The 'Dream Hoarders' and The Indian Economy

Right now, India is one exciting economic story. Its population is young and its economy is growing. The government, with a strong mandate in Union and State levels, have been introducing a number of structural reforms that the previous governments, over a quarter century, could not do. With legislative reforms, private participation in infrastructure building is becoming easier, and there is hope that India's rickety ports, faltering railways and mostly potholed roads would soon appear in a different, shiny, avatar. In a lot of ways, India is at a moment like China in the early 80s: The structural changes should unlock a steep growth, quick growth of employment and a new cycle of private prosperity.

This would be a reasonable expectation but for India's deficiencies in Education and Health, which may mean that India's demographic potential would never be realised. Structural reforms and infrastructure building can create the opportunities, but without corresponding growth of productivity and income, the projects can quickly become 'white elephant' nightmare. Without widespread prosperity, the shopping malls would go empty and the country's booming e-commerce companies, which makes massive losses but are backed by private equity in the hope of an eventual payday, would collapse like house of cards. 

Now, one would expect, therefore, the next stage of India's reforms and public investment would be aimed towards education and health. In fact, if questions about India's human development is raised, the usual answer is that it would follow. One can indeed argue that health and education can not wait till the arrival of prosperity, because they are preconditions, rather than outcomes, of prosperity. The model of growth in India, however, is not Meiji Japan, but the British Industrial Revolution, and the assumptions of a 'trickle down' effect on human development is central to Indian policy making.

This may mean a significant challenge for the Indian economy, because trickle down may never work in India. While it appears perfectly logical that, with prosperity comes good education and health, it never works if the society is deeply stratified. One would like to think that the traditional divisions of Indian society, based on caste, have gone away after seven decades of affirmative action: But it was rather accentuated, with greater regional and income disparities and cultural and educational divisions.

In this context, I think the current discussions about rising inequality, which focuses too much on economic inequality and disproportionately on a handful of billionaires, is somewhat unhelpful. The conversations in India mirror the global conversation, and people complain about Ambanis and Tatas of having a disproportionate advantage over 'little men'. Indeed, there is no denying that this is a problem, but this does not, at least by itself, explain why a country like India don't want to address its challenges of health and education more proactively. The answer, I would argue, is to be found elsewhere, and for this, 'dream hoarders', a category Richard Reeves used to describe the top 20% of the American society, is quite useful as an analytical concept. This would be the top end of the Indian middle classes, which usually means people with best education (or at least, with best educated children), lifestyle, neighbourhoods, healthcare etc., and I believe one needs to look at the political roles and priorities of this segment of people to understand the problems that India faces.

Indian middle class, a popular term, is actually a problematic concept, as what is called middle class is in India is not what 'middle class' means elsewhere. And, while some politicians and CEOs wax lyrical about 300 million strong middle class, they miss the point about how stratified this class in the middle really is. As The Economist points out in a recent article, 'Indian middle class' has a big hole in the middle, with a lot of people teetering on the verge of proletarization, whereas a few sitting pretty with a lot more, extracting their full share of political and social privileges, while being covered by the excuse of being the middle class.

It is this segment, which is equivalent to Reeve's 'Dream Hoarders'. Indeed, they should be called dream hoarders if we acknowledge that the existence of an 'Indian Dream', a hope that life will indeed get better. The reason why these people should be called Dream Hoarders is not just because they have better housing, heathcare and education (and everything else), but they are deeply segregationist and believe in 'keeping out' others from such privileges.

This phenomena is less well analysed than it should be (if for no other reason than the people who usually conduct such analysis are usually on the wrong side of the divide) but the segregationism is a key challenge to building human capacity in an economy. In an economy where doctors are in short supply, say, segregated hospital system would create very good and very bad hospitals; gated communities would invariably mean poor neighbourhoods outside, and state schools would be deprived of the best teachers and better students as a private schooling system flourishes. And, because of the political influence of this middle-class-who's-not-in-the-middle, which comes both from their money as well as their ability to shape the climate of opinions, the policies of the state would be directed at actively accentuating such advantages.

This class is a bigger problem for the poor and the poor middle classes, because Ambanis do not compete for school places with them, and neither the very rich, secured in their London homes and private islands, look to gentrify neighbourhoods by driving the poor and the old out. The well-to-do does all that, and create an everyday discrimination not just on economic but cultural grounds. They seek to undermine rule of law - every policeman thinks twice before stopping a BMW as the predictable first conversation would not be about the traffic offence that was committed but 'do you know who I am' - and democracy, as invariably follows.

A big beneficiary of the national prosperity, the dream hoarders are a big challenge for its sustainability, and yet, it is the same people who are left in charge. That the conversation in India is about building bullet trains rather than fixing hospitals and schools should, therefore, not be a surprise. And, indeed, no one wants to talk about it, too. However, it is an useful reminder for those who are looking to India for the next big thing, that the democratisation of Indian middle class may be one of the preconditions for the realisation of the Indian promise.



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