Thinking Aloud About Uttar Pradesh

Until very recently, I used to teach a course called Contemporary India. The program in which I used to teach this course is suspended temporarily, for it was designed for American students who would spend a semester studying in India.

One of my favorite classes in that course was about India’s demographics. It was one of my favorite classes because I got to show three slides in it. These slides were nothing but screen-grabs from an excellent feature that the Economist magazine had published a while back. Note that the content requires Flash, and it therefore probably will not work in our modern browsers. But the slides I speak of are presented below.

The first of these shows each state in India mapped to the country that is closest to it in terms of economic output:

The second shows each state as mapped to the country that is closest to it in terms of economic output per capita:

And finally, we have the third chart: each state in India being represented as a country that is closest to it in terms of population:

Each chart is worth more than a few minutes of your time. Note how Maharashtra is like Singapore, Sri Lanka and Mexico respectively, for example, when you make comparisons in terms of economic output, economic output per capita and population respectively.

My favorite thing to point out, especially to my American students, used to be how all of Canada’s population could fit inside Kerala. India is truly a mind boggling country!

But, Uttar Pradesh. That is what we’re going to talk about today. This is a mind boggling country (not a typo. It really is a country. If it were a country, it would be the fifth most populous country in the world. Yes, really).

It has, as this article points out, about 10 percent of India’s districts. One out of every seven Lok Sabha MP’s comes from this state. One out of every six Indian is from the state of Uttar Pradesh. Yogi Adityanath is the chief minister of Uttar Pradesh, but he is responsible for the same number of people as Imran Khan or Jair Bolsonaro. It, to put it mildly, is a truly large state.

And the article that I linked to in the paragraph above makes a point that is worth thinking about: is it too big?

Shekhar Gupta recommends carving up the state into five separate states, and before you scoff at the idea, consider the facts once again: should one chief minister be responsible for the governance of the fifth most populous country in the world?

And the problem isn’t just about population, it is also about national level politics. Or rather, about a problem that nobody wants to think about with any level of urgency.

Here’s the problem: how many people should a Member of Parliament in the Lok Sabha represent? Ideally, it ought to be India’s population divided by the number of elected representatives in the Lok Sabha. But obviously, in a country of India’s size and complexity, that isn’t always possible.

Here’s Ajit Ranade from two years ago, writing in the Livemint:

We may desire “equality” of constituencies, but economic development and demographic patterns do not develop uniformly across the country. Some states have achieved zero population growth while others still have very high fertility rates. This pattern too has a north-south dimension. It is as if the economic centre of gravity is shifting south and the political centre of gravity is shifting north.

Here is what he means by that: in the year 1976, we passed a law that effectively froze the number of seats in India’s Lok Sabha, per state. That number was frozen on the basis of the 1971 census. And from 1976 until the year 2000, we decided to not do anything about it.

And then, in the year 2000, we made the problem worse. Here’s Ajit Ranade again:

In 2000, another amendment postponed the day of reckoning to 2026. Thus, only after 2026 will we consider changing the number of seats in Parliament. Till then, everything is frozen as per the 1971 census. Remember, in 1971, India’s population was 548 million, and by 2031, the first census after 2026, it may well be close to 1.4 billion. The great apprehension is that redrawing boundaries and distributing the existing 550 MPs might mean that the south will lose a lot of seats to the north. Even if more members are added to the Lok Sabha, that incremental gain will mostly go to the northern states.

https://www.livemint.com/Opinion/7unVzUcfBJxbHHaiRpenmK/India-should-begin-discussing-the-delimitation-question.html

It is not just the fact that Uttar Pradesh is too big from an administrative viewpoint, and that it contains too many people for it to be administered as one state in a country. It is not just the fact that it is far too important a state in the political calculus of India.

It is the fact that it is about to get a lot bigger, a lot more complex, and a whole lot more important in about five years from now. Why do I say that, you ask? Well, for all of the reasons above, but also for the chart below:

Here’s Shekhar Gupta, from the article I referred to earlier:

Twenty crore people, divided over 75 districts spread over 2,43,000 sq km, is too much to govern for one government, especially when run entirely by one individual, which is the norm in our states now. Similarly, 80 seats in the Lok Sabha is too much power for one state in a federal republic. It is more than Gujarat, Rajasthan and Karnataka put together. It is politically distortionary. Especially when UP’s politics is so internally divisive based on caste and religion that the incentive for improving social indicators is poor.

https://theprint.in/national-interest/uttar-pradesh-is-indias-broken-heartland-break-it-into-4-or-5-states/458552/

When you think about that excerpt, and think about the point Ajit Ranade makes in his article two years ago, you realize that we need to start talking – soon, and a lot – about what is to be done about Uttar Pradesh.

