Case Analysis: Fiat and Fairness - Why China can build cities overnight and India cannot

Case Analysis: Fiat and Fairness - Why China can build cities overnight and India cannot Order Description see the uploaded file for the case that you are going to write analysis on. The analysis should start with a brief executive summary including the main arguments/findings. Arguments need to be well-supported by evidence from the case. A good case analysis: is well structured and well written & has clear arguments backed with evidence & engages critically with the evidence provided in the case. Since this is case analysis for a Master of Public Policy degree. Please use scholarly and reliable references. For the exclusive use of Y. Liu, 2015. Fiat and Fairness Why China Can Build Cities Overnight and India Cannot E xc e r p t e d fro m Billions of Entrepreneurs: How China and India are Reshaping Their Futures—and Yours By Tarun Khanna Harvard Business Press Boston, Massachusetts ISBN-13: 978-1-4221-8058-7 8050BC This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. Copyright 2008 Harvard Business School Publishing Corporation All rights reserved Printed in the United States of America This chapter was originally published as chapter 4 of Billions of Entrepreneurs: How China and India are Reshaping Their Futures—and Yours, copyright 2007 Harvard Business School Publishing Corporation. No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior permission of the publisher. Requests for permission should be directed to [email protected], or mailed to Permissions, Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163. You can purchase Harvard Business Press books at booksellers worldwide.You can order Harvard Business Press books and book chapters online at www.HBSPress.org, or by calling 888-500-1016 or, outside the U.S. and Canada, 617-783-7410. This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. Chapter Four Fiat and Fairness Why China Can Build Cities Overnight and India Cannot Shanghai and Mumbai are the respective commercial capitals of China and India. Each city features a stretch of waterfront—the Bund in Shanghai and Marine Drive in Mumbai—as the defining architectural feature of the urban landscape. Old colonial buildings, remnants of a bygone era, ring each waterfront. Beyond their crescent-shaped waterfronts, however, the two cities could not be more different. A comparison of their origins and development reveals the opposing sets of priorities China and India hold regarding public and private property rights. Different priorities led to different policies that shaped the different physical environments in which billions of people now live. As with statecraft and access to information, an understanding of property rights in China and India is as crucial for Westerners as it is for the Chinese and Indians who wish to work together. Visitors to Shanghai are immediately struck by the gleaming district of Pudong, which has emerged in just over a decade as the highlight of the city’s strategy to accommodate its eighteen billion residents. Pudong was mainly farmland until 1990 when the Chinese government decided to set up a Special Economic Zone there. Today Pudong epitomizes the government’s massive effort to rebrand Shanghai from the Paris of the East, as the city was once known, to its Manhattan. Pudong now boasts more skyscrapers than Manhattan, and some say that its Lujiazui financial district, host to several hundred multinationals, puts London’s Canary Wharf to shame. Pudong has become a “must see” phenomenon. Its landmarks, the Jin Mao Tower, 1 This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. Oriental Pearl TV, the Broadcast Tower, and Shanghai Maglev Line, among others, are modern marvels. How did this happen? First, the idea of creating Pudong was not a matter of public debate but came from the very top of the CCP hierarchy, more specifically, from Deng Xiaoping himself. Such an “agreement” would be harder to reach in a heterogeneous society like India where leaders who represent a multitude of ethnic, religious, and socioeconomic interests, are often at odds on all public policy matters. Second, even if there had been opposition to the idea, it would have been difficult to publicize without a free press or other organs of civil society independent of the Party. Nor could the judiciary, also beholden to the Party, have adjudicated disputes fairly. But perhaps most importantly, once the decision had been made in Beijing, virtually nothing could have prevented the Chinese government from carrying out its agenda. In contrast, the prestige of Mumbai’s nouveau riche Cuffe Parade development has been marred by the presence of Machimaar Village, a malodorous, albeit colorful, fishing community that has shared real estate with skyscraper’s upscale homes for some thirty years. During that time any city politicians or administrators daring to suggest a redevelopment plan that would clear Macchimaar Village or any other shantytowns in Mumbai have been ensnared in political turmoil. A vicious cycle of slum clearance and rebuilding has gone on for decades. If a political party legitimizes a certain slum one year, the other party outlaws it the next election cycle. As a result, slum dwellers and average Mumbaikaars (residents of Mumbai) alike suffer. Clearly the city can make no tangible gains under its paralytic politic system. Pudong is a visible example of what the CCP’s fiat authority can accomplish. With public infrastructure projects ongoing throughout the nation, China has shown that, at least in the early stages, a country can have economic growth without embracing individual property rights. But can the rights of the state permanently trump those of individuals? To what extent can national development be an altar on which personal freedoms are sacrificed? Are those