Day 354: In Spite Of The Gods

Understanding the difference between organized and unorganized India is the key to understanding why India’s economy is so peculiar: at once confident and booming yet unable to provide secure employment to the majority of its people. Contrary to much of conventional wisdom in the West, which often, quite wrongly, sees Indian employees of foreign multinationals as exploited sweatshop labor, the 14 million who work either for Indian or foreign private companies are the privileged few—India’s aristocracy of labor. In 1983, as India was entering the twilight of its swadeshi phase, the average labor productivity of the worker in the private organized sector was six times that of his counterpart in the unorganized sector. By 2000 that gap had risen to nine times.10 The gap in earnings was similar. This is a world of difference. Crossing from one world to the other takes good education and skills, or a huge dose of luck. It does not happen often enough.

India’s ability to provide a better bridge between the old world and the new depends a great deal on the extent to which it can provide jobs for low and semiskilled employees in its manufacturing sector. In terms of scale, India can only be measured against China. In 2005 India employed just 7 million people in the formal manufacturing sector, compared to more than 100 million in China. Given the large investment flows and the priority that Nehru gave to industrialization, many people find it puzzling that sixty years after independence India’s manufacturing sector remains so small in terms of the number of people it employs. That is because Nehru’s strategy was essentially capital-intensive—its priority was to develop India’s technological capacity, rather than to employ the maximum number of people. But it does not follow that Indian manufacturing is correspondingly weak or uncompetitive. Measured by quality, if not quantity, many of India’s homegrown private sector manufacturers are considerably more impressive than their counterparts in China. Again, India finds itself higher up on the ladder than one would expect it to be. It is just that most of its people are still sitting at the bottom.

This very Indian paradox is everywhere visible. But one of the best places to see it is in the impeccably maintained and clean-swept company town of Jamshedpur in the eastern state of Jharkhand, close to the isolated Himalayan kingdom of Nepal. Jamshedpur is almost a museum of India’s industrial history from its nationalist beginnings in the late nineteenth century long before the British departed, to the India of the early twenty-first century that exports galvanized steel to China and auto components to America and Japan.

The town was established in 1902 by Sir Jamshed Tata, founder of the Tata Group, India’s largest private sector company. At the beautifully kept park in the center of the town, fourth- and fifth-generation menial employees of the company can be seen leaving rice or flowers or offering puja (small prayers) beneath the imposing bearded statue of Jamshedji,* as he is still known. The sight reminded me of Rudyard Kipling’s description of lower-caste Hindus and Muslims worshiping at “each other’s wayside shrines with beautiful impartiality.” But the prayers are well deserved. For the poor, a job with Tata is a job worth having. With it comes access to high-quality company medical care, pukka (quality) housing with clean and drinkable tap water, and good schools in which to educate your children. But there are fewer and fewer jobs.

Like many large Indian manufacturing companies, Tata’s balance sheet has gone from respectable in 1991, when a new world was opened up by Manmohan Singh’s abolition of the industrial licensing system, to world-class today. Yet the company’s payroll count has gone in the opposite direction. In 1991 the imposing steel mill in Jamshedpur turned out just 1 million tons of steel a year and employed 85,000 people. Now, in 2005, it is making 5 million tons a year and employs 44,000 people. Tata Steel’s turnover has risen from $800 million to $4 billion over the same period. “We could probably get the labor force down to 20,000 and move up to a production of 10 million tons,” said one of the Tata executives assigned to show me around.

Tata Steel’s story, in which it transformed itself from a laborintensive company that supplied low-cost steel to the domestic market in 1991 to a capital-intensive company that supplies world-beating automobile steel to Japan’s shiniest car companies today, parallels that of other successful Indian manufacturers. Up until 1991, Tata Steel made everything it possibly could in its own backyard, since it was always too much of a struggle to import spare parts or new machinery under India’s “import substitution” regime. Naturally this need for bureaucratic approval was a distraction from what the company was supposed to be doing and added greatly to its labor force. The company also employed large numbers of lobbyists and “gofers” who spent their time hanging around ministries and petitioning bureaucrats.

It was yet another questionable legacy of the well-meaning society Nehru wanted to build. Nehru gave India some of the strictest labor laws in the world, making it virtually impossible to sack an employee, even if the person you wanted to fire was a chronic absentee. Nehru gave India an industrial licensing system in which companies such as Tata needed the permission of bureaucrats for even the smallest investment decisions on what they could produce, when they should produce it, and where they should produce it.

Some parts of Nehru’s model, such as the Orwellian “License Raj,” have been dismantled. But some, such as the absurdly strict labor laws (which were made even stricter by Indira Gandhi in 1976), remain. This means that companies are reluctant to hire large numbers of people even when they are expanding since they fear being stuck with boom-era payrolls during the next recession, which would push them into bankruptcy and endanger everyone’s job. But it also means companies prefer to outsource as much as possible of their work to small, unaudited outfits in the “unorganized sector,” so they can escape the labor laws, which are unenforceable in India’s labyrinthine informal economy. There are other legacies that have yet to be abolished, including the “Inspector Raj” of constant inspections that plagues much of Indian business. As Gurcharan Das, former head of Procter & Gamble’s India operations, wrote, “In my thirty years in active business in India, I did not meet a single bureaucrat who really understood my business, yet he had the power to ruin it.”