I would love to read more about this. If any of you reading this have reading material to share, I would be very grateful indeed. Thank you.

Notes on “Re-aligning global value chains”

There is a danger that this may well end up becoming a habit, I publishing notes on an article written by Gulzar Natarajan, but well, it’ll be a worthwhile habit.

Here’s the one sentence take-away: “Good luck trying to move these chains away from China. Especially India.”

Ok, two sentences. My blog, my rules.

The article begins on a fairly upbeat note, if you think that a re-balancing of these chains away from China is a good idea. Japan has been mulling on this idea for a while, and the trend has only accelerated since the pandemic struck.

It goes on to speak about how the USA, and ‘like-minded’ nations such as Australia, India and Japan have also been considering walking down this path.

But then we enter into problematic territory:

  1. The pandemic has only accelerated this trend, as we already mentioned.
  2. Good luck.

Gulzar Natarajan pulls an extensive quote by Tim Cook from Inc. A part of it is quoted below:

“And the part that’s the most unknown is there’s almost two million application developers in China that write apps for the iOS App Store. These are some of the most innovative mobile apps in the world, and the entrepreneurs that run them are some of the most inspiring and entrepreneurial in the world. Those are sold not only here but exported around the world… China has moved into very advanced manufacturing, so you find in China the intersection of craftsman kind of skill, and sophisticated robotics and the computer science world.”

Tim Ferris had a useful insight that is relevant in this context. I’m paraphrasing here, but my takeaway is that it is perhaps better to be very good at a few things than be perfect at one and abysmal at everything else.

China is very good at a few things, and that makes it difficult to shift away from that country. It’s not enough, any longer, to be very good at cheap manufacturing. Not if you want to compete with China, because they’re still very good at that – and so much more.

And speaking of being very good at manufacturing:

“She is just one of dozens of workers we see at sewing machines and assembly tables at this umbrella factory. The factory tells us each worker will sew 40 umbrellas an hour, 1,600 a week. By year’s end, that’s 80,000 umbrellas a year from each worker like Chang. More than half those umbrellas will be sold in the United States. The factory chairman Lu Xinmiao reveals to us one of their biggest clients is Costco.”

And, from the same article…

“The head of the factory, Zhejiang Qingyi Knitting Company, tells us that if they could, they would hire 200 more workers today. He tells us that there is now more competition for workers. Some estimate it will take another 45 million workers from rural China within the next five years just to keep up with the demand for product. Here in Datang, Lu Xinmiao has given his employees 20 percent raises to make sure they stay. Cheng now makes 2,500 yuan a month, equal to $357.”

The article I quoted from speaks about umbrellas. Gulzar Natarajan speaks about coffins and bras.

Sample this, from The Economist:

“In this “Town of Underwear”, as the local government likes to call it, there are thousands of similar factories. Gurao produces 350m bras and 430m vests and pairs of knickers a year for sale at home and abroad. Undies account for 80% of its industrial output.”

But we can go on and on – specialized manufacturing that is still relatively cheap, especially when you take into account scale and (at least adjusted for the price that you’re paying) quality, means that China is still – even now! – a world beater in the manufacture of almost anything.

And the days of the bottom of the “manufacturing smile” are long since past for China as a whole:

“China now ranks second only to the United States in terms of start-up investment. From 2014 through 2016, China provided just under 20 percent of the world’s venture capital.”

That is from a McKinsey report titled Asia’s Future is Now. Left unsaid in the title is the fact that this is so because China would want it to be so.

In tomorrow’s essay, we’ll take a (big picture only) overview of how much of this cheap manufacturing shift away from China – to the extent that it happens at all – will actually come to India.

RoW: The movement of people into and out of Poland

One target for this year, 2020, is to write about one country a month. As this Wednesday article makes clear, this month’s country is Poland. Given its history and its current politics, I was curious about immigration and Poland – as the title of this post suggests, the movement of people into and out of Poland.

This is a topic that is of interest to me for a variety of reasons. I got the chance to teach a course on migration and its impact on development some years ago, and reading up for that course was quite instructive. Specifically, I got to know the works of Douglas Massey, and also chanced upon this lovely paper – lovely to me, that is – by Bryan Caplan. I also want to read this book, written by him.

Our government’s approach to migration – completely wrongheaded, in my view – is of course another reason to want to read about experiences in other parts of the world.

