False Economy - Alan Beattie [27]
Mistakes are becoming rapidly, almost immediately, obvious. The timescale of urbanization is being telescoped by the preexistence of production technology. The cities of China do not have to wait, as did London, for the invention of the steam engine and better ways of smelting iron. Two centuries of industrial and postindustrial technology, not to mention billions of dollars of foreign investors' money, are waiting for any country that can pull away from subsistence farming and start to grow.
There are evident modern-day equivalents of the divergent experiences of England, Scotland, and Ireland. Shanghai is doing noticeably better than Mumbai or Lagos. The rural Chinese migrants desperate to move to the cities, knowing that even a job in a sweatshop beats life on the farm, are slowed and regulated. Internal migration controls limit rural depopulation. And new urbanites are somewhat anticipated in the expansion of cities and the planning of new centers to which they can be diverted. But in India, an uncontrolled flood of refugees fleeing drought and crop failure in the villages of Maharashtra and Gujarat turn up in badly run cities like Mumbai. Half of Mumbai's population lives in shantytowns or slums, with little access to water or electricity, no title to their land, and no security over their homes.
Even worse than allowing a great surge of rural refugees to turn up in a city unplanned is to give them even more incentives to do so. Yet over the last century, in many of the world's poor countries, that is precisely the pattern that has created some of the worst urban imbalances on the planet. It comes not so much from entirely ignoring the wishes of the people as from listening only to those who shout the loudest or are the most threatening.
Argentina's fetish with industrializing was not an anomaly. Throughout the twentieth century, developing countries kicking off the colonial harness wanted immediately to do what the imperial trade system had often deliberately prevented them from doing—building up their own industry rather than importing manufactures from the colonizing Europeans. As with Argentina, to do so often meant to tilt the playing field toward manufacturers. They were subsidized directly through tax advantages and handouts, and imported goods were made more expensive with the imposition of import tariffs.
But the main effect of policies that skew prices toward industry is not just—or not mainly—to redress imbalances in competitiveness between newly born homegrown manufacturers and the established beasts prowling the international economy. It also changes the prices between city and countryside. To get going, industry historically needed agriculture to provide the profit surplus to fund investment. But once it was up and running, it frequently found its interests at odds with those of farmers. A defining moment of British industrial history came when the Corn Laws, which had protected landowners and raised the price of food, were repealed. As we will see later, this helped not just working-class consumers, for whom food was a huge part of their weekly household budget, but also manufacturers, who could thus hold down wages without affecting the real incomes of their employees.
In many cases, developing countries went one further, not just removing the floor beneath agricultural incomes but actively trying to put a ceiling on them. Food price controls became a very frequently used weapon in the battle to encourage economies to shift from farm to factory. The problem with artificial inducements, as in Argentina's sorry history, is that they often create an appearance without a reality. Shifting relative prices created push, sure enough, but it turned out to be less good at creating sustained pull.
An hour's flight north from Lusaka, the capital of the impoverished southern African nation of Zambia, is the country's "copper belt," where the world's second-largest deposit of the metal is mined. As we will see later in discussing the distinctly mixed blessing of being endowed with oil or other minerals,