The vast business of poverty.

We have been writing that our politicians contrive to keep people poor because it makes it easy to buy votes by throwing handouts at them. On taxpayer money, of course. Television channels lap up poverty porn where a billionaire politician shares a frugal meal with a poor woman, preferably of a lower caste. Apparently the Congress has managed to lift 150 million people out of poverty in the last 10 years, although this was by giving dole, such as the MGNREGA scheme, and as such was completely unproductive and resulted in rising fiscal deficit and inflation. The Congress was extremely reluctant to take credit for this achievement because then it would not be able to justify promising more handouts to win the present elections. But they did. Their manifesto promises to expand social spending to include rights to healthcare, pensions and housing. It is easy to understand the profound reluctance of the Congress to ditch socialist policies because they have enabled it to grab power for 56 out of 66 years since independence. Raise revenues by levying heavy taxes and then distribute the money in the form of largesse to win the gratitude and votes of the masses. This was the ' garibi hatao ' slogan of Indira Gandhi which brought her to power but led to bankruptcy in 1991 when we had to pawn our gold to survive. That is what the present Gandhis did but it swiftly brought the threat of a credit downgrade to junk status and they were forced to retrench. Normally any party likes to expand the economy before elections to generate a feelgood effect but the fear of a downgrade enforced fiscal austerity leading to further fall in growth. So the Congress campaigned on average growth rate over the last 10 years which even the usual Congress supporters found hard to swallow. The mystery is the refusal to learn from the experience of other countries. Across the world every country that has fallen for socialism, with its seductive logic of distribution of wealth so that there is no poverty, is poor. To distribute wealth you have to create it first which means low taxes to allow people to spend which increases demand and stimulates companies to invest in new production, thus increasing employment. As sales increase indirect tax collections increase in tandem and increased employment leads to increase in direct taxes. The government can then use the increased revenues on infrastructure, further stimulating the economy and creating more jobs. By its policy of wanton handouts the Congress did exactly the opposite, creating inflation and reducing jobs. The business of poverty is probably dying. Which can only be a good thing.