Posts Tagged ‘Industry’

Urbanization: The Big Picture

September 4, 2013

By Anjum Altaf

Anyone wanting to understand urbanization needs to get past two major misunderstandings.

First, urbanization is not about individual cities – neither solving their problems nor enhancing their potential for growth. The end result of urbanization is indeed an increase in the population of cities but the term itself refers to the movement of people from rural to urban locations.

But which urban locations do (or should) people move to? That is a more important question.  What are the choices that exist and what determines the attractiveness of one location over another? Should public policy attempt to influence the spatial distribution of population by altering the attractiveness of different types of locations?

Second, the pattern of urbanization is not predetermined. People move primarily to seek work and therefore any change in the distribution of employment opportunities should alter the pattern of migration. Different industrial or economic policies should lead to different patterns of urbanization.

For example, an export-oriented industrial policy favors coastal locations; one based on high-end services might best be centered in big cities; labor-intensive manufacturing for the domestic market is suited to medium-sized cities; a big agro-industrial push strengthens the role of small towns.

It should be obvious that urbanization cannot be divorced from a discussion of industrial policy. But what exactly is our industrial policy and what role does it envisage for the various categories of urban locations – the big, medium, and small-sized cities and towns? Never having considered this explicitly, we have unplanned urbanization with suboptimal results – the big cities are overwhelmed with the influx of people and the majority of medium and small-sized cities are stagnant.

Eighty percent of Pakistan’s population lived in rural areas in 1950 when the economy was dominated by agriculture. Industrialization began to draw people into cities primarily because urban wages exceeded rural wages and better access to services added to the attraction.

The structural transformation of an economy – the transition from agriculture to industry – is accompanied by urbanization because most industry is located in cities. South Korea and Pakistan shared the same level of urbanization in 1950 but the structural transformation in the former is complete – in 2010, 80 percent of its population was urban.

The structural transformation in Pakistan and India has remained stunted by contrast – by 2010, only about 40 percent of their populations were urban according to official statistics, the consequences reflected in their much lower living standards compared to South Korea.

The stunted transformation in the subcontinent is both a source of opportunity and a cause of concern: the former, because the majority of the population is yet to migrate and therefore their choice of locations can be influenced by intelligent policy interventions; the latter, because there is little serious thinking on industrial policy that will influence people’s choices over locations.

The concern is compounded by the fact that arrested industrialization does not forestall urbanization. There might be no positive incentive to migrate but if rural poverty deepens desperate people would be pushed into cities. Such a poverty push has swelled a number of megacities in Africa. A similar push drives the export of labor from many regions in South Asia skipping domestic locations and moving directly to employment-generating cities abroad.

Poverty-driven urbanization is a consequence of weak industrialization. Employment shifts directly from agriculture to low-level services in informal sectors. The results are visible in slums in the big cities.

Healthy urbanization is not possible without industrialization whose policy parameters impact the choice of locations. This connection is ignored in the subcontinent. When challenged, policymakers are likely to argue that economics ought to be left to the free market which would best determine the locations of jobs and people would move accordingly.

This is contrary to experience. God did not create markets, human beings did. Almost all major markets in the subcontinent are outcomes of public sector investments (railways, canals, roads, villages) made by the British for objectives that are hardly relevant today. Opening up the Pakistan-India border or linking Kashgar to Gwadar would strengthen some markets and create others where none existed before. Each would affect the choice of destinations for rural migrants.

This raises a policy question: Where should jobs be located to yield an urbanization pattern that makes people better off? The question assumes that policy makers have a free hand in choosing locations and types of jobs. Unfortunately, that is not the case –one cannot, for example, relocate an impoverished farmer and expect him or her to adapt seamlessly to modern industry in a mega-city.

The reason is simple. Pakistan and India have not invested adequately in the health, education and skills of their rural citizens. Weak social and labor policies have severely limited the ambit of industrial and urbanization alternatives. Abstract theory might suggest that mega-cities are the most efficient engines of economic growth but with the existing endowment of human capital one might just end up with a transfer of rural poverty to urban locations.

The more realistic question is to ask what kinds of urbanization patterns are compatible with existing socioeconomic conditions. Should an informed policy favor rural industrialization? Should there be a phase of skill enhancement through agro-industrial development in small towns? Should medium-sized cities serve as intermediaries in a staged urban-industrial strategy?

These longer-term perspectives may appear suboptimal from the viewpoint of abstract growth theory but economists tend to forget that life is real and not abstract – one can only assume away reality at great cost to human beings.

