When I was Commissioner to the Government of Meghalaya in 1999-2000, I spent a lot of time and effort in trying to persuade the Chief Secretary, Commissioner for Rural Development and the Secretary of the Planning Commission to consider a pilot scheme for negative income tax in Meghalaya.
The scheme would have implemented the solution that I've been advocating for many years now – a scheme broadly based on Milton Friedman's negative income tax model.
(A preliminary proposal that I circulated on India Policy Institute is linked here).
I even tried my best to get the Prime Minister's office on board. Of course, no one bothered. I was given all kinds of lame excuses.
Getting SICK with a situation where poverty was not being addressed, and bad policies of all sorts were rampant (many in the name of poverty alleviation), I resigned the IAS and left India.
What I suspected has come true. The ABSOLUTE levels of poverty in India have increased, not fallen.
Prabhat Patnaik (whom I met at LBSNAA in June 1994 when he spoke to us on "investment and growth in liberalised economy") has identified this fact, and challenged those who claim that India is a "shining" success.
Although some people will debate his conclusions that "absolute impoverishment of the working people" has occurred in India, I'm not interested in such idle debate.
For me liberalisation WITHOUT A NEGATIVE INCOME TAX is recipe for disaster.
In BFN I vigorously argue for a social insurance scheme. The free society must ensure that everyone achieves a (frugal) minimum even as the society is liberated and made incentive compatible.
Instead of contesting Prabhat Patnaik's facts, it will be more sensible to even now (more than 12 years since I first propounded it!) to introduce a negative income tax program in India that ELIMINATES poverty entirely.
I am an enemy of poverty first, and then a friend of liberty. To me both MUST go hand in hand.
[Note: I wrote a longish post but with an accidental stroke, without saving it on WordPress, lost it! I'm not going to re-type it. (It is horribly frustrating, for a person with RSI and eye strain, like me, to lose my typed work!)]
Basically, all I want to note that in 12 out of the past 20 centuries, India was the RICHEST region in the world (there were no "countries" then). In the remaining 8 centuries, it was the world's 2nd richest region. Only in the 19th and 20th centuries – and now – has India not been in the top two nations in the world.
See details here.
The rules of the game changed between 1400 and 1750. Just like big companies that do not change with the times, die, India almost entirely lost its capacity to innovate by around 1750. Others, earlier far behind, rushed ahead. Every Tom Dick and Harry, including Japan, South Korea, Hong Kong, Singapore, Taiwan went ahead.
India continued to lives in its dreamworld, as confused as Islamic cultures are about their precipitous downfall. Tragically, till today, most Indians REFUSE to recognise that the rules have changed long ago. The competition is no longer the same. It is 10 times tougher.
India can NEVER become No.1 in the world again till Indians realise that they have to play with the new rules.
That means, among other things, discarding caste, stopping the constant religious babble that destroys peace and harms relationships, and the economy. That means building systems that are incentive-compatible.
That India should be doing AT LEAST TEN TIMES better than today is obvious. But achieving that requires a significant change in policies and governance – which have to be radically different to what we have had over the past 60 years.
Unfortunately, none of the existing political parties in India have the remotest clue how to get this to happen.
And so, once again, if you are serious about a very prosperous and successful India, read BFN; join FTI. There is NO other policy known to mankind that can help India achieve its potential; or rather, its natural right.
Why did India not accelerate?
India has lagged badly since about 1750, as the following graph shows:
[Source: Gregory Clark, A Farewell to Alms: a brief economic history of the world, p.321
"the acceleration of advances in productivity came from the supply side. People responded differently to incentives that had been in place for generations. That difference in response was a dynamic inherent in the institutionally stable private property regime of preindustrial England. The characteristics of the population were changing through Darwinian selection. England found itself in the vanguard because of its long, peaceful history stretching back to at least 1200 and probably long before. Middle-class culture spread throughout the society through biological mechanisms." [Source: Gregory Clark, A Farewell to Alms: a brief economic history of the world, p.259.]
