Out of the ‘Slums’: Economic Lessons from an Oscar Winner


Did you watch the Oscars last night? Well, if you haven’t heard, the awards confirmed the fact that "Slumdog Millionaire" is not a bad picture. (It also confirmed that "Wolverine" is surprisingly deft at singing show tunes. Take that, Magneto.)

But according to Reason magazine’s blog, "Slumdog" is much more than an interesting tale of gameshow prowess. It also serves as an illumination on the plight of India, begging discussion about the progress the country has made by freeing up its markets and ultimately its people, and the steps it still needs to take to help its poor rise above poverty:

For decades would-be entrepreneurs staggered under the weight of corruption and bureaucracy. Want to import a computer for your business? You’d have to get permission from a bureaucrat. Want to sell food from a small cart? You’d need all kinds of licenses. 

But in the 1990s, India emerged as a high-tech powerhouse. What changed?

"In the 1990s India started liberalizing its economy," says (Shikha Dalmia, Reason Foundation senior analyst), "and it did three things: cut taxes, liberalized trade, and deregulated business." Although they failed to cut the kind of red tape that entangled Slumdog‘s orphans, the reforms did make it easier for more Indians to start businesses and hire employees.

"One IT company doesn’t just employ computer professionals," says Dalmia. "It also needs landscaping services, cleaning services, and restaurants. There was this tremendous spillover effect that allowed people to lift themselves out of poverty."

Since the early 1990s, India has cut its poverty rate in half. About 300 million Indians—equivalent to the population of the entire United States—escaped the hunger and deprivation of extreme poverty thanks to pro-market reforms that increased economic activity.

Yet here in America we’re turning away from market reform. Says Dalmia, "It’s just this great conundrum that at the same time that deregulation and markets have produced such dramatic results in India, they are falling into suspicion in America." Dalmia’s prescription for India is at odds with what politicians have chosen to "stimulate" the United States. "What India needs to do is continue apace with its liberalization effort, but expand it to include the poor. Release them from the shackles of government corruption and government bureaucracy."

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