The key takeaway is the following: Cities are not going to drive growth; rather, different types of growth will energize different types of cities – provided there has been adequate investment in human and physical capital.

Anjum Altaf is Dean of the School of Humanities and Social Sciences at the Lahore University of Management Sciences. This op-ed appeared in Dawn on September 3, 2013 and is reproduced here with permission of the author.

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Two Fires

October 16, 2012

By C. M. Naim

On Tuesday, September 11, 2012, a horrific fire in a garment factory in the Baldia Township in Karachi killed at least 259 persons, male and female. As I read about it on subsequent days I was reminded of another fire that occurred a century earlier—to be exact, on Saturday, November 25, 1911—in New York City. It too was in a garment factory, and took 146 lives, mostly young females. Named after the shirtwaist factory where it occurred, it is known in American history as the Triangle Fire. To refresh my memory I took to the books, and soon realized that the Triangle Fire had a few lessons for the present day Pakistan.[1] (more…)

Urbanization in India: Some Questions

September 22, 2010

By Anjum Altaf

There has been a radical shift in the global consensus on urbanization. Till very recently India shared the anti-urban bias of most developing countries – the conclusion of a major 2004 study was that “most problems should be easier to manage if urban population growth is slowed.” Now urbanization is in fashion and cities are being touted as engines of growth. A 2010 McKinsey report begins with the statement that ‘urbanization is critical to India’s development’ and the government has launched the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) to support this vision.

India’s urban population is projected to increase from 340 million in 2008 to 590 million in 2030.  With this post I hope to initiate a discussion of some of the likely dimensions and implications of this increase.

Would cities really play a dynamic role in economic growth or would they become concentrations of poverty and of communal or class conflicts? The answer could depend largely on the public policy initiatives that accompany the change.

An important conceptual distinction, often overlooked, needs to be made between urbanization policy and city management (the focus of JNNURM). Urbanization policy should be concerned with the spatial distribution of population and the size distribution of urban places. It can be better characterized in terms of the desired destinations for rural migrants: should they be encouraged to move to small towns, medium-sized cities, or to large metropolises? The management of individual cities, on the other hand, should be considered independently of spatial policy.

The emerging global consensus on spatial policy considers size to be a major advantage if cities are managed well – Tokyo, New York and London are often held up as the models to emulate. The 2009 McKinsey report on urbanization in China recommends a concentrated spatial pattern centered round mega-cities. While this may be the right recommendation for China, I believe the generalization is flawed. In particular, I wish to argue that it is a mistake to think of urbanization as an independent phenomenon. On the contrary, it is a derivative phenomenon that follows from the distribution of employment because people move in response to opportunities for jobs. Thus there is, and needs to be, a very strong link between urbanization policy and industrial or economic policy. If they are not coordinated there can be a lot of misallocation of scarce resources. The combination of urbanization and economic policies gives rise to what can be termed the ‘economic geography’ of a country.

This can be easily recognized if one looks back on the distinctive economic geographies of pre-industrial, industrial, and post-industrial economies. This has also been very starkly obvious in the case of China where the government has proactively managed the economic geography of the country both because of its control on the location of jobs via state-owned enterprises and on the movement of people via the mechanism of an internal passport system. Thus, when its industrial policy was to promote town and village enterprises, it supported the rapid growth of small towns while freezing movement to the big cities. Later, when the industrial policy shifted to manufacture for the global market, the urbanization policy also changed to permit migration to the large cities on the eastern coast as well to create new large cities from scratch. Shenzen epitomizes the latter phenomenon: it has grown from a fishing village at the end of the 1970s to a city of 14 million today of whom 70% are migrants without a formal status of urban residents.

This should convince us that the prime driver of urbanization policy in China is industrial policy, i.e., the determination of what kind of jobs are to be created and where they are to be best located? However, a little further reflection should lead to the realization that industrial policy itself is not a completely open choice – it needs to take into account global conditions, comparative advantage, the nature of the domestic market, and the characteristics of the human and physical capital that is available at any given time.

The joint policy choices that need to be made keeping in view all these factors can be quite complex and need integrated analysis and planning. There is need at this time in India to begin proactively discussing issues of economic geography. This would integrate urban and industrial policies and highlight the relationships that need to exist between different sized cities in the Indian context. It would thereby also provide a basis for the optimal allocation of resources to different size-categories of cities. It is quite possible that city-size alone might not be the best measure of priority as it presently is in the JNNURM with its bias towards the bigger cities.

