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Posts Tagged ‘industry

The colossi of Guangdong

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RG_Pearlriver_1

West of Hong Kong lies one of the most extraordinary landscapes in the world, as much for the dense concentration of urban zones, of industrial and factory regions, but also for the change that has occurred over the space of a generation. In the 1970s, the Pearl River Delta was a mainly rural region. Of course there was Guangzhou (known to the world as Canton) but the rest of the sprawling delta was village. The Pearl River itself (‘Zhu Jiang’ in the Chinese) is China’s third longest river, but the second largest by volume of water which moves (after the Yangtze) and its course and seasons governed a basin in south-central China that is just over 400,000 square kilometres large.

The nine cities of the Pearl River Delta together form the world’s most urbanised region. Where did they come from? According to most annals of trading history concerning China, in the late 17th century the Qing government became more open to foreign trade and when that happened Guangzhou (Canton) quickly became a suitable port.

A shipping container terminal whose size defies the scale the eye can gauge, but one of several in the Pear River delta region.

A shipping container terminal whose size defies the scale the eye can gauge, but one of several in the Pear River delta region.

The Portuguese in Macau, the Spanish in Manila, Arabs from the Middle East and Muslims from India were already actively trading in the port of Canton by the 1690s, when the French and English began frequenting the port through the ‘Canton System’ (which was the name given to the imperial court’s regulatory response to what it saw, that long ago, as political and commercial threats). But for the Pearl River Delta, the gates had been opened – the Ostend General India company arrived, so did the Dutch East India Company, then came ships from most western colonial powers.

Over every horizon in every direction but towards the sea is such a landscape, teeming with structures and over-crammed with multi-tiered infrastructure.

Over every horizon in every direction but towards the sea is such a landscape, teeming with structures and over-crammed with multi-tiered infrastructure.

By the middle of the 18th century, Guangzhou had already emerged as one of the world’s great trading ports, and the ‘Thirteen Factories’ (not in fact factories at all but the designated areas of the port in where foreign trading was conducted) which were given imperial leave to operate, ensured the distinction was maintained until the outbreak of the First Opium War (1839) and the opening of other ports a few years later.

When, in the 1990s, China became known as the factory of the world, the province of Guangdong (of which Guangzhou is the capital) was where these manufactures were done. This is the activity which has made the province both the most populous in China and the biggest contributor to national GDP. What has also happened is the most rapid urban expansion in human (and Chinese) history. In a little more than 30 years, the Pearl River Delta region has become the epicentre of the Chinese manufacturing and consumer economy.

Over two generations, the urbanisation rate has increased from 28% to 83% which in effect means that where once not very long ago two-thirds of the residents pursued agriculture-based livelihoods, now four-fifths live in fully urban environments. The scale and speed of this transformation is astonishing. The cities of the Pearl River Delta have since 2008 been also referred to as a single interconnected zone of megacities, as their perimeters have blurred, they merge through wide highways and fast railway links and the endless manufacturing zones with their vast factory structures. The entire region has a geographical size larger than Denmark or Switzerland – with a wide river lined thick with docks and crammed with watercraft running through in the middle.

As densely packed as components on printed circuit boards, but these factory zones are kilometres long on each side, and their clones fade into the blue industrial haze.

As densely packed as components on printed circuit boards, but these factory zones are kilometres long on each side, and their clones fade into the blue industrial haze.

Working and living here is the largest urbanised population in the world – Guangzhou with 12.8 million, Shenzhen with 10.5 million, Dongguan with 8.3 million, Foshan with 7.3 million and the rest (Huizhou, Zhongshan, Jiangmen, Zhaoqing and Zhuhai) with another 18 million together) for a linked agglomeration of 56.9 million people. This enormous urbanised region accounts for 4.2% of China’s total population, and for 9.3% of its GDP. The multi-megalopolis has been assembled through the completion (and continuous expansion) of more than 150 major infrastructure projects (each by itself would be a significant milestone in a small country) which have helped the colossal network of transportation, water, energy supply and telecommunication to function every day.

