Supplying an effective social safety net is one of the most important functions of government. Most citizens feel the least their country can do is to ensure that they never face extreme privation.Enacting such a safety net faces many challenges, such as the problem of expanding enrollment. As soon as you provide for the poor, many people who would have managed without a handout will find it advantageous to live on government support. As a result, the amount of money given out will be many times the original “poverty gap” – the amount of money needed to bring each poor family up to the poverty line.Another challenge is the problem of disincentives. Many people are not only getting government payments but are also refraining from working, meaning there is a double cost to the economy. And even people who do work are now facing higher tax rates, which will reduce their work effort as well.Finally, there is the expense of administering a program.In India, all of these problems are dwarfed by another problem: corruption. A recent New York Times article estimated that only about 30 percent of the welfare budget actually reaches needy families. For comparison’s sake, in advanced countries, administrative costs are usually about 10%, meaning 90% of the budget reaches recipients.India presents a unique combination of the advanced and the backwards. We are used to lumping India together with other “Asian tigers” due to its large number of skilled workers, which large companies are increasingly taking advantage of. But India also has a huge number of desperately poor people; the Times article estimates that more than 40% of young children in India are underweight.Therefore, politicians and experts are pondering an entirely new system: Every single family would receive a budget sufficient for food. On the one hand, the expense and scope of such a program seem overwhelming: India has over a billion people – every single one of whom would become an aid recipient. But the advantages are also impressive: Without a means test to limit eligibility to the poor, there would be no disincentives to work and no need for a bureaucracy to monitor eligibility. The sums given to better-off families are also not a total waste of resources; they may not need the aid, but they certainly benefit from it.From India’s point of view, the main advantage is that corruption can be limited. Having bureaucrats confirm eligibility and giving aid in kind (bags of rice, cans of kerosene) can be useful to keep aid from reaching the less needy, but this system also makes it easier for bureaucrats to extort or pilfer.India’s conundrum is an extreme illustration of the hard choices every country faces in providing an effective safety net for it citizens.Given their unusual situation, it may be that they will benefit from an unusual solution of truly universal eligibility for some minimal level of protection.
email@example.comAsher Meir is research director at the Business Ethics Center of Jerusalem, an independent institute in the Jerusalem College of Technology (Machon Lev).