Memo to Natalie Bennett: Not everyone in India is poor

The Green Party leader thinks being poor in India isn’t as bad as being on benefits in the UK “because at least everyone else there is poor too.” This suggests Ms Bennett has a strange view of India.

Business magnate Mukesh Ambani’s $1 billion mansion in Mumbai’s business district

 

A House in Mumbai

The house of Mukesh Ambani is a rather remarkable property. Forbes magazine describes this structure in Mumbai’s business district thus:

The twenty-seven story, 400,000-square foot skyscraper residence, named after a mythical island in the Atlantic, has six underground levels of parking, three helicopter pads, a ‘health’ level, and reportedly requires about 600 staff to run it. It is the world’s most expensive home far and away with construction costs topping $1 billion.

As you might have gathered Mr Ambani is a phenomenally wealthy man. The managing director and majority shareholder of Reliance Industries Limited has a net worth of upwards of $23.6 billion. He is far from being the only billionaire in India: there are at least a hundred others.

‘At least everyone else is poor…’

Men (and a much smaller number of women) like Mr Ambani came to my mind today while reading about what Green Party leader Natalie Bennett told the Economist’s Bagehot columnist:

[The Greens] talk about the world sparingly and mainly to illuminate leftist British issues. They are broadly against consumption, for example: “The world is sodden with stuff, it cannot have more stuff,” said Ms Bennett. Yet they do not appear to have considered what that would mean for billions of the world’s poorest people, almost none of whom live in Britain. When Bagehot suggested to her that there was a problem with this, Ms Bennett said he was worrying too much: to be poor in India wasn’t so bad as to be on benefits in Britain, she suggested, “because at least everyone else there is poor too”.

I disagree with the sentiment of the entire piece. Nonetheless, it was this final sentence that struck me as a particular clanger. India is second only to Africa as a recipient of condescension from rich westerners. Ms Bennett’s image of Indian’s contentedly living in shared poverty is as patronising as it is untrue. It is true that Indian has more people living in absolute poverty than the whole continent of Africa. But it also has a middle class numbering 250 million. The World Bank estimates that statistically speaking the gap between rich and poor in Britain and India is virtually identical. However, those statistics don’t really capture the starkness of that divide because it is often the divide between comfort and desperation, between your children being malnourished or not, or between having running water or not. What’s strange about this point is that it even needs making. These kinds of divides in Indian society are obvious as soon as you step off the plane. That’s not much of an exaggeration: during my taxi ride from Mumbai airport to my hotel a few blocks away from Mr Ambani’s pad, you could see people sleeping rough on the steps of massive branches of multinational banks!

Benefit of the doubt?

There are a few points that could be said in Ms Bennett’s defence. Firstly, she claims that the Economist’s article did not accurately reflect what she said. But her explanation of the purported error seems more like an elaboration rather than a correction. She clarifies that she was talking about relative rather than absolute poverty, which seemed to me crystal clear from what appeared in the Economist though not necessarily from the coverage that followed. However, I’d suggest that doesn’t really deal with the point we’re discussing here. If you’re worried about comparative poverty then you probably want politicians to realise that the second most populous nation on earth has rich people as well as poor ones.

Secondly, we could perhaps excuse her some sloppiness given that she was speaking off the cuff. However, one would have to be a very indulgent soul not to see her comments as reflecting poorly on her. Apart from anything else she actually has a degree in Asian Studies, so this is a point that really should have been familiar to her.

New India, Old India

Finally, I suppose she could (in the unlikely event that she addresses what I’m saying here directly) respond that it’s all very well for me to come along with my anecdotes about what’s going on in Mumbai where neo-liberalism has taken hold but she was talking about life in the traditional rural communities where the majority of Indians still live. This is fair enough up to a point. However, I would observe that the figures on inequality I mentioned earlier were for the country as a whole including both towns and cities. It is also not as if rich Indians only emerged with economic liberalisation in the 1990s. In the 1940s, when India was still a firmly rural and agricultural society, Osman Ali the prince of Hyderabad was reputed to be the richest man on the planet. And even in an Indian village where there is something approaching material equality, there may well still be deeply unpleasant status hierarchies arising from the caste system. How this is being affected by economic growth and the move to cities is a complicated area. However, we can hope that the sheer mass of humanity in large cities will render the most stigmatising elements of the caste system, the notion that the mere presence of a Dalit or a member of another ‘backward’ caste is a form of pollution, will become untenable when living and working in such close proximity to so many people as one does in a city. Lest anyone think these kind of status hierarchies are a peculiarly Indian phenomenon, I would observe that the Duke of Wellington disliked the building of the railways because it would: “only encourage the lower classes to move about”.

