my rediff piece: 28 economists write letter to save #NREGA. Ignore them, @pmoindia: kill this idiotic scheme!

October 17, 2014

a significantly edited version of the following was published by rediff on 17 oct 2014 at http://www.rediff.com/business/column/why-it-is-time-to-scrap-nrega/20141017.htm?sc_cid=twshare

they edited out the details of the two older letters i referred to (‘witzel letter’ and ‘binayak letter’) but the rest of it, an analysis of NREGA, is intact. but i had fun with the older letters!

The brave 28 economists saving India from apocalypse

Rajeev Srinivasan on the absurdity of a bunch of economists supporting a wildly irrational policy

There is a last-ditch effort to force India to save one of the most ridiculous legacies of the UPA government, its National Rural Employment Guarantee Act (NREGA). It makes no sense because it doesn’t do skill development, routinely transfers public funds into private hands, and creates hard-to-break dependencies. But most of all, I liked the letter-writing campaign in its support.

I was amused to hear that 28 “eminent economists” had written a letter http://www.ndtv.com/article/india/full-text-of-leading-economists-letter-to-pm-modi-on-nrega-606483  to Prime Minister Narendra Modi telling him, in effect, that the heavens would fall if NREGA were to be touched. I was reminded of two similar letters: one from 47 “scholars” (the “Witzel letter”) supporting an obscure pedagogue in a California lawsuit, and another from 40 “Nobel prize winners” in support of Binayak Sen, accused of treason, and of aiding and abetting terrorists.

The trouble with all these letters is a logical fallacy of “appeal to authority”. It’s as though by waving these people’s credentials about, the proponents can cow down and browbeat into submission even the legitimate concerns of any opponent. But, in fact, the named people may a) not be authorities at all, b) may not be authorities in the subject matter under discussion, c) may have no idea about the proposition and simply signed off under pressure from a zealous proponent.

I found this quite true in the Witzel letter case. At issue was the startlingly negative depiction of Hinduism in textbooks used by California schools, and a group of Hindu parents had sued the school board to fix it. Opposing the case, Harvard University Sankritist Michael Witzel got, as he claimed, “47 world experts on Ancient India, reflecting mainstream opinion”, to sign his letter opposing the parents’ petition.

So far, so good. One would assume that Witzel got world experts on Ancient India to agree with him. But then I found out that, among the signers of the petition (I wrote the following in an article at the time, in 2006, and masked full names to avoid embarrassing people publicly, but I do have their full names and university affiliations):

  1. SP is a PhD in Urban Transportation
  2. RK is a physicist
  3. GGF teaches Roman history and ancient warfare
  4. SS is an economist
  5. AV teaches Central Asian Linguistics, Japanese and Korean
  6. HB teaches post-colonial studies
  7. DR teaches Indo-European linguistics
  8. WB teaches African Studies and Philosophy
  9. DS teaches linguistics
  10. SZ teaches linguistics
  11. JK is a retired professor of anthropology
  12. AK is a PhD in Indo-Iranian linguistics
  13. PD teaches linguistics
  14. RR teaches sociology
  15. RT is a Marxist historian, but she doesn’t know Sanskrit or Tamil, the classical languages of India
  16. Kalpana Desai of the Mumbai Museum Indus Valley Heritage Center, who one would assume knows ancient Indian history, retracted her signature from the Witzel petition

Kalpana Desai dropped out, and that made it 46. Those listed above cannot by any stretch of the imagination be considered scholars in the area of Ancient India, and were just included in the list because, I assume, Witzel could bully them. I also pointed out the absurdity, similarly, of Physics Nobelist William Shockley asserting that blacks were genetically inferior, for which he was practically booed out of academia for not having any idea of the discipline of genetics.

In a similar vein, the “Binayak letter” was co-signed by 40 Nobel laureates, as follows http://www.thehindu.com/opinion/op-ed/nobel-laureates-rally-behind-binayak-sen/article1170207.ece :

The signatories: Peter Agre, Nobel Prize in Chemistry, 2003; Kenneth J. Arrow, Nobel Memorial Prize in Economic Sciences, 1972; Richard Axel, Nobel Prize in Physiology or Medicine, 2004; David Baltimore, Nobel Prize in Physiology or Medicine, 1975; Martin Chalfie, Nobel Prize in Chemistry, 2008; Claude Cohen-Tannoudji, Nobel Prize in Physics, 1997; Robert Curl, Nobel Prize in Chemistry, 1996; Johann Deisenhofer, Nobel Prize in Chemistry, 1988; Richard R. Ernst, Nobel Prize in Chemistry, 1991, and Edmond H. Fischer, Nobel Prize in Physiology or Medicine, 1992;

Walter Gilbert, Nobel Prize in Chemistry, 1980; Roy J. Glauber, Nobel Prize in Physics, 2005; Paul Greengard, Nobel Prize in Physiology or Medicine, 2000; David J. Gross, Nobel Prize in Physics, 2004; Roger Guillemin, Nobel Prize in Physiology or Medicine, 1977; Dudley Herschbach, Nobel Prize in Chemistry, 1986; Antony Hewish, Nobel Prize in Physics, 1974, and H. Robert Horvitz, Nobel Prize in Physiology or Medicine, 2002;

