Category Archives: economics

by | 21 December 2008 · 5:39 pm

Niall Ferguson on Current Economic Prospects

Economic historian Niall Ferguson weighs in on China’s and America’s role in the current global economic crisis under the provocative headline, What “Chimerica” Hath Wrought.

The most important thing to understand about the world economy over the past decade has been the relationship between China and America. If you think of it as one economy called Chimerica, that relationship accounts for around 13 percent of the world’s land surface, a quarter of its population, about a third of its gross domestic product, and somewhere over half of the global economic growth of the past six years….

Yet commentators should hesitate before prophesying the decline and fall of the United States. It has come through disastrous financial crises before—not just the Great Depression, but also the Great Stagflation of the 1970s—and emerged with its geopolitical position enhanced. That happened in the 1940s and again in the 1980s.

Part of the reason it happened is that the United States has long offered the world’s most benign environment for technological innovation and entrepreneurship. The Depression saw a 30 percent contraction in economic output and 25 percent unemployment. But throughout the 1930s American companies continued to pioneer new ways of making and doing things: think of DuPont (nylon), Proctor & Gamble (soap powder), Revlon (cosmetics), RCA (radio) and IBM (accounting machines). In the same way, the double-digit inflation of the 1970s didn’t deter Bill Gates from founding Microsoft in 1975, or Steve Jobs from founding Apple a year later….

But the most important reason why the United States bounces back from even the worst financial crises is that these crises, bad as they seem at home, always have worse effects on America’s rivals. Think of the Great Depression. Though its macroeconomic effects were roughly equal in the United States and Germany, the political consequence in the United States was the New Deal; in Germany it was the Third Reich. Germany ended up starting the world’s worst war; the United States ended up winning it. The American credit crunch is already having much worse economic effects abroad than at home. It will be no surprise if it is also more politically disruptive to America’s rivals.

Among the other developed economies, both the Eurozone and Japan are already officially in recession, ahead of the United States. The European situation is especially precarious because, contrary to popular belief, European banks are in worse shape than their American counterparts. Average bank leverage in the United States is around 12:1. In Germany the figure is 52:1. Short-term bank liabilities are equivalent to 15 percent of U.S. GDP; the British figure is 156 percent. Indeed, the United Kingdom runs a real risk of being Greater Iceland—an economy crushed by a super-sized financial sector.

Moreover, unlike the United States, there is no single European Treasury that can implement multibillion-dollar fiscal stimulus. Monetary policy may be uniform throughout the Eurozone, but fiscal policy is still a case of every man for himself.

Emerging markets, too, have been hammered harder by the crisis than the “decoupling” thesis promised. In the year to the end of October 2008, the U.S. stock market declined by 34 percent. But Brazil’s was down 54 percent, China’s 58 percent, India’s 64 percent and Russia’s 66 percent. When Goldman Sachs christened these four countries the BRICs, they little realized that their equity markets would one day be dropping like bricks. These figures are scarcely good advertisements for the more regulated, state-led economic models favored in Beijing and Moscow.

via A&L Daily

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Filed under China, economics, Europe, Japan, U.S.

by | 12 December 2008 · 10:33 pm

Japan’s Many Failed Stimulus Plans

In Wednesday’s Washington Post, Amity Shlaes chronicles the failure of Japan’s attempt to stimulate its economy during the 1990s by heavy government investments in infrastructure.

The situation in Japan then was similar in some ways to that in the United States today. A dramatic market crash and a plunge in real estate prices shook what had been a confident nation. Japan turned inward; economists talked earnestly about paradigm shifts. The obsession with exporting no longer seemed to be serving the country well. Leaders cast aside their previous concerns about budget deficits. The then-Ministry of International Trade and Industry sorrowfully let it be known that there were “areas in which Japan lags behind major developed nations.”…

The projects were similar to some infrastructure plans under discussion here today. Bridges? Japan put up the longest suspension bridge in the world. Airports? Kansai International, yes, on an artificial island, but also local fields such as Ibaraki Airport near Mito. Roads? Japan built new streets and highways, including the famous New Tomei Expressway. For biotech and telecommunications, Japan poured out the subsidies.

