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Every now and then I get into an argument on trickle-down economics.  It used to happen more often when I was dealing with the watershed development crowd. This time around though it was another issue, taxes, which triggered this post.

It is almost axiomatic that watershed development helps those who own land. Those households who have small holdings or are landless wage workers reap almost no benefits. However, proponents of watershed development in India would (and even now) argue that improved irrigation means that the landless have more income generation opportunity. This is because the farmers with the (now) irrigated land need more labour which the landless or marginal farmers provide.

Somewhat true but the question remains “is this the best way to reduce poverty of the landless / marginal farmers?” This question becomes relevant when most of the funds that end up being used for watershed development are actually meant to be for poverty alleviation of the poorest.

What happens in reality is that land owners get disproportionate economic benefits. This further widens the gap between them and the landless. This later translates to increased inequities in the socio-political space as well. I have seen this happen in too many places in India.

In fact this is a  problem with most programmes designed around the ‘trickle down’ theory. The input-output ratios make no sense. I have not really seen it work well anywhere.

That is because the theory itself is fundamentally flawed and convoluted. It is a highly complicated system of ensuring that the benefits of any policy / programme reach the poor. This is what John Kenneth Galbraith called the horse and sparrow theory; feed the horse a lot of oats and some of them will pass out and feed the sparrows! Surely it is easier to just feed the oats to the sparrows rather than make them pass through the horse?

I think development planners need to be a bit more direct in their approach. I have no hassles if someone wants to work on irrigation or cut taxes for the rich; just let us not pretend it is for the betterment of the poor. Using the trickle-down rationale actually reminds me of the Rube Goldberg machine (image from wikipedia)

I don’t think the poor can afford the wait. We should slightly more direct / focussed strategies;

  • Promotion of alternative livelihood options (training, credit, access to markets etc) for the landless.
  • Scholarships for the girl child from poor homes to enable her to attend school.
  • Food vouchers for extremely vulnerable households who are unable to work.

What do you think?