My article titled ‘Development, not global regulation, the solution to climate change’, says author of new report was published on International Policy network on December 3 2007.
London -- In advance of the COP-10 meeting on climate change in Argentina (6-17 December), the Sustainable Development Network has issued a blueprint on the relationship between climate change and sustainable development. The blueprint emphasises the role of economic development and technological progress in eliminating poverty and enabling people to cope with adverse effects of climate change and other problems.
The blueprint concludes that the poor are currently the most vulnerable to disease, flooding, droughts, and other catastrophic natural events. While climate change may make these worse tomorrow, empowering the poor will enable them to improve their lives and reduce their vulnerability today and in the future.
Barun Mitra, Director of the Liberty Institute in New Delhi and one of the authors, says that the Kyoto Protocol and similar attempts to control the climate through restricting emissions of ‘greenhouse gases’ would do nothing to help the poor. ‘The Kyoto Protocol intends to prevent possible problems of tomorrow for the rich world, but people in the poor world must survive today.’
Mr. Mitra said that poor countries continue to suffer from problems that have been eliminated in wealthy countries. ‘A million Indians die every year from indoor air pollution -- not because they consume too much energy, but because they lack access to modern energy sources.’
He noted that Kyoto-style emissions restrictions are unsustainable and counterproductive: ‘Poor countries need access to modern energy sources, but this will not happen by putting caps on consumption or emissions through Kyoto or other mechanisms,’ said Mitra. ‘Poor countries need free, competitive markets to ensure economic development. By allowing consumption today, poor countries are more likely to be clean and efficient tomorrow.’
Mitra concluded that ‘Economic development, not global regulation, is the solution to climate change.’
Kendra Okonski, a co-author and Director of the Sustainable Development Project at International Policy Network, agreed: ‘Perversely, restrictions on emissions will make people everywhere more vulnerable to negative effects of climate change. They are costly, have little impact on the climate, and will perpetuate poverty – hardly a path towards sustainable development.’
‘Whether climate change is benign or harmful, wealthy and poor countries must enhance their ability to adapt to changes of all kinds,’ concluded Ms. Okonski.
Notes for editors:
The blueprint says that wealthy countries are generally resilient to problems and uncertainties because they have adopted institutions that are more compatible with human nature, including:
■ property rights that are well-defined, enforceable and transferable;
■ the ability to make and form contracts, but also the freedom from contract;
■ the rule of law, administered by an independent and fair judicial system;
■ open trade free of vested interests and artificial barriers to trade; and
■ good governance (which is enhanced by adherence to the other institutions) enabled by transparency, accountability amongst elected officials, bureaucrats and civil servants.
Monday, December 3, 2007
Saturday, December 1, 2007
What Can India Learn from Hong Kong?
The WTO ministerial meeting in Hong Kong failed to break the deadlock at the trade negotiations. But Hong Kong provided the best illustration of free trade, without any negotiations. For the past 50years, the secret of the success of the city has been its open trade policy. In this article published in the Far Eastern Economic Review (FEER), in December 2007, I ask "What Can India Learn from Hong Kong?"
There is more than a little irony that the World Trade Organization ministerial is being held in Hong Kong this month. Hong Kong is the epitome of the success of unilateral free trade policies: A few pieces of rock, devoid of any natural resources, the territory today ranks among the most prosperous places on earth. Hong Kong’s success is rooted in the institutions of rule of law and economic freedom. The territory did not negotiate any free trade deal. It just declared it unilaterally, and the rest is history. Yet the contrast between the success of Hong Kong’s unilateral free trade policy and the current deadlock in wto negotiations could not be more glaring.
The WTO’s troubles started at its birth 10 years ago. The hazards of multilateral trade negotiations were exposed quite early on the streets of Seattle in 1999. The next ministerial in Doha, Qatar, which came soon after the 9/11 tragedy, launched a new round of negotiations—but this small success was short-lived. Long before they landed in Hong Kong, the multilateral negotiators have been trying to navigate the turbulent sea of different issues and interest groups since negotiations collapsed in Cancun, Mexico in 2003.
Freedom to trade is a cornerstone of human civilization. It gave rise to cities which provided a platform to engage in trade. It created an opportunity to specialize and improve productivity, and exchange the surplus of one’s produce with others in the marketplace. Two lessons follow from this very brief summary. Free trade is undertaken voluntarily, and consequently it is a win-win situation for both parties engaged in the exchange. If the deal was not mutually beneficial, trade would take place. Secondly, it is people who engage in trade—not countries.
The fatal flaw of multilateral trade negotiations lies in the fact that since national delegates are engaged in the negotiations, they increasingly fall under the sway of vested interests who seek to use the trade talks to protect their own privileges, or at the very least to delay the process of trade liberalization. The multilateral approach to trade replaces the natural win-win situation of voluntary trade between private parties with the flawed assumption that trade is a “zero-sum” game.
National negotiators use this as a cover, finding justifications to protect apparent “national interests.” In reality, they aim to protect vested commercial interests, be they farmers or manufacturers, from competition. Inevitably, the result is deadlock as presently witnessed at the WTO. To a large or even greater extent, the same tendency applies to bilateral and regional trade negotiations.
Thus, the location of Hong Kong as the venue for the present WTO ministerial meeting is more than mere coincidence. By all accounts, the trade negotiators are unlikely to achieve any substantive breakthroughs apart from renewing their commitment to continue the negotiations.
But should the wto fail in Hong Kong, this could only help to bring focus back to the benefits of real free trade. The trade negotiators, policy makers and the international media now have a unique opportunity to learn from the unilateral free trade policies of Hong Kong, and experience the rich dividends such a policy has yielded.
Two economies that starkly demonstrate the effect of unilateral trade policy are India and Hong Kong. Half a century ago, these two poor countries in Asia decided to travel two distinct economic paths.
India, a nascent democracy, decided to shape its destiny by isolating itself from the international economy, adopting the philosophy of “self-sufficiency.” It sought to build its future by harnessing its own domestic resources and promoting infant domestic industries. The international community looked favorably upon this new experiment with democratic socialism in India, and provided assistance to help the country on its way. India’s fiscal and regulatory policies aimed to make international trade irrelevant. Sky-high tariffs were backed by nightmarish procedures, and the public sector was commanded to scale the economic heights. When combined with
India’s historical tendency toward food shortages and famine in the first half of the
20th century, these restrictions paralyzed India’s economy and perpetuated poverty.
By the mid-1970s, agriculture (which was predominantly in private hands) was helped by the hybrid seeds of the first green revolution technology. This moved India away from being a “basket case” to being a “bread basket.” But otherwise, India’s huge endowment of natural resources
could hardly be harnessed efficiently in this system. Even the country’s democratic foundations were shaken by the emergency rule in 1975-77. Through sporadic attempts at reforms in the 1980s, the economy fell to the depths of despair in 1991, with an unprecedented foreign-exchange crisis. The crisis triggered the economic reforms of the 1990s, which have succeeded
in reigniting the belief that India could soon be an economic power on the world stage.
During the period that India unilaterally shut itself out of the world, Hong Kong unilaterally adopted free trade policies and maintained the institutions of economic freedom. It did this partly out of necessity. At the same time, it carved out a special economic niche for itself, taking advantage of its precarious geographical proximity to China, which had adopted closed-door socialist economic policies in the aftermath of the communist revolution. Chinese entrepreneurs went into overdrive, seizing every opportunity that China and the region provided. The British government in the territory had a policy of benign neglect—keeping economic interventions to a minimum, while maintaining the critical institutions like the rule of law. Yet this was hardly a conscious decision of the colonial masters, since the United Kingdom itself did not adopt the same approach.
Though Hong Kong comprised a few fishing villages and was devoid of any natural resource base, its unilateral approach to trade combined with its protection of market institutions enabled the country’s economy to flexibly grow and adapt to global change. Consequently, while the Indian economy stagnated, Hong Kong economy skyrocketed. In fact, India’s share in global trade declined continuously between the 1960s and the 1980s. Despite its much smaller size, Hong Kong’s international trade (including re-exports) remained at a much higher level. Since its economic reforms in 1991, India’s economic growth rate has increased as compared to that of the 1970s and 1980s. But even after the reforms since 1991, India’s average tariffs remain relatively high—in the range of 25% to 35%—while Hong Kong’s are still zero. While Hong Kong consistently remained in the top position in terms of overall economic freedom consistently over the years, India’s freedom has improved only marginally by some measures. Despite appreciable improvement over the last decade, the level of economic freedom in India is much lower than in Hong Kong.
So here we have two countries that followed two very different policies, quite unilaterally, and achieved two opposite outcomes. The numbers say it all: The per capita income of Hong Kong is $27,179 using purchasing power parity, and India’s is a meager $2,892. Two global indices—The
Heritage Foundation’s Index of Economic Freedom and the World Bank’s Doing Business 2005—indicate that the divergent outcomes in Hong Kong and India are not mere coincidences. These indices show that restrictive and bureaucratic economic policies contribute to delays and bottlenecks which adversely affect the performance of businesses of all sizes. The contrast is equally glaring in the two countries’ trade regimes. While Hong Kong averages close to the rich countries in all categories, India takes almost three times as long to complete import and export procedures.
As for international trade, India’s problems stem not from too much trade in goods and services, but too little. In 2002, India’s total exports and imports stood at $87.7 billion and $74 billion respectively, in 1995 dollars. For tiny Hong Kong, the corresponding export and import figures were $321 billion and $301 billion respectively. Clearly the problem of any poor country is not that it trades too much, or is flooded by foreign imports, but that it trades too little. Even in relative terms, India’s share of world trade has fallen to 0.8% today from 1.5% in 1950. This brings us to the current Doha Round of WTO negotiations, due to end by 2006, where agriculture has become the major sticking point. The agitation of so-called “development” organizations around the touchy issue of agricultural subsidies has led many to argue that if the rich world does not reduce or eliminate its agriculture subsidies, then the poor countries should not open their markets to produce from the rich countries. But this argument misunderstands the fundamental purpose of trade, and demonstrates ignorance about the progression of economies.
After relying on a policy of economic self-sufficiency for decades, India had very little economic diversification. This explains why today, India’s agricultural sector produces approximately one-quarter of India’s gdp—and 70% of India’s population is involved in farming. The majority of India’s farmers are poor smallholders who have extremely low productivity, which relates to a variety of government-imposed barriers inside India: taxes between states, which leads to corruption and bribery among low-level bureaucrats; extremely poor infrastructure; and a range of price regulations that do not allow prices to reflect the true supply and demand situation.
Smallholder farmers are the victim of these policies—since they cannot attain a better price for their produce, they cannot afford technologies to improve productivity, or find alternative nonfarm economic opportunities. It is precisely these people—at least 600 million Indians—who would benefit most from unilateral trade liberalization. Why? Because they are farmers out of need: They grow food or primary goods because they have no other choice. For the poor, it does
not matter where the food comes from, if it is accessible at a lower price. From this perspective, cheap and subsidized food from the rich countries would only help stimulate economic growth and improve welfare in poor countries. First, it would induce reforms in the agricultural sector
in poor countries, making it much more competitive. Agriculture will not remain a liability, but become a source of economic strength. Secondly, low-cost imports will only facilitate the transition of poor countries from being dependent on agriculture and natural resources to being more diversified.
Thirdly, this transition from agriculture to manufacturing and to services will actually enable today’s poor countries to graduate out of poverty. Finally, it would serve to harness human potential and unleash human creativity and entrepreneurship, which would spread prosperity
around the world.
Effectively, India adopted this more liberal approach in the trade in services, a sector which has experienced rapid growth since the early 1990s and in the post-WTO period. India’s relative success in information technology-related services is a reflection of the benefits of unilateral economic and trade reforms. Factors such as India’s telecom liberalization acted as a massive
boost for the growth of information-technology services. In sharp contrast to it hardware, and the manufacturing sector in general, which were hobbled by government regulations, India’s it services faced few policy-induced obstacles. Indeed, the outside world now sees India’s trade in services as evidence that the country is escaping the “Hindu rate of growth” that characterized India’s economy for the past few decades. Rather than being ambivalent towards opening other service sectors like banking and insurance, India would do well to unilaterally open all the service sectors.
Again, Hong Kong is an almost perfect example of unilateral free-trade policies cutting across all sectors of the economy. This is why Hong Kong seamlessly managed the transition from being a low-end manufacturing and trading port in the 1960s to being a high-end economy dominated by the service sector. The success of unilateral free-trade policies will also make irrelevant another thorny issue at the wto, that of “special and differential treatment” for countries which are at different levels of economic development.
With unilateralism, entrepreneurs in every country would have the freedom and ability to discover their competitive advantages and to specialize. Otherwise, “special and differential treatment” will, in fact, impose “special and differential punishment” on ordinary consumers. This large group is unrepresented in these international jamborees, but suffers the most from a lack of choice and competition.
India is no stranger to unilateral reforms—the economic situation in 1991 was so dire that only a unilateral approach would suffice. India undertook a whole range of domestic economic reforms unilaterally, reducing tariffs and delicensing large sections of the economy. Today, a unilateral approach to trade would propel India towards becoming a modern, diversified economy. The country would be better able to acquire inputs and capital for all kinds of economic activity, to better utilize its natural and human resources.
Competitive market processes would drive up the value of people’s labor, and would diminish the number of people (mostly farmers) who still live an impoverished existence. Given India’s enormous potential, it is now time for it and other poor countries to take a leaf out of Hong Kong’s unilateral approach to free trade. It would benefit India in the short and long term, by harnessing the great entrepreneurial spirit, vigor and optimism that is now driving India forward.
There is more than a little irony that the World Trade Organization ministerial is being held in Hong Kong this month. Hong Kong is the epitome of the success of unilateral free trade policies: A few pieces of rock, devoid of any natural resources, the territory today ranks among the most prosperous places on earth. Hong Kong’s success is rooted in the institutions of rule of law and economic freedom. The territory did not negotiate any free trade deal. It just declared it unilaterally, and the rest is history. Yet the contrast between the success of Hong Kong’s unilateral free trade policy and the current deadlock in wto negotiations could not be more glaring.
The WTO’s troubles started at its birth 10 years ago. The hazards of multilateral trade negotiations were exposed quite early on the streets of Seattle in 1999. The next ministerial in Doha, Qatar, which came soon after the 9/11 tragedy, launched a new round of negotiations—but this small success was short-lived. Long before they landed in Hong Kong, the multilateral negotiators have been trying to navigate the turbulent sea of different issues and interest groups since negotiations collapsed in Cancun, Mexico in 2003.
Freedom to trade is a cornerstone of human civilization. It gave rise to cities which provided a platform to engage in trade. It created an opportunity to specialize and improve productivity, and exchange the surplus of one’s produce with others in the marketplace. Two lessons follow from this very brief summary. Free trade is undertaken voluntarily, and consequently it is a win-win situation for both parties engaged in the exchange. If the deal was not mutually beneficial, trade would take place. Secondly, it is people who engage in trade—not countries.
The fatal flaw of multilateral trade negotiations lies in the fact that since national delegates are engaged in the negotiations, they increasingly fall under the sway of vested interests who seek to use the trade talks to protect their own privileges, or at the very least to delay the process of trade liberalization. The multilateral approach to trade replaces the natural win-win situation of voluntary trade between private parties with the flawed assumption that trade is a “zero-sum” game.
National negotiators use this as a cover, finding justifications to protect apparent “national interests.” In reality, they aim to protect vested commercial interests, be they farmers or manufacturers, from competition. Inevitably, the result is deadlock as presently witnessed at the WTO. To a large or even greater extent, the same tendency applies to bilateral and regional trade negotiations.
Thus, the location of Hong Kong as the venue for the present WTO ministerial meeting is more than mere coincidence. By all accounts, the trade negotiators are unlikely to achieve any substantive breakthroughs apart from renewing their commitment to continue the negotiations.
But should the wto fail in Hong Kong, this could only help to bring focus back to the benefits of real free trade. The trade negotiators, policy makers and the international media now have a unique opportunity to learn from the unilateral free trade policies of Hong Kong, and experience the rich dividends such a policy has yielded.
