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Times Face-off: Madras HC has criticized the gift culture, but subsidies are not limited to election time. Two prominent economists debate the pros and cons of state support | India News

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Times Face-off: Madras HC has criticized the gift culture, but subsidies are not limited to election time. Two prominent economists debate the pros and cons of state support | India News

The basic forms of support for the poor are not gifts. They work hard, they get small
Surajit mazumdar
Are “gifts” a good idea? Stated in this way, this question almost instinctively invites a negative answer. After all, if everything we use to satisfy our needs and wants ultimately has to be produced or created through human effort, how can the right to claim them without that effort be accepted as the norm? However, the underlying problem is obscured in the process and several implicit assumptions are made that are far from valid.
What are generally known as ‘gifts’ involve governments providing some facilities or services free of charge, or income support (even in kind) to those with low income levels. The fear that is often expressed is that this would erode their incentive to fight and contribute to the productive effort of society. The flip side of the story is that since someone ultimately has to pay for these gifts, providing them involves imposing a penalty on those who are creating the wealth and income of society. However, there are several problems with this understanding:
The first problem is the assumption that the income earned by different individuals or households in society, before any tax and subsidy measure, is basically proportional to their contributions. Income generation, however, is a social process in which different people participate in different ways; Who gets what piece of the pie depends on circumstances other than the amount of your effort. Typically, those who earn extraordinarily little have to work very hard, partly because returns to labor in India are so low and partly because some of them do unpaid work to help support their low-income household. . Even those who are unemployed are not unemployed by choice and therefore cannot be called lazy. On the other hand, those who hoard a large chunk of the pie often do so on the basis of ownership of wealth and inherited advantages, and not just their effort, advantages that high income also allows them to accumulate more. There is nothing natural about the resulting enormous inequality: it is the result of a social process. Therefore, there is also nothing unnatural for society to use the tax and public spending mechanism to improve that. And for those who are too young or too old to work, every society has to find some way to meet its needs. We can hardly say that we are doing stellar work on these fronts.
It’s also worth remembering that so-called gift recipients also pay taxes out of their paltry income. In India, two-thirds of the tax revenue of the central and state governments They come from indirect taxes, and their ‘indirect character’ lies in the fact that those who transfer these taxes to the government coffers and those who ultimately pay them are different.
Therefore, those who are too poor to pay income tax also pay taxes every time they make purchases in the market and their taxes make up a large proportion of tax revenue in India.
The wealthy and the corporate sector are also the recipients of the “gifts.” Everyone shares in the benefits of the services provided collectively, but some may do it in a more advantageous way: think about things like roads or the administration of justice. There are many costs that have to be borne in ‘running the country’ from whose economic life flows benefits that are extremely skewed in distribution. Nowadays, there is a growing trend for even public services to be offered in ways that allow private business, from which the rich profit to profit – think about what is happening with vaccines in India or elsewhere. government sponsored health insurance. Lastly, of course, there are several things that are obviously gifts for the rich: provision of land and other resources at low cost, transfer of assets from public to private ownership, innumerable tax concessions, etc. ‘and some are the result of discretionary decisions made for individual benefits.
India is a highly wicked society in which taxes on the rich and public spending are extremely low. This structural reality is also being reproduced by generating limited employment opportunities that help maintain a world of cheap labor. Between what they earn from work and the so-called gifts they receive, most indigenous people cannot contribute to creating the market demand that will generate the economic activity in which they will be able to find both employment and income. This, instead of millions of people being inactive because they are in some subsidy, is the dominant reality of the country. In this context, declaring that ‘gifts’ are bad is an idea that is not really about eliminating gifts. It is about isolating the political process of effecting any change in this reality, a reality in which some benefit at the expense of the majority.
