The Hindu Business Line : The economic fault lines

Unlike geographical fault lines, the economic ones spread disaster everywhere — on the prudent and the successful as much as on the imprudent and unsuccessful. P. V. Indiresan offers a solution to give the poor what they value and is goo d for them too. It cannot be stolen from them, and yet profit politicians even when they do not deny the poor.

There is a solution to the problem of giving the poor something they value and yet profits politicians even when they do not steal from those they are supposed to serve. This unusual asset is a house given on rent. — S. James

ONCE A year, the United Nations Development Programme puts out its Human Development Report. Once a year, commentators on India's economic development cry their hearts out at the absence of any significant progress. That is one day's sorrow. After that day, everything is forgotten; it is business as usual.

This time there is some justification for brushing the Human Development Report under the carpet. No matter how much better Bangladesh is proceeding in human development, no matter how badly we are stagnating at the far-from-creditable rank of 127 out of 177 countries, the Sensex has shot up to record heights. The economy must be doing well. If the poor are not keeping in pace with national progress, those are the unavoidable pains of development. Increasing rich-poor disparity is dismissed by the very elegant expression "collateral damage of rapid economic growth".

This cynicism is partly because experts are baffled. They have revived the Rural Employment Guarantee Scheme, and are willing to pump tens of thousands of crores of rupees targeting the poorest of the poor. Critics point out that such schemes have never worked before. Planners know it but have nothing better to offer.

If money could have solved the poverty problem, there would have been no poor in the country. Finance is not the bottleneck. The problem is not the rich-poor divide either.

The problem is the geographical divide: If we draw a line from Visakhapatnam to Dehra Dun, east and north of the line is poor and getting poorer every year; south and west of it is rich and getting richer every year.

If it had been a geological and not an economic phenomenon, it would have been called a fault line and people would have been warned of cataclysmic earthquakes that will inevitably result.

The widening gap

Economic fault lines are no less catastrophic but with a difference. Earthquakes are confined to the fault line; rest of the area is safe. Economic fault lines are different; they spread disaster everywhere — on the prudent and the successful as much as on the imprudent and unsuccessful. Our country is at risk not because many are getting poorer and so many others are getting richer, but because the poor and the rich are separated geographically.

Although nobody dares to accept it, our Constitution is flawed. It is not an accident that those politicians who keep the poor down get re-elected and those that try to hasten development get defeated. The Constitution provides a premium for those who perpetuate poverty.

All these years, we have been asking how much money we should pour down the throat of the poor to satiate their hunger and thereby raise them above the poverty line. That is not a useful question to ask. Instead, we should ask why do some regions stagnate, and some do not.

There is a simple physical model for stagnation — the parachute. No matter from what height the parachute is dropped, it falls at a constant speed. For our present purpose, a water tank with a hole in the bottom is a more evocative model. Because of the hole at the bottom, some water leaks out. As the water level rises, the rate at which water leaks out increases; at some stage the rate of leakage equals the rate at which the water pours in. Then, there is no further increase in the water level. The tank may be ten feet deep but water may never rise above one foot.

That is exactly what is happening in our Cow Belt. No matter how much money the Centre pours in, the level of development remains the same. The Cow Belt is a leaky tank; politicians are the hole at the bottom.

Politicians come to power not by winning votes, but by buying votes. The price of a vote depends on the education and wealth of a voter. Educated and wealthy voters raise awkward questions. They demand a lot from a candidate before casting their vote, or they may not vote at all. The poor illiterate ones are happy to give their vote for a bottle of liquor even if it is accompanied by an empty promise. For that reason, poverty and illiteracy are profitable for politicians. The larger the majority the poor command, the larger the profit the politicians will make by stealing the money meant for the poor.

Here is a true story which I heard from the horse's mouth. An MP complained to the Central Vigilance Commissioner that her leader had swindled the Rs 2 crore she had for the MP Local Area Development (MPLAD) scheme. She wanted to spend it on improving schools but the leader would have none of it: "Educate them, they will never vote for us," he apparently said. Then, she suggested building roads. The Great Man was agreeable. Give me the money, he said, took it and that was the end; not an inch of road was constructed. According to the Constitution, not even the CVC could do anything. Only the electorate could punish him; they re-elected him instead.

A new reward scheme

This evil can be checked if the law could punish corrupt politicians. That is not possible because laws are made by politicians and you cannot expect them to hurt themselves. We could modify the reward scheme: Make the MPLAD grant proportional to the taxes collected in the constituency. That will force legislators to value development. However, the idea will not be accepted. After all, ours is supposed to be a socialist state; every MP must have the same amount.

The only solution is one in which the Centre bypasses the local politicians and in such a way that local politicians cannot object, and the people do not mind. Let us not forget, the very poor value a bottle of liquor on election day more than a school or hospital that functions every day. Then, the solution lies in giving the poor what they value, something that is good for them too. It should also be such that it cannot be stolen from them, and yet should profit politicians even when they do not steal from the poor. That is, our scheme must have four features: (a) valued by the poor; (b) good for them; (c) safe from being stolen by politicians and (d) enrich politicians even when they do not steal.

Then, we need something that the proprietor can own but cannot enjoy personally, and has to let others have that benefit. Surprising as it may appear, there is such an unusual asset — a house given on rent. The landlord owns it, benefits from the rent but it is the tenant that enjoys (hopefully) living in that accommodation. Then, let the legislator be permitted to use the MPLAD funds to build houses for rent. We may add a stipulation that the houses should be so small that only the poor will want them. Undoubtedly, legislators will cheat. However, they will have to show some evidence, a permanent evidence, of the money spent. So, the poor will get some housing even if they cost less than what legislators claim.

Introduce competition

These are the days of competition. We know that competition does wonders. The problem with legislators is they have no competitors — except at election times. Public memory being proverbially short, that kind of momentary competition does not have much force. They need permanent competition. For that here is my recipe. Give an extra grant, half of what the legislator gets under the MPLAD scheme, to the opponent who got the second highest votes. That would be fun. A monopoly legislator can cheat with impunity. Once there is competition, problems arise. The competitors can collude but they are likely to fall out over the spoils sooner or later. Once one of them decides to cheat less, the other one will be forced to follow suit. Do not under-estimate the power of competition. Incidentally, this idea may prove popular among politicians; with this modification, the number of beneficiaries among politicians doubles. One or two precautions in order: When lavatories were gifted to some villagers, they still went to the fields and used the lavatory as a place to keep their valuables — the lavatory was the only place they could lock anything in. Hence, do not give them a toilet alone without a house to go with it.

Next, make the poor stronger: Build houses in clusters and not separately for individuals. As the SHG programme has demonstrated, once the poor combine (but only in small numbers of five to ten), they get the strength to look after themselves and face the rich with firmness. How will that improve the Human Development Index? It will because most of our diseases are water borne. Hence, a house with a lavatory and water tap will improve health appreciably. Once water is available, girls need not spend half the day fetching water. So, they will have time to attend schools. Once girls, (eventually mothers) get educated, the whole family improves. HDI will therefore go up. Still the question remains: Do our politicians want the poor to prosper?

(The author is a former Director of IIT Madras. Response may be sent to: indresan@vsnl.com)

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