I’ve recently been reading The Logic of Life by Tim Harford (personal website and see the page on the book on his website). Harford is an economist in the UK who currently works for the Financial Times. Chapter seven of this book goes into great detail on the question of cities and their economies.
Harford begins by observing that prices for basic goods (food, rent) are higher in cities than in rural areas, and even though wages are higher in cities, the difference in wages is less than the difference in prices. In other words, doing the same join in a city allows one to earn more, but the cost of living rises by even more. So why, asks Harford, do people migrate to cities?
Harford’s basic explanation is simple, and dates back to the time of Alfred Marshall, one of the founding fathers of modern economics. Marshall observed that the main value of cities is close contact with other people. When many people live in close proximity, they can work more efficiently with each other, leading to a better quality of life. But more importantly, cities are great for the creation of new knowledge, as people learn by observing each other.
Harford also blasts the myth of cities being “bad news” for the environment. According to Harford, while cities no doubt pollute more per unit area, they populate much less per person. Apart form the obvious efficiencies entailed by volume, such as mass transportation systems (of which the most efficient, according to Harford, is the elevator) there is efficiency due to higher prices.
In conclusion, Harford complains about the fact that despite cities being efficient and important, politicians in the United States and Europe often stunt the growth of cities by subsidizing and pandering to vote banks in rural areas. Thus, he argues, these subsidies often go to the relatively richer people in the rural areas rather than the urban poor.
Reading this chapter led me to reflect a bit on my (extremely limited) knowledge about rural-urban migration.
Why do people migrate?
There are some differences between underdeveloped countries like India and developed countries like the United States. In the United States, rural people are not in general substantially poorer than their urban counterparts. Farmers in the United States, for instance, are often fairly rich. In India, on the other hand, rural areas are substantially less developed, and the rural poor are substantially poorer.
Influx of people from rural to urban areas is fairly common in India. Construction workers in Chennai and Bangalore often come from rural Andhra Pradesh, Bihar, and Orissa. Barbers and other small-scale entrepreneurs from rural areas in Uttar Pradesh and Bihar often come to cities like Mumbai and Bangalore. Waiters in many city restaurants are people with families in the villages.
At the lower end of the economic scale, I suspect there are two broad reasons for people coming to the cities. The first is to exploit the wage differential. The same kind of job pays more in the cities. A single earner may come to the city, earn the higher wage, and send money back to his (or, more rarely, her) family back in the village, where costs are low. Sometimes, an entire family may move to the city in the hope of saving enough money to return to the village.
The other reason is to enter the city economy on a more permanent basis. Here, a person or family may enter the city and accept the higher cost of living in exchange for greater opportunities to rise up the economic ladder. This is particularly the case, I suspect, for people in families that are not just poor but come from castes and backgrounds that are systemically discriminated against in the villages. In a larger and more cosmopolitan city, where commerce often takes precedence over prejudice, these people have more of a chance to earn well from their skills.
This second reason is, in some sense, a rephrasing of Harford’s own explanation of why people migrate to cities. True, people at the low end of the educational and economic ladder, when migrating to cities, may not be thinking in terms of the externalities and knowledge spillovers that cities routinely provide. But such calculation may well be implicit. After all, it is the density of population in cities that provides more job opportunities, more scope for enterprise, more learning opportunities, and less blatant bigotry and prejudice.
The urban poor
Despite the existence of huge numbers of urban poor, migration is still generally from rural areas to urban areas. There are two reasons to this. First, whatever the conditions of the urban poor, the rural poor are often substantially worse off. Second, as I pointed out earlier, even those urban poor who have sacrificed a lot to come to the city hope to be compensated with a chance to rise up the economic ladder.
Given the strong attractions that cities have to offer, migration is natural. In the absence of rapidly expanding good-quality cheap housing, there will be slums and haphazard settlement. The squalid living conditions in slums may lead one to naively condemn urban life and the “inequalities” it creates. I suspect that much of this inequality existed earlier — people would not migrate to the cities if it made them worse off. The rapid influx of people into cities, even where it leads to the growth of slums, may well be seen as a vote by the people for the opportunities that cities have to offer, in as much as rising stock market prices as seen as a vote for the company’s performance.