We know that India, unlike China, does not have a state-directed urbanization policy although earlier attempts to slow urban growth could be considered a variant. The spatial policy is one of laissez faire with rural-urban migration being channeled via market signals and forces. The estimate that between 75 to 80 percent of the urban population will reside in Class I cities by 2030 is one that is based on the projection of existing trends assuming that the laissez faire regime remains unchanged.

A market-led urbanization policy is the accepted norm in developed countries and one that is recommended in theory. However, we should not fall in the trap of making a fetish of markets. It is often the case in developing countries that the markets that exist are incomplete or legacies of past colonial regimes whose objectives might have been at odds with those of present governments. For example, it made economic sense for colonial governments to develop the major ports and the links to them in order to facilitate interactions with the mother country. This rationale may or may not remain important for an independent country. If the rationale changes, new markets and market connections often have to be created by strategic allocations of public sector investments. These can alter the subsequent patterns of the movement of financial and human capital. As an example, the government in China created new markets where none existed first via the Town and Village Enterprise policy and then by the massive investments in the Special Economic Zones on the east coast.

It is clear that urbanization policy in India is not explicitly integrated at present into the national economic policy to enhance the effectiveness of the latter. A debate is needed on what kind of urbanization pattern would be optimal for India given the economic orientation it chooses for driving future growth. Based on the policy of choice, measures and incentives could be put in place to shape the spatial pattern of population distribution and the size-distribution of urban places. This need not be through direct control over the movement of people. Rather, it should be the outcome of purposefully determined and spatially strategic public investments.

This is not the place to prescribe the economic orientation that would be best for India at this time of global recession. However, it should be obvious that a decision about urbanization policy in the absence of consensus on economic orientation would be premature. An investment in thinking through some essential characteristics of the Indian situation would be rewarding and should yield some pointers towards feasible scenarios for the future. Here I wish to list a few considerations as starting points for a discussion of feasible alternatives for the economic geography of India:

1.     Unlike China and the US, the majority of the Indian population resides inland and not along the coasts. What are the implications of this demographic difference?

2.     Almost half of India’s rural population is illiterate and unfamiliar with industrial work making its transition to an urban lifestyle relatively more difficult. Does this imply that a staged pattern migration might be a preferred route to consider?

3.     Raising the productivity of rural labor (including its health status) would require major investments if returns to urbanization are to be realized. Should these investments be made pre- or post-migration?

4.     India’s fastest growing industries have low employment potential within the formal labor market and especially low employment potential for illiterate and unskilled workers. Rural migrants will find it very hard to find a niche in demanding urban job markets. What are the implications for the spatial distribution of population?

5.      The scarcity of land in Indian cities would push low-value activities and poor people to the peripheries. Environmental concerns would reinforce these trends. Should this suggest a proactive policy promoting satellite towns?

6.     Agglomeration economies in cities depend on infrastructure investments that integrate labor markets – primarily rapid transit that links affordable housing and concentrated job centers. These investments in urban productivity have lagged in India where priority has been given to social welfare. Should existing major cities get such investments first or should cities with the most future potential get the prioirity?

7.     The politically dominant unit in India is the state and not the city – it is the Chief Ministers of states that rise in national politics not mayors of cities. It seems difficult to envisage changes that would reverse this hierarchy. What kind of mechanisms and incentives are needed to encourage states to leverage their cities more effectively?

8.     The electoral system and constituency boundaries create a bias towards non-urban voters especially because voters that can be influenced are preponderantly outside municipal boundaries. How can cities overcome this handicap?

9.     A growth-first strategy focused on cities would heighten already severe spatial inequalities. Would India’s democratic system allow enough time to postpone addressing these inequalities to the distant future, i.e., would a spatial version of the trickle-down policy be politically feasible? If not, what kind of urbanization policy would balance urban and rural interests?

10.  Cities in India are much more fractured along lines of religion, ethnicity and caste than their counterparts in East Asian countries. Would these fault lines survive the tensions that could be released by uneven growth and changes in demographic balances? If not, what measures would need to accompany accelerated migration to urban areas?

The aim in raising these issues is to get away from the facile generalization that there is some optimal urbanization policy that is equally applicable to all countries. An urbanization strategy focused on the undoubted economic potential of large cities would have to survive the many pitfalls that are unique to India’s political, economic, and social landscape. It is the contours of this landscape that should shape the urbanization policy that would be best for the development of India and for the prosperity and well-being of its people.

