Author: Atanu Dey

Economist.

People Matter: India’s Population Problem

Time to take a look once again at the population-poverty trap.

In 1965, about 40 years ago, there were less than 500 million of us. By 2004, the population of India has more than doubled. The effect of this incredible increase has been a falling standard of living in general, shortages, untold misery and conflict. It is foolish to expect that we can provide a decent standard of living to so many in such a short time. The vast majority of us do not have adequate drinking water, sanitation, health care, education and job opportunities. The preceding statement does not even begin to indicate the amount of human misery and sorrow which it implies. It hides within it the teeming millions who suffer without the slightest hope of ever seeing a future remotely human.

But let us get back to numbers again so that we can have at least an intellectual understanding of the problem before we begin to address the real issues. The population growth rate is a convenient measure of how fast the population is increasing. For India, it is at present 2.2 percent annually. This apparently innocuous looking number has terrible consequences. It implies that the population will double in less than 30 years. By the year 2030, at the current birth rate, India would have 1700 million people, surpassing China to become the most populous nation on earth. For the present, India has an additional 16 million mouths to feed, clothe and educate every year. Even the most optimistic scenario for the future of India is daunting due to demographic momentum. To quote Paul Ehrlich of Stanford University: “Suppose, over the next thirty to thirty-five years, India’s average completed family size dropped from the 1990 level of about 4.3 to 2.4 (replacement level) and remained there, and death rates didn’t rise. India’s population would continue to grow for almost a century, and when it stopped there would be about 2 billion Indians – as many people living in that one nation as populated the entire planet in 1930!”

A HUMAN PROBLEM

The numbers above are dry statistics and we are understandably dismissive of them since they have little relevance to more pressing problems at hand. So what’s the big deal? Well, it is a human problem and we have to feel the human issues involved to really understand what the implications are. An account of a personal encounter would be in place here. I walked out of a railway station while waiting in transit not long ago. It was noon time and the road in front of the station was crowded with the mad hustle of cars, buses, cycles, scooters and people. In the middle of the road, over a narrow divider, was the sleeping form of an old woman. She lay there in her rags with her eyes closed, perhaps asleep out of sheer exhaustion, with a stick and a battered tin can near at hand, in the middle of all the noise and fumes of the traffic in the noonday heat.

So here was a human being with all the capacity for love, pain, joy, hope, caring, companionship, contemplation and all those qualities that you and I have in common with every human. Nature had invested as much in her as in any other human on earth. Yet she was just a hopeless bundle of misery existing in a void without comfort or joy. I watched with a sick feeling in my stomach that I couldn’t do anything for her. And for the millions of others in circumstances not too different from her’s. It wasn’t the first time that I had seen something like this. It wasn’t even the first time that day. I am sure that you too have felt the pain. But we have stood by helplessly and turned away finally to cope with other problems.

Perhaps everything terrible is in its deepest being
something helpless that wants help from us. — Rainer Maria Rilke

We may have unlimited compassion in our hearts but there is a limit to the sizes of our pockets. We have to shut out the dictates of our hearts to turn our attention to the urgent task of surviving. At best we dig out a few coins and hope to alleviate our conscience. The problem remains out of mind even though it is not out of sight. It is a human problem.

At another level of comprehension, it is an economic problem. The value of an entity is ruthlessly dictated by the ratio of supply and demand. We have too many people and hence each individual is valued so little. Pathetic though it is, the fact is that we have devalued human life to the point that millions continue to exist in conditions that afford little dignity and humanity and we are apparently unmoved to do anything about it.

What does this personal account have to do with the larger issue that I was discussing above? Pretty much everything, really, if you care to think about it. When I hear, for example, that so many millions of people live in dire poverty, I don’t really understand what it means. To fully understand it I would have to have the empathy to feel how it is like to be in that old woman’s place. Then to take that painful existence and multiply it a million fold (an impossible task, surely) and then I may have a hint of how much suffering is implied by that statement.

Well, you may say, all this thing about compassion and human pain is a lot of sentimental hogwash and doesn’t really concern you overly. But what if all this has an impact on you, your future and your children? Would you be concerned then? More about this later.