who decry the loss of personal freedom too easily silenced? Or is it a worthwhile bargain to gain material wealth at the cost of submitting to the control of a political authority that gets things done? Mumbai’s mess illustrates how private rights and public interests can collide. Is it right for a nation to invariably err on the side of individual rights, even at severe costs to the public? But this is not all. No sensible planner could interpret Mumbai’s situation as a mere result of theoretical debates about public versus private interests. Institutional inefficiency—resulting from well-intentioned constraints on the government, like the free press, judicial processes, and civil society—has checked and balanced India into paralysis. Are private rights truly protected? In India, 2 billions of entrepreneurs This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. one never knows whether the rich or the poor, the foreign or the local, the administrator or the politician will win a battle of disputed property rights. Pudong: Why the Chinese Can Build Cities Overnight Pudong was always just a river away from Nanjing Road, the commercial center of old Shanghai. But an old Chinese saying reflected the lack of regard most people had for this marshy farmland: “One would rather have a bed in Puxi [west of the river] than a house in Pudong.” This is no longer true. Today there are five tunnels and five bridges connecting Puxi to Pudong, with many more links planned. The city’s development journey started in the mid-1980’s with a proposal by Chinese American architect Lin Tongyan, but the plan stalled until Deng Xiaoping launched his famous Southern Tour in 1992, an effort to allay postTiananmen fears and recommit China to economic reforms. For Deng, a consummate bridge player, Shanghai was a key card in his plan to develop China.1 In April 1990 the Chinese government designated Pudong as the “dragon head” to lead the development of all coastal cities in the larger Yangtze Delta area. Beijing’s political will was matched by its generous financial commitments— grants, low-interest loans, and relocation expenses for affected factories and their workers.2 Unusually, Beijing also let Pudong retain revenues above those usually allowed. Further, as a measure of how important it was to Beijing, Pudong received an elevated status in the government hierarchy. Asked if Pudong was part of Shanghai, the deputy director of the Pudong Academy of Development, Wang Guoxing, said that although they had hoped to be independent of the Shanghai municipal government and to deal with the central government directly, they had failed. Yet Pudong attained, and still retains, a higher status than other districts of Greater Shanghai. Zhu Rongji, then Shanghai’s mayor, was told to attract foreign governments and international financial institutions able to supplement the project’s funding by providing long-term, low-interest loans. To accomplish this, Zhu was given unprecedented powers and became known as the “one-chop man” for his dedication to cutting the red tape in the city’s approval processes. In 1996 Lujiazui was selected as the first district in China where foreign banks could conduct business in local currency. Of course foreign banks had to commit to Lujiazui if they wanted a license.3 Meanwhile, state-owned development companies were admonished to think of innovative ways of financing their parts of the Pudong project. The municipal authorities created a land market by selling rights only land use to approved development companies. This served as collateral to get loans. The government gained revenues from the resulting real estate developments f i at a n d fa i r n e s s 3 This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. by charging transaction fees and real estate taxes. A host of incentives were offered to make Pudong the destination of choice for foreigners, including reduced income taxes for Sino-foreign joint ventures, tax exemptions for foreign investments in infrastructure in the first five profit-making years, and a 50 percent tax reduction for five years after that.4 The Shanghai municipal government even granted residency permits to anyone from outside Shanghai who bought an apartment in Pudong worth at least Rmb 500,000 ($60,200). The result? Today, Pudong’s economic output nearly equals the total output of Shanghai ten years ago, and from an area of thirty square kilometers in 1990 the district burgeoned to 100 square kilometers by 2004. During the same period Pudong’s GDP rose from RMB 6 billion ($1.1 billion) to RMB 140 billion ($17 billion). More than nine thousand foreign companies entered Pudong, including more than 180 Fortune 500 companies, and the Lujiazui financial district alone hosted 150 Chinese and foreign financial organizations. This success is infectious; for example, the city of Jiading, northwest of Shanghai, is trying to develop an auto specialty corridor. Despite a 26 billion RMB ($3.1 billion) price tag, the governments of Shanghai and Jaiding are intent on building a state-of-the art stadium to lure Formula One racing. Do they hope to break even with the venture? That concern seems to have been lost in the rush to acquire this Western symbol of prosperity. What about Pudong’s three hundred thousand displaced farmers? Under the Sunshine Relocation Policy they were methodically and incrementally moved to previously prepared accommodations and received some cash compensation based on the acreage they lost. Although not large sums by today’s standards, they were considered significant a decade ago. Many young farmers took jobs in Pudong’s new factories and moved their families out of the district. The older farmers took on miscellaneous jobs. Many of them became local officials, entrepreneurs, or salaried workers in nearby factories. Observers pointed out that most displaced