Two economies that starkly demonstrate the effect of unilateral trade policy are India and Hong Kong. Half a century ago, these two poor countries in Asia decided to travel two distinct economic paths.
India, a nascent democracy, decided to shape its destiny by isolating itself from the international economy, adopting the philosophy of “self-sufficiency.” It sought to build its future by harnessing its own domestic resources and promoting infant domestic industries. The international community looked favorably upon this new experiment with democratic socialism in India, and provided assistance to help the country on its way. India’s fiscal and regulatory policies aimed to make international trade irrelevant. Sky-high tariffs were backed by nightmarish procedures, and the public sector was commanded to scale the economic heights. When combined with
India’s historical tendency toward food shortages and famine in the first half of the
20th century, these restrictions paralyzed India’s economy and perpetuated poverty.
By the mid-1970s, agriculture (which was predominantly in private hands) was helped by the hybrid seeds of the first green revolution technology. This moved India away from being a “basket case” to being a “bread basket.” But otherwise, India’s huge endowment of natural resources
could hardly be harnessed efficiently in this system. Even the country’s democratic foundations were shaken by the emergency rule in 1975-77. Through sporadic attempts at reforms in the 1980s, the economy fell to the depths of despair in 1991, with an unprecedented foreign-exchange crisis. The crisis triggered the economic reforms of the 1990s, which have succeeded
in reigniting the belief that India could soon be an economic power on the world stage.
During the period that India unilaterally shut itself out of the world, Hong Kong unilaterally adopted free trade policies and maintained the institutions of economic freedom. It did this partly out of necessity. At the same time, it carved out a special economic niche for itself, taking advantage of its precarious geographical proximity to China, which had adopted closed-door socialist economic policies in the aftermath of the communist revolution. Chinese entrepreneurs went into overdrive, seizing every opportunity that China and the region provided. The British government in the territory had a policy of benign neglect—keeping economic interventions to a minimum, while maintaining the critical institutions like the rule of law. Yet this was hardly a conscious decision of the colonial masters, since the United Kingdom itself did not adopt the same approach.
Though Hong Kong comprised a few fishing villages and was devoid of any natural resource base, its unilateral approach to trade combined with its protection of market institutions enabled the country’s economy to flexibly grow and adapt to global change. Consequently, while the Indian economy stagnated, Hong Kong economy skyrocketed. In fact, India’s share in global trade declined continuously between the 1960s and the 1980s. Despite its much smaller size, Hong Kong’s international trade (including re-exports) remained at a much higher level. Since its economic reforms in 1991, India’s economic growth rate has increased as compared to that of the 1970s and 1980s. But even after the reforms since 1991, India’s average tariffs remain relatively high—in the range of 25% to 35%—while Hong Kong’s are still zero. While Hong Kong consistently remained in the top position in terms of overall economic freedom consistently over the years, India’s freedom has improved only marginally by some measures. Despite appreciable improvement over the last decade, the level of economic freedom in India is much lower than in Hong Kong.
So here we have two countries that followed two very different policies, quite unilaterally, and achieved two opposite outcomes. The numbers say it all: The per capita income of Hong Kong is $27,179 using purchasing power parity, and India’s is a meager $2,892. Two global indices—The
Heritage Foundation’s Index of Economic Freedom and the World Bank’s Doing Business 2005—indicate that the divergent outcomes in Hong Kong and India are not mere coincidences. These indices show that restrictive and bureaucratic economic policies contribute to delays and bottlenecks which adversely affect the performance of businesses of all sizes. The contrast is equally glaring in the two countries’ trade regimes. While Hong Kong averages close to the rich countries in all categories, India takes almost three times as long to complete import and export procedures.
As for international trade, India’s problems stem not from too much trade in goods and services, but too little. In 2002, India’s total exports and imports stood at $87.7 billion and $74 billion respectively, in 1995 dollars. For tiny Hong Kong, the corresponding export and import figures were $321 billion and $301 billion respectively. Clearly the problem of any poor country is not that it trades too much, or is flooded by foreign imports, but that it trades too little. Even in relative terms, India’s share of world trade has fallen to 0.8% today from 1.5% in 1950. This brings us to the current Doha Round of WTO negotiations, due to end by 2006, where agriculture has become the major sticking point. The agitation of so-called “development” organizations around the touchy issue of agricultural subsidies has led many to argue that if the rich world does not reduce or eliminate its agriculture subsidies, then the poor countries should not open their markets to produce from the rich countries. But this argument misunderstands the fundamental purpose of trade, and demonstrates ignorance about the progression of economies.
After relying on a policy of economic self-sufficiency for decades, India had very little economic diversification. This explains why today, India’s agricultural sector produces approximately one-quarter of India’s gdp—and 70% of India’s population is involved in farming. The majority of India’s farmers are poor smallholders who have extremely low productivity, which relates to a variety of government-imposed barriers inside India: taxes between states, which leads to corruption and bribery among low-level bureaucrats; extremely poor infrastructure; and a range of price regulations that do not allow prices to reflect the true supply and demand situation.
Smallholder farmers are the victim of these policies—since they cannot attain a better price for their produce, they cannot afford technologies to improve productivity, or find alternative nonfarm economic opportunities. It is precisely these people—at least 600 million Indians—who would benefit most from unilateral trade liberalization. Why? Because they are farmers out of need: They grow food or primary goods because they have no other choice. For the poor, it does
not matter where the food comes from, if it is accessible at a lower price. From this perspective, cheap and subsidized food from the rich countries would only help stimulate economic growth and improve welfare in poor countries. First, it would induce reforms in the agricultural sector
in poor countries, making it much more competitive. Agriculture will not remain a liability, but become a source of economic strength. Secondly, low-cost imports will only facilitate the transition of poor countries from being dependent on agriculture and natural resources to being more diversified.
Thirdly, this transition from agriculture to manufacturing and to services will actually enable today’s poor countries to graduate out of poverty. Finally, it would serve to harness human potential and unleash human creativity and entrepreneurship, which would spread prosperity
around the world.
Effectively, India adopted this more liberal approach in the trade in services, a sector which has experienced rapid growth since the early 1990s and in the post-WTO period. India’s relative success in information technology-related services is a reflection of the benefits of unilateral economic and trade reforms. Factors such as India’s telecom liberalization acted as a massive
boost for the growth of information-technology services. In sharp contrast to it hardware, and the manufacturing sector in general, which were hobbled by government regulations, India’s it services faced few policy-induced obstacles. Indeed, the outside world now sees India’s trade in services as evidence that the country is escaping the “Hindu rate of growth” that characterized India’s economy for the past few decades. Rather than being ambivalent towards opening other service sectors like banking and insurance, India would do well to unilaterally open all the service sectors.
Again, Hong Kong is an almost perfect example of unilateral free-trade policies cutting across all sectors of the economy. This is why Hong Kong seamlessly managed the transition from being a low-end manufacturing and trading port in the 1960s to being a high-end economy dominated by the service sector. The success of unilateral free-trade policies will also make irrelevant another thorny issue at the wto, that of “special and differential treatment” for countries which are at different levels of economic development.
With unilateralism, entrepreneurs in every country would have the freedom and ability to discover their competitive advantages and to specialize. Otherwise, “special and differential treatment” will, in fact, impose “special and differential punishment” on ordinary consumers. This large group is unrepresented in these international jamborees, but suffers the most from a lack of choice and competition.
India is no stranger to unilateral reforms—the economic situation in 1991 was so dire that only a unilateral approach would suffice. India undertook a whole range of domestic economic reforms unilaterally, reducing tariffs and delicensing large sections of the economy. Today, a unilateral approach to trade would propel India towards becoming a modern, diversified economy. The country would be better able to acquire inputs and capital for all kinds of economic activity, to better utilize its natural and human resources.
Competitive market processes would drive up the value of people’s labor, and would diminish the number of people (mostly farmers) who still live an impoverished existence. Given India’s enormous potential, it is now time for it and other poor countries to take a leaf out of Hong Kong’s unilateral approach to free trade. It would benefit India in the short and long term, by harnessing the great entrepreneurial spirit, vigor and optimism that is now driving India forward.
Friday, June 22, 2007
Can trade save the tiger?
South China Tiger is one of the most endangered sub-species of the tiger. No one really knows if there are any still around in the forests of southern China. The Chinese have been been exploring alternative strategies to save the tiger in wild. They have a successful captive breeding programme, which could help meet the demand for tiger parts in traditional Chinese medicines, and reduce the demand for wild tigers. This article, "Can a trade convention save South China tiger?", appeared in the China Daily, on 22 June 2007.
The South China tiger is the most endangered of all tiger subspecies, so when it comes to protecting it, there's not much margin for error.
Small wonder that the dust is still settling on the tiger issue at the Convention on International Trade in Endangered Species (CITES) two-week conference in The Hague, which ended on June 15.
Call it concern, call it politics, the conflicts were over trade in tiger parts and the efficacy of raising South China tigers in captivity for release into the wild.
There were two key components of the tiger resolution passed by CITES - captive breeding and commerce.
The resolution recognized the role of captive breeding for conservation. Indian delegates at the conference were among the first to claim success in stopping China's proposal for trade in tiger parts. While India focused on China, China sought to look at the issue of tiger conservation.
For decades many governments and NGOs have proclaimed that captive breeding has no role in tiger conservation. In 1995, a joint statement by China and India on the issue of captive breeding created such a furor that for years afterwards, India was reluctant to even discuss tiger conservation directly with China.
China has in the past few years set up one of the world's most ambitious wildlife conservation programs.
It has tried to identify and isolate the most endangered tiger subspecies, the South China tiger. While debate exists over whether the South China tiger still exists in the wild, all of the known 60 animals are in captivity in China.
Four of the carefully selected South China tigers were sent to South Africa two years ago, where a special program is being developed to revive the natural instincts in these captively bred tigers, so that they are able to survive in the wild.
A private charity, Save China's Tigers, has joined with the wildlife department of China's State Forestry Administration to implement the project.
The tigers are learning to live independent of their human handlers and have begun hunting small animals in the 200-square-kilometer facility in South Africa. The expectation is that within a few years, the progeny of the present generation of tigers in South Africa will be completely wild and ready for reintroduction in two of the designated habitats in South China.
Meanwhile, efforts are on to prepare two small reintroduction sites, both less than 200 square kilometers, for receiving the tigers. The goal here is to assess the quality of forest and habitat, stock them with appropriate prey animals, then release the tigers in a few years' time.
Ever since its inception, this program had been condemned by many wildlife NGOs. First, they doubted the pedigree of South China tigers in captivity in China. Second, they claimed that tigers bred in captivity cannot regain wild instincts. Finally, they felt that poaching would make it impossible for these tigers to survive in Chinese forests. In sum, rather than joining this innovative Chinese effort, these self-proclaimed champions of tigers chose to condemn the efforts without giving them a try.
This undertaking provided a great opportunity for Indian experts, who are among the few in the world with field experience managing tiger habitats, to work with their Chinese colleagues. But, despite the 1995 joint statement on the role of captive breeding in conservation, India chose to opt out.
So the Chinese sponsors of the project went to South Africa, one of the few countries where wildlife is taken seriously, both for ecological and economic reasons. China is still eager to have Indian experts help rebuild the designated tiger habitats in southern China. This could herald a new avenue of cooperation between the two Asian neighbors.
At the CITES conference, the role of captive bred tigers in conservation was affirmed. Is it any wonder that Indian officials and their NGO supporters are now trying to claim victory in an attempt to hide their failure to join China in this unprecedented experiment to rewild and reintroduce tigers to wilderness areas?
In addition to acknowledging the role of captive breeding in conservation, the CITES resolution on tigers urged all parties to limit breeding to conservation purposes only.
Rajesh Gopal, head of India's National Tiger Conservation Authority and a member of the Indian delegation to CITES, expressed relief that China has agreed to restrict the breeding of tigers. Gopal told the Indian Express, "This would have been disastrous for us. For, Indian tigers would have been laundered under farmed tigers."
China banned trade in tiger parts in 1993. But if that policy helped Indian tigers, there is hardly any evidence of it. In fact, many of the NGOs who in the past blamed China for not effectively implementing the trade ban have in recent years admitted that there is no longer much evidence of tiger parts in Chinese markets. So the question is, if India is losing a tiger a day to poachers, where are these tigers headed?
CITES, as its name indicates, is a convention that governs international trade in flora and fauna, particularly endangered species. China, so far, has not sought to reopen trade in tiger parts, domestic or international. China is only seeking expert opinion and scientific evidence, as part of a process to completely reassess its tiger conservation policies.
Most importantly, breeding and trade in tigers or their parts for the domestic Chinese market is outside the purview of CITES. Similarly, breeding and trade in live tigers is not prohibited in the United States, which has the largest number of tigers in captivity, estimated at between 10,000 and 15,000. China has about 5,000 tigers in captivity today.
A round of discussions with international experts is scheduled to take place in the northeastern Chinese city of Harbin in early July. This is part of the review process that was initiated by China last year, and likely to continue for some time.
If after reviewing evidence and opinions, China were to decide on a limited opening of trade in tigers for its domestic market, it could do so completely within the CITES mandate.
What then to make of claims in the Indian media that the Indian delegates at CITES thwarted Chinese efforts to reopen trade in tiger parts when China had made no such proposals?
The world needs to decide whether scoring points against China is more important than exploring effective strategies that may help secure the future of the tiger in the wild.
Tigers surely deserve this.
The South China tiger is the most endangered of all tiger subspecies, so when it comes to protecting it, there's not much margin for error.
Small wonder that the dust is still settling on the tiger issue at the Convention on International Trade in Endangered Species (CITES) two-week conference in The Hague, which ended on June 15.
Call it concern, call it politics, the conflicts were over trade in tiger parts and the efficacy of raising South China tigers in captivity for release into the wild.
There were two key components of the tiger resolution passed by CITES - captive breeding and commerce.
The resolution recognized the role of captive breeding for conservation. Indian delegates at the conference were among the first to claim success in stopping China's proposal for trade in tiger parts. While India focused on China, China sought to look at the issue of tiger conservation.
For decades many governments and NGOs have proclaimed that captive breeding has no role in tiger conservation. In 1995, a joint statement by China and India on the issue of captive breeding created such a furor that for years afterwards, India was reluctant to even discuss tiger conservation directly with China.
China has in the past few years set up one of the world's most ambitious wildlife conservation programs.
It has tried to identify and isolate the most endangered tiger subspecies, the South China tiger. While debate exists over whether the South China tiger still exists in the wild, all of the known 60 animals are in captivity in China.
Four of the carefully selected South China tigers were sent to South Africa two years ago, where a special program is being developed to revive the natural instincts in these captively bred tigers, so that they are able to survive in the wild.
A private charity, Save China's Tigers, has joined with the wildlife department of China's State Forestry Administration to implement the project.
The tigers are learning to live independent of their human handlers and have begun hunting small animals in the 200-square-kilometer facility in South Africa. The expectation is that within a few years, the progeny of the present generation of tigers in South Africa will be completely wild and ready for reintroduction in two of the designated habitats in South China.
Meanwhile, efforts are on to prepare two small reintroduction sites, both less than 200 square kilometers, for receiving the tigers. The goal here is to assess the quality of forest and habitat, stock them with appropriate prey animals, then release the tigers in a few years' time.
Ever since its inception, this program had been condemned by many wildlife NGOs. First, they doubted the pedigree of South China tigers in captivity in China. Second, they claimed that tigers bred in captivity cannot regain wild instincts. Finally, they felt that poaching would make it impossible for these tigers to survive in Chinese forests. In sum, rather than joining this innovative Chinese effort, these self-proclaimed champions of tigers chose to condemn the efforts without giving them a try.
This undertaking provided a great opportunity for Indian experts, who are among the few in the world with field experience managing tiger habitats, to work with their Chinese colleagues. But, despite the 1995 joint statement on the role of captive breeding in conservation, India chose to opt out.