 

PPP Prattle

August 8, 2010

By Azhar Ali Khan

A slogan is a sort of battle cry which usually carries in it an appeal to sentiments of a particular group of people and the repetition of this battle cry is intended to arouse people into taking a certain desired action. If the slogan is well-worded, short and sweet and easily pronounceable, its appeal becomes more effective. But for the people to take the desired action, it should be physically possible and, invariably, the slogan has to be backed with some force. When they say “Buy British” in England, it works because almost every article of daily use required by an average person in England, or anywhere else for that matter, is ‘made in England’, and it is physically possible to ‘Buy British’. But even in England, when Japan dumped in the East End of London ready-made shirts at 6/- per dozen or flooded toy shops at Christmas, the magic of ‘Buy British’ failed to work, in spite of the highly developed sense of patriotism in an average Englishman, born out of over a thousand years of freedom. The British Government then had to back this slogan with the force of tariff walls and by devising ways and means for cutting down production costs. In Bharat, if they had started a “Buy Bharati Brand” slogan it would probably not work, but the Government achieved their object by putting a total ban on imports of consumer goods and at the same time providing facilities for indigenous production, so that now one can get everything produced within the country. Due to the ban on imports, foreign firms who had substantial sales of their manufactured goods in Bharat were also forced to set up their factories in India, without the Indian Government begging for it the way we have been doing; that too without being able to attract foreign capital.

We started only a slogan – Patronise Pakistani Products – and thought that its sentimental and alliterative appeal alone will make people buy Pakistani products. But where are those products of Pakistani manufacture which the sponsors of this slogan would want us to buy and what facilities have been provided for their production and, lastly, what restrictions have been imposed on the promiscuous import of the innumerable variety of consumer goods with which we are over-flooded and over-stocked such that imported goods very often sell on the footpaths at below the landed cost?

The PPP naturally failed to achieve its object, because it appealed to people to do something which was physically impossible. Moreover, there was no substance, no reality and no force behind it. It was just three meaningless words, to many because they were in a foreign language and to others because they realized that there was hardly anything Pakistani to be patronized. The Government, themselves, never acted upon it and huge orders for all description of goods, even those which are produced in Pakistan, continue to be placed outside on the basis of lower quotations or better quality. Army boots, to produce which we have over a hundred thousand skilled shoe-makers, are still purchased from England. But the Government spent a few lacs on the PPP, for which the only explanation appears to be that they were charmed with the magic of alliteration. A criticism with more meaning than the PPP was, therefore, written in sustained alliteration of over 500 P’s, but it failed to make the Government act in accordance with the suggestions contained in it, probably because the only force behind it was the opinions and suggestions of an unknown writer! It also emphasizes that there is no limit to performing gymnastics and jugglery with words, but it is not words but deeds that are needed.

PPP PRATTLE

(Penned by the President of a Pakistani Producers association and printed and published in popular Pakistani periodical in early post-partition period.)

PREAMBLE

Persons placed in Prominent Positions in Pakistan’s political party in power in post-partition period persistently promoted and pursued prolonged propaganda programmes for purely personal publicity, prestige or profit, hardly pertinent to pressing problems present in Pakistan during that period, particularly pertaining to production, planning and promotion. “Patronise Pakistani Products” propaganda was one such publicity programme – a painful, practical pleasantry on the poor, penniless, panic-stricken and prostrated Producers, pestered, persecuted, pursued and pushed pell-mell out of a Panditistan and pouring by millions into Pakistan – the promised paradise only to pine and perish in poverty and privation, their passionate and piteous pleas for provision of a proper place for production, power, protection and patronage producing only the phony PPP parade, while prosperous and privileged partymen were provided with permits to procure practically all imported products on “OGL” (open general license) positively precluding the possibility of Pakistani production proving a profitable proposition to producers or even practicable.

PPP Prattle was published to pinpoint in proper perspective the paralogism of PPP propaganda.

The following criticism covers the main production problems with some general suggestions:-

PRESS PUBLICITY

Poor Pakistani producers, precariously poised on a precipice are profoundly puzzled and perplexed at this promiscuous, persistent, profitless publicity and propaganda through press, platform, periodicals, pamphlets, publications, placards and posters; PPP posters permanently placed in prominent positions persuading people to purchase Pakistani products, while purblind policies of people in power are plaguing production programmes with all possible predicaments.

PRIMARY PROBLEM – PREMISES

Preliminaries to procurement of proper place for production present the problem of being a party to the pernicious practice of paying premiums, popularly pugree, or propitiating petty but privileged public servants, which practice, propriety apart, is pregnant with the possibility of prosecution.