Onwards, then: five articles about Poland and its approach to immigration.

  1. “A draft of the interior ministry’s new migration policy, leaked to Polish media last month, revealed the government’s priority is to lure Poles back from western Europe, and to attract people from Russia, Belarus and Ukraine, who can prove they have Polish origins.The document said Poland’s safety was guaranteed by its cultural, national and religious homogeneity, and said the new policy would focus on selecting immigrants who would follow Poland’s law and customs, as well as “values emerging from . . . Poland’s dominating religion”.

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    An article form the FT, miraculously ungated, about the issue.
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  2. “Poland’s massive migration numbers, and the warm welcome Ukrainians have received, stands in marked opposition to the anti-migrant electoral campaign that helped bring PiS to power four years ago. The party crushed a coalition of opposition parties with 46 percent of the vote in last month’s European Parliament election, its strongest ever result. Stumping in 2015, PiS head and Poland’s de facto leader, Jarosław Kaczyński, said that “refugees” would “bring in all kinds of parasites, which are not dangerous in their own countries, but which could prove dangerous for the local populations.”
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    The title of the article says it all, really.
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  3. “So it may come as a surprise that the Polish government has, very quietly, presided over the largest influx of migrant workers in the country’s modern history — though they are mostly Christians from neighboring Ukraine.Prime Minister Mateusz Morawiecki has not been shy about promoting the government’s agenda. “We want to reshape Europe and re-Christianize it,” he said in 2017 in an interview with a Catholic television station. The government recently ordered all new passports include the phrase, “God, Honor, Motherland.”

    But immigration is Poland’s paradox. It has benefited greatly from the European Union’s open borders, earning billions of dollars in remittances from the hundreds of thousands of Polish workers who have migrated to other countries in the bloc, especially to Britain. Yet with Poland now facing labor shortages, the government is failing to lure back the diaspora — and is restricted by its political stance against migrants.”
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    The more things change, the more they stay the same, as the saying goes.
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  4. “Since the opening of the labour market following Poland joining the European Union in 2004, Poland experienced a mass migration of over 2 million abroad. As of 2011, 52 out of 1,000 Polish citizens have lived outside the country;[10] estimated at 2.2 million by the Polish Central Statistics Office (GUS), and 2.6–2.7 million by the journalists. GUS statistics estimate that the number of long term Polish immigrants abroad have risen from 0.7 million in 2002 to a peak number of almost 2.3 million in 2007, and has since declined to 2 million by 2010–11.It has remained relatively stable at that level for a short period, following the uncertainty of Global Recession of 2007–08, By December 2015, 12% of Polish labor population left for UK to work there.According to a 2013 survey, approximately 14% percent of adult Poles have worked abroad since 2004 (approximately a quarter for over a year); 69% have a family member of a close friend who lives abroad, and approximately 24% are open to immigration. Majority of Polish migrants or those considering leaving are young; according to a 2014 survey approximately 90% of Poles under 34 have considered some form of migration. ”
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    That is from a Wikipedia article about the topic.
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  5. “BELGIANS must believe Siemiatycze is the capital of Poland, residents of this eastern Polish town like to quip. Those that are left, that is. Since before the fall of Communism Brussels has been the destination of choice for thousands of Siemiatyczans who seek work abroad. Accurate figures as to just how many have left are hard to come by, as people often retain Siematycze as their official place of residence. But it is clear that the real population of the town, at any given moment, is considerably less than the official figure of 15,000.”
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    From within that Wikipedia article, an article from the Economist about the number of people who have left Poland over the years.

 