So the Chinese sponsors of the project went to South Africa, one of the few countries where wildlife is taken seriously, both for ecological and economic reasons. China is still eager to have Indian experts help rebuild the designated tiger habitats in southern China. This could herald a new avenue of cooperation between the two Asian neighbors.
At the CITES conference, the role of captive bred tigers in conservation was affirmed. Is it any wonder that Indian officials and their NGO supporters are now trying to claim victory in an attempt to hide their failure to join China in this unprecedented experiment to rewild and reintroduce tigers to wilderness areas?
In addition to acknowledging the role of captive breeding in conservation, the CITES resolution on tigers urged all parties to limit breeding to conservation purposes only.
Rajesh Gopal, head of India's National Tiger Conservation Authority and a member of the Indian delegation to CITES, expressed relief that China has agreed to restrict the breeding of tigers. Gopal told the Indian Express, "This would have been disastrous for us. For, Indian tigers would have been laundered under farmed tigers."
China banned trade in tiger parts in 1993. But if that policy helped Indian tigers, there is hardly any evidence of it. In fact, many of the NGOs who in the past blamed China for not effectively implementing the trade ban have in recent years admitted that there is no longer much evidence of tiger parts in Chinese markets. So the question is, if India is losing a tiger a day to poachers, where are these tigers headed?
CITES, as its name indicates, is a convention that governs international trade in flora and fauna, particularly endangered species. China, so far, has not sought to reopen trade in tiger parts, domestic or international. China is only seeking expert opinion and scientific evidence, as part of a process to completely reassess its tiger conservation policies.
Most importantly, breeding and trade in tigers or their parts for the domestic Chinese market is outside the purview of CITES. Similarly, breeding and trade in live tigers is not prohibited in the United States, which has the largest number of tigers in captivity, estimated at between 10,000 and 15,000. China has about 5,000 tigers in captivity today.
A round of discussions with international experts is scheduled to take place in the northeastern Chinese city of Harbin in early July. This is part of the review process that was initiated by China last year, and likely to continue for some time.
If after reviewing evidence and opinions, China were to decide on a limited opening of trade in tigers for its domestic market, it could do so completely within the CITES mandate.
What then to make of claims in the Indian media that the Indian delegates at CITES thwarted Chinese efforts to reopen trade in tiger parts when China had made no such proposals?
The world needs to decide whether scoring points against China is more important than exploring effective strategies that may help secure the future of the tiger in the wild.
Tigers surely deserve this.
Friday, June 1, 2007
China's market plan to save the tiger
Communist China is seeking a reassessment of conservation policies, and wants to explore the possibility of bringing the tiger under the discipline of market forces, in the hope of saving the magnificent beast. But critics from the “free world” are blaming the tiger crisis on market failure, and seeking a greatly enhanced role for the state. China is looking at the profit motive to save the tiger, while its critics are looking to brute force to implement the prohibition on smuggling.
In this article titled, "China’s Market Plan to Save the Tiger", published in Far Eastern Economic Review (FEER), in June 2007, I explore the prospect for the tiger in the wild.
The Nepalese minister inaugurating the international tiger symposium in Kathmandu in mid-April acknowledged that traditional approaches in the conservation field are not bearing fruit, and called for new thinking. His call came not a day too soon. The number of wild tigers remaining in the world is at an all-time low, estimated at between 2,000 and 3,000, probably half of what was believed a few years ago. Yet while there was a range of policy options before the who’s who of the tiger world, the week-long deliberations brought only more confusion and contradictions.
Is the tiger facing a crisis at all? Could it be that in the past, wild tiger numbers in India had been grossly inflated because of a faulty counting procedure? Is it true that on average one tiger a day is poached in India, and if so where are these dead tigers headed? If reports by some environmental organizations are to be believed, then there are very few instances of tiger bones or tiger medicine found in China today. Why then is the focus on poaching, when others claim that the biggest threat to the tiger comes from the continuing loss of habitats?
Should India be commended for maintaining a smaller number of tigers in the wild, even if it does not answer to what happened to the vast sums of money that have been spent over the past decades? Should China be condemned for continued demand for tiger parts, when there is little evidence of tiger products in China’s markets?
For the first time, a large delegation from the People’s Republic of China participated in the deliberations. China is now considering legalizing the trade in tiger products from farmed animals within its borders. This further ignited the debate over the relationship between economic development and environmental quality. Are conservation objectives and commercial goals compatible? Is the consumer demand for tiger parts necessarily a prescription for the possible extinction of tigers in the wild?
For the past three decades of tiger conservation, commerce and conservation have been pitted against each other. The principal focus of the present conservation strategy has been to prohibit all forms of culling of tigers, trading in tiger parts and consumption. Policing has been made the cornerstone of tiger-conservation polices. The goal has been to place tigers and the forests so high on a pedestal that market prices won’t be able to touch these precious resources! So we have the paradox of highly valued resources placed outside the discipline of market forces, and some of the poorest people on earth living in close proximity to such valuable resources without any incentive to conserve and manage the resources in a sustainable manner.
The reality is that when there is a demand from consumers in the market, such a policy prescription is an open invitation to criminals and smugglers to profit from poaching of tigers. So poaching continues to pose a threat to wild tigers. This approach ignores the fact that tigers are a renewable resource. They breed very easily in captivity. In fact over the last decade China has almost perfected the art of managing and breeding large number of tigers in captivity, currently estimated at 5,000 animals. Bringing some of these tigers to meet the demand in the market for tiger parts by legalizing trade could make poaching economically less attractive.
There are plenty of examples of species thriving under the discipline of commerce. From bison to crocodiles, many species have largely escaped the threat of extinction. Just as the tiger conservation policy was seeking to prohibit commerce in the 1970s, crocodile farming was taking roots.
Today, while India continues with its policy of keeping the crocodile outside the scope of commerce, elsewhere crocodiles have become a very successful commercial animal.
An estimated two million crocodiles are harvested each year from facilities as far apart as Australia, South Africa and the United States.
Contrary to the fears of conservationists, this has not led to crocodiles being poached in India or elsewhere. The reason is simple. If an international brand name wants a large volume of crocodile skins at a competitive price, it has no reason to seek a poacher when it can procure it from a legal farmer.
Take the case of hunting. In India, the government has prosecuted film actor Salman Khan and others for their alleged crime of hunting a few blackbucks. Recently, former Indian cricket Captain Mansur Ali Khan Pataudi was similarly ensnared in a hunting controversy. The blackbuck is a very attractive animal, indigenous to South Asia. Yet, today there are probably more blackbucks in Texas alone than in its home range in India. And it is legal to hunt these animals in the U.S.
In the U.S., blackbucks are looked upon as an investment, and therefore managed in a very sustainable manner by many range owners. It is estimated that in the U.S., the annual economic activity from a whole range of environmental activities, including nature treks, bird watching, fishing and hunting, generates revenue of over $100 billion.
It is possible to conceive a similar outcome in India or China, with their enormous diversity in wildlife resources. Big cats like tigers, lions or leopards could help transform the lives and living standards of some of the poorest sections of our populations.
Wildlife conservation, rather than being a drain on the national exchequer, could become
a contributor to the economy. There is an environmental dividend from economic development. Most rich Western countries have been able to restore and improve their environmental quality with economic development. Economic development opens opportunity for people to move away from land and reduce their dependency on environmental resources for their survival. China seems poised to reap this environmental dividend soon. Much more than poaching, pressure on natural habitats by poverty-stricken human settlements pose by far the biggest threat to biodiversity and tigers.
China’s economic growth in recent decades is credited with moving a couple of hundred million rural residents away from the countryside. This has helped lower the pressure on natural resources such as forests and wetlands.
China has identified a couple of original habitats of the south China tiger for a bold experiment in rewilding and reintroduction of one of the most endangered subspecies of tiger today. A few of these tigers have been sent to South Africa for a rewilding program to revive their hunting
and survival skills. The progenies of these tigers could be reintroduced in the designated
areas in China. Efforts are underway to help restore these habitats. And one of the prime objectives is to help integrate many of the remaining local villagers into the ecotourism model, so that these people directly enjoy the economic benefits of the environmental restoration.
Clearly, the declining human pressure on forest and wildlife, coupled with breeding facilities meeting the demand for tiger parts in Chinese market, together have the potential to dramatically improve the prospects of tigers in the wild, securing the future of these majestic animals. If the 21st century is the Asian century, then tiger conservation provides an opportunity to bring a new dimension of cooperation between Beijing and Delhi.
India has had a lot of trouble handling large cats in captivity. Last year, about half a dozen big cats died in Delhi Zoo. In 2000, about a dozen mysteriously died at Nandankanan Zoo over the span of a week. In China, breeders have managed to handle hundreds of animals in close proximity without a major calamity. Meanwhile, India has a lot of expertise in terms of people who have years of experience in managing tiger habitats. These people provide a ready pool of talent that could help China restore and rebuild some of its habitats.
The choice before the delegates in Kathmandu could not have been starker. Should their governments persist in spending millions of dollars in an attempt to keep the tiger outside the purview of the market, and look at commerce as the principal threat to conservation? Or should they seek to harness the power of commerce for the cause of conservation? The future of tigers in the wild may depend on the decisions taken in the coming months. Hopefully, the turmoil among the conservationists gathered in Nepal is only the beginning. For the sake of the tiger, one hopes it will expose the myth of conservation being necessarily at odds with commerce, and bring to light the reality of harnessing the power of commerce for the cause of conservation.
In June, delegates from around the world will discuss the relationship between commerce and conservation at the Convention on International Trade in Endangered Species in The Hague, Netherlands. China is not currently seeking to reopen international trade in tiger parts. But if China decides to reopen domestic trade in tiger parts, just as the U.S. allows trade in live tigers, it will be perfectly in line with its international commitments.
This debate over the tiger is a reflection of the ironic reversal of traditional ideological positions. Communist China is seeking a reassessment of conservation policies, and wants to explore the possibility of bringing the tiger under the discipline of market forces, in the hope of saving the magnificent beast. But critics from the “free world” are blaming the tiger crisis on market failure, and seeking a greatly enhanced role for the state. China is looking at the profit motive to save the tiger, while its critics are looking to brute force to implement the prohibition on smuggling.
Welcome to the brave new world of tiger conservation!
In this article titled, "China’s Market Plan to Save the Tiger", published in Far Eastern Economic Review (FEER), in June 2007, I explore the prospect for the tiger in the wild.
The Nepalese minister inaugurating the international tiger symposium in Kathmandu in mid-April acknowledged that traditional approaches in the conservation field are not bearing fruit, and called for new thinking. His call came not a day too soon. The number of wild tigers remaining in the world is at an all-time low, estimated at between 2,000 and 3,000, probably half of what was believed a few years ago. Yet while there was a range of policy options before the who’s who of the tiger world, the week-long deliberations brought only more confusion and contradictions.
Is the tiger facing a crisis at all? Could it be that in the past, wild tiger numbers in India had been grossly inflated because of a faulty counting procedure? Is it true that on average one tiger a day is poached in India, and if so where are these dead tigers headed? If reports by some environmental organizations are to be believed, then there are very few instances of tiger bones or tiger medicine found in China today. Why then is the focus on poaching, when others claim that the biggest threat to the tiger comes from the continuing loss of habitats?
Should India be commended for maintaining a smaller number of tigers in the wild, even if it does not answer to what happened to the vast sums of money that have been spent over the past decades? Should China be condemned for continued demand for tiger parts, when there is little evidence of tiger products in China’s markets?
For the first time, a large delegation from the People’s Republic of China participated in the deliberations. China is now considering legalizing the trade in tiger products from farmed animals within its borders. This further ignited the debate over the relationship between economic development and environmental quality. Are conservation objectives and commercial goals compatible? Is the consumer demand for tiger parts necessarily a prescription for the possible extinction of tigers in the wild?
For the past three decades of tiger conservation, commerce and conservation have been pitted against each other. The principal focus of the present conservation strategy has been to prohibit all forms of culling of tigers, trading in tiger parts and consumption. Policing has been made the cornerstone of tiger-conservation polices. The goal has been to place tigers and the forests so high on a pedestal that market prices won’t be able to touch these precious resources! So we have the paradox of highly valued resources placed outside the discipline of market forces, and some of the poorest people on earth living in close proximity to such valuable resources without any incentive to conserve and manage the resources in a sustainable manner.
The reality is that when there is a demand from consumers in the market, such a policy prescription is an open invitation to criminals and smugglers to profit from poaching of tigers. So poaching continues to pose a threat to wild tigers. This approach ignores the fact that tigers are a renewable resource. They breed very easily in captivity. In fact over the last decade China has almost perfected the art of managing and breeding large number of tigers in captivity, currently estimated at 5,000 animals. Bringing some of these tigers to meet the demand in the market for tiger parts by legalizing trade could make poaching economically less attractive.
There are plenty of examples of species thriving under the discipline of commerce. From bison to crocodiles, many species have largely escaped the threat of extinction. Just as the tiger conservation policy was seeking to prohibit commerce in the 1970s, crocodile farming was taking roots.
Today, while India continues with its policy of keeping the crocodile outside the scope of commerce, elsewhere crocodiles have become a very successful commercial animal.
An estimated two million crocodiles are harvested each year from facilities as far apart as Australia, South Africa and the United States.
Contrary to the fears of conservationists, this has not led to crocodiles being poached in India or elsewhere. The reason is simple. If an international brand name wants a large volume of crocodile skins at a competitive price, it has no reason to seek a poacher when it can procure it from a legal farmer.
Take the case of hunting. In India, the government has prosecuted film actor Salman Khan and others for their alleged crime of hunting a few blackbucks. Recently, former Indian cricket Captain Mansur Ali Khan Pataudi was similarly ensnared in a hunting controversy. The blackbuck is a very attractive animal, indigenous to South Asia. Yet, today there are probably more blackbucks in Texas alone than in its home range in India. And it is legal to hunt these animals in the U.S.
In the U.S., blackbucks are looked upon as an investment, and therefore managed in a very sustainable manner by many range owners. It is estimated that in the U.S., the annual economic activity from a whole range of environmental activities, including nature treks, bird watching, fishing and hunting, generates revenue of over $100 billion.
It is possible to conceive a similar outcome in India or China, with their enormous diversity in wildlife resources. Big cats like tigers, lions or leopards could help transform the lives and living standards of some of the poorest sections of our populations.
Wildlife conservation, rather than being a drain on the national exchequer, could become
a contributor to the economy. There is an environmental dividend from economic development. Most rich Western countries have been able to restore and improve their environmental quality with economic development. Economic development opens opportunity for people to move away from land and reduce their dependency on environmental resources for their survival. China seems poised to reap this environmental dividend soon. Much more than poaching, pressure on natural habitats by poverty-stricken human settlements pose by far the biggest threat to biodiversity and tigers.
China’s economic growth in recent decades is credited with moving a couple of hundred million rural residents away from the countryside. This has helped lower the pressure on natural resources such as forests and wetlands.
China has identified a couple of original habitats of the south China tiger for a bold experiment in rewilding and reintroduction of one of the most endangered subspecies of tiger today. A few of these tigers have been sent to South Africa for a rewilding program to revive their hunting
and survival skills. The progenies of these tigers could be reintroduced in the designated
areas in China. Efforts are underway to help restore these habitats. And one of the prime objectives is to help integrate many of the remaining local villagers into the ecotourism model, so that these people directly enjoy the economic benefits of the environmental restoration.
Clearly, the declining human pressure on forest and wildlife, coupled with breeding facilities meeting the demand for tiger parts in Chinese market, together have the potential to dramatically improve the prospects of tigers in the wild, securing the future of these majestic animals. If the 21st century is the Asian century, then tiger conservation provides an opportunity to bring a new dimension of cooperation between Beijing and Delhi.
India has had a lot of trouble handling large cats in captivity. Last year, about half a dozen big cats died in Delhi Zoo. In 2000, about a dozen mysteriously died at Nandankanan Zoo over the span of a week. In China, breeders have managed to handle hundreds of animals in close proximity without a major calamity. Meanwhile, India has a lot of expertise in terms of people who have years of experience in managing tiger habitats. These people provide a ready pool of talent that could help China restore and rebuild some of its habitats.
