How Modi can solve India's Poverty Problem

'Just as the BJP has been harnessing the power of religion for political purposes, Modi needs to harness the power of religious and corporate institutions for poverty alleviation,' says T C A Srinivasa-Raghavan.
Illustration: Uttam Ghosh/Rediff.com

When light passes near a massive object like, say, Jupiter, it bends a little instead of travelling in a straight line.

The heavier the object, the more is the bend.

This sort of change in the presence of a huge object happens to humans also.

From King Kong to Godzilla, Hollywood has made films to depict this.

These films show a massive animal walking into a building or a room full of people, who are going about their businesses, and how this incursion alters their behaviour.

Big things in the vicinity make small things behave differently.

And here lies the key to understanding the disjunction between modern microeconomics and modern macroeconomics.

Microeconomics was not predicated on the massive presence of the State in the economy.

Macroeconomics, on the other hand, is largely about the massive presence of the State.

The result: All the old rules of microeconomics to achieve efficient outcomes have gone out of the window.

Not just that: The larger the State's presence, the more ineffectual have the rules become.

The USSR was an extreme example of that. India is not far behind.

Mind, I am not talking only about the World Bank long ago called 'bureaucrats in business' and the need to get them out of it.

That formulation was about how the gorilla behaved, not the people.

I, on the other hand, am referring to how people behave in the presence of the gorilla.

Modern economics either ignores the gorilla or worse -- as Contessa Sonia de Maino and Saint Jean de Dreze have shown -- thinks of it as a benign presence and makes it grow bigger.

The State benign? Do pigs have wings?

The simple fact is this: Never mind how benign the intentions are, the methods the State employs are designed, inadvertently, to oppress the citizen.

The policies of all our governments since 1957 illustrate this.

All citizens have been continuously and mercilessly screwed since then.

But people like us can look after ourselves. The poor can't.

Enter Gertrude Himmelfarb, of whom maybe only one or two Indians may have heard. She used to teach economics at City College of New York.

In 1984, she wrote a book called The Idea of Poverty in which she said poverty alleviation had far more to do with ordinary morality than with State action, which always degenerates into economic brutality.

Repression is intrinsic to State action.

The financial repression we see in India is one form of that.

The repression of labour that we see in China is another.

Himmelfarb made a simple point which Thomas Marquis de Piketty will contest hotly. She said when objective definitions of income are used to define poverty, the way people think of poverty also changes.

Himmelfarb also said that State action shifts the burden from individuals to groups.

Individual moral responsibility thus becomes a victim, as the State assumes responsibility for the welfare of the poor.

In 1991, she wrote another book called Poverty and Compassion, in which she brought in Virtue.

This was a far better instrument, she said, than Reason for fighting poverty.

Rationality is fine, according to her, but morality is more effective.

That may be why religious institutions do more to help the poor than the State does -- in all countries, throughout history.

Remember Mother Teresa?

Just as the BJP as a political party has been harnessing the power of religion for political purposes, Modi as the head of government needs to harness the power of religious and corporate institutions for poverty alleviation.

All he has to do is mandate religious and corporate institutions to help with the delivery of government programmes.

This is already happening, but in a random sort of way. It needs to be made systematic and there are two ways of doing this.

There's the American way, which requires all charitable trusts to spend five per cent of their annual incomes on 'good works'.

And there's the CSR way, which forces all large companies to help the poor in some way.

But in my view this must be restricted to just three areas: Nutrition for children between the ages of one to five; education for children between five and 15; and health for everyone below the age of 25.

This can be done by revisiting Section 80G of the IT Act to direct it towards nutrition, education and health.

The short point is that Modi must focus on policy and leave implementation to those who do it better.