27/11/06

they agree with me in mexico..and at the nyt..and the world bank

'In 1995, the Mexican peso crashed and the economy contracted by 6 percent. At the time, Santiago Levy, the deputy finance minister, realized that the country’s antipoverty programs were going to fail its poor. The programs were a hodgepodge of food subsidies, adopted in response to powerful food producers. They were inefficient because they targeted foods everyone ate, rich and poor. Some even targeted foods the poor don’t eat, such as bread – poor Mexicans eat tortillas.
Mr. Levy saw a looming disaster – but also an opportunity to build political support for an antipoverty program that worked. Stealthily, he organized a pilot project to test a new idea in Campeche, far away from the capital so it would draw little notice. He began a program to pay poor mothers to keep their children in school and take their kids to the health clinic. He compared the results to poverty figures in a group of similar villages without the program. It was a great success. Data in hand, he persuaded President Ernesto Zedillo to phase in the new program and phase out the food subsidies.
Oportunidades, formerly called Progresa, is now embraced by all parties in Mexico and, with financing from the World Bank, is helping virtually every poor family. It not only focuses antipoverty spending on those who really need it, it does so in a way that encourages families to break the cycle of poverty for their children.' (from this blog).

looks familiar? doesn't it look similar to what i had suggested a few months ago in this post ?

'why do they pay so little attention to the non-voting children in mahbubnagar as compared with the voters in mumbai? a simple dole of ,say, rupees five hundred a month (which is what, almost, the current bill assures) to rural parents who send their children to school would not only cost much less than what the current project would but also a. stop the migration and b. protect the rights of the children.would you call that charity? most of the subsidies and other giveaways intended for the poor are today cornered by the more privileged classes. why shouldn't the poor have their share? but that would not be elaborate enough for the wise men.'

that was actually a part of a long comment i had originally made here on a dilip d'souza article on the employment guarantee act (which i had reposted on this blog as an independent post). this idea had taken a hazy kind of shape in my mind around two years ago when i had started looking at poverty alleviation programmes in india a little closely. i had nursed serious doubts about their efficacy for more than a decade but..ordinary, well-meaning citizens in india don't usually question these programmes hard enough...and they usually let their hearts rule over their heads in these matters. but the nrega was a kind of last straw for me..because i knew, whatever the intentions behind it, it was going to miserably fail. but that wasn't why i primarily objected to it, there were other reasons...and chief among them was that it was a shortsighted program - it didn't address the problem of future poverty, because it ignores the causes of present poverty. worse - it takes money away from programs which would actually help the most in fighting future poverty - schools. funds for the nrega would mean that the much needed increase in the woefully inadequate funding schooling, and education in general in india receives..can be ruled out for a long time.the upa govt had promised to increase budgets for education upto 6% of gdp, as first prescribed by the kothari commission way back in the sixties. now, how can that happen? the twin objectives of my idea were to address both the problems of a.illiteracy b. poverty, in that order, because poverty can't be solved without solving the problem of illiteracy, in my view.

the idea, in a nutshell, was that the govt pays rural parents a certain allowance/dole/sum every month to encourage them to send their children to school. the design of the plan was simple: direct transfer of funds every month from delhi to every villager's doorstep. please read the post and the comments to get a better idea. my contention is that the idea has better chances of fighting leakage and corruption that plague most such schemes in india (because it is based on direct transfer of money from delhi to the beneficiaries...and does not, as annie of known turf and otherindia presumes in the comments, involve any other agency in this transaction).

now, i am pleasantly surprised to find that there are other people in the world, much more important people, endorsing a program that so closely resembles an idea that i'd thought up! the mexico program is now being touted as one of the most successful anti-poverty programs, alongside eight other great endeavours such as universal vaccination, de soto's ownership titles for the poor idea and microcredit etc., Read more about those eight programs on the Poverty & Growth Blog of the World Bank Institute here.

18 comments:

Venu said...

Actually, Milton Friedman had the idea of a negative income tax long back (he mentions it in Capitalism and Freedom) and that is the inspiration for the EITC program in the US which has been an (apparently) effective anti-poverty tool. Charles Murray too recently wrote a book called "In our hands" where he proposed that the welfare state be replaced by an annual cash dole to all adults (his aim was much more radical and ambitious than just eliminating poverty).

Interesting article.

gaddeswarup said...