Further, it’s important to remember that some people may choose the slum simply because it is cheaper, and given the huge demand for cities, constructing fresh housing will not, in the short run, remove the slum. I’ve heard anecdotal stories about how, when slum-dwellers were given cheap housing to replace the slums, many of them sold the cheap housing to other people and went back to the slums. Others, who moved to the cheap and legal housing, were quickly replaced by new migrants.
Pride and prejudice
In his doctoral thesis at the University of Chicago, Gary Becker (homepage and blog) studied the economics of discrimination. He later published his research in a book titled The Economics of Discrimination. Becker’s key idea was that markets reduce discrimination. Simply speaking, competitive forces make it harder for firms to be able to make economically unprofitable decisions due to prejudice. Becker also showed, using simple mathematical models, that the larger the proportion of the underprivileged group, the faster the discrimination is destroyed. He later argued, in BusinessWeek columns later republished in his book The Economics of Life, that South Africa’s apartheid regime was supported by white trade unions, and disliked by white employers, since it reduced the size of the labor market and forced them to pay higher wages. Since a large fraction of South Africa’s population was black, this constituted a significant competitive disadvantage, and employers were thus, by and larger, supportive of ending apartheid legislation.
That cities are, in general, less prejudiced than villages in the same country, seems to be at least pratly explainable by the greater strength of market forces. Suppose, to take a hypothetical (but not entirely implausible) example, there are a bunch of Hindu shopkeepers serving customers in an area, and they are generally averse to hiring Muslim assistants. If there are many Muslims willing to work, and none of the shopkeepers are hiring them, the Muslims would be willing to work for relatively lower wages. A shopkeeper may then decide that at this low wage, the benefits she gets from hiring the assistant are well worth the discomfort it brings her. So, she hires a Muslim assistant. Since her Muslim assistant is paid a lot less than the Hindu assistants in other shops, she has a competitive advantage. Other competitors then decide that they could fire their Hindu assistants and get Muslim assistants. As Muslim workers are more in demand, their wages go up, and the Hindu workers bid their wages down to stay abreast of the competition.
In villages, these things happen more rarely. Why? There are many possible reasons. First, in villages where the rule of law runs less than in villages, certain groups can use violence to “enforce” their prejudices. Thus, if a Hindu shopkeeper hires a Muslim assistant, other shopkeepers, rather than reacting to competitive pressures, may hire hooligans to beat up the shopkeeper and assistant. Of course, this happens in cities too. But the better the enforcement of law and order, the more it is imperative that people respond to competition by performing better rather than by suppressing their competitors.
For instance, religious competition is routinely suppressed in villages. In many parts of Orissa, certain activists who call themselves the “Hindu right” have attacked Christian missionaries whose goal was to convert people to Christianity, as well as the Hindus they converted (most of these Hindus are Dalits — people from oppressed castes). In the presence of a good rule of law in these areas, the “Hindu religion” would have to compete in the marketplace with Christianity by removing or at least reducing the oppression suffered by the Dalits.
Second, a typical village may not have a sufficiently large and diverse market for competitive forces to be powerful enough. With just one person in each trade, it is hard for competitive pressure to build up.
Third, distinct communities may live separate from each other, with efforts to minimize commerce and other interaction between them. Such separation may be enforced by recourse to real or made-up religious teaching, false stories told about the “other”, and violence or the threat of it. In such circumstances, people in one community may not have enough knowledge about the other community to locate people they might work with or have dealings with.
Cities in danger?
If cities help people escape prejudice, they can also foster new ones. Or at any rate, they can help concentrate prejudices that were earlier present but diluted across large areas. And given the density and mixed nature of the population of the cities, these can lead to violence. If Hindus in a Hindu village have very negative views of Muslims in a Muslim village, this is bad news, but given the limited opportnuities for them to interact, it is unlikely to lead to direct violence. In a densely populated shantytown with both Hindus and Muslims, such views create riot-prone conditions.
