Emergic: Rajesh Jain's Blog

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Weekend Reading

February 13th, 2010 · 7 Comments

This week’s links:

  • The New Golden Age: from strategy+business. “Linchpins of the golden age will include the worldwide build-out of a new services-oriented infrastructure based on dig­ital technology and a general shift to cleaner energy and environmentally safer technologies.”
  • The Future of Web Content – HTML5, Flash & Mobile Apps: by Jeremy Allaire. “Most of the debate and discussion over HTML5 vs. Flash vs. Native Apps has little to do with what is the right technical approach, or whether something is open or closed, it has to do with the expressions of power and control that drive the businesses of the Internet’s dominant platform companies — Apple, Adobe, Google and Microsoft.”
  • The Tea Party Movement: from The Atlantic. A look at the activism that has grown in the US over the past year. Can something similar be done in India?
  • From Sampurna Swaraj to Sampurna Azadi: The Unfinished Agenda: A talk by CK Prahala. “We have to “reimagine politics and governance” as it is practiced in India. We have to address the issues before us – corruption, separatism and inequality by working to change the circumstances that create them.”
  • Our Greatest Weapon: by Atanu Dey. “Our weapon is knowledge. Our challenge is to wield our weapon with ruthless efficiency. We have to bring out into the open all that the government has hidden from public view.”

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7 responses so far ↓

  • 1 Sanjay // Feb 15, 2010 at 7:12 am

    Atanu writes well but I am not sure that the model of India, her history, context, milieu etc he has mentally constructed for himself is an accurate representation of reality. Imo, he misses the single biggest piece of the puzzle – private property in farming – that was introduced by the British 200 years ago. In one fell swoop, this created millions of small, mom-and-pop farmers each producing the same commodity and taking it to market at the same time.

    Along with a group of interested, like-minded people, I’ve been meaning to write a book on this topic but haven’t had the time. Unfortunately :-(

  • 2 Atanu Dey // Feb 15, 2010 at 8:56 am

    Sanjay, you write that you are not sure that the “model of India” I have mentally created is an accurate representation of reality.

    I agree with that. First, to be very pedantic, economic models are not accurate presentations of reality. Reality is too complex to be accurately modeled. Not only are the models very crude approximations, but they are not even required to be for the intended purpose. The purpose of the model is to reveal the interrelationships between the essential features of the world — as seen by the person making the model. The question one has to ask is not whether a model is accurate but rather is the model useful. And how do we define useful? That it make accurate predictions and that it explains why things are they way they are.

    That was about the model. Now to the other point about your not being sure of what my model of India is.

    There is no single model of India that I have. Depending on the context, different models apply.

    Analogy: Suppose I were to model a car as a diagram. It would be very very complicated diagram. To simplify, I could say just do the electrical system. But when I do that, I don’t mean to imply that the entire car is just an electrical system. There’s the power, transmission and steering system. I could put that on a different diagram. It is assumed that the separation of the various models is for convenience only — no one really believes that all these things are not part of the same car.

    It all depends on the level of analysis. Suppose we just take the internal combustion engine of the car. What it is can be very complicated to describe. But at the highest level, you will say it converts chemical energy (gasoline) into kinetic energy through the use of a working fluid (air). The air expands because it gets heated by the explosion of the gas-air mixture and that kinetic energy is used for whatever purpose.

    How did the introduction of private property into farming affect the economy of India? Depends on the broad features of scheme, on what used to happen, and what changed. If I know those bits, I can figure out whether it was good or bad, and for whom.

  • 3 Atanu Dey // Feb 15, 2010 at 9:01 am

    I wrote above, “Suppose I were to model a car as a diagram.”

    A diagram is a model, as much as a model of a car made out of wood and plastic.

    Once again, models differ based on what you want to do with them. The wood and plastic model may be used for figuring out wind resistance, or for looks, and by the fabrication people. The diagram may be used by other people who don’t really care for how the car looks.

  • 4 Sanjay // Feb 15, 2010 at 6:51 pm

    Atanu: Thanks for your response, it is always good to read your well-reasoned thoughts. The issue of private property in farming is a huge topic and it has taken months of discussion and debate with many people to understand its implications. Hence, the need for a book.

    The first dynamic to understand is that the new system of land ownership was a complete break from the past. I post excerpts from a book by Dr. Frithjof Kuhnen, Professor of Rural Development, University of Gottingen ………..

    India’s invasion by the British brought about, in the course of time, a complete transformation in the country’s land tenure system.

    After some time of experimentation, in 1793, Corwallis’ Permanent Settlement brought a final regulation of the procedure for levying taxes, which led to decisive changes in land tenure. The British did as if all the land belonged to the state and was thus at their disposal. They registered the local tax collectors, who were called zamindars, as owners of the land in their district. These zamindars had to collect and deliver the taxes; the amount was fixed at the beginning and remained the same permanently.

    The right to the land conferred on the zamindars was alienable, rentable, and heritable. This meant the introduction of a complete novelty, in India. The privilege of utilizing land had become a saleable good. Those who had been cultivators until then obtained the status of ‘occupancy tenants.’ These occupancy rights were heritable and transferrable and were not tampered with as long as the holders paid their taxes. In contrast to these, the tenants who cultivated land owned by the tax collectors were” tenants at will’, i.e., they could be evicted.