There are labyrinths of roads, tunnels and bridges across the delta, as well as intra- and inter-city railways so that the residents of the Pearl River Delta speed from any one of the nine cities to another in an hour or less. Extending south-eastwards, these lead into Hong Kong, the Special Autonomous Region, whose economic might and cultural richness are both natural guides for the Pearl River multi-megalopolis but also (as seen from within Hong Kong, and perhaps Beijing) its competitor. Will the Pearl River Delta – the world’s biggest concentration of manufacturing megawattage, of people and of infrastructure – eventually absorb Hong Kong?

[Photos by Rahul Goswami, 2015.]

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Written by makanaka

October 26, 2015 at 20:20

Bharat and its billionaires

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RG_new_India_inequality_panelSeveral times a year, one money-minded organisation or another publishes a ‘rich list’. On this list are the names of the extraordinarily wealthy, the billionaires. Such a list is compiled by Forbes magazine. In this year’s list of billionaires, there are 90 Indians.

Perhaps it is the largest contingent of Indians on this list ever, perhaps their wealth is greater, singly and together, than ever before, perhaps the space below them (the almost-billionaires) is more crowded than ever. What must be of concern to us is the inequality that such a list represents. In the first two, perhaps three, Five Year Plans, cautions were expressed that the income (or wealth) multiple between the farmer and the labourer on the one hand and the entrepreneur or skilled manager on the other should not exceed 1 to 10.

In practice it was quite different, but the differences of the early 1990s – which is when economic liberalisation took hold in India – are microscopic compared to those of today. What’s more, the astronomically large differences in income/wealth of 2015 are actually celebrated as being evidence of India’s economic superpowerdom.

The current per capita national income is 88,533 rupees and it will take, as my disturbing panel of comparisons shows, the combined incomes of 677,713 such earners to equal the wealth of the 90th on the Forbes list of Indian billionaires. Likewise, there are six on the list of 90 with median incomes, and a median income is Rs 11.616 crore, which is equal to the entire Central Government budget outlay for agriculture (and allied activities) for 2015-16.

Written by makanaka

March 5, 2015 at 22:03

Finding the income gap in factories

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Soon after the liberalisation of India's economy in 1991 the rise in the average annual salary of the non-worker employee rose faster than that of the worker. From 1998-99, the difference became more pronounced and further from 2006-07 became very much more so.

Soon after the liberalisation of India’s economy in 1991 the rise in the average annual salary of the non-worker employee rose faster than that of the worker. From 1998-99, the difference became more pronounced and further from 2006-07 became very much more so.

When did the income gap between worker and white collar employee widen? The Central Statistics Office of the Ministry of Statistics and Programme Implementation has released its Annual Survey of Industries 2011-2012 for the factory sector. This small but significant compilation helps trace the evolution and trend of the gap in incomes from 1981-82 to 2011-12.

Using the figures given for wages and number of workers, the annual wages per worker (at current rates for that year) becomes available, so does the annual salary for non-worker employees. From 1981-82, when average wages per worker in the factory sector was Rs 7,197 it took 23 years for the wages to cross Rs 50,000. The rise was faster in the annual salary for non-worker employees which began at an average of Rs 13,325 in 1981-82 and crossed Rs 50,000 in 13 years.

In 1993-94, when the annual salary for non-worker employees crossed Rs 50,000 it was about 1.9 times the annual wages of the worker. In 2003-04 when the annual average wages of the worker crossed Rs 50,000 the annual average salary of the non-worker employee was about 3.1 times more. That gap continued to grow – 3.8 times more in 2007-08 and 4 times more in 2011-12.

While the next Rs 50,000 rise in the annual average wages of the worker took another nine years (from Rs 50,000 to Rs 100,000), over the same period (2003-04 to 2012-13) the annual average salary of the non-worker employee rose from Rs 156,000 to Rs 422,000 (adding the last year as a continuation of the trend, for this MoSPI series halts at 2011-12).

Written by makanaka

April 8, 2014 at 00:31

Expanding India’s WPI, neglecting its CPI

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There are some 130 food items in the proposed WPI whereas the retail price collection basket with the most items has only 46.

There are some 130 food items in the proposed WPI whereas the retail price collection basket with the most items has only 46.

The Planning Commission is to agree by the end of 2014 March on the composition of an expanded set of items for the wholesale price index. The expanded index – with a few new categories and some reclassifications – is a proposal, formally, by the Office of the Economic Adviser, Ministry of Commerce and Industry.

