Flagship scheme (Food Security Bill) of Congress towing the lines of socialism and another populist scheme to gain votes in the coming 2014 general election. The problem with the flagship schemes is that flag is waved by party to project the scheme as success but in reality ship is marred by heavy corruption and inefficiency. Political parties simply do not want to look through the issue or rather problem at hand, which is purchasing power and employment, needed by person either in town or city to purchase the goods of his/her needs. Parliament was jammed and ruckus was created on the corruption issues, which is forte of government, but none of the political leader actually wanted a debate on the point that why food security bill (FSB) is needed and how it will create corruption. They wanted a debate on implementation of the scheme but the problem lies with the inception itself, when government allow ELIGIBLE household; 5kg food grain per person per month. The monster in waiting is the failed Public Distribution System (FDS), which will open new black market of food grain like kerosene in the current scenario. It is not rocket science to understand from procurement till distribution everything will have corruption as it is free money to procure, accounting can be tampered and in distribution (FCI) it will be given through ration cards, which is already suffering from heavy corruption. Babus and bureaucrats at the top will take away their share, which is a known facts even though government will deny it, and in middle market middleman and government agent will take their share and finally the local ration unit will eat away as much as he wants. The actual beneficiaries for whom the scheme is launched will be suffering from the hunger and poverty as before and only the handful on people will get benefitted. These handful of people will become cheerleaders for the government phony schemes and will help in propagate the lies that populist schemes actually helps the poor but in reality it never helps the poor.
Burden of finance on economy
Let us take the case of astonishing spending head on, government estimates it to be 1.2 trillion rupees which includes the current FSB also into the food program. This figure is just a tip of iceberg in terms of expansion of spending if FSB gets the see the broad daylight, as to match the requirement to transportation, storage, distribution, purchase and production to meet the requirement, will increase the spending to many folds. As the infrastructure cost will increase and maintenance will become hard to sustain and burden of this spending will fall on the pocket of tax payers. Currently also government offers cheap food grains to 325 million people through the PDS and FSB will be a grotesque expansion of the system which already proven corrupt, inefficient and failed. The worst part is everybody wants to help the poor not by letting poor to work and earn his daily bread to suffice his needs but to offer him something free. This intention to offer something for free need to looked as crime, where rather than taking that person out from his misery makes him dependent upon outside help to survive. This mindset is way too well understood by the politicians and their bureaucrats, who create a system where they just pretend to help poor by allowing them to live a life of parasite, who will always look up to government for his needs. Hence the vote bank politics comes into picture where rather looking at the root cause of poverty, which is no job opportunity. They look at keeping the people in perpetual poverty and in a state of desperation where they just hook up to oppressor (Government) to show their benign intention, like FSB to offer free food. It will not come as a surprise to anyone except the politician and bureaucrats if spending will increase India’s fiscal deficit and rating agencies could very well lead to a downgrade of the country’s sovereign rating to “junk” status.
Plateful buffet for corruption
As soon as FSB scheme will see the daylight, everybody in the government will to too vibrant and delighted to implement it. Here the corruption will be waiting to succor his appetite as PDS system through which government wanted to distribute, is already under deep clutches of inefficiency, delays and corruption. From top to bottom everybody will be in hand in glove with the corruption as it is free food, or rather say free money as in the case of procurement, where accountability and transparency of the system is already too low. At each level tax payers money will be finding some pockets to fill either bureaucrats or ministers or local MLA or PDS shop owner, where money will flow both ways. Corruption will happen when money follow top down approach in procurement and will be drilled down till local shop. Then bottom up approach once the material to distribute, because of lack of transparency, the shop owner will open a parallel black market to sell the good at market rate. Money collected here will take a path of bottom up approach from market bureaucrats to police. Some will argue that PDS system is proven to be good in some state, where they are measuring the success of PDS which less failure or complete failure in other states. Government sympathizers will take up case where it is less than complete failure and showcase for provide an example where success is measured by least failure. This will become a scam in waiting for the government, which will much bigger than 2G but looking at the current situation of Congress, they will not be at receiving point when it will be unearthed in public.
