Public works: Lessons from history

One of India’s earliest experiments with economic policy — actively directed at providing employment — occurred during the late 18th century. In 1784, at a time of devastating famine, the then Nawab of Awadh, Asaf-ud-Daula, de­cided to institute a public works programme to provide employment. Thus began the construction of the now-famous Bara Imambara mosque complex in Lucknow, which was completed in 1791. That was Keynesian economics before Keynes.

The British (for ideological reasons) took a step back — their largely laissez-faire approach led to millions of deaths during a series of devastating famines during the Victorian era. And while there were other projects like the Bara Imambara across the globe (such as the Victorian poor laws), it was not till the 20th century that governments the world over, following Keynes’ theories, began to organise public works on a systematic scale to provide employment and income at a time of economic crisis. American President Franklin D Roosevelt’s New Deal in the 1930s, is reckoned to be the first large public works programme in the modern era, targeted at providing employment during a time of distress, namely, the Great Depression. Roosevelt was a Democrat. Yet in Europe, around the same time, another leader of a very different political disposition was to institute a large public works programme for similar reasons — providing employment at a time of economic depression. The country was Germany, the politician was Adolf Hitler, and the project was the now-famous German high-speed “autobahn” road system.

Fast forward to the 1970s and to Maharashtra. As a World Bank study in 2013 on the cross country experiences of public works programmes points out, “Much of the current momentum for introducing and scaling up public works programs derives from India’s experience in the 1970s, when the state of Maharashtra was hit by a massive drou­ght that forced 70 percent of its rural population into poverty.” The Ma­ha­rashtra rural employment guarantee scheme was a forerunner of such sche­mes, not just in India, but across the world. The same study points out: “Public works programmes have emer­ged as a critical social protection and safety net response, not only in low-income countries and fragile states but also in middle-income countries hit by high unemployment rates in the wake of the global economic crisis.”

A labourer repairs a road under Mahatma Gandhi National Rural Employment Guarantee Scheme in Kolkata (Photo: PTI )

The cases above illustrate one of the enduring features of public works. The first is that at the time of a crisis, public works are used as tools of economic policy across the ideological spectrum. The United States, under a Republican President, was one of the first countries to announce a fiscal stimulus amounting to well over $2 trillion just a few weeks ago when the economic consequences of the Covid crisis became clear. Even Germany, which among the advanced economies is most closely wedded to fiscal prudence, has bitten the bullet and announced a fiscal stimulus in response to the economic disruption caused by Covid. And more recently, the Indian government has announced a Rs 50,000 crore rural public works scheme (Garib Kalyan Rojgar Abhiyan), to provide livelihood opportunities to migrant workers returning to their home states.

But it is in this aim — to create enduring assets, apart from providing employment — that the real challenge lies. Many of the initiatives created under public relief programmes in recent decades have not created lasting assets — in this respect they are very different from the works of an earlier era such as the Bara Imambara or the New Deal projects or the German autobahns that built edifices and utilities of enduring significance.

Asset-oriented public works projects can be divided into two types. First are those that are smaller in scale — rural roads, schools, clinics, panchayat offices and reviving and creating water-bodies. This is clearly the approach taken in the Garib Kalyan Rojgar Abhiyan. These strive to involve local communities to a much greater extent than has been the case. Local communities then have a much greater stake in both the construction, and crucially, in the maintenance of these assets over their lifespan. It is this first tier of simpler projects from where the real impetus to local employment generation will come, within the periphery of the village.

The second set of projects are the large capital-intensive ones — national and state highways, major district roads, coastal economic zones, low-cost mass housing, new state capitals, major irrigation works, and 24x7 water supply to all homesteads. These should aim at using the most efficient construction methods possible and within that fra­mework, aim at maximising employme­nt. An earlier article laid out an extensive set of possible projects under a Rs 30 trillion National Renewal Fund (“India’s ‘new deal’ mo­me­nt”, May 15, 2020).

The Covid crisis has created massive economic disruption and left millions without work and facing an uncertain economic future. It is imperative to rethink and reprioritise employment-generating projects both on a national and local scale, and build national assets that will last generations.

History has taught us that such public works programmes are desirable and possible.

The author is chairman, Feedback Infra

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel