Even before the (recently enacted) Rural Employment Guarantee Scheme has started creating jobs in the rural areas of this country, it has already succeeded in generating quite a bit of employment among the punditry.
First, let me point to Jean Dreze, one of the key people behind REGS. He has written two pieces in the Times of India. The first discusses a serious problem with REGS's forerunner program called Food for Work scheme, and identifies a solution as well. The second elaborates on the theme of how to make REGS work well -- through another law that was recently enacted: the Right to Information Act, 2005. [Update (9.9.2005): D.R. Mehta, former Chairman of SEBI, has an op-ed in yesterday's ToI; he supports REGS.]
The critics, on the other hand, have been saying one thing, and they have been rather persuasive. Their point is: "this is all just loot! Don't trust the politicians; they will just steal the money". At 40,000 crore -- 400 billion -- rupees, it is much more than a pocket or a bag or a Samsonite suitcase (remember Harshad Mehta and his suitcases?) can hold. Some of the critics are real heavyweights: Surjit Bhalla (here, here), T.N. Ninan, and Omkar Goswami. Given the long and sad history of corruption in our country, one has to just agree with the critics of REGS on this point.
The debate, at this point, is between two sides that have dug their heels in. Advocates just want to get on with REGS, while the critics, using the 'corruption' plank, are waiting for an opportunity to say 'I told you so'.
However, there is another debate, if it does take place, that will be really worthwhile. Let me, in my own sort of rambling way, pose the issues.
Clearly, no one would want to dispute that abject poverty is a reality for a significant fraction of our rural population. For example, Goswami describes a rural district in Bihar:
Located on the left bank of the river Sone, Jehanabad in Bihar surely ranks among the worst 50 rural districts in the country. According to the 2001 Census, 66 per cent of its 221,000-odd households lived in kutcha houses; and only 1.5 percent of the households could boast of an electricity connection which, knowing Bihar’s administration, probably didn’t have electricity for more than two hours a day.
Jehanabad is a desperately poor district with no roads or infrastructure worth the name; schools exist merely on paper, and medical facilities are non-existent. [...]
Given this, I am sure many people would say "yeah, the rural poor need help". By 'help', I don't mean dole. Help, safety net, social security, "keeping them going till they are able to make use of the opportunities a liberalized India will offer them ... er, eventually", that sort of stuff.
Now, how should this 'help' be provided? In other words, what does economics have to say about the best way of giving the rural poor a helping hand?
I don't want to hear 'growth is the best way, particularly in the long run'. Just as the critics of REGS have pointed to past failures about corruption in government schemes, others may -- rightly -- point to how the higher growth rates in the last 15 years haven't led to significant job creation; apparently, there indeed is such an animal called 'jobless growth'. Moreover, a 'long run' may not exist for many of the rural poor if their poverty is not addressed.
A second issue may be posed as follows: Assume (this is a BIG assumption!) that corruption is not an issue, and that social security is a worthwhile goal. Now, is REGS the best way to provide social security to poor rural folks? If not, why not? Also, if not, what are the alternatives?
All of the criticism that I have seen of REGS so far has only harped on the 'corruption' theme, and ignored the other issues (I have outlined two that I can think of; there probably are more). I am sure the economists argue about them all the time. I am also sure, many people would like to know about the options available for tackling poverty (in the short run, if you insist), and their relative pros and cons. Sadly, our punditry has not done a good job of infoming the public about such important debates.