When one plan proved insufficient, another was begun…. Between 1992 and 2000, the Japanese launched 10 stimulus packages that included public works. The Land of the Rising Sun became the Construction State. Other worthy issues, such as consistent tax reform, lagged. In fact, fiscal reform overall was postponed. After the 1995 Kobe earthquake claimed thousands of lives, the focus on infrastructure was reinforced….

“The construction state is in some respects akin to the military-industrial complex in cold-war America (or the Soviet Union), sucking in the country’s wealth, consuming it inefficiently, growing like a cancer and bequeathing both fiscal crisis and environmental devastation,” commented Gavan McCormack, a professor at the Australian National University. The stimulus plans had the opposite effect of what was expected. Appalled at the country’s new deficits, Japanese consumers closed their wallets.

Worst, though, was the failure on jobs. Unemployment fell in many nations in the 1990s. In Japan, the ’90s were a lost decade: The unemployment rate more than doubled and surpassed the U.S. rate — an unthinkable occurrence just a few years earlier.

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by | 9 November 2008 · 11:25 am

Gandhi: Too Saintly for the Good of Others?

From Indian Summer: The Secret History of the End of an Emperor, by Alex von Tunzelmann (Picador, 2008), pp. 40-41:

Few political figures have been so widely misunderstood as Gandhi, in his own time or today. He emerged at a time when monarchies were falling and communism loomed; he was contemporary with Lenin. To many listeners, aware of the march of events in Russia, Gandhi’s speech sounded like a rallying cry to Indian socialism, with its talk of the casting off of jewels and the power of the workers. This was, indeed, the reason that young radicals like Jawahar [Nehru] were so attracted to him. But a closer examination of Gandhi’s words reveals something different, and much more profoundly religious. He had confronted the moral behavior of society, not its structure. Gandhi called for the princes to stop wearing their finery and instead “hold it in trust” for their subjects. This is not the same thing at all as telling the masses to rise up and seize it. Gandhi was not challenging the princes’ right to hold wealth, nor even their right to reign. He was asking for a change of heart.

Gandhi’s condemnation of princely luxury was part of a much broader preoccupation with returning India to what he supposed had been a prehistoric “golden age” of godliness, simplicity and humility. He had begun to reject Western ideals of progress and technology, and insisted that India’s future lay in a return to simple village life, not industrialization. As a symbol of this, he adopted hand-spinning on a wooden wheel and used only khadi—hand-spun—textiles. He developed a distaste for the synthesized drugs and surgery which he associated with Western medicine, describing them as “black magic.” Doctors, he believed, “violate our religious instinct” by prioritizing the body over the mind and curing diseases that people had deserved by their conduct. Lawyers, meanwhile, had propped up British rule by espousing British law and were like “leeches” on the people, their profession “just as degrading as prostitution.”

This position had fueled continual conflict in his own family life. Unsurprisingly, he was far from supportive of his sons’ ambitions to pursue careers in medicine or law. “I know too that you have sometimes felt that your education was being neglected,” Mohandas wrote to his third son, Manilal. But, he contended, “education does not mean a knowledge of letters but it means character building. It means a knowledge of duty.” His eldest son, Harilal, fared worse. After Mohandas denied him a legal scholarship to London, he ran away from home, married a woman without his father’s consent, was disinherited and ended up unemployed, destitute and bitter. When Manilal tried to lend Harilal money, Mohandas was so furious that he banished Manilal from his presence for a year. Manilal ended up homeless, sleeping on a beach.

It is not easy being a saint, and it is perhaps even less so to live with one. “All of us brothers have been treated as a ringmaster would treat his trained animals,” Harilal wrote to his father in the course of a twelve-page letter deploring Mohandas’s treatment of his wife and sons. And yet, to a wider audience beyond his immediate family, Gandhi’s charisma, determination and fearlessness were inspiring.

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Filed under democracy, economics, education, India, religion

by | 24 October 2008 · 6:08 pm

India’s Diverse Diasporas

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 233-235:

The cultivation of sugar-cane in colonies such as Mauritius and the Natal province of South Africa, in Trinidad, Guyana and Surinam in the Caribbean and Fiji in the Pacific Ocean created settlements of Indian labourers as many stayed on as free labourers after their contracts had expired. In some of these places the Indians emerged as the majority of the population, but with few exceptions they did not rise above the position of labourers. Therefore the diaspora in the ex-sugar colonies is not much of an economic asset to India. Mauritius is an exception to this rule. It has shown encouraging signs of economic growth and its Indian majority dominates the politics of the island but has maintained equitable relations with the other ethnic groups. Mauritius has become a major offshore banking centre for investors who channel their investments in India through the island. This has led to the strange phenomenon whereby tiny Mauritius ranks high among the nations investing in India. Being well aware of the benefits of good relations with Mauritius, India is even prepared to protect the maritime economic zone of the island with the help of its navy….

