Tag Archives: west bengal

Industrialization in a Land Hungry State – A Lesson from Robert Solow

Originally published in The Telegraph, Calcutta on January 1, 2013 under the title Exploring the Possible

 

If surviving the test of time is proof of quality, then MIT Nobel Laureate Robert M. Solow’s model of economic growth has surely distinguished itself with flying colours. The work was published as far back in time as 1956 and survives in the academic world till this day, despite the ruthless attack it had to face from Professor Joan Robinson of Cambridge, UK and her associates. Rightly or wrongly, the latter questioned the logical underpinnings of Solow’s work and the debate was intense enough to metamorphose childhood friends into bitter enemies belonging to opposite camps in their adulthood. The controversies ultimately waned out though, possibly on account of a workable alternative model of economic growth that the critics failed to provide.

The Solovian prescription for growth and the plans for West Bengal’s industrialization, one might suspect, are strange bedfellows. However, this, curiously enough, may not be the case. For sustained growth, Solow visualizes all means of production to be growing at the same rate in the long run.  The situation resembles the cloning of production organizations, two of which, identical in all respects, particularly in the use of resources, would produce double the output produced by one, three producing three times and so on. Amongst the resources, population, which acts as a proxy for the labour force, is controlled by demographic rather than economic activities. Thus, all other inputs, most importantly capital, need to adjust and grow at the same rate as labour and this in turn leads output too to grow at the same rate.

Interestingly enough, Solow was not overly worried about the land problem. His cloning exercise involves replication of production organizations that are identical in their use of capital and labour. But common sense suggests that two factories that use identical quantities of capital and labour, can be constructed only on similar plots of land. On the other hand, while both capital and labour can expand endlessly, at least for argument’s sake, the total quantum of land available on the planet  is physically limited. Thus, Solow’s cloning comes up against a major barrier, viz. the scarcity of land, unless of course one imagines production units to grow vertically upwards in search of the moon rather than spread horizontally.

Land of course does not concern Slow. But if it did, how should he have proceeded? The answer could probably be found in the special manner in which labour is treated in his work. A worker is both an embodiment of nature endowed muscle power as well as socially available technological skills. The stock of muscle power grows with the population. This is the demography story. Technological skills multiply too over time, but Solow was vague at best as far as the technology tale went. What he was clear about though was that his labour resource was separable into two parts, ability to work and the skill associated with that ability. The cloning in Solow’s model involves replication of capital and the joint person cum skill input. Capital and the joint input, and hence output, grow at the same rate in the long run, but the joint input itself grows at a higher rate than the rate of growth of population in isolation, since its growth rate is the sum of the growth rates of population and technology. Consequently, even as output grows at the same rate as the joint population cum skill input, it grows faster than population. This means that output finally grows faster than population so that per capita output rises in the long run, which is the objective of economic growth and development in most societies.

It is not output alone that rises faster than population. So does capital, since the latter too grows at the same rate as the population cum skill input. Suppose, however, that labour lacked the skill attribute altogether. Then growth in capital at a rate faster than population would have given rise to the same absurdity as factories multiplying over non-augmentable land.

Economics text-books assert that the extra output one can squeeze out of  fixed size inputs diminishes with each extra squeeze with the help of inputs capable of growth. Therefore, in the absence of skill formation, as we are temporarily assuming, if capital were to rise at a higher rate than the growth in population, then the resulting output would be growing at ever slower rates. The only steady growth the system will be able to handle would involve capital, unskilled labour  as well as output growing at the same rate. To the extent then that a rise in output per head of population is a desired goal of development, the Solow model has a pretty dreary prediction to make if skills fail to grow.

Speaking more broadly, skill improvement signifies technical progress and the Solow message is that per capita output growth is not sustainable in the absence of a simultaneous growth in technology. Solow restricted his exercise to capital and labour resources alone. However, there is no reason why we should not interpret his work to include non-augmentable land too. Just as skilled labour qualifies for a larger number of workers than a mere a headcount, so should land services not be judged by the geographical size of land alone. Like labour, effective land size could be larger than its physical size in the presence of land augmenting technical progress.

