Punjab’s Resource Curse

A resource curse is when a place that has abundant supplies of natural resources (usually crude oil) ends up worse because of it. The concept explains, for example, why:

  • Saudi Arabia, which has so much crude oil, is nevertheless such a horrible place for human rights
  • The Democratic Republic of Congo, which is a supplier of all the rare minerals that go into our cellphones, is torn apart by civil war
  • Jharkhand and Chhatisgarh, which produce so much of India’s coal and iron ore, are miserably poor and underdeveloped compared to places which only buy up the power and steel products

Less extreme and gruesome examples of the resource curse include Dutch Disease, in which having lots of natural resource exports makes all your other industries less competitive. So even though the Netherlands didn’t descend into poverty or dictatorship after the discovery of natural gas, the rest of their economy suffered.

Although the Netherlands (and Norway!) managed to stay intact as democracies1, having lots of natural resources certainly does seem to make you more susceptible to dictatorship or authoritarianism, or at least make it harder to build democracy and the rule of law. This EconTalk episode, in which Leif Wenar talks about refusing to trade oil with dictatorial regimes is an interesting discussion on that. (For what it’s worth, I found it highly worth hearing, but it left me unconvinced because it didn’t really address the issue of oil and other commodities being very fungible in trade. But still very intriguing; and the bits about how to use resource revenues for the community or nation rather than to enrich dictators has interesting tie ins with the work of Elinor Ostrom2, which I am also reading these days.)

After hearing the episode and ruminating on it for a while, I had a moment of insight. That insight was this: Punjab has a resource curse too. The resource in question is fresh water.

My narrative goes something like this: for centuries, the five rivers (plus the Indus) in the Punjab made it a little more fertile than, say, the Ganga-Jamuna Doab or the Cauvery delta. But in the 1950s and 1960s, the Green Revolution was to Punjab what the invention of the oil well was to Texas or Arabia. The introduction of thirsty and productive hybrid varieties of wheat and rice meant that suddenly the abundant water resources, instead of being left to flow, were being rapidly converted into foodgrains3.

As irrigation, electrification and groundwater pumping stepped up, so did foodgrain production (though productivity eventually stagnated). Simultaneously, the slow decline of manufacturing began. And in the 1980s and 1990s, the freshwater resource curse became as bad in Punjab as the petroleum resource curse became for Arabian states, playing out in:

  • Khalistani separatism and terrorism
  • Police retaliation and brutality
  • The steady consolidation of the Badal family over the Shiromani Akali Dal

Meanwhile, as the state itself went bankrupt, and the power company even more so, manufacturing became practically unviable (being so far inland from a decent port doesn’t help either); and the drug abuse epidemic took off. And here Punjab is today, where manufacturing is unviable, agriculture itself is looking unsustainable after years of pumping groundwater and growing rice has left the soil waterlogged and unsuitable for cultivation, people across the state are drug addicts, and the best option for anybody with ambition is to migrate to Canada or Italy4. What a mess.

 

  1. To be pedantic, they are parliamentary monarchies
  2. The Economics Nobel Laureate in 2009, who won for her work on how different communities manage common pool resources
  3. Ajit Ranade, the AVB Group’s in-house economist has now been warning for many years that India has been exporting its water in the form of agricultural produce; though his concern is more with sugarcane and less with Punjabi basmati.
  4. Yes, Italy. The Air India Delhi-Milan flight is like the sardar version of Kerala – Gulf flights. Lots of apprentice farmers or small scale meatpackers and their families shuttling between karmabhoomi and janmabhoomi. And interestingly enough, Bangladeshis seem to have the North Italian retail business locked down.

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