Why it matters

I find Ms Bennett’s misapprehensions about India concerning for several reasons:

  • As the Economist’s reporter observed it perhaps speaks to a frequent flaw with leftist thinking whereby they proclaim solidarity with those in less economically developed countries but wind up treating them as props for their chosen narratives. Far from wanting saving from capitalism, a recent piece of research by Pew suggested people living in developing and emerging economies are more supportive of free markets than those in wealthier economies.
  • I would like politicians to have a reasonable grasp of big economic trends like the fact that India is now one of the world’s fastest growing economies.
  • An implication of the Ms Bennett’s comments seems to be that we choose between absolute and relative poverty. In fact, there are countries like Sweden in which both are low and countries like India in which both are high.

Postscript

None of this is to say that there is not a legitimate debate about the role of economic liberalisation and growth in India. Witness, for example, the very public battle between economists Amartya Sen and Jagdish Bhagwati in the run up to the last Indian General Election. It’s just that such debates ought to be well informed and be about India and not the West by proxy.

To help the world’s poor we need to think small

A roundabout water pump. This superficially appealing notion has become a standard example of the naivety and hubris of many Western interventions in poorer nations.

Why do so many aid projects that seem so impressive at a small scale, fail so spectacularly when they are scaled up?That’s the subject of one most interesting and important articles I’ve read in a long time. In it the aid worker Michael Hobbes reflects on his profession. What he recounts is not pretty: expensive medical equipment sent to villages without the electricity to operate it, small studies in Kenya used to justify not giving Indian children textbooks and charities that plunge themselves into chaos by slashing their internal administration so they can claim to have low overheads. Hobbes suggests that all these examples arise from the development sector’s pursuit of a single formula for lifting people out of poverty which can be rolled out wherever people are in need. This, Hobbes argues, is unrealistic: poor societies are complex and varied, and will respond in a highly individual fashion to interventions. This leads him to a sobering conclusion:

I’ve just spent thousands of words telling you all the ways the incentives of donors, recipients, and NGOs contradict each other. Why not just scrap it altogether?

Because I don’t think that’s the conclusion these examples suggest. I think they suggest something much less dramatic: It’s not that development is broken, it’s that our expectations of it are.

First, let’s de-room this elephant: Development has happened. The last 50 years have seen about the biggest explosion of prosperity in human history. China, India, Taiwan, South Korea, Turkey, Mexicothese aren’t the only countries where you’d rather be born now than 50 years ago. Even the poorest countries in the worldBurundi, Somalia, Zimbabweare doing way better on stuff like vaccinations and literacy than they did earlier in our own lifetimes.

You sometimes hear this Cambrian proliferation of well-being as an argument against development aid, like: “See? China got better all by itself.” But the rise of formerly destitute countries into the sweaters-and-smartphones bracket is less a refutation of the impact of development aid than a reality-check of its scale. In 2013, development aid from all the rich countries combined was $134.8 billion, or about $112 per year for each of the world’s 1.2 billion people living on less than $1.25 per day. Did we really expect an extra hundred bucks a year to pull anyone, much less a billion of them, out of poverty?

Development, no matter how it happens, is a slow process. It wasn’t until about 30 years after Mao’s death that China’s per capita GDP reached lower-middle-income status. The country’s growth is arguably the fastest of any country’s since we, as a species, started gathering economic statistics. Even in the most cartoonishly successful scenario imaginable, countries like the Central African Republic (per capita GDP: $700, adjusted for purchasing power), Burundi ($600), and the Democratic Republic of Congo ($400) will take decades just to reach the point where China is now.

The ability of international development projects to speed up this process is limited. Remember how I said the deworming project had a 60-to-1 ratio between the price of the pills and the increase in wages for the kids who got them? The increase was $30. Not $30 per year. The kids earned $30 moreover their lifetimes as a result of the deworming treatment. You find this a lot in the development literature: Even the most wildly successful projects decrease maternal mortality by a few percent here, add an extra year or two of life expectancy there.

This isn’t a criticism of the projects themselves. This is how social policy works, in baby steps and trial-and-error and tweaks, not in game changers. Leave the leaps and bounds to computing power. If a 49-cent deworming treatment really does produce a $30 increase in wages for some of the poorest people on Earth, we are assholes for not spending it.

