National Rural Employment Guarantee Scheme

The National Rural Employment Guarantee Scheme is one of the few well-intentioned schemes to come out of the current UPA government. The NREGS guarantees 100days of unskilled work per family for every family that is below the poverty line. Now, lets not even go into how BPL classifications are calculated or the absurdity and lack of context to the BPL surveys. There are many points about this scheme which are at a macro level wrong --

1. As one of the recipients of this scheme famously said "Are our tummies on vacation the remaining 265 days?" What is the rationale behind 100 days per one member of family?
2. Providing work that required unskilled labor is essentially a welfare scheme. It is not promoting the skill sets of that targeted population. Its the classic case of "give them fish, rather than teach them to fish". Potentially the same money can be spent at every Panchayat level to provide training in skills that will lead the population towards economic independence and dignity.
3. As many social audits across the districts where the scheme is being implemented show, the muster rolls are largely fudged, corruption accounts for a huge drain on this money, and a very small percentage of the money actually trickles down to the intended recipient. In fact, Rajiv Gandhi, when he was the Prime Minister, famously admitted that only 15% of government spending manages to reach the recipient. The rest is wastage. A similar Employment Guarantee Scheme tried out in Maharashtra in 1976 had already fallen victim to this atrocious Public Distribution System. In fact, the Indian government does not have any evidence of being capable of properly implementing any social welfare scheme.

Given all these obvious issues, the question then is if not NREGS, then what? The problem is not restricted to unskilled work, and then neither is the solution. Clearly the solution needs to be autonomous, small, and needs to come from the bottom, from the folks who need the money. The government needs to stop dictating lives and stop interfering. The policies that restrict our manufacturing sector from matching the growth in the services sector need to go. Agriculture has to be supported, or the farmers transitioning from agriculture into manufacturing or services need to be provided the skills to do that (again, allow private enterprise, and it will come about organically, instead of some governmental masterminding). National budgets need to spend less on defence and instead pour some funds into Education (at all levels). And in the middle of all this, the right folks will get the right skills and will be able to get their right to livelihood.

A possible counter-argument of course is that while all this is happening, people are starving. Maybe a combination of some scheme with a larger solution in tow is probably what is recommended. However, the government seems intent on earning hearsay goodwill (read votes, and support of left-parties) by implementing only the welfare schemes, and the bureaucracy is happy to implement the scheme with its 85% drain on many crores of rupees!

The Agrarian Crisis of India Shining

India is rapidly developing. Services sector is booming. Our GDP is increasing at 9%. We are cutting nuclear deals with USA. Our youth have the credit to buy German and Japanese cars and motorcycles. Our farmers do not have the credit to buy seeds. We are cutting deals with Monsanto and undercutting our farmers. Over 60% of our economy is reliant on agriculture. Agriculture sector is in a serious crisis. India is ready for a massive collapse.

Thats the story of two different Indias. If you really think about it, everything about India is pluralistic. Agriculture is fundamentally unsustainable. Like education, the country needs to subsidize and support its agrarian sector. Particularly a country who's excess of 50% economy is agrarian and excess of 70% of the population are farmers. However, as the policies of the past decade unfold, we are seeing a continued spread of farmer suicides across the country.

P. Sainath has written extensively on this crisis. Click here to follow the link to indiatogether.org and scroll down along the right column to read Sainath's reports on the crisis in

• Andhra Pradesh (Anantpur and other nearby areas)
• Kerala (Wyanad)
• Maharashtra (Vidarbha)

I'll add more details to this post when I have more time.

Bhopal Gas Disaster Survivors Struggle

Shortly after midnight poison gas leaked from a factory in Bhopal, India, owned by Union Carbide Corporation. There was no warning, none of the plant's safety systems were working. In the city people were sleeping. They woke in darkness to the sound of screams with the gases burning their eyes, noses and mouths. They began retching and coughing up froth streaked with blood. Whole neighbourhoods fled in panic, some were trampled, others convulsed and fell dead. People lost control of their bowels and bladders as they ran. Within hours thousands of dead bodies lay in the streets. Read a survivor's account of "that night". More background here.

All that was back in 1984. The government let the miscreants get away, and also made a deal with Union Carbide as compensation for those who died that night. The survivors today have a fight of a different nature altogether, as they fight the contamination, the water borne handicapping diseases, physical malformations, societal stigma, hunger, poverty -- it never ends. I visited Bhopal in January of 2007 and met with the survivors and visited the contaminated factory site. It was a surreal experience. Folks are obviously in a bad state for resources. The ground water is badly contaminated and there is no other water available except once a week. The governmental promises about pipelines from nearby Kolar river have not been kept. The factory site is dilapidated and lot of chemicals still lie around, and with every rainy season, further deeply get entrenched into the water table of the area.