The choice before the delegates in Kathmandu could not have been starker. Should their governments persist in spending millions of dollars in an attempt to keep the tiger outside the purview of the market, and look at commerce as the principal threat to conservation? Or should they seek to harness the power of commerce for the cause of conservation? The future of tigers in the wild may depend on the decisions taken in the coming months. Hopefully, the turmoil among the conservationists gathered in Nepal is only the beginning. For the sake of the tiger, one hopes it will expose the myth of conservation being necessarily at odds with commerce, and bring to light the reality of harnessing the power of commerce for the cause of conservation.
In June, delegates from around the world will discuss the relationship between commerce and conservation at the Convention on International Trade in Endangered Species in The Hague, Netherlands. China is not currently seeking to reopen international trade in tiger parts. But if China decides to reopen domestic trade in tiger parts, just as the U.S. allows trade in live tigers, it will be perfectly in line with its international commitments.
This debate over the tiger is a reflection of the ironic reversal of traditional ideological positions. Communist China is seeking a reassessment of conservation policies, and wants to explore the possibility of bringing the tiger under the discipline of market forces, in the hope of saving the magnificent beast. But critics from the “free world” are blaming the tiger crisis on market failure, and seeking a greatly enhanced role for the state. China is looking at the profit motive to save the tiger, while its critics are looking to brute force to implement the prohibition on smuggling.
Welcome to the brave new world of tiger conservation!
Tuesday, May 15, 2007
Going beyond land: Protecting Property, Securing Economy
Brazil, China and India have all provided glimpses of their potential. Brazil has been talked of as a potential economic super power for over a generation now. China has greatly enhanced its prospect over the past two decades. India’s economic promise is beginning to attract attention in the past decade. While the prospect of economic growth and prosperity look promising, the potential is clouded by fundamental weaknesses regarding the property rights regime that could mar their prospect of fulfilling their own promise. This is an article I wrote after a trip to Brazil to attend a conference, in May 2007.
Going beyond land: The Case for Securing Property Rights in Brazil, China and India
Land is an emotive issue in most societies. But land is also the most basic of economic assets. Therefore, the way land rights, or property rights, are protected provide a good indication of the economic health of the country. On a recent trip to Brazil, I was surprised to see the intensity of feeling among large sections of the population on the question of land rights, and on the issue of access to land for the poor. But I also realised some interesting parallels and contrasts on this issue in three of the most talked about BRIC countries – Brazil, Russia, India and China.
A lot has been said about the BRIC countries over the past few years. (I am leaving aside Russia for the purpose of this article.) Here, I will focus on the issue of property rights, in the context of land rights, as it is developing in Brazil, China and India.
All the three countries have provided glimpses of their potential. Brazil has been talked of as a potential economic super power for over a generation now. China has greatly enhanced its prospect over the past two decades. India’s economic promise is beginning to attract attention in the past decade. But if considered together, these three countries provide a very good road map towards economic growth and prosperity. And if looked upon separately, all the three countries exhibit fundamental weaknesses that could mar their prospect of fulfilling their own promise.
Brazil has established itself as an agricultural superpower. And quite counter intuitively, this has happened because agriculture as a share of Brazilian economy has shrunk to about 8-9% of GDP. Yet, today Brazil is among the top producer and exporter in a number of produces – beef, coffee, cotton, oranges, etc. Brazil is also among the very few countries left in the world, where agricultural and pasture land is expanding. It is estimated that over a million hectares of virgin land are brought under agriculture each year. The rise in productivity is also reflected in the fact that only about 14-16% of workforce is related to agriculture.
Nevertheless, here is an indication of the major problem facing Brazil. The relatively higher proportion of workforce associated with agriculture, coupled with a few million “landless people”, who are being organised to demand access to agricultural land, illustrate not the ills of large scale farms and professional nature of Brazilian agriculture, but the continued bottlenecks that is retarding Brazil’s transition from a developing to a developed economy.
Typical of a large developed economy, is not the irrelevance of agriculture, but the fact that despite its small share as a percentage of the national GDP, agriculture production is high. This situation is sustained by high productivity and access to modern technology, finance and management. Consequently, the demand for agricultural land declines, and the environmental quality in the countryside keeps improving.
For instance, United States is the world’s largest agricultural producer, although about 1% of its GDP comes from agriculture, and about the same percentage of workforce is associated with agriculture. But this story of the US, would not be complete, if one does not considers the wider economic environment which permitted massive transition of labour from agriculture, first to manufacturing, and then to services. It is this ability to sustain the transition that primarily contributed to sustaining the US agriculture.
But it is this process of transition that has been retarded in various degrees in Brazil, China and India.
While Brazil has overcome the macro-economic chaos of the 1970s and 80s, the regulatory environment is not very conducive for sustaining the growth of non-agricultural sectors. The ‘Doing Business’ report reflects some of these key problems. Consequently, the opportunity for non-agricultural entrepreneurship and employment are stagnating. The labour laws haven’t helped either. Never have I witnessed in the past decade, the prospect of federal police going on strike in any major economy in the world, as was the case in Brazil last April.
And it is this relative stagnation imposed on the non-farm sectors, which is forcing many more poor people to try and make a living out of agriculture, depriving them of opportunities to participate in the economic transition. Brazil would have been much more assured of its economic future, if the success of Brazilian agriculture, had been able to bring down the share of labour in agriculture to 8%, in line with its economic share, 8% of GDP.
The political leadership, rather than making the case for facilitating this economic transition away from agriculture, is tying to focus on ways to keep people on land. So on the one hand there are special schemes to help the family farms, on the other hand there is this latent support to seize parts of private land, and distribute these to the “landless”.
Violation of property rights in the form of land seizures, not only undermines the institution of rule of law, one of the fundamental premises of modern and free societies, but also in an economically perverse way traps the hapless poor in a highly competitive agriculture sector.
On the one hand, most of these supposed beneficiaries may not be able to sustain themselves in agriculture, as higher productivity further reduces agriculture share of the economy in the coming decade. So many of these people who really needed help in terms of education and skills to facilitate their transition out of agriculture could only fall further back economically.
On the other hand, because of insecure property rights, the investment that might have further promoted Brazil’s agriculture may falter.
This need not be the case. Of the three countries, Brazil has the best potential to build on the strength of its agriculture, and ensure its economic transition to manufacturing and services, and join the ranks of developed countries. But this would not happen if Brazil opts to hobble its agriculture, and compounds the problem by perpetuating regulatory bottlenecks retarding the non-farm sectors.
The situation in Brazil is quite a contrast to that in China. China’s reforms started in the agriculture sector, but because of very weak private property rights, farmers have been increasingly left stranded. The insecure land rights have meant that farmers have not really been able to capitalise on their land assets, and try to join the economic transition away from agriculture. So you have almost a crisis situation in China, with agriculture share of GDP down to 13%, but the labour force in agriculture at over 60%. It is not surprising that there are reports of 70-80,000 instances of protests annually in rural China, mostly related to land rights. This also explains the enormous and growing inequality between the large population stuck in agriculture, and those in China’s large and gleaming new cities.
But China has been able to manage the situation to an extent, because of its phenomenal growth in manufacturing sector. If Brazil is the bread basket of the world today, China has become the shop floor of the world. It is perhaps this transition to manufacturing, which opened up new economic opportunities to a few hundred million young Chinese from the countryside, that provides the key to understanding China’s ability to manage this rural – urban dichotomy, so far.
Whether this situation is sustainable, is an open question. But what is quite clear is that a more secure property rights in rural land in China would help many Chinese peasants to capitalise on their only asset, and prepare themselves for life beyond agriculture.
The experience of India provides yet another twist to this story. Among the three countries, India is the poorest. Over the past 60 years, the share of agriculture in GDP has fallen from a high of 75% to about 20% today, but the labour force associated with agriculture is hovering just under 60%. No wonder, agriculture in India is almost synonymous with poverty. Among the three countries, the transition to the manufacturing sector has been the slowest in India. But what is worse is that the regulatory environment has stifled not just entrepreneurship, but has sustained barely 10% of the workforce in the formal sector employment.
With agriculture in a ditch, and manufacturing hobbled by regulations, an elite band of Indian entrepreneurs, joined hands with an equally elite educated and skilled workforce found a new opening in the service sector. The IT and the communication revolution greatly facilitated access to global markets, and before the political establishment could realise, India marked its arrival on the world stage as the world’s back office.
While the potential in IT and outsourcing has raised India’s profile on the world stage, at home it is becoming increasingly clear that without a new revolution in agriculture and manufacturing, India may never be able to live up to its potential. Because without these twin engines, the economic transition from largely rural and low skilled workforce to manufacturing will not be possible.
But to achieve this, transition, what India needs is a much greater protection to property rights, and reforming the highly restrictive land market. India is one of the unique countries where the political demand for land distribution to the landless in the 50s and 60s, has now moved in to a new form of protest against attempt by government to take over private land of small farmers in the name of promoting industrialisation. In recent months, there has been a growing revolt against ‘takings’ by government using ‘eminent domain’ powers. Not unexpectedly, this is leading to renewed charges of crony industrialisation.
Although Brazil, China and India have had very different history, and have travelled down different economic paths, there is a strong common thread running right through these apparently divergent experiences. That thread is property rights. Respect for property rights, and reforms of the land market, hold the key to smooth transition from agriculture to industry, and to services. Only then can these countries lift the burden of poverty from the shoulders of millions of their citizens.
Property right is not a luxury of the rich. The rich in almost any kind of society can figure out ways of protecting their property, either using the law, or even buying protection outside the law. Property right is sacrosanct particularly for the poor, because without it, they have no means left to protect their meagre assets, capitalise those assets, and put those assets to optimum use.
Over bearing regulations that strangle enterprise, restrict access to markets, curtail freedom to trade and exchange, all constitute violation of property rights in one form or the other. Brazil, China and India, are the best examples of distortions created by different forms of violations of property rights. To achieve their potential, all the three countries will have to seriously reconsider the diverse nature of property rights violations, and adopt a secure rule of law environment. Today, these three countries epitomises their success in their respective areas, and the world has taken note of their potential. But by the same token, the enormous disparities between different sectors of their economies also illustrate the enormous pitfalls that lie ahead of them.
But the road from potential to performance can only be paved by recognising and securing property rights, going much beyond land.
Going beyond land: The Case for Securing Property Rights in Brazil, China and India
Land is an emotive issue in most societies. But land is also the most basic of economic assets. Therefore, the way land rights, or property rights, are protected provide a good indication of the economic health of the country. On a recent trip to Brazil, I was surprised to see the intensity of feeling among large sections of the population on the question of land rights, and on the issue of access to land for the poor. But I also realised some interesting parallels and contrasts on this issue in three of the most talked about BRIC countries – Brazil, Russia, India and China.
A lot has been said about the BRIC countries over the past few years. (I am leaving aside Russia for the purpose of this article.) Here, I will focus on the issue of property rights, in the context of land rights, as it is developing in Brazil, China and India.
All the three countries have provided glimpses of their potential. Brazil has been talked of as a potential economic super power for over a generation now. China has greatly enhanced its prospect over the past two decades. India’s economic promise is beginning to attract attention in the past decade. But if considered together, these three countries provide a very good road map towards economic growth and prosperity. And if looked upon separately, all the three countries exhibit fundamental weaknesses that could mar their prospect of fulfilling their own promise.
Brazil has established itself as an agricultural superpower. And quite counter intuitively, this has happened because agriculture as a share of Brazilian economy has shrunk to about 8-9% of GDP. Yet, today Brazil is among the top producer and exporter in a number of produces – beef, coffee, cotton, oranges, etc. Brazil is also among the very few countries left in the world, where agricultural and pasture land is expanding. It is estimated that over a million hectares of virgin land are brought under agriculture each year. The rise in productivity is also reflected in the fact that only about 14-16% of workforce is related to agriculture.
Nevertheless, here is an indication of the major problem facing Brazil. The relatively higher proportion of workforce associated with agriculture, coupled with a few million “landless people”, who are being organised to demand access to agricultural land, illustrate not the ills of large scale farms and professional nature of Brazilian agriculture, but the continued bottlenecks that is retarding Brazil’s transition from a developing to a developed economy.
Typical of a large developed economy, is not the irrelevance of agriculture, but the fact that despite its small share as a percentage of the national GDP, agriculture production is high. This situation is sustained by high productivity and access to modern technology, finance and management. Consequently, the demand for agricultural land declines, and the environmental quality in the countryside keeps improving.
For instance, United States is the world’s largest agricultural producer, although about 1% of its GDP comes from agriculture, and about the same percentage of workforce is associated with agriculture. But this story of the US, would not be complete, if one does not considers the wider economic environment which permitted massive transition of labour from agriculture, first to manufacturing, and then to services. It is this ability to sustain the transition that primarily contributed to sustaining the US agriculture.
But it is this process of transition that has been retarded in various degrees in Brazil, China and India.
While Brazil has overcome the macro-economic chaos of the 1970s and 80s, the regulatory environment is not very conducive for sustaining the growth of non-agricultural sectors. The ‘Doing Business’ report reflects some of these key problems. Consequently, the opportunity for non-agricultural entrepreneurship and employment are stagnating. The labour laws haven’t helped either. Never have I witnessed in the past decade, the prospect of federal police going on strike in any major economy in the world, as was the case in Brazil last April.
And it is this relative stagnation imposed on the non-farm sectors, which is forcing many more poor people to try and make a living out of agriculture, depriving them of opportunities to participate in the economic transition. Brazil would have been much more assured of its economic future, if the success of Brazilian agriculture, had been able to bring down the share of labour in agriculture to 8%, in line with its economic share, 8% of GDP.
The political leadership, rather than making the case for facilitating this economic transition away from agriculture, is tying to focus on ways to keep people on land. So on the one hand there are special schemes to help the family farms, on the other hand there is this latent support to seize parts of private land, and distribute these to the “landless”.
Violation of property rights in the form of land seizures, not only undermines the institution of rule of law, one of the fundamental premises of modern and free societies, but also in an economically perverse way traps the hapless poor in a highly competitive agriculture sector.
On the one hand, most of these supposed beneficiaries may not be able to sustain themselves in agriculture, as higher productivity further reduces agriculture share of the economy in the coming decade. So many of these people who really needed help in terms of education and skills to facilitate their transition out of agriculture could only fall further back economically.
On the other hand, because of insecure property rights, the investment that might have further promoted Brazil’s agriculture may falter.
This need not be the case. Of the three countries, Brazil has the best potential to build on the strength of its agriculture, and ensure its economic transition to manufacturing and services, and join the ranks of developed countries. But this would not happen if Brazil opts to hobble its agriculture, and compounds the problem by perpetuating regulatory bottlenecks retarding the non-farm sectors.
The situation in Brazil is quite a contrast to that in China. China’s reforms started in the agriculture sector, but because of very weak private property rights, farmers have been increasingly left stranded. The insecure land rights have meant that farmers have not really been able to capitalise on their land assets, and try to join the economic transition away from agriculture. So you have almost a crisis situation in China, with agriculture share of GDP down to 13%, but the labour force in agriculture at over 60%. It is not surprising that there are reports of 70-80,000 instances of protests annually in rural China, mostly related to land rights. This also explains the enormous and growing inequality between the large population stuck in agriculture, and those in China’s large and gleaming new cities.
But China has been able to manage the situation to an extent, because of its phenomenal growth in manufacturing sector. If Brazil is the bread basket of the world today, China has become the shop floor of the world. It is perhaps this transition to manufacturing, which opened up new economic opportunities to a few hundred million young Chinese from the countryside, that provides the key to understanding China’s ability to manage this rural – urban dichotomy, so far.
Whether this situation is sustainable, is an open question. But what is quite clear is that a more secure property rights in rural land in China would help many Chinese peasants to capitalise on their only asset, and prepare themselves for life beyond agriculture.
The experience of India provides yet another twist to this story. Among the three countries, India is the poorest. Over the past 60 years, the share of agriculture in GDP has fallen from a high of 75% to about 20% today, but the labour force associated with agriculture is hovering just under 60%. No wonder, agriculture in India is almost synonymous with poverty. Among the three countries, the transition to the manufacturing sector has been the slowest in India. But what is worse is that the regulatory environment has stifled not just entrepreneurship, but has sustained barely 10% of the workforce in the formal sector employment.
With agriculture in a ditch, and manufacturing hobbled by regulations, an elite band of Indian entrepreneurs, joined hands with an equally elite educated and skilled workforce found a new opening in the service sector. The IT and the communication revolution greatly facilitated access to global markets, and before the political establishment could realise, India marked its arrival on the world stage as the world’s back office.
While the potential in IT and outsourcing has raised India’s profile on the world stage, at home it is becoming increasingly clear that without a new revolution in agriculture and manufacturing, India may never be able to live up to its potential. Because without these twin engines, the economic transition from largely rural and low skilled workforce to manufacturing will not be possible.
But to achieve this, transition, what India needs is a much greater protection to property rights, and reforming the highly restrictive land market. India is one of the unique countries where the political demand for land distribution to the landless in the 50s and 60s, has now moved in to a new form of protest against attempt by government to take over private land of small farmers in the name of promoting industrialisation. In recent months, there has been a growing revolt against ‘takings’ by government using ‘eminent domain’ powers. Not unexpectedly, this is leading to renewed charges of crony industrialisation.
Although Brazil, China and India have had very different history, and have travelled down different economic paths, there is a strong common thread running right through these apparently divergent experiences. That thread is property rights. Respect for property rights, and reforms of the land market, hold the key to smooth transition from agriculture to industry, and to services. Only then can these countries lift the burden of poverty from the shoulders of millions of their citizens.
Property right is not a luxury of the rich. The rich in almost any kind of society can figure out ways of protecting their property, either using the law, or even buying protection outside the law. Property right is sacrosanct particularly for the poor, because without it, they have no means left to protect their meagre assets, capitalise those assets, and put those assets to optimum use.
Over bearing regulations that strangle enterprise, restrict access to markets, curtail freedom to trade and exchange, all constitute violation of property rights in one form or the other. Brazil, China and India, are the best examples of distortions created by different forms of violations of property rights. To achieve their potential, all the three countries will have to seriously reconsider the diverse nature of property rights violations, and adopt a secure rule of law environment. Today, these three countries epitomises their success in their respective areas, and the world has taken note of their potential. But by the same token, the enormous disparities between different sectors of their economies also illustrate the enormous pitfalls that lie ahead of them.
But the road from potential to performance can only be paved by recognising and securing property rights, going much beyond land.
Wednesday, April 18, 2007
Conservation for commerce
The international gathering of tiger conservationists in Kathmandu this week will be in a sombre mood. The number of wild tigers is at an all time low. The decibel of the debate over the relationship between economic development and environmental quality is at an all-time high. Are conservation and commerce compatible? Can we harness the consumer demand for tiger parts help stave off the possible extinction of tigers in the wild? Can villagers living near forest benefit from the wildlife in their vicinity? I try to answer some of these question in this article, "Conservation for commerce", published in the Hindustan Times, on 18 April 2007.
The international gathering of tiger conservationists in Kathmandu this week will be in a sombre mood. The number of wild tigers is at an all time low — between 2,000 and 3,000 — probably half of what was believed a few years ago.
The decibel of the debate over the relationship between economic development and environmental quality is at an all-time high. Are conservation and commerce compatible? Is the consumer demand for tiger parts necessarily a prescription for the possible extinction of tigers in the wild? The meet is an opportunity to undertake a serious re-evaluation of existing tiger conservation strategies. Interestingly, for the first time, an official Chinese delegation is participating in the deliberations, triggering further speculation.
Through the last three decades of tiger conservation, commerce and conservation have been pitted against each other. The principal focus of the present conservation strategy has been to prohibit all forms of consumption, hunting of tigers, and trading in tiger parts. Policing has been made the cornerstone of tiger conservation polices.
So we have the paradox of high-value wildlife resources placed outside the discipline of market forces, and some of the poorest people in the world living in close proximity to such resources, without any incentive to conserve and manage sustainably.
But when there is a demand from consumers in the market, such a policy prescription is an open invitation to criminals and smugglers to profit from the poaching of tigers. Thus, poaching has continued to pose a major threat to wild tigers. In addition, about 75 per cent of the alleged tiger parts seized in China and sent to wildlife forensic labs for testing, are being found to be fake. Clearly, when trade is outlawed, only outlaws trade.
But tigers are a renewable resource. They breed very easily in captivity. In fact, China has, over the past decade or so, almost perfected the art of managing and breeding a large number of tigers in captivity, currently estimated at 5,000 animals. Bringing some of these tigers into the market to meet the demand for tiger parts, by legalising its trade, could make poaching economically unattractive.
There are many examples of species thriving under the discipline of commerce. Even as the tiger conservation policy prohibited commerce in the 1970s, crocodile farming was taking root. Today, India continues with its policy of keeping crocodiles outside the scope of commerce. But crocodiles have become very successful commercial animals elsewhere. Two million crocodiles are estimated to be harvested each year in Australia, South Africa and the US. Yet, there is hardly any evidence of crocodiles being poached in India or elsewhere because of market demand.
The reason is simple. If an international brand name wants a large volume of crocodile skins, at a competitive price, it has no reason to seek a poacher when it can procure these from a legal farmer.
Further, it is estimated that in the US the annual economic activity from a range of environmental activities, including nature treks and bird watching to fishing and hunting, generates revenue of over $ 100 billion. Big cats like tigers, lions and leopards can help transform the lives of some of the poorest sections of the population in poor countries.
Most rich Western countries have been able to restore and improve their environmental quality with economic development. China seems poised to reap the environmental dividend soon.
Pressure on the natural habitats of impoverished people poses, by far, the biggest threat to biodiversity and tigers — much more than poaching does. China’s economic growth in recent decades is credited to have moved a couple of hundred million rural folks away from the country side. In some of the remote rural regions, villages are depopulating at a very fast rate. This has helped lower the pressure on natural resources of land, forest and water bodies.
China has identified a couple of such areas, original habitat of the south China tiger (SCT), for a bold experiment in ‘re-wilding’ and re-introduction of one of the most endangered sub-species of tigers.
Clearly, the declining human pressure on forest and wildlife — a result of increasing alternative economic opportunities — coupled with breeding facilities to meet the demand for tiger parts will dramatically alter the future of tigers in the wild, securing the future of these majestic animals. Tiger conservation provides an opportunity to bring a new dimension of cooperation between China and India.
India has had a lot of trouble handling large cats in captivity. Last year, about half a dozen big cats died in the Delhi zoo. In 2000, a dozen mysteriously died at Nandankanan zoo over a span of a week. In China, breeders have managed to handle hundreds of animals in close proximity without any major calamity.
India has a lot of expertise in terms of people who have the experience of managing forests and tiger habitats. These people provided a ready pool of talent to help China restore and rebuild some of its tiger habitats. Finally, wildlife conservation, rather than becoming a drain on the national exchequer, could become a major contributor to the national economy.
The choice before the delegates in Kathmandu this week could not have been starker. Should they harness the power of commerce for the cause of conservation? Or should they continue to condemn commerce? The tiger is at a crossroads, but its future depends on the choice we make between these two scripts.
The international gathering of tiger conservationists in Kathmandu this week will be in a sombre mood. The number of wild tigers is at an all time low — between 2,000 and 3,000 — probably half of what was believed a few years ago.
The decibel of the debate over the relationship between economic development and environmental quality is at an all-time high. Are conservation and commerce compatible? Is the consumer demand for tiger parts necessarily a prescription for the possible extinction of tigers in the wild? The meet is an opportunity to undertake a serious re-evaluation of existing tiger conservation strategies. Interestingly, for the first time, an official Chinese delegation is participating in the deliberations, triggering further speculation.
Through the last three decades of tiger conservation, commerce and conservation have been pitted against each other. The principal focus of the present conservation strategy has been to prohibit all forms of consumption, hunting of tigers, and trading in tiger parts. Policing has been made the cornerstone of tiger conservation polices.
So we have the paradox of high-value wildlife resources placed outside the discipline of market forces, and some of the poorest people in the world living in close proximity to such resources, without any incentive to conserve and manage sustainably.
But when there is a demand from consumers in the market, such a policy prescription is an open invitation to criminals and smugglers to profit from the poaching of tigers. Thus, poaching has continued to pose a major threat to wild tigers. In addition, about 75 per cent of the alleged tiger parts seized in China and sent to wildlife forensic labs for testing, are being found to be fake. Clearly, when trade is outlawed, only outlaws trade.
But tigers are a renewable resource. They breed very easily in captivity. In fact, China has, over the past decade or so, almost perfected the art of managing and breeding a large number of tigers in captivity, currently estimated at 5,000 animals. Bringing some of these tigers into the market to meet the demand for tiger parts, by legalising its trade, could make poaching economically unattractive.
There are many examples of species thriving under the discipline of commerce. Even as the tiger conservation policy prohibited commerce in the 1970s, crocodile farming was taking root. Today, India continues with its policy of keeping crocodiles outside the scope of commerce. But crocodiles have become very successful commercial animals elsewhere. Two million crocodiles are estimated to be harvested each year in Australia, South Africa and the US. Yet, there is hardly any evidence of crocodiles being poached in India or elsewhere because of market demand.
The reason is simple. If an international brand name wants a large volume of crocodile skins, at a competitive price, it has no reason to seek a poacher when it can procure these from a legal farmer.
Further, it is estimated that in the US the annual economic activity from a range of environmental activities, including nature treks and bird watching to fishing and hunting, generates revenue of over $ 100 billion. Big cats like tigers, lions and leopards can help transform the lives of some of the poorest sections of the population in poor countries.
Most rich Western countries have been able to restore and improve their environmental quality with economic development. China seems poised to reap the environmental dividend soon.
Pressure on the natural habitats of impoverished people poses, by far, the biggest threat to biodiversity and tigers — much more than poaching does. China’s economic growth in recent decades is credited to have moved a couple of hundred million rural folks away from the country side. In some of the remote rural regions, villages are depopulating at a very fast rate. This has helped lower the pressure on natural resources of land, forest and water bodies.
China has identified a couple of such areas, original habitat of the south China tiger (SCT), for a bold experiment in ‘re-wilding’ and re-introduction of one of the most endangered sub-species of tigers.
Clearly, the declining human pressure on forest and wildlife — a result of increasing alternative economic opportunities — coupled with breeding facilities to meet the demand for tiger parts will dramatically alter the future of tigers in the wild, securing the future of these majestic animals. Tiger conservation provides an opportunity to bring a new dimension of cooperation between China and India.
India has had a lot of trouble handling large cats in captivity. Last year, about half a dozen big cats died in the Delhi zoo. In 2000, a dozen mysteriously died at Nandankanan zoo over a span of a week. In China, breeders have managed to handle hundreds of animals in close proximity without any major calamity.
India has a lot of expertise in terms of people who have the experience of managing forests and tiger habitats. These people provided a ready pool of talent to help China restore and rebuild some of its tiger habitats. Finally, wildlife conservation, rather than becoming a drain on the national exchequer, could become a major contributor to the national economy.
The choice before the delegates in Kathmandu this week could not have been starker. Should they harness the power of commerce for the cause of conservation? Or should they continue to condemn commerce? The tiger is at a crossroads, but its future depends on the choice we make between these two scripts.
Sunday, April 15, 2007
Economics of populism
Populism may be an inherent part of democracy, but one must be wary of opportunism. I review the book, 'Can India grow without Bharat?' by Shankar Acharya, one of India's leading economic policy maker. This was published in the Financial Express, on 15 April 2007, under the title "The Economics of populism".
Can India grow without Bharat, asks Shankar Acharya in the title of his new book. Whether you are a politician or an economist, the answer to that question is almost always a no. So what is it the economist wants to bring out in this book?
Acharya had served as the chief economist advisor to the government of India for seven long years between 1993 and 2000. Unusually, he served four prime ministers in four different political formations during this period getting a ringside view of politics of economic decisions. Here he brings together 33 short essays, written between late 2003 and 2006. These essays cover a range of issues from macro economic policies, budgetary and taxation policies, infrastructure issues, foreign trade, and foreign policy issues. He presents a sense of cautious optimism at India’s economic future. He recognises the potential and possibilities, but also stresses that India will not rise automatically, unless a range of policy changes are effected. And he is not sure that the political processes have the capacity to do it.
No doubt India has moved a long way in the past 15 to 30 years. One of the chapters, ‘India’s tax reformers’, reminds us of the extent of these changes. He briefly traces the history of tax reforms from the 1970s, and credits the personalities that were involved in those decisions. In the 1970s, customs duty were often above 200% on many products, excise duty ranged from 2 and 100% spread over 24 slabs. Cascading taxes were the norm. On the other hand, personal income tax had 11 slabs, ranging from 11 to 85%, and with a surcharge of 15%, the top marginal rate was effectively 97.5%. Needless to say that tax administration was very complex and distinctly arbitrary.
From the Wanchoo committee report on direct taxes in 1971, to the Kelkar report a few years ago, from VP Singh to Manmohan Singh, Chidambaram and Yashwant Sinha, the general direction of tax reforms have been sustained. But Acharya credits Singh as the father of modern tax reforms, for “he and his team took a holistic view of tax reforms, both direct and indirect.”
Another interesting essay is ‘Why did India reform?’ Going beyond the 1991 balance of payment crisis, Acharya points out that while the 1991 elections were not fought on the grounds of political ideology or market versus the state, “most elements of the reform agenda had been around in influential sections of India’s technocracy for some years”. Contrary to left-wing criticism, reforms were indeed home grown. Secondly, the clear mandate by Narsimha Rao to Manmohan Singh enabled the latter to coordinate closely with the PMO, RBI and the commerce ministry. Dr Singh’s previous experience at various senior government positions helped him clear a lot of the minefields. The author characterises the reforms process as a “medium bang”, in the spectrum between the ‘big bang’ and ‘gradualism’. The results started to become visible as early as 1993, and thus the momentum for reforms were sustained. Finally, he stresses Singh’s role for seizing the opportunity, saying “he was the right man in the right place at the right time.”
Since most of the essays in this volume deal with the issues facing the present UPA government, it is natural that the readers may like to read Acharya’s assessment of the present political dispensation. In a mid term review of the UPA, the author gives the government just 38 out of 100, over 10 parameters. Predictably, the author assesses the performance of exchange rate and external payment at a high of 8 out of 10, while employment, public sector reforms, agriculture and human resource development all awarded a low of 2 out of 10. Not much for a government that repeatedly declares its concern for the common man at the top of its agenda. One of the critical essays deals with one of the corner stone of UPA policy — National Rural Employment Guarantee scheme. Writing in November 2004, Acharya is categorical. This law would “certainly destroy India’s public finances and much else besides.” As UPA took over the reign of power in the summer of 2004, Acharya acknowledged that the economic team of Dr Singh, P Chidambaram and Montek Singh Ahluwalia is the strongest at the cabinet level. Still, he castigated the Common Minimum Programme for falling under Gresham’s law — “bad money drives out good money”.
By the end of 2005, Acharya is apprehensive of the resurgent populism, where long term economic and social health is sacrificed for short-term political gains. The author traces a brief history of political populism in India, from the days of Indira Gandhi and slogan of ‘garibi hatao’. In all these years, Acharya says, populism while present, took a back seat only during the 1991-1996 regime of Rao and Singh, and 1998-2004 of the NDA rule.
Needless to point out that at the end of both these era of relatively low level of populism, both these regimes were humbled at the next electoral battle. But the electoral outcomes for populist regimes have been even more pathetic! “The only effective remedy against the obvious political temptations of populism, lies with the country’s leadership and their motivation, courage and ability to protect long-term national interests, from short term political opportunism.”
