6th January 2018
Instead of giving free water to the rich, how about eliminating poverty?
I was starting to write a new article and found this old one. I think I had sent it to some newspaper and upon not receiving any response, forgot about it. However, the content is relevant and should at least be on this blog. In time, it could be suitably amended for a further article.
Srivatsa Krishna’s open letter to Arvind Kejriwal (TOI, 27 December 2013) gives Arvind Kejriwal credit where it is due, while pointing out key shortcomings in AAP’s policy capability.
A government must maximise allocative efficiency through competition and better regulation. Thereafter, poverty, not prices should be a government’s concern.
If Arvind wants to help the poor through lower prices, why does he want to fund the middle class and the rich? Indian socialists have typically created vast bureaucracies to fund the middle classes and the rich in the name of the poor. This seems to be more of the same.
The liberal position (which I represent through the newly created Swarna Bharat Party) requires a social insurance system to eliminate deep poverty. This is a safety net if things go wrong. It also ensures reasonable equal opportunity. While the liberal believes that poverty declines with greater freedom, a level of poverty will always arise due to bad luck, bad decision-making or a combination of both. Private charity can’t help everyone in a vast country like India so government has an ongoing role in eliminating dire poverty.
Direct transfer of funds to the poor requires four things: identifying them accurately, providing them an income top-up up to the poverty line, keeping the poverty line low so it doesn’t create work disincentives, and a requirement to work condition so able-bodied persons don’t get paid if they avoid work. This would ensure that everyone works, but if someone can’t work or has been subject to misfortune, he can survive: in frugal dignity.
The challenge that puts off most people from such a program is twofold: how can we identify the poor accurately in this huge country of India? And how can these people be paid? Both are now relatively easy to address.
Identifying the poor accurately was possible even in the past but with improved IT and artificial intelligence, it is now a breeze. We need each family lodge an income tax return for the previous year, to allow the government to estimate the family income for the following year.
This task – of getting each poor family in India to sign an income tax return – not something within the Indian bureaucracy’s feeble capabilities. The private sector can, however, easily perform this task under the oversight of an independent anti-poverty commission. About half a dozen pilot projects can be conducted using the world’s best IT (including digital photos and videos).
Both human and artificial intelligence would be needed to assess the data, including at least two layers of random independent private auditors, with severe penalties imposed for false declaration and/or identification.
Even in 1986-88 I was able to conduct a computerized village level income survey in villages of Assam, which allowed data to be sorted using pre-set criteria. I then personally verified the accuracy of the data through Gram Sabha meetings. The desperately poor are willing to sacrifice privacy, so they would be willing to take an outsider’s help to complete their income tax form.
Once identification is complete, the precise amount to top-up a family’s income could be transferred through fortnightly payments into the family’s Aadhaar-linked bank account. The payment would also include school vouchers for the family’s children in any school of choice, and a voucher for private health insurance. If someone’s income is 80 per cent of the poverty line, he would receive the balance 20 per cent. People receiving such social insurance payouts would have to be randomly audited to ensure they are participating in the market to the best of their ability and not simply sitting idle.
The next year’s income tax return would be used as basis to adjust the payments. If a family earned more than the poverty line, it would be taxed; if not, its payments would continue. Such pilot projects, evaluated after a year, would lead to the full implementation of the program. I expect that poverty would be history within three years. After poverty has been eliminated, all subsidies and the public distribution system would be scrapped.
My calculations show that if the money spent in the name of the poor is directly spent on the poor, poverty can be abolished virtually overnight, with savings to the system.
Beyond the elimination of poverty, Arvind should only act as an umpire and regulator, not directly try to manage Delhi or run businesses. This would allow private enterprise to supply all the goods and services that Delhi needs, and create a Singapore in no time.
There has never been a shortage of funds to eliminate poverty. There has, instead, been significant misdirection of funds towards the middle and rich. Instead of that, if Arvind follows the liberal agenda, he can eliminate poverty and create superlative wealth.
All in less than three years.