Given this Solow insight, it is not enough for the authorities in charge of this land scarce state to simply send blank invitations to industrialists to invest in employment generating projects. Instead of adopting a rigid stand on land policy, attracting thereby criticisms from its political opponents and raising doubts in the minds of potential investors, the government might be able to do far better by laying down an acceptable road map for the sort of industries the Bengal economy should be able to cope with. As matters stand now, such industries ought to be equipped with technologies that are simultaneously labour intensive and frugal in the use of land.

A number of service sectors might easily qualify, though it is doubtful that the IT sector belongs to this category. The IT sector is mostly skilled labour intensive and, as elsewhere in the Indian economy, its growth, however phenomenal, holds little promise for unskilled or semi-skilled employment generation in a large scale. Heavy manufacture too cannot qualify as was evident during the 600 acres controversy in Singur’s Nano factory.

It makes little sense therefore to throw open the land markets to all and sundry. Land being scarce, its market price will be prohibitively high for new ventures to be initiated. A far better idea could be to set up an expert group to identify those industries alone that are endowed with technology that is either capable of converting small land holdings into effectively large ones or require small land holdings relative to output. These are the industries that the government should be luring into the state by offering whatever incentives it is in a position to offer.

Despite the clamour raised by the Chambers of Commerce, it is unlikely that large scale industries will fulfill the criterion. Agro-industries backed up by multiple cropping could well be a solution. The hotel industry in remote tourist spots could work as well. Both are semi-skilled labour intensive and hotels can actually expand vertically. The list, even if short, needs to be carefully prepared instead of wearing the mask of an unqualified industry friendly face. Even if a large industry or two were to move into the land hungry state, it cannot open the floodgates for heavy industrialization. Instead of criticizing and lamenting over the impossible therefore, our time will be far better spent in discovering the possible.

 

 

The Philosophy of Poverty vs The Poverty of Philosophy: Travails of West Bengal

Neither Karl Marx, who authoured The Poverty of Philosophy, nor M. Proudhon, who wrote The Philosophy of Poverty in 1847 could perceive how relevant the titles of their works would be for the state of West Bengal’s Assembly elections 164 years later. It is not as though the subject matter of the controversy between them has any bearing at all for the election at hand in 2011. Sometimes though, the shell assumes greater significance than the nut itself, or else why should they have coined a word such as ‘nutshell’? And what, in a nutshell, is the situation of West Bengal?

Let us address the issue though from a somewhat simplistic point of view, one that any run of the mill economist would subscribe to. If economists are to be trusted, then a price has to be paid for acquiring anything one desires. A producer, for example, must incur a cost to produce his output. And he is satisfied if the sales revenue adequately exceeds the costs. The same logic applies to consumers. Consumption of commodities and services involves payment. Further, in a free society at least, the consumer derives a satisfaction that normally exceeds the cost of purchase.

Like production and consumption, which are instances of change from one state to another, all changes are costly and more often than not, the cost cannot be viewed as a simple monetary loss. Perhaps the closest example at hand in this context is the story of Singur. The Nano factory would have industrialized a primarily agricultural region, changing thereby an agrarian society into an industrial community. The cost involved not merely the farmers’ loss of the land they tilled for an income. As events have demonstrated, there were other costs too surrounding an adjustment to a new way of life. The fact that the Tatas were driven away probably demonstrates the simple economic truth that the benefits of industrialization they promised appeared too small in the eyes of the potential beneficiaries compared to the multifarious costs they would be called upon to incur to accept the change. Neither the benefits nor the costs were all too clearly defined, but there is little doubt that the people living in the region, or at least a large number of them who thought rationally, did engage in a cost-benefit calculation and concluded that the costs exceeded the benefits. Consequently, when state power attempted to force the ‘benefits’ down their throats, they revolted.

