Marginalization: The International Language

This morning on the radio I heard this story:

India could overtake Britain and have the world's fifth largest economy within a decade as the country's growth accelerates, a new report says...

Everywhere you turn in India's cities are signs of economic boom. New cars choking the streets, middle-class housing and shopping malls swallowing up farmland, airports chock-a-block with travellers. But this is probably only the start of a transformation that will reshape the global economy.

It might have been the soap in my eyes, but this story clanged against my brain. "I'm no economist," I thought, "nor sociologist nor any kind of major expert on India, but there's something wrong with this story."

There is, indeed, something wrong with this story:

According to activists, shacks and shantytowns have disappeared from the edge of the Indian capital to make room for shopping complexes and cinema halls. The law sanctioned some of these steps; other acts appear simply to be at the behest of the powerful against the weak...

By the time the authorities cleared a path through the slum, 200 huts made of bricks and galvanised steel were reduced to rubble. Puja had lost her home and her 12-day-old baby son was killed in the demolition, according to his parents. "The big people do not care for us," she said. "We have been here for years and they just wanted to get rid of us to make Delhi look beautiful."

Although the above is on a greater - if only in some ways - scale of tragedy, I can't help but be reminded of what the rich in this country tend to do to disadvantaged kids when they get in the way of No Child Left Behind. Got stragglers? Cut the cord.

When Indian PM Jawaharlal Nehru spoke in front of Congress in 1949, he said:

India is industrially more developed than many less fortunate countries and is reckoned as the seventh or eighth among the world's industrial nations. But this arithmetical distinction cannot conceal the poverty of the great majority of our people. To remove this poverty by greater production, more equitable distribution, better education and better health, is the paramount need and the most pressing task before us and we are determined to accomplish this task.

It doesn't seem like they're doing a very good job of it, does it? (Still, besides the obvious human rights concerns over the fate of the squatters, I realize this may seem like a privileged American taking potshots at [Ed: what is seen as] a developing country. To the contrary; it seems that the Indian government is determined to follow the recent US model of economics and economic reporting:  Frontload the economy and then take us on a tour of Maserati dealerships. "Look, business is booming!")

Booming:

"The problem for Delhi is huge because 32% live in jhuggies (slums). How can you just bulldoze? Where will they put all the millions of people? What about their rights?" These questions are not answered in India, where a lack of coordinated policy responses leaves little but disarray.

Unlike the poor, powerful groups can mobilise to bring the government to heel. A recent attempt to seal thousands of illegal shops was halted by a coalition of traders who could vote the Congress party out of power in the Delhi municipality.

The Wall Street Journal recently contrasted India's democracy with China's centralised dictatorship. "In China, the other billion-person economy struggling to square rapid growth with colossal infrastructure needs, illegal squatters are dealt with decisively and unceremoniously. One day they are there; the next they are not," the paper's correspondent wrote.

However another view emerges from the United Nations human settlements programme. Its analysis is that "China is the only large country that has managed to urbanise without the creation of large slum areas or informal settlements".

That we as a "public" trust economists to report on the economy is frustrating. In the wrong hands (read: most of them), economics is a self-fulfilling prophecy; Alan Greenspan is the cliched example, but even on a smaller scale, it happens. Consider the "Cramer Bounce":

The sudden overnight appreciation of a stock's price after it has been recommended by Jim Cramer on his CNBC show, "Mad Money". This increase in price can be attributed to investors who buy stocks after seeing Cramer's recommendations.

This effect is fairly significant in certain classes of stock. For example, one study entitled Is the Market Mad? Evidence from Mad Money released by Northwestern University in March of 2006 showed that for smaller stocks, the overnight increase can be more than 5%.

This abnormal increase lasts for only about 12 days, whereupon the stock's price retreats back to its pre-recommended price, assuming no other news has been released.

I'm not ascribing bad intentions to Cramer himself (in fact, he lives by strict rules about not investing in or divesting of stocks he talks about on his show) but to macro it on up again, what does a story like the "soon to be fifth in the world" story do for the Indian economy? Well, it encourages investment, of course, and more specifically, investment with the companies, individuals, and governments which are currently behind the marginalization of the underclass - and, slightly more abstractly, it marginalizes the voices for change who see things for how they really are. It's hard to believe that a rising tide lifts all boats when 32% of the boats are closer to swamping the more the tide comes in.

Since I'm in a quoting mood, I'll close by saying that this whole thing reminds me of something Adam Smith wrote in the Wealth of Nations. It's not strictly analgous, except that it is: Inasmuch as "the public" trusts "the powerful" to report and advance "the economy", they are always wrong to do so.

The proposal of any new law or regulation which comes from [businessmen], ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.

-- Auguste

Comments

[Xanthippas]

Wow. Good quote there at the end.