farmers were better off, even if they became janitors in the offices built on what had been their land. Finally, the plan identified distressed households in need of government assistance. In the case of Pudong, where relocation methods were exemplary, it’s hard to find much dissent. This is not true for other development-related moves in China that I discuss later. Machimaar Village and Street People with Cell Phones: Why Mumbai Cannot Be Shanghai The fishermen were here first . . . when Bombay was a dumbbell-shaped island tapering, at the center, to a narrow shining strand beyond which could be seen the finest and largest natural harbor in Asia. —Midnight’s Children, Salman Rushdie5 4 billions of entrepreneurs This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. In the 1960s and 1970s Cuffe Parade, at the southernmost tip of Bombay, was the destination for the nouveau riche in India. Manicured apartment complexes were inhabited by the city’s socially prominent, while upscale bakeries, selling French bread and lemon tarts, sat between the skyscrapers. But an eyesore encroached on this luxurious landscape. The fisherfolk of Machimaar Village displayed hundreds of square feet of prawns and fish in sidewalk stalls beside the hovels they called homes, commandeering what could have been a prime beach for the glitterati. It is somewhat embarrassing to remember the many days I walked past Machimmar Village on my way to my daily tennis games. Dressed in tennis whites, I was blissfully oblivious to the vast disparity between my life of privilege and the poverty of the mothers I passed along the way carrying baskets of fish and squirming naked children. How preposterous it was that a poor village could coexist with Bombay’s premier real estate and that it could be only a matter of time, at least in my mind, before one of them (read Machimaar Village) would have to go. Yet nearly three decades later, both Cuffe Parade and Machimaar Village are unchanged. While Cuffe Parade remains one of the country’s most expensive real estates, home to the rich and famous, thousands of fisherfolk still make their living by casting their nets from Macchimaar Village into the waters of the Arabian Sea. In 2007 I reenacted my boyhood stroll past the fishing village. Ramnath, a wizened sixty-year-old, claimed to have lived in the village for forty years, and had retired, sort of. His son still fished daily, his wife took the catch to the local market, and he helped out by cleaning and drying the fish. Although Ramnath’s family earned just Rs. 10,000 per month (about $250), they managed to make ends meet. How? As part of the “informal sector” they paid no taxes, they ate what they caught, they paid no rent for their makeshift home, and they put nothing aside for a future that seemed impossibly utopian to plan for given their day-to-day existence. “Why don’t you move away?” I asked Ramnath.6 “Why would we? We have the best view in the city!” he replied. Indeed, they overlooked the same seashore and cityscape as some of the best-heeled citizens of Mumbai. “And,” he added, tongue-firmly-in-cheek, “we have the Ambanis as our neighbors.” The Ambani family is India’s first family of the nouveau riche. Its founder, Dhirubhai, built a fortune in petrochemicals, and his two heirs, Mukesh and Anil, independently launched their own multibillion-dollar business conglomerates. During my conversation with Ramnath we were joined by a young mother named Usha, carrying a baby on her hip. “This is a great place,” she told me. “I hope I can settle here. I’m moving here from a coastal village in Maharashtra where things are pretty bad. I hope I can get into the dhandha.” Dhandha is Hindi for “trade” and refers to the fishing trade. f i at a n d fa i r n e s s 5 This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. I asked, “Don’t the rich people try to move you out?” “Not anymore,” replied Ramnath. “At election time people come around pretending to do things. But we can’t trust anyone. If they offer us something, I’m sure they’ll not follow through once election season is over, and then where would we be?” These descendants of the Koli tribe (koli in Marathi, the local language, means both spider and fisherman; both capture their prey with nets) were exactly the way I remembered them two decades ago. Time has stood still in Machimaar Village. Indeed, the Koli have witnessed the handing of Mumbai from the Gujarat Sultans to the Portuguese, and then from the Portuguese to the British in the form of the dowry of Catherine of Braganza to Charles II, and finally from the British to independent Indians. How is it that the Kolis have not been removed as part of some urban renewal scheme, as they surely would have been in China? Historically Indian law has protected their habitat as a matter of principle. In the 1990s the Supreme Court restricted land reclamation and the removal of fisherfolk when it implemented Coastal Regulatory Zones. Justice Jeevan Reddy of the Supreme Court, while upholding the Monsoon Trawl Ban, expressed the court’s view of development: . . . public interest cannot be determined only by looking at the quantum of fish caught in a year. . . . The government is perfectly justified in saying that it is under obligation to protect the economic interest of the traditional fisherpeople and to ensure that they are not deprived of their slender means of livelihood. Whether one calls it distributive justice or development with a human face, the ultimate truth is that the object of all development is the human being. There can be no development for the sake of development. Priorities ought not be inverted nor true perspective lost in the quest for more production.7 The law spells it out: “the object of all development is the human being.” Unlike China, where laws allowed Pudong to be built overnight, India puts a priority on “development with a human face.” True, Cuffe Parade’s wealthy residence associations have periodically urged the city government to demolish the shanties. Occasionally demolitions follow such entreaties, but the ramshackle homes are always rebuilt. Although the rich could force their politicians’ hands and bribe their way to a fish-free nirvana, the reality is that the rich rarely vote. In contrast the residents of Machimaar Village do vote, and the politicians, the ultimate homo economicus, respond to those votes by protecting the property rights of the poor. Further, the symbolism of uprooting a poor fisherwoman to cater to elites enjoying Cuffe Parade’s posh facilities would generate political heat in socialist India. 