EC101: Links for 28th November, 2019

  1. “The zeroth step, of course, is being open to the process of unlearning. We come with our own biases, shaped by our varied experiences and perceptions. But our experience or knowledge is not always indicative of the macroreality. An unrelenting hold on what we have already learnt is the equivalent of the sunk cost fallacy in economics.”
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    Pranay Kotasthane has a new newsletter out, and it is worth subscribing to. Stay humble and curious is the gist of his zeroth lesson, and the other points are equally important. Go read, and in my opinion, subscribe.
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  2. “China is still a one-party state, but it owes much of its current prosperity to an increase in liberty. Since Mao died, his former subjects have won greater freedom to grow the crops they choose, to set up businesses and keep the profits, to own property, and to move around the country. The freedom to move, though far from absolute, has been transformational. Under Mao, peasants were banned from leaving their home area and, if they somehow made it to a city, they were barred from buying food, notes Bradley Gardner in “China’s Great Migration”. Now, there are more rural migrants in China than there are cross-border migrants in the world.”
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    The rest of this article from the Economist is about migration to the cities – and I find myself in complete agreement – many, many more people in India need to live in her cities. But also see this!
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  3. “Mazzucato traced the provenance of every technology that made the iPhone. The HTTP protocol, of course, had been developed by British scientist Tim Berners-Lee and implemented on the computers at CERN, in Geneva. The internet began as a network of computers called Arpanet, funded by the US Department of Defense (DoD) in the 60s to solve the problem of satellite communication. The DoD was also behind the development of GPS during the 70s, initially to determine the location of military equipment. The hard disk drive, microprocessors, memory chips and LCD display had also been funded by the DoD. Siri was the outcome of a Stanford Research Institute project to develop a virtual assistant for military staff, commissioned by the Defense Advanced Research Projects Agency (DARPA). The touchscreen was the result of graduate research at the University of Delaware, funded by the National Science Foundation and the CIA.”
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    Mariana Mazzucato, about whom more people should know, on the role of the government in today’s economy.
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  4. “Back in the early 1970s, Xerox had figured out a strategy to block competitors in the photocopying business. It took out lots of patents, more than 1,000 of them, on every aspect of the photocopy machine. As old patents expired, new ones kicked in at a rate of several hundred new patents each year. Some of the patents were actually used by Xerox in producing the photocopy machine; some were not. There was no serious complaint about the validity of any individual patent. But taken as a whole, Xerox seemed to be using the patent system to lock up its monopoly position in perpetuity. Under antitrust pressure from the Federal Trade Commission, Xerox in 1975 signed a consent decree which, along with a number of other steps, required licensing its 1,700 photocopier patents to other firms.”
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    Timothy Taylor adds grist to the anti-patent mill.
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    “Thinking about how to facilitate a faster and broader dispersion of knowledge and productivity gains seems like a potentially important part of explaining the current economic picture and suggesting a policy agenda.”
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    That’s the concluding part of the blog post. Just sayin’!
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  5. Every time I begin to think I kind of understand macroeconomics

India: Links for 4th November, 2019

5 links about India’s middle class – whatever that means – for today.

  1. “The then managing editor of Fortune magazine, Marshall Loeb, was obsessed with the counterintuitive story of a fast-growing middle class in a country still synonymous with poverty. For my story, Loeb devised a headline that trumpeted, “India Opens for Business: The world’s largest middle class beckons foreign investors.” The article quoted NCAER data which estimated that the lower middle class, with annual household incomes of $700 to $1400, was responsible for 75% of unit sales of radios and soap and between a third and half of all shampoo and TV sets.”
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    Care to guess when this article – the one that is being spoken about here –  was penned? Read the rest of the article for a slightly pessimistic take on India’s middle class and its growth prospects.
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  2. I may have linked to this earlier, and apologies if I have, but a compendium of articles on India’s middle class is incomplete without linking to this magnificent – truly magnificent – article from Stanley Pignal in the Economist about India’s middle class.
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  3. Amitabh Kant et al provide for a rebuttal in the Livemint to the article I mentioned above. Given that it is almost two years since both articles were written, give or take, I leave it to you to judge which one has held up better over time.
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  4. Speaking of holding up over time, this is a McKinsey report from 2007 (yes, you read that right), about India’s big spenders – the soon to arrive middle class.
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    “The middle class currently numbers some 50 million people, but by 2025 will have expanded dramatically to 583 million people—some 41 percent of the population. These households will see their incomes balloon to 51.5 trillion rupees ($1.1 billion)—11 times the level of today and 58 percent of total Indian income.”
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  5. And finally, Vivek Kaul on a related note – the income-tax-paying Indian.
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    “In this regard, the Economic Survey of 2015-16 pointed out: “If the state’s role is predominantly redistribution, the middle class will seek—in professor Albert Hirschman’s famous terminology—to exit from the state. They will avoid or minimize paying taxes; they will cocoon themselves in gated communities; they will use diesel generators to obtain power; they will go to private hospitals and send their children to private education institutions.””

Tech: Links for 27th August, 2019

I got the day off today!

Harsh Doshi, an alumnus of GIPE and a friend, has written today’s post about bitcoins.  Thanks, Harsh.