Cargo Cult and Democracy

There is an interesting anthropological curiosity which arose amongst the islands in the South Pacific after the Second World War. It is known as the Cargo Cult. I first came across it in Marvin Harris’s book Cows, Pigs, Wars & Witches many years ago. (By the by, I highly recommend Harris’s book OUR KIND: Who we are, Where we came from & Where are we going — Evolution of Human Life & Culture.)

The islanders had noticed that Europeans had some sort of powerful magic which allowed them to receive stuff from the heavens. The islanders decided that they too must make arrangements to receive stuff. So they faithfully reproduced the artifacts that they saw the Europeans use in magically making cargo appear out of the skies. They cleared a large area in the forest, lit bonfires around this, built a hut close by in which they put a box with antennae sticking out of it, made ‘headphones’ out of coconut shells, and spoke earnestly into a ‘microphone’. Then they waited for cargo to drop out of the skies, just as they had seen the Europeans receive during the war.

It is a fascinating tale and has wide-ranging implications. The islanders were not stupid, merely ignorant. They figured out what we could call the ‘front end’ of the whole enterprise. They did not know that there was a very deep backend to the deal. In their ignorance, they expected a facsimile to work and when it didn’t, they attempted to modify the front end to more accurately reflect the bits they had observed the Europeans use.

The cargo cult is an amazingly important metaphor for our age. Technology is increasingly becoming more complex and the effective use of this complex technology confers immense advantage. However, the more complex the technology, the more its use is dependent on a complex ecology within which it is developed. Transplanting the technology without the supporting ecology is a waste because it does not work as advertised. The technology — whether it is hardware, software, all sorts of institutions — co-evolved with other bits that form an ecological whole which make the whole system function whereas any subsystem in isolation will not work.

Let’s take an institution such as capitalism, for example. Hernando DeSoto in his book The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else outlines the missing bits in the case of capitalism. Another example: why did the shift to a market economy spell disaster for the former Soviet Union. A market economy has a very deep backend. That backend includes institutions such as the legal system which enforces contracts, a flexible labor market, a number of banking and financial intermediation institutions, and so on. Without the supporting institutions, the market institution is a non-starter. It is merely a cargo cult market economy.

In the area of digital technology also, we see the cargo cult mentality. The modern computer evolved in advanced industrialized countries (AIC). AICs have other systems that support the use of computers and these systems also evolved to keep pace with the rapid evolution of computers. Transplanting computers to a place where these systems don’t exist is silly because the computers are then like the props used by the South Pacific islanders. It is no wonder that they don’t work as advertised.

My final example of the cargo cult metaphor is the institution called democracy. Voting every so often to elect representatives that sit in a great big hall to decide matters of national importance is the front end. The deep backend requires an informed public at a minimum. Even under the best of circumstances, aggregating individual preferences is a risky venture as students of public choice theory will appreciate. (See Ken Arrow’s Impossibility Theorem.)

In the case of India, we have a cargo cult democracy. It looks like one with electronic voting machines and election speeches and manifestos, with pollsters and pundits, with election commissioners and voting stations. Only the deep backend is missing. There is no understanding of issues of substance among the people who vote. Put up a name which is recognizable, and they would vote for or against that name. Promise enough freebies (free electricity, for instance) and they will vote for you, never mind that it may bankrupt the state and that eventually it will impoverish the same voting public. For democracy to work, you need accountability — both among those who vote and those who are elected. In an area where the government is seen as a source for endless handouts by the people, and the leaders look upon their stint in the driving seat as an excellent opportunity to steal from the public, democracy is not likely to work. All the talk about the smart voter is so much hogwash that the mind boggles.

The Indian stock market is crashing. People are voting with their pocketbooks and sending an important signal. The signal, as I see it, is that the Indian economy is spinning around in the bowl and will soon be down the tubes as soon as the flush cycle finishes.

It is all karma, neh?