From an author who believes that economic incentive and institutions matter, his assessment of the political process is not very satisfactory. This book provides a lucid explanation of a lot of economic issues. Although such compilation have their own limitations, this reviewer expected some insight in to the politics of economic reforms, and some thoughts on the incentives that make political actors behave in a particularly “populist” way.
Can political sensibilities match the needs of economic sensitivities? From his vantage position, one hopes that Acharya will pen another volume exploring whether economic reforms can ever capture popular imagination, or whether populism can usher in an era of sustainable reforms. Such an insight may prove to be much more long lasting in its impact, contributing to securing national well being, than the political dust raised by many specific policy debates.
Can India grow without Bharat, asks Shankar Acharya in the title of his new book. Whether you are a politician or an economist, the answer to that question is almost always a no. So what is it the economist wants to bring out in this book?
Acharya had served as the chief economist advisor to the government of India for seven long years between 1993 and 2000. Unusually, he served four prime ministers in four different political formations during this period getting a ringside view of politics of economic decisions. Here he brings together 33 short essays, written between late 2003 and 2006. These essays cover a range of issues from macro economic policies, budgetary and taxation policies, infrastructure issues, foreign trade, and foreign policy issues. He presents a sense of cautious optimism at India’s economic future. He recognises the potential and possibilities, but also stresses that India will not rise automatically, unless a range of policy changes are effected. And he is not sure that the political processes have the capacity to do it.
No doubt India has moved a long way in the past 15 to 30 years. One of the chapters, ‘India’s tax reformers’, reminds us of the extent of these changes. He briefly traces the history of tax reforms from the 1970s, and credits the personalities that were involved in those decisions. In the 1970s, customs duty were often above 200% on many products, excise duty ranged from 2 and 100% spread over 24 slabs. Cascading taxes were the norm. On the other hand, personal income tax had 11 slabs, ranging from 11 to 85%, and with a surcharge of 15%, the top marginal rate was effectively 97.5%. Needless to say that tax administration was very complex and distinctly arbitrary.
From the Wanchoo committee report on direct taxes in 1971, to the Kelkar report a few years ago, from VP Singh to Manmohan Singh, Chidambaram and Yashwant Sinha, the general direction of tax reforms have been sustained. But Acharya credits Singh as the father of modern tax reforms, for “he and his team took a holistic view of tax reforms, both direct and indirect.”
Another interesting essay is ‘Why did India reform?’ Going beyond the 1991 balance of payment crisis, Acharya points out that while the 1991 elections were not fought on the grounds of political ideology or market versus the state, “most elements of the reform agenda had been around in influential sections of India’s technocracy for some years”. Contrary to left-wing criticism, reforms were indeed home grown. Secondly, the clear mandate by Narsimha Rao to Manmohan Singh enabled the latter to coordinate closely with the PMO, RBI and the commerce ministry. Dr Singh’s previous experience at various senior government positions helped him clear a lot of the minefields. The author characterises the reforms process as a “medium bang”, in the spectrum between the ‘big bang’ and ‘gradualism’. The results started to become visible as early as 1993, and thus the momentum for reforms were sustained. Finally, he stresses Singh’s role for seizing the opportunity, saying “he was the right man in the right place at the right time.”
Since most of the essays in this volume deal with the issues facing the present UPA government, it is natural that the readers may like to read Acharya’s assessment of the present political dispensation. In a mid term review of the UPA, the author gives the government just 38 out of 100, over 10 parameters. Predictably, the author assesses the performance of exchange rate and external payment at a high of 8 out of 10, while employment, public sector reforms, agriculture and human resource development all awarded a low of 2 out of 10. Not much for a government that repeatedly declares its concern for the common man at the top of its agenda. One of the critical essays deals with one of the corner stone of UPA policy — National Rural Employment Guarantee scheme. Writing in November 2004, Acharya is categorical. This law would “certainly destroy India’s public finances and much else besides.” As UPA took over the reign of power in the summer of 2004, Acharya acknowledged that the economic team of Dr Singh, P Chidambaram and Montek Singh Ahluwalia is the strongest at the cabinet level. Still, he castigated the Common Minimum Programme for falling under Gresham’s law — “bad money drives out good money”.
By the end of 2005, Acharya is apprehensive of the resurgent populism, where long term economic and social health is sacrificed for short-term political gains. The author traces a brief history of political populism in India, from the days of Indira Gandhi and slogan of ‘garibi hatao’. In all these years, Acharya says, populism while present, took a back seat only during the 1991-1996 regime of Rao and Singh, and 1998-2004 of the NDA rule.
Needless to point out that at the end of both these era of relatively low level of populism, both these regimes were humbled at the next electoral battle. But the electoral outcomes for populist regimes have been even more pathetic! “The only effective remedy against the obvious political temptations of populism, lies with the country’s leadership and their motivation, courage and ability to protect long-term national interests, from short term political opportunism.”
From an author who believes that economic incentive and institutions matter, his assessment of the political process is not very satisfactory. This book provides a lucid explanation of a lot of economic issues. Although such compilation have their own limitations, this reviewer expected some insight in to the politics of economic reforms, and some thoughts on the incentives that make political actors behave in a particularly “populist” way.
Can political sensibilities match the needs of economic sensitivities? From his vantage position, one hopes that Acharya will pen another volume exploring whether economic reforms can ever capture popular imagination, or whether populism can usher in an era of sustainable reforms. Such an insight may prove to be much more long lasting in its impact, contributing to securing national well being, than the political dust raised by many specific policy debates.
Saturday, March 24, 2007
Ground reality
Prospect of a property rights movement
Much has been written about the tragedy of Singur and Nandigram in West Bengal. Yet not much light has been shed on the real significance of the protests by farmers on land acquisition. Brand Buddhadeb has suffered a serious blow much beyond West Bengal. But, more importantly, an undercurrent of awareness is spreading through the grassroots of society on an almost unheralded issue — the protection of property rights.
This article was published under the title "Ground Reality", in the Hindustan Times, on 24 March 2007.
Political and social activists have been hurling arguments to score points against rivals. If one side stresses on the need for industrialisation, the other calls for inclusive growth. The self-proclaimed champions of the poor are hobnobbing with big businesses, while the Opposition spectrum, from the fringe Left to the far Right, want to be seen to be siding with the rural poor. And business leaders, who have been enjoying the freedom to mobilise capital, want investment opportunities to be sugar-coated with a range of privileges and subsidies, including tax breaks and land at low costs.
Sixteen years after India began dismantling the licence and permit raj, it is clear that reforms have improved the economic environment for entrepreneurs. Yet, the issue of land acquisition in the name of promoting industrialisation or special economic zones (SEZs), shows how deeply entrenched the sense of political patronage continues to be in the influential sections of Indian society.
Nothing else can explain the desire of so many Indian business houses to ask the government to procure land for their projects. Since these businessmen have been the biggest beneficiary of liberalisation of the capital market, one could have expected them to demand a similar liberalisation of the land market in the country.
If businesses cannot legitimately acquire the necessary land for their purposes, then it is the land market that needs to be reformed. Instead, they have sought to eliminate the land market completely by asking the government to act as the middleman and perpetuate the land mafia.
Similarly, the opinion among social activists range from those who want land to perpetually remain under agriculture or forests, to others who focus more on an adequate rehabilitation and compensation package. Despite their concern for the poor, most of them fail to realise that property rights is not a luxury of the rich, but a necessity for the poor. The rich can survive in most societies, irrespective of their legal rights, because with their wealth they can buy protection from the powers that be. It is the poor who are left most vulnerable if they are denied the right, because they have no other recourse, except to become political pawns.
Economist Hernando de Soto, among others, has shown that the poor are trapped in poverty primarily because of their inability to capitalise on their assets, including land.
Today, Indian businesses can raise capital freely at home and abroad, they can buy and sell assets, engage in mega mergers and acquisitions. Yet, most Indian farmers hardly enjoy the freedom to buy, sell, lease or rent land. In most parts of India, farm land is regulated under land ceiling and land usage laws. In addition, laws make it difficult to even change crop patterns, and restrict the movement of agricultural produce.
The astronomical rise of real estate prices in urban India is also a reflection of the rigidities that have hobbled our cities. Rent control, land ceiling and zoning, coupled with weak legal avenues for the enforcement of contracts, have all made land in urban India artificially scarce. All — the land mafia, politicians, bureaucrats and businesses — have benefited, except the land owner himself.
Indians have been slowly, but steadily, surrendering the most fundamental of rights — the right to property — from almost the very inception of the Republic. Jawaharlal Nehru began the process with the creation of the Ninth Schedule in 1951, in an attempt to put land acquisition beyond the purview of judicial review. With her populist nationalisation, Indira Gandhi greatly diluted the scope of property rights protections. The first non-Congress government took one more step. In 1978, it amended the Constitution such that property rights no longer remained a fundamental right. Except a few brave voices, hardly anyone mourned the demise of the individual’s right to property.
The law is quite distinct from legislation. It is easy to write legislation that violates the spirit of the law as commonly understood. So the State passed legislations undermining basic principles of law in the name of helping the poor. First, land was sought to be confiscated from big landlords and redistributed to the poor. And now, the same land is being forcefully acquired through the use of eminent domain from the poor to be given over to large private investors.
Once a fundamental legal principle, that of property rights, is sacrificed, ‘might’ becomes right, and people are left vulnerable to the coercive power of the State. Since the communists in West Bengal lay their first claim to legitimacy on rural land distribution in the name of the landless, it is not surprising that they are now caught between a rock and a hard place as they try to facilitate land acquisition for the sake of industrialisation.
Yet, in the past two decades, there has been a steady and growing demand for greater recognition of private property rights in one form or another. Twenty years ago, at the height of the agitation against the Narmada dam, the issue was polarised between whether to build the dam, and the quality of the rehabilitation package for the people who lost their property. In the last few years, the tribal rights debate brought to the fore the issue of securing property rights for forest dwellers.
The violence over land acquisition in Orissa’s Kalinganagar two years ago, and the recent tragedy in Nandigram in West Bengal, mark more milestones on the long road to property rights. A couple of months ago, ministers in the West Bengal government asserted that under the land acquisition laws, consent of the landowner was not required. They would then go on to highlight the compensation and rehabilitation packages. The law remains the same, but the protests in Singur and Nandigram have forced the state government to announce that no land will be acquired without consent.
A similar sentiment at the grassroots in urban India, following the demolitions and sealing drives is forcing the political establishment to recognise the potential political cost of the violation of property rights.
A momentum seems to be building from the grassroots. Property rights could be an issue that unites Bharat and India, the poor and the rich alike. The time seems ripe for a people’s campaign for the restoration of the right to property as a fundamental right. This would empower the people and unleash the much-needed second generation reforms by including all sections of society into the growth path. The tragedy at Nandigram will not be wasted if the country joins hands for a campaign to restore property rights.
Much has been written about the tragedy of Singur and Nandigram in West Bengal. Yet not much light has been shed on the real significance of the protests by farmers on land acquisition. Brand Buddhadeb has suffered a serious blow much beyond West Bengal. But, more importantly, an undercurrent of awareness is spreading through the grassroots of society on an almost unheralded issue — the protection of property rights.
This article was published under the title "Ground Reality", in the Hindustan Times, on 24 March 2007.
Political and social activists have been hurling arguments to score points against rivals. If one side stresses on the need for industrialisation, the other calls for inclusive growth. The self-proclaimed champions of the poor are hobnobbing with big businesses, while the Opposition spectrum, from the fringe Left to the far Right, want to be seen to be siding with the rural poor. And business leaders, who have been enjoying the freedom to mobilise capital, want investment opportunities to be sugar-coated with a range of privileges and subsidies, including tax breaks and land at low costs.
Sixteen years after India began dismantling the licence and permit raj, it is clear that reforms have improved the economic environment for entrepreneurs. Yet, the issue of land acquisition in the name of promoting industrialisation or special economic zones (SEZs), shows how deeply entrenched the sense of political patronage continues to be in the influential sections of Indian society.
Nothing else can explain the desire of so many Indian business houses to ask the government to procure land for their projects. Since these businessmen have been the biggest beneficiary of liberalisation of the capital market, one could have expected them to demand a similar liberalisation of the land market in the country.
If businesses cannot legitimately acquire the necessary land for their purposes, then it is the land market that needs to be reformed. Instead, they have sought to eliminate the land market completely by asking the government to act as the middleman and perpetuate the land mafia.
Similarly, the opinion among social activists range from those who want land to perpetually remain under agriculture or forests, to others who focus more on an adequate rehabilitation and compensation package. Despite their concern for the poor, most of them fail to realise that property rights is not a luxury of the rich, but a necessity for the poor. The rich can survive in most societies, irrespective of their legal rights, because with their wealth they can buy protection from the powers that be. It is the poor who are left most vulnerable if they are denied the right, because they have no other recourse, except to become political pawns.
Economist Hernando de Soto, among others, has shown that the poor are trapped in poverty primarily because of their inability to capitalise on their assets, including land.
Today, Indian businesses can raise capital freely at home and abroad, they can buy and sell assets, engage in mega mergers and acquisitions. Yet, most Indian farmers hardly enjoy the freedom to buy, sell, lease or rent land. In most parts of India, farm land is regulated under land ceiling and land usage laws. In addition, laws make it difficult to even change crop patterns, and restrict the movement of agricultural produce.
The astronomical rise of real estate prices in urban India is also a reflection of the rigidities that have hobbled our cities. Rent control, land ceiling and zoning, coupled with weak legal avenues for the enforcement of contracts, have all made land in urban India artificially scarce. All — the land mafia, politicians, bureaucrats and businesses — have benefited, except the land owner himself.
Indians have been slowly, but steadily, surrendering the most fundamental of rights — the right to property — from almost the very inception of the Republic. Jawaharlal Nehru began the process with the creation of the Ninth Schedule in 1951, in an attempt to put land acquisition beyond the purview of judicial review. With her populist nationalisation, Indira Gandhi greatly diluted the scope of property rights protections. The first non-Congress government took one more step. In 1978, it amended the Constitution such that property rights no longer remained a fundamental right. Except a few brave voices, hardly anyone mourned the demise of the individual’s right to property.
The law is quite distinct from legislation. It is easy to write legislation that violates the spirit of the law as commonly understood. So the State passed legislations undermining basic principles of law in the name of helping the poor. First, land was sought to be confiscated from big landlords and redistributed to the poor. And now, the same land is being forcefully acquired through the use of eminent domain from the poor to be given over to large private investors.
Once a fundamental legal principle, that of property rights, is sacrificed, ‘might’ becomes right, and people are left vulnerable to the coercive power of the State. Since the communists in West Bengal lay their first claim to legitimacy on rural land distribution in the name of the landless, it is not surprising that they are now caught between a rock and a hard place as they try to facilitate land acquisition for the sake of industrialisation.
Yet, in the past two decades, there has been a steady and growing demand for greater recognition of private property rights in one form or another. Twenty years ago, at the height of the agitation against the Narmada dam, the issue was polarised between whether to build the dam, and the quality of the rehabilitation package for the people who lost their property. In the last few years, the tribal rights debate brought to the fore the issue of securing property rights for forest dwellers.
The violence over land acquisition in Orissa’s Kalinganagar two years ago, and the recent tragedy in Nandigram in West Bengal, mark more milestones on the long road to property rights. A couple of months ago, ministers in the West Bengal government asserted that under the land acquisition laws, consent of the landowner was not required. They would then go on to highlight the compensation and rehabilitation packages. The law remains the same, but the protests in Singur and Nandigram have forced the state government to announce that no land will be acquired without consent.
A similar sentiment at the grassroots in urban India, following the demolitions and sealing drives is forcing the political establishment to recognise the potential political cost of the violation of property rights.
A momentum seems to be building from the grassroots. Property rights could be an issue that unites Bharat and India, the poor and the rich alike. The time seems ripe for a people’s campaign for the restoration of the right to property as a fundamental right. This would empower the people and unleash the much-needed second generation reforms by including all sections of society into the growth path. The tragedy at Nandigram will not be wasted if the country joins hands for a campaign to restore property rights.