François Jacob, Nobel Prize in Physiology or Medicine, 1965; Daniel Kahneman, Nobel Memorial Prize in Economic Sciences, 2002; Eric R. Kandel, Nobel Prize in Physiology or Medicine, 2000; Lawrence R. Klein, Nobel Memorial Prize in Economic Sciences, 1980; Roger D. Kornberg, Nobel Prize in Chemistry, 2006, and Sir Harold W. Kroto, Nobel Prize in Chemistry, 1996;

Finn E. Kydland, Nobel Memorial Prize in Economic Sciences, 2004; Yuan T. Lee, Nobel Prize in Chemistry, 1986; Rita Levi-Montalcini, Nobel Prize in Physiology or Medicine, 1986; Roderick MacKinnon, Nobel Prize in Chemistry, 2003; Sir James Mirrlees, Nobel Memorial Prize in Economic Sciences, 1996; Joseph E. Murray, Nobel Prize in Physiology or Medicine, 1990; Douglas D. Osheroff, Nobel Prize in Physics, 1996, and John C. Polanyi, Nobel Prize in Chemistry, 1986;

Ramakrishnan, Nobel Prize in Chemistry, 2009; Sir Richard Roberts, Nobel Prize in Physiology or Medicine, 1993; Jens C. Skou, Nobel Prize in Chemistry, 1998; Jack Steinberger, Nobel Prize in Physics, 1988; Sir John Sulston, Nobel Prize in Physiology or Medicine, 2002; Charles H. Townes, Nobel Prize in Physics, 1964; Klaus von Klitzing, Nobel Prize in Physics, 1985, and Torsten N. Wiesel, Nobel Prize in Physiology or Medicine, 1981.

And exactly what did all these non-Indians with expertise in physics or medicine or something know about the situation on the ground, where Communist terrorists – including their leader, Narayan Sanyal, in his 70s, whom Binayak Sen, a pediatrician, had met dozens of times, surely not for medical reasons – have been massacring tribals http://www.thehindu.com/news/national/other-states/maoists-kill-two-abducted-tribal-leaders/article6004863.ece , blowing up policemen http://www.bbc.com/news/world-asia-india-26524542 , and other such democratic and peace-loving activities?

In exactly the same vein, the brave 28 economists are attempting an “appeal to authority” based not on their knowledge of development economics on the ground in India, but merely on their degrees, academic positions, or some such. I have not done a background check on them, but I suspect most of them are from the JNU stable of extreme-left economic thinking, and therefore their neutrality is suspect. These are people who gained from the status quo ante, and they would like to preserve it.

I also wonder if they see themselves like the brave 300 Spartans at Thermopylae, or the boy-with-his-finger-in-the-dyke of Dutch mythology, or King Canute, who ordered the waves to recede. In any case, these people are attempting to stop what they consider an implacable foe, right-wing economic policies.

Is there any merit to the position that NREGA is doing a very valuable service to the nation? Did NREGA in fact accomplish what it set out to do? And what exactly DID it set out to do? I had the frightening experience of listening to a lecture a year ago by Mihir Shah, a member of the erstwhile Planning Commission, who apparently was the ‘father’ of NREGA. (I note in passing this was the second-most scary lecture I have ever been to, the scariest being one by former IAS officer Harsh Mander, he of the purple prose and vivid imagination.)

In the Mihir Shah lecture (he was predictably a JNU/Center for Development Studies, Trivandrum product), the main point he stressed was how much money had been spent on NREGA. He said, and I counted him saying it three times, “There’s unlimited funds for NREGA”. From this I gathered that the intent of NREGA was to spend large amounts of taxpayer money. In that, it definitely succeeded. Absolutely staggering amounts of money have been spent: if I remember correctly, over 2.3 trillion rupees, which is of the order of magnitude of $40 billion over several years (or 0.35% of GDP per year).

That is the amount of money spent by the taxpayer. Most of that would have been siphoned off by intermediaries, although the economists’ letter asserts that “corruption has steadily declined over time”, without any evidence. Rajiv Gandhi famously said that only 15% of any government spending actually reached the intended recipient; that was many years ago, and given the ingenuity of bureaucrats and politicians, it is likely that only 10% now reaches the recipient. That is, NREGA has been a windfall of $36 billion to middlemen, and in particular, Congress Party cadres.

This is a very large transfer of taxpayer monies to private hands. Of course, the UPA government was a past master at this, and it is the same thing it deployed in another absurd policy, Right to Education, which in effect transfers public money to the management of schools run by certain religious groups, and not others.

One of the big problems with entitlement spending is that it distorts incentive structures. Whatever monies reaches the recipients creates in them the expectation that the mai-baap sarkar will hereafter look after them: it becomes a right, that these funds will forever flow to them with no effort on their part. If the government attempts to cut down on social welfare programs, or to induce people to put in some work in return for the dole, there will be social unrest, and it will be political suicide. Thus these cargo-cult activities will be in effect in perpetuity, beggaring the treasury.

