Wednesday, September 28, 2005

Manmohan's tragic Dilemma, August 28, 2005

I wouldn’t want to be in Manmohan Singh’s shoes these days. His heart says, ‘yes’; his head says, ‘no’. His political boss has pushed through parliament a national employment guarantee act, which feels good to his heart–after all, what could be nicer than to know that all Indians are employed! But his conscience tells him that this will be the biggest ‘loot for work’ program in India’s history. Thus, he is in a tragic dilemma, a dharma sankat.

A Chinese expert on India who lives in Beijing sent me an email saying that the Chinese would never contemplate such a job-creating scheme. ‘It would bankrupt us’, he said. ‘We create jobs by building roads, for example. A road creates opportunities for productive, permanent jobs as villagers begin to move between villages and towns. We have learned that job-creating schemes don’t create roads even when they are supposed to. This is because they are not accountable for road quality but only for creating jobs–the road is washed away in the next rain.’

Manmohan Singh knows that the Chinese expert is right–the only way to prosperity is not by giving a man a fish but by teaching him to fish. Only by giving people skills, creating infrastructure, and encouraging private investment are productive jobs born. Manmohan is a fine economist and knows that another one percent of GDP borrowed from the banks to finance this program will crowd out private investment, push up interest rates, lower the economy’s growth rate–and saddest of all, will actually reduce jobs! It troubles him that this act will pay Rs 60 a day when economists have demonstrated that paying the minimum wage diverts people from productive to unproductive jobs. The answer to more jobs is to reform our labour laws so that employers are not scared to hire workers.

The entire political class, meanwhile, smells the opportunity for a big corruption feast. This is why no one spoke out in the Lok Sabha, but only proposed amendments that would make corruption easier. Even if Rajiv Gandhi was wrong in thinking that only 15 percent of the funds reach beneficiaries, studies over 25 years in the EPW show that the poor never received more than 30 percent. Jean Dreze, author of this bill and someone I deeply admire, confesses that muster rolls were either absent or fudged in five out of six states studied under the current food-for-work program. ‘Loot for work’ are his words! Ask Manisha Varma, Solapur’s collector, how it’s done–she has just uncovered a Rs 9.1 crore EGS fraud in her district. All this puts a man of conscience like Manmohan in a dilemma–how to support a bill when you know that perhaps Rs 28,000 out of Rs 40,000 of the hard earned savings of the Indian people will be stolen. The states know it too and are thus unwilling to contribute even 10 percent of its cost.

One day I fear I shall meet Manmohan Singh weeping in a corner of India’s history–a knowing accomplice in the worst robbery in free India since the Fifth Pay Commission Award. He’ll be thinking how did this statist virus affect us just when things were going so well for India? I shall sympathize with him and hope that one day we too will become a middle class nation, and then the politics of India will also change. We will elect different sort of leaders, who will encourage us to depend on ourselves, and who will invest in infrastructure and in better schools rather than in populist giveaways.


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This is because they are not accountable for road quality but only for creating jobs–the road is washed away in the next rain.

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