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Time of India
01-06-2025
- Business
- Time of India
Trade wars and chocolate bars, what India of the 1970s can teach Trump
Cooking, and eating, are often on Abhijit Banerjee's mind. But for the Nobel-winning economist, what starts with planning the night's dinner usually ends up in questions about the consumption, production, distribution of food, and their intimate relation to the broader economic issues of our times. His new monthly column for The Sunday Times, is about eating and thinking, about pleasure and responsibility, about global food and the Indian palate. Illustrated by Cheyenne Olivier, it offers recipes for life and lunch LESS ... MORE One advantage/disadvantage of being old is that I lived through what is history to so many others. President Trump adores William McKinley, the 25th US president, for his tariffs, but at 78, he is way too young to have lived behind a properly high tariff wall. I, on the other hand, lived in the India of the 1970s, when we had managed to kill almost all international trade through a combination of tariffs and other rules for importing (non-tariff barriers in trade parlance). I mostly experienced trade barriers through the important lens of chocolate. India, for reasons I do not claim to understand, did not grow much cocoa in those days, despite having many areas that seem suitable for that crop based on where else it grows. So, all the cocoa was imported and the exorbitant duties made it expensive. To keep the chocolate affordable for ordinary middle-class kids like me, Cadbury's used minimal amounts of cocoa. Illustration credit: Cheyenne Olivier (France) The net result was something milky and intensely sweet, not unlike most Indian confections, but chocolate mostly only in name. The trouble was that I had tasted the real deal, courtesy some of my parents' kind friends who either lived abroad or had gone on a visit. And it tasted very different — there was a bitterness and depth to them that was unmistakable. On our occasional trip to Kolkata's crumbling 'New Market', or to movie theaters in its vicinity, I would notice men in tight pants who were clearly trying to attract my mother's attention (and failing). Fairly soon, I figured out that they were selling various smuggled items, mostly watches, perfumes and CHOCOLATE. I could see from the print on the wrapper that though it said Cadbury's, this was a different breed. My instincts told me that my mother would not take kindly to the idea of buying contraband Cadbury's, but it was hard to shake off the desire to try it out. As I grew into teenage, my understanding of the gains from trade became less one-dimensional. For one, I was more aware of how people around me dressed, and it became clear that there were jeans and jeans. Those that flopped a bit, like mine, and the ones exuded a steely foreign firmness. I remember admiring the new pair that a neighbour was wearing and his telling me, very proudly, 'impotted', which to me sounded like impotent. I started giggling, at which point he got very huffy and commented on my apparent tendency to be jealous, which to be fair, I was a bit. All that has changed now. According to some industry estimates, India is the third largest exporter of denim in the world. Unfortunately, we still don't have our global brand of jeans, but there is no doubt about the quality of the denim. For one, I am biased but I think my friend Suket Dhir makes some of the most stylish denim products I see anywhere. There are two more or less standard theories of what changed. One that we heard a lot in India before the opening of the economy in 1991 is that we need the pressure from imports to force our producers to get to global quality. My colleague David Atkins, with Amit Khandelwal from Columbia University and Adam Osman from the University of Illinois, participated in a randomised experiment in which some carpet manufacturers in Egypt that had previously produced only for the domestic market, were connected to potential importers abroad. It took some time for them to get going, but eventually, they started exporting and making more money, and perhaps more interestingly, weaving higher-quality carpets in the same amount of time. The authors called this learning-by-exporting. The alternative view is sometimes described, confusingly, as learning-by-doing. It is better described as learning-by-not-importing. The idea is that it takes some time to learn how to produce quality, and if you are new to the business, there is an apprenticeship period where the competition from abroad might make it impossible to sell profitably. Knowing that they are in for a prolonged period of loss before things turn around, firms may not take on certain products that would otherwise be natural for their country to produce. This argues for temporarily