Tuesday, March 20, 2018

Can India Solve Its Youth Problem?

While China has controlled its population and will see a drop in the near future, India has not and will continue to see growth.  This leaves China with a declining number of workers relative to the number of elderly who will be leaving the workforce and needing pension and healthcare support as they age.  This will be a major economic trial for China.  On the other hand, the fertility in India remains quite high and it is most significantly burdened by an undereducated and often malnourished population of young people who must be provided education and employment if social stability is to be maintained.  Economists like to refer to India’s youth-oriented population as a “demographic dividend,” meaning that it will provide a large number of working age people who can promote economic growth and still save and pay the taxes needed to maintain their dependent elderly.  However, if this crush of new “workers” are not provided an opportunity to participate in the economy of the future, India could continue to have hundreds of millions of under-educated and under-employed people wandering their streets for the indefinite future—more of an economic catastrophe than a dividend.

Anja Manuel writes of these issues for both China and India in her book This Brave New World: India, China, and the United States.  Her discussion of China was partially presented in Can China Solve Its Ageing Population Problem?  Here, the focus is on India.

“As China greys, India faces the opposite problem.  It is struggling to create sufficient education and job opportunities to keep its young adults gainfully occupied.  The Modi government knows that if it misses this demographic dividend, the Indian economic juggernaut may stall and a new generation of hundreds of millions of Indians will be trapped well below the middle-class life they aspire to.  To take advantage of a youth bulge, India will need decent schools.  It will also need to create labor-intensive jobs in manufacturing and bring in more foreign direct investment.  India must slow population growth in some states so that its youths are not working solely to feed their own many children.  As the population gets wealthier, the ‘bulge’ will also increase demand for electricity and water and put more strain on India’s creaking infrastructure.”

That paragraph lists a number of heroic tasks that India must complete before it can join the ranks of “wealthy” nations.  The first is population control.  It is often assumed that because China could manipulate its society and create a more modern economy and society, then India can do the same.  However, India is decades behind China in making progress, and it may be too late to try to reproduce what China accomplished.

Historically, populations fall when they become wealthier and when women become sufficiently empowered to expect a future beyond that of a breeder of children and a household servant.  Mao made numerous disastrous decisions when he attained power in China, but he at least recognized that “women support half the sky.”  The status of women improved in China as it eventually grew in wealth.  The infamous “one-child rule” is often indicated as the reason for the decline in China’s birth rate, but fertility was already declining when it was implemented.  While it is true that the rule continued the tradition of generating a surplus of baby boys relative to baby girls due to abortions and infanticide, it also boosted the position of women.  Many parents would decide that if they could only have one child, and it turned out to be a female, that girl would be provided whatever advantages the family could afford.  In China today, women aspire to a college education and a career in the economy.  They compete with men for positions in government and industry.  India will take generations to get to where China is today.  It will not limit its population until it manages to deal with its gender inequalities.

India performs dismally on the UN’s gender equality index, while China’s ranking is even higher than that of the US.

“Domestic violence and rape are just some of the problems India’s women face.  The country ranks an appalling 127th out of 187 countries on the UN Development Program’s 2013 gender equality index (this compares to China’s impressive 37th place, followed by the United States’ 47th).  Wealthy and high-caste women do better than their poorer sisters.  Yet fewer Indian women of all social classes work outside the home than in other Asian countries.  When they do it is often in agriculture and as servants, so they are poorly paid and get no benefits.  At home, girls are valued less than boys, partly because of the large dowries their families must pay to marry them off.  As a result, parents invest less in girls’ education, and many female fetuses are aborted (as in China).  Violence against women is common.”

“The treatment of women in India is a tragedy for human reasons.  In cold economic calculus, it also retards India’s growth.  The Organization for Economic Co-operation and Development (OECD) estimates that enlarging opportunities for women could raise India’s GDP growth by around two percentage points per year….”

Some pundits have argued that India will eventually exceed China in its economic prowess because, as a Democracy, it will be wiser than China and its planners.  So far, the data indicates that China is far ahead of India in providing social benefits such as education, decreased mortality, and gender equality to its population, while India still struggles to compete with states like Bangladesh in providing such benefits.

It is difficult to avoid noting the accomplishments of India’s scientists, engineers, and industrialists who are amazingly successful around the world.  Yet India’s education system is a disaster.  After independence the decision was made to develop a few excellent engineering-focused universities (Indian Institutes of Technology, or IITs), but this left less funding for general education.