The pernicious effects of give-away programs have long been documented in the US and Europe, where “welfare queens” have been targeted for condemnation. It is a fact that periodically, in times of great stress, it is necessary to create make-work schemes so that the poor will have a cash income to purchase scarce goods. This has been done periodically by Indian kings when famine occurred (which, thanks to El Nino, is about every 12 years or so when the monsoon fails). But to make that dole a pillar of the government’s policies does not make sense.

So if Mihir Shah and other worthies saw NREGA as a program to create a crushing burden on the State, they have succeeded. I asked him what the benefit had been for all the funds spent on NREGA. His answer was illuminating: that so many women and SC and ST had been employed by NREGA. The same argument is put forward by ministry officials in http://www.livemint.com/Opinion/tdKbJga16hmXmKs42zHeuK/MGNREGA-A-tale-of-rural-revival.html

But I consider that to be a red herring. The real question is: “How many people have been skilled up and thus able to escape from needing to be in NREGA?” The true success of a program like NREGA would lie in its own irrelevance, that is, people no longer need it as a crutch. NREGA should enable them to climb out of poverty and stand on their own two feet.

But this is expressly forbidden by NREGA rules. Skill development, which is what India needs more than anything else if it is to become a global contender in manufacturing, appears to be outside the purview of NREGA, which is expressly meant for unskilled laborers. While working with a committee on skill development, I found out this startling fact:  you cannot use NREGA funds to train people to get off the dole! What I gather is that you need a specific exemption to be able to do so!

That means the idea behind NREGA is to create a pool of unskilled workers and keep them unskilled in perpetuity, while the usual suspects merrily create armies of phantom employees and other clever mechanisms to cash in on the loot. I have seen this in action: in Kerala, you find that instead of the 1-2 people you actually need for a particular job such as clearing the underbrush along roads, usually 5-6 people show up, which of course ends up in highly inflated estimates of work done.

Besides, there is another pernicious effect, perhaps an instance of the law of unintended consequences. Migrant labor has been a major part of the success of agriculture in the past couple of decades, as poor Gangetic Plain laborers went to places like Punjab to harvest crops. This pool of labor is now absent, as they have been absorbed into make-work schemes in their home states; this probably is a big issue for farmers in Punjab, Andhra/Telangana, and other places with agricultural production.

The prognosis from this is not good, and agriculture, if it is economically not sensible, can vanish overnight. I speak from experience in Kerala. When I was a child, the state was full of productive paddy fields; now, almost all of them lie fallow, because labor costs became unaffordable. That is exactly what farmers elsewhere will do, and I believe they are doing so already: leaving land uncultivated because they cannot find, or cannot afford, the labor necessary. Agriculture, even in developed countries, has some element of labor – my former home, California, depends heavily on its Mexican farm workers.

Thus, from several perspectives on utility and results (but admittedly not on its efficacy in being a black hole for money), NREGA is an absolute disaster. The brave 28 economists tilting against its natural death are like Don Quixote on his nag Rosinante charging the windmills – blissfully unaware of reality; and they ought to be ignored. Indeed, as Jagdish Bhagwati once said, “India’s curse has been its brilliant economists”. With these experts, those in the Planning Commission, and Raj Krishna, whose sole claim to fame was in inventing the racist term “Hindu rate of growth”, it is hard to disagree with Bhagwati.

2250 words, 16 October 2014

Byline: Rajeev Srinivasan is a management consultant. His earlier columns can be found here

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One Response to “my rediff piece: 28 economists write letter to save #NREGA. Ignore them, @pmoindia: kill this idiotic scheme!”


  1. Respected Mr. Rajeev

    These are my concern and query:

    1) If any part of the body got infected then whether the whole part should be pruned or that infection should be terminated.

    2) You have argued that Punjab is facing agrarian crisis because wage hike and decline in low paid agriculture migration from the North India. That means in then name agriculture growth and high income of agriculture farmer, labourer should continued to be bondage at very low wage. You argument shows that success of green revolution was solely based on low paid agriculture labour.

    3) How can you say that there is scarce of agriculture labour if one person from household get job for 100 days. That means rest of days the 265 days he/she might have not be working. Another, thing is that considering the 7 persons average household size (NSSO 2011) at the poorest decile. Is it possible that 2555 (365*7) meal days could meet form only 100 days employment.

    4) For your kind information although NREGA is the brain child of Prof. Jean Drèze, but the actual implementation and program formulation was headed by the then agriculture minister Sri Raghuvansh Prasad Singh who belongs the rural farmer family.

    5) Mr. Rajeev actual flaw in the NREGA is the implementation and corruption by the highly qualified graduate (like you) Indian Administrative Officers and its lower associates.

    ************************************************************************************************************************************************************************
    Mr. Rajeev You have become personal in your argument therefore I may also be little bit personal in this argument. I am very sorry for that.

    1) How many years have you been in India specially rural area.

    2) As per your comment you are also not an development e economist, by manager.

    3) Mr Rajeev without experiencing the agony of socio-economic deprivation and absence of entitlement failure how can you advocate for the welfare of them.

    Best, Kaushalendra Kumar
    IIPS, Mumbai
    kaushalendra.1983@gmail.com


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