Populist master Stroke but terrible economics
An old saying which always go perfectly is “There is no free lunch and If you want to enjoy something, you have to pay for it.”. To add to it is either you have to pay for it or let someone else pay for your misfortune, case in point taxpayers. So, how can government provide the free lunch, when normal person has to stretch himself from dawn to dusk to get a meal for his family. But Government can just take it by putting more taxation on the items or by making things compulsory which even if the person do not want it but need to have it, for example digitalization of signals. If food security bill comes into picture, it will become a selling point to get the vote in the current election but even if Congress do not win the general election, the corruption perpetuated by FSB will produce a blot on the party who will win election. It will be easy to criticize then government by saying that government is not able to curb the corruption. So it is a win-win situation for congress if it gets to see the light of implementation i.e. A perfect political master stroke. On production side in agriculture industry, investment which is required to make agriculture less labour intensive and more productive is curbed by laws; restricting the business groups. They will bring machinery and expertise along with them to enhance the productivity in agriculture, which already it is in sadden state, being heavily dependent upon the monsoon. If monsoon is not good, which happen frequently in certain areas, farmers who has taken loans, expecting the monsoon, is now debt ridden and no way to repay the debt. Government rather than removing the red tape and let the free market take precedence, government again intervene and gives farmers a loan waivers. This loan waiver also do not help, all the people but only a certain few and rest goes into the pocket of politician and bureaucrats. Socialist will jump on this statement that what will happen to farmers who works on farms they will be unemployed and wages will go down. But in free market where government will not intervene the farmers who cannot be employed in farms will farm the work elsewhere and skilled labour who will be working in farms will be having a better wages and better lifestyle. As even the corporate will need people to perform the task, no matter how much automated a job becomes, people are needed to manage the task, a perfect case in IT industry, where same concern was raised before. This will create a better economy which will help farmers and government don’t have find a scheme to give waiver or free food.
Ruining the market
Best way to explain the government policy is by Milton Friedman statement “The government solution to a problem is usually as bad as the problem.” , which can be easily seen in the policy of subsidized food, diesel, cooking gas, NREGA jobs, so many like the same. This schemes is just change the mentality of people that they can get something without even working for it. The basic need for which person struggles are bread, clothes and home (Roti, kapada aur makaan), for sometime this even remained as main slogan of political parties. The point here is why just to stop at food security bill, why not just go further and start bills like
Clothes security bill (For all who cannot afford clothes for themselves)
Home security bill (For all who cannot afford house for themselves)
Entertainment security bill (For all who cannot afford entertainment like films, matches etc for themselves)
Vacation security bill (For all who cannot afford to go for vacation to exotic location for themselves)
And for all this government has to allocate budget and let the parliament pass the law. By doing all this government becomes the major share holder of businesses which can be easily handled by the private sector. Wherever government intervene they ruin the market of that sector; just have a look at the Government run the Indian airlines is suffering a heart attack and will not recover until government comes out from it. Entrepreneurs and market forces will do much better job by providing the completion and enhancing the quality of material at a reasonable rates. It is apparent when liberalization happened in 1991 ,the entrepreneurs and market enhanced the economic growth in a country like India. They liberated the millions of people from poverty to a decent standard of living which is no meager task. Even if government put all the bogus bill which is mentioned above it will not be able to perform the iota of job, which free market has done after liberalization to IT and other industries. So to bring the actual and meaningful prosperity to people, government has to stop the phony scheme ,remove red tape and provide the infrastructure which will help in reality the entrepreneurs to open industries and give jobs to people.
Free food, money, electricity, jobs or anything which undermines the market and government takes steps to amplify the situation will end up in corruption and inefficiency. If government rather than improving the market engage in schemes than people will start looking for solutions provided by the crusaders; which will drag country down to lines of communism. Already citizens are fed with the corruption in government and elsewhere, so rather than creating a new corruption monster again, economic advisers of government can help them understanding the issue. Even after so many years the economist in the India are still toeing the lines of planning the economy where they support the idea, where government is the only solution to the problem but in reality it is not true at all. The solution to the problem can be summed in a statement that The only way that has ever been discovered to have a lot of people cooperate together voluntarily is through the free market. And that’s why it’s so essential to preserving individual freedom. But in a country where even being economist Prime Minister who cannot see through the real problem is a disaster in itself. We need to get together and make people understand the concept of providing the economic freedom to individual, which will help individual to raise prosperity for himself and society as a whole.