• Click here for a full picture story of that visit.
• A lot of background details and up-to-date information is available from bhopal.net
  

Despite all this, the Bhopalis will first smile, and then offer you a cup of chai and then ask you "Ab boliyen, kaise aana hua?" I'll add more details and links and stories here when I get more time.

Government fostered Inequality, or how the many go hungry feeding the few

Read about this rather interesting restaurant in this essay by Russel Roberts. If You're Paying, I'll Have Top Sirloin first appeared in the Wall Street Journal, 18-May-1995.

When you eat there, you usually spend about $6—you have a sandwich, some fries and a drink. Of course you'd also enjoy dessert and a second drink, but that costs an additional $4. The extra food isn't worth $4 to you, so you stick with the $6 meal.

Sometimes, you go to the same restaurant with three friends. The four of you are in the habit of splitting the check evenly. You realize after a while that the $4 drink and dessert will end up costing you only $1, because the total tab is split four ways. Should you order the drink and dessert? If you're a nice person, you might want to spare your friends from having to subsidize your extravagance. Then it dawns on you that they may be ordering extras financed out of your pocket. But they're your friends. They wouldn't do that to you and you wouldn't do that to them. And if anyone tries it among the group, social pressure will keep things under control.

But now suppose the tab is split not at each table but across the 100 diners that evening across all the tables. Now adding the $4 drink and dessert costs only 4¢. Splurging is easy to justify now. In fact you won't just add a drink and dessert; you'll upgrade to the steak and add a bottle of wine. Suppose you and everyone else each orders $40 worth of food. The tab for the entire restaurant will be $4000. Divided by the 100 diners, your bill comes to $40. Here is the irony. You'll get your "fair share." The stranger at the restaurant a few tables over pays for your meal, but you also help subsidize his. It all "evens out."

But this outcome is a disaster. When you dine alone, you spend $6. The extra $34 of steak and other treats are not worth it. But in competition with the others, you've chosen a meal far out of your price range whose enjoyment falls far short of its cost.

Self-restraint goes unrewarded. If you go back to ordering your $6 meal in hopes of saving money, your tab will be close to $40 anyway unless the other 99 diners cut back also. The good citizen feels like a chump.

And so we read of the freshman Congressman who comes to Congress eager to cut pork out of the budget but in trouble back home because local projects will also come under the knife. Instead of being proud to lead the way, he is forced to fight for those projects to make sure his district gets its "fair share."

Matters get much worse when there are gluttons and drunkards at the restaurant mixing with dieters and teetotalers. The average tab might be $40, but some are eating $80 worth of food while others are stuck with a salad and an iced tea.

Those with modest appetites would like to flee the smorgasbord, but suppose it's the only restaurant in town and you are forced to eat there every night. Resentment and anger come naturally. And being the only restaurant in town, you can imagine the quality of the service.

Such a restaurant can be a happy place if the light eaters enjoy watching the gluttony of those who eat and drink with gusto.

People who are overeating at the expense of others should be ashamed. That shame will return when others are forced to cut back too. This requires deep cuts and an end to the government smorgasbord where the few benefit at the expense of the many.

PS: Link to Roberts' essay from a friend. This and many similar essays were reprinted in the book The Libertarian Reader, David Boaz, Editor, Free Press, 1997.

Where then the promised freedom? 60 years and counting...

Sixty years to our independence today, as India awakes to a new president who, when running a bank, took money from the women depositors, distributed most of that money amongst her relatives as loans and, according to RBI, did nothing to recover that money, thereby causing that bank to shut down. A president who can talk to spirits. A president who, during emergency envisioned an India where people with hereditary diseases were to be forcibly sterilized. And yet, a president who is a woman too. In any other mature democracy, our president would be in jail for fraud, not in Rashtrapathi Bhavan. Today, India celebrates its sixty years of independence and its first woman president! The two represent the cornerstones of the evils in our social, economic, and political systems -- a resting on the laurels of past actions (we are an ancient civilization), and an apathetic acceptance of our curtailed personal freedom.

