Kurt Johnson

Unfortunately I’m not sure exactly what’s going on in this scene - we were driving down a rural “highway” in a bus and I just snapped this through the window. We saw hundreds of these small structures - I think they were mostly for storage of harvests or implements but a few of them were residential. Throughout the drive from Delhi to Agra and Agra to Jaipur there were fields like this (bright yellow color) on the side of the road and a fairly dense population working in the shoulder area - collecting/processing dung patties, moving agricultural produce, working on irrigation systems, etc. There are quite a few more photos like this in my Agra album.

Today’s NY Times has an article that dovetails with my last post, i.e. how democracy in India might slow down development vs. a strong central planning authority.

On the first Monday morning of the year, four bulldozers, accompanied by nearly 300 police officers, arrived on a rocky patch of farmland on the edge of a wooded village and began leveling the earth. It was meant to be the first step in the construction of India’s third-largest steel mill.
…
In 2005, Orissa attracted the largest foreign investment ever in India, with the promise of a $12 billion steel plant by Posco, of South Korea. The same year, Orissa also held the record for the highest rate of poverty in India, which included nearly half its population, or 17 million people.
…
The Congress Party, which rules the central government but plays opposition here in Orissa state, has seized on the episode, flying in its party president, Sonia Gandhi, to console grieving tribal villagers - an important constituency for the party. Orissa authorities privately grumble that Maoist guerrillas, resurgent across the tribal belt, had a hand in the troubles.
…
On paper, at least, the government has acquired the land that makes up the Kalinganagar Industrial Area. On paper, too, the government has awarded varying amounts of compensation to some of the roughly 1,800 families who have been displaced, though the state’s industrial development agency now says an estimated 1,500 families are yet to be fully compensated. All plants in the industrial area are obliged to employ one member of each family displaced, but not all those jobs have yet materialized, the agency adds.
…
The villagers acknowledge that some of them got paid. Mr. Haibru, the village leader in Gobarghati, reaped $26,000 in compensation for his 28 acres, for instance. But those without legal claims to the land - and there seem to be a great many among the villagers here - got little or nothing. Some seem unaware that the land now belongs to Tata. Others are not entirely sure exactly what benefits they are entitled to.

Most here seem convinced of three things, however. First, that whatever relief they have received is not enough in exchange for abandoning their land forever. Second, that considering Kalinganagar’s ambitions, their sorry patches of land will soon be worth a great deal more than what they have been offered. And third, that the factories that have mushroomed across their lands have delivered few opportunities to their communities.

Again, my impression is that in China is a place where citizens have been taught to bow to the authority of the central government (via the Cultural Revolution, Tiananmen Square, etc). Consequently if the Chinese central government gets behind something it will probably get done quickly relative to India’s pluralistic democracy and “flexible” system of property rights and civil law enforcement.

Would you trade political representation for getting the lights on ten years sooner? I think this is what some of our speakers had in mind when they talked about the huge frictional cost that China may have to pay to transition from authoritarianism to representative government (which citizens will presumably demand as they become wealthier and better educated). It can take decades for a nation to figure out how to build a working coalition government or how to set up policies that work; the speaker’s contention was that India has a head start in this area.

I’m still recovering from the trip but thought I’d post some brief remarks on the experience. About 35 Wharton MBAs went for two weeks and traveled to Mumbai, Bangalore, Delhi, and some tourist sights in Agra+Jaipur. The trip was really a testament to the power of the Wharton brand - we had incredible access to people and places that I could not possibly have visited alone. Highlights included meetings with Manmohan Sing (India’sPrime Minister), Kamal Nath (Minister of Commerce), K.P. Singh (DLF), Narayana Murthy (Infosys), Dr. Devi Shetty (Narayana Hrudayalaya hospital), multiple Tata companies, Reliance Industries, the Parikrma Foundation, Ujjivan, and many others.

This was my first visit to India. It’s hard to argue with the stereotype that India is “a land of contrasts”. There are abundant examples of things that are going really well - certain technical professions, the harmonious mixing of disparate religious and ethnic groups, and some flagship developments (e.g., the Jamnagar refinery that we visited, the IITs, liberalizing airlines and autos). The country is seeing 7-8% annual GDP growth and a rapidly expanding middle class. Everyone we talked to was quite optimistic and almost without exception the important trendlines are moving in the right direction. However all of the optimism needs to be tempered by realizing that there are still plenty of “basic” functions that just aren’t getting done. Electric power reliability is probably the most obvious - from what we heard there is nowhere in the country that has reliable power 24×7 and many places only get a few hours per day of electricity and running water. It’s strange to see cutting edge corporate IT campuses that could be lifted straight from Silicon Valley and know that they can’t rely on city power and water.

