India's informal costs has huge hidden costs. But both the government and (too often) the media trumpet its parasitic success as a triumph of ingenuity amid poverty.
Think I'm wrong? Contrast a typical article about the “industries” of Dharavi – Asia's largest slum, surrounding Mumbai's international airport – to Katherine Boo's much-talked-about new book about the lives of slum dwellers, Behind the Beautiful Forevers.
In a representative article for the New York Times, Jim Yardley follows up on many similar Indian reports to profile a Dharavi where a “a churning hive of workshops” generates “ an annual economic output estimated to be $600 million to more than $1 billion.” While Yardley describes the crowded, dangerous living conditions in some detail – “a cliché of Indian misery” – he emphasizes the productivity and “can-do spirit” of the slum, which has, in his words, become almost “a slum franchising operation,” outsourcing its business model to other slums throughout Mumbai (and the rest of the country.
“...Dharavi is an industrial gnat compared with China’s manufacturing heartland — and the working conditions in the slum are almost certainly worse than those in major Chinese factories — but Dharavi does seem to share China’s can-do spirit,” Yardley writes. “Almost everything imaginable is made in Dharavi, much of it for sale in India, yet much of it exported around the world.”
In fact, with this contrast to China, and a lengthy description of India's informal sector, Yardley does strike at the heart of the matter. I'm singling him out here not because he does a bad job, but because he's writing for America's publication of record. As readers of this blog know, the so-called triumph of Indian ingenuity has long been one of my bugbears – and as such I'd have like to see Yardley spell out exactly why the slum model of business succeeds, and what it costs the country and its employees. For as he mentions in passing, this is many times worse than the alleged exploitation of workers at factories run by China's FoxConn -- no more an example of the entrepreneur's genius than Somalia's notorious pirates.
As I put it in an article for GlobalPost some time ago, India's backward policies – founded in Gandhi's village economics – have propped up these micro-enterprises. Despite being inefficient and, frankly, dangerous, they fly below the radar of regulators – scoffing at minimum wages, ignoring safety standards, hiring and firing workers in ways larger companies can only fantasize about, and systematically polluting the slums and poor neighborhoods where they operate.
And though they are most often hailed for staving off starvation instead of decried for delaying a real industrial revolution, the results are disastrous. I'm not sure I can bear to read a whole Upton Sinclair-style book on the subject, but as Katherine Boo puts it (a la Pankaj Mishra's review):
Many of the slum dwellers, including Abdul, gain their sense of upward mobility by contrasting their lot with that of their less fortunate neighbors, “miserable souls” who “trapped rats and frogs and fried them for dinner” or “ate the scrub grass at the sewage lake’s edge.” Migrants fleeing a crisis-ridden agricultural sector cause an oversupply of cheap labor in Mumbai, so the boy whose hand is sliced off by a shredding machine turns, “with his blood-spurting stump,” to assure his boss that he won’t report the accident.
A 2-year-old girl drowns suspiciously in a pail, and a father empties a pot of boiling lentils over his sick baby. As Boo explains, “sickly children of both sexes were sometimes done away with, because of the ruinous cost of their care.” “Young girls in the slums,” she adds, “died all the time under dubious circumstances, since most slum families couldn’t afford the sonograms that allowed wealthier families to dispose of their female liabilities before birth.”
Adults, too, drop like flies. One of Abdul’s friends ends up as a corpse with his eyes gouged out. Injured men bleed to death, unattended, by the road to the airport. Maggots breed in the infected sores of the scavengers Boo hangs out with. “Gangrene inched up fingers, calves swelled into tree trunks, and Abdul and his younger brothers kept a running wager about which of the scavengers would be the next to die.”
This slum is not horrific by accident, but the product of government neglect and the exploitation by the informal sector that is so often described, erroneously, as “plucky self-reliance.” Consider a contrasting article from the Indian business press.
The Sunday Economic Times outlines the thriving recycling industry for electronic parts in Delhi (not an apples to oranges comparison with Mumbai's Dharavi, I would argue). It's a profitable business, handled mostly by what we cheerfully call the “informal sector” – workers one step up from beggars, picking through waste laden with toxic chemicals, in this case. “Electronics industry association Elcina estimates that 1,350 tonnes of toxins are generated every six months from discarded mobile phones alone,” the paper reports. “Add to it the 3 million washing machines or 6 million refrigerators.”
The effects are mostly undocumented. A few months back, reporting for my story of India's problem with escalating inequality, I visited a slum colony on the outskirts of Delhi where cottage industries of this sort were operating. The air had an ozone-like tang, and there were piles of strange, fine, gray dust everywhere – literally as common as dirt – caused by the breaking down of various plastics and metals with acid.
According to the Economic Times, “an estimated 800,000 metric tonnes of e-waste would be generated in 2012, as per the Central Pollution Control Board (CPCB). Yes, the number of formal recyclers has been increasing at a rapid pace - from a single firm in 2005 to the current 47 - but the total recycling capacity of these authorised facilities is just 217,000 mt per annum.”
Those numbers hint at a shocking degree of contamination, of course, and ET goes on to describe some of the grim effects on the health of workers in the informal recycling sector. But the article's most compelling observation about the informal sector is an economic one. If an old computer is recycled through the informal sector, ET writes, desperate workers manually break it down and dip it in acid to sift gold from copper and silver, leading to “avoidable pollution and the loss of many more metals.” And only “30-40% of gold and silver are extracted.”
In contrast, organized sector recyclers separate metal from glass using a mechanized, magnetic separator, sift plastic, non-ferrous metals and aluminum with eddy currents and process copper, tin, lead and gold by smelting and electro refining. The result: more than 95% of precious metals are extracted. That means to be profitable, the informal sector must make up for two-thirds lower efficiency by cutting corners, and the only place they have to cut is wages and safety.
Instead of promoting such businesses, or creating regulations that force larger firms to outsource work to them, the Indian government should be working day and night to eradicate them – or force them to follow the law. But a government that sees self-employment as the answer to its massive job shortage, and promotes training programs in such modern activities as basket weaving – as though the country has an insatiable design for baskets and stone carvings – will never draw that conclusion.