Atanu Dey On India's Development

The Gods Must be Crazy

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If you have not seen the movie “The Gods Must be Crazy”, you have a treat waiting for you. And if you have never heard of the “natural resource curse”, you are sure to be intrigued. They both point to the counter-intuitive nature of the world, and suggest in some sense why India is poor.

The “The Gods Must be Crazy” (1980) is set in South Africa.

Xi and his band of San/Bushmen relatives are living well off the land in the Kalahari Desert. They are happy because the gods have provided plenty of everything, and no one in the tribe has unfulfilled wants. One day, a glass Coke bottle is thrown out of an aeroplane and falls to earth unbroken. Initially, this strange artifact seems to be another boon from the gods—-Xi’s people find many uses for it. But unlike anything that they have had before, there is only one bottle to go around. This exposes the tribe to a hitherto unknown phenomenon, property, and they soon find themselves experiencing things they never had before: jealousy, envy, anger, hatred, even violence.

What happens to the Kalahari bushmen is a variant of what is called the “natural resource curse

The resource curse (also known as the paradox of plenty) refers to the paradox that countries and regions with an abundance of natural resources, specifically point-source non-renewable resources like minerals and fuels, tend to have less economic growth and worse development outcomes than countries with fewer natural resources.

The coke bottle provoked conflict because there was just one of it available to the tribe. The gods should have provided enough coke bottles for everyone to have as many as needed by the tribe, or none at all. Of the “zero, one, or infinite” numbers to choose from, the gods were crazy to choose “one.”

The natural resource curse works in a slightly different way. The country has an abundance of a natural resource, sufficient for everyone to get a decent share of it. But that resource can be captured by an individual or a small group of people and exploited for their own benefits, perhaps by exporting the resource. In other words, the resource is some public property which can be expropriated for private gains.

The general outlines of the expropriation story go this way. The valuable natural resource induces competition among those who have power and seek even more power. In any population, there are a non-zero number of criminally greedy people. These people fight for control of the resource. Once they gain control, they use whatever means to maintain control, which could include the use of their captive military. Thus you see vicious dictatorships take over countries which are cursed with natural resources.

These dictators keep the population poor and dependent on them so as to continue to rape the country. Their policies are not development oriented. Often the advanced industrialized countries are complicit in the rape because it is easier for them to deal with a corrupt dictator and have easy access to the natural resource by keeping the dictator happy.

Economic growth and development requires the productive people of the society to work cooperatively, although there is competition among the producers of goods and services to make the most profits through commercial success. But countries where the corrupt compete for control of a natural resource end up with little productive capacity since all energies are expended in directly unproductive activities such as maintaining an armed force (often to keep the people in control) and secreting away the proceeds of the sale of the resource in foreign banks.

In general, the natural resource curse results in a kakistocratic government — government by the most corrupt and the least principled.

A fairly robust case can be made that India is a kakistocracy. At first glance, this is a puzzle. India does not appear to be a case of the natural resource curse. India is not an oil-rich or mineral rich country. But at second glance, it becomes clear that India does have a resource which can be — and is — expropriated: People.

India has 1.2 billion people. Some of these people are productive. Although the average production (the measure of which is the per capita income) is low, the aggregate production is a tidy sum. Whoever controls that production, controls a pretty penny.

Here’s how that works. Political parties and politicians realize that gaining control of the government is an excellent opportunity to make a killing. The form of government which allows extraction and exploitation of the people is precisely the form of government that India has: socialistic.

A socialistic government ostensibly works towards ensuring equity. Which basically means taking from the productive segment of the population and giving it to the unproductive segment. Redistribution is a good thing for those in charge of the redistribution because it allows them to keep a tidy part of the amount being redistributed for themselves.

The need for redistribution of course can be created by the simple expedient of keeping a large segment of the population extremely poor. By keeping them needy, the government ensures their loyalty. That is easy to do and does not require any special talents such as figuring out the difficult job of empowering people to stand on their own feet.

An expanding, intrusive government is what one would expect in this case. The more sectors the government controls, the greater the scope for capture of the natural resource (which as we noted is people.) This is true for India.

The more valuable the natural resource, the greater is the competition to capture it. If the resource is expected to yield, say, $1 trillion, then hundreds of billions can be spent to gain control. This is true in India’s case. Political parties spend that kind of sums in elections.

India’s political leaders have a single-point agenda: gain control of the government so that they can make their hundreds of millions. This they do by expanding the scope of the government. They come up with one scheme after which involve hundreds of billions of dollars of transfer from the productive to the unproductive.

The best part of the Indian political scene is that the productive segment funds the elections that elect the rapacious politicians. How? The government taxes the productive segment and uses part of it to buy the loyalties of the unproductive segment. The unproductive segment is large and they vote for the politicians. Thus the productive are forced to pay for the whips and chains that they suffer.

