Why Are India's Poor So Poor?

Praful Bidwai writes the latest in a long line of tedious, often repetitive articles about growing income and wealth inequality in India. Of course, Mr. Bidwai blames the rich—or the middle class—and the neoliberal policies on which their wealth is based on:

The contrast between this obscene concentration of wealth at the very top, and the prevalence of mass poverty, with the most appalling conditions of life at the bottom, should shock us all. Not only is this morally indefensible and unacceptable in itself; but coupled with deep and entrenched inequalities of opportunity in this super-hierarchical, casteist society, it is especially repugnant.

In his article, Mr. Bidwai cites statistic after statistic to burnish his arguments, weak as they are. Yes, statistics say there is income inequality in India, but they don’t explain why, and neither does Mr. Bidwai. Nor does he offer any solutions except for asking Indians to find the goodness in them and address the pressing needs at hand. In other words: let’s keep on trying till we get it right. This is good sloganeering, of course, but it translates into poor public policy.

What Mr. Bidwai and rest of the left-wing chattering classes really want is a return to the halcyon days of Nehruvian socialism, where everybody was poor, and the government was suppose to be the only fount of wealth, as well as wisdom. If there is a good reminder why government is never a good source of creating wealth, or distributing it, the failure of the National Rural Employment Guarantee Act (NREGA) should be sobering.

Amit Varma from India Uncut writes:

Last month, the Delhi-based Society for Participatory Research in Asia, a non-profit organization, released a preliminary study on NREGA’s governance. The results are shocking. In the financial year beginning in April 2006, only 6% of the households registered under the scheme actually received their 100 days of employment. PRIA’s study also cited shoddy implementation practices across 14 of India’s 28 states. In the surveyed villages, only 45% of registered households had even applied for work under the scheme. And of those households that had applied for a job, only 44% had received one within the required 15 days.

PRIA’s results mirror the findings of another study carried out by the Centre of Environment and Food Security earlier this year. The CEFS study focused on the state of Orissa, and found that about 75% of the funds spent in Orissa had been “siphoned and pocketed by the government officials.” “We could not find a single case where entries in the job cards are correct and match with the actual number of workdays physically verified with the villagers,” the study noted. Out of a total $187 million in public monies spent in the state during the 2006-2007 fiscal year, around $127 million was effectively stolen.

This kind of wastage shouldn’t come as a great surprise. India’s bureaucrats hold effectively tenured positions, and are often unaccountable to the public they serve. Their incentives are tailored only toward increasing their power and their budgets. Government is not transparent, and most common citizens do not contemplate legal recourse against it, as the legal system is dysfunctional and the rule of law is weak.

Poor governance plagues India still, but it hurts the poor more than the middle and upper classes, who have carved out a life in the private sector and are less reliant on the government (as it should be). And in the case of NREGA, money allocated for the poor disappear into the black hole of government bureaucracy and the corrupt hacks who run it. Yet we do not see Mr. Bidwai demonize them like he does the rich. For Bidwai, a government employee—no matter how unaccountable or how inept—is above reproach; who should be put on a pedestal and revered like some Hindu deity.

In essence, the government is the problem, not the rich.