6 billions of entrepreneurs This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. Machimaar Village’s saga is not an isolated one. Whenever I drive from the airport toward South Mumbai, to Cuffe Parade, I pass Dharavi on the right-hand side, a 175 hectare of swampy land that is home to nearly one million people and is reportedly Asia’s largest slum. The stench emanating from the open sewers is unbearable, yet the inhabitants of Dharavi manage a vibrant, informal economy that generates $500 million in goods and services annually. Schools, clinics, shops, and bakeries gainfully employ thousands of people in the Dharavi slum. Gods and politicians are everywhere; temples and mosques easily coexist, and pockets of the slum are divided among strongholds of various political parties and slumlords who lay down the law, mafia style. Like Machimaar Village, Dharavi is a landmark, a symbol, even a force of nature. Successive governments have tried to redevelop Dharavi by converting parts of the slum into legal properties. The catch, of course, is that the slum dwellers are not recognized or given legal status and therefore have no right to the properties. Rather than fight the move in the courts, the disenfranchised often simply pick up and reestablish down the street, carrying television sets, bicycles, motorcycles, cell phones, and reconstructing their makeshift structures. As if to underscore the enormous differences between Indian and Chinese urban reform, in 2003 the management consulting firm McKinsey and Company published Vision Mumbai, a report that laid out a to-do list for the “Shanghaization” of Mumbai. One of McKinsey’s face-lift suggestions was amending government regulations to allow the construction of taller skyscrapers,8 a move that undoubtedly would have entailed clearing several slums where 50 percent of Mumbai’s population made their homes. No sooner was the report issued than it became a lightning rod for criticism from environmentalists, former bureaucrats, academics, and activists. The media suggested that the only redeeming feature of Vision Mumbai was that it was prepared gratis by a firm known for its exorbitant rates. The fiery reaction to the report demonstrated that for most Indians, changing infrastructure for the sake of national development was an abstract and unwelcome concept. The people could not embrace massive change when it conflicted with personal well-being, and no leader emerged with the political imagination needed to make the case for public interest. These attitudes are not changing. In 2005 Vilasrao Deshmukh, the chief minister of the state of Maharashtra (of which Mumbai is the capital), embarked on a grand project to rid “akha Mumbai” (in Marathi, the local language, “all of Mumbai”) of slums. Bulldozers demolished twenty-five hundred shanties and displaced about a million people. Then Deshmukh was put in his place. He received a phone call from Sonia Gandhi, the national president of the Congress Party and reputedly the power behind f i at a n d fa i r n e s s 7 This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. Prime Minister Manmohan Singh, asking him to back off. He did. Another Congress Party member stated, “Mumbai can never be Shanghai,” and it became politically suicidal to use the term Shanghaization in India. So how does urban renewal happen in India? One thriving example can be found south of Delhi, where in the last two decades farmland has given way to urban development. Here, a private-sector entrepreneur has achieved—albeit much more slowly—what the state achieved in Shanghai. K. P. Singh, the head of Delhi’s DLF Group, has transformed fragmented holdings of agricultural land into a modern metropolis. DLF is arguably India’s leading real estate development company, and K. P. has built DLF into a real estate and construction group with revenues of about Rs. 150 billion ($35 billion) and, in 2007 a market capitalization greater than $30 billion. He is now one of the world’s wealthiest men.9 Equally extraordinary is K. P.’s transformation of vast acres of undeveloped land into one of the most modern places in India, Gurgaon. This city bordering south Delhi is now famous for its sleek office towers, shopping malls, multiplexes with state-of-the-art projection systems, upscale homes and condominiums, and even a world-class golf course. How did K. P. accomplish this in India’s paralytic political climate? I spoke with him at his office in the DLF Building, located in the heart of Delhi’s business district. In the manner of a headmaster chiding his young tutelage, he said, “A lot of you young people don’t know that DLF has been around for many years. You think Gurgaon just sprung up from nowhere. Raghuvendra Singh started DLF in 1946, before partition.” I told K. P. that twenty years ago my parents moved south of Delhi to what was then the village of Gurgaon. Friends and family derided the move saying, “There’s nothing there. You’re moving to the sticks.” Now it’s a bustling community, a desirable address. K. P.’s eyes glistened. “Most of South Delhi was developed by DLF. People don’t know that.” That afternoon in