Deepak Lal: Bleeding hearts

It is time we pensioned the Soft Left off because they are the enemies of the poor

It is an enduring feature of the Soft Left that it is always willing to assuage its bleeding heart by throwing other people's money at what it perceives are the world's woes.

In India many of the foolish actions the current coalition government has undertaken, or is proposing, form part of this pattern.

In the UK, New Labour has opened the public purse to throw money at unreformed nationalised health and education services, which has predictably been largely wasted.

Now the world's bleeding hearts are proposing a massive increase in foreign aid to "solve" Africa's enduring poverty. In all these cases the basic flaw in the proposals is that they fail to take account of the nature of the instruments that are to be used to promote their cherished panaceas.

They all require politicised and bureaucratic methods of delivery, where given the predatory nature of most polities and their bureaucracies, these very methods are part of the problem rather than the solution.

Or else though aimed at helping some perceived disadvantaged group the remedies proposed will only make things worse.

The basic purpose of all these measures is to extend the reach of the state.

But as this column has constantly argued, the state and its agents""no matter how much actions are cloaked in the rhetoric of the public good""are by and large in most countries predatory, and no less so than in India despite the "dream team" of reformers purportedly at its helm.

In this column I will examine some of the recent proposals by these bleeding hearts in the hope that an informed citizenry can see through the rhetoric pulling at their heart strings to take money from their purses to enlarge those of the state and its functionaries.

Take, for example, the proposed Act going through Parliament to provide labour in the unorganised sector "rights" similar to those enjoyed by workers in the organised sector.

As many previous columns have noted the greatest damage to the interests of India's labouring millions has been done by the colonial labour laws, which provide "rights" for labour in the organised sector.

These have been the equivalent of a tax on the use of labour in the large-scale industrial sector. This has led to the growing capital intensity of Indian industry in a country awash with labour.

The jobless growth in the industrial sector since liberalisation is the result of the failure by successive governments to rescind these colonial labour laws.

The reasons are well-known. Each major political party has its own client trade unions which prevent this necessary reform to protect the incomes and perquisites of their members.

This labour aristocracy of course receives its "rents" at the expense of those millions unable to enter this aristocracy because the "tax" on labour they impose reduces its demand.

But now the coalition government led by the Congress is proposing to artificially raise the price of labour in the unorganised sector.

As any housewife knows, if you raise the price of anything, demand for it falls. This is exactly the predictable outcome of the proposed bill to "protect" labour in the unorganised sector.

The hope of labour-intensive industrialisation in India, which as China has shown can lead to spectacular gains in the employment and incomes of the labouring poor, will thereafter be permanently dashed.

Those "intellectuals" of the Soft Left in India who have pushed this measure in the name of the poor should hang their heads in shame.

This is the surest means of damaging the interests of the poor by both reducing the overall demand for their labour whilst at the same time feathering the nests of the myriad intermediaries (both private and public) who will be inducted to administer, or to capture the rents from these new laws.

Or take the increased social expenditures which the coalition government has committed itself to, and which the finance minister has in his Budget partly delivered at the cost of a standstill in meeting the targets of the bill imposing fiscal responsibility.

Lip service is paid to looking at the outcomes of these increased social expenditures on health, education, and employment guarantees.

But, as innumerable studies have shown, public provisions of health and education have failed massively, so much so that even the poorest of the poor are relying on private providers for these basic services.

The leakage from public employment and poverty programmes is known to be massive: as Rajiv Gandhi attested, only 25 per cent of these transfers reach their intended beneficiaries.

Moreover, as a large number of studies in many developing countries have shown, public transfers to alleviate "poverty" most often crowd out private transfers""which are large in the developing world.

There are well-known alternatives. For health and education, it is to publicly finance these for the poor but to allow them to choose private providers through some form of voucher scheme, probably best administered through the panchayats.

Whilst for poverty alleviation, India's own recent experience and that of China show that rapid labour-intensive growth is the only sustainable route.

This increased social expenditure will only crowd out the investment needed to finance the infrastructure India desperately needs to accelerate growth and alleviate poverty.

Or take the showering of largesse on the unreformed National Health Service by New Labour in the UK.

The predictable outcome of failing to privatise one of the largest remaining nationalised industries in the world is that much of the extra money has gone on administrators rather than doctors and nurses, so that the NHS provides one of the worst standards of health care for one of the most advanced countries in the world.

Finally, take the recent outburst of calls for action from the world's great and the good to save Africa: the UN's new millennium agenda fathered by economist turned saint cum pop star Jeffrey Sachs, the recent Africa Commission report fathered by Tony Blair.

Their purpose is to argue for massive increases in foreign aid to Africa. But if foreign aid was the answer to Africa's problems it should now be rich.

Measured in today's dollars Africa has received $2.3 trillion over the last 50 years. Yet it has stagnated. The reasons for the failure are evident and increasingly acknowledged even by many bleeding hearts.

It is politely called the problem of governance, which in ordinary language means much of Africa has been ruled by predatory elites who have been more interested in feathering their own nest than in the public weal.

Compared with most Asian countries Africa was not poor, as it has immense natural resources. But they have been systematically looted by their predatory elites, who have also ruined hitherto thriving economies.

Robert Mugabe in Zimbabwe is the most recent in a long line of tropical gangsters. Why does anyone believe that throwing foreign aid money at him and his ilk will help the African poor?

If the bleeding hearts were serious about the plight of the poor of Africa they would have to contemplate some form of direct or indirect imperialism to provide the good governance they all admit Africans need.

But how many of them are willing to contemplate that?

The Soft Left has always claimed the moral high ground and tugged at our heartstrings by claiming to speak in the name of the poor and the oppressed.

But this is mere rhetoric and as innumerable examples show, not least the recent policies espoused in the Common Minimum Programme in India, in the policies they advocate they are the enemies of the poor.

Alleviating poverty has become a worldwide business from which these Lords of Poverty derive a profitable living. In the interests of the world's poor, it is time we said "Boo" to them and pensioned them off.