I wish to offer five perspectives, influenced by my experiences as a marketer in a consumer goods company (Hindustan Lever Ltd.) for three decades and working in a large industrial conglomerate (the Tata Group) for eight years after that.
1. Political and business leaders are already changing their attitudes about the legitimacy of squatter cities. Even 50 years ago, Dharavi in Mumbai might well have been the world’s biggest slum, largely settled by Tamils and Telegus from southern India. It has even produced one of the well-known dons of crime, Varadaraj Mudaliar, a character who has inspired a major Bollywood film (Nayakan, directed by Mani Ratnam).
As a young sales manager marketing to grocery shops in urban slums, I used to wonder how these slums could possibly survive. At that time, Mahatma Gandhi’s view seemed to be right: He had advocated keeping people in the rural areas by promoting the charkha, the village spinning wheel.
Today, Dharavi is brimming with entrepreneurship. It boasts households with television sets, shops selling mobile telephones, and restaurants serving multiethnic cuisine. It is no longer “illegitimate” in any way. Civic amenities like bus service, schools, and hospitals took several decades to come, but they exist now.
Many political leaders, over the past 50 years, have contemplated stopping urban migration through regulation: for example, by monitoring entry into Mumbai. Leaders now realize that this will not work; they should manage the situation rather than attempt to eliminate it. In November 2005, Indian Prime Minister Manmohan Singh said in Delhi, “Urban areas are the nodes from which enterprise, creativity, and prosperity radiate in all directions.… We need a new wave of city buildings for the 21st century.” China’s leaders are thinking similarly. As the Financial Times noted on November 15, 2005: “Beijing aims to manage, rather than halt, rural migration which it accepts is important for economic growth.”
2. The new cities represent a new kind of global melting pot. People of different regions, subcultures, and even nationalities constitute an invisible and uncontrollable proportion of the immigration wave. Rural Bangladeshis, for example, are enticed by organized syndicates, which operate over the 4,000 kilometers from Kolkata to Mumbai, to cross the porous border in Bengal to seek a livelihood in the burgeoning Indian cities. In a multilingual country like India, the “real” language spoken among the slum-dwellers is invariably not the local one (Marathi in Mumbai) but one from elsewhere (Tamil, Telegu, Hindi, or Bengali). All of them are commingling in the urban slum population.
As all these people mix, the economic vibrancy of the urban slums is providing an escape valve for the pressures and tensions of inequality. Economist Albert Hirschman likened a society with recognizably distinct groups to a multilane highway. If none of the lanes is moving, then people will sit through a traffic jam patiently. However, if one or two lanes are moving faster and they see no hope of a movement in their own lane, then they will jump lanes. History shows that great disparities in wealth cause economic depression, and in repressed political situations, even revolutions. A release mechanism for inequality is best found before the pressure becomes unmanageable.
Informal-sector employment and entrepreneurship in the urban squatter cities represent a short-term solution. But will that be enough in the long run to absorb enough people into the formal economy and society with dignity and opportunity? Or will some kind of intervention, from either the government or the private sector, inevitably be called for?
3. One should not judge squatter colonies and urban slums by the standards of the urban rich. I used to think that people would quit the slums with the slightest inducements from government. Even today, if a person like me visits there, the situation appears intolerable. And urban planners continue to think that rehabilitation apartments are a solution. But they are not.
Journalist Suketu Mehta captures the reason in this passage from his book Maximum City: Bombay Lost and Found (Knopf, 2004): “I asked…if she wouldn’t rather live in a decent apartment.… She replied, ‘There is too much aloneness there, a person can die behind closed doors of a flat and no one will know. Here there are a lot of people.’”
4. Because squatters are real consumers with real needs to be satisfied, they represent an opportunity. Companies have learned to design their products by comprehending the needs of such consumers. They live on an economic escalator; if a company can connect with them early on, there are legitimate business rewards to be reaped in the course of time. They provided my company with a market for consumer goods — a large and attractive one.
Initially, my company did not sell them Lux, “the bathing soap of the film stars,” but sold them Lifebuoy, “the soap that washed away germs.” Today, those consumers buy Lux, and even more expensive soaps.
In the early 1970s, they had no running water in their dwellings, so they could not use synthetic powdered detergents — there was no receptacle to soak their clothes in, let alone the water to rinse after the soak. My company designed a synthetic detergent bar called RIN, one of the first such bars in the world, so consumers without access to large quantities of running water could wash by rubbing the clothes. Such soaps are flourishing consumer products today. It is the same story with shampoos, TV sets, bicycles, and two wheelers, electric bulbs, and even banking.
Microcredit — the use of pooled credit to help lower-income people start businesses and find opportunities — is no longer just a rural phenomenon. There is an association of Indian microcredit lenders, and its members feel that the conditions of growing urbanization today represent “the big moment; it couldn’t be bigger.” The central bank of India promotes this idea, on the grounds that microcredit helps the poor, but it also allows banks to increase their business, enhance their profit, and spread the risk. A recent World Bank report indicates the growth potential in India by pointing out that microcredit touches only 5 percent of the poor. In Bangladesh, microcredit touches two-thirds of the poor.
5. Asians should not be too complacent; we Asians will also face the problems of an aging population. China and East Asia’s working-age population will peak in 2010; India’s will peak about 30 years later. Thereafter, there will be progressively fewer consumers (as is the case in the West and Japan already) but, more importantly, the number of pensioners will increase without an increase in the working population.
This will have an adverse effect on market sizes and cost structures in geometrical progression, just as the beneficial converse happened in the earlier phase when the working population increased. For India, there may actually be a demographic bonus between 2010 and 2040, when its working population is still increasing, while populations in the rest of Asia level off and decline.
The rabbit is in the middle of the python, and because the process of depopulation will happen over 30 years, the subject does not engage much of the attention of Asian corporate leaders. But it will.
R. Gopalakrishnan (email@example.com) is the executive director of Tata Sons, the holding company of the Tata Group, India’s largest industrial conglomerate.