The era of decolonization did not provide much scope for re-migration from the diaspora to India. Nor did the erstwhile colonial powers invite people of Indian origin to settle in their home countries. There were only two striking exceptions to this rule. The Netherlands became the target of a mass exodus of Indians from Surinam after that colony gained independence in 1975. This was due to the fact that the Dutch had granted citizenship to the people of Surinam and since the Indians did not get along with the Afro-American majority, they left for the Netherlands before their right of citizenship could be revoked. A similar exodus of Indians from Uganda to Great Britain had taken place after Idi Amin had established his tyrannical rule in 1971. The Indians of Uganda were not the offspring of indentured servants but had followed the Uganda railroad. The workers who built that railroad had also come from India, but almost all of them had returned to their homes in the Punjab. The subsequent immigrants from India were for the most part literate Gujaratis who manned the administrative posts of the railway or set up shops in the hinterland which had been opened up by the railway. When these people were persecuted by Idi Amin and shifted to Great Britain they did very well there as a result of their business acumen. This group of the Indian diaspora is of considerable importance for India. But, of course, the Indians who came from East Africa are only part of the Indian diaspora in Great Britain, which also consists of Indian professionals and businessmen who migrated from India to the ex-imperial country in search of greener pastures.

Another post-colonial migration which had some similarity to the export of Indian manpower in colonial times was the recruitment of Indian labour by the countries along the Persian Gulf when those countries earned millions of petro-dollars. This recruitment benefited all South Asian countries. Most of them sent unskilled labourers to the Gulf; India had the lion’s share of skilled administrative jobs. For quite some time the ample remittances of these skilled personnel filled the gap in India’s balance of payments which was usually affected by a negative balance of trade. When the first Gulf War of 1991 disrupted this profitable connection, India was hit very hard, the more so as the disaster was sudden and unexpected. When Indira Gandhi was asked in 1981 whether she could envision an Indian exodus from the Gulf similar to that from East Africa precipitated by Idi Amin, she jauntily replied: ‘The Arabs need US.’ Her successors also took this for granted and were rudely awakened by the Gulf War.

The Indian diaspora in the countries along the Persian Gulf was very different from that everywhere else. First of all it was of very recent origin. This diaspora had no second or third generation members born in the country of residence. Moreover, the Indians who came to the Gulf did not intend to settle there for any length of time. There were many educated people from Kerala among them who simply wanted to earn enough money to build a house back home. Busy construction work in the villages of Kerala provided striking evidence of this trend in the 1980s. Under such conditions there was hardly any incentive to establish Indian community centres in the Gulf countries. The Indian diaspora was not concentrated in anyone place and its members fluctuated. Nevertheless, this was the diaspora which was most important for India, due to the economic effect of its remittances. Other Indian diasporas would be less inclined to send money to India as they would rather invest it where they lived. The occasional support of poor relatives in India did not give rise to substantial remittances.

Today’s Wall Street Journal weighs in on one of the barriers to the expansion of India’s diaspora in the U.S., where “the American Association of Physicians of Indian Origin which was founded in 1984 has 42,000 members” (Rothermund, p. 235):

The Chandrayaan-I blasted off about dawn from the Satish Dhawan Space Center. It is expected to reach lunar orbit by November 8. The probe, whose principal goal is to “conduct mineralogical and chemical mapping of the lunar service,” carries five scientific payloads from India and others from NASA and the European Space Agency. With this achievement, India joins the U.S., Japan, Europe, Russia and China in the lunar club.

India deserves congratulations for the Chandrayaan-I, which attests further to that nation’s remarkable strides as an economic and scientific power. That said, we cannot fail to draw attention to how this event bears on the continuing lunacy of Congress in limiting visa quotas for highly skilled immigrants.

American universities are filled with foreign students, not least from India, getting degrees in engineering and science. Many dearly wish to stay and work in the U.S. Instead, we basically kick them out after training them, owing to the Congressional limit of 65,000 H-1B visas, which are used up the day they are released in March.