The story of our freedom struggle, was not the story of a Gandhi here and a Nehru there -- it was about millions of people who wanted to be master of their own destiny. The British empire was a natural target, and the relief is palpable in the speeches made on that historical day, three score years ago. The tragedy is that for most Indians, political freedom was enough. An oppressive regime gave way to an oppressive state, and we did not protest. Lack of economic freedom continued to keep India poor, and we did not protest. Corruption was rife, and we accepted it as a way of life, and did not protest. Personal freedom was routinely denied to us, and we did not protest. In parts of our country today, people are treated worse than the British treated us, and we do not protest. We have come to accept mediocrity, and we do not protest. As a nation, we stopped caring for freedom once we gained independence.

Take economic freedom, for instance. At the time of our independence, the Indian economy was very different - it was much poorer and less industrialized, and government was less important - revenue was just 5 per cent of the gross domestic product. But our governments introduced industrial licensing, and later used it to create government monopolies in a series of industries, including heavy machinery, fertilizer, coal, shipping and aircraft, and prevent new private entry into industries such as steel. Traditional, liberal (in the traditional sense of supporting freedom) Congress-party workers protested, some even left the Congress and started their own political parties, but as a nation we allowed our freedom to be curtailed, little realising the fact that in this lay the seeds of gross economic inequality we were to see sixty years later.

Take trade, for example. When two people make a transaction, they only do so because both are better off. Prosperity is the result of a chain of such win-win transactions between people profiting by fulfilling each other's needs. But Jawaharlal Nehru once described profit as a "dirty word" and gave in to the fatal conceit, to use Friedrich Hayek's phrase, of imagining that the economy, and the lives of people, could be planned.

The benefits of economic freedom are largely unintuitive, and rarely has lack of that freedom been protested by the masses in any society. But what about personal freedom? The Indian Penal Code, drafted by our imperial overlords in the 19th century to keep us natives in place, and tailored on Victorian morality, is filled with archaic laws that should have been repealed 60 years ago. Section 377 effectively outlaws homosexuality. Section 295(a), that makes it illegal to "outrage religious feelings", routinely used by bigots, from all religions, to stifle free expression. It is filled with laws that criminalise the act of giving offence, outlaw victimless crimes and treat women as the property of men.

What about our education system? The British empire set up an education system which guaranteed to generate a body of clerks to serve the Queen. Not once did we think about reviewing the system. Nor did we think about spending money to guarantee education to all our children. When Gandhiji asked for compulsory eight years of education for all children of free India, he was silenced by saying there is no money to do that other than by supporting the sale of liquor. Till date, despite the 86th amendment of the constitution which makes primary education a fundamental right of every child, the government drops the Right to Education bill on false excuses of lack of funds. We, the citizens of India, all these years, accepted this lack of freedom, not just for ourselves, we let this visit our children and the future generation of a nation.

Milton Friedman, a prime proponent of local governance, once said -- "There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you're doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I'm not so careful about the content of the present, but I'm very careful about the cost. Then, I can spend somebody else's money on myself. And if I spend somebody else's money on myself, then I'm sure going to have a good lunch! Finally, I can spend somebody else's money on somebody else. And if I spend somebody else's money on somebody else, I'm not concerned about how much it is, and I'm not concerned about what I get. And that is a government."

Dr. Ambedkar, deified today as the demigod of Dalit politics, rejected the word socialist in the preamble of our constitution and remarked thus -- "What should be the policy of the State, how the society should be organized in a social and economic sense are matters which must be decided by the people themselves according to time and local circumstances. It cannot be laid down in the constitution itself, because that is destroying democracy altogether".

Freedom for a country should mean every person being free to live their lives as they please, as long as they do not interfere with the similar freedoms of others. These past sixty years, India's democracy has not matured into a participatory republic but has only remained symbolic by allowing an orderly transfer of power through the ballot box. Instead of participating in the governance and demanding our freedoms, for long we have allowed our mai-baap sarkar to treat us as subjects, not citizens, and continue to deny us our freedoms.

In the Hindu culture, the 60th anniversary is an important milestone, amongst other things an occasion to renew marriage vows. Sixty years ago, our nation married democracy, and this anniversary is an opportunity to renew those vows. Today is an opportunity to think about the freedoms we dont have; the freedoms that have been denied to us; the freedoms that we so easily didnt care for. There is an age old political adage that we get the leaders we deserve. Today, as India celebrates its sixty years of independence, let us be the leaders we
deserve to have.

Development as Freedom

AMARTYA SEN, who won the Nobel Prize for economics in 1998, is best known for his studies of poverty and famine. He has argued that no democracy has ever suffered a famine--a striking instance of his larger point that many issues of distribution cannot be analyzed in economic terms alone. Development as Freedom is an important overview of his thought, and one of his most accessible works, though still not an easy read.