But there are retail wheels within wholesale ones, and there are indications provided by the financial and business press that it is the Prime Minister’s Office that is backing the revision – which will also allow the Reserve Bank of India to make decisions about interest rates that could benefit industry.

My interest was drawn to the several additions that have been made to the category of ‘food articles’ (some of which has been covered by media reportage, which quite typically has ignored the changes proposed in the rest of the categories). More important than these few changes to the components of wholesale food price are the additions made under the ‘manufactured products – food products’ category.

This is a greater expansion of items (although the weightages for the new items have not yet been made public) and reflects the shift in what is being purchased by households – more packaged and processed food in place of raw cereals, pulses, fruit and vegetables. The expanded list also signals the dietary shift – a nutritional time-bomb whose effects can already be seen in the rising rates of youth becoming overweight – towards processed cereals, sugary drinks, edible oils, and snack foods.

The tall and narrow chart you see here shows the difference between the sets of items covered by the proposed new WPI and the current sets of items that are monitored for consumer retail prices. The three sets that do this are from: (1) the Ministry of Agriculture, Directorate of Economics and Statistics, (2) Ministry of Labour and Employment, Labour Bureau, and (3) Ministry of Consumer Affairs, Food and Public Distribution, Department of Consumer Affairs.

This is the second expansion in the number of items that make up the WPI in the last three years, whereas the relatively much smaller list of items that are used to monitor the prices of food for consumers has remained the same over the same period (the last revision was about five years ago in the Ministry of CAF&PD system).

As usual, there is little or no public discussion on the additions to the WPI and the continuing neglect of the items that are used to compute the consumer price index – some of those collection systems are 30 years old. The proposed expansion of the WPI food and food-related items will deepen the already very serious lack of correspondence between the WPI and CPI.

More troubling is the deepening meaninglessness of the CPI numbers – rural and urban for major states doesn’t help one bit if the list of items is not expanded to reflect more accurately what households actually buy, rather than ignore the growing list of items they do. Continuing to ignore this long overdue need for correction will short-change India’s salaried workers and wage earners, and very seriously under-report true inflation especially for food.

The very odd macro-economics of food prices and food inflation in India

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Food inflation has hurt, but we have just the prescription for it. So says the Economic Advisory Council to the Prime Minister of India. This group of the country’s seniormost macroeconomic planners is considered to be as heavyweight as they come, and have considerable influence on policy in India. The major ministries listen to the pronouncements of the EAC very attentively – finance, commerce and industry, power, steel, agriculture, infrastructure. India’s industry associations and business interest groups do the same – they are the Confederation of Indian Industry (CII), the Associated Chambers of Commerce and Industry of India (Assocham) and the Federation of Indian Chambers of Commerce and Industry (Ficci).

But amongst the five members of the EAC (all ‘Drs’, naturally) there are no women. There is no trade union member, there is neither nurse nor teacher, there is no housewife and there is no bus driver, there is no municipal sweeper and no roadside food vendor, there is no-one from a ‘scheduled caste’ or a ‘scheduled tribe’, in fact there is no tribal at all, there is neither artist nor essayist, there is no-one to speak for the old folk of India and none to explain the dreams of India’s youth. Still they call it a council to which the country’s prime minister listens. What he and his ministerial colleagues learn from these five cosseted greybeards in their ivory tower I can hardly imagine.

The price of a kilo of rice, from 2006 to 2011, in 49 urban centres in India.

Let us see why it is so difficult to find utility (the word classical economists make much of) in the pronouncements of this cabal.

They said: “Very high rates of inflation have characterized the last two years. Much of the inflationary pressure came from primary foods, including cereals in the initial months.”

True.

They said: “While, open market intervention and large releases under the public distribution system (PDS) helped to stabilize the price of cereals, pressure continued to come from rising prices from other primary food items – especially pulses, milk, eggs, meat & fish.”

What does “open market intervention” mean? If it means the central government buying foodgrain to funnel into the public distribution system, this is a method riddled with corruption and crippled by speculation. There are no “large releases” different from the normal schedule of releases which in a country like India are large anyway. Cereal prices have not stabilised – not in 2011 and 2010 and not at any time in the last five years.

