The Gods Must be Crazy

If you have not seen the movie “The Gods Must be Crazy”, you have a treat waiting for you. And if you have never heard of the “natural resource curse”, you are sure to be intrigued. They both point to the counter-intuitive nature of the world, and suggest in some sense why India is poor.

The “The Gods Must be Crazy” (1980) is set in South Africa.

Xi and his band of San/Bushmen relatives are living well off the land in the Kalahari Desert. They are happy because the gods have provided plenty of everything, and no one in the tribe has unfulfilled wants. One day, a glass Coke bottle is thrown out of an aeroplane and falls to earth unbroken. Initially, this strange artifact seems to be another boon from the gods—-Xi’s people find many uses for it. But unlike anything that they have had before, there is only one bottle to go around. This exposes the tribe to a hitherto unknown phenomenon, property, and they soon find themselves experiencing things they never had before: jealousy, envy, anger, hatred, even violence.

What happens to the Kalahari bushmen is a variant of what is called the “natural resource curse”

The resource curse (also known as the paradox of plenty) refers to the paradox that countries and regions with an abundance of natural resources, specifically point-source non-renewable resources like minerals and fuels, tend to have less economic growth and worse development outcomes than countries with fewer natural resources.

The coke bottle provoked conflict because there was just one of it available to the tribe. The gods should have provided enough coke bottles for everyone to have as many as needed by the tribe, or none at all. Of the “zero, one, or infinite” numbers to choose from, the gods were crazy to choose “one.”

The natural resource curse works in a slightly different way. The country has an abundance of a natural resource, sufficient for everyone to get a decent share of it. But that resource can be captured by an individual or a small group of people and exploited for their own benefits, perhaps by exporting the resource. In other words, the resource is some public property which can be expropriated for private gains.

The general outlines of the expropriation story go this way. The valuable natural resource induces competition among those who have power and seek even more power. In any population, there are a non-zero number of criminally greedy people. These people fight for control of the resource. Once they gain control, they use whatever means to maintain control, which could include the use of their captive military. Thus you see vicious dictatorships take over countries which are cursed with natural resources.

These dictators keep the population poor and dependent on them so as to continue to rape the country. Their policies are not development oriented. Often the advanced industrialized countries are complicit in the rape because it is easier for them to deal with a corrupt dictator and have easy access to the natural resource by keeping the dictator happy.

Economic growth and development requires the productive people of the society to work cooperatively, although there is competition among the producers of goods and services to make the most profits through commercial success. But countries where the corrupt compete for control of a natural resource end up with little productive capacity since all energies are expended in directly unproductive activities such as maintaining an armed force (often to keep the people in control) and secreting away the proceeds of the sale of the resource in foreign banks.

In general, the natural resource curse results in a kakistocratic government — government by the most corrupt and the least principled.

A fairly robust case can be made that India is a kakistocracy. At first glance, this is a puzzle. India does not appear to be a case of the natural resource curse. India is not an oil-rich or mineral rich country. But at second glance, it becomes clear that India does have a resource which can be — and is — expropriated: People.

India has 1.2 billion people. Some of these people are productive. Although the average production (the measure of which is the per capita income) is low, the aggregate production is a tidy sum. Whoever controls that production, controls a pretty penny.

Here’s how that works. Political parties and politicians realize that gaining control of the government is an excellent opportunity to make a killing. The form of government which allows extraction and exploitation of the people is precisely the form of government that India has: socialistic.

A socialistic government ostensibly works towards ensuring equity. Which basically means taking from the productive segment of the population and giving it to the unproductive segment. Redistribution is a good thing for those in charge of the redistribution because it allows them to keep a tidy part of the amount being redistributed for themselves.

The need for redistribution of course can be created by the simple expedient of keeping a large segment of the population extremely poor. By keeping them needy, the government ensures their loyalty. That is easy to do and does not require any special talents such as figuring out the difficult job of empowering people to stand on their own feet.

An expanding, intrusive government is what one would expect in this case. The more sectors the government controls, the greater the scope for capture of the natural resource (which as we noted is people.) This is true for India.

The more valuable the natural resource, the greater is the competition to capture it. If the resource is expected to yield, say, $1 trillion, then hundreds of billions can be spent to gain control. This is true in India’s case. Political parties spend that kind of sums in elections.

India’s political leaders have a single-point agenda: gain control of the government so that they can make their hundreds of millions. This they do by expanding the scope of the government. They come up with one scheme after which involve hundreds of billions of dollars of transfer from the productive to the unproductive.

The best part of the Indian political scene is that the productive segment funds the elections that elect the rapacious politicians. How? The government taxes the productive segment and uses part of it to buy the loyalties of the unproductive segment. The unproductive segment is large and they vote for the politicians. Thus the productive are forced to pay for the whips and chains that they suffer.

Schemes such as the NREGA, or the right to education, or the right to this that or the other. All named after members of a certain family. This gives them the excuse they need to tax even more. And they handle the tax revenues with very sticky fingers.

They steal from the country by selling off public assets at below-market prices and taking kickbacks. They buy military equipment or railway equipment — and pocket large sums.

The gods may be crazy but the politicians of India are not. They know precisely what they are doing.

{This post was brought to you by the generous support of the Malviya Family in Bangalore — and from readers like you. Thank you.}