The paper examines the division of tasks required between politicians and bureaucrats to run an effective rural employment guarantee scheme (EGS) in India, in the context of Indian history and habits. There are still weaknesses in the incentive structure of the new nationwide EGS. First, there is no guarantee that high quality durable assets will be produced. Second, the role of the bureaucrat in the EGS is not clearly defined. A number of analytical results are obtained. A major one is giving the bureaucrat a long-term task (durable assets) as his objective will ensure the completion of both tasks, since effort must be allocated to the short-term task (employment) in order to achieve the long-term task. More power to the local populace and politicians will ensure that local needs, including employment are met. The results, together with an examination of the interactions between politicians and bureaucrats, village self-government, and the water economy in India, imply that an EGS with good incentive properties has the potential to reverse corruption of the executive, and vitalize village self-government. Lower level politicians are more accountable to the public. The tradition of voluntary labour associated with cooperative village management of the water economy, can make local resources available to extend the cyclical EGS. Higher own resources at stake will improve the efficiency of resource utilization and the quality of work done.