 50 years, we have followed policies that reward slackers in the name of being helpful to people. The nexus between the babus in the government offices and corrupt industrialists have given rise to something akin to crony capitalism.
Many leftists cite the facts mentioned above to justify how globalization has really not helped India. I would like to ask the question whether globalization is responsible for non-equitible distribution of resources amidst rural Indian population? If the government of India has failed to do its job, why blame the new economic boom in urban areas for that? It is ironic that the new revenues generated by businesses in urban India has not been dispersed among the rural constituents. Would not the government do its job better if they stop investing the hard earned revenues in loss making public sector enterprses in order to support few hundred thousand employees? This single action by GoI can free up funds from a swamp that keeps on taking without giving anything back in return.
My objection is not to the various issues raised by the leftists while demanding that the government show more concern for the poor. Many times, leftists raise concerns in the areas that really need attention. It is right for them to criticize guys like me who always see the lotus in the pool of mud. Sometimes we forget about poor people after going through some mind boogling new statistics about the way Indian economy is growing. The euphoria of finally seeing a lazy elephant get up and start running at a speed never thought to be possible takes over our mind. For too long Indians have castigated themselves for all the problems in their society. We have always looked inwards without any self-confidence till even a few years back. Therefore, it is not surprising that at the first glimpse of a break from the past, our new generation is filled with a sense of confidence that borders on cockiness. This is good in many ways. However, this is also disturbing at some levels.
My distaste for the leftists is because of the solutions suggested by them to solve the problem of poverty in India. Recently, GoI started a scheme called Rural Employment Guarantee Scheme (REGS). One of the architects of this scheme is Dr. Jean Dreze himself. This scheme is scheduled to be implemented in a phased manner in all the districts of India. I have not studied the details about the scheme yet. As far as I know, the basic concept of this scheme is to pay one person from each family of rural folk a salary of 100 days in return for some menial work like digging up canals, firming up local reservoir walls etc. The authorities selected by GoI to implement the provisions of the bill are the state governments, panchayats (village level government administration), and non-government organizations. Many economists like Dr. Surjit Bhalla have already expressed doubts about the financial viability of the scheme.
Judging from the past experience, does anbody think that schemes like this can ever solve India's problems? Haven't we already seen what a colossal waste earlier schemes like Jawahar Rozgar Yojana were? The current scheme, in my opinion, will enrich a small number of contractors and farmers in the villages without ever doing anything for the real poor. Some basic questions that need to be considered are - who will provide accountability for the way money is spent? How can we make sure that every Rs. spent actually ends up with needy? Most of the times, money like this ends up lining the pockets of the landlords, bureaucrats, and the politicians. We all know what a wonderful job they do in sharing their new found happiness around?
Some other important points to consider are: who will pay for this? It is rumored that the entire budget for this scheme annually is Rs. 40000 crores annually. This is a sheer waste. No way is this money going to be used for improving rural infrastructure, education, health, sanitation etc. This money is only going to perpetuate the myth of the "mai-baap sarkar" among the minds of common folk in India. If families can improve their condition by not getting education and not working hard, what is the incentive for them to send their kids to school and earn an honest day's wage? Are we really creating more jobs for rural folks with schemes like this? These schemes are nothing but a clever way to hide unemployment. A welfare, nanny state breeds inefficiency.
The worst part of this hare-brained scheme is what would happen if the same Rs. 40000 crores is invested by GoI in different infrastructure projects in rural areas every year. This will stimulate the economy in real sense of the word and create actual wealth. Construction industry will create jobs. Other industry will seriously start investing in manufacturing units located in rural areas. This will provide employment for rural folks who do not have land and prevent the migration to cities. Imagine what the rise of agro-based industries located right in the heart of rural landscape will do to the prices fetched by the crops of the farmers. Eliminating middle-men will increase the wealth of the farmers. Productivity as well as the connectivity of the rural economy will go up leading to better conditions of living.
At this point, I would like to conclude this series that I have written about India and socialism. It is imperative for the right thinking Indians to get their act together and prevent the leftist political thought from completely overtaking our system. The way our economy is progressing, I do not forsee much support for the leftists in the near future. In spite of the fact that many Indians are poor and can not even afford two square meals a day, I do not believe that the solution is a protected and closed economy. The role of state should be limited to providing basic necessities for its citizens like clean drinking water, food for nuitrition, basic education, health, and good infrastructure. It should not transcend the barriers and be responsible for probviding its subjects with job security and employment benefits. India has a bright future. This can only be achieved by government concentrating its efforts in improving the infrastructure of the social sector, implementing a liberal but wide taxation scheme and providing encouragment to private enterprise spurred on by the efforts of the entrepreneurs, the investors, and the industrialists.
