Tag: poverty

India, Urbanization and Poverty

“Mumbai is the wealthiest city in India. It contributes over 6% of India’s economy, 30% of its income tax, 40% of its trade, and 60% of its customs duties. Its per capita GDP in 2015 stood at $5,328, more than 3.3 times that of the country as a whole. And yet, half of the population lives packed into just 12% of the city’s available land.”

That is from a data rich (and yet pleasant to read) essay about Mumbai and it’s mad policies regarding real estate. Those mad policies are nothing new, some of them are more than a hundred years old, and they have been covered extensively in lots of different places. Not getting urbanization right is a sport that all countries play well – although you’ll certainly get a sympathetic nod from me if you argue that we in India play it better than most. Why, I come from Pune, and you need to come visit our city one of these days to understand just how good (bad is what I mean, but you knew that already) we have become in the last four to five years alone.

Please go ahead and read the whole essay, it is full of delightful little nuggets and not-so-little laments. Did you know, for example, that urban planners planned to limit Mumbai’s population to a maximum of 3.4 million by 1980? This is like I planning to limit my weight gain to two hundred grams around the last week of the year, and I have the same success as Mumbai’s urban planners back in the day – we’re at about 25 million for the Mumbai metropolitan area now.*

And here’s another face-palm worthy statistic:

“The 1999 act is a marginal improvement over the original, but still doesn’t provide adequate incentive for investment. The annual 4% rental increase is below Indian inflation since 1999, below current Indian treasury yields, and far below the increase in demand or the increase in per capita GDP. At the allowable annual increase, the value of rent diminishes sharply over time. If the average Indian landlord received 30% of their income in rent in 1999, and received 4% annual nominal rent increases, they would be making only 8% of their income from rent on those units by 2021. Even more starkly, the act does not address the lag in rents from 1940 to 1999. A unit rented out under the 1947 rent act would have its rent pegged to 1940 prices until 1999, at which point a one-time 5% increase would be allowed, and a 4% annual increase thereafter”

But I wanted to focus on one particular thing in today’s post, and it is this excerpt:

However, the greatest beneficiaries of housing liberalization may be those who are least visible — those newly able to move into the city. One estimate found that migrants who move to cities in the Global South report increases in income as high as 30%. A separate RCT conducted in Kenya, meanwhile, estimated that households with family members who moved to Nairobi experienced an over 150% increase in income.

That is, the idiocy of our urbanization policies keeps people in poverty, and has done so since independence. How? By making it more difficult to migrate into India’s cities, that’s how. An unseen consequence of failed urbanization are the unseen poor, and that is an unseen tragedy.

Urbanization is, and remains, an underrated idea in India, and this has deep implications for our ability to overcome our challenges when it comes to eradicating poverty.

*Questions about my weight gain in the last week of the year will be deemed an invasion of my privacy, and will therefore be ignored. Go away.

Links for 6th May, 2019

  1. “Not long ago, the Liverpool away coach uniform was technical mountain climbing apparel, which had its roots in drug dealers in cold northwest England figuring they didn’t need to freeze to death slinging weed in a park. That meant a lot of North Face gear, which became fashionable. One leader at an LFC firm bought so much high-end gear that when he got a stadium ban several years ago, he actually started climbing mountains around the country, unsure of what else to do with all the stuff he’d bought.”
    ..
    ..
    A nice long read on Liverpool: the city and the club. Also a fascinating peek into a place in England that isn’t necessarily English.
    ..
    ..
  2. “In my view, reform of government economic administration must take priority. As things stand, it is a prerequisite for the success of any other reform. A weak state cannot deliver anything other than grandiloquent statements of intention. This must change. Without a capable State, there can be no transformation.”
    ..
    ..
    Rathin Roy explains in the Business Standard why India hasn’t fulfilled its potential so far, and what needs to be done to change the status quo.
    ..
    ..
  3. “How much, in all, does Popovich spend annually on food and wine? That’s hard to say. But he reportedly earns $11 million a year, the highest salary in the league for a head coach. Considering the offerings from his private wine label and that he holds thousands of bottles in his cellar, plots out dozens of high-end dinners per year at some of the country’s most high-end restaurants, drops $20,000 on wine alone at some dinners, and routinely leaves exorbitant tips — well, it’s not a stretch to suggest that Popovich might ultimately drop a seven-figure annual investment on food and wine. “He’s spent more on wine and dinners than my whole [NBA] salary,” former NBA coach Don Nelson says. But in San Antonio — where Popovich has won more with his team than any NBA coach has with a single team in history — the investment, apparently, has been worth it.”
    ..
    ..
    Is good dining the means to an end? Read this fascinating article to find out one man’s answer.
    ..
    ..
  4. “Gorbachev pushes back at the notion that the Soviet Union’s end was somehow a triumph for the other side. “Americans thought they’d won the Cold War, and this went to their heads,” he says. “What victory? It was our joint victory. We all won.” Well, maybe not entirely — Vladimir V. Putin, pointedly absent from most of the film, is glimpsed in footage of Raisa Gorbachev’s funeral — but you come away from the movie agreeing with Herzog’s assessment, and yearning for Gorbachev’s brand of diplomacy.”
    ..
    ..
    A short article about Gorbachev – a documentary about the man. He’s 88 this year, but the article is interesting throughout. And the excerpt is a great way to think about whether you have really understood the concept of a zero-sum-game.
    ..
    ..
  5. “The Northern states are densely populated. But this density has clearly not provided the economies of scale to promote rapid economic growth. One problem is that the dense population in the Gangetic plains is not clustered in large cities. Prateek Raj of the Indian Institute of Management in Bengaluru has written about the metropolis vacuum in the Hindi speaking states of Uttar Pradesh, Bihar, Jharkhand, Madhya Pradesh and Chhattisgarh, which together have 500 million residents (bit.ly/2UOS2Kv). “The glaring absence of a major metropolitan center in the region has forced young people to migrate away from the small towns and move to other cities in the West and the South,” he argues.”
    ..
    ..
    A lovely read from Niranjan Rajadhakshya about what ails Northern India and how one might tackle the issue. The lack of urbanization is a very real problem in Northern India, among others.