They said: “Greatly improved output of kharif pulses in 2010 combined with marketing of imported pulses at controlled prices, helped to curtail the inflation in pulses by July 2010. However, prices continued to rise for fruit, milk, eggs and meat & fish.”

Inflation in the prices of pulses has by no means been curtailed, controlled or even understood. Many kinds of pulses in India are consumed in many different ways, and there is demand not only from final household consumers but also from the dispersed and very varied small foods and snacks manufacturers for whom pulses are a necessary ingredient. Fruit, milk, eggs, meat and fish – all scarce items in the food basket of the poor but high-margin items for the food retail stores in urban India. The EAC has made no mention of why prices for these foods rose – homework not done.

They said: “The prices of vegetables took an unexpected turn in December 2010 and January 2011, resulting in an increase in the wholesale price index of vegetables by 34 and 67 per cent respectively in these two months. In consequence, primary food price inflation stayed in the double digits.”

Not only in December 2010 and January 2011. Several staple vegetables have been the actors in price volatility operas in all the 49 urban centres for which  India’s Food and Consumer Affairs Ministry monitors retail prices. To blame, in my view, is the steady ingress of the food logistics sector (itself part of the corporatisation of food and agriculture in India) into urban centres beyond the major metropolises. The “cold chain” and “value chain” evangelists work for the retail food and processed foods industry, and can exercise degrees of arbitrage which are wholly ignored by the EAC. Inside the market, there was no hint of the “unexpected”.

The price of a kilo of wheat, from 2006 to 2011, in 49 urban centres in India.

They said: “Such a lengthy period of sustained high food price inflation had its expected impact on money wage rates and other cash expenses, which in turn began to get passed into the price behaviour of manufactured goods. Year-on-year inflation for manufactured goods rose from around 5 per cent to 8 per cent in September and October 2011.”

Shouldn’t fossil fuel products and the prices we pay for them share the blame? I think a cursory study of the prices for OPEC and non-OPEC crude products will explain a lot. And besides, “wages” are wages to people who – being mostly in the informal sector and unorganised labour – cannot bargain collectively nor are represented in policy-making bodies (like the EAC), so their money wage rates have not risen in tandem with inflation. Quite the contrary, for rural labour (agricultural and non-farm both) the average household spends 65% of its income on food.

[You can get the EAC Review of the Indian Economy 2011-12 document (pdf) here] [You can get a plain text file of the paragraphs on food and agriculture, prices and inflation (txt) here]

They said: “The net effect was that the headline rate of inflation stayed close to 10 per cent for an extended period of twenty two months.”

True, even for whatever is meant by “headline rate”.

They said: “It should not be forgotten that throughout this period there has also been a suppression of the headline rate insofar as the prices of several refined petroleum products, especially diesel, continued to be restrained by policy – which has had an adverse impact on the subsidy bill and therefore on government finances and also on the finances of the public sector oil companies.”

Oh we are so distressed by the hurt caused to government finances, especially coming on top of the enormous tax write-offs (called “forgone tax revenue” in India’s quaint public accounts jargon) given to the esteemed members of CII, Assocham and Ficci, many of whom are direct beneficiaries of the measures that led to a high “headline rate” of inflation in the first place. Money for jam, I would call it.

They said: “The effort of public policy, especially monetary policy, seems to have had its desired effect. The headline rate dropped to 9.1 per cent in November and further to 7.5 per cent in December and has dropped further in January 2012.”

Now I know that the spreadsheet program supplied to the EAC for such calculations is provided by Messers Alice in Wonderland GmBH.

They said: “The welcome developments in the easing of inflationary pressures will enable the RBI to adjust its monetary stance over the next several months. However, the continued pressure from the fiscal side will continue to impose some limitations. Hopefully the extent of the fiscal burden may ease in 2012-13 and create conditions that are more conducive to investment and economic growth.”

Ah yes, in case we were momentarily misled, this is to remind us that the purpose of high-level panels of greybeards is to prove circuitously to the proletariat that conditions conducive to investment and economic growth matter (so very much) more than our shrinking wages and the spiralling prices we pay for our daily bowl of rice and scraps of vegetables. We stand educated.