In The Name Of Poor

The United Nations Development Programme is working on the strategy for doing business with the poor and creating value for all. The message is that doing business with the poor provides excellent opportunities for making profits for companies and is equally beneficial for the poor. The UNDP seeks the basic conflict between labor and capital in the modern economy. Surely, certain types of business can be mutually beneficial for labor as well as capital. But such stratagems are tangential at best and do not provide a pathway for much increasing incomes of the poor.

The natural consequence of economic growth is that interest rates are lowered. More wealth or capital is available which, in turn, translates into lower rates of interest. Lower interest rates make it profitable for the businessman to employ more machines and less labor. Thus employment in the organized sectors is declining even as the manufacturing sector posts double digit growth rates. Less opportunities of employment mean that labor has to accept lower wages to hold on to the scarce jobs. This is how the market operates.

The objective of Government is to provide more income to the common man. And, since common man’s income is under attack from cheap capital, the simple way increase his income is to impose taxes or place restrictions on capital. The Government can impose, for example, an additional tax of say ten percent on the capital deployed in power looms. That will raise the cost of machines and make it increase his income is to impose taxes or place restrictions on capital. The Government can impose, for example, an additional tax of say ten percent on the capital deployed in power looms. That will raise the cost of machines and make it profitable for the businessman to employ more labor. Certain sectors were reserved for small scale industries in our country for this same purpose. This basic philosophy has been accepted by the UNDP.

Thousands of Self-Help Groups have been formed in India but poverty shows no signs of receding. Reason is that price of goods produced from labor intensive methods by poor people are losing price advantage in the ruthless market economy dominated by large capital. The loans will sink the poor into the cesspool of indebtedness.  A company by the name of Wellness provides low-cost medicines through a network of franchisees in Kenya. But cheap bus travel, cheap pencils and notebooks, cheap schools, cheap kerosene oil and cheap cloth has not lifted the poor anywhere out of poverty-because real wage earnings of the poor decline along with. Cheap medicines but such efforts do not reduce poverty.

Agencies like UNDP must understand that the price of labor has to but decline in tandem with the price of capital in the market-driven growth model. These efforts are in the nature of firefighting. At best, they provide small relief from the gigantic forces of market that is smothering the poor into helplessness and hopelessness. These efforts are like the clean footpath made available to the starving man to die on. Of course a clean footpath is better than a dirty footpath. But the problem of the starving man is food.