Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Guaranteeing employment The Hindu Dec 27, 2004 By Amit Bhaduri If this Government still has eyes to see and ears to hear the poor, it must be bolder with a much larger employment programme. It is puzzling why even democratically elected governments find it so hard to attach utmost priority to the problem of unemployment. They seem more bothered about the level of fiscal deficit, the health of the stock market, direct foreign investment or privatisation. The issue of how best to ensure a stable livelihood for millions of the poorest and most vulnerable citizens appears lower in the order of priorities. In this respect, the lesson of the last election already seems to have been forgotten. A `Shining India' with a 7 to 8 per cent growth, or even a 10 per cent growth as in China might not deliver in terms of election results. We have no way of knowing what would have been the results of a free election in China but we do know what the recent electoral verdict in India was. The name of the game, all Governments ought to realise, is changing. Neither high growth nor `sound' public finance coupled with a booming stock market but a stable livelihood for the vast majority of Indian citizens must be given the highest priority. This might be acceptable in principle to all the partners of the United Progressive Alliance Government headed by the Congress. However, just like the previous Government headed by the Bharatiya Janata Party, the UPA Government appears to be following economic policies that indicate that its priorities lie elsewhere. This is presumably partly due to the faulty economic understanding of the current Indian economic situation, and partly on account of the underlying political interests shaping the policies of this Government. While the economic and political aspects are intertwined, for a better understanding we need to separate them. Let me begin by emphasising the obvious. It is putting the cart before the horse to talk about a range of human rights or enhancing individual capabilities, until some very basic needs such as food, clothing, shelter, and health are ensured for all citizens. To presume that the market would do it in a country like India is untenable, both theoretically and politically. Theoretically, under the highly artificial assumptions of perfectly functioning markets, it can be shown that the free market would provide some solution. However even in theory, under the best of circumstances described by perfect competition, there is no guarantee that the distribution of income would be tolerable. In the extreme, some people might have too little income to survive and meet their basic needs; indeed, their starvation would be a part of the market solution! Even more strikingly, there is nothing in this branch of economic theory studying the properties of the price system, which specifies how long it might take for the market to reach its solution, if it reaches that at all (that is the system is stable). So, like a dictator, the market can always promise without actually delivering. And it becomes a convenient excuse for a politician to claim indefinitely that until the next round of reforms takes place, the good results will not follow! Mercifully however, there is one hitch in this, at least in a political democracy. Politicians are accountable for their performance by the time of the next election. In this sense, unlike the market system, our democratic political system has to work within given time horizons. This is also an important reason why seeking pure market solutions often makes no political sense, because even under the best of circumstances one does not know even theoretically how long it would take to yield result. When the market fails to provide the solution, the Government must be willing to act. There is no better way of doing this than providing assured employment, which goes towards meeting the basic needs of the poorest sections of the populations. This has not only to be sustained but gradually extended in scope over time, which is possible if the employment generation scheme largely supports itself over time. Economists these days tend to be wary of ambitious employment generation programmes for two reasons. First, they believe there is not enough `money' because a ceiling on fiscal deficit must be respected. Secondly, often extrapolating from past experiences, they suspect this would become no more than a way of income transfer from the taxpayers, which would soon become unsustainable. On both counts, they are wrong in the present Indian situation. It is a false doctrine that looks upon the Government budget as analogous to the budget of a household. In terms of existing institutional arrangements, unlike the household, the Government can run large deficits by borrowing from the Reserve Bank of India, and from the public. It can even continue to service its debt by borrowing more. This process can continue so long as the economic credibility of the Government does not suffer. We would do well to ask ourselves whether a Government with the achievement of rapidly expanding employment opportunities and high growth would be any less credible in the eyes of the Indian public than a Government that maintains a strict fiscal discipline with a dismal growth and employment performance. My best guess is that the IMF and the foreign investors would prefer the latter option, but not the Indian public at large to whom the Government is accountable. There has never been any systematic statistical evidence in India either that a larger budget deficit results in higher inflation. So the link between budget deficit and inflation tends to be more imaginary than real, and for good reasons. A larger budget deficit by pumping more money into the economy would raise prices if goods and services do not expand proportionately. But consider the present situation. There is excess capacity in sectors such as cement, steel and transport so that the real investment for public works can be undertaken. `Money' in this context is only a lubricant to place the orders for these investment goods. As wages are paid in these projects, they will be spent mostly on food and clothing of which also we have stocks and excess capacity. In addition, we have a large foreign exchange reserve as a safety valve. So the objection that the Government has no money makes little sense in this context. If the Government does not have the administrative capacity to undertake this job, it must come clean without giving the lame excuse of lack of funds. Anyway, the road ahead is not to be found through the Central or State Government administrations. Projects such as building rural roads, warehouses for grains, and minor irrigation have to be undertaken on a decentralised basis through the local bodies, the elected panchayats. This raises two problems, which are little discussed. But without facing them, the employment guarantee schemes can never become sustainable. First, if the panchayats are given the financial authority to execute the programmes, what would be the role of the MLAs and MPs, who are also elected representatives of the people? The Indian Constitution makes the demarcation clear between the Centre and the States but the legal framework seems far less clear in defining the power of the panchayats. Secondly, the benefit of decentralisation starts only if the local population has the right to know about the accounts. Is it too much to expect that all panchayats should, like the Fair Price Shops, be legally obliged to display on board the funds received and spent? As a matter of fact, without the Right to Information, an Employment Guarantee Scheme, even with enough funds would be like getting into the boxing ring with one hand tied at the back. The Bills, both on Employment and on the Right to Information, which the Government is proposing to bring to the winter session of Parliament, are highly diluted versions of what is needed. Instead of reinforcing each other, they are likely to become two more useless pieces of legislation. If this Government still has eyes to see and ears to hear the poor, it must be bolder with a much larger employment programme and the right to information at all levels of administration. (Amit Bhaduri, who has written widely in economics and taught at several universities in India and abroad, is Distinguished Professor at Pavia University, Italy, and Visiting Professor, Council for Social Development, New Delhi.)