Caring for the Poor, at Nation Level

A lot of us dislike pro-poor policies to varying degrees. Reasons include misuse and abuse of such schemes, leakage (corruption), and resentment that tax payers money is “diverted” to the poor. But, says Karthik Muralidharan in Accelerating India’s Development, we should support such schemes for 3 reasons.

 

Altruism: If one is charitable at a personal level, then surely one should support such measures “at scale”. But, yes, the effectiveness of the state has to improve.

 

Patriotism: If one wants the country to be strong economically, a strong and productive workforce is key. That requires education, health and justice systems to be well established, so we should support policies improving those.

 

Selfishness: The elites and middle class suffer too. An inefficient workforce translates to lower productivity and higher cost of goods. An ineffective health system means the cost of illness has to be borne by individuals.

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There are many who believe in strategic philanthropy. This refers to philanthropy in areas with the highest social return on philanthropic investment. This may sound strange (return on philanthropy? Isn’t philanthropy about giving without expectation of returns?), but the keyword there is “social return”, i.e., returns to society, not returns to the individual making the donation.

 

How does strategic philanthropy help? An example with real numbers helps understand. Governments spend ₹7,50,000 crores on education. A gift of ₹1,000 crores to build schools raises the budget to ₹7,51,000 crores. Whereas a strategic investment that improves the effectiveness of education spending by even 1% would yield efficiency gains of ₹7,500 crores. Put differently:

“Traditional philanthropy is additive to the public budget, whereas strategic philanthropy that even modestly improves state effectiveness can generate multiplicative benefits.”

Rohini Nilekani is one of the famous proponents of strategic philanthropy.

 

Take Aadhar. Digital Public Infrastructure (DPI) e.g. UPI, DigiYatra, eKYC etc were built on top of Aadhar to form the India Stack. Not only is Aadhar a great example of a systemic improvement, it was designed for India. The book’s core point is that the public needs to understand why the Indian state underperforms on so many fronts, so that they can help identify measures to fix those underlying causes (and vote for politicians who show those tendencies), and yes, to help design new systems tailored for the country. To end with a quote by James Clear:

“You do not rise to the level of your goals. You fall to the level of your systems.”

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