consultants are sandburs



Saturday, February 04, 2017

India has better ideas. Our national leadership should look and learn.

The Economist, here, this extended excerpt:

Bonfire of the subsidies - India debates the case for a universal basic income - India should replace its thicket of welfare payments with a single payment
From the print edition - Feb 2nd 2017 - Editorial


ONE of the many indignities associated with being poor in India is navigating the country’s thicket of welfare programmes. The central government alone runs 950 of them; the states operate many more on top. Some are big, like those doling out subsidised food and fertiliser. Many are little more than an excuse for government ministers to stage a photo-op.

The Indian government this week floated the idea of replacing most of these schemes with a “universal basic income” (UBI), an unconditional cash payment that could be disbursed not just to the poor but to everyone (see article). In rich countries, the UBI is raised as a possible response to a world where artificial intelligence and automation put large numbers of people out of a job. But unless technology destroys jobs on an unprecedented scale and creates none in their place, the case for such a scheme is premature. Functional social-safety nets and instruments such as tax credits make it possible to direct money to the needy in these countries. In India, despite its practical difficulties, the idea has a different logic and deserves a more sympathetic hearing.

For one, a little money would go a long way for India’s poor. Over a fifth of its population lives below the poverty line. The scheme outlined this week by the chief economic adviser to the Indian government, Arvind Subramanian, would cut that figure to less than 0.5% by transferring about $9 a month to all adult Indians. If doled out to everyone, that would cost around 6-7% of GDP; the 950 welfare schemes soak up 5% of GDP.

Giving people cash would be far better than today’s system of handing out welfare in kind. The plethora of schemes in place for Indians to claim subsidised food, fuel, gas, electricity and so on are inefficient and corrupt. Beneficiaries are at the mercy of venal officials who can lean on them to accept less than they are entitled to. Payments in kind rest on the paternalistic assumption that poor Indians are incapable of making rational spending decisions. A small trial in the state of Madhya Pradesh debunked the notion that a UBI would be frittered away on booze and gambling.

The idea of including India’s plutocrats in the handout sticks in the craw. The government’s paper on UBI is itself unsure about the “universal” bit of it, suggesting that a quarter of the population should somehow be excluded to make the scheme more affordable. But gauging who is poor and who isn’t has repeatedly proved beyond the capacity of the Indian authorities. Over 35% of the richest 1% of Indians benefit from subsidised food to which they are not entitled. Worse, 27% of the poorest fifth of the population are denied their due.

Questions of affordability would loom less large if the Indian authorities collected more tax—central-government revenues are a measly 11% or so of GDP. And a universal benefit may operate better if the sharp-elbowed middle class had a stake in making sure it runs well.

Universal basic income and poverty levels vary nation to nation, but ours is the wealthiest of all historical time, and with a minor adjustment to the excessive tax avoidance laws the wealthy have bought from Congress more money can be collected. Then, cut the death technology spending somewhat, cut the military officer corps which for a brass heavy military would not be felt but as an efficiency, and lo, the money in our US of A could be raised to allow every person fairness and decency, as rights against government impositions and not as charity.

If there's a will, there's a way. That is a southern old saying taught to me in childhood.

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