Why Bihar should ensure there are no slums in Mumbai?

Slums are seen as a great blemish to any urban settlement. Various efforts made to eliminate these are rendered futile.

A slum dweller has substantially reduced cost of living as compared to a legal resident. The total cost of working for a legal resident includes rent for property, facilities like water, electricity telephone, cost of travel etc. There are also long-term expenses for maintenance of the facilities they use. For a slum dweller these cost do not include the major heads of rent and in some cases cost of travel is also reduced. The maintenance is almost as negligible as the rent. Due to these cost advantages the slum dwellers are able to work at much reduced wages as compared to the legal residents. This has cascading implications.

Firstly, this prevents any increase in the cost of labour in the city. Alternatively the labour costs may also reduce. This allows the city to retain its cost advantage over other competing areas. Corporates and revenue contributors do not feel the need to shift base to the newer areas, the newer areas do not get adequate returns on the investments. But as this is only a pseudo‑advantage it actually strains the infrastructure of the city. Investments in the infrastructure generate more jobs and more jobs attract more people. This goes into a degenerating spiral till the area cannot take any more modifications to adapt to the increasing demand.

While superficially it seems that the cost of living of only the lower end of the wage spectrum is affected, a peek at the economic mechanism reveals how this affects the entire range of incomer earners. It reduces the cost of living by making maids, drivers and other services available cheaper than it would have been possible otherwise. In its absence the pinch of increasing costs would have felt earlier creating a trigger for economically rational action.

The political impact of this is even greater. The local legal residents are not able to compete against this new workforce that enters this local markets. This forces the local labour force to move out of their “homeland” leading to “son of soil” movements. The fact that the political parties promoting the “son-of-soil” movements themselves are promoting slum rehabilitation schemes shows the hollowness of the intentions on both grounds.

The major political impact is of the vote-bank politics. The work force that migrates into the city needs a support structure and political leaders exploit this need to gain a hold in the area. The fate of the politician depends upon the number and not their legality (which can often be purchased by politicians themselves). The politicians therefore are in favour of migration into the area rather than out of it. This gives a situation the last push down the spiral out of which recovery is rather impossible.

Rational action assumed as a solution for slums is enforcement of laws against encroachment of private and public places. When this rational action assumed is broken the system fails miserably. The system needs to be redesigned so as to be fail-proof in such circumstances.

Notes and Points
Slums have an effect to lower or maintain the cost of labour in the city. This effect is short term and has a detrimental effect on the investments made in the city in the long term. Over the long term these investments are less profitable than investments in economically viable legal locations.

Artificially decreased cost of living denies the lesser developed areas to get a share in the limited investment capital available. This means Bihar and other lesser developed states should be more keen to eliminate the slums in metros and urban areas than the metros themselves.

Slum problem can be tackled politically or economically or both. Political solution would be to restrict the right to vote to locations where they have a valid house. Economically, taxation could be increased for investments in congested cities and metros. This will make investments in congested cities unviable thus allowing development in towns and cities other than those already congested. However we also need to ensure that there also a pull from other cities for such investments to come through.

There should be a great interest from the central government to make sure that congested cities do not get the investments for the greater good of the economy as a whole. Developmental bias is certain to clarify the same.

Essentially what it means is that if you ensure Law and Order (and not let slums come up in the first place) to allow the economics to shape the development you will have ideal country!! Will India create an atmosphere where Economics is able to efficiently take its course? That is a big question!!!