shielding domestic firms from foreign competition to allow them to find their feet. The idea goes back at least to Alexander Hamilton, author of the Federalist papers and now a subject of a great musical, and is often referred to as the 'infant industry argument'. A recent paper in the American Economic Review by Reka Juhasz finds support for this theory in France during the Napoleonic wars. Before the war, France was slow to adopt mechanised cotton spinning technology developed in Britain. Instead, they imported British cotton yarn. A war-time blockade of British manufacturers changed that, especially in the north of France. This was where trade was particularly effectively blocked, unlike in the south, where exports from Britain continued to seep in. Juhasz shows that this difference in access to British cotton leads to an interesting reversal. The south, the part of France which had more mechanised spinning before the war, fell behind the north during the blockade. After the war ended and trade resumed, the north kept its lead and managed to compete successfully with the cotton from across the Channel. The infant industry grew up. It didn't need protection anymore. The timing of take-off in the Indian denim industry is consistent with a learning-by-exporting view, since it mostly happened after liberalisation in 1991. However, given that the industry actually started in the 1980s behind the tariff wall, it is possible to argue that the trade barriers helped the infant industry to get prepared to meet global competition. The take-off still happened after the economy opened up, perhaps because importing the machines and other inputs for making denim became much easier after 1991. I remember working with locally available inputs in the 1970s, the goal in my case being to replicate the Black Forest cake that I had loved at the then-famous Kolkata restaurant called Skyroom. I had my prized can of Himachali cherries for the filling, but the chocolate batter made from several slabs of domestic chocolate refused to look anything like the rich brown viscous liquid that they showed in the photo, and I eventually gave up. Perhaps it was a bit the same for the denim-makers. Whether it is helping the exporters or stopping the imports, the intervention is meant to be temporary, just long enough that the industry can get going. The traditional position of economists is that if a country needs permanent refuge behind a high tariff wall to keep a particular sector going, it is probably better to shut down and focus on whatever the country is good at. Exports of successful products can pay for the imports of the ones that don't do well. Politicians, including President Trump, often have a very different view on this. The problem is that trade has winners and losers, and they are not the same people. In the US, the big winners are relatively well-educated people who live on the coast; the losers are less educated residents of the middle of the country. The winners win more than the losers lose, economists would say, so why not tax the former to compensate the latter? The catch is that the US, unlike many European countries, has no tradition of large-scale redistribution through taxes and transfers. Instead, Trump wants to permanently block the imports of a wide range of products in the hope that it 'reshores' the industries that were lost due to trade and brings back the associated jobs to the mid-Western workers. At one level, this is not very different from what we do in India to protect the livelihoods of farmers: we have essentially permanent tariffs of 35% or more on things like corn, which is what annoys the US. At another level, however, it is vastly more audacious. We are merely trying to keep the farmers in business: Trump wants firms to start new businesses, businesses that have been gone for a generation or more, and create jobs. They will need fresh, large investments and newly trained workers. Buyers will need to be willing to pay the premium and swallow the lowered quality, like we did in India in my youth. Retailers will need to not look for alternatives, if not from China, from Brazil or Rwanda. Managers will need to hire workers rather than deploy robots to do all the work. The investors will need to believe that this new regime will last, and they won't fall victim to some new deal that the President (or the next President) likes better. The reshoring probably won't happen. But in its name, the world economy is being upended; no one knows where it will land. In the meanwhile, I remain on the lookout for shifty men on Boston streets selling illicit bags of the wonderful Chinese black walnuts and sweet salty candied plums. This is part of a monthly column by Nobel-winning economist Abhijit Banerjee Facebook Twitter Linkedin Email Disclaimer Views expressed above are the author's own.