Would calling this the “pre-emptive export of jobs overseas” make it any less attractive to economic protectionists?

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Filed under anglosphere, Caribbean, economics, education, Fiji, India, migration, South Africa, U.K., U.S., Uganda

by | 23 October 2008 · 9:50 pm

Siassi: A Culture of Maritime Trade in PNG

From Alice Pomponio’s “Seagulls Don’t Fly into the Bush: Cultural Identity and the Negotiations of Development on Mandok Island, Papua New Guinea” in Cultural Identity and Ethnicity in the Pacific, edited by Jocelyn Linnekin and Lin Poyer (U. Hawai‘i Press, 1990), pp. 51-52:

For the Siassi Islanders, trade implies sailing. Knowledge of the sea, winds, and stars is crucial to overseas sailing in the precarious Vitiaz and Dampier straits. In pre-European times men who were renowned sailors and good navigators were therefore highly regarded. Along with maritime knowledge, such a man would also possess the magical incantations to control the weather, wind, and seas, and in some cases, the sorcery by which to control or destroy his rivals. A traditional leader would combine as many elements as possible to expand his wisdom and enhance his renown. However, merely having the talent or the personality to lead is not enough: one must demonstrate that power continually. Before pacification and missionization, demonstrating prowess entailed aggressive overseas trade, navigation and sailing skills, competitive feasting, sorcery, multilingualism, and social networking to establish and maintain trade alliances. Definitions of manhood stressed creative abilities, mental shrewdness, knowledge concerning economic investment/return ratios, and manipulation of social relationships. Finally, all of these displays and trading exploits must be carried out with the aplomb of a “man of wisdom.”

Out of this constant travel and trade emerged a big-man status system oriented not toward the accumulation of land and wealth in a sedentary environment, but toward manipulation and management of others’ products through mobility and trade—that is, the control and redistribution of wealth. I call this kind of system “middleman culture.” Though recognizably Melanesian, it is distinct from the more familiar patterns of entrepreneurship studied to date in Melanesia in three crucial respects: (1) the relative lack of land or utilization of land resources (horticulture and pig husbandry) as a basis for the local economy; (2) the emphasis on trade as a primary, rather than secondary, feature of the subsistence economy, and as a standard for evaluating entrepreneurial talents and achievements; and (3) a social and distributive system that militates against the accumulation of significant amounts of wealth and favors instead the control and manipulation of goods, food, and people.

Siassi big-men are not “men of anger” or warriors. They are craftsmen, clever investors, and men of knowledge. They succeed not by overpowering their adversaries physically, but by outsmarting them—not by production, but by clever manipulation. Through generations of trading they have transformed a landless society of maverick immigrants into a patterned system of seagoing salesmen, trading their own and others’ products for a profit. This profit is then recycled into their own system of exchanges, politics, and prestige.

This sounds rather more benign than the cultures of maritime raiding that have also plagued the coasts and islands of so many parts of the globe, including PNG before the imposition of a pax Germanica in New Guinea and a pax Britannica in Papua.

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by | 20 October 2008 · 5:53 pm

India’s Huge Informal Labor Sector

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 211-213:

The poor in India are a vast reserve army of cheap labour. Organized labour in the ‘formal’ sector of the economy is a comparatively small part of the total labour force. In 2003 the public and private sectors together employed 27 million workers. The private sector is the smaller one with 8.4 million but a greater share of the ‘manufacturing’ category with 4.7 million as against only 1.5 million in the public sector. According to the theory of W. Arthur Lewis, in a ‘dual economy’ (traditional and modern) there is a reserve army of labour in the traditional sector which supplies the modem one with a steady flow of new recruits. But the Indian economy is not a dual one: it consists of two parallel economies. Since the reform of 1991, employment in the formal sector has practically stagnated; there has been only a slight shift from the public to the private sector, the first losing and the latter gaining 1 million employees. These figures would confirm the frequent comments on the phenomenon of jobless growth. But, of course, this refers only to the formal sector; the actual growth takes place in the informal sector. In fact, from 1978 to 2000, the share of the informal sector in the total labour force increased slightly from 91.3 to 92.4 million, although one would have expected a decrease of informal labour in a period of steadily increasing economic growth. The wage differential between the two sectors is enormous. For employees in the public sector, official statistics show an average daily per capita rate of Rs 681. According to the National Sample Survey mentioned earlier, the daily wages for male casual labourers in urban areas are Rs 75 and in rural areas Rs 56; the rates for female labourers are Rs 44 and 36 respectively. The figure for the public sector would, of course, include the high salaries of the Class I officials, but they are a small minority when compared to the legions of humble Class IV officials who do manual work or errands for the higher-ups. Nevertheless, even these humble people are head and shoulders above the casual labourers in the informal sector. Moreover, their jobs are secure and permanent, unlike the ‘informal’ jobs, which are subject to the rule of ‘hire and fire’.

