Sunday, September 21, 2008

Huge price of street politics - AMARTYA SEN ON THE SINGUR SITUATION

Nobel laureate Amartya Sen, in a letter emailed to The Telegraph editor Aveek Sarkar, assesses the Singur situation and warns of the consequences if the “attraction of street activism” persists and the Tatas pull out.

Thank you for asking me about my assessment of the Singur situation. I have, in fact, been trying to follow the events as closely as possible, and I must confess I am greatly concerned about what is going on. It is a complex subject, and we have to consider many different issues together.

First, as I argued in my two Telegraph essays on December 29 and 30 last year, unlike the Nandigram decision, which was (I believe) significantly mistaken, the Singur project with the Tatas was basically sound. West Bengal badly needs industries and new employment and income earning opportunities, and Tatas with the ancillary enterprises would help in that greatly, and also encourage a new image of West Bengal as being no longer hostile to industrial investment.

Second, it is a pity that the plot that the Tatas wanted for the factory, based on their concerns (including closeness to Kolkata), is not only well suited for their project but also fertile for agriculture. It would have been easier if the location were different, but that is no longer a possibility. I am not concerned here so much about the aggregate loss of agricultural land, since that is relatively small, and the income and employment gain from economic expansion in the Singur region would be incomparably larger. What is not, however, small is the loss for those owners of land who did not want to part with their plots, and that is a serious issue.

Third, I argued in my Telegraph essays that (1) it would have been much better to buy the land involved without any compulsion, rather than acquiring it (acquirement has to be the last resort, not the first move), and (2) even with acquirement, giving a 40% higher price than the existing market price was not adequate, since with the entry of industries the land prices would rise much more than that. Of course, if Tatas move out now (as seems likely), the land prices in and around Singur would drop dramatically as Singur returns to its old economic state. That should be a big concern right now for the political protesters, but on the part of the Government of West Bengal, there was a strong case for offering a higher price originally as part of the Singur project, since — with the Tatas there — land price in Singur would be much higher than what the government initially offered and paid.

Fourth, the new compensation offer made by the government is much more reasonable. The higher land prices now offered (combined with the other facilities that have also been offered, including employment arrangements) make it a good compromise.

Fifth, the protesters might be persuaded by their political leadership that their interests would be best served by getting back their old piece of land. Attachment to particular plots is certainly an understandable desire. But the world in which all this will happen will be very different. The Tatas have made clear that they will move out if they get less land than they have been given (they judge that they need that land for the viability of their project). Not just Maharashtra, but also Karnataka and Uttaranchal, among other states, seem to be ready with alternative offers much more favourable to the Tatas. Indeed, there is good reason to expect that the Tatas are very much in the process of relocating, unless there is a fairly immediate breakthrough (which now seems unlikely). With their departure from West Bengal will come a huge fall in land prices all around Singur, and also loss of job opportunities that will affect the local population. I am not sure how much the leaders of the protest movements have thought through these issues.

Sixth, for West Bengal as a whole, it would be a huge economic setback, if the Tatas do move out. Its impact would not be confined only to the economic loss from the withdrawal of investments of the Tatas and the ancillary producers, but also from the general sense across India that the politics of West Bengal makes it nearly impossible to base any new economic move in the state, and that the single-minded politics of the street can drive out any new enterprise.

That politics might change over time once the terrible consequences of industrial and economic stagnation are more widely appreciated and understood. But for the moment the political attraction of street activism seems dominant, supplemented intellectually by the old physiocratic illusion of prosperity grounded only on agriculture. The latter piece of romantic thought cannot but fade over time with the influence of realism (no country has ever achieved much prosperity on the basis of agriculture alone). But at this moment realism looks like a distant dream.