Time of India
07-05-2025
- General
- Time of India
Urban dreams, rural roots: Why millions still farm
Cooking, and eating, are often on Abhijit Banerjee's mind. But for the Nobel-winning economist, what starts with planning the night's dinner usually ends up in questions about the consumption, production, distribution of food, and their intimate relation to the broader economic issues of our times. His new monthly column for The Sunday Times, is about eating and thinking, about pleasure and responsibility, about global food and the Indian palate. Illustrated by Cheyenne Olivier, it offers recipes for life and lunch LESS ... MORE My grandfather was a devoted, if not particularly gifted, gardener. Our terrace was lined with earthenware pots where jasmines and tuberoses grew in the summer and roses in the winter. Every year, sometime in October, my grandfather would broach his plans for the winter seasonals — this year, we would agree, unlike the last many years, the dahlias will be as large as a man's hand and the marigolds tight as a child's fist around an unexpected candy. We would come back from Gariahat market carrying bags of damp earth ('best quality from Hooghly') and the pomace left after pressing out mustard oil, its potency confirmed by its repulsive odour. My job was to empty the pots and break up the clods, reluctantly bringing chaos into the lives of a hundred peaceable earthworms, before mixing our old dirt with the new. One year, when I was eight or nine, I decided to launch an agricultural project of my own. With a spoonful of cement from the kind man who was fixing our terrace, I blocked the drainage hole at the bottom of a pot to have the standing water one needs for rice to germinate and planted a handful of unhusked rice that our cook had found while cleaning the rice and discarded. The grains turned into green shoots that I carefully transplanted in other pots. In due course there was rice, a whole handful that I peeled off the sprigs and proudly brought to our cook to ask him to get them husked and make rice. I still recall the look of infinite contempt that quickly flashed over his face before he patiently explained that there was not enough for one mouthful. If this was an appropriate learning experience for a future development economist, Cheyenne's memory of being lost among the cherry tomatoes seems to presage a future artist. Her father, like my grandfather, found gardening a bit mysterious and frustrating, but this one time the cherry tomatoes went wild in their front yard. Cheyenne, looking for the sweetest of them all, found herself surrounded by plants a foot taller than her, laden with bright red fruits, but no dad in sight. These days, Cheyenne does the gardening, but she has stayed away from growing vegetables. As for me, my one attempt to grow flowers in our then front garden in Cambridge was such a disaster (weeds everywhere, dead plants, poor landscaping) that an obviously irate neighbour came to warn us that we were depressing everyone's property values. ILLUSTRATION CREDIT: Cheyenne Olivier Many amateur gardeners find gardening hard. And yet the world over, poor rural families manage to do it successfully enough to make farming the single largest occupation in the world. Nearly 900 million people, more than 10% of the world, farm for a living, by a recent Food and Agriculture Organisation estimate. And this does not include all those, mostly women at least in India, who grow their own chilies and curry leaves, tulsi and lemongrass on a tiny plot of land adjacent to their homes, or in pots on their porch. I have an indelible memory of being somewhere in central Bengal, interviewing a woman whose face was framed by two beautiful, velvet green winter melons ( chaal kumro in Bangla) hanging from the bamboo eaves of her hut. One side of her little house was crisscrossed by creepers that went onto her roof, filtering the sunlight through the mosaic of giant leaves and yellow flowers. Interestingly, when we surveyed poor families in rural Udaipur district in the early 2000s, while more than 90% said they worked in agriculture, only 17% said farming was the main source of their earnings. This is a pattern that shows up in many places in the world today, very different from how it was, for example, in India 100 years ago. What explains this pattern? Why don't they give up farming and specialise in whatever else they do that pays most of their bills? Why does almost every poor family we surveyed in Udaipur own some little land? A part of the answer is that in many developing countries like India, living in the city is expensive and/or unpleasant for low-income families. The shortage of decent affordable housing is acute — the choice is usually between crowding into a slum or spending 4-5 hours a day commuting. Many migrants, therefore, prefer to leave their families in their home village and make regular trips back. The land in their village gives them a place to call home, and something for their family to do while they are away (they will often come back for the planting and the harvest). For policy makers in many low and middle-income countries, who are often acutely aware of just how inadequate their urban