POWER

Prospects of plentiful power at any predictable period are poor. Power projects under planning may, perhaps, provide power to posterity, but the present position positively precludes the possibility of power-operated plants.

PROTECTION

Processes of providing protection to Pakistani products are protracted, perfunctory and, perhaps, purposely prolonged, and, with Pakistan pegged to pacts and preferences and pursuing a policy of pleasing and pampering politically powerful partners, positive protection cannot possibly be provided!

PECUNIARY PROBLEM

Pecuniarily, poor Pakistani producers are placed in a precarious position. The prodigal protagonists of PPP propaganda, prepossessed with perverse pertinacity of purpose to pursue preposterous propaganda programmes are prepared to provide with promptitude princely purses for palatial pantechnicons, pictorial PPP posters and persistent press publicity, but profess powerlessness to place a perforated pice on the palsied palm of the poor producer painfully plying his profession in poignant poverty and privation.

PRIMAL PRE-REQUISITE

Prompt provision of positive protection is the primal pre-requisite of the proper progress of this “praiseworthy and plausible” Patronise Pakistani Products propaganda, publicized by press and preached from public platforms. Protection! Protection!! Protection!!! plaintively plead Pakistani producers, but people in power are not perturbed.

PLETHORA OF PLEDGES

Pakistani Production cannot possibly attain the peak of prosperity on purely a plethora of pledges, periodic periphrasis, palavering and perorations of prominent personages from public platforms, pious but palpably puerile professions and promises patently paradoxical to practice and passionate panegyrics on patriotism.

PARASITES

Pakistan’s productive potential is practically paralysed by promiscuous imports, preposterous and pernicious profiteering of privileged and prosperous parvenus, a pestilence of perfidious practices prevalent in private and public, a pitiless prostitution of power and persistent parasitism of privileged people pushing the poor to perpetual poverty.

PERVERSE POLICIES

Pakistan’s paleolithic, petrified and pertinacious administration, putrefying with petty and paltry party politics, pestered with pugnacious provincial prejudices and preferentialism, plagued with pre-partition pygmies now puffed with power, persistently pursues a perverse policy of patronizing, pampering, pacifying and placating the plutocrat, paving his path with primroses and permitting him to pamper in a paraphernalia of pomp and pleasure, while the proletariat presents a pathetic panorama of poverty and privation.

PARALOGISM

Primitive processes of production plus the precarious pecuniary position prevailing in Pakistani production positively precludes the possibility of Pakistani products presenting the potential purchaser plus value in price or performance. This provokes people to propound the paramountcy of a planned practical programme preceding this paralogistic PPP prattle.

PATRONIZE PRODUCTION

Proud and powerful proponents of Patronise Pakistani Products Propaganda, please provide positive proof of proper patronage of production before preaching PPP to people. Press into practice the pantheon of persistently publicized Plans, Plans, Plans, Pilot a practical programme of planned production, put pressure on prosperous people to part with their piles of profits to be put into productive projects, pull the poor producer out of the pandemonium of poignant poverty and pestilence. Let pride and prestige of power not prejudice or prevent perception in proper perspective of a palpably plain problem.

PPP PANJANDRUM

Privileged and powerful! Please pause and ponder. Parading a pompous pageant of PPP panjandrum will not provide a panacea for a paralytic and palsied industry, will probably not open the portals of paradise to the poor producer, plying his profession in pest-ridden places, positively not persuade the proverbially parsimonious Pakistani purchaser to patronize poor quality Pakistani products when pavements profusely piled by peddlers with a promiscuity of perfect and pretty low-priced imported products petrify his already poor patriotic propensities.

Poor Pakistani Producer

PAKISTAN PAINDABAD!

(Penned by Azhar Ali Khan and Published in Natural Resources, August 1962)

 

Captivating Catchwords

August 8, 2010

Composed by Azhar Ali Khan on the occasion of the All Pakistan Cottage Industry Conference held in May 1950

Editor’s Note: We are reproducing two essays by Azhar Ali Khan written 50 years ago. While they are extremely dated they retain their value as historical documents providing a commentary on the trajectory of Pakistan. In them one can identify what has and has not changed in the culture of Pakistan over the ensuing decades. These essays are part-serious, part-satirical, part-tongue-in-cheek. They were penned as a challenge in alliteration – to see how long an essay on a serious topic could be written using most words beginning with the same letter. This is the ‘C’ essay. The ‘P’ essay would be reproduced later. (more…)