Wednesday, March 21, 2007
Restoring property rights, Protecting People
Fundamental right is not a luxury for the rich, but a necessity for the poor. The rich has the resources to protect their interest by any number of ways, the poor has nothing but the law to fall on. A version of this article of mine had appeared in the Bengali langugage newspaper, the Ananda Bazar Patrika in Calcutta, on 21 March 2007.
A lot is being said about the tragedy of Singur and Nandigram in West Bengal, Parliament has been adjourned, yet not much light has been shed on the real significance of these protests by farmers on the issue of land acquisition. Brand Buddhadeb may have suffered a fatal blow, but despite the ideological melee, an undercurrent of awareness is spreading through the grassroots of society on an almost unheralded issue – protection of property rights.
Political and social activists have been hurling arguments accusations, trying to score points against their rivals. If one wants to stress the need for industrialisation, the other calls for inclusive growth. The self-proclaimed champions of the poor are seen to be hobnobbing with big businesses, while the opposition spectrum from the fringe left to the far right want to be seen to be siding with the rural poor. While business leaders, who have been enjoying the freedom to mobilise capital and want investment opportunities to be sugar coated with a range of privileges and subsidies, from tax breaks to low cost land.
Sixteen years ago India began dismantling the licence and permit raj system. Today it is clear that the reforms have improved the economic environment for many Indian entrepreneurs. Yet the issue of land acquisition in the name of promoting industrialisation or special economic zones (SEZs), shows how deeply entrenched is the sense of political patronage in influential sections of Indian society even today.
Nothing else can explain the desire of so many Indian business houses to ask the government to procure land for their projects. Since these businessmen have been the biggest beneficiary of liberalisation of the capital market, one could have expected them to demand a similar liberalisation of the land market in the country.
If businesses cannot legitimately acquire the necessary land for their purposes, then it is the land market that needs to be reformed. Instead they have sought to eliminate the land market completely by asking the government to act as the middleman and perpetuate the land mafia.
Similarly the opinion among social activists range from those who want land to perpetually remain under agriculture or forests, to others who focus more on an adequate rehabilitation and compensation package. Despite their concern for the poor, most of them fail to realise that property rights is not a luxury of the rich, but a necessity for the poor. The rich can survive in most societies, irrespective of their legal rights, because with their wealth they can mostly buy protection from the powers that be. It is the poor who are left most vulnerable if they are denied the right, because they have no other recourse, except to become political pawns.
Economist Hernando de Soto, and others have shown that poor are trapped in poverty primarily due to their inability to capitalise on their assets, including land.
Today, Indian businesses can raise capital freely at home and abroad, they can buy and sell assets, engage in mega mergers and acquisitions. Yet, most Indian farmers hardly enjoy the freedom to buy, sell, lease or rent land. In most parts of India, farm land is typically regulated under land ceiling laws, and land usage laws. In addition, there are laws that make it very difficult for even changing crop patterns, and restrict movement of produce.
The astronomical rise of real estate prices in urban India is also a reflection of the rigidities that have hobbled our cities. From rent control, to land ceiling, zoning, coupled with a weak legal avenues for enforcing contracts, have all made land in urban India so artificially scarce. All, from the land mafia, to politicians, bureaucrats and businesses have benefited, except the land owner.
Indians had been slowly but steadily surrendering the most fundamental of rights – the right to property – from almost the very inception of the Republic. Nehru began the process with the creation of the Ninth Schedule in 1951, in an attempt to put land acquisition beyond the purview of judicial review. With her populist nationalisation, Mrs Indira Gandhi greatly diluted the scope of property rights protections. And the first non-Congress government took one more step, and amended property rights as a fundamental right out of the Indian Constitution in 1978. Except a few brave souls, hardly anyone mourned the demise of this most of basic right of the individual, the right to property.
It is worth noting that law is quite distinct from legislation. It is easy to write legislation that violates the spirit of the law as commonly understood. So the State passed legislations undermining basic principles of law in the name of helping the poor. First, land was sought to be confiscated from big landlords and redistributed to the poor. And now the same land is being forcefully acquired through the use of eminent domain from the poor to be a given over to big private investors. Once a fundamental legal principle–property rights–is sacrificed, might becomes right, and people are left vulnerable to the coercive power of the State. Since the communists in Bengal lay their first claim to legitimacy on rural land distribution in the name of the landless, it is not surprising that they are now caught between a rock and hard place as they now want to facilitate land acquisition for the sake of industrialisation.
While the intelligentsia, the political leaders and social activists have barely noticed, in the past two decades, there has been a steady and growing demand for greater recognition of private property rights in one form or another.
Twenty years ago, at the height of the agitation against the Narmada dam, the issue was polarised between whether to build the dam, and the quality of the rehabilitation package for the people who lost their property. In the last few years, the tribal rights debate brought to fore the issue of securing property rights for the forest dwellers, although the law greatly constricts the use of land, therefore, suppresses the real value of the property. But at least it brought the issue of land right to the fore.
The violence over land acquisition from Kalinganagar in Orissa two years ago, to the recent tragedy in Nandigram in West Bengal, have added another stone to the long road back to property rights. Barely two months ago, ministers in West Bengal government often repeated that under the land acquisition laws, consent of the land owner was not required. They would then go on to highlight the compensation and rehabilitation packages. Although, the law has remained the same, today the protests in Singur and Nandigram have forced the WB government to announce that no land will be acquired without consent.
A similar sentiment at the grassroots in urban India following the various demolitions and ceiling drives pushed, in this instance, by the judiciary, is forcing the political establishment to recognise the potential political cost of violation of property rights.
Clearly a momentum seems to be building from the grassroots of Indian society. Property rights could be an issue that unites Bharat and India, rich and poor alike. Property rights was eroded because of the intellectual profligacy of the elite in the first three decades of the Indian Republic, the underlying theme of the popular protests in recent years could yet force the elite to recognise the democratic aspirations of the people. The time seems ripe for a broad people’s campaign for the restoration of right to property as a fundamental right. This would empower the people and unleash the much needed second generation reforms by including all sections of society in to the growth path.
75 years ago, Gandhi shook the British Empire by picking salt at a desolate coastal village. The tragedy at Nandigram will not be wasted if the country joins hands for a campaign to restore property rights.
A lot is being said about the tragedy of Singur and Nandigram in West Bengal, Parliament has been adjourned, yet not much light has been shed on the real significance of these protests by farmers on the issue of land acquisition. Brand Buddhadeb may have suffered a fatal blow, but despite the ideological melee, an undercurrent of awareness is spreading through the grassroots of society on an almost unheralded issue – protection of property rights.
Political and social activists have been hurling arguments accusations, trying to score points against their rivals. If one wants to stress the need for industrialisation, the other calls for inclusive growth. The self-proclaimed champions of the poor are seen to be hobnobbing with big businesses, while the opposition spectrum from the fringe left to the far right want to be seen to be siding with the rural poor. While business leaders, who have been enjoying the freedom to mobilise capital and want investment opportunities to be sugar coated with a range of privileges and subsidies, from tax breaks to low cost land.
Sixteen years ago India began dismantling the licence and permit raj system. Today it is clear that the reforms have improved the economic environment for many Indian entrepreneurs. Yet the issue of land acquisition in the name of promoting industrialisation or special economic zones (SEZs), shows how deeply entrenched is the sense of political patronage in influential sections of Indian society even today.
Nothing else can explain the desire of so many Indian business houses to ask the government to procure land for their projects. Since these businessmen have been the biggest beneficiary of liberalisation of the capital market, one could have expected them to demand a similar liberalisation of the land market in the country.
If businesses cannot legitimately acquire the necessary land for their purposes, then it is the land market that needs to be reformed. Instead they have sought to eliminate the land market completely by asking the government to act as the middleman and perpetuate the land mafia.
Similarly the opinion among social activists range from those who want land to perpetually remain under agriculture or forests, to others who focus more on an adequate rehabilitation and compensation package. Despite their concern for the poor, most of them fail to realise that property rights is not a luxury of the rich, but a necessity for the poor. The rich can survive in most societies, irrespective of their legal rights, because with their wealth they can mostly buy protection from the powers that be. It is the poor who are left most vulnerable if they are denied the right, because they have no other recourse, except to become political pawns.
Economist Hernando de Soto, and others have shown that poor are trapped in poverty primarily due to their inability to capitalise on their assets, including land.
Today, Indian businesses can raise capital freely at home and abroad, they can buy and sell assets, engage in mega mergers and acquisitions. Yet, most Indian farmers hardly enjoy the freedom to buy, sell, lease or rent land. In most parts of India, farm land is typically regulated under land ceiling laws, and land usage laws. In addition, there are laws that make it very difficult for even changing crop patterns, and restrict movement of produce.
The astronomical rise of real estate prices in urban India is also a reflection of the rigidities that have hobbled our cities. From rent control, to land ceiling, zoning, coupled with a weak legal avenues for enforcing contracts, have all made land in urban India so artificially scarce. All, from the land mafia, to politicians, bureaucrats and businesses have benefited, except the land owner.
Indians had been slowly but steadily surrendering the most fundamental of rights – the right to property – from almost the very inception of the Republic. Nehru began the process with the creation of the Ninth Schedule in 1951, in an attempt to put land acquisition beyond the purview of judicial review. With her populist nationalisation, Mrs Indira Gandhi greatly diluted the scope of property rights protections. And the first non-Congress government took one more step, and amended property rights as a fundamental right out of the Indian Constitution in 1978. Except a few brave souls, hardly anyone mourned the demise of this most of basic right of the individual, the right to property.
It is worth noting that law is quite distinct from legislation. It is easy to write legislation that violates the spirit of the law as commonly understood. So the State passed legislations undermining basic principles of law in the name of helping the poor. First, land was sought to be confiscated from big landlords and redistributed to the poor. And now the same land is being forcefully acquired through the use of eminent domain from the poor to be a given over to big private investors. Once a fundamental legal principle–property rights–is sacrificed, might becomes right, and people are left vulnerable to the coercive power of the State. Since the communists in Bengal lay their first claim to legitimacy on rural land distribution in the name of the landless, it is not surprising that they are now caught between a rock and hard place as they now want to facilitate land acquisition for the sake of industrialisation.
While the intelligentsia, the political leaders and social activists have barely noticed, in the past two decades, there has been a steady and growing demand for greater recognition of private property rights in one form or another.
Twenty years ago, at the height of the agitation against the Narmada dam, the issue was polarised between whether to build the dam, and the quality of the rehabilitation package for the people who lost their property. In the last few years, the tribal rights debate brought to fore the issue of securing property rights for the forest dwellers, although the law greatly constricts the use of land, therefore, suppresses the real value of the property. But at least it brought the issue of land right to the fore.
The violence over land acquisition from Kalinganagar in Orissa two years ago, to the recent tragedy in Nandigram in West Bengal, have added another stone to the long road back to property rights. Barely two months ago, ministers in West Bengal government often repeated that under the land acquisition laws, consent of the land owner was not required. They would then go on to highlight the compensation and rehabilitation packages. Although, the law has remained the same, today the protests in Singur and Nandigram have forced the WB government to announce that no land will be acquired without consent.
A similar sentiment at the grassroots in urban India following the various demolitions and ceiling drives pushed, in this instance, by the judiciary, is forcing the political establishment to recognise the potential political cost of violation of property rights.
Clearly a momentum seems to be building from the grassroots of Indian society. Property rights could be an issue that unites Bharat and India, rich and poor alike. Property rights was eroded because of the intellectual profligacy of the elite in the first three decades of the Indian Republic, the underlying theme of the popular protests in recent years could yet force the elite to recognise the democratic aspirations of the people. The time seems ripe for a broad people’s campaign for the restoration of right to property as a fundamental right. This would empower the people and unleash the much needed second generation reforms by including all sections of society in to the growth path.
75 years ago, Gandhi shook the British Empire by picking salt at a desolate coastal village. The tragedy at Nandigram will not be wasted if the country joins hands for a campaign to restore property rights.
Tuesday, March 20, 2007
Something patently wrong
Dr R A Mashelkar, one of India's leading science administrators resigned from a government technical committee, last week, in wake of personal and politically motivated attacks from certain quarters. In this article, "Something patently wrong", published in the Hindustan Times, on 20 March 2007, I look at the misguided debate over ever-greening of patents, when there are much more serious problems faced by patients in India.
Last Sunday, Indians woke up to mourn the unexpected loss of its team to Bangladesh in India’s first World Cup match. The news that ought to wake up the nation is the situation that led to the resignation of RA Mashelkar from the technical committee formed to look into India’s patent law. Mashelkar resigned because of personal attacks and political machinations. Among his critics were political activists who put their populist agenda ahead of the country’s interest, and social activists who make a career in perpetuating ill-health.
Mashelkar is one of India’s most respected scientists and a pioneering administrator of its public sector scientific establishment. Most importantly, he encouraged scientists to file patents to harness the commercial potential of innovations. Mashelkar truly realised the potential of the scientific community and foresaw the need for a good intellectual property (IPR) law that could provide an institutional framework for new opportunities.
But over the last few weeks, his critics have portrayed Mashelkar as a Bollywood-style villain. The Mashelkar committee was formed to review technical aspects of the Indian Patent Amendment Act, 2005. From the time it was passed, recognising among others things product patent in pharmaceuticals, there have been questions. One contentious issue was Section 3(d), which states that “the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant”.
The issue here is of ‘ever-greening’ of patents, or an attempt to extend the life of a patent by incorporating cosmetic changes. The Indian law complicated things by using terms like “mere discovery” or “efficacy of the substance” — difficult to define and easy to misinterpret.
The contentious nature of these provisions was also brought to light by a case filed by Novartis before the Chennai High Court. It challenged an order of the patent registrar who refused a patent for ‘Glivec’, although the same product has been granted a patent in other countries. In its report two months ago, the Mashelkar committee had noted that the said provision would be a violation of the Agreement on Trade-Related Aspect of Intellectual Property Rights (Trips).
Unfortunately, this technical recommendation got mired in a new controversy over plagiarism. Certain sections of the recommendations had been directly taken from another study submitted to the committee during its deliberations. Mashelkar immediately apologised to the author whose work was incorporated without due acknowledgement. He also requested the government to withdraw the report and offered to redo it.
The debate over pharmaceutical product patent has always been politicised. Politicians are eager to seize an opportunity to bash MNCs. It is a convenient tactic to divert attention away from India’s dismal healthcare. After all, in a country which has not recognised patent in medicines for over three decades — where 97 per cent of medicines is believed to be off-patent — India is quite far from becoming the world’s healthcare capital.
About 70 per cent of Indians never access modern healthcare systems. No doctor in public sector healthcare can claim that patients’ problems are related to patents. But rather than looking into the whole chain of delivery — medical professionals, diagnostic facilities, dispensaries and hospitals — it is easier to wave the national flag. The reality is that even if there were no patents, or if medicines were distributed free, many patients would still not benefit. Nothing else can explain the failure to provide ORS to diarrhoea patients, or the failure to vaccinate children against polio.
Mashelkar has been criticised by the Indian pharmaceutical industry — an industry so concerned about Indians that they see their growth potential in markets abroad. Indeed, the aspects of the patent law that these businesses are opposed to are similar to the ones under US law, where some of the Indian companies are rapidly filing for their own incremental patents. The US patent law has been criticised but it can hardly be a coincidence that a stable patent law has contributed to making the US the most attractive destination for research and development, hosting some of the largest and best pharmaceutical research establishment, and at the same time being the largest market for patented medicines as well as generic drugs. The US pharmaceutical market today is close to $100 billion, about half of which is generic, and the total Indian market is just about a fifth of the US generic market.
One may differ on the interpretation of Section 3(d). The court is expected to rule on it. But IPR will assume even greater significance in the knowledge economy. And to engage in character assassination of Mashelkar, in an attempt to undermine IPR, will neither improve our healthcare system nor lay the foundation for our entry in to the knowledge era. That surely will not be cricket.
