Saturday, April 30, 2005

EGA, once again.


Via Mall Road's Shivam Vij : Amy Waldman has a report in the New York Times on the much diluted (some would say 'sabotaged') Employment Guarantee Act, about which I have written before.

Read Waldman's report before it goes behind the NYTimes firewall in a week. It quotes both proponents and opponents of EGA; first off the block are the opinions against EGA:
'Where energy and policy should go is how to accelerate the growth, and not be distracted by these old slogans that really made sense 40 years ago,' said Surjit S. Bhalla, an economist who opposes the employment law.

"The finance minister, Palaniappan Chidambaram, made a similar argument in an interview, saying that while an employment guarantee could 'keep the pot boiling once a day,' it would not end poverty. That could be done, he said, only through 7 to 8 percent annual growth and 'real jobs.'"

Then come arguments for EGA:

Mr. Dreze says that even if the poverty-reduction figures are valid, which many economists dispute, the economy would have to grow at a much faster rate than even the most optimistic estimates if it were to truly improve the lot of the poor.

"The way we're going now it is going to take forever to get people to an acceptable living standard," he said.

Even 1 percent of gross domestic product - the expected price tag for the employment law - was a small price to pay for easing hunger, stemming seasonal migration and reducing child labor, he argued.

Thankfully, in spite of the "he said, she said" tone of this first part, Waldman's report does a credible job of describing how things are on the ground. Nothing new to anyone who has been following this issue, though.

Interestingly, Waldman's report discusses both EGA and the mid-day meal scheme (MMS), which has been mandated by the Supreme Court to cover the entire country. She has checked out how the latter works, and needless to say, she has good things and bad things to say about it ("he said, she said" all over again!). What are the good things? "A study by the Center for Social Equity in New Delhi said the program had especially helped retain girls, who are often the first denied schooling in poor families; improved child nutrition; and encouraged mixing among castes".

I too drew a parallel between EGA and MMS in my earlier post in January. The point I made then remains valid today: "I have not seen good arguments against the scheme, only some rants about how it will not work, how our politicians cannot be trusted with it, how we cannot afford it, etc."

Sigh!

4 Comments:

  1. sudeep said...

    >> I have not seen good arguments against the scheme, only some rants about how it will not work, how our politicians cannot be trusted with it, how we cannot afford it, etc.

    I think "it will not work" because of inherent flaws in the way these schemes have been run in the past is a pretty good argument !! Its up to the proponents of the scheme to convince others why it will work, Otherwise, we'll end up with yet another black hole for public money. The road to hell is paved with good intentions, are good intetions this time around a sufficient guarantee that will make this scheme work ? Is EGA the new "temple" of modern India and socialist India ?

  2. sudeep said...

    I went through Venus article that you had posted in your earlier post on EGA. This seems to be the thrust of his argument.

    1) one could also ask whether so much intellectual energy must be expended just to ensure two square meals for the poorest of poor.

    Perhaps Venu should give away the shirt he is wearing to the next hungry man he sees. After all its only a question of "ensuring two sqaure meals for the poorest of the poor".

    2) Most subsidies are given to the not so poor, hence there should be no argument whether more subsidies are given to the poorest of the poor. In addition I should feel bad as I am a middle class person and take state subsidies.

    I think I have already rebutted this line of reasoning. Good money after bad, perhaps ??

    3) Some economists argue that the employment guarantee scheme in Maharashtra has not led to significant poverty reduction relative to other states. However, it can equally be speculated that things might have got worse if the employment guarantee scheme had not existed at all.

    So he admits that the benefits of the EGA are speculation. Does anyone have the guts to gamble with Rs 25,00,00,00,000 - 50,00,00,00,000 based on speculation ?

    Let me reach for my (non-existant) revolver and start a game of Russian Roulette before I do that.

  3. Abi said...

    Sudeep,

    First, please ask yourself if the country (aka society, government, ...) should do anything -- anything at all -- to help the poor get out of grinding poverty.

    If your answer is no, I am not here to convince you otherwise.

    If you say yes, we are on the same side, and we need to consider the next question: how should India's poor be helped. In spite of the fact that EGA is about work (and, not charity or dole), you seem to think EGA is not a good plan.

    Fine.

    Can we then have some other plan that you like.

    I only suggested that conservatives accept EGA as a politically necessary compromise, and work towards ensuring that it is done right: make it self-targeting, maximize its reach, minimize pilferage and corruption, etc.

  4. sudeep said...

    >> First, please ask yourself if the country (aka society, government, ...) should do anything -- anything at all -- to help the poor get out of grinding poverty.

    Sure we should, but this is axiomatic. The distance between this and the arguable necessity of EGA is one that - IMO - is being spanned at present by nothing but a leap of faith.

    >> In spite of the fact that EGA is about work (and, not charity or dole), you seem to think EGA is not a good plan.

    But so was "Jawahar Rozgar Pariyojna" and countless others, why will it be different this time around ?

    I think its time that the government realizes that it *can not* provide jobs to everyone, its simply not competent enough. (Almost) Every single case of prosperity that one sees today in India is not because of work generated by the government, but because the government got out of the way !!

    If the government can't even handle its core competencies (law & order/primary health care/primary education..) how shall they be able to handle jobs and money for such a large number of people ?

    It is from an ossified environment of policy making that such suggestions about "job creation" come about. I am not an economist, but can a job be really created, out of thin air ? Yeah, like the Nawabs of Luckhnow, I can pay someone to build by day and break by night, but thats a dole, not a job.

    The fundamental question is this. There is an economic rationale for the assets created via EGA, or there isnt. If there isnt, then lets stop pretending that EGA is about jobs and asset creation and not a dole. If there is, then why are these assets not being created in the present framework ? Can these assets be created via private entrepreneurship ? Is the Govt. of India the best agency to create these assets ?

    These questions need to be asked, answered and empirically proven to work before yet another big ticket scheme is let loose on the public. Not doing so will be criminal and result only in a deluge of corruption, empowerment of the corrupt and consequent emasculation of Civil Society in India.