Tuesday, June 24 1997, The Indian Express
Consider the economist: he notches up a credit on the national income accounts every time a farm animal is born. Yet, when a human infant arrives, he reduces per capita income appropriately and falls prey to the delusion that population is somehow a major problem that has to be tackled with strong state action. Such a belief is widespread in India, and the strong-armed methods used by a probationary dictator to tackle the population problem should be fresh in our minds.
The other viewpoint -- that of the free-marketeer -- has never been prominent in Indian development economics. It could not, for it did not believe that strong state action was required at all. Lord Peter Bauer has for long been writing that economics begins with the activities of traders -- not manufacturers. Hence a free trade regime can foster development better than one in which state action to restrict markets props up an inefficient manufacturing industry -- what was called ``import-substitution industrialisation''. On population, Bauer was equally free from state's bias: open up commercial contracts between people of different nations and, with prosperity, birth rates will stabilise -- development as the best contraceptive.
Mancur Olson, the leading public choice theorist of the Chicago School, recently presented a paper in Delhi in which he examined the possible reasons for the differences between rich and poor countries. One of the factors Olson examined was population -- the delusion that human numbers cause poverty. Here, the critical indicator is population density: number of persons per square kilometre. If this is uniformly high for poor countries and low for rich countries, then we can identify population to be a cause of national poverty. The actual figures gave a different answer. Germany, Belgium, Holland and Japan had higher population densities than India -- and they are rich. Zaire and Argentina have very low densities -- yet they are poor. Some of the richest parts of the world -- like Hong Kong and Singapore have astronomically high population densities. Olson arrived at the conclusion that the only factor behind the differences between rich and poor countries was ``national boundaries''.
Julian Simon from Maryland has been tackling a big group that believes in the population problem: environmentalists. His research, which led to a Columbia University debate with the environmentalist Norman Myers, has featured on a BBC ``Horizon'' programme. Simon takes the anti-statist position regarding the environment: that it is with prosperity and freedom and knowledge that the world can be cleaned up and nature managed; strong state action is not the solution. Human population growth does not demand it.
Today, India and China are both seen, not as future population explosions, but as the two Big Emerging Markets. The notion that population causes poverty therefore deserves burial. It survives in India on impressionistic grounds. Astronomically high real estate values are not on account of population pressures on scarce land, but because of inadequate investments in roads. Wherever money is not diverted from public goods to development schemes, cities decongest and the countryside is populated. This spreads prosperity. This also reduces real estate values by adding more land to overall supply. Some leave the city for the village; population and prosperity spread. The key: investments in public goods like roads. The Planning Commission invests in a spoils system based on unsound economics.
There is an entire host of literature in development economics that comes from free-marketeers. This is neglected. That is because it fundamentally brings to question the basic belief on which planned economies rest: that `development' requires strong state action. The Indian state lauded Gunnar Myrdal when he won the Economics Nobel Prize in 1974. Myrdal advocated strong state action by an intellectual-moral elite: planning. The man with whom Myrdal shared the prize, Friedrich August von Hayek, represented the other point of view. And it is this latter school of thought that needs to come to the forefront here. We need to have a clash of ideas. Not more of the same.
Chakraverti is a freelance writer based in Delhi
Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.
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