Thursday, June 26, 2008

Third Worlds within a Third World

My job takes me to various cities in India and the breathtaking diversity never ceases to amaze me. India is clearly a multitude of nations within a country. Needless to say, what is germane here is not the cultural diversity but the seemingly vast economic variations that seem to exist in this country. Over the last few months, I have visited Delhi, Hyderabad, Chennai, Kolkata, Kanpur and Patna (from Bangalore where I live). You don't need to be a trained economist to realize that some of these cities - Delhi, Bangalore, Hyderabad, Chennai are on the opposite ends of the economic spectrum from Kanpur and Patna, with Kolkata somewhere in between. While there is the glitz, frenetic construction and the quintessential urban chaos that accompanies rapid and unplanned growth that is unmistakable in a Bangalore or Chennai, the opposite is true of Kanpur and Patna. It is almost as if the much talked about economic growth has bypassed these cities. This is not to say that the richer cities have managed to get rid of poverty - on the contrary, economic disparities may be growing wider in these cities. Despite that, there is an unmistakable feeling of optimism that comes with economic growth - a feeling that is conspicuously absent in a Patna or a Kanpur. There is no better place to see this than the railway station - the one institution that seems to capture the city's economic spectrum in a microcosm. While the Bangalore station even has a wi-fi hotspot, an internet cafe and umpteen Coffee Day kiosks, the Kanpur station is a drab, crumbling edifice dotted by just a couple poorly maintained kiosks. Walk out of the station and the differences are even more stark - the Kanpur station transport system is dominated by cycle-rickshaws, which are fast dwindling (thankfully) in places like Bangalore, Hyderabad and Chennai. In fact the single most striking fact in a Kanpur or a Patna is the vast number of cycle rickshaws that ply on the roads. One obvious reason for this is the fact that as older industries (e.g. tanneries in Kanpur) dwindle and are yet to be replaced by the newer ones, the surplus labour is driven to take up jobs with extremely low entry barriers like ferrying people. One naively optimistic view here is that some enterprising entrepreneur can spot an economic opportunity in these cities for setting up labour intensive industries (obviously, there is a lot more to an attractive investment opportunity than surplus labour). A more likely (and depressing) scenario is that these economic disparities are likely to continue to grow - as the richer states and their cities hope to climb into an economic virtuous cycle while the poorer states are forced to languish in their economic quagmires.

At a more macro-level, such intra-country variations, combined with other political trends (most notably the growth of regional parties) could lead to newer forms of friction. One obvious outcome of this disparity is the growing migration within the country. While little research seems to have been done on the demographic shifts driven by economics, there is growing intolerance on regional lines - the recent events in Mumbai being an example. Further, it is not inconceivable that some of the richer states begin to push back against the current taxation system, where the federal structure translates to the richer states subsidizing the poorer ones, something that is currently an undisputed outcome of the socialist nature of the Indian economy. One scenario could be a push towards a more decentralized form of taxation (moving towards a strongly regional bias similar to the Swiss system of Cantons). This, in a sense, will be an affirmation of the fact that this is a nation of individual states who were brought together by an accident of history and not bound together by a compelling cultural or economic glue. And if and when that happens, the already uneasy nature of this lop-sided growth could take a much uglier turn.

The Economics of Charity

To the economist, the concept of charity ought to be an aberration, at least when viewed through the lens of rational economics. For a profit-maximizing individual, charity will find no place in his calculations. What then, can explain the acts of giving - from the one rupee to the beggar at the traffic signal to more elaborate forms, ranging from supporting causes to even part some or all of your time to acts of giving. Clearly, the drivers are more than merely economic - and yet, little is known as to what motivates people to go out and part with their money, time or both without any clearly quantifiable economic returns. The Platonic view would be to attribute this quality to the 'goodness' or a sense of morality that is intrinsic to humans - but that is in the domain of philosophy, one area where economists fear to tread.

One immediate cause that comes up is Religion. Religions that were born out of socialist ideals have even taken the trouble of linking charity to social justice and in turn, justice as an essential objective of religion. And so there is the concept of 'tithe' in Christianity (which required individuals to contribute a tenth of their output - be it in cash or kind, to the church). Islam is equally formal about this and even empowers the state to collect such contributions and provide guidelines on spending them ( The underlying message, of course, is that spiritual enlightenment is tied to charity - in other words, there is a potential upside (however vague that maybe) to charity. As the cynic would retort, would it remain charity any longer? Moreover, this fits in with the age-old role that religious establishments have played - that of custodians of an individual's path to spiritual enlightenment. However, this could easily be interpreted as a way for the individual to 'buy' his/her way to his/her spiritual goals. Which is probably why the more philosophical religions like Hinduism and Buddhism are not explicit about charity - they appear to club charity together with a larger basket of material and spiritual activities that drive a way of life leading up to Nirvana. Not that this approach is devoid of issues - for one, it is difficult, for the average person, to clearly identify what constitutes this way of life. It is precisely this ambiguity that created a 'market opportunity' for the Brahmins to step in and offer to be the guardians of an individual's spiritual roadmap. One rather unfortunate outcome of this is the seemingly paradoxical behaviour in India - lavish temples are built all the time in the midst of all the poverty and deprivation. One interesting area of research would be to assess the evolving trends in charity, as incomes grow.

One suspects, however, that in India, a paternalistic form of charity has always been more popular, given its very long history of caste based feudalism. Historically, the ruling, landowner and merchant castes used to indulge in charity - in its benevolent form, this was money doled out to people who worked for them, which only served to perpetuate the social hierarchy. In its more malevolent form, this would take the form of economic slavery, where the giver explicitly 'bought' out individuals (bonded labour is, in fact, still prevalent). In modern times, while economic growth has blurred the caste-driven social hierarchy, the increasing economic disparities have ensured that the opportunities for paternalistic giving have not gone away. Partly as a means to mitigate guilt and partly as a way of buying loyalty, the economic haves are not averse to paying for the maid's children education or the surgery that the driver's wife had to have. While it may give the warm afterglow that accompanies any act of giving, it also has the potential of buying loyalty. At least in this case, there is no doubt in the economics of charity.

And so the question remains - is charity driven purely by a sense of morality or is it the outcome of a sub-conscious (or deliberate) act of calculated cost/benefit analysis? That is a question for the philosopher to ponder.