his office, I learned just how far back K. P.’s history with DLF stretched. In 1954, he married the eldest daughter of DLF’s founder, Raghuvendra Singh. He explained how his association with the family business coincided with India’s changing land policies, reminding me that in 1957 the government passed the Delhi Development Act, making land development a concern of the state. K. P. waved his hand dismissively. “The socialist way of thinking came into play in the early 1960s. You see, in the first ten years after independence the urban development policy was very good— DLF was doing well. There were major incentives to private developers, and most of South Delhi was developed then.” He shook his head. “But since 1961, there was a socialist shift and a total elimination of private sectors in urban development. This was the start of a plethora of fly-by-night developers operating under state patronage. Of course state patronage is a loosely 8 billions of entrepreneurs This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. defined term. Sixty percent of Delhi is unauthorized.” Throughout the 1960s DLF made few gains. When K. P. joined the company in 1971, it was ripe for change. In the sixties, DLF receded. We just did not want to do business under these circumstances. But then, in 1971, wanting to do something new, I joined DLF. Hungry for business, I started to lobby the government and build alliances. It has taken me thirty years. During Rajiv’s [Prime Minister Rajiv Gandhi] time things started to look up. Rajiv saw the potential to business when the state got out of the business of being in business. Under him things started to change on the policy front, and I had already started to acquire land. So the timing was good. You know these three and a half thousand acres on which DLF sits? The government did not just hand it to me and say “go build.” I began acquiring the land in the late 1970s. I negotiated day and night with seven hundred families who each owned four or five acres of land. Remember we are talking about a heterogeneous society. If brothers owning land were hostile to one another, we had to negotiate with them; if the daughter had a stake and lived in a village a hundred miles out of Delhi, we had to get her on board. To earn their trust, I dressed like a farmer, went to their houses evening after evening, when the farmers come home from the day’s work. I had to make sure we got the records straightened. K. P. Singh sighed, as if still recovering from the effort of those negotiations. I thought about farmers in northern India, the very people who use the tractors made by Mahindra and Mahindra. Unlike the American hobbyist who buys a brand-new vehicle, the Indian farmer typically has a tractor that is in disrepair, second- or thirdhand, polluting, and noisy. In my mind’s eye I saw the farmer perched on his tractor, his skin dry and parched from spending all day in the sun, dressed in a turban and loose-fitting garments. “You see, assemblage of land remains the biggest problem in developing it,” K. P. explained. “Unlike in other countries, I can’t run a bull-dozer over the occupants. If one of them goes to court, I’ll be in litigation for the rest of my life.” “Were you ever in court?” I asked. “And how did you convince the farmers?” I thought of the women on the farms, the saris they wear draped over their heads as protection from the sun as they haul bricks on a construction site, work in the fields, of course carry babies on their hips, prepare meals, and care for the home. I thought of their dignity, the colored bangles on their arms, nose rings and earrings, and I wondered if it had been difficult for K. P. to convince them to give up their land. K. P. leaned back in his chair, smiling with pride, to tell me he’d acquired most of DLF land without any major litigation, and on f i at a n d fa i r n e s s 9 This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. credit. “I took a loan from one farmer and then promptly used it to buy additional land. The farmers became my bankers and I became the bank for them. It was literally all about trust. At the end of each month, my guys would deliver the interest to these farmers personally. That kind of thing doesn’t happen nowadays.” This, I thought, was truly incredible. Much like contemporary U.S. businesses that consolidate so-called fragmented industries, K. P. bought out the farmers to do things with the large properties that an individual farmer could not. Today DLF continues to operate in much the same way. Brokers sometimes represent unknown buyers and sellers, and often brokers don’t know one another’s identities. That way K. P. can buy land at less than what it’s worth. The full market value of the land is high because of government distortions that constrict effective land supply: the Urban Land (Ceiling and Regulation) Act,10 rent control, a very high stamp duty preventing efficient property transfers, and blocks of sarkaari zameen (government institutions holding prime real estate) that cannot be used for anything. DLF’s story is portrayed throughout India as a massive entrepreneurial feat. But some people question India’s big developers, claiming that they profit unduly from the opacity of the land market and are complicit in perpetuating such opacity. As Pratap Bhanu Mehta, a leading political scientist in India, says, “No one quite knows how the large builders acquire land from the government. No detailed public records exist. How can some builders who are supposedly bankrupt continue to live in such affluence? There is widespread suspicion of a nexus made of the mafia, the media, builders, and politicians. What is good however is that the judiciary does poke holes through this once in a while.” It is important, however, to keep efficiency and accountability conceptually distinct. The Chinese government is