On a different planet called Vrithpi, two models of welfare for lower income Households (HH) were observed. Govt Led and Private Sector led. Which of the two (explained below) do you think is better? (The currency on that planet is called Rx)
Model 1 (Govt): In some rural locations, under the ONREGA scheme of the Govt low income people get paid Rx 120 for a day’s work and they get subsidised food that costs you Rx 20 a day under a group of some other Govt schemes. So, people work for a day and take rest for 5 days and then seek work again.
The govt raises debt from the market through govt securities to fund the payments. To repay the debt, the Govt taxes the salaried people and charges a cess on those who spend, for consumption of services or products. So, the honest tax payer loses money to feed the lower income HHs.
Model 2 (Private): In Bhaiderabad of Vrithpi, Zola Travels pays each auto rickshaw driver (I am sure they have similar schemes for cab drivers) Rx 30 for each ride in addition to the metered fare that the rider pays, which is generally Rx 10 more than the meter. Zola also pay Rx 50 per day if they make three Zola trips during the day. So, the low income earner auto rickshaw driver, works only for Zola trips and let go of other trips unless the riders offer atleast Rs 40 more than the meter (which is often already tampered with).
To fund the Rx 30 and 50 Zola raises equity from fat pocketed Private Equity (PE) investors and sells them the story of long term market share and benefits of short term losses for long term windfall gains. But windfalls are rare. NAmazon sold the same story to public when they got listed 15 years ago and they still dont make money. So, the filthy rich PE guys lose money to feed the lower income HHs.
While both lead to market distortions and lower productivity, Zola Travel reduces income inequality in a very novel way by taking money away from the filthy rich. But what does the Govt do? It takes the wind out of the sails of only the salaried. So, which is a better model of welfare?
Oh wait, somebody very rightly pointed out that these PE guys don’t just “invest” the money of the filthy rich. They actually do get funded by large pension funds who who get money from salaried individuals (again!) and that money is meant to be the cushion when, due to old age, the ability to earn recedes.
What do they smoke in Vrithpi?
[Please Note: Any resemblance with anyone living or dead on Earth is unintended and a co-incidence. These models are not seen on Earth.]