In another blog, I was about to point out (but did not) that Kuffir came up with a similar idea. It.is interesting that Kuffir's idea came from thinking about real life situations about bureaucracy, waste, corruption etc. I am not sure about Freedman's ideas. He was a brilliant man and had several ideas. I hope that Kuffir will develop his ideas carefully without reacting to left and right. I am a bit surprised by his fascination with Shrivtsva'a article, but Kuffir seems to have thought long and hard about some of these problems.

kuffir said...

welcome back! glad to see you active again.
yes, i'm aware of friedman's idea of negative income tax and the eitc.. and doles have been discussed for so many years across the world..but very little in india itself.. i find friedman's concept un-implementable in india right now because so little of india's economic activity is actually recorded.. and the reach of the taxing agencies is so pathetically limited. and their resources aren't able to monitor the activities of even those who pay taxes..
i am pleased with the mexican example, not because it proves my own theory...but because it tells us that it could work in india too!
we face similar problems and our resources are similarly limited..and our implementing agencies resmble each other in their inefficiency.. we're both third world!
also, the mexican program focusses on such important goals as education and health..which almost all poverty-alleviation programs in india ignore..
on a lighter note...have you visited blogbharti?

kuffir said...

swarup garu,

thank you for the endorsement..but which other blog was discussing a similar idea? and who's shrivastava? do you mean d'souza?

gaddeswarup said...

I meant this article of Arun Shrivtsava about which you posted in blogbharti. It is as left wing a conspiracy theory as one can imagine. For all I know, he may be right. But my feeling is it is unproductive to pursue such lines. It is perhaps advisable to see what is possible and go along with other parties as much as possible pretending to take their statements at face value. Usually the other parties in spite of their plans do not have their way. Secondly, I think that there are no universal solutions, one has to figure out what suits a given region at a given time and what is possible.
There were a couple of posts in nanopolitan, one about the govt.giving cows to farmers and another about friedman's negative tax propsition. I think that you responded in one of them.
All this is vague. Since I do not have any deep local knowledge, I try to just observe what others say after preliminary discussions.

Venu said...

You are right that the reach of the tax agencies in India is limited.

Blogbharti seems interesting but it is a high-frequency blog. I will read it more once I finish the quarter..

kuffir said...

swarup garu,

you read me wrong - my objectives on blogbharti are quite different from what i do here - if i link to a post on blobharti, it doesn't mean that i endorse the blogger's views.. quite often, my own personal views could be quite different from the blogger's i link to. my job on blogbharti is to spot and find any view that seems to be reasonably presented and..needs to be heard, adds to the wider debate. in the particular case of shrivastava, i don't actually like many of his ideas - but my view is that we in india tend to ignore environmental issues..often. i've referred to claude alvares' name in the headline - he was an environmentalist who was very active in the seventies-eighties and often wrote about them (environmental issues0 in the mainstream press like the 'illustrated weekly' etc., i once attended a lecture of his in hyderabad.. he had warned us of the ill-effects of the green revolution back then..it is only being echoed by several people now. maybe we should have paid him a little heed back then.
it's not just the environmentalists- i've been exposed to ideas across the indian political/social spectrum...like the hindutvavadis on one end and the militant leftists on the other and everyone else in the middle...and as you pointed, one can/should only agree with the little that's reasonable,if any, in their arguments.
yes, i agree with you that one's views shaped by one's own local/national roots and the solutions too would then..spring from there. you'd have noticed i made the same point on nanopolitan. i'm kind of a loner in the blogworld..in that way. because i don't agree with rigid stances on either side of the spectrum.

Anonymous said...

Hmm...very interesting article and idea. However, I'm wondering about your claim that the way your idea will be implemented will not open up new avenues for corruption. Who decides which families receive this dole? Won't corruption seep in through that entity or agency which checks the eligibility of families that can receive such aid?

I haven't read all the articles you have linked to so I might have missed it but but I'm wondering how much expenditure this scheme will entail if it is ever implemented. Has anyone made any rough estimates? Does the Indian govt. have that kind of money minus the usual seepage of corruption and inefficiency?

I'm going on a tangent here but how can one minimize corruption if such a scheme is ever implemented?

Anil said...

Hmm...very interesting article and idea. However, I'm wondering about your claim that the way your idea will be implemented will not open up new avenues for corruption. Who decides which families receive this dole? Won't corruption seep in through that entity or agency which checks the eligibility of families that can receive such aid?