Subjection to the rule of ‘hire and fire’ has increased with the growing casualization of informal labour. New forms of contracting labour have developed which permit the employer to shift the onus of hiring and firing casual labour to agents who are told how many workers are needed at any given time. Casualization has particularly affected women workers who were previously not very active in the labour market but have joined it in recent years in increasing numbers. Concerned social scientists have coined the term ‘feminization of poverty’ in order to characterize this phenomenon.

The ‘informal’ proletarians are not protected by any trade unions, which for good reasons concentrate on the organized sector of the economy. Very few of the recognized trade unions can depend on regular fees paid by their members. Accordingly, union leaders must look for other sources of income. They usually squeeze the employers by threatening to stir up trouble. There is no collective bargaining in India: wages are set by officially appointed tribunals and there are also tribunals which try the cases of individual workers who have been made redundant or have not been paid the wages due to them. Therefore most labour leaders are lawyers who spend their time pleading before those tribunals. The informal proletariat has no contact with such tribunals or lawyers.

The usual staff of a workshop in the informal sector consists of the boss and fewer than ten workers. In small firms which operate as subcontractors for manufacturers, the boss may even be an engineering graduate. Capital investment in such workshops is minimal so very often they band together and help each other out. One has a lathe, the other a drilling machine, etc.; if the piece of work requires both, it is carried from one shop to the other. The ignorant observer may think that this cluster of workshops is a slum, but on closer inspection he will be surprised to see the quality and variety of their products. Bigger firms rely on such subcontractors for two reasons: first of all, they can keep the number of workers and the investment in machines limited; and, secondly, if there is a slack in demand they can cut the orders farmed out to the subcontractors. This explains the phenomenon of jobless growth in the organized sector. The huge number of subcontractors who have the reserve army of labour on their doorstep shield the organized sector against risks but can also respond very quickly to increased demand. There is, however, a growing gap between labour productivity in the organized and in the informal sectors. In 1983 labour in the organized sector was about six times more productive than that in the informal one; by 1999 the differential had increased to nine times. This would also account for the wage differentials between the two sectors.

The wages paid by subcontractors, particularly if they work for manufacturers producing cars or machine tools, have to be higher than the wages of casual labourers mentioned above, but they would still be much lower than those in the organized sector. The qualifications of the informal proletariat working for subcontractors range from those of skilled workers to that of untrained people. The skilled workers in workshops would be the ‘creamy layer’ of the informal proletariat and they would be above the poverty line. But the great majority of the reserve army of informal labour are quite poor, something that would be particularly true of the many landless labourers who are at the beck and call of the landowning peasantry. Earlier systems of permanent attachment of such labour to the households of their employers have long since disintegrated because the employer can always find casual labour and does not need to retain labourers in the off-season. Even at times when the harvest or other seasonal operations suddenly require additional labour, there are nowadays migrant labourers who make themselves available for seasonal employment. Workers from Tamil Nadu will show up in the Punjab or elsewhere at a distance of 1,500 kilometres from their home. Here, too, the informal proletariat shows its usefulness as a reserve army of labour. About 43 per cent of India’s rural population are landless. If one deducts from this about 8 per cent for traders, carters, and so on there would still be 35 per cent of labourers who depend on their daily wages.

Of course, ‘casualization’ is hardly limited to India or to informal sectors of large economies. One report last year estimated that 70% of the faculty in American universities now depend on part-time or limited-term contracts. So, to twist the clause that begins this passage: An oversupply of postgraduate degrees provides a vast reserve army of cheap labour for universities.