Addendum: My blog post is perhaps based on incorrect data. Here's useful information:
A long time ago, as part of my job in the 1980s, I used to visit village Anganwadi centres under the Integrated Childhood Development Service (ICDS) scheme. The situation was quite bad even in the relatively prosperous state of Haryana. But as Sunanda, the Angawadi worker reports (below) in the Economist, she has weighed children for 25 years and "nothing has changed". They remain malnourished.
In BFN I showed how socialism and lack of freedom harms the IQ of children. This is one of the most potent pathways – through malnutrition. We are ruining the future of our country by starving our children. In BFN I also showed how poverty can be ELIMINATED in just three years.
But the socialists of India are more intent on spouting HOT AIR about how much they care for the poor than in actually getting the poor out of the poverty zone. True, this issue is bigger than just poverty elimination (involving education as well), but that is why we need a revolution in the way India is governed.
Putting the smallest first: Why India makes a poor fist of feeding the young, and how it could do better (Economist, 23 Sept 2010)
VISHAL, the son of a farm labourer in the west Indian state of Maharashtra, is almost four. He should weigh around 16kg (35lb). But scooping him up from the floor costs his nursery teacher, a frail woman in a faded sari, little effort. She slips Vishal’s scrawny legs through two holes cut in the corners of a cloth sack, which she hooks to a weighing scale. The needle stops at just over 10kg—what a healthily plump one-year-old should weigh.
The teacher nods and puts Vishal back on the floor, where he sits listlessly before a jigsaw puzzle. That his teacher does not look perturbed is unsurprising. Nearly half of India’s small children are malnourished: one of the highest rates of underweight children in the world, higher than most countries in sub-Saharan Africa. More than one-third of the world’s 150m malnourished under-fives live in India.
That makes the sight of small, skinny children depressingly routine. Vishal’s rural village is not especially impoverished; 120km (75 miles) from Mumbai, India’s financial centre, it offers factory-work as well as the farm labour most country people do. But the battered register in Vishal’s nursery, a government-run centre known as an anganwadi (literally, courtyard), shows that close to half the children are malnourished, a handful chronically so. “It’s always been this way,” says Sunanda, the anganwadi teacher, who has weighed the children in her care every month for 25 years. “Nothing has changed.”
Since 1991 GDP has more than doubled, while malnutrition has decreased by only a few percentage points. Meanwhile, the chasm between lucky and unlucky Indian children is growing: under fives in rural areas are more likely to be underweight than urban children, low-caste children than higher-caste children, girls rather than boys.
Cow’s milk and water
Even the children of wealthier families suffer surprisingly high rates of malnutrition. Government data show that a third of children from the wealthiest fifth of India’s population are malnourished. This is because poor feeding practices—foremost among them a failure exclusively to breastfeed in the first six months—play as big a role in India’s malnutrition rates as food shortages.
Most growth retardation occurs by the age of two and is irreversible.
Often, it starts during pregnancy. More than half the women of childbearing age in India are anaemic—a condition that can be much improved by fortifying food—and 30% of Indian children are born underweight. In healthy infants, this could be corrected with six months of exclusive breastfeeding. But especially in rural India, where women often go back to the fields mere days after giving birth, babies’ diets are often supplemented with cow’s milk and water, which exposes them to infection.
But countrywide the scheme suffers from the usual ailments of public services in India. Recently the production of daily meals served at anganwadi centres was taken out of the hands of pilfering contractors and given to groups of local women.
Fortifying the food handed out by the PDS would be an economical and effective way to lower rates of anaemia and increase nutrition. So far, India has resisted that idea. But most experts agree that the country will make a serious dent in child malnutrition only when it focuses on pregnant women and the very young, perhaps by providing an additional worker in each anganwadi centre to make home visits. “India has missed its big window of opportunity by not giving priority to mothers and the under-threes,” says Victor Aguayo, chief of Unicef’s nutrition programme in India. “It cannot afford to do so any longer.”