“Unfortunately, educated Indians are an exception.  From elementary schools to graduate degrees, the education system is underresourced and creaking.  The Delhi slum school I visited crammed twenty kids into each twelve-by-twelve-foot, furniture-less classroom.  Children sat on the brown floor and wrote with stubs of donated pencils….To contrast with the glittering world of Indian engineering stars, India has by far the most illiterate adults in the world.  Nearly 300 million adult Indians cannot read, more than a third of the total illiterate population on earth.”

India is trying to improve school attendance and has had some success, but it is far from keeping up with progress in its major competitor China.

“In the 1980s, only 60 percent of Indian youths could read; now the number is over 90 percent.  But Indian children still receive far fewer years of schooling than Chinese or American children—only a bit over five years on average.  If they make it through high school, very few Indians receive any vocational training.”

And those who manage to get an advanced education, even a university diploma, find it difficult to find employment.

“For the lucky Indian teens who manage to finish high school, their prospects are not rosy.  A vast majority of them cannot get jobs even if they finish university.”

“As many as 83 percent of engineers graduating from Indian Universities in 2013 could not find jobs, due to poor English language and other skills.  The call center company 24/7 Customer Pvt. Ltd. Hires only three out of every one hundred Indian applicants and now recruits in the Philippines and Nicaragua, where the qualifications are better.”

What the education system desperately needs are well-trained teachers.

“Although it has improved enrollment, India faces chronic problems because there are not enough teachers, some existing teachers are unskilled, and others chronically miss work.  India needs a sobering 1-2 million (!) new teachers for the bulge of children who are entering its creaking school system.  Minister Sibal told me in 2012 that India has to train several hundred thousand teachers a year to teach the 200 million school children.  He added that in the United States, there are about 3,000 teachers per million people, but in India there are only 456.”

One of India’s problems is the fact that it has a poorly organized economy that makes collecting taxes and allocating them to critical needs nearly impossible.

“About 90 percent of Indian workers are in the unorganized sector—everything from the small shops that don’t pay taxes, to day-wage construction workers, and the waste pickers I met in eastern Delhi.  As a result, even if India wanted to build a comprehensive pension scheme, it would be nearly impossible for people to contribute some of their paychecks to this effort.  There are no paychecks.”

Manuel indicates that India plans to focus on jobs in “labor intensive” manufacturing, but if India plans on reproducing China’s path by providing numerous manufacturing jobs for its young, that train may have already left the station.  China followed that path decades ago and while its people and its environment suffered mightily from the strain of being a low-wage manufacturer, it did increase the nation’s wealth and lift a great fraction of its population out of poverty.  But China has already moved on.  It now has the resources and infrastructure to compete with anyone in the world in manufacturing.  Competing on wages is no longer desirable or possible.  If India wishes to become a dominant maker of things, it must either follow the high-tech, highly-automated path China is already on, or compete with low-wage states like Bangladesh and Vietnam in Asia, or the poorer nations of Africa.  Neither path is likely to provide the hundreds of millions of living-wage jobs needed for its youth.

It should be noted that in addition to all its internal problems, India is surrounded by countries with which open hostilities could break out at any moment.  It must maintain a large military force to patrol its long borders with China and Pakistan.  To maintain the image of a growing international power, it must project that power both militarily and economically.  The idea of India contributing economic aid to other nations when it cannot care for its own people seems a bit absurd.

All nations are at risk from climate change.  India is one of the countries most at risk.  Any change to the annual monsoon rain pattern could be catastrophic.  Neighboring Bangladesh is most at risk from rising sea levels.  It is virtually surrounded by India.  India could soon face a situation where it must decide whether to close that border completely or allow tens of millions of climate refugees to pour into its country.

India is often lauded as the largest democracy on earth.  It is encouraging that it has maintained a democratic system in spite of all its social and economic problems.  However, having a democratic system is not the same as having an effective system of democratic representation in government.  Some cynical Indians would claim that what India has is actually a psephocracy.  That is not a very common term, but what it seems to mean is that India has a valid ballot system for electing representatives to office, but the elected only pay attention to their voters during election season and once in office devote their efforts to partisan politics and various forms of corruption.

So, after all that, what does the future hold for India: demographic dividend, or demographic disaster?

The interested reader might find the following articles informative.

India: Demographic Dividend or Demographic Catastrophe?

India’s Democracy and China’s Central Planning: Which Works Best?

Can China Solve Its Ageing Population Problem?

The Population of China and Absurd Economic Projections

India and Its Psephocracy

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