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by | 11 October 2008 · 10:18 pm

Wordcatcher Tales: Susokman

From Village on the Edge: Changing Times in Papua New Guinea, by Michael French Smith (U. Hawai‘i Press, 2002), pp. 164-165:

In the mid-1990s, Deborah Gewertz and Frederick Errington interviewed dozens of Wewak’s more affluent Papua New Guinean residents, including “lawyers, doctors, nurses, bankers, clergy, teachers, managers, entrepreneurs, shopkeepers, army personnel [and] civil servants,” both male and female. They also mingled with them at Rotary Club events, the Yacht Club, and the Wewak Resort and Country Club where these business and professional people went to socialize and network….

[I]n order to take part in the life of the urban elite, Papua New Guineans generally have to weaken their ties to their village kin. In villagers’ eyes, attending the university, working for the government, or habitually wearing shoes and socks should not dissolve the bonds of kinship. But the wearers of shoes and socks (the susokman, as they are called in Tok Pisin) find that it is difficult to live up to village definitions of their kinship obligations and simultaneously provide for the basics of urban life—housing, food, business clothing—and take part in urban elite social life, including the professional networking that goes on in restaurants, in clubs, and on the golf course. Gewertz and Errington argue that villagers tend to define success as meeting a wide variety of kinship obligations; but for the urban elite, success means providing an affluent life for one’s immediate family, and that usually means putting strict limits on generosity to more distant kin.

Village kin may see this as lack of generosity, but they are judging by the moral ideals of village society. In terms of those ideals, material wealth is for creating and maintaining social bonds, and wealth gained at the expense of social ties is tainted. But what looks like antisocial greed to the village is necessity and prudence to the urban elite. If they fall on hard times because they have given unstintingly to their village kin, their urban peers will not praise their generosity; they will criticize their moral weakness. To join the elite, then, Papua New Guineans have had to work hard; but they have also needed good luck, and they have had to enter a different world of morality.

When I arrived in Papua New Guinea in 1976 to start linguistic fieldwork, the first thing I did was to throw away the worn-out tennis shoes I had traveled in. All during my student years in Hawai‘i during the 1970s, I rarely wore any footwear but Japanese zori (rubber slippers). When Hawai‘i Loa College required caps and gowns when I graduated in 1973, I went barefoot beneath my gown.

The second whimsical thing I did in PNG, on the taxi ride in from the airport to Port Moresby, was to stop by Koki Market to buy betel nut. (I got some for the taxi driver, too.) It was my first chance to use the Tok Pisin I had studied in grad school to prepare for fieldwork.

I arrived from Australia during Easter holidays and had trouble reaching my contact at UPNG, so I spent the first night at a downtown hotel, where I discovered that the dining room required shoes and socks. That was a new way to distinguish the elites from the hoi polloi in the newly independent nation, since discrimination on the basis of race was now prohibited. That evening I decided to order supper to my room.

Betel chewing was also prohibited inside the hotel, so before dinner I took the makings of several betel quids—areca nuts, betel pepper catkins, and slake-lime powder—outside onto the near-empty holiday streets. A young Papua New Guinea man soon came up to chat and I offered him a chew. It was my second chance to practice Tok Pisin in country, but it ended soon after I figured out what my new acquaintance meant when he asked me, “Masta, yu laik takim kok o nogat?” His native language must have been one in which [t] and [s] are allophones of a single phoneme, which sounds like [s] in front of /i/ (as in Kiribati) but sounds like [t] elsewhere. When I belatedly deciphered his accent and understood his intent, I laughed it off with “Ah, nogat ya!” and turned my unshod feet back toward the haven of the shod and socked.

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Filed under democracy, economics, education, language, Papua New Guinea

by | 7 October 2008 · 8:40 pm

Surprising Correlates of Birth Rates in South India

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), p. 181:

The National Population Policy for the year 2000 had once more set a target for the achievement of the replacement level of the Indian population. The replacement level is defined in terms of the Total Fertility Rate (TFR) of 2.1 births per woman in the course of her life and should be reached by 2010. Demographic projections would prefer to assume 2016 as a more realistic date. The average Indian TFR had come down from 6 in 1951 to 3 in 2001. To the great surprise of planners and demographers, several south Indian states have proved to be way ahead of the National Population Policy. Kerala registered a TFR of 1.71 in 2001, and Tamil Nadu was at almost the same level with 1.76, closely followed by Andhra Pradesh at 1.94. Karnataka was still above the replacement level, at 2.24; it was estimated that it would reach that level within a few years. Andhra Pradesh was the greatest surprise of them all: its TFR had dropped from 2.39 in 1997 to 1.94 in 2001. It has a high rate of female illiteracy and there has been no significant economic progress in this state. The major assumption of demographers that female education and economic progress would lead to a lower TFR was therefore contradicted by the experience of Andhra Pradesh. Moreover, the decline in the TFR usually takes time and does not happen in such a dramatic fashion as it did in Andhra Pradesh. Perhaps it was an awareness of future deprivation rather than of economic progress which prompted even illiterate women to resort to birth control. This goes against all normal demographic assumptions, but there was a striking parallel to this development in Andhra Pradesh in East Germany at the time of German reunification. The number of East German births dropped by 40 per cent at that time, which must have been due to apprehension of an uncertain future on the part of young East German women. This shows that perceptions of the future rather than long-term social and economic trends may influence the decisions of women. This is, of course, only one aspect of the rapid spread of birth control. Knowledge of the methods of contraception and the will to adopt them are also of great importance. Demographers who have studied the spread of adoption of contraceptives have noticed a snowball effect. After an initial phase when only a few women practise birth control, the demonstration effect catches on and others follow their example. In a strange reversal of the assumption that female education leads to birth control, it has been found that birth control may foster female education. Among illiterate women who adopted contraception there were many who would send their girls to school. The correlation seems to be significant, but of course it does not necessarily indicate a causal relation.

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Filed under economics, education, Germany, India

by | 4 October 2008 · 3:48 pm

Mistrust All the Way Up in PNG

From Village on the Edge: Changing Times in Papua New Guinea, by Michael French Smith (U. Hawai‘i Press, 2002), pp. 65-66:

Many Papua New Guineans probably were easily convinced that the World Bank was up to no good because they had no faith in their own government, which had sought help from the bank. In fact, many private citizens I spoke with in 1995 distrusted the Papua New Guinea government even more than the World Bank. They mistrusted not just the current government but the government as an institution. The staff of local-level government organizations expressed deep distrust of every level of government above their own, and some village representatives to these local bodies did not trust the staff. People in provincial towns spoke with disdain of the “people in Moresby” the capital, who were “living in a different world” as one activist put it. Activists in rural areas sometimes made the same complaint about those in the provincial towns. As a representative of a rural women’s organization in the East Sepik Province told me, “the bigshots in Wewak” [pop. 25,000!] did not understand what life was like still farther afield.

Such criticisms might sound familiar almost anywhere, but mistrust of government has a special flavor in Papua New Guinea, and this distinctive and pungent mistrust provided fertile ground for the reaction to the bank’s ERP [= Economic Recovery Program] policy prescriptions. In light of conditions in 1995, many Papua New Guineans felt that the government—not just the sitting government, but every government since independence—simply had not proven itself. Many also felt that the elite Papua New Guineans who ran the government treated the citizens of the country unfairly and unequally. Europeans working in Papua New Guinea or reporting on events there often complained of corruption in the higher circles, but they were no more vocal on this issue than rank-and-file Papua New Guineans themselves.

Many Papua New Guineans probably also distrusted the government because they still saw it as a foreign entity. Papua New Guineans had taken the tiller at independence, but the boat itself was built on the European model. The electoral and parliamentary political system was nothing like precolonial political systems, and these differing systems were only awkwardly coordinated.

Above all, the idea that the people of Papua New Guinea were all members of a single nation and that this identity transcended narrower affiliations—with family, kinship group, village, and speakers of the same language—had not taken hold. There had been no prolonged, popular struggle for independence in which disparate groups throughout the country might have forged a sense of unity or acquired a stake in new national institutions. The nation, too, was an unfamiliar concept to many. Indeed, some Papua New Guinea peoples did not regard themselves as having ceded their autonomy and accepted subordination to the greater power of the state. In fact, to some the state appeared positively menacing. In the 1990s, Papua New Guineans caught up in Christian revival movements in parts of the country associated the state with the Antichrist.

Doesn’t sound that different from everywhere else on earth these days.