efficient, even if not accountable and transparent. A privately held company, as DLF was until recently, is not accountable either, at least in the sense of a public corporation, but it does get the job done. In India the DLFs must compensate for a state that resists development for fear of treading on individual property rights. The Power of Rivers Yet another challenge both China and India face is tapping into the power of their rivers. The Yangtze River in China and the Narmada River in India have been mythologized for centuries by poets and writers in their respective countries. The Yangtze, which originates in the Qinghai-Tibetan Plateau, also known as the Roof of the World, runs 6,380 kilometers eastward across mainland China before it pours into the East China Sea, passing through 10 billions of entrepreneurs This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. land inhabited by four hundred million people. The Narmada River, which rises on Amarkantak Hill in the state of Madhya Pradesh, passes through the Marble Rocks at Jabalpur and the valley between the Vindhya and Satpura ranges, and continues through the states of Madhya Pradesh, Maharashtra, and Gujarat. Finally, eight hundred miles later the Narmada pours into the Arabian Sea at the Bharuch District of Gujarat. Hindus, some of whom consider the Narmada even holier than the Ganges, believe the river sprang from the body of Lord Shiva and that the mere sight of its beauty will purify the soul. Plans to engineer dams great enough to harness the natural power of these immense rivers have long histories of contention. In China the idea dates back to Sun Yat-sen, who estimated the Yangtze could power all the country’s railways, electricity lines, and factories. India first considered damming the Narmada in 1901, when the British Raj established the First Irrigation Commission of India, but it was only after independence that the project gained momentum. Despite countless studies and commissions, construction of dams in both countries was suspended for decades. By the late 1980s Chinese efforts to tame the Yangtze had to contend with a new global political economy. India’s proposed Narmada Dam came under increasing attack from engineering and environmental experts as well as the public. Big dams had become unfashionable, if not completely taboo, among development professionals; and environmentalists and activists argued that the human and environmental costs, displacement, and degradation far outweighed any benefits. Each nation responded to its dam controversy in a manner consistent with the ethos of its decision-making process: China by fiat authority and India by democratic dissent. China’s most enduring and outspoken critic of damming the Yangtze was Wangli Huang, the late professor of hydrology at Tsinghua University. By the 1950s Huang had conducted years of research on the Yangtze and determined the dangers of a building design that did not consider potential sedimentation problems. For daring to criticize the CCP, Mao sent Huang to a labor camp in 1958, and during the subsequent Cultural Revolution even the professor’s children were pressured to denounce him. Still the project remained just a matter of study. In the late 1980s Dai Qing, a trained missile engineer who worked with Chinese military intelligence before becoming a journalist, published a scathing political critique called Yangtze, Yangtze. Nevertheless, in 1989 two feasibility studies, one by the Chinese and the other by the Canadian International Development Agency and the World Bank, concluded that a dam more than 550 feet tall would be technically, economically, socially, and environmentally sound. The project was sanctioned by f i at a n d fa i r n e s s 11 This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. the National People’s Conference in 1992, and soon after that the Fifth Plenary Session of the Seventh National People’s Congress approved a resolution to proceed with the Three Gorges project with a vote of 1,767 to 177, with 664 abstaining—indicative of legislative dissent by Chinese standards, where most resolutions pass nearly unanimously. In 1994 the project officially got under way, and in 1995 the resettlement of about 1.5 million people began. International opposition to the building project soon translated into financial hurdles. In 1996 the World Bank and the U.S. Export-Import Bank declined to provide assistance, citing environmental concerns. But in January 1997 the State Planning Commission approved the issuance of 1 billion yuan ($121 million) in corporate bonds for financing further construction. In March 1997 Chongqing was upgraded to a municipality, a move to ease resettlement and expedite the project. Over the course of the project, allegations of corruption and fraud surfaced. Many observers feared that substandard materials were being used, ultimately risking the lives of millions. In 1999, after some high-profile construction accidents at the site, Premier Zhu Rongji, the man responsible for Shanghai’s redevelopment and an advocate for higher construction standards, sounded caution. In 2000, while addressing the Ninth Plenary Session of the Three Gorges Project Construction Committee (TGPCC), which was under the State Council, Zhu urged the builders to step up environmental protection and ecological construction in the dam area and improve the resettlement of local people. Observers saw the premier’s comments as a response to the increasing corruption scandals that had engulfed the project. He emphasized that builders bore a “mountain of responsibility on their heads.” The premier’s comments were widely reported in the press.11 China’s official media reported in 2003 that the reservoir at Three Gorges was deep enough for the dam’s turbines to begin generating hydroelectric power.12 But that same year a report published by an