‘Smart cities’ have to be set up on sound social justice grounds
It is evident that the project for setting up the ‘smart cities’ has first to be set up on sound social justice grounds at the risk of accentuating the existing vast inequalities in incomes and wealth in the country.It will have to be carefully and meticulously “managed” for the good of all
In his epoch-making book, ‘Capital in the Twenty-First Century’, Thomas Piketty, the now highly renowned economist from the Paris School of Economics for his extensive research into the fundamental causes of rising economic inequality across societies, states that housing wealth – based on the ownership of land – has played a critical role in the rising inequalities across all societies during the past few centuries. One must pay attention to the fruits of his research, especially in a place like Mauritius where you have to heed Mark Twain’s advice to “buy land, because they’re not making it any more”.
The Minister of Finance in the last budget speech indicated that the 13 ‘smart cities’ the government was contemplating to create to bring about a new phase of growth in the country would employ up to 7000 arpents of land. This literally means that lands currently being employed for certain other purposes – residential and small commercial/ agricultural activities – would be converted to urban vocations – roads, railways, infrastructure, offices, luxury villas, shopping malls, high-rise buildings, etc., in diverse parts of the country. Other than displacement from existing occupations of land, the projects would tend to economically empower owners of lands in particular.
We’ve seen this phenomenon of rising prices of land throughout the history of Mauritius. In the period of the country’s severe under-development – the colonial period – the landless were able to cast their hard-earned savings into purchasing tiny plots of land from the historical owners of the country’s land property. This is what brought about a new economic class in the country, the small planters, and their relative emancipation from dire poverty. In past years, economic pressure has led many of them to sub-divide their tiny plots into tinier ones. Some have abandoned the economic activity of planting so that their lands are lying idle, waiting perhaps to be taken up by new property developers such as those involved in the ‘smart cities’ projects.
Land prices have kept escalating to the point of becoming out of reach to even what we consider as being our middle class. An arpent of land at Trianon when the parcelling out of sugar cane land began – in the 1980s — was sold for Rs 40- 42,000. Today, it is selling for Rs 7-8 million an arpent. Many suggest that part of the price escalation is due to pressure of demand from laundered money seeking to find a berth in the official economy. But it has a lot to do with the development of infrastructure – modern roads and ready connectivity to nearby and further-off urban and business centres.
This trend means that as new centres of economic activity will be set up in different parts of the country, the wealth generated for landowners – more particularly for owners of large urban and highly networked developable areas – will be accentuated. The more rules are made to restrict the use of land along with the typical accompanying corruption – such as zoning or strict land conversion rules – the more wealth will tend to concentrate in the hands of the few of its larger owners. The effect of the resulting price escalation will be to make it even more difficult for wage earners, both at the lowest paid and middle class levels, to get into land and affordable housing.
In many places over the world, growth and intensification of use of urban centres has resulted in huge premiums or, to use the correct word in the language of David Ricardo, an eminent economist of the 19th Century, “rents” paid to owners of land. The exorbitant “rents” paid to the latter, combined with prohibitive land use rules by governments and urban authorities, have created such a high price situation that workers seeking employment in the upcoming places of high productivity which promise higher wages have found it prohibitive and uneconomic to move to the most thriving of the world’s economic metropolises. They’ve been sent back to the less productive – and, hence, lower earning – places in the country.
The poor feel the effect of this escalation the most. This pattern of development reconciles Thomas Piketty’s findings that wealth and incomes have been appropriated disproportionately by owners of “capital” (including land), whereas owners of labour have been successively repressed by such an economic model. He has collected enough statistics from different countries to prove his point and has remained unchallenged to this day.
Governments could set right the foreseeable imbalance between the “rent” earning landowners and the rest of the population by adopting a system of taxation which taxes away the windfalls from urbanisation going into the hands of historical landowners. And using the revenues so obtained to economically empower the other social classes so they also could share equitably in the gains. Government cannot not play the moderator’s role if it is minded to bring out a more balanced economic equation.
It is evident that the project for setting up the ‘smart cities’ has first to be set up on sound social justice grounds at the risk of accentuating the existing vast inequalities in incomes and wealth in the country. It will have to be carefully and meticulously “managed” for the good of all.
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The type of industrial activity which the Industrial Revolution of the 18th Century ushered on the world stage has undergone massive change. It is being digitalized and robotized to ever increasing extents. E-commerce is gradually taking over thanks to online trading catching up, even in economies that some decades ago would not have been thought ready for this kind of transformation. We will ignore the advantages being conferred by new digital technologies at the cost of finding ourselves irrelevant and isolated at the level of global trade.
There is a growing and evolving new mainstream of economic activity based on the Internet. We have made some progress in this respect but we don’t appear to have gone far enough in an age where people are increasingly speaking of the “collapse of distance” by the digital revolution. The speed of our Internet cannot even compare with that of hotels in the best cities of the world. The cost of Internet access continues to remain high and prohibitive. All this acts as a severe handicap on our further development. Somehow, the providers of technology manage to retain their monopoly positions and prevent the country from going for the new high-speed vocation to which global evolution of technology has been calling the country for years now.
It may be worth paying serious attention to all the factors that have been holding us down towards the long-awaited embrace of the country with modern times. But even so, there is plenty of sound argument for enhancing our sea and air connectivity. Even this depends very much on the level of management we can give to intensification of our physical connectivity. A good management of this chapter in our economic life would have quickly identified the shortcomings, tackled them expeditiously and delivered the efficient platform on which we could successfully vie against others.
* Published in print edition on 17 April 2015