I haven't read all the articles you have linked to so I might have missed it but but I'm wondering how much expenditure this scheme will entail if it is ever implemented. Has anyone made any rough estimates? Does the Indian govt. have that kind of money minus the usual seepage of corruption and inefficiency?

I'm going on a tangent here but how can one minimize corruption if such a scheme is ever implemented?

(Sorry for the double posting, I forgot to include my name in the prev comment).

kuffir said...

anil,

thanks for finding the post interesting - my primary aim was to toss up the idea, kind of in the air, and test how it sits with people genuinely concerned with this issue like you..i was expecting much derision and ridicule but..the nature of your comment shows that there is such widespread frustration among people on this issue that they're willing to consider any alternative seriously..

in its crude, unrefined form (meaning it can/should be improved)the idea translates into these elements -
* nobody selects the beneficiaries..the children, which means the parents in practice, select themselves. which means it's universal like the nrega (the strong left element in our politics would accept only those kind of programs)
* corruption can't 'seep in through that entity' because there is no such entity. but corruption can seep in if the programme is not effectively monitored - for instance, the parents or someone in their name, could be 'receiving' the money but the child is not in school. false identities could be created. but some of these steps/factors could reduce it to the minimum-
a) a countrywide census that records, apart from regular data, biometric information on all citizens of the country
b)regular check of student attendance rosters against stored data...some biometric elements can be checked and identified in less than a few minutes by new technology that's available, and not so very expensive - some countries are using them extensively. if you are a techie (as seems to be the norm in the blogworld :))you'd be more aware of how technology can be applied in these things,
c) from the population figures available..i've made an estimate that a large majority of families in rural india have children below the age of 14.. which means a majority of citizens in a village could be beneficiaries..which in turn means everyone/anyone could be monitor the program and ask if any child is not in school- why is he/she not in school? it could build positive social pressure on parents and others.
d)ngos in my view could play a better, more useful role in monitoring this program than they can in actually delivering education themselves.. their resources being limited the role they can play in delivering education would be very, very marginal. bit in a monitoring role, they along with other social/political/religious activists can play a role more in keeping with their resources and their strengths.
e)it could be built into the law that a single child outside school would mean the whole village stops receiving the dole. similar punitive measures would mean that everyone..not just the education and social welfare, labour etc., departments would be monitoring the education of every child.
f) a massive propaganda campaign needs to be conducted to make every villager aware of the program - just as (universally as) they are aware of the 'right to vote'. in this campaign too - ngos could play a significant role.
g)there are 'n' number of ways in which money sent from delhi could be siphoned away midway.. here too technology should offer workable solutions.. the money could be transferred directly, electronically, to nearest bank in the village. or to the nearest post office, telegraphically..maybe every family (or woman of the family)can receive a kind of smart card that contains biometric information too.. the experience of the nrega has revealed that even post offices (post masters, actually)have become a part of the problem.. but this can be overcome through the consistent dissemination of information through the campaign i mentioned earlier..
* despite all the measures i suggested there could/would still be a certain amount of leakage/corruption in the program..but this could restricted to 15-20% ..but it will never reach the levels of other 'schemes' where 70-80% is the norm.
* now, the money..the mere figure would probably mean nothing to lay citizens..unless a comparable alternative (to measure against) is offered. let's take the nrega - figures/estimates about this program vary from 50000 crores to 100,000 crores and much above (when it is expanded to all the districts in the country..and then reaches all potential 'workers'). around 40% or more of the nrega scheme would actually go towards adminstrative and material costs. so the poor, if the scheme is implemented with 0% corruption, would get around 25000-50000 crores as their total wages.
i'll let you mull over the figures a little..remeber 0% corruption.

kuffir said...

less than 10% pro-poor

kuffir said...