Unfortunately, politicians are not immune from using the vibrant economies of cities for their own political ends, and sometimes these ends conflict with the values of catholicism, harmony, and tolerance. Mumbai (formerly Bombay) is considered India’s business capital, as New York is to the United States. It is also the seat of Bollywood, India’s film industry. It is the prime example of a city that people often travel to in order to fulfill their dreams. It has migrants from all over India, and includes, in addition to Hindus and Muslims, many Christians, Jews, Sikhs, Parsis.
In 1992-93, around the time of the Babri Masjid demolition, the Shiv Sena, a political party claiming to represent the “Hindu right”, made a a number of provocative statements that led to Hindu-Muslim riots in Mumbai. These were certainly not the worst riots in India — but it was bad news in a city as cosmopolitan as Mumbai. Following that, there were serial bomb blasts in 1993, believed to have been sponsored by underworld (Muslim) dons based in Dubai, in “revenge” for the crimes inflicted on their co-religionists. Since then, Mumbai has been witness to many blasts and terror attacks, most notably the bomb blasts in July 2006 in local trains, and the November 26-29 infiltration from sea by terrorists who attacked six different parts of the city.
Now, it’s true that people of a city cannot vote out terrorists, but it is easy to vote out politicians who stoke fires of hatred. In fact, I’d personally say that while terrorism in cities is bad news for them, the use of inter-group prejudice by politicians is also very bad news. The Shiv Sena began as a party strongly against migrants from South India to Mumbai. When it failed to gain popular support with the anti-south vitriol, it switched tracks to attacking Muslims, or, more euphemistically, to emphasizing a “Hindu-first” approach.
Politicians in other areas have used their control over the political and economic machinery of cities to make their own points too. Even in cases where there are no riots against a community, this use, in my view, goes against the spirit of a diverse city. Notable among this is a one-day shutdown of the city of Chennai called by the then Tamil Nadu Chief Minister Karunanidhi (this was on 31st March 2007). This shutdown, coming on a Saturday, involved closing down all bus routes, all trains plying in the day time, all domestic flights, and all shops and restaurants (I didn’t go around the markets that day, but a friend told me that people in the pay of the ruling party were roaming around with sticks trying to ensure compliance — some shopkeepers managed to keep their shops open arguing that they sold medicines and hence should be open to serve the people in case of an emergency). The cause? Karunanidhi wanted to show his party’s solidarity for a legislation favoring quotas for certain groups (the legislation had, at the time, been challenged in court). It is unclear whether he felt that the strike would influence the court’s decision on whether to uphold the legislation. I suspect it more likely that he was trying to indicate his commitment to the cause to his vote banks. Since Karunanidhi didn’t have to pay for the economic cost of the shutdown from his own pocket, this was a fairly cheap way of indicating his commitment.
Positive moves
Politicians occasionally succumb to the temptation of exploiting the city to score political points, but in general they also recognize that the less they come in the way of the city’s growth, the better. The recent growth of the IT industry in cities like Bangalore (now Bengaluru), Mumbai, Chennai and Delhi, seems promising. Governments have also been partnering with private parties and individuals to improve infrastructure facilities in cities. True, privatization creates new opportunities for graft (particularly in the absence of open bidding and with exclusive contracts). Still, there has been general progress. Delhi now has a world-class local metro system, while other cities like Bangalore and Mumbai are in the process of building theirs.
With an improvement in infrastructure must come a basic realization that cities are by their very nature places that people from different parts move to, and a realization that people moving into cities will invariably mean that as long as there are rural poor, there will be urban poor. Assuming that all people, whether rural or urban, have equal rights, we should make no efforts to block people from entering cities. Arguments that try to protect certain people in cities at the expense of others (often cloaked in terms of regional, communal, or other sectarian terms) should be seen for what they are — politicians exploiting people’s tendency to look for self-interest in order to divide the electorate and reap gains. It is important to invest in providing basic opportunities and living facilities to all who choose to come to the cities and are willing to work, while realizing that this alone cannot remove urban poverty as long as there continue to be poor people in villages.