(The writer is professor of economics at Jawaharlal Nehru University)
AGAINST
This ingrained culture of handouts enslaves rather than empowers
Amartya lahiri
The Madras High Court recently made some scathing remarks about the practice of handing out gifts during election time in Tamil nadu. The thoughtful remarks of the court cannot be but applauded. The gift debate is almost a problem; the idea must be resolutely opposed.
The traditional electoral strategy of gifts is not the exclusive domain of political parties in Tamil Nadu. It has become endemic to both state and parliamentary elections. The promises to pay off debt, provide free electricity, free rice, cash donations to specific constituencies, subsidized cooking gas, and many more are familiar to voters across the country.
These electoral strategies or vote buying tricks are not the exclusive domain of communist, socialist or populist political parties. Parties across the ideological spectrum have found the siren song of gifts hard to resist. In fact, Indian elections have tended toward competitive populism for several decades.
The gift ecosystem has not been limited to handouts directed at the poor. The expectation of state support is ingrained in private companies and is the reason for the repeated bailouts of banks flooded with non-performing assets (NPAs), the regulatory tolerance of large borrowers who do not repay their loans, the lenient disclosure rules in the Stock exchanges for companies that fail to meet their obligations. bank loans, non-payment of the electricity bill that leaves most of the electricity distribution companies in a situation of insolvency, etc.
The expectation of government handouts can also be found in the myriad upheavals across the country by various groups demanding reservations in higher education and employment on the basis of caste and ethnic identities. As a result, 70 years after the adoption of the Constitution, the reserves have persisted and increased in scope. We are also regularly featured on the show of parties that promise additional reservations to selected ethnic groups each election season. Sadly, this all makes a total mockery of the original view of the constituent Assembly that the reserves would remain in force for only ten years. But that, in the language of the time, is just collateral damage.
The gift culture can also be seen in the center-state negotiations. States are now pushing for special BIMARU status in order to purchase additional core grants and packages. Instead of announcing positive achievements and successes, we see some states aggressively and regularly advertise their own ineptitude, all in order to purchase special packages. This announcement of his own incompetence is apparently not seen by state politicians as a potential electoral liability.
It is clear that important parts of politics in India have gradually become rights-seeking individuals and groups. This is nothing more than the logical culmination of a culture prepared in images and experiences of public policy infused with subsidies, subsidies, protection, reserves and regulatory tolerance.
The Indian experience is a healthy reminder of the danger of gifts. They first unlink the results of effort, which then gradually induces a condescension toward effort and a search for easier paths to achieve goals. A by-product of this is a collective corruption of the psyche. Successfully taking shortcuts and cornering, instead of being ridiculed, you are applauded for being “smart.”
All this is not to rule out the role of public social security programs against setbacks in health and employment, or systemic constitutional measures to repair historical injustices through reservations. But these programs have to be exceptions, limited in time and aimed at highly selected individuals and groups. Additionally, they should be designed as a response to clearly identified market failures with an accompanying argument about how the specific program will resolve the failure. Instead, what we have is an expanding list of rights both in terms of magnitude and coverage.
Nothing corrodes the spirit of man more than to remove him from his dignity by degrading the value of the ethics of work and industry. Yet that is precisely what an entrenched culture of subsidies and gifts does. Giving gifts is similar to selling an intoxicant to people that sickens the mind and erodes pride. Instead of empowering man, they enslave man.
It is probably more appropriate to quote the father of the nation Mahatma Gandhi, a man who seems to be regressing in the collective consciousness of the country, who said it all much more eloquently almost a hundred years ago: “Ahimsa would not tolerate the idea of ​​giving a free meal to a healthy person who has not worked for some honest way. , and if I had the power, I would stop every Sadavrata where free meals are given. It has degraded the nation and fostered laziness, idleness, hypocrisy, and even crime. Such misplaced charity adds nothing to the wealth of the country, whether material or spiritual, and gives a false sense of worthiness to the donor “(Young India, 8/13/1925).
(The author is a research professor of economics at the Royal Bank, University of British Columbia)

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