Animal spirits in slumdogs - Columnist - livemint.com

More than nine out of 10 workers here are doing some variant of selling apples; they are busy in low-productivity work that inevitably results in low levels of income. That is an important difference between a rich country and a poor country. In the former, the poor are inevitably unemployed. In the latter, the poor are often employed to dig ditches, collect garbage or work in dingy workshops.

These are the millions who are stuck halfway between farm and factory. They have abandoned villages where there is not enough land to either own or work on. But they have not yet landed in proper factory jobs where they can use machines and their output can be sold competitively in the global market.

Edward L. Glaeser, an economist at Harvard University and arguably the greatest urban economist of our times, was in Mumbai recently to research a book on cities.

“The defining characteristic of Mumbai is not crime or Bollywood, but entrepreneurship, even in the city’s slums,” he wrote in his blog on 26 May.

“One recent survey found that 43% of urban Indians who worked were self-employed. By contrast, there is no metropolitan area in the United States with a self-employment rate above 11%. Unfortunately, India’s high entrepreneurship rate is still something of a puzzle. I suspect that it reflects both good things about the country, like energy and intelligence, and bad things, like a maze of regulations that make it difficult to build large companies that follow the rules.”