“Poor people cannot repay their loans, so it is a good policy.”
Variations on the quote above were the responses given from half of the dozen SHG members I have interviewed in the last week when asked if they thought the recent farm loan waiver was a good policy. The other half had not heard that the government was forgiving farm loans at all (possibly due to a deficiency in the waiver’s design). The interviewees all live in small villages across Western Orissa and none of them receive any sort of government loan.
When reading sophisticated critiques of the farm loan waiver by well-informed analysts, it is important to remember that this was, if not entirely, at least in part a political decision made to pander to a certain portion of the electorate and certainly not purely an attempt to create a more equitable society (not that this is anything new). Most of the powers that be couldn’t care less about those critiques and are primarily interested in how the larger population perceives the policy.
If you were a poor farmer unable to get a formal loan and, without knowing the details, heard that the government had forgiven loans for some other poor farmers, you would probably be pretty sanguine about the policy. You might even think that the government is beginning to show sympathy for the plight of people like yourself.
It seems clear to me that the people who are most affected by the government’s loan policies are those with the least access to information and the least ability to advance their interests. Although complex critiques of government policy are no doubt useful, they usually preach to the choir. The underlying issue is that often times poorly devised government policies often still serve their purpose politically if the populace is not well-informed.
So what to do? Try to educate the public about the nuances of the policy? Focus entirely on criticizing the policy makers to the point that it affects their reputation? Ignore the public sector and focus on making a difference through private institutions?
I suppose these are the difficult questions that make living in a democracy such an exciting and frustrating dilemma.
Variations on the quote above were the responses given from half of the dozen SHG members I have interviewed in the last week when asked if they thought the recent farm loan waiver was a good policy. The other half had not heard that the government was forgiving farm loans at all (possibly due to a deficiency in the waiver’s design). The interviewees all live in small villages across Western Orissa and none of them receive any sort of government loan.
When reading sophisticated critiques of the farm loan waiver by well-informed analysts, it is important to remember that this was, if not entirely, at least in part a political decision made to pander to a certain portion of the electorate and certainly not purely an attempt to create a more equitable society (not that this is anything new). Most of the powers that be couldn’t care less about those critiques and are primarily interested in how the larger population perceives the policy.
If you were a poor farmer unable to get a formal loan and, without knowing the details, heard that the government had forgiven loans for some other poor farmers, you would probably be pretty sanguine about the policy. You might even think that the government is beginning to show sympathy for the plight of people like yourself.
It seems clear to me that the people who are most affected by the government’s loan policies are those with the least access to information and the least ability to advance their interests. Although complex critiques of government policy are no doubt useful, they usually preach to the choir. The underlying issue is that often times poorly devised government policies often still serve their purpose politically if the populace is not well-informed.
So what to do? Try to educate the public about the nuances of the policy? Focus entirely on criticizing the policy makers to the point that it affects their reputation? Ignore the public sector and focus on making a difference through private institutions?
I suppose these are the difficult questions that make living in a democracy such an exciting and frustrating dilemma.
* Scroll down to see the entry "Blanket Schemes: Bon Pour Rien" by Akhand for more thoughts on the loan waiver
2 comments:
Excellent post! I was very surprised to read that even those who are not receiving government loans view the waiver as good and are not asking "why isn't my loan to the moneylender / MFI being forgiven also?"
Dan,
Thanks for discussing the article you read in Pragati. The publication is an attempt to bring policy discourse to a wider audience.
You are right on the ball that this loan waiver is motivated by an eye on political gains. It's not sound economics, but is it sound politics?
Perhaps not. Because it is quite likely that those who benefit from the waiver will go ahead and vote as they always did (on caste, community, religious lines, for instance). On the other hand those that lost out would perhaps not forgive the party that played this dirty trick on them.
Export controls and attempts to keep prices of commodities down will now further alienate farmers from the UPA.
A week is a long time, they say. How about six months? The UPA might have been too cynical by half.
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