Links for 21st February, 2019

  1. “Premise 1: The only coherent way of characterizing monetary policy as being either too “easy” or “tight” is relative to the policy stance expected to achieve the central bank’s goals.Premise 2: “Monetary policy can be highly effective in reviving a weak economy even if short-term interest rates are already near zero.”
    Premise 3: After mid-2008, and especially in early October, the expected growth in the price level and nominal GDP fell increasingly far below the Fed’s implicit target.”
    Scott Sumner reviews a decade’s worth of blogging about one topic, and one topic only – his understanding of monetary theory. The three premises, and the conclusions, policies and problems that arise from there is what the next ten ears have been about. There are two reasons why reading this post is worthwhile. Number one, it helps you understand (I think) monetary policy better. This is true irrespective of whether or not you agree with him. Second, and perhaps more importantly, if you had to write down three ideas about which you could continue to write for the next decade – what would those ideas be? I’m still struggling to find an answer myself!
  2. “There’s a different thrill here for me which is actually the thrill of refutation of confirmation. With theory it’s almost like it emerges out of nothing. And really it’s only in our heads, it’s not something that we have seen before. It is a pure outcome of imagination and there’s a thrilling magnetism to that because that imagination might be right. For me that is the most amazing thing, being guided only by mathematics.”‘The correct analogy is that there’s this singular somewhere in the ocean and you don’t know where — there is only one giant white whale and you need to go kill it because it bit your leg off.””
    Longreads.com, if you are not aware of it already, is just a fantastic website, full of hidden and not-so-hidden treasures. This particular piece was commissioned by Long Reads itself, and is worth reading because of the search for the so called ninth planet, but also because it explains why you should read (and re-read) Moby Dick – because reading Moby Dick helps you understand the link between monetary policy and the hunt for a planet that should exist.
  3. “Solving problems of will requires giving the poorest citizens information and the political heft to hold their leaders accountable. That is best accomplished by strengthening democratic institutions. Poverty is political: Solving problems of will, like problems of capacity, requires rolling up our sleeves and working with the governments in the countries where the poor live to redistribute not only income, but also power.”
    There is much to ponder upon, and at least in my case, disagree with in this article. Read especially the part about India’s space program. But that being said, the article itself is worth reading because it highlights the problems of thinking about poverty – and doing the thinking across space and time. And that solving poverty requires institutional growth is a well understood concept in development economics – but not necessarily outside it.
  4. “It is true that most people are disengaged from serious news, and vote with their guts rather than their heads, or being guided by friends rather than a close reading of policy analysis. That does not make them fools.There is much to concern me in the current political information environment. I worry (partly selfishly) that it is harder than ever to sustain a business that provides serious journalism. I worry that politicians around the world are doing their best to politicise what should be apolitical, to smear independent analysis and demean expertise.I worry that there is far too little transparency over political advertising in the digital age: we don’t know who is paying for what message to be shown to whom.The free press — and healthy democratic discourse — faces some existential problems. Fake news ain’t one.”
    The always excellent Tim Harford on why we overrate Fake News, and should maybe not spend so much time worrying about it – and that the world is saner than it might appear…
  5. “Soon, I will experiment with “atemporality.” For days or weeks at a time, I will escape the present moment and only consume content published in a different decade. For example, if I want to learn about the 1970s, all my media consumption will consist of books, videos, and interviews published in the 1970s. By doing so, I’ll embody the mindset of people in a bygone era and gain new perspectives on the here and now.Everything has been said before. The big concepts aren’t new. You’ll find them in old works. Nassim Taleb calls this the Lindy Effect: “The longer something has been in print, the longer it will remain in print and the higher value it is.”

    With just a couple taps, we can transform our relationship with time, ignite our sense of history and escape the Never-Ending Now.”
    … David Perell has some interesting ideas about how we might solve the problem Tim Harford speaks about above. One way of escaping Fake News, is to escape news itself. Maybe not for ever, and maybe not everyday – but escaping into the past by using the tools now available to us is a good idea.