Last Sunday, Indians woke up to mourn the unexpected loss of its team to Bangladesh in India’s first World Cup match. The news that ought to wake up the nation is the situation that led to the resignation of RA Mashelkar from the technical committee formed to look into India’s patent law. Mashelkar resigned because of personal attacks and political machinations. Among his critics were political activists who put their populist agenda ahead of the country’s interest, and social activists who make a career in perpetuating ill-health.
Mashelkar is one of India’s most respected scientists and a pioneering administrator of its public sector scientific establishment. Most importantly, he encouraged scientists to file patents to harness the commercial potential of innovations. Mashelkar truly realised the potential of the scientific community and foresaw the need for a good intellectual property (IPR) law that could provide an institutional framework for new opportunities.
But over the last few weeks, his critics have portrayed Mashelkar as a Bollywood-style villain. The Mashelkar committee was formed to review technical aspects of the Indian Patent Amendment Act, 2005. From the time it was passed, recognising among others things product patent in pharmaceuticals, there have been questions. One contentious issue was Section 3(d), which states that “the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant”.
The issue here is of ‘ever-greening’ of patents, or an attempt to extend the life of a patent by incorporating cosmetic changes. The Indian law complicated things by using terms like “mere discovery” or “efficacy of the substance” — difficult to define and easy to misinterpret.
The contentious nature of these provisions was also brought to light by a case filed by Novartis before the Chennai High Court. It challenged an order of the patent registrar who refused a patent for ‘Glivec’, although the same product has been granted a patent in other countries. In its report two months ago, the Mashelkar committee had noted that the said provision would be a violation of the Agreement on Trade-Related Aspect of Intellectual Property Rights (Trips).
Unfortunately, this technical recommendation got mired in a new controversy over plagiarism. Certain sections of the recommendations had been directly taken from another study submitted to the committee during its deliberations. Mashelkar immediately apologised to the author whose work was incorporated without due acknowledgement. He also requested the government to withdraw the report and offered to redo it.
The debate over pharmaceutical product patent has always been politicised. Politicians are eager to seize an opportunity to bash MNCs. It is a convenient tactic to divert attention away from India’s dismal healthcare. After all, in a country which has not recognised patent in medicines for over three decades — where 97 per cent of medicines is believed to be off-patent — India is quite far from becoming the world’s healthcare capital.
About 70 per cent of Indians never access modern healthcare systems. No doctor in public sector healthcare can claim that patients’ problems are related to patents. But rather than looking into the whole chain of delivery — medical professionals, diagnostic facilities, dispensaries and hospitals — it is easier to wave the national flag. The reality is that even if there were no patents, or if medicines were distributed free, many patients would still not benefit. Nothing else can explain the failure to provide ORS to diarrhoea patients, or the failure to vaccinate children against polio.
Mashelkar has been criticised by the Indian pharmaceutical industry — an industry so concerned about Indians that they see their growth potential in markets abroad. Indeed, the aspects of the patent law that these businesses are opposed to are similar to the ones under US law, where some of the Indian companies are rapidly filing for their own incremental patents. The US patent law has been criticised but it can hardly be a coincidence that a stable patent law has contributed to making the US the most attractive destination for research and development, hosting some of the largest and best pharmaceutical research establishment, and at the same time being the largest market for patented medicines as well as generic drugs. The US pharmaceutical market today is close to $100 billion, about half of which is generic, and the total Indian market is just about a fifth of the US generic market.
One may differ on the interpretation of Section 3(d). The court is expected to rule on it. But IPR will assume even greater significance in the knowledge economy. And to engage in character assassination of Mashelkar, in an attempt to undermine IPR, will neither improve our healthcare system nor lay the foundation for our entry in to the knowledge era. That surely will not be cricket.
Monday, March 12, 2007
Globalisation empowers ordinary people
At an online seminar on globalisation organised by the Friedrich Naumann Stiftung, in Manila, in March 2007, I looked at the forces affecting globalisation, and held that critics of globalisation have a political agenda to keep the people disempowered by restricting their choices, and preserving the privileges for the elite.
Globalisation: Power to the people
A lot of the times it seems to me that that debate over globalisation portrays the phenomenon as something new. The communication revolution has drastically changed the speed of information flow, and perhaps many of us have in a sense been disoriented with the pace. So much so that we lost a sense of human history!
Globalisation is a phenomenon as old human civilisation. It started when the first man learned to trade, barter, his or her goods.
Today, there is hardly a product that has not been impacted by some kind of voluntary exchange of one kind or other.
Rice and wheat, which are the staples of most humans on the planet today, are the results of enormous chain of modifications carried out by generations spread across the world, to come to their present forms. Spices were one of the first major agricultural commodities to be traded globally. Cocoa and Coffee are among the two most traded commodity of value for the past few centuries. Cotton and textile products are another example of products shaped by choices made by millions across generations.
Earlier, when the world was poorer, communications and transportation were slower, only the rich could have access to some of these globalised products. Today it is possible to make most of these erstwhile luxuries accessible to most across the planet.
Globalisation therefore is a reflection of popular empowerment. The voluntary choices that people make trigger the supply and demand chains to span the globe in search of the most cost effective solutions.
Far from harmonising the world, globalisation enhances choice for the locals, bringing them closer to the world.
For instance, over a decade, we in Delhi, the Indian capital, would have had to try really hard to find authentic Thai or Mexican restaurants, not even a MacDonald. Today, quite a few have sprung up, greatly enriching the range of choice for the consumers. And advent of choice has stimulated competition, inspiring a lot of local food outlets to greatly improve their product range and services. So it is quite common to find a Macdonald rubbing shoulders with, Indian food chain outlets.
While the locals have been similarly empowered with greater choices, the elite seem to have lost quite a few of their distinctions! Most of the opposition to globalisation today, comes from erstwhile elites, many in their new incarnation as social activists, who feel threatened that some of their privileges are becoming common place. It is these social elites who have often joined hands with economic vested interests, to oppose globalisation as a way to retard the pace of popular empowerment. This clearly political agenda is often clothed with terms like promoting economic self-reliance, protecting social values, or preserving the environment for the future generations.
We need to clearly understand that all these slogans are actually intended to disempower the people, and protect the privileges of the elite.
Lets go global and seize the new opportunities being opened up because of globalisation.
Globalisation: Power to the people
A lot of the times it seems to me that that debate over globalisation portrays the phenomenon as something new. The communication revolution has drastically changed the speed of information flow, and perhaps many of us have in a sense been disoriented with the pace. So much so that we lost a sense of human history!
Globalisation is a phenomenon as old human civilisation. It started when the first man learned to trade, barter, his or her goods.
Today, there is hardly a product that has not been impacted by some kind of voluntary exchange of one kind or other.
Rice and wheat, which are the staples of most humans on the planet today, are the results of enormous chain of modifications carried out by generations spread across the world, to come to their present forms. Spices were one of the first major agricultural commodities to be traded globally. Cocoa and Coffee are among the two most traded commodity of value for the past few centuries. Cotton and textile products are another example of products shaped by choices made by millions across generations.
Earlier, when the world was poorer, communications and transportation were slower, only the rich could have access to some of these globalised products. Today it is possible to make most of these erstwhile luxuries accessible to most across the planet.
Globalisation therefore is a reflection of popular empowerment. The voluntary choices that people make trigger the supply and demand chains to span the globe in search of the most cost effective solutions.
Far from harmonising the world, globalisation enhances choice for the locals, bringing them closer to the world.
For instance, over a decade, we in Delhi, the Indian capital, would have had to try really hard to find authentic Thai or Mexican restaurants, not even a MacDonald. Today, quite a few have sprung up, greatly enriching the range of choice for the consumers. And advent of choice has stimulated competition, inspiring a lot of local food outlets to greatly improve their product range and services. So it is quite common to find a Macdonald rubbing shoulders with, Indian food chain outlets.
While the locals have been similarly empowered with greater choices, the elite seem to have lost quite a few of their distinctions! Most of the opposition to globalisation today, comes from erstwhile elites, many in their new incarnation as social activists, who feel threatened that some of their privileges are becoming common place. It is these social elites who have often joined hands with economic vested interests, to oppose globalisation as a way to retard the pace of popular empowerment. This clearly political agenda is often clothed with terms like promoting economic self-reliance, protecting social values, or preserving the environment for the future generations.
We need to clearly understand that all these slogans are actually intended to disempower the people, and protect the privileges of the elite.
Lets go global and seize the new opportunities being opened up because of globalisation.
Saturday, January 6, 2007
Storm in a Soda bottle
Reviewing the allegations of pesticide in soft drinks in India last year, I outline the fatal flaw in the media based activism that sacrifices science for fifteen minutes of glory. A version of this article appeared in the Indian Express.
Looking back at the year of 2006, perhaps you remember the uproar this past summer concerning pesticides in Coca-Cola and Pepsi products in India? In early August, the Centre for Science and Environment (CSE), an Indian NGO, published a report alleging that the pesticide levels in Coca-Cola and Pepsi products were unsafe. Social activists in India and across the world railed against Coca-Cola and Pepsi, and the Economist ran a feature article on how these activists had “dented two of the world’s glossiest brands.” The Indian Parliament and Supreme Court held hearings on the matter, and several Indian states outright banned Coca-Cola and Pepsi. Meanwhile, US-based activists called on colleges and universities to ban Coca-Cola on their campuses.
It now turns out that this was all a storm in a soda bottle. The Indian government will conclude its official investigation of the matter in January. In a recent preview of the report, the experts noted “the results and conclusions reached by the CSE in the report can not be accepted on its face value”. The government stated to the Indian Supreme Court that exhaustive testing of carbonated drinks on the Indian market after the CSE report had not turned out a single instance of unsafe levels of pesticides. This followed confirmation of independent analyses by highly respected laboratories in India and the UK, which all concluded that the products of Coca-Cola and Pepsi are safe for consumers.
Now that the CSE have had their fifteen minutes of fame, journalists and social activists in India as well as the US would do well to focus on the real issues of economic and environmental improvement in India. Unfortunately, however, smear campaigns against multinational companies tend to be more attractive to many news editors, politicians and NGOs than providing solid analyses of real problems.
There is a fatal flaw in this strategy of media based activism, in the name of science and environment. It seeks to bypass the peer reviewed and respected journals of science in favour of the popular media. Without such validation, science is sacrificed for the sake of popularity. Consequently, real priorities get distorted, often with fatal consequences for victims. Good intentions cannot substitute for sound public policies.
Consider the magnitude of India’s public policy problems. 500,000 children under the age of five die each year due to diarrhoea, 50% of children drop out by the middle school level, barely 40% of the population has access to any kind of sanitation facilities, and 50% of Indian homes have no electricity. Yet NGOs and the media prefer to focus on Coca-Cola and Pepsi.
This disproportionate focus on the perceived failings of two world class multinationals becomes even more absurd when one considers the social benefit of soft drinks in a country where the quality of the drinking water is often in doubt, even in urban centers like Delhi, the capital city.
Moreover, the economic contribution of the fast growing soft drink and bottle water sector in India is not insubstantial. Importantly, this growth has included hundreds of thousands of vendors who typically man the street side kiosks selling soft drinks and water to millions across the country.
What the furore concerning Coca-Cola and Pepsi has exposed is not the safety of soft drinks, but the sorry state of the public debate on economic and environmental development issues. It is as if some journalists, activists, and politicians believe they can prove their social consciousness by assaulting multinational companies with no regard to factual base of these attacks or the consequences of distorting priorities through falsehood.
I have great respect for American consumers and activists who want to show their solidarity with the poor in India through their shopping habits. Voting with your purse is a great way to let companies know that you are unhappy with their practices. However, if the consumer activists are serious, they owe it to themselves as well as the people they are trying to help to get their facts straight. In the case of Coca-Cola and Pepsi, the facts speak for purchasing an extra few bottles next time you go shopping rather than boycotting these brands.
As one of the judges on the Indian Supreme Court commented recently, one can understand someone raising the issue of pesticide content in water, which is a necessity of life. “But colas? Is it a necessity of life? If any one has reservation about pesticide content in the colas, he can just refrain from consuming them rather than coming to the courts.”
Mahatma Gandhi would have approved. Empower the people by letting them make their own decisions. Coca-Cola and Pepsi are so successful because millions of consumers across the world have faith in the products of these companies and exercise their right to choose freely among a variety of products. Restricting consumer choice by harassing Coca-Cola and Pepsi will make the consumer more vulnerable, not less.
Looking back at the year of 2006, perhaps you remember the uproar this past summer concerning pesticides in Coca-Cola and Pepsi products in India? In early August, the Centre for Science and Environment (CSE), an Indian NGO, published a report alleging that the pesticide levels in Coca-Cola and Pepsi products were unsafe. Social activists in India and across the world railed against Coca-Cola and Pepsi, and the Economist ran a feature article on how these activists had “dented two of the world’s glossiest brands.” The Indian Parliament and Supreme Court held hearings on the matter, and several Indian states outright banned Coca-Cola and Pepsi. Meanwhile, US-based activists called on colleges and universities to ban Coca-Cola on their campuses.
It now turns out that this was all a storm in a soda bottle. The Indian government will conclude its official investigation of the matter in January. In a recent preview of the report, the experts noted “the results and conclusions reached by the CSE in the report can not be accepted on its face value”. The government stated to the Indian Supreme Court that exhaustive testing of carbonated drinks on the Indian market after the CSE report had not turned out a single instance of unsafe levels of pesticides. This followed confirmation of independent analyses by highly respected laboratories in India and the UK, which all concluded that the products of Coca-Cola and Pepsi are safe for consumers.
Now that the CSE have had their fifteen minutes of fame, journalists and social activists in India as well as the US would do well to focus on the real issues of economic and environmental improvement in India. Unfortunately, however, smear campaigns against multinational companies tend to be more attractive to many news editors, politicians and NGOs than providing solid analyses of real problems.
There is a fatal flaw in this strategy of media based activism, in the name of science and environment. It seeks to bypass the peer reviewed and respected journals of science in favour of the popular media. Without such validation, science is sacrificed for the sake of popularity. Consequently, real priorities get distorted, often with fatal consequences for victims. Good intentions cannot substitute for sound public policies.
Consider the magnitude of India’s public policy problems. 500,000 children under the age of five die each year due to diarrhoea, 50% of children drop out by the middle school level, barely 40% of the population has access to any kind of sanitation facilities, and 50% of Indian homes have no electricity. Yet NGOs and the media prefer to focus on Coca-Cola and Pepsi.
This disproportionate focus on the perceived failings of two world class multinationals becomes even more absurd when one considers the social benefit of soft drinks in a country where the quality of the drinking water is often in doubt, even in urban centers like Delhi, the capital city.
Moreover, the economic contribution of the fast growing soft drink and bottle water sector in India is not insubstantial. Importantly, this growth has included hundreds of thousands of vendors who typically man the street side kiosks selling soft drinks and water to millions across the country.
What the furore concerning Coca-Cola and Pepsi has exposed is not the safety of soft drinks, but the sorry state of the public debate on economic and environmental development issues. It is as if some journalists, activists, and politicians believe they can prove their social consciousness by assaulting multinational companies with no regard to factual base of these attacks or the consequences of distorting priorities through falsehood.
I have great respect for American consumers and activists who want to show their solidarity with the poor in India through their shopping habits. Voting with your purse is a great way to let companies know that you are unhappy with their practices. However, if the consumer activists are serious, they owe it to themselves as well as the people they are trying to help to get their facts straight. In the case of Coca-Cola and Pepsi, the facts speak for purchasing an extra few bottles next time you go shopping rather than boycotting these brands.
As one of the judges on the Indian Supreme Court commented recently, one can understand someone raising the issue of pesticide content in water, which is a necessity of life. “But colas? Is it a necessity of life? If any one has reservation about pesticide content in the colas, he can just refrain from consuming them rather than coming to the courts.”
Mahatma Gandhi would have approved. Empower the people by letting them make their own decisions. Coca-Cola and Pepsi are so successful because millions of consumers across the world have faith in the products of these companies and exercise their right to choose freely among a variety of products. Restricting consumer choice by harassing Coca-Cola and Pepsi will make the consumer more vulnerable, not less.
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