infrastructure is, this continuing attachment to the village takes a bit of the pressure off. Even China, the most dramatic example of large-scale urbanisation in our times, movement to urban areas was strictly regulated through the hukou system (residence registration) to ensure demand for housing did not outpace its supply. Land ownership also offers a form of social security in places where the state does not offer one. If you lose your job, it is a way to feed the family and survive. In China, in the depression after the Tiananmen Square episode in 1989, a large portion of the urban labour force went back home to cool their heels. Farming is what sustained them. Something similar happened in India and many other countries during the pandemic. Of course, this requires the households to worry about future uncertainty enough to hold onto the land. It is not clear that they always do: when things are good, they may be tempted to sell the land and take a job elsewhere, but if the job suddenly vanishes, they will still need to be supported by the community or the state. This is another reason why the state may try to force them to hold onto a certain amount of land — that way they have something to fall back upon. This might explain the unique position of land as an asset in many countries in Asia, Africa and Latin America. What farmers call their own land isn't actually theirs to sell, though they might have been farming it for generations. For example, until recently, land in China remained state property to be allocated to households for cultivation based on need. At least in theory, families that were too busy to cultivate their land were meant to lose it to those with unemployed hands. Elsewhere, such as in the northeast of India, but also in large parts of Africa and the Mexican ejidos, for example, the decision to sell land rests with the community. And even where there are no legal restrictions on land sales, as in much of India, there is a strong sentiment attached to land that belonged to the family ( baap-dada ki zamin ), which probably serves a similar purpose. I see that pride on the face of our cook when she offers me a bilati amra (apparently called hog plum in English) that grew in her family's garden south of Kolkata. With a pinch of salt and some chili powder, it makes a rare healthy snack that I adore. There are other commitment advantages to keeping some land in the family: if something happens to the main income earner or he (it is typically a man) simply abandons them, it can provide a minimum sustenance. In Africa, for example, unlike in India, land that a woman brings into the marriage or acquires as a part of her bride-price continues to belong to her even if the man marries again. Indeed, this attempt to codify the special social role of land can go even further. A study by my wife and colleague Esther Duflo and Chris Udry from Northwestern University, finds that in Côte D'Ivoire, there are three types of land in each marriage. There is land that the man controls and cultivates, whose produce belongs to him and he might use in whatever way he pleases; land his wife controls and cultivates and whose produce belongs to her; and land, which the father is expected to cultivate, to grow 'appreciated crops', crops that can only be used for the welfare of the children. The main example of such a crop turns out to be yam, which both feeds the family and gets sold in the market, but the money from it can only be used for things like children's education. This seems to be a way, in a setting where men often marry multiple times, for each wife and her children to have a long-term claim on the father's time. But beyond all this careful social engineering, in a world where women often live very circumscribed lives where they mostly get to do the drudge work and rarely get credit for the results, having a bit of land offers them the pleasure of being able to deliver something delicious and/ or beautiful to the family. I remember the joy with which my aunt, who never worked outside and never had a child, would make karaishutir kochuri (breads stuffed with peas) for us, 'with peas', as she would say with her slightly withheld smile, 'from my own garden.' This is part of a monthly column by Nobel-winning economist Abhijit Banerjee illustrated by Cheyenne Olivier. RECIPE: Karaishuti diye begun pora (Smoky eggplant salad) Here is a recipe for when the peas are at their sweetest… Pop 500 gm of peapods and boil the peas till cooked but not mushy (6-8 minutes). Char two eggplants of 500 gm each that have been scored with a sharp knife (or 3 or 4 smaller ones) on a gas fire or under a broiler till the skin is mostly burnt and the flesh is falling apart. Cool. Discard the skin and the stem. Mash the flesh and leave in a colander for any liquid to drip out. Mix with the cooked peas, ½ cup minced red onion, 1 heaped tablespoon finely chopped ginger, 2 thinly sliced green chilies, ¼ cup chopped cilantro, ½ cup finely chopped tomato, 2 tbs mustard oil, and 1 tsp salt (or to taste). Serve with slightly charred bhakris or phulkas. ILLUSTRATION CREDIT: Cheyenne Olivier Facebook Twitter Linkedin Email Disclaimer Views expressed above are the author's own.