Wrong again, Mr. President of the US of A

There’s a lot of people in the world who don’t believe that people whose skin color may not be the same as ours can be free and self-govern. I reject that. I reject that strongly… I believe that people whose skins aren’t necessarily — are a different color than white can self-govern. [Source]

The above, in case you haven’t figured it out, is the ever articulate President of the United States of America.
Continue reading “Wrong again, Mr. President of the US of A”

The AP results are in: Chandrababu Naidu is out

Andhra Pradesh (AP) election results are in and Chandrababu Naidu is out. He was an unusual CM. He wanted to make Hyderabad into a Singapore, and make AP a shining state. From what I hear, it appears that his stress was on the use of hi-tech for bringing about transformation. I am not too informed about what the game plan was but it appears that the common person did not obviously share his vision and they voted him out. Perhaps he fancied himself to be a Lee Kwon Yew and did not realize that unlike the Singaporean dictator, he had to seek a mandate from the masses. The masses are more interested in the short-run rather than the long-run.

Continue reading “The AP results are in: Chandrababu Naidu is out”

Politically Incorrect: India’s Corrupt Voters

I am never quite sure why people insist that the Indian democracy is so great. To me it appears to be the greatest curse imposed on India from up on high. It is totally politically (sic) incorrect to take this view, of course. But I don’t apologize for believing so and I am convinced that the Indian voter is corrupt.

Rajesh Jain’s blog has an item on lessons from India’s elections which got me thinking. The claim made by Shekhar Gupta of the Indian Express is that India’s voter has become smart.

Compared to whom? I ask. Compared to Shekhar Gupta?

I guess so since Shekhar Gupta claims that the Indian voter has become smart. For I don’t see any reason to believe that the Indian voter has changed in any substantial way. The Indian voter continues to be a narrow-minded, ignorant, casteist, bigoted, vacuous idiot it has always been.

Here is my reasoning.

  • Exhibit A: I look at the politicians of this country. To a first approximation, they are ignorant, bigoted, casteist, vacuous idiotic criminals. These bunch of unspeakable criminals (where I use the word in its literal sense) are consistently voted into power by the Indian voter.
  • Fact B: A population of wise, informed, well-meaning, broad-minded, intelligent voters cannot continue to vote a bunch of corrupt ignorant bigots as their political leaders.
  • Major Premise C: Voters reveal their character by expressing their preferences at the polls.
  • Minor Premise D: Leaders are endogenous to the group, that is, they emerge from within the group and so reflect the dominant traits of the group.

Mr Gupta writes that the voter is not swayed by charisma. Well, how would we know? We need charismatic people first and then if the voter is unmoved, we can say that it is true.

We do know that the Indian voter is swayed by “big names”, though. Why else would they trot out an uneducated chap (Rahul Gandhi) as the Congress mascot unless they were confident that the Indian voter will be swayed?

What else explains the tenacity with which the entire Nehru-Gandhi clan is totally into getting into the highest political positions? By their indomitable courage? No. Their astonishing brilliance in academics? None are really even educated. Their thorough understanding of the problems of development? Never done an honest day’s work. Their undying dedication to the hard task of nation building? Shirley, you jest. Their selfless sacrifice demonstrated by their social work? Not a bloody chance in hell.

What then explains the astonishing idiocy of the Indian voter to continue to vote the Nehru-Gandhi clan to power?

Let’s face the facts. I would have loved to report that we are a great democracy. We are not. If we were, we would not be facing the prospect of having an Italian aupair as the prime minister of a country of 1000 000 000 people. She says that she is loyal to her adopted country (never mind that she did not apply for Indian citizen for over a decade). Well, I would ask her whether she has any loyalty to the country that she was born in. No? If a person has no loyalty towards the land of one’s birth, I would not pay a tinker’s damn to any other oath of loyalty that the person takes. If you change your allegiance once, it is all too easy to do it once again. Indians who don’t understand that simple concept are idiots and I don’t care how accomplished they may be in their respective fields. If an Indian says that Sonia’s origin is not an issue for the prime minister’s seat, I would say that Indian is a moron.

I have met only a handful of politicians personally. I have known some of them well and all of them — every one of them to the last person — has accumulated vast sums of money through bribery and corruption. It is a random sample. I have no doubt that the vast majority of Indian politicians are corrupt. Politicians are endogenous to the population. They are random samples drawn from the underlying population. In other words, the sample characteristics give an indication of the population characteristics. The corruption of the politicians is the single most damning evidence that the voters are corrupt.

That is the law.

