The plight of the common man

Perhaps, never in the history of free India could the common man have felt so miserable & taken for granted than now. Prices are soaring, inflation is high, medical expenses are increasing, housing is not affordable, education is slowly getting out of reach of even the famed middle class...with so much happening, all at the same time, the plight of the common man is glaring right in front of our eyes. While the Government of India may be hoping that the new Chief Economic Adviser to the Prime Minister, Raghuram Rajan will work magic for the economy, reality is far from that fantasy. While the economic cost of living a decent life has skyrocketed, the Government is surprisingly mum about the social sector spending. MGNREGA, which the Center boasts as its flagship program to guarantee minimum 100 days' employment per annum to the rural population, the program is actually inefficient because of siphoning of funds meant for the program by middlemen, creating false identity & drawing the money, entire money not reaching the beneficiaries, etc. In addition to this, while the MGNREGA might guarantee 100 days' employment per annum, what about the remaining 250 days in a year? With the costs increasing by the day, the amount the beneficiaries would receive for the 100 days would barely suffice to meet the requirements of food, leave aside clothing, healthcare, & education. Still, the Government calls it the flagship program. 

If equity is one of the most important fundamental rights guaranteed by the constitution, then, any program should ideally result in equitable distribution of resources. Unfortunately, the spate of scams that have been tumbling out of the closet clearly indicates blatant misuse of public office by those in the echelons of power. Even if only 50% of the size of these scams were to be spent by the Government on creating the social infrastructure to build a strong Nation, it would automatically create millions of jobs & a means of livelyhood for the masses. When that happens, the masses will automatically start spending & the economy will bounce back. Cutting down subsidies, while it does bring in short term benefits, in the long term, by cutting down subsidies to the farming sector we are only calling for spiralling prices. In that regard, while freeing the diesel prices to be in tune with market trends, it should be done so only for the commercial sector & not the farming sector. Why should the farmers pay the price for the ills of others? Unfortunately, while the farming community is usually a huge vote bank, it is the least regarded after the elections. The result? Thousands of farmers commit suicide every year. In my opinion, a Nation which does not look after its farmers well, will not be able to create a welfare State. 

It is widely believed that by cutting down corporate taxes, industries will be able to productively invest the money in creating new capacities & thereby create new jobs. Unfortunately, the facts beg to differ. In the US, during the term of George Bush Jr., what happened in 2008 was a collective failure of this philosophy. The corporates just kept on writing fatter & fatter bonuses to themselves while creating an armageddon of economic risk to the global economy & eventually when the entire system collapsed in 2008 (which is nothing but a structural collapse), they all went to Obama with a begging bowl to save them. And when Obama did agree to save them & handed them with taxpayers' money, what did the corporates do? Again, they wrote fat bonuses to themselves. This is clearly atrocious at the least. No wonder, Obama was fuming at the irresponsible & condemnable behavior of the corporates. In my opinion, such corporates should have been jailed for misusing taxpayers' money.  

In economic theory, there is something like a "hidden hand" which takes care when each individual looks after his / her own interest. There is no such hidden hand anywhere. If the hidden hand were to come to the rescue, it certainly did not do so during the Great Depression of 1930s, or the oil crisis of 1970s, & now, in 2008, when human greed was at the peak. There is no way we can afford to say "greed is good". The point is, whose greed & how much of it is good? Because, human greed has no limits, & the resources available on Earth is clearly not infinite. Hence, we should be promoting "live within your means" program throughout the world. Only this philosophy of living within ones' means is sustainable in the long term.

Many people believe in the "trickle down effect" of wealth creation. Ironically, the trickle down happens only at the top...It never reaches the common man on the streets. In the guise of trying to create a feel good factor, we should not be assuming & creating illusory philosophies which are far from the hard facts of life. In that regard, Raghuram Rajan seems to have made the right noises...that the structure of Public Distribution System in India is highly inefficient & corrupt, to tackle the supply side constraints which is also a important contributing factor for high inflation...clearly it can be seen that if the supply side constraints are addressed & the PDS is made more responsive & efficient, it creates win-win situation for the Government & the people. When this is coupled with social sector spending by the Government, we will have the economy bouncing with "animal spirits" which the Prime Minister wants.

On a personal note, I like Raghuram Rajan because he saw the 2008 catastrophe coming way back in 2005. It is another matter that nobody took him seriously...Including the then Fed Chairman...