    Because of fragmentation resulting from inheritance, the farms became smaller and smaller. The fact that land could be used as collateral made it possible to borrow money to pay taxes in the case of crop failures. But, in that way, more and more farms passed into the hands of moneylenders, often better off cultivators in the village. In the course of time, these ceased to cultivate their land themselves and sub leased it instead. Finally, the ryotwari region was no longer a self cultivator region. More than one third of the land was leased and in many districts more than two thirds.

    In the Mahalwari region as well, sub leasing and indebtedness became more and more common. Indeed, it was not possible to transfer the land to people who were not from the locality, but the result was that landed property became concentrated in the hands of a few wealthy people, whereas the others lost their rights. A constantly increasing number of people were or became landless. While in the middle of the last century there were still no landless, in 1931 and 1945, respectively 33 and 70 million landless labourers were registered.

    Whereas, formerly, the cultivators possessed the right of use and the government the right to impose taxes, now the rights in land were split into many pieces. In this process, not only did a large number of cultivators lose their valid land rights and fell in status to unprotected tenants and labourers. At the same time, the tax collectors became landlords and large landowners. A stratum of intermediaries who did not have a specific function developed, and the land passed into the hands of moneylenders. This caused an enormous differentiation in financial conditions, whereby, the mass of farmers lived in abject poverty.

    ………. end excerpt

    Keep in mind that this is not just obscure history but paints an accurate picture of the present too. Indebtedness (impact: farmer suicides), fragmentation (outcome: intra-family, inter-caste conflict), landlessness (outcome: naxalism) are very much the reality today in rural India. Azim Premji traveled the length and breadth of India looking for land to set up Wipro campuses. He once observed that 90% of the land he came across was under some kind of family dispute.

    The result of land fragmentation (due to inheritance) is so pervasive that India has 116 million farms today; the average size per holding is less than 3 acres and each farm supports on average 6.5 people. Some of the farms at Nandigram were little more than the size of backyards. I do not even mention the spillover impact on cities due to all types of rural —> urban migration.

    The Anglo concept of explicit and heritable property rights was the profoundest change the colonials brought to India. It was a secular change because it impacted equally, all Indians regardless of caste, region, language, religion etc.

    There are no simple answers to your question “what is the economic impact ..?” At minimum, there is a need to have an accurate representation of India which is more holistic than that usually provided by any single area of study.

  • 5 Sanjay // Feb 15, 2010 at 9:36 pm

    Here is one way that the GoI may be forced into making decisions that appear at the surface to be distinctly sub-optimal from an economic standpoint:

    Consider the case of famines in India during the colonial period. In his book, “20th Century Holocausts”, author Mike Davis lists the debilitating famines in india during the british period. He asserts through well documented research that British colonial rule in India disrupted the ways in which these cultures traditionally handled famine conditions (prior to the Brits, there were 1-2 famines every hundred years) by focusing the local economies on profit making enterprises benefiting the British, and responded with incredible callousness to the utter misery that resulted.

    Dr. Abdel-Wahab El-Messiri, Emeritus professor of comparative literature at Ain Shams University, Egypt went one step further directly linking the famines that afflicted India to “the implementation of modern Western property laws.”

    I set this stage not just as a rehash of history but because many of the same conditions (2010 India is still 70% rural) exist today. Despite this, however, post-independence India has not suffered through a single episode of famine when even China experienced a major famine in the 1959-1961 timeframe. How has India managed this stupendous achievement? and has this achievement been at the “cost” of not following classical economic principles?

  • 6 Atanu Dey // Feb 16, 2010 at 2:21 pm

    Sanjay:

    Thanks for your detailed and informative replies above.

    Land tenancy laws, land fragmentation as it is inherited by larger number of family members, share cropping, landlessness arising from indebtedness, low productivity, credit constraints, etc., can help one understand the present plight of Indian farmers and peasants. Books have been written and studied.

    I am more inclined to reason from first principles and test the conclusions by noting whether they accord with reality on the ground, and whether this reality could have been predicted.

    Economic principles are fairly robust when it comes to these matters that we are speaking about. I will not go into them as this is not the appropriate forum.

    However, I would like add a bit to your point that India has not had a famine — whereas China had — post 1947.

    Putting that fact next to the fact that India still is 70 rural must tell us something. Only I am not sure what that is.

    India became somewhat food self-sufficient following the Green Revolution (thanks to Norman Borlaug). Though famines have been averted, the population continued to be at subsistence levels: the population growth kept pace with the growth in production and some growth in productivity.

    The main increase in production came from intensive use of land, water and fertilizers. Factor intensity led production increase has its limits. The land becomes “mined” and natural limits are hit.

    As long as the population continues to depend on agriculture as their primary source of income, there are limits to income growth. The problem of farmer suicides can be seen as a natural and predictable effect of the increasing number of people who are dependent on agriculture as their livelihood.

    Note that even the the percentage of people living in the rural areas has not changed much (and in fact may have even dropped a bit) in the last 60 years, the number of people who live in rural India has increased by around 600 million. If we do the numbers, we can see why the size of the average size is so low.

    I believe that reasoning from first principles and doing a bit of arithmetic is all that we need to comprehend why things are the way they are and what needs to be done if we want to change them.

  • 7 Atanu Dey // Feb 16, 2010 at 2:32 pm

    Sanjay:

    One last point. I found the book “A Farewell to Alms” by Gregory Clark very instructive. I especially liked his treatment of the Malthusian trap that some economies are prone to. India is to a large degree in the Malthusian trap.

    I have discussed some of these issues in a class I taught last Summer at UC Berkeley on development. (See Econ171 course blog.)

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