He has, he wrote to me in an email, used my style – which made me realize I have one. Still, here you go five (but who’s counting) links about bitcoins:

  1. Before trying to understand how the Bitcoin took form of money, commodity and security – something truly unique – it is important to understand what was the idea behind the genesis of the bitcoin. Read this whitepaper, authored by Satoshi Nakamoto. We are still unaware of who s/he truly is, or are we?
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  2. The Economist explains lucidly what bitcoin is and how it works.
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  3. Just what is bitcoin mining?
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  4. Bitcoin, or in general crypto, is looked at as an advanced technology with the likes of AI and ML. But too much tech may also not be necessarily prone to disasters, one that has blocked $137 million.
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  5. The Government of India and RBI, along with SEBI have banned cryptocurrencies and hailed the idea of blockchain, a decentralised ledger technology. Here is an article debunking the myth that separating the two will be good.
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  6. Bonus: One of India’s most articulate voices on Bitcoin, here in his 20 min long TEDx Talk

Links for 28th May, 2019

  1. “On March 18, 2013, at the Motera B ground, a scraggy-haired stick figure bowls his last two overs, landing (or trying to land) yorker after yorker. Looking on is former India coach John Wright, then head coach of Mumbai Indians. The batsmen are Mumbai openers Aditya Tare and Shoaib Shaikh. The No. 3, Abhishek Nayar, remembers: “Two pure batsmen at the crease, two overs of unbelievable yorkers. We couldn’t get him off the square.” Tare returns to the dressing room and says that the strange bowler was “a lot sharper than you thought”. One ball hits a batsman’s footmark, shoots up over wicketkeeper-captain Parthiv Patel’s head and zips over the boundary line. In the gallery, Wright sits up. Woah. The lad has wheels. “With some players you see something different and you go… there’s something there. It was the same that day. Real wheels.” He watches two overs, talks to Parthiv, makes a phone call to HQ, and Bumrah is invited to sign up for the IPL’s richest franchise.”
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    Sharda Ugra in The Cricket Monthly on Jasprit Bumrah – but as Niranjan Rajadhakshya recently pointed out, really on development. Also, I was completely wrong about the IPL – it has, without a shadow of a doubt, been a boon for cricket in general, and Indian cricket in particular. Mea culpa!
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  2. “The overall messages that emerge from our analysis are as follows. First, we find evidence that NPEs can be beneficial in improving allocation of technologies to end users (benign middleman), but also use the patent system to threaten litigation on downstream firms (stick-up artist). Second, the existence of NPEs in the market for ideas could discourage downstream innovators and encourage upstream innovators.Third, we show that the overall impact of NPEs on innovation is far from immediate, and depends on many forces in the market. A key question for understanding the impact of NPEs on innovation is what fraction of patent-infringing firms are innovators. On the academic side, researchers can further explore the role of non-innovators versus innovators in patent infringement. On the policy side, our work suggests that “patent trolls” need to also be understood in their multiple roles, instead of putting them into the single box of benign or malevolent.”
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    The importance of opportunity cost, the role of patents, and how difficult it can be to understand how markets and market participants work, in one slightly complex article. Worth a read, for sure.
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  3. “The scale of the potential changes seems hard to imagine. But look back through history, and humanity’s relations with the living world have seen three great transformations: the exploitation of fossil fuels, the globalisation of the world’s ecosystems after the European conquest of the Americas, and the domestication of crops and animals at the dawn of agriculture. All brought prosperity and progress, but with damaging side-effects. Synthetic biology promises similar transformation. To harness the promise and minimise the peril, it pays to learn the lessons of the past.”
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    The Econommist examines, lucidly as always, the impact that synthetic biology might have on our future.
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  4. “The Heckman Curve describes the rate of return to public investments in human capital for the disadvantaged as rapidly diminishing with age. Investments early in the life course are characterised as providing significantly higher rates of return compared to investments targeted at young people and adults. This paper uses the Washington State Institute for Public Policy dataset of program benefit cost ratios to assess if there is a Heckman Curve relationship between program rates of return and recipient age. The data does not support the claim that social policy programs targeted early in the life course have the largest returns, or that the benefits of adult programs are less than the cost of intervention.”
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    On whether the Heckman Curve makes sense or not, from an empirial viewpoint. Again, for reasons of opportunity cost and the perils of policy planning.
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  5. “Many regard the falloff in the creation of high-wage jobs as the inevitable result of advances in artificial intelligence and robotics. It isn’t. Technology can be used either to displace labor or to enhance worker productivity. The choice is ours. But to ensure that such decisions benefit workers, governments need to coax the private sector away from its singular focus on automation.”
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    Darren Acemoglu helps us understand the importance of complements and substitutes, and how policy making, in spite of its many perils, remains important.