Liberation and Development — Part II

Last week on May 3rd, I began discussing Liberation and Development which I will continue now. I had written that

I will further argue that it is possible to bootstrap the process of development but only if resources are used efficiently and if problems are solved by addressing causes rather than by alleviating superficial effects.

The point I was making is that energy, credit, and knowledge are the basic ingredients for economic production. Economic production is a pre-requisite for development. Efficient use of the three basic ingredients is important. I had also taken a more generalized view of credit where I considered the stock of capital available to an economy as form of credit. It is intergenerational credit because the present generation can use the capital stock created by the previous generations. The capital stock is represented by the machines, buildings, transportation systems, etc. The source of the capital stock is investment which itself the flip side of a flow of savings. Savings in any period is the difference between production and consumption of that period. Finally, efficient use of savings translates into capital stock via through the investment route.

Does efficiency in the use of savings matter? The chairman of the US Federal Reserve Board Mr Alan Greenspan believes it does. At a conference in Chicago on May 6th, in his speech Globalization and Innovation, Greenspan said:

Although saving is a necessary condition for financing the capital investment required to engender productivity, it is not a sufficient condition. The very high saving rates of the Soviet Union, of China, and of India in earlier decades, often did not foster significant productivity growth in those countries. Saving squandered in financing inefficient technologies does not advance living standards.

Volumes can be written in merely outlining how inefficiently India uses its savings. There has to be a reason for why an economy which has a high savings rate cannot translate those savings into higher production through the intermediate steps of investment, capital stock growth, and higher productivity. One of the primary reasons could be the missing complementary ingredient which is knowledge or know-how. Our savings rate is high but savings are low because our incomes are so low. A poor person with a Rs 1000 income and 20% savings rate will only be able to save Rs 200. Compare that to a rich person with a savings rate of 5% but an income of Rs 10,000, saving Rs 500. Furthermore, the rich person is likely to have better investment advice and therefore be able to mobilize his savings better than the poor person.

In other words, when it comes to savings and what to do with them, we are caught in a classic bind which is exemplified by the lament garibi mein aataa geelaa. I cannot quite translate it accurately but it goes like this: Too much water in the dough has made it unusable; but one is so poor that one cannot afford any more flour to correct the imbalance; thus whatever little one had is also wasted. The caution therefore is that when one is poor, one cannot afford not to be careful about how to use the resources one has. How much water to add to a given amount of flour is a decision taken by policy makers who may or may not be sufficiently knowledgeable about cooking. If at the end of the day, all you have is a lump of useless runny dough, you know that the policy makers have messed up. That is what has happened in the case of India. For decades, absolute morons ruled the country whose idiotic economic policy led to the disaster we see around us today.

The economy is being freed after decades of mismanagement and misrule. But even now, we are definitely not out of the woods. Whether it is telecommunications policy or education policy: the idiots continue to pour too much water in the too little flour we have. I would like to look into the telecommunications policy tomorrow.

On the Birth Anniversary of the Buddha

Yesterday was the anniversary of the birth of one whose concern was with enlightenment and awakening. I wrote a small piece on my personal weblog at UC Berkeley to mark that occassion.

Of Liberation and Development

Lord Acton observed that power tends to corrupt and absolute power corrupts absolutely. He was of course referring to political, economic, and social power. I argue that power liberates, and absolute power liberates absolutely. I am referring to power that drives machines, or energy. This point is so important that I am forced to raise it to the status of a law. The The First Law of Liberation.

Since I am at it, I may as well outline the The Second Law of Liberation: Credit liberates, and absolute credit liberates absolutely. The corollary to that is naturally the conclusion that Microcredit liberates microscopically. The Third Law of Liberation states that knowledge liberates and absolute knowledge liberates absolutely and leads to Enlightenment. Enlightenment is outside the scope of the present discussion since it drags nirvana into the picture and since for now we are stuck in samsara, I will not insist on absolute knowledge; only the relative knowledge which is our lot in our everyday lives.

So there you have it: power, credit, and knowledge are the basic ingredients for the recipe that liberates. The utility of liberation is expressed in the Zeroth Law of Development which is that liberation is a pre-condition for development. Without freedom of thought and action, nothing of value can be accomplished. At its core, development is about freedom — economic, political, religious, … ad infinitum. Casual empiricism bears out that law: where these freedoms are missing, development is absent. If you really insist on it, check out the human development indicies of countries and you would notice that countries that are in economic, political, and religious shackles are not developed.

