The Telegraph
Since 1st March, 1999
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- There has been no proper debate in India on the welfare state

An astonishing amount has been written about the proposed employment guarantee act. But the debate over this act was often more like ships passing each other in the night than an actual debate. The Right ' in the economic sense of the term ' has been sceptical that the EGA might be administratively untenable, fiscally imprudent and unsustainable. The Left, for its part, has been correct in thinking that we will have to think more creatively about social guarantees to a large number of citizens for whom the undoubted benefits of wealth creation are still a distant gleam. On the other hand, the Left does not quite own up to the onerous responsibility of macro-economic prudence. So the debate is stuck between unthinking idealism and intemperate cynicism.

The debate on the EGA often has the character of a non-debate, because the issues are never joined. The Left thinks that throwing state money with good intentions is the solution to most problems. The Right on the other hand, seems to move from the plausible assumption that throwing money is not always a solution to the more dubious proposition that it is not a necessary part of a solution. The Left is enamoured of a certain kind of idealized statism, the Right of a knee-jerk cynical anti-statism. The Left argues that more spending on welfare is necessary, the Right cautions that almost all of it will go waste. The Right speaks of regulatory reform, freeing up the markets, protecting property rights, privatizing, removing labour market rigidities, balancing the budget as crucial ingredients of sound economic policy. The Left gives all of these things short shrift and argues instead for greater spending on social security, employment guarantees, welfare schemes, job security and so forth. The Right wants to remove the barriers that bind those who want to create wealth. The Left is interested in the fate of those who might not be able to. The Right wants reform of the state first; the left does not want the cause of justice to wait till the state puts its house in order.

Of course, these contrasts are stylized. In principle, few economists of the Right will deny that they are for more social welfare. They just disagree about the means and strategies that will make welfare programmes efficient and sustainable. It is often patently disingenuous of the Left to accuse those championing the cause of trade and privatization to be anti-poor. Nothing could be farther from the truth. As Burke said, those who yelp loudest on behalf of the poor do not always do the most to help them. But it has to be acknowledged that sometimes excessive attention to a particular class of issues relating to efficient markets can render some important welfare challenges invisible. It is more likely that economists on the Left will oppose some of the market discipline and regulatory sanity of their colleagues on the Right. But they have something of a point in bringing to attention the fact that India will, down the line, need not just pro-market reform but something like a genuine welfare state as well.

The debate over the EGA has also revealed much about the economics profession in India. For one thing, there are very few economists who seem to be willing to dirty their hands with what one might call mid-range design of social service delivery systems. We all agree that the state is a corrupt and leaky bucket. But what is astonishing is how little effort goes in to designing better monitoring and incentive systems for state programmes. Admittedly, a very complex cluster of vested interests stands in the way of a real reform of the state. But we are using these vested interests as too much of an alibi to even try. Take, for example, the one thorny issue in the implementation of EGA, the problem of fake muster roles.

This problem could be addressed in substantial measure if we had better monitoring systems. The right to information is one component of such a monitoring system. But an investment in technology and authentic databases would also help considerably. It is absolutely astonishing that one of the IT powerhouses of the world will not use IT to improve the quality of government service delivery. The point is that the debate can now move to constructively designing new delivery systems. But instead it has been caught in the quagmire, where half of our economists are still thinking in very traditional terms when it comes to service delivery, and the other half quite content to reiterate their critique.

Second, Left and Right have acquired material and intellectual vested interests. This allows each side to accuse the other of hypocrisy and thus ignore their argument. Organized labour is part of the Left's political constituency. It therefore sacrifices future job creation by excessively protecting the present incumbents of the organized sector. The Right, on the other hand, is so focussed on its target audience, capitalists, that it feels the existential burdens of many in the rest of society far less. Even if one were an ardent supporter of pro-market reform, it would be foolish to shut one's eyes to the enormous social challenges occasioned by our economic success that will require state intervention. But both sides are content to expose each other's hypocrisies.

Third, there is also a curious kind of self-selection in terms of intellectual interests of economists of the Left and the Right. There are very few from the Left who take things like public finance and regulation seriously as intellectual pursuits, and very few from the Right who bring their analytical talents to bear upon designing welfare systems. They can thus easily remain immune to each other's concerns. And finally, the public debate, at least, is dominated by implausible extremes. On the one hand, you have claims like those made by Surjit Bhalla, that there is very little agrarian unemployment, and on the other hand, those made by Utsa Patnaik that there is very little poverty reduction. In the public debate, such polemical positions simply crowd out the space for constructive engagement.

For what it is worth, we are living in a fool's paradise if we think that we do not need a serious welfare state. A properly run EGA could be one element in the construction of such a state. I happen to think that the scheme is not a bad idea with two caveats. First, we should invest in capacity-building for monitoring; and second, I am not entirely convinced that we should set the wages at minimum wage for such a scheme. But there can be a proper debate about designing the details of the scheme.

But the larger point is that I am not convinced why the Left and the Right have to always talk past each other. Why cannot we have disinvestment and increased social spending' Why can't we have greater labour-market flexibility and more social protection for labour' Does macro-economic prudence necessarily require giving up welfare ambitions' Can tough thinking on incentives and governance be reconciled with a more robust sense of justice' Can there not be a grand social contract where we free up every obstacle to the creation of wealth, but with mechanisms in place to better the condition of the least well-off substantially' Why can't the Left give up on untenable subsidies and the Right its implacable hostility to a measure of welfare'

The Left often speaks a language of idealism without responsibility, the Right invokes the discipline of responsibility without due consideration to justice. If they took each other's concerns seriously, we could have a genuine argument. Otherwise much of what passes as debate is theoretical posturing, an elaboration of self-confirming assumptions that do little to address concrete problems.

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