P.V. Indiresan

The fruits of economic development fall where educated people live, not where they work. Hence, if we want to enrich villages, we should induce the educated to live there. But for this to happen we need to install reliable means of social services and transport and other systems that are on a par with what is available in the cities, says P.V. Indiresan.

Development is fastest where the educated are.

RECALL the face of the best educated and the most qualified person you have seen and ask yourself whether the rural development you contemplate will be of any use to him, whether he will gain anything by it.

(With apologies to Mahatma Gandhi)

The previous article suggested that the Finance Ministry should treat the number of educated persons in villages as one of its outcomes. That will be novel because the uneducated poor, not the educated rural-urban migrant, has always been our priority in rural development. We make no provision for the educated to stay in villages. We force the educated to migrate to cities and denude villages of human capital.

In contrast, in the US, the educated middle-class has out-migrated from the cities to suburbs. This suburban movement is the result of the desire of the educated to get away from cities. However, the US model too is flawed: It locates jobs in cities and uses suburbs as dormitories; the educated middle class live in the suburbs but do not work there. In consequence, cities are decaying in the US the same way villages are crumbling in India.

This contrasting experience of India and the US teaches us one lesson: Fruits of economic development fall where educated people live, not where they work. Hence, if we want to enrich villages, we should induce the educated to live in villages.

The Chinese Academy of Sciences has a different view. It has proposed that by year 2050, their predominantly rural, agricultural society should be transformed into a suburban, knowledge-based one. Its other goals are: Life expectation should rise to 80; no one should be below the existing poverty line; half the population should afford cars, should also be able to travel abroad; everyone should have access to social services. It hopes to attain these goals by making China 80 per cent urban, by moving 500 million villagers to cities and 600 million city dwellers into high-tech suburban homes.

We can achieve all these goals of health and wealth faster by adopting the Gandhian ideal of moving development to villages instead of adopting the Chinese model of moving villagers to developed cities. I make this assertion on the basis of two postulates: (a) Development is fastest where the educated are. (b) Moving the educated to villages is cheaper than moving the masses to developed cities.

That development is fastest wherever the educated congregate may be taken as self-evident. On the other hand, it is not equally obvious that moving the educated to villages is cheaper than moving the masses to developed cities.

To appreciate why that is let us consider what kind of location the educated seek when looking for a home. Availability of employment is naturally the primary criterion. Once that issue is settled, availability of educational services assumes importance in young age and availability of health services dominates later on.

The US experience has shown that educated middle class families will be happy to move to rural areas provided there is a selection of good schools near by, primary medical care is good and transport is affordable.

In a city, playgrounds are unthinkable; in villages, they are the easiest to organise. Hospitals too are cheaper to construct in villages than in cities. Transport will at first sight appear to be an intractable problem. That is not so. In rural areas, we can link up to 3-5 hundred thousand (but not more) people at half the cost (or less) than in cities. Social services definitely cost less to install in villages than in cities; the real problem is finding enough customers. That problem is automatically solved when the educated start living in villages.

Further, the numbers to be moved are much less (about 10 times less) when we move the highly educated rather than the masses. More important, the masses cannot pay the market price of the shelter they occupy in cities; they squat on somebody else's land, often on Rs 10-20 lakh worth of property. In consequence, valuable property yields next to no income. Squatting increases criminality too; it also destroys the ecology. Once these cumulative opportunity costs are taken into account, modernising villages will turn out cheaper than expanding cities.

Once we consider how much cheaper it is in rural areas to provide the services the educated desire, and compare it with the opportunity costs of housing the poor in cities, it becomes clear that it is cheaper to move the educated to villages rather than move the poor to cities.

However, getting the educated to move to the villages is not easy. That is a chicken-and-egg problem: Which should come first; educated people who will man the services, or the services that alone will attract the educated? This dilemma is best resolved by first installing social services and transport systems.

Professor Sowell tells the story of President Gorbachev asking Ms Margaret Thatcher how she manages to feed her people, which he was unable to do. The short answer is that she did not feed her people; the market did. However, sceptical people may be, the Invisible Hand of Adam Smith manages to match supply with demand. That is how any person can get masala dosa, or aloo paratha or mutton biryani or whatever else he or she fancies. No planner, no Directorate of Masala Dosa, Aloo Paratha and Mutton Biryani of the government, can do that as efficiently and as effectively as thousands of traders do everyday.

The way President Gorbachev did, our ministers may enquire why there are qualified doctors in every locality of Bangalore or even in much smaller cities like Mangalore while we cannot get any of them to serve the 750 million villagers. The answer is the same: Services in the cities are led by the market; services in villages are controlled by the government.

In spite of any number of carefully designed and well-funded schemes for rural employment, farmers continue to commit suicide; landless labourers continue to die of starvation. In spite of villages having a huge establishment for welfare, they languish. On the other hand, even without state aid, cities such as Mumbai and Delhi attract, employ and feed several hundred thousand new rural immigrants every year. Why the difference? The answer is the same as before: Cities have large functioning markets; villages have officials.

Then, my proposition to the Finance Ministry is as follows: