Friday, February 29, 2008

On the Micro Economics of Efficiency: Suicide in India and the Politics Amelioration

One of the great things about democracy is its responsiveness to crisis. Unfortunately, the motivating crisis tends to center on the re-election of a government. Likewise, the greatest benefit of free (more or less) markets, are the long term aggregate wealth maximization that serves as its (aggregate) social reward. Unfortunately, the long term is paved with short term misfortune.

The reality of both of these insights is nowhere more apparent today than in India. The English newspaper, the Guardian today reported on the pledge by the Indian government to forgive about £7.6bn in agricultural loans. See Randeep Ramesh, India Pledges £7.6bn To Combat Rural Suicides, The Guardian (U.K.) March 1, 2008. The object was to try to stem the rise in suicides among Indfian farmers unable to pay their loans. "In India millions are driven to despair by their inability to pay off loans of a few hundred pounds. Figures show that more than 166,000 farmers have killed themselves since 1997 - a death almost every half an hour. The farm sector is a key part of the economy, employing two-thirds of India's 1.1 billion population." India Pledges £7.6bn To Combat Rural Suicides, The Guardian (U.K.). The finance minister was at pains to suggest that the reason for this great forgiveness was to include Indian farmers in the great economic surge that India has been exdperiencing this decade.

Curiously enough, the consequences of this one time event was viewed somewhat differently by political analysts: "Analysts described the giveaway as the biggest in India's banking history, and said it signalled an early election." Id. What appears as a mercy to some--an effort to use th e state to transfer wealth to the poorest sectors of the economy, can easily appear to be a sophiscated scheme for vote buying by others. ""It is irresponsible economics. To revive agriculture you need to build canals, roads and warehouses, not indulge massive populist sops," said Mohan Guruswamy, director of the Centre for Policy Studies, a Delhi economic thinktank. "Every government now will look at writing off loans to win votes. The neglect has to be stopped but not like this."" Id.

And, indeed, in a world order governed by principles of democracy, the line between state economic policy and corruption of the most fundamental sort is difficult to see. And what appears to be economic policy with a great social mission, may be neither. Where government policy becomes a veil that barely hides a quid pro quo relationship between the electorate and the political classes, the character of the state changes dramatically. States no longer operate for the benefit of the community as a whole, but for the benefit of those classes who seek to control its apparatus. And thus we see the glimmerings of this sort of state enterprise through the loan forgiveness program—a general fighting over the spoils of distribution: “In television interviews, many farmers said they were pleased with the government plan. But some landlords were angry that only those farmers with smallholdings - less than 2 hectares (5 acres) - would benefit from the welfare package. Rival parties said the money was too little too late. The government's Communist allies said many farmers were indebted to private moneylenders and would not get the money, which covers only bank loans. The finance minister said the details of the scheme would silence doubters.” Id. This is the African problem as well. States that serve as little more than institutions for the control and distribution of wealth among those who control its institutions become something other than classical states. Or perhaps they revert to the more traditional form of state. This is not good news for those who still embrace traditional notions of the state and the purpose of its apparatus.

Even so, the policy does have some benefit—suicides will drop for the moment. But only for the moment. The cause of the suicides—the need for loans for the maintenance of enterprises that are not economically viable in the changing economic landscape of India—is postponed. The solution, throwing money at some of the affected farmers, treats the symptom but leaves the problem for the successor government to deal with in turn.

1 comment:

Anonymous said...

Obrigado por intiresnuyu iformatsiyu