Schemes such as the NREGA, or the right to education, or the right to this that or the other. All named after members of a certain family. This gives them the excuse they need to tax even more. And they handle the tax revenues with very sticky fingers.

They steal from the country by selling off public assets at below-market prices and taking kickbacks. They buy military equipment or railway equipment — and pocket large sums.

The gods may be crazy but the politicians of India are not. They know precisely what they are doing.

{This post was brought to you by the generous support of the Malviya Family in Bangalore — and from readers like you. Thank you.}

  • http://honestlynagpur.blogspot.com/ kautilya

    that’s one of my favorite movies.

    nice explanation as usual of the ‘natural resource curse’.

  • http://Www.indianliberals.org Ashish Deodhar

    I think human resources are different from natural resources in one important aspect – humans can think and act. Those who have been kept wanting for generations should, one would imagine, realise the game at some point and demand change. Why they haven’t yet is a puzzle.

    Having said that, I don’t think it’s as simplistic as you put it. There’s a lot more at play here than simple need of an electorate. A lot of it is foolish pride – Dalit pride, Dravidian pride, Hindu pride, Muslim pride… Something tells me that that’s more important for a greater number of people than their own betterment.

    But I entirely agree with you that increasing government control contributes significantly to the overall mess. Reduce their role and there will be no evil!

  • TiredProf

    Zero, one, infinite. Even if the gods chose infinite, India’s population would soon match it, and we would be back to nasty, brutish and not-short-enough lives, clawing for resources from dawn to dusk.

  • JD

    There are many rich countries with plenty of natural resources, for example the US (coal, metals, uranium, timber, gas, oil), Canada (also minerals, gas, oil, fish etc), Australia (minerals, natural gas, uranium ore, diamonds, aluminium, lead, etc).

    They are managed far more efficiently than the third world countries like some sub-Saharan African states, Indonesia (Papua or Irian Jaya has tremendous mineral and Uranium reserves, much of that island is closed off to the local population, American and other western interests have private militias guarding their turf there).

    The infrastructure, technology and management in the developed countries is superior to the third-world resource-rich nations. They usually have some sort of democracy, there are no open dictators, people are comfortable, no one is pushed towards rioting or coups. However, even these countries are controlled by powerful special interest lobbies. Just look at the USA and see how many senators are aligned with these lobbies.

  • Loknath

    India is a curse to the world. Three more decades and the whites would ridicule india of over population and consuming their share of pie with new found wealth. There will be massive food shortage if every Indian ate as much as an American or European. Given that the population of this country cannot be controlled by lectures and pills alone, external threats will. A war might follow on some pretext and that will decimate the population of India. May be thats the inflection point for India.

  • Shyam Reddy

    Great one Atanu…we all know this is what is happening in India. You said rightly, the taxes collected from the productive segments are spent on buying loyalties of unproductive segments who are masses and who make a big difference to the political system. The best way in my opinion to beat this is to stop and ban the word called “subsidy” which is the root cause of all problems in India.

  • DesiGuru

    I am now thinking Atanu, whether you are actually jealous that you can never make tons of money like the Congressi politicians or marwari desi businessmen. I must admit I have that problem :D
    If less than 98% of Indians were not socialistic in their thinking I would blame and curse the current winners in India too (politicians and entrenched businessmen)

    Not to take anything from the core point that less government is always better for a country, the biggest fallacy in your thinking is you challenge the concepts learned from human biology and history and also make an error in identifying causality.

    India and Indians is about a very weak collection of human beings with extremely poor intellectual abilitiy (as a whole and on average) and also low physical strength. We are talking about a collection of people who are intrinsically prone to being ruled and raped and pogromed for centuries and centuries. Things look much brigher now magically though a few centuries later the Islamic Republic of India should be a lot of fun to watch. From outside.

    You are telling me people with such a history, deserve more than their 9% growth rate, free employment, free food, open escape option to the west for the best brains, reasonably merit based entry into the potentially money making (corruption based) government jobs, 50% reservation in nearly everything for the bottom 50% etc etc.

    Maybe you think the smart people (politicians, businessmen) in India should be as stupid and idiotic like Gandhi and not loot those who deserve to be looted. I disagree. Just desserts in India will look different from Just desserts in the US. We have to deal with it.

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  • Jayant N

    “The obscure we see eventually. The completely obvious, it seems, takes longer.” — Edward R. Murrow

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  • Ranger

    Tavleen Singh writes an excellent article on the renewal of the License-Permit Raj :

    http://www.indianexpress.com/news/back-to-the-licence-raj/746595/0

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