Sunday, April 05, 2009
Slums of India
Thanks to the Oscar winning movie, the slums of India have become a much discussed topic in socials these days. In big cities like Bombay, slums, though illegal encroachments have water supply, electricity and other public goods. The reason for this is that slum-dwellers are a big vote bank, and no power-seeking politician can hope to win an election by over-looking this group. The economists' solution may be simple!! Evict them, or the government should sell the land to the highest bidder. Well!! Neither is an easy solution, and both will lead to much violence. What if they just gave the slum-dwellers titles to the encroached land? That solution is rife with problems as well. It creates perverse incentives for more slums to emerge. Most slum-dwellers, unlike popular opinion, are hard-working people. They just do not have enough resources to pay exorbitant rents in these cities. The problem thus logically goes to city laws that are unable to protect lessor and lessee. Thus, lessor's ask for a security deposit equivalent to ten months rent, which is not a small sum for low income individuals. So, to stop slums from developing and growing, cities just need to change their laws. Any other solutions?