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Filed under democracy, economics, NGOs, Papua New Guinea

by | 4 October 2008 · 12:25 pm

Affirmative Action Dilemmas in India

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 168-170:

Before [V. P.] Singh was toppled, his government had introduced the 27 per cent reservations for the backward castes in August 1990. The Congress government under Prime Minister Narasimha Rao had to live with this new rule and made no attempt to reverse it. It was soon faced with a landmark judgment of the Supreme Court in November 1992, which forced the government to establish a National Backward Classes Commission with quasi-judicial powers to determine the claims of castes for the recognition of their ‘backwardness’. The judgment of the Supreme Court was due to a lawsuit initiated by some members of backward castes. The judges feared that they would be inundated with such suits and realized that they had no criteria by which to determine such cases. Moreover, they felt that litigants who were not at all backward as far as their economic situation was concerned would nevertheless try to obtain the benefits of affirmative action. The judgment of 1992 therefore included an injunction which obliged the government to define the criteria by which the ‘creamy layer’ of the backward castes would be excluded from such benefits.

The debate concerning the ‘creamy layer’ highlighted the problem created by the synonymous use of the terms ‘caste’ and ‘class’. All official statements referred to ‘backward classes’ when they really meant backward castes, the term ‘caste’ being deliberately avoided as it referred to an undesirable aspect of Indian social life. However, caste and class are not at all identical. Many members of the high castes are poor labourers, whereas there are many rich people of low caste origin. Since speaking of a rich class among the members of the backward classes seemed to be incongruous, the term ‘creamy layer’ had to be used.

The National Backward Classes Commission was established by an act of Parliament (Lok Sabha) in 1993. Even before it was constituted, a special commission had reported on the problem of the ‘creamy layer’. It was decided that the children of high government officials or of persons with an annual income above Rs 100,000 would not be entitled to the benefits of affirmative action. In 2004 this limit was raised to Rs 250,000 (approximately US$ 5,000). But whereas the ‘creamy layer’ could be defined in this way, it was much more difficult to fix the basic criteria for defining ‘backwardness’. Of altogether 1,133 applications received from various communities during the period from 1993 to 2003, the commission accepted 682 for inclusion in the list of backward classes and rejected 451. In its report submitted in 2004, the commission admitted that it had to base its decisions on inadequate data and often had to fall back on the census of 1931 as it was the last one which contained information on castes. The commission therefore recommended that future census operations should once more provide data on caste affiliations as it would otherwise be impossible to base affirmative action on reliable social data. It is doubtful whether the Indian government will follow this recommendation concerning census operations in view of the political trouble it might cause. Moreover, once it is known why such questions about caste are asked, interested parties would see to it that the respondents answered them in a suitable manner.

The problem of defining the criteria of ‘backwardness’ came up once more in 2006 when the Congress-led coalition government decided to extend the reservation for OBCs to educational institutions. The reservation of government jobs was controversial enough, but educational reservations cut even deeper as far as the career prospects of students from higher castes were concerned. Due to India’s rapid economic growth, many students look for jobs in the private sector rather than for government posts. But whatever job one wants to get, access to higher education is the necessary precondition. Once more the Supreme Court played a decisive role. It asked the government to specify the criteria for OBC reservations. In addition, doctors launched a nationwide strike against this new policy since they are the only group of educated people whose strike really matters. The government stuck to its policy. The political equation is obvious: there are probably about 400 million OBCs in India and their vote will decide the outcome of the national elections which are due in 2009.

In the absence of census data, the National Sample Survey Organization finally supplied some relevant data in 2006 which were based on a sample survey of 125,000 households. According to this, the proportion of OBCs in the Indian population amounts to 41 per cent whereas the Scheduled Castes account for 20 per cent and the Scheduled Tribes for 8 per cent. As far as household expenditure was concerned, the survey showed that in the rural areas the OBCs attained about the same level as the ‘forward communities’ in this respect, whereas in the urban areas these communities were far ahead of the OBCs. Of the members of urban ‘forward communities’ 52 per cent spent Rs 1,100 per month whereas among the OBCs only 28 per cent reached that level.

The politics of affirmative action has certainly strengthened the solidarity of the Other Backward Castes…. The ‘social federalism’ of a caste-based society is also reflected in the pattern of regional parties whose rise was discussed in an earlier chapter. The notions of hierarchy associated with a caste system have vanished from political life where the manifold patchwork of regionally dominant peasant castes is much more important than notions of hierarchy and hegemony. But one particular element of stratification has survived in spite of all affirmative action: the stigma of ‘untouchability’.

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