~~In Spite Of The Gods: The Rise of Modern India -by- Edward Luce

Day 286: Thinking Small

In 1949, a ship called the MS Westerdam departed from the coast of Europe, its hundreds of passengers headed toward U.S. shores. Nestled deep in the ship’s cargo compartment, a pair of headlights peeped out of a dark tarp; two wide, open circles leading to the soft curves of what would soon be known as the world’s most recognizable car. Protesters, rebels, dissidents, politicians, businessmen, the world’s corporate elite—all would eventually become entwined in its story. By the end of the 1960s, it would do what no other car had done before: transcend age, class, and country to become a symbol adopted by them all. Americans would call the car the Beetle. In other places it would become the Flea, the Turtle, the Vocho, the Foxi, the Buba, the Fusca, the Poncho, and the Mouse.

Over the years, the car developed a cult following as well as a more public persona. It had fan club after fan club created on its behalf; it showed up in the films of Woody Allen and Stanley Kubrick; Disney endearingly dubbed it “The Love Bug”; it was even driven—briefly—by James Bond. For decades, the car filled college towns and campuses, the choice of students and faculty alike. It appeared on the cover of Abbey Road. John Lennon had a white one in his driveway. Packs of them dotted the beaches of California, surfboards strapped to their roofs. A children’s game even spontaneously developed around the car as kids scanned the roads in search of it: Punch Bug red! No punch back! The car became so ubiquitous that pop artist Andy Warhol included it in his iconic series of silk screens, placing it in the company of personalities such as Elvis and Marilyn Monroe.

Today the original Volkswagen is still known as the longest-running and best-selling single car design in history, and it is the only car to have been brought back by popular demand … twice. Sometimes referred to as the world’s most huggable car, perhaps no other automobile has ever been lavished with such attention and affection. But onboard the MS Westerdam on that cold winter day in 1949, none of that had yet come to pass. In those days, very few thought the car had potential. Reaching U.S. shores for the first time, the car had much more in common with the millions of immigrants coming over on similar ships, men and women who had been through dark times and were now seeking refuge or hoping to reinvent themselves, eager to find out if what they’d heard about the American dream was real.

It had been a long road. In fact, after nearly two decades of work and planning, the Volkswagen had only barely made it into existence at all. During the Second World War, the car’s country and factory were all but destroyed. Caught in the ugliness of the Nazi machine, it became a symbol of the hated party. By 1949, one of the men responsible for it had committed suicide and another had been kidnapped and placed in prison, where he languished, imagining he’d failed to fulfill one of his lifelong dreams.

Needless to say, when the car was unloaded on the docks of New York City that first time, it was not greeted warmly. Not only because of the dark stain of war that washed over with it, but also because of the undeniable fact that the round little car just didn’t fit in. America had been through a long Depression and a long war, but now unprecedented prosperity was finally leaking into the land and the country was on the verge of an automotive boom. The United States of the 1950s would be marked by wide elegant cars—the bigger the better—with flamboyant tail fins, extra comforts, and plenty of chrome. In contrast, the Volkswagen was oddly shaped and excruciatingly austere. People found it comical, awkward, and strange.

And yet on those very same New York shores, in pockets throughout the city, there were men and women—people considered just as out of place as the car itself was in those days—who were feeling a new kind of energy, readying themselves to take the risk of dissenting, of going against the common way of doing things, of thinking strange. Likewise, back in Germany, a similar change was happening as the country struggled to come to terms with its dark history. On both shores, there was a desire to evolve from within, a need for individual freedom and economic responsibility, for less empty extravagance and for more meaning and truth. It would take a while to mature, but a revolution was rising, and the Beetle would be at the center of the wave. After so many years of obstacles and near misses, the car would finally be in just the right place at just the right time, merging with the larger flow of modernizing governments and evolving markets to revive a sense of joy and wonder in the world.

Beetle owners have a saying: They don’t find their cars, their cars find them. To some degree, that’s how this book came to be. My first real encounter with the original Beetle happened only after I’d graduated from college and moved to Germany. Riding back to Berlin after an artist residency in the countryside, lulled and drowsy in the backseat of an SUV, I was shaken from my daze when we came upon one particular town. That evening, the landscape had been empty and dark until suddenly there was the bright illumination of towering glass structures and fiery smokestacks: I was overwhelmed at the way this alien-like city suddenly sprang up out of the somber, empty terrain. One of the German friends I was with saw the effect it had on me: That’s Wolfsburg, she said, Isn’t it strange? She went on to explain that this town was originally built by the Nazis; Adolf Hitler had built it for his car. What car? I asked. You don’t know it? she wondered aloud. I thought everyone in America knows the Bug.

In German, “Volkswagen” means “People’s Car.” At first, it seemed impossible to me that the same car that was once a child of Nazi Germany could grow up to become a symbol of freedom, democracy, and love. But as I would soon discover in my research, the car had always been meant for the people, and it lived up to that dream in ways no one expected and no one could have planned.

~~Thinking Small: The Long, Strange Trip of the Volkswagen Beetle -by- Andrea Hiott