The definition of madness is when someone goes on doing the same thing expecting a different result each time. The Congress party in its current avatar fits this description perfectly. Its leader is talking about redistribution and jobs without having a clue about either.

Here let’s just talk about jobs and work. Most people don’t know the difference. But the distinction is important.

Some years ago, Modi, with reference to employment, famously asked the people to make fritters, or pakoras. This brought a tsunami of ridiculous derision and sneering from the Opposition and its cheerleaders.

But it wasn’t to them that the prime minister was talking. His message was to the millions of unskilled and unemployed people who looked to the government for jobs so that they could have a regular, monthly, lifetime income and pension.

Forget it, Modi told them. I am not going to encourage this nonsense. And it was absolutely the right thing to do.

Income without corresponding output and productivity is the Soviet model of macroeconomics and development. It’s now being followed by the West. And we know what happened to the USSR and is now happening to the West. Debt and disaster.

Hence the central issue in employment theory: can you have incomes that are not paid for by taxes and borrowings? Modi, intuitively, said yes. Fry pakoras and that way you won’t be a burden on society. Besides, the demand for tea and pakoras is perennial.

Indeed, quite unwittingly perhaps, he had hit upon a key distinction in economics, the one between working for yourself and working for an employer. Or selling your output or selling your time.

The central point in this is that, in the former, self-employment, in order to produce one unit of output, you require far less capital per unit of labour than in the latter.

The importance of this can’t be overlooked because, firstly, we are a capital scarce country which can’t afford to waste capital and, secondly, at any given time only around 25 per cent of those employed by the government produce a positive return. The rest are going along for the ride.

Government employment, as C Northcote Parkinson pointed out in the 1950s, is a form of charity. He was a management expert and could recognise waste when he saw it.

But government expenditure without corresponding output and productivity has become a major problem now, for two reasons. One is political because it allows politicians to promise heaven on earth. The other is economic because it creates unsustainable debt and inflation.

The Americans were the first, in the 1970s, to make this sort of expenditure fashionable, and their economists were also the first to criticise it. But the political allure of large budget deficits proved too great. It has refused to go away. Politicians the world over have taken on permanent liabilities which are wrecking economies.

The economists advising politicians know this but are as helpless as cooks who have to defer to the owner of a kitchen. So far the BJP has deferred to the cooks.

Technology, jobs, work

There’s another aspect to the employment issue which seems like a paradox: the application of higher levels of technology to production processes reduces employment but increases work.

There’s plenty of evidence about this throughout history. The coming of motorised transport and the going of non-motorised transport is just one of a few hundred cases in point.

Actually, however, it’s not a paradox at all. It happens because of the more efficient allocation of capital. But capital doesn’t vote in elections. Labour does. If capital voted and labour didn’t, both employment and work would expand.

But since that’s neither going to happen nor desirable, the problem comprises striking a balance between efficiency and equity. The first step in this direction is to stop equating equity with an income stream that’s broken into 12 instalments payable over a lifetime.

Instead, it’s earnings that should be introduced into the equity calculus, even if it means selling pakoras.

The point is this: even with a lifetime job your earnings can be very low, as indeed they are. But with self-employment you can earn a lot more, as indeed people do. I know this from personal experience.

This is why the Congress party is so dreadfully wrong. It wants to prioritise labour over capital. The USSR did that and collapsed. China didn’t and, despite its current problems, is an economic superpower. The US is going the Soviet way and will end up paying a heavy price, just as Europe has done. The choice before India is thus absolutely clear: skilling and self-employment.