Route to pro-poor prosperity

Dr Bharat Jhunjhunwala
The Aam Aadmi is so dissatisfied with the present political arrangements that he was inclined to support a dharna by Delhi CM Arvind Kejriwal which was clearly against the law. Section 144 had been promulgated in the area. Yet about 70 percent of the Delhi people supported Kejriwal’s protest. The Aam Aadmi feels that it is not possible to reform the system from within. He is willing to take the law into his own hands. This dissatisfaction arises from the fact that inequality in the country has increased stupendously. On the one hand a handful of the elite-specially ministers and government servants-are minting money. Walk into any village in the country and most likely the best house will belong to a government servant. The Aam Aadmi feels cheated. He has elected the politicians; and government servants were expected to ‘serve’ the people but they have become an end unto themselves.
Roots of this exasperation lie in the economic model we have followed since Independence. The economic policies have been basically anti-people. I give a few recent examples. FDI in retail is being encouraged. That will lead to loss of livelihood to millions of street corner shops. The MNCs may truly provide cheaper and better quality goods than what is available in the market at present. But the shop owner would not have the money to buy them. Of what use are the cakes and pastries displayed in the shop if one does not have the money to buy them? Two, land of the poor and tribals is being mercilessly acquired for mining and other commercial activities. True, they often get good compensation in cash. But this money does not last long in absence of avenues for productive employment. Many oustees of Tehri Dam are today living like paupers. The sense of security and belonging they had doing agriculture in their self-owned fields has gone.
There is a consensus that we must remove multiple rates and types of taxes and introduce one Goods and Services Tax. It is forgotten though that the reduction of tax on machine made cloth has led to the decline of handloom and millions of weavers have lost their livelihood. The consumer has indeed got cheap cloth but the weaver has been reduced to a pauper. Four, huge costs are being imposed on the Aam Aadmi by subjecting him to environmental disaster. People living near thermal power plants are being subjected to radiations so that air-conditioners in Delhi can be provided with electricity. Industries are discharging pollutants into our rivers with impunity. The fishes are dying and fishermen are losing their livelihood. But scrutiny of these harmful policies is not undertaken because these are beneficial for the elite.
At the same time the politicians have to manage their way through democracy. They need to collect votes from the same Aam Aadmi whom they have deprived of his livelihood. This objective is secured by implementing pro-poor relief programs such as MNREGA, Right to Food and loan waiver for farmers. Ministers and government servants take the butter and distribute buttermilk to the poor. This is flaunted as the Government being pro-poor.
The economic theory underlying this model was that of ‘trickle down.’ It was assumed that a part of the increase in income and wealth of the rich will trickle down to the poor. Such indeed takes place. But a trickle is only a trickle. It is like the elite capturing the village pond for its swimming and handing a bucket of water to the Aam Aadmi for his bath and cooking. We must appreciate that there has been a huge expansion of the middle class-courtesy ‘trickle down.’ Poverty has virtually been eliminated from the country. But inequality has risen and that is irking the Aam Aadmi.
The rise in inequality was fine in the short run. The impact of economic policies was hazy. People were happy with the relief programs. But the tables have turned in the long run. The ill effects of the anti-poor economic policies have become manifest and people have become disenchanted with the present system. They see that corruption is spreading all around; and that the rich are getting richer and ministers and government officials are pursuing their self interest without restraint. This explains the support to AAP despite the Government implementing these path breaking relief programs.
The present policy is bad in principle. One cannot provide genuine relief to the poor by depriving them of their livelihoods. The pro-growth economic policies such as those of industrialization have delivered. India is today recognized as an emerging economic super power. But that is no solace to the weaver who loses his livelihood.
The task before us is to take the best of the two approaches. The pro-growth economic policy has to be combined with not only protecting but also supporting the livelihood of the Aam Aadmi. Vinoba Bhave had once said that the touchstone of an economic policy should be how it affects the poorest person. The Government has essentially delivered this by providing cheap grains and 100 days employment under MNREGA. The body of the poor people has been taken care of but his soul is unhappy. He has lost the pleasure of life and living off doles panned out by the Government.
The increase in inequality that we see is not a contribution of the Government. Inequality has historically increased with economic development. The agricultural society was more unequal than the tribal food gatherers. The British Empire was more unequal than the Roman Empire. Globalization will lead to further increase in inequality in keeping with this trend. One person like Bill Gates is making money from selling Windows software across the world. On the other hand there is a global race to bottom in wages earned by the unskilled worker. Globalization had enabled MNCs to move to countries where the wages are at a global minimum. Hence we find industries migrating from China to Vietnam nowadays. Inequality is increasing and will continue to increase. The problem is becoming worse because of corruption. The Government is trying to find solution to this by implementing poverty alleviation programs. This will not work because it alleviates only extreme forms of poverty. Moreover, rampant corruption in the welfare bureaucracy leads to more dissatisfaction even if it helps reduce poverty.
I do not know of a economic solution to the problem. Perhaps the solution will lie in the field of culture. The rich may be persuaded to live simple lifestyles; and there has to be greater accountability of the politicians and government servants as being demanded by AAP. Then the huge amount of money owned by the rich will not irk the people.

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