Ghandian Ideas Don't Work in 21st Century India

I forgot to blog about this interesting WSJ piece from a few days back about how current efforts by the Congress Party to provide work to the mass of unemployed are quite lacklustre. Congress Party heirs of Gandhi and Nehru will of course be sensitive to questions of social justice, but you really must question if this is the way to go about it. Although it may provide more ammunition to rational choice types in providing state funds for dubious work projects, I believe that the broader matter of inequality and overall social stability deserves a broader framing than that. While the effects of globalization on inequality in developed countries are endlessly debated--hollowing out of the middle class, barbell society, etc--similar anxieties about how spoils are divided in an increasingly integrated world resonate in the developing world. Having defeated the BJP in the 2004 elections despite most expectations to the contrary given that India's economic resurgence was well underway, the Congress Party is well-attuned to the electoral consequences of those left behind. But is this the way to go?

India has its own version of America's Depression-era Works Progress Administration: a gigantic program designed to create jobs through building infrastructure in a developing nation's most-backward rural areas. But unlike its American counterpart eight decades ago, the Indian program, its detractors assert, is keeping the poor down, rather than uplifting them.

The Mahatma Gandhi National Rural Employment Guarantee Scheme, as the $9 billion program is known, is riddled with corruption, according to senior government officials. Less than half of the projects begun since 2006—including new roads and irrigation systems—have been completed. Workers say they're frequently not paid in full or forced to pay bribes to get jobs, and aren't learning any new skills that could improve their long-term prospects and break the cycle of poverty.

In Nakrasar, a collection of villages in the dusty western state of Rajasthan, 19 unfinished projects for catching rain and raising the water table are all there is to show for a year's worth of work and $77,000 in program funds. No major roads have been built, no new homes, schools or hospitals or any infrastructure to speak of. At one site on a recent afternoon, around 200 workers sat idly around a bone-dry pit. "What's the big benefit?" said Gopal Ram Jat, a 40-year-old farmer in a white cotton head scarf. He says he has earned enough money through the program—about $200 in a year—to buy some extra food for his family, but not much else. "No public assets were made of any significance."

Scenes like this stand in stark contrast to India's image of a global capitalist powerhouse with surging growth and a liberalized economy. When it comes to combating rural poverty, the country looks more like a throwback to the India of old: a socialist-inspired state founded on Gandhian ideals of noble peasantry, self-sufficiency and a distaste for free enterprise [in a nutshell, swadeshi].

Workers in the rural employment program aren't allowed to use machines, for example, and have to dig instead with pick axes and shovels. The idea is to create as many jobs as possible for unskilled workers. But in practice, say critics, it means no one learns new skills, only basic projects get completed and the poor stay poor—dependent on government checks. "It actually works against the long-term future of the poor because it doesn't give them any long-term solutions to poverty," says Gurcharan Das, an author who has written about India's economic development. "It's a Band-Aid solution."

Indian officials acknowledge that the program is flawed, though they say it has provided an important safety net for the 50 million households, comprising more than 200 million people, that have participated in the past year alone. Proponents of the plan, including left-leaning economists and activists, say that because the pay is often better than other rural jobs, it has given workers a bargaining tool to demand higher wages. Echoing the Gandhian ideals for which the program is named, they say workers are also better off staying in their villages, close to their families, instead of moving to the cities in search of work and winding up in slums.

"The scheme has been a big success in creating employment for rural people," Sonia Gandhi, president of the ruling Congress party, told a meeting in February of officials who administer the program. "However, there have been complaints of irregularities and corruption, too."

Niten Chandra, a senior official at the federal rural affairs ministry, says the aim was never to build major highways or other large infrastructure, but to create work and raise wages. He says that state governments, whose job it is to monitor projects and ensure audits are carried out, are at fault for failing in many cases to guard against corruption and unfinished work...

The repercussions go far beyond irrigation projects. India's failure to uplift its poor and improve the economy in rural areas—where two thirds of the country's 1.2 billion people live, mostly untouched by the boom—threatens the country's growth, economists say. India has so far relied on its services industry in cities to fuel growth. But the country is running out of skilled workers and its agricultural dwellers are ill-suited to fill the gap. India's success or failure in boosting the size of its middle class will determine the long-term attractiveness of the market to foreign investors.

Yet the number of people relying on the program is expected to rise after the government earlier this year decided to tie wages to the cost of living, automatically increasing the 100-rupee maximum for a day's work to about 125 rupees in many states. That's higher in some places than the daily wage for farm labor. The result is that many more millions will likely become dependent on the government for income despite a two-decade-old push to reduce the state's role in the economy.

As quaint as it may sound, transitioning from agrarian to industrial or even post-industrial service-oriented societies is still the issue of the day in many of the world's emerging economies. With faith in "trickle-down" economics having been conclusively dashed via the example of developed economies where inequality remains on an upward trend, LDCs are experimenting with alternatives to redress this situation. Still, I have doubts whether a neo-primitivist work programme prone to corruption can help ensure the transition from agricultural-based societies as well as reduce inequalities on a sustained basis.