anil,

to continue my elaboration - the costs.. what's important here is to note the difference between other 'schemes' and the program i suggest is in terms of a)leakage b)duration of returns c)measurable outcomes..roughly.
the link i left in the preceding comment tells you about the 'progress' of the nrega this year..here are a few more links - progress of nrega in bengal and progress in karnataka ..
the performance of the nrega, in terms of people reached, and the leakage as you can see is abysmal..the returns are very short-term and no one has any clue as to how the outcomes can be measured. in the program i suggest, on the other hand, leakage/corruption can be checked to a great degree as i outlined in my earlier comment, the returns would not just be short-term..but also consistent. and they'd translate into a secure future for the beneficiaries and their children! they're definitely measurable..through a simple head-count of high school graduates.
now the budget - we have various estimates which suggest that 25-35% of indian population is below 15. i'll take the higher figure of 35%. around 65% of the population in india lives in villages - let's say around 65-70 crores. approximately 35% of these rural population are children below 15 years..that'd come to a figure like 20-24 crores or so. now, considering the fact that most families in rural india have more than one child...let's say the number of families with at least one child below fifteen would be around 10-12 crores.. (this is guesswork..but you'd agree it's not way off the mark).. so, as the intention of the program is not to encourage people to 'produce' more children - the program would be restricted to one allowance per family (no matter what the size of the family).. so we have an estimate of around 10-12 crore beneficiaries. some estimates say that there are only sixteen crore children of schoolgoing age in rural india.. but roughly, these are rupee costs..
* an allowance of rs.500 per month, per family (mother of the child should be designated the guardian of the child) would work out to rs.6000 per year, per family.
* the total costs of the program would work out to anything between 40,000 crores to 72,000 crores per year(depending on the actual no.of families)
* now the nrega, as i pointed out earlier, would eventually cost much more than that..and half of that would be administrative costs etc (leakage not included)..and if it is eventually expanded to include every working age citizen in rural india, the figure could go up by much more than two times.
* this program, on the other hand, can be phased out..as and when one whole generation of children is educated..because educated parents don't need to be 'bribed' to send their children to school..(that'd mean in ten-fifteen years time)
* even if the allowance is halved, it'd still mean a sizeable addition to the incomes of families in rural india..especially the landless poor who constitute 43% of the population of the villages..
* i don't need to tell you about other positive effects this could have on the rural A)economy B)society.
* more than the resources..what this program requires is a massive reorientation of govts in the centre and the states.. they'd have to put education/health and other 'capabilities-building'(i am inserting my own understanding of amartya sen's prescription here) policies on the very top of their agenda..the centre and the states together have to spend a massive 100,000 crores more on education (to raise it to levels of 6% of gdp)every year..more schools will have to built, existing schools would have to be strengthened and made education-worthy (my question is why can't we build schools that we all can be proud of..modern, fully equipped, fit for the twenty-first century?)more teachers would have to be employed..
* to make all that work more attention needs to be paid by the govts (centre and states) to education (than to other departments)..which would mean that they've to shed/decentralise many of their functions,
* the resources would be more of a burden on the states, individually, than the centre (even the a major portion of the dole would have to come from the centre like in the nreaga scheme)..because they've to start pouring more resources than they're doing now into education..kerala, consistently, spent around 20-25% of its budget on education for many years after 1971.. states like andhra, u.p., and other bimaru states spend less than ten percent on education(and what's the school education component?)..
* the centre and states would've to restructure their 'welfare' spending...this program can replace a host of resource-guzzling inefficient subsidiea/giveaways etc at the centre and save the states from competitive spending on such silly schemes as 'free television sets' etc., this program could actually reduce spending on 'welfare' through its efficiencies..
*so the resources can be mobilized...provided our govts can generate the political will..

Anil said...

Thanks Kuffir for the detailed analysis and info, thats a lot of food for thought. Will get back to you after I go through all the links.

Anoop Saha said...

When my parents were in a refugee camps in 60s, every family were given around Rs. 50 by the government (which was a large sum at that time). As a result, many families stopped looking for other avenues of earning and stagnated. This caused more harm than good compared to the cases where families were given livelihood options (land, shops, etc.)

While I don't discount the theory of incentive based approach, more research is needed to prove that it can be more practical. Taking away subsidies because the government is unable to plug the holes is like punishing the victims twice. The poor actually suffer because of diversion of subsidies to other quarters, and effective mechanisms are required to plug the holes.

About NREGA, at worst 2% of our GDP is going towards NREGA. A vast section of our rural poor remain unemployed for certain months, and it is the state's responsibility to provide them opportunities to find work. However, NREGA needs to be more imaginative. Other than infrastructure projects, the funds can be used for livelihood training. A percentage of people can be trained in some easily acquired skills. I see vast potential in NREGA in transforming rural life.
As per money for other purposes, they can come from other areas. There is no contradiction in allocating 6% in education, 10% in health and 2% in nrega.