Amartya Sen wants us to "think capabilities, not commodities." Sen places economic life within the wider context of personal and societal wellbeing. He thinks a central task of a good society is to "convert," as efficiently as possible, economic wealth into human capabilities. Some societies are better at this than others. Sen gives examples of countries with relatively high income per capita but low quality of life (South Africa, Singapore) and others with relatively low income per capita but high quality of life (Sri Lanka, Costa Rica). The purpose of economic development, then, should be not the production of more and more goods, or the creation of more and more wealth, but rather the expansion of people's capabilities to function and thrive in their communities. It is relevant to ask: Are people well nourished? Are they able to obtain a good education? Can they appear in public without shame?

This shift of framework can seem rather abstract until Sen applies it to matters, literally, of life and death. Take famines. Conventional wisdom long held that famines are caused by the lack of food. According to this view, the answer to famine is to provide emergency food relief and then increase or repair a country's total food production. Sen has shown that while food supply is relevant, the ability of people to control their access to that food is most crucial. A country in which people can share the available food supply can almost always avoid famine. Democracies are more successful at avoiding famine because starving people and their advocates are able to make their demand for help more politically compelling. Democratic India, for example, has managed to warn its politicians about impending famines, and thereby has avoided them, while authoritarian China in the late 1950s did not get that message to its leaders, and starvation followed.

The capability framework also sheds light on the household. Sen shows that income earned in the market by a male breadwinner is often not evenly distributed within the household, due to cultural as well as legal factors that discriminate against women. Standard economic analysis (if it doesn't peer inside the institution of the family) overlooks the resulting inequality. Households in which mothers have adequate education and access to outside employment achieve better health, not just for mothers but for their girls and boys alike.

The market system is often touted for the instrumental freedoms it provides for people--that is, the market helps people to meet basic needs like having adequate nutrition and shelter. But Sen argues that the market system also produces the intrinsic good of participation--participation in social life through "freely" chosen work and through buying and selling products of one's choosing. Even staunch supporters of the market often miss the significance of participation.

Sen aptly states that no market choices are fully free (they are constrained both by the talents and background of the individual and by the nature of society itself). This acknowledgment leads the author to note the potential value of redistribution to alleviate those severe inequalities that prohibit full participation in society. In addition, Sen points out that political and civic participation can help citizens to deliberate together about "what they really need" and what individual and societal ends are truly worth valuing.

In his final chapter Sen surveys the relationships between justice, freedom, and responsibility. And he reiterates the advantages of capabilities over narrower measures of human development. The idea of "human capital" is a step forwards, but is still too narrow in its restriction to effects on production; it fails to capture the direct contribution of human capabilities to well-being and freedom and their indirect effects on social change.

Confessions of an Economic Hit Man

or How the United States Uses Globalization to Cheat Poor Countries Out of Trillions

John Perkins was a self-professed Economic Hit Man. He worked for a score and more years as chief economist at an international consulting firm in Boston called Chas. T. Main. His job was to persuade countries that are strategically important to the U.S. - such as Indonesia, Panama, Ecuador, Iran and Saudi Arabia - to accept enormous loans for infrastructure development from USAID and World Bank and then to make sure the lucrative projects were contracted out to U.S. corporations. This ensured that the principal money moved only from Washington D.C. to New York, Boston and San Francisco.

The countries which received all the infrastructure improved the lot of the top 2% of their elite and further marginalized bulk of their poorer population. Stuck with extraordinarily huge debts which they couldn't possibly repay, these countries came under the control of the U.S. government and other U.S.-dominated aid agencies. Terms of repayment were meted out and the foreign powers were forced to hand out free or cheap oil, allow U.S. military bases and other atrocious empire building actions.

As an economic hit man, chief economist John Perkins' job of persuasion entailed coming up with projected economic growth rate charts over a futuristic 25 years in the event of the country accepting the generous loans of the empire-building aid agencies. According to Perkins, when he and his ilk failed to convince the heads of state, the CIA (he calls them sharks) would move in and silently assassinate the president and instead place a puppet at the head who would agree to the terms of the loan. When this failed, U.S.A. would go to war, an Iraq would occur.

Very lucidly in his new book Confessions of an Economic Hit Man, John Perkins takes one through his career, from being hired as an econmic hit man to his actions in Indonesia, Equador, Panama, Saudi Arabia and Colombia. An insider's view to building an empire.

Here is a link to an interview with John Perkins with Amy Goodman on the Democracy Now website.