international nongovernmental organization pointed out several problems. Compensation to the resettled population had fallen short, promised jobs no longer existed, police used excessive force to mute protests, and embezzlement of construction funds was continuing.13 The Three Gorges Dam finished ahead of schedule in 2006. Officials stated that when its twenty-six turbines become operational in 2009, the dam will have a capacity of more than eighteen thousand megawatts. However, unlike the model relocation program for the farmers of Pudong, the damming of the Yangtze will not end happily. An estimated one million people will have been relocated from their homes and more than twelve hundred towns and villages will be submerged under the rising waters of the new dam. 12 billions of entrepreneurs This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. As for India’s plans to dam the Narmada River, initial work on the project started in 1961, but controversy surrounding the sharing of water and costs between the three concerned states stalled construction for nearly twenty years. Not until the 1980s, when the sheer scale of the dam became public, did the project once again acquire notoriety. Taming the Narmada and its tributaries involved building 30 big dams, 135 medium dams, and 3,000 small dams. Today the Narmada Valley Dam controversy has split the nation in two. Some quote Nehru’s famous lines describing dams as “temples of modern India”; others, digging deeper, have found that Nehru also called dams “a disease of gigantism.”14 Unlike China, however, India can tolerate controversy. Medha Patkar came on the scene in 1985 as a student studying the fate of communities threatened with submersion. She, along with her group, Narmada Bachao Andolan (Movement to Save the Narmada), is effectively the Mother Teresa of dam dwellers. Arguing that building the dam violates the fundamental rights of the people who will be displaced, Patkar has succeeded in internationalizing the issue. She served on the World Commission on Dams, an independent body sponsored by the World Bank to review the performance of large dams and make recommendations for future planning of water and energy projects. Patkar’s Andolan single-handedly changed the World Bank’s perspective on large dam projects across the world. While the World Bank waffled and Patkar agitated, the Ministry of Environments and Forests provided the project with a conditional clearance in 1987. Five years later the World Bank commissioned a study of the project to be conducted by an independent team led by Bradford Morse. The socalled Morse Report concluded that the project overstated its benefits and underestimated its environmental and human costs, and suggested that the bank take a fresh look at it. The government of India refused to accept the findings of the Morse Report. This provoked Patkar’s movement to file public interest litigation in 1994.15 In response, the courts halted work on the project in 1995. The court did a complete turnaround in October 2000 when the majority of the judges of the Indian Supreme Court cleared the way for the construction of the Sardar Sarovar Dam, one of the biggest dams to be built on the river. Patkar responded, “The Supreme Court, thus, has betrayed the tribal and peasant communities in the country at large and specifically, those in the Narmada Valley. Judiciary in this country is clearly under various political pressures and probably cannot act with the law honestly, can’t decide on merit of the case alone.”16 Supreme Court rulings in 2005 stated that raising the height of the dam above 360 feet was illegal until families that were temporarily and permanently affected by the construction were relocated. f i at a n d fa i r n e s s 13 This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. By March 2006, however, authorities had allowed the addition of 33 feet to the height of the Sardar Sarovar Dam. In protest, Patkar went on an indefinite hunger strike outside the house of the ruling party’s leader. Such fasts in India are associated with Mahatma Gandhi’s fasts in protest of various aspects of British rule and have a moral aura to them. Other protesters fasting with Patkar told the press that they were there because their land stood to be submerged by the additional height of the dam and they had not been offered any compensation for it. Patkar was eventually arrested. Two months are a long time on the Indian political scene. In June 2006 Patkar was somewhat vindicated when the state government of Madhya Pradesh issued an order to stop construction of the Maheshwar Project, another of the dams slated to be built on the Narmada. The state ministry announced that work on the dam would not continue until a comprehensive rehabilitation plan was created. That dam was supposed to have been completed in 1995. A Tale of Two Other Singhs: How Individual Can India’s Individual Property Rights Be? My first impression of Surat Singh, a lawyer in the Indian Supreme Court, was how different he appeared from the Boston Brahmins and legal pundits to whom I had become so accustomed. There was no tweed jacket, no bow tie, no glasses, and no tan briefcase in hand. When I contacted him on the phone, he’d described himself as a “short, arrogant guy with a loud laugh.” Because he’d participated in several high-profile cases in India, and held masters of law degrees from Delhi and Oxford Universities, and a doctorate in law from Harvard, I’d asked him to guide me through the thicket of Indian property law. On his suggestion, we met in the lobby of the Park Royal Hotel in south Delhi. Dr. Singh’s most discernable accoutrement was a small hand towel that doubled as a handkerchief. He accentuated the urgency of what he had to say by periodically leaning across the coffee table and dabbing the perspiration off his nose and forehead. The