India has no shortage of smart people - if fixing the electricity problem were simple it would have been done a long time ago. Public investments in generation are slow to happen because currently electricity is a state monopoly that gives power away for far below the cost of production. Politicians are unwilling to raise consumer power prices so it’s hard to justify any new investment since every incremental KWH produced will suck more money out of the state treasury. Experiments with 3rd party generation selling into the state grid have not gone smoothly and at least one company we spoke with that had the capability to sell up to 200-300 MW back to the grid was not doing so because they had not been able to get an agreement from the state to buy the power. As far as infrastructure investments go reliable electric power is a no-brainer - electric lights extend the usable day, electric appliances reduce the need to burn wood or dung and aid air quality, and modern heating & air conditioning boost worker productivity and reduce health and death costs.

When thinking how India compares to China it’s intriguing to consider how the pluralistic democracy in India can hurt things (as in Kuwait where fixing irrational subsidies might get done in a monarchy but never in a representative democracy). My impression of China is that if the senior central planners decide to do something they can execute changes pretty rapidly. Conversely India has to coordinate several tiers of elected officials and stakeholders who each have their own constituencies and can derail the process. This was brought home neatly by a story about Steven Roach: apparently he met with a few executives about the need to build infrastructure, and at the end one commented “this was a great discussion”. Roach’s reply: “That’s exactly India’s problem. While we were having this great discussion China built three bridges”. However at least one economist we met with argued that China’s citizens will increasingly demand political freedoms to match their new economic freedom and that there will be a huge frictional cost in this transition to representative government, in his view a cost India has already paid.

Another angle on the superiority of a centralized technocratic hierarchy was contained in today’s reading for my business law class (although not all of India’s pluralism translates to corruption, political patronage and lobbying can behave a lot like corruption):

Huntington observes that…the transition from an autocratic to a more democratic government is usually accompanied by increases in corruption….New governments lose monopoly over bribe collection and as a result multiple agencies take bribes where only one did before, leading to a much less efficient allocation….Russia under Communists had a monolithic bribe collection system. With Communists gone, central government officials, ministry officials, and many others are taking bribes, leading to much higher bribes in equilibrium though perhaps lower corruption revenues, just as the model predicts. Similar stories are told about Africa after independence, when the colonial corruption machines disintegrated (Ekpo, 1979). The evidence is strikingly consistent in showing the superiority [efficiency] of monopolistic bribe taking over that by independent monopolists.

So thinking about China-India-US growth has thrown a kink into my conventional wisdom about the benefit of free markets and property rights vs technocratic central planning. China’s central planning has by most accounts been more effective than India’s free markets. India’s property and due process rights and have pretty clearly been a hindrance to development vs. China’s communist model. Is it simply a matter of India’s corruption and bureaucratic friction overwhelming the “superior” structure of individual rights and free markets? Is China in a unique period of “benevolent” dictatorship that is not robust over time (e.g., if they get another Mao at the top of the hierarchy instead of a Deng Xiaoping type things could unwind quickly without the speedbumps that a representative democracy offers…in theory).

Anyway, the trip was extremely rewarding and I’m very glad I participated. I’ll post later on some of the specific site visits (and fun stuff) we did.

I am hosting my photos as well as those of other people on the trip. The gallery is at:
http://www.kurtjohnson.net/2005IndiaGIP

The real work isn’t posting the photos; it’s trying to figure out which ones don’t suck. It’s easy to just dump 4,000 photos online but nobody wants to parse through 4,000 so I’m trying to make some judgements to cut mine down to a reasonable number.

The trip was fantastic; hopefully I’ll get more written during the next weekend or two. Classes started twelve hours after I returned so time has been a little short.

This was taken in Mumbai on the causeway out to the Haji Ali mosque. The kid is standing out in the water preparing a line to fish with. Unfortunately the water at this spot is absolutely filthy - junk floating in the water, visible effluents, and stinking of untreated sewage….but there were a dozen kids out there anyway.