Assuming that a section of politicians, the opposition if you will, was responsible for the uprising, amounts probably to putting the cart before the horse.  The opposition had surely used the brewing resentment to attract people’s support towards itself, but in its incipient stage at least, the public antipathy was not the opposition’s creation. And, in a democratic society of course, it is only too natural for a given set of rulers to be usurped from power by its competitors. Judged by the current attitudes and statements of the people who ruled West Bengal for the last 34 years, however, this simple truth does not seem to have dawned upon them. Needless to say, one cannot rule out corrupt practices surrounding the drive to halt the Left juggernaut in its tracks, but classics in history, such as the Decline and Fall of the Roman Empire, teach us that corruption has never been a one sided game.

Nonetheless, a suggestion of being dislodged from the seat of power seems to sound as foolish to the occupants of Writers’ Building as the Napoleonic ‘impossible’, or, probably, as absurd as the dinosaurs considered any thought of their extinction a million years ago. Yet, however impossible the emerging scenario might appear to the powers that be, the approaching wheels of democracy seem to be sending precisely the message the rulers wish to turn a blind eye towards.  And what is making their publicly displayed sense of incredulity vis-à-vis a possible defeat in the elections look totally unconvincing is the state of the exchequer. Even if they are returned back to the Writers’ Building, there are reasons to suspect that they will have little to offer to the people of the state other than a mendicant order. They are perilously close to preaching a ‘philosophy of poverty’ in other words, one that Gautama Buddha might have approved, but certainly not the Marxists who flew into power in 1977, flapping their dialectical wings. The fortunate amongst them are no longer around. The unfortunate few are hopping across television channels, explaining to gullible members of the populace that accumulating enormous debts is a way of life for the entire country, and not Bengal alone, without bothering to locate the creditors who will assure that the debtors will live in perpetual bliss. 

If all this appears to be unpalatable, the tragedy alas does not end here. The reverse side of the coin, the supporters of the opposition in other words, should probably hold their euphoria in leash as well. A comparison of costs and benefits applies to the opposition as forcefully as it does to the ageing class of Left rulers. Removing the latter from power is quite obviously a costly affair, involving, if politicians, social commentators and the media are to be trusted, entities as precious as human lives. What, however, constitutes the benefits? The primary benefit, as most people seem to believe, lies in exorcising the supposed fiend. So far so good, but life does not stop after retrenchment, neither for the retrenched nor for those who hand out the pink slips.

What will society look like once the evil is banished? The manifesto of the principal member of the opposition offers a quick view of the fairyland that West Bengal is about to transform into. During the first 200 days of assumption of power, it will present West Bengal with a ‘… basic industrial strategy …’ of creating ‘… massive employment through development of the manufacturing sector’. There will be ‘… a chain of industrial towns … across the state …’ along with ‘inter-linkages’. A ‘(t)arget creation of 300 ITIs [from the present 51] for basic skills with focus on SME’s worker requirement’ has found a place in the first 200 days’ agenda too. Moreover, ‘17 clusters will be selected to be converted into world class centres of excellence with focus on cooperation between enterprises and promoting economies of scale.’ The Government will ‘…benchmark Kolkata with the best cities in the world’. (May God save the pavement-hawkers!) The list is literally endless and, given the 200 days’ deadline, it raises visions of an Aladdin in the making, or at least of the wonderful lamp that won him the princess!

One does not know yet if the coalition partners of the presumed government-to-be will be anything more than strange bed fellows. However, it is not hard to form an opinion about the assortment comprising the big brother or sister of the coalition. It is a collection of individuals sharing one and only one cause between themselves, viz. a total demolition of the left. Apart from this, it is a motley crowd, totally shorn of a macro or a social character. As in the case of society, which is not merely a gathering of people, a group of highly competent professionals cannot constitute a political identity if the solitary adhesive that holds it in place is a common hatred of the enemy. Such diverse assemblages work perhaps when a country goes to war, but once the war is over, they are normally not expected to deliver peace time governance. A government in power must necessarily be characterized by a macro personality, a common vision of the future, a jointly held belief. It should not be confused with a joint stock company, each department of which is being supervised by an able ‘professional’.  Once we view the matter from this point of view, one suspects that this political formation is characterized by a ‘poverty of philosophy’ as opposed to the ‘philosophy of poverty’ of the Left.