And this is where I landed after a year of absorbing dozens of books and articles and speeches about international development: The arguments against it are myriad, and mostly logistical and technical. The argument for it is singular, moral, and, to me anyway, utterly convincing: We have so much, they have so little.

If we really want to fix development, we need to stop chasing after ideas the way we go on fad diets. Successful programs should be allowed to expand by degrees, not digits (direct cash payments, which have shown impressive results in Kenya and Uganda, are a great candidate for the kind of deliberate expansion I’m talking about). NGOs need to be free to invest in the kinds of systems and processes we’re always telling developing countries to put in place. And rich countries need to spend less time debating how to divide up the tiny sliver of our GDP we spend on development and more time figuring out how to leverage our vast economic and political power to let it happen on its own.

Is he correct? I don’t know enough about development to say. However, the notion underlying Hobbes argument that societies change slowly and unpredictably is one I would endorse. Economic changes often have roots that are centuries old. For example, it seems that the fact that the industrial revolution happened in Europe and not Asia can be traced back to the demographic impact of the Black Death way back in the fourteenth century. We might not want to wait centuries for our efforts to transform the lives of planet’s poorest and it may be that with deliberate planning and greater resources we can do better. However, Hobbes makes a compelling that patience will always be a prerequisite for social change.

The unfortunately realistic economics of the Hunger Games

hungergames

One of the criticisms of the Hunger Games is that it’s not plausible that in a futuristic sci-fi world with extremely advanced technology, much of the population would still be on the edge of starvation. Matthew Yglesias argues that the extreme inequality between the Capital and the Districts is not only plausible but has actually existed and that Collins has identified how it would come about. He illustrates this by reference to the work of two economic historians:

Acemoglu and Robinson’s general theory can be grasped through the lens of the “reversal of fortune” they observe in the Western Hemisphere and originally described in an academic paper co-authored with Simon Johnson. If you plot per capita income in the Americas today, you see a clear pattern with the United States and Canada ahead, the southern cone around Chile and Argentina in second place, and the middle portion much poorer. It turns out that if you turn the clock back about 500 years, the pattern was reversed. The places that are rich today were poor then, while those that are poor today were generally rich in the past. This, they argue, is no coincidence. When Spanish conquistadors showed up in the prosperous areas of Latin America, they stole all the gold they could get their hands on and then set about putting the native populations to work. They set up “extractive institutions” whose purpose was to wring as many natural resources (silver, gold, food) from the land as possible while keeping power in the hands of a narrow elite. These institutions discourage savings and investment, since everyone knows any wealth can and will be arbitrarily expropriated. And while the injustice of it all led to periodic revolutions, the typical pattern was for the new boss to simply seize control of the extractive institutions and run them for his own benefit.

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District 12 is a quintessential extractive economy. It’s oriented around a coal mine, the kind of facility where unskilled labor can be highly productive in light of the value of the underlying commodity. In a free society, market competition for labor and union organizing would drive wages up. But instead the Capitol imposes a single purchaser of mine labor and offers subsistence wages. Emigration to other districts in search of better opportunities is banned, as is exploitation of the apparently bountiful resources of the surrounding forest. With the mass of Seam workers unable to earn a decent wage, even relatively privileged townsfolk have modest living standards. If mineworkers earned more money, the Mellark family bakery would have more customers and more incentive to invest in expanded operations. A growing service economy would grow up around the mine. But the extractive institutions keep the entire District in a state of poverty, despite the availability of advanced technology in the Capitol.

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But Collins is right in line with the most depressing conclusion offered by Acemoglu and Robinson, namely that once extractive institutions are established they’re hard to get rid of. Africa’s modern states, they note, were created by European colonialists who set out to create extractive institutions to exploit the local population. The injustice of the situation led eventually to African mass resistance and the overthrow of colonial rule. But in almost every case, the new elite simply started running the same extractive institutions for their own benefit. The real battle turned out to have been over who ran the machinery of extraction, not its existence. And this, precisely, is the moral of Collins’ trilogy. [Spoiler alert: Ignore rest of this story if you haven’t finished the trilogy.] To defeat the Capitol’s authoritarian power requires the construction of a tightly regimented, extremely disciplined society in District 13. That District’s leaders are able to mobilize mass discontent with the Capitol into a rebellion, but this leads not to the destruction of the system but its decapitation. Despite the sincere best efforts of ordinary people to better their circumstances, the deep logic of extractive institutions is difficult to overcome, whether in contemporary Nigeria or in Panem.