Congress’ NYAY scheme is about macro-economics, not just number crunching

Congress’ NYAY or minimum income scheme won’t make poor and unemployed lazy, it will help enhance wage levels, writes V Krishna Ananth.
Congress’ NYAY scheme is about macro-economics, not just number crunching
Congress’ NYAY scheme is about macro-economics, not just number crunching
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The surprise announcement on Monday by Congress President Rahul Gandhi that his party, if elected to power, will ensure income of at least Rs 72,000 in a year (adds up to Rs. 6000 a month) to the poorest households in the country has stirred the hornet’s nest. I use this phrase – hornet’s nest – deliberately and metaphorically too. The hornet, is a large wasp and when it stings, it injects a venom into the skin causing pain, swelling and itchiness on the person stung.

Economists of the hue that articulate and propagate the idea that the market shall be let to determine the economy of a nation as against the state intervening in any way are out there, as hornets will be when their nests are stirred or disturbed, stinging the world of ideas, injecting a venom that such schemes will only destroy the equilibrium.

The equilibrium, in their view, is stuck in the argument that that in all circumstances the government's balancing its expenditure with its income, i.e. not resorting to any fiscal deficit, is the most desirable policy for an economy. This argument, it may be stressed, was put forward in the early years of the 20th Century by those in the Treasury Benches of British Parliament and to hold against any public expenditure on alleviating the hardship faced by the people.

British Economist Joan Robinson, in her book Economic Philosophy, published in 1962, declared with force that this ‘humbug of finance’ was destroyed by John Meynard Keynes. Although it appeared to have been destroyed and Keynes seemed to rule the roost in the capitalist West when Robinson wrote her classic text, the fact is that Keynes is being sought to be banished post-1990s and incidentally with the collapse of the Socialist bloc.

Wage levels will be enhanced

Let me clarify that it is not the intention (re-iterate again that it is not the intention) here to hold a brief for Rahul Gandhi or his party. And yet, it is imperative for the cause of dealing with questions in economics from the perspective of political economy (macro-economics) and not from the simple neo-classical framework; hence the need to restore Keynes and his economic ideas into the debate on the Nyuntam Aay Yojana (NYAY) or the Minimum Income Scheme is in order.

It is necessary to state at the outset that the scheme is not the same as transferring Rs 6000, month after month, into the bank accounts of the 20% households that will be identified as the poorest in our midst. It should mean that those who fall in this category shall be guaranteed monthly income of at least Rs 6000 per month, preferably by way of creating productive employment for them; and in the event they do not find access to such employment, the money or the deficit shall be transferred to them.

In a sense, it could mean an extension of the MGNREGS in terms of the money they should get. And this is to ensure that the poorest do not die due to starvation. It will also ensure that the wage levels of those already in employment and earn less than Rs 6000 (collectively as a family) will be enhanced and more importantly it will ensure that a large army of unemployed that will be willing to work on lower wages than what is earned by those employed is not generated.

Oskar Lange, a Polish economist who spent most of his academic life in the US, called this phenomenon – of a large army of unemployed persons is bound to aid the capitalist system. This he called a “spontaneous” system, governed by its own immanent tendencies and among them the tendency to reproduce continuously a reserve army of labour. Lange also held that the capitalist state facilitates and even aids the spontaneous movement of this army of the unemployed to seek employment and willing to seek that for wages lesser than that paid to the labour force that is already employed.

Such equilibrium, however, is simply amoral and is potent with social strife apart from shrinking the market for goods that industries produce and reproduce. While imperialist expansion helped overcome the crisis of a shrinking market at home due to under-employment and large-scale unemployment, the world in the post-World War era warranted a different response. And Keynes became relevant and the imperative for the system then.

It is not different now. Keynes and his theory that established that the stress on balancing income and expenditure by governments is simply humbug continues to be relevant and can be dismissed as bad economics only if one does not perceive societal equilibrium and harmony as unwarranted. Hence, it makes sense, to argue for a minimum income guarantee scheme; let it come from any one of our leaders and parties.

NYAY won’t make poor, unemployed lazy

Let me now attempt to make sense of the implication of such a scheme in practice. Where the poorest of the poor is left with some money in their hands, they will obviously consume that by way of purchasing goods; it must be kept in mind that they will not consume such goods otherwise and by extension the market for manufactured goods will remain smaller in the event. In other words, it will warrant a slow-down in the manufacturing sector and thus a slump in the economy.

On the other hand, where the poorest of the poor are left with a guaranteed income through work or such money is doled out in the absence of work, the money will be ploughed back into the system and thus buoy the economy. It may be that a part of such money will go into consumption of alcohol. This is an argument that is viral already and those who make this have not wondered the source of Vijay Mallya’s riches before he ended a defaulter! The King of Good Times, after all, prospered selling brew! And no such scheme existed then.

The point is the scheme as such is not going to make the poor and the unemployed lazy as it is made out. They are poor and unemployed not out of choice. They are poor and unemployed because poverty denied them the access to quality education and hence low on skills and hence their life was reduced to hunger and squalor. They did not choose to be poor, because life is difficult and cruel for those who are poor.

And it is imperative for any society and ours in particular, 72 years after independence, to continue to put out schemes till such time when we will find none who are eligible to avail the benefits from such schemes. To sting poison against any such proposal is to behave like the hornet when its nest is stirred.  

Views are author’s own

V Krishna Ananth teaches History at Sikkim University, Gangtok.

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