Now let us discuss the first of the Trinity: Power. (Just for the heck of it, I like to represent it by Shiva, the Mahadeva in the Hindu pantheon.) Power is another word for energy and it is energy that acts on matter to transform it. The reason that energy can do so is simply because matter is condensed energy. The fundamental point to consider is that it was energy that transformed matter into all the stuff that you see around yourself (not to mention the stuff that is yourself.) Everything without exception. I am writing this on a laptop while flying at 33,000 feet in a plane. Everything that I can see around me has been mined from the earth and transformed through thousands of processes involving technology to create machines that would astound us constantly if were not so jaded by their pervasiveness. Inside this laptop, for instance, there is a chip which processes signals. The chip is made of simple stuff — silicon, a few metals including gold, plastic (carbon, hydrogen, nitrogen, oxygen, etc.) — the kind of stuff that you can grab in any handful of earth. What transformed that earth into a chip is energy which powered the machines that embody knowledge as technology. The conclusion therefore is that power, or energy, is what you basically need, and if you have sufficient amounts of power, you can do anything that your heart desires.

Power is the fundamental irreducible basic natural resource and all other resources can be derived using it, albeit indirectly. For instance, using power, you can mine any mineral you need from sea water of which there is a practically inexhaustible supply. You can get fresh water as well from it. All you need is power. So the conclusion is that if you have a shortage of power, all other shortages derive from that. Every poor country is one that does not have access to power and every rich country has access to power. Whether the rich country’s access to power is endogenously determined or not, is a different matter. If one has any doubts about how important power is to countries, one just has to remember that in all the wars that the US fights around the world, energy holds center stage.

Next on our list of liberating elements is credit. What do I mean by credit? I mean any capital that is available to one for use without having earned it before using it. This is a broader concept than just the money credit that you can access using credit cards, banks, loan sharks, etc. I am referring to capital that has been accumulated for generations which includes machines, buildings, roads, libraries, technology, and so on. If one thinks about it for a bit, one uses stuff that one has not paid for all the time. The current generation has access to and uses capital that it has not paid for. Therefore it can be said that the current generation is using credit. And the more credit that is available to any entity, the more productive it is going to be. To understand this bit, one has to merely look at the credit available to the population of a rich nation and compare that to that which is available to the people of a poor nation. People are born pretty much with equal capabilities on the average. What distinguishes them later in life is whether they had access to credit or not. A surgeon’s son grows up to a professional, while a peasant’s son grows up to be a manual laborer. On a higher level of aggregation, the people of a technologically advanced country have access to greater credit — more machines and more know-how — and therefore they are more productive.

For a glimpse of where I am going with this, I would like to now outline my argument here:

  1. Energy, credit, and knowledge are the basic ingredients for liberation.
  2. Liberation is a precondition for development.
  3. So if one wishes to bring about development, one has to assure the availability of energy, credit, and knowledge.

I will argue that underdeveloped countries have to struggle so hard to become developed because they are deficient in some or all of the three essential ingredients of liberation. I will further argue that it is possible to bootstrap the process of development but only if resources are used efficiently and if problems are solved by addressing causes rather than by alleviating superficial effects. Finally, I would address the question of the use of information and communications technologies for development. The point that I would discuss is that knowledge is the active agent of transformation. ICT, as the name implies, is technology that is concerned with information, and not knowledge directly. Not keeping the distinction between knowledge and information leads to confused thinking and ultimately immense waste of resources.

{Read the next article in the series Of Liberation and Development-II here.}

Simple Encrypted Exam Questions System

The recent spate of leaked exam papers is crying out for a solution. Here is my proposal. It is simple and cheap and will avoid the humongous costs of leaked questions.
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Why, oh why, don’t they own shoes?

If one ponders the question of why cobbler’s children often go barefoot, one comes to the obvious conclusion that cobblers are traditionally poor and cannot afford the luxury of the same shoes that they produce for others. It is not that they don’t desire shoes; only that shoes lose out in a cost-benefit analysis.

Continue reading “Why, oh why, don’t they own shoes?”