Cosmic Voices said...

I think the problem is fundamentally in our mindset. Cash is a very dirty word. I remember till I left my school I was never given cash. Parents say "Ask what you want and we would get it". The unsaid part of the reply would be "provided we think it is worthy". It is the same psyche that runs through out. Right from the most basic institution, family, to the most complex, Govt and international agencies like world bank. Everyone thinks that the poor are unintelligent, unimaginative and irresponsible. Hence, the govt (read babus) have to take the "white man's burden" of "guiding" (read deciding, regulating and monitoring" the amelioration of the poor.

Cash would lead to unproductive expenditure, they and even I thought once. But if you are really serious about the money going into booze, why do you auction liquor licences? On a serious note, irresponsibility towards family is matter personal perversion. It is not and cannot be linked to poverty. The chances of a father being irresponsible in a rich household is in no way lesser than a poor one.

But we cannot come into terms with this fact. The poor have to be ignorant and irresponsible. Hence don't give them cash. Instead give them work (even if it mean filling and digging wells). Give them grains (even if it means that they have to transported over thousands of kilometers benefiting rich farmers and transport companies).

I again repeat what I said in the comment to the previous post of kuffir. The govt spends Rs 3.65 to tranfer Rs 1 of food subsidy. The case would not be very different in other subsidies/programmes.

I agree there is a chance of leakage and corruption in the identification of beneficiaries. But that is common to all schemes. But where doles might score against others is that there is no further leakage in terms of deciding what "asset" should be created, which contractor should create it, how much should it cost, etc.

Ultimately, all the welfare schemes must ensure capacity building, not infrastructure (a very catchy word in the 10%-aspiring-era) building.

As usual, a very nice post and nice links. :-)

kuffir said...

anoop,

i thought i wouldn't need to point out how the dole idea is better than nrega considering i've already done that at length in my earlier responses to anil.. but i'd like to respond one important point that you raised -
'As per money for other purposes, they can come from other areas. There is no contradiction in allocating 6% in education, 10% in health and 2% in nrega.'

let's look at this possible scenario - the nrega, let's assume, reaches all families in the rural india without exception, as it is intended, in the next three years. that means:
1) it has reached around 12-15 crore families (this is a guesstimate based on the assumtion that the villages constitute more than 65% of total indian population). let's settle for the figure of 13 crore families..meaning 13 crore 'workers'.
2)at around 100 rs a day per worker for a hundred days a year..the total wages for each worker for a year works out to 10,000 rs. for 13 crore workers the total wage bill would be around 1,30,000 crores.
3)if you a figure of another 1,30,000 crores to account for the administrative and material costs associated with the nrega..the total budget for the nrega would increase to 2,60,000 crores a year.
4)the estimated total expenditure of the central govt, on all heads, in 2006-7 is around 5,50,000 crores. if we assume the increase in total expenditure in the next three years is around 10% a year ..then the total expenditure, three years from now, would be around 7,80,000 crores. or a total increase of around 2,30,000 crores.
that'd mean the total increase in expenditure would all have to go to support the nrega- and that still wouldn't be enough.
this would mean a) there can be no increase in expenditure in any other area by the central govt and definitely not in education.
for expenditure on education to reach around 6% of gdp, the central govt on its part would have to spend an additional 40,000 crores or so a year..the rest of the increase of around 40,000-60,000 crores would have to come from the states. nothing less
than an increase of 100,000 crores from the current levels would meet the neglected demands of the education sector. now, you tell me whether this increase is possible with the nrega..
as for nrega being better than a dole i'd say..cosmic voices presents a much better case against that idea.

kuffir said...

cosmic voices,

'Everyone thinks that the poor are unintelligent, unimaginative and irresponsible. Hence, the govt (read babus) have to take the "white man's burden" of "guiding" (read deciding, regulating and monitoring" the amelioration of the poor.'
that's a brilliant summing up of the attitude of our rulers. i couldn't have said it better. i should remind myself that i need to visit your blog at least twice every day to sharpen my wits. thanks for the endorsement.

Cosmic Voices said...

"visit your blog at least twice every day" .. I am honoured :-)

But my belief remains that its me who has to always learn from you

 
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