The world’s eyes are riveted on Syria this week, as the United States, France and perhaps a few others organize plans to punish a bloodstained government for its use of chemical weapons against its own people. It’s a story that has everything: the prospect of violence, the political agony of an embattled White House, David Cameron’s loss of grip, and perplexing questions about right and wrong. For liberal internationalists, few international laws are more important than those that ban the use of WMD against civilians; on the other hand, when the political patrons of a war criminal block action at the UN Security Council, liberal internationalists must choose between their highest values and their most cherished institution.
That’s why the Syria story is dominating the news this week, and like the rest of the world, VM has been following it closely. But another story that is getting less attention is much more important for the future of the world: the economic crisis in India represents a much more fateful moment in world politics than anything happening in Syria.
What’s so important about India’s economic problems? It’s more what they tell us about the state of the country than the severity of the problems themselves. The stock market jitters, the currency crash, the GDP slowdown and the government deficit aren’t enough in themselves to sink India. All economies go through rough patches every now and then, but the question isn’t about a downturn. The question is whether the Indian political system has what it takes to get the economy back on track.
Two horrible things happened in India this week: an inept government reeling from serial corruption scandals and mounting evidence of economic failure pushed two bad bills towards enactment. There’s a wasteful “food security law” that will do much more to nourish India’s rich world of government corruption than to help the poor on a sustainable basis, and a poorly designed “land reform” law that could be even more crippling.
We’ve noted the food bill before; the land law is new and its consequences could be devastating enough to India’s growth prospects to change the course of world history. In India, under a law dating from the British Raj, the government has wide powers of eminent domain. Essentially, the government is the nation’s real estate agent, organizing transactions between buyers (often Indian or foreign companies who want to build factories, or Indian government organizations wanting to build roads or other infrastructure) and the farmers and others who own the land. For many Indians, this approach makes sense for two reasons. First, there are so many small plots in India that without the convenience of government organization (and its powers of eminent domain to force unwilling holdouts to sell), it would difficult if not impossible for private organizations to get the land for big projects. The second reason is that given the low level of education among many rural people in India and their lack of economic sophistication, there is a fear that unscrupulous investors will swindle the poor unless the government is there to protect them.
This isn’t just paternalism. Rural life in India isn’t always beautiful, and corrupt local officials, landlords and others can and often do squeeze the poor unmercifully. It’s not at all clear that a “free market” in land would lead to anything but the forced dispossession of hundreds of thousands and even millions of poor farmers and their families.
But there’s a catch. The paternalistic state, theoretically devoted to the welfare of poor farmers, is staffed by very human and often very venal officials. Business interests wanting to develop land can bribe politicians and officials to get the government to force land sales; a system established to protect the poor is easily perverted into the instrument of their destruction.
As a result, the business of land sales for economic development in India often degenerates into an unholy mess. NGOs, farmer organizations, corrupt officials, desperate farmers, families with conflicting claims and many other parties get caught up in struggles that can go on for years. Sometimes violent rebel groups get involved in land controversies, and even in their absence these battles can turn violent as farmers fight desperately to hold onto the only security they know. What makes these struggles even more bitter at times is the knowledge on the farmers’ part that the bureaucrats aren’t giving them the full and fair price for the land. Like their counterparts in China, Indian officials and politicians see the gap between the price paid by investors and the price paid to farmers as a revenue source that both supports local government and in some cases lines the pockets of local officials.
India certainly needs land reform, but as an editorial in the Hindustan Times notes, this bill makes things worse. The government’s land bill
envisages payment of twice the market rate for land in urban areas and four times the market rate for land in rural areas — enough to make any project, public or private, economically unviable. Then, it calls for the consent of 80% of landowners before any acquisition can proceed.
The Times goes on to spell out the consequences: the law mandates a windfall bonanza for landowners, requires social impact studies that will drag out the process of land acquisition for “years if not decades” and will make the acquisition of large plots of land for development uneconomic all across India.
The problems don’t stop there. The Times concisely describes why the final passage of this law would be a disaster of the first magnitude:
This provision could well spell the end of India’s dreams of emerging as a manufacturing superpower. The only way to quickly lift what the western media pejoratively refers to as India’s teeming millions into the lower middle classes and then progressively higher, is to create industrial jobs.
The farm sector accounts for 16% of GDP but supports 60% of the population. This is clearly unsustainable. We need rapid industrialisation. And for this, we need land — not land that has been acquired from their owners for a pittance and given to industry cheap, but land that has acquired at a fair value and given to industry at a price that keeps projects viable.
We couldn’t have put that better ourselves. India can only hope to provide a better way of life for its hundreds of millions of poor rural people by rapidly developing as an industrial power. To do that, private investors have to be able to buy land, and the government has to be able to acquire land for roads, electricity plants and transmission lines and all the other necessities of an industrial society.
Land blockages and infrastructure problems have so far blocked India from benefiting fully from the globalization of industrial production and landed the country in a Catch-22 style development trap. Because there is no massive industrialization, most of the jobs and other benefits of Indian globalization go to the well educated—the techies in the cyberparks and the fluent English language speakers in the call centers. These are the types of international businesses that can flourish in a country filled with talented people but lacking the basic infrastructure that can support a modern manufacturing economy.
But because the benefits of globalization are so thinly spread, many in India resist further changes. In China, whatever that country’s political problems, massive numbers of ordinary people know that their jobs in manufacturing or in servicing companies that manufacture for export are linked to China’s integration into the global trading system. While China is in many respects a dangerously unequal economy, its global opening has at least created opportunities for people in all walks of life. That is much less true in India, so dangerous laws like this one have more support.
India must move towards an industrial revolution; tens of millions, hundreds of millions of Indians must move from the countryside to the city, from agriculture into manufacturing and services. That is never easy, even under ideal circumstances, and India will be attempting to accomplish this transformation as Indian labor faces tough competition from China, other developing countries— and automation. There is no time to lose, but India at the moment seems stuck.
This isn’t just an Indian story. Whether or not India moves forward toward a modernizing economy is partly a story about Indian incomes and social conditions; it is also a story about world geopolitics. If India hesitates on the threshold of industrialization while China moves swiftly ahead, the balance of power in Asia will become shakier year by year. If India can keep pace with China, it is likely that Asian geopolitics will settle down over time. With two economic superpowers rising together, and a strong Japan on the scene, the Asian balance of power looks reasonably stable. With one superpower rising and another potential superpower on the sidelines, the picture could change.
In the long run, what India does about its industrial and land use policy matters much more to the world than anything that happens in Syria. It matters more to the happiness and economic security of billions of human beings, and it matters more to the prospects for world peace.
Even in the middle of yet another crisis in the unhappy Middle East, Americans need to keep their eyes on the countries in which humanity’s fate in the 21st century will be hammered out. Land policy in India is a bigger deal than sectarian politics in Syria; we need to keep our eyes on the big picture.
[Manmohan Singh photo courtesy of Shutterstock]