It was the poverty of a common philosophy that dislodged three consecutive governments between 1967 and 1972. The Left came to power in 1977 and continued to rule for 34 years because it succeeded in forging a common world view, rightly or wrongly. Unfortunately, however, it is now entrenched in internal contradictions itself and has little more than its ‘philosophy of poverty’ to offer.

West Bengal is caught between the devil and the deep blue sea and the election results will hardly symbolize the end of its tragedy.  

[A slightly revised version of the article appeared in The Telegraph, Calcutta on April 21, 2001]

Figures in the Limelight

Bengal Politics: Saas Bhi Kabhi Bahu Thi Syndrome

The municipal elections suggest that there is a “Saas Bhi Kabhi Bahu Thi” (SBKBT) syndrome at work in Bengal politics. An unchanging coalition being in power for over thirty years defies not merely the logic of democracy, but every other semblance of logic as well. It reminds one of SBKBT which forced its inanity upon the tired viewers for years on the assumption that the idiot box was meant to produce idiots. The market culture finally played a curative role of sorts in the case of SBKBT. One suspects that its TRP crashed irretrievably with profit seeking advertisers turning wary of patronizing the serial.

Marxists detect skeleton packed cupboards in every corner of a market society. Consequently, free competition was banished from Bengal, including the freedom of democratic choice ever since their arrival.

Yet, matters were not appalling throughout the Marxists’ tenure in Bengal. They had cleansed the system of the misrule by their predecessors. Bengal got its land reform policy. The lot of the rural poor improved in the early days and the panchayat system was used for common good.

Was this not the case with SBKBT as well? It did start with a bang, but after an overstretched run, it departed with a whimper. The producers served the same wine in ever newer bottles, but the viewers finally refused to accept it as bubbling champagne. The idiot box failed to produce idiots!

The Marxists too did not perceive that the benefits of land redistribution would peter out. As farmers’ families expanded in size, land and income per head declined. But the panchayats were manned by Marxist musclemen to perpetuate the myth of classless development, following the idiot box model.

In the urban centres, the rulers had little idea about industrialization except for the half digested Marxist theories they applied to destroy growth possibilities. And to improve the coercion driven TRP, they nurtured militant trade unionism. Their failure to generate industrial progress was carefully hidden under a shroud of empty slogans. Armed with these, the torch bearers made inroads into every form of public utility, including hospitals, schools, colleges and universities. Kolkata earned renown for the ugly wall graffiti that greeted visitors, all in the name of the underprivileged! City roads have remained choked up by hawkers, public transport is allowed to violate every norm of safety and the police force has been reduced to a box full of tin soldiers. Even court verdicts against street congestion have been violated with impunity. The arrogance of power spread from the masters to the servants and the result is a destruction of work culture.

By the time sense dawned, the obstructionist policies had proceeded too far and, as Singur demonstrated, the rulers’ strategies themselves were successfully employed, even if guided by incorrect economics, to lead to their undoing. And with incompetence ruling the roost in every sphere of life, along with vast pockets of unemployment, people were bound to feel the pinch someday or the other. Even the Marxist cadre began to detect the absurdity of the promises made by leaders who refused to call it a day and allow fresh blood to flow into the system.

Now, much in the spirit of SBKBT, the municipal elections point out that an army of idiots has not emerged to help perpetuate the Marxist mega-rule. Few appear to exist in the state that are willing to watch the show anymore. Having endured things for more than thirty years and sensing that the once mighty rulers are a spent force, Bengal is about to pass a verdict against the rulers. What is particularly painful for the Left Front is that even the telltale improvements in municipal administration under their rule did not attract the voters’ sympathy.

Interestingly enough, in the TV serial world, one has not come across productions so far that are radically different from SBKBT. In the political sphere too, we need to wait and watch. Is it possible for Kokata to turn into London? If so, where will this oriental London hide its hawker jammed roads? Will Bengal metamorphose into Switzerland? If it does, will the black money stashed away in Swiss banks flow into the state?

[Published as a Guest column in the Hindustan Times, Kolkata edition, June 6, 2010.]