only break he took was when he glanced askew at his companion, a Delhi real estate broker, looking for authentication of what he had just said. I merely took notes during this virtuoso performance, occasionally posing a question. Dr. Singh’s story began, not quite at the beginning of how property rights came into being in India, but rather at how they evolved immediately after independence when a number of constitutional articles specified the fundamental status of property rights in India. Any Indian was guaranteed by law to be able to own property.17 There were caveats, of course. Under 14 billions of entrepreneurs This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. Article 31, for example, no one can be deprived of their property except by law, but the law is required to set compensation or principles on which such compensation is to be paid. At this point, Dr. Singh alerted me that despite the “sacrosanct” place of property rights in the Indian Constitution, the two most important institutions of Indian democracy—the judiciary and legislature—soon found themselves at loggerheads over the status of those rights. “You have to understand the socialist ideology and land reform background,” warned Dr. Singh.18 He explained that property rights law in independent India arose in the context of an overwhelming desire for equitable land reform in the aftermath of the exploitative zamindari (land tenure) system, under which the propertied few, the zamindars, had lorded over the masses. “There was an unavoidable tension between citizens’ right to property and the government policy of fashioning an egalitarian society.” At the time, Nehru’s Congress Party particularly wanted the government to be able to acquire (preferably without compensation) and control private assets (read as land and some businesses) for public good. Soon after independence, several land reforms were passed. Zamindari was abolished, ceilings were fixed on land holdings, cultivating tenants secured permanent rights, and in some states the law regulated the share of the landlord. No sooner had these laws been enacted, however, than differences between the judiciary and the legislature on the question of property rights became apparent. Behind this tension were several prominent cases in which the legislature continued to demand powers to appropriate private property, and the judiciary continued to question the right of the legislature to do so. At first the legislature seemed vindicated. In the First Amendment to the Indian Constitution, enacted in 1951, the judiciary permitted the government to acquire estates—a term broadly defined to cover almost all agricultural land and, in particular, properties owned by zamindars and other revenue farmers—in the public interest. Another part of the amendment (termed the Ninth Schedule) declared that none of the laws related to several agrarian reforms could become invalid on the grounds that they violated fundamental property rights embodied in the constitution. When landowners continued to petition courts on grounds that appropriation of their land violated their rights, the Supreme Court, in two well-known cases, rejected the argument and confirmed Parliament’s right to amend the constitution. A minority of dissenting judges continually questioned that parliamentary right. However, Nehru’s towering personality and charisma, and the idealism of the first years of independent India, contributed to the legislature’s upper hand until his death in 1964. The tussle between the judiciary and the legislature over the question of property rights eventually culminated in their being relegated to a weaker f i at a n d fa i r n e s s 15 This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. statutory right. Property rights were no longer fundamental and so were vulnerable to legislative whims. Dr. Singh emphasized one of the most severe consequences of this: “The problem was that in removing the right to property as a ‘fundamental right’, no citizen has the right to approach the Supreme Court under Article 32 [which allows a redress of any violation of fundamental rights]. And with it goes the possibility of speedy adjudication.” Over the years each act of judicial activism in favor of individual property rights prompted Parliament to simply amend the constitution. One such case was Golakhnath v. the Union of India. Golakhnath was a well-known priest and religious personality who had owned an estate that had largely been declared “surplus” under the Punjab Security of Land Tenures Act of 1953.19 The Golakhnath family petitioned the Supreme Court, claiming that their rights to acquire and hold property had been violated. Eleven Supreme Court judges heard the Golakhnath case in 1966. Chief Justice Subha Rao, who had acquired a reputation of favoring individuals’ right to property over the government’s right to acquire it, stated that Parliament could not meddle with individuals’ fundamental rights. He suggested that there was an inviolable basic structure to the constitution and that fundamental property rights were part of that sacrosanct portion, making them immune to legislative maneuvering. “Mrs. Gandhi was furious,” Dr. Singh exploded as he mimicked Indira Gandhi’s rage. “She said that the Supreme Court does not really know the real situation in India. The property is concentrated in the hands of the few and the masses are suffering.” Bold judicial activism ran afoul of the political establishment’s then-populist policies. Even though the Golaknath judgment would not affect any previously enacted land-related amendments, it had set off alarm bells in Parliament. To make matters worse, within just a few weeks of the Golakhnath verdict, the Congress Party incurred heavy losses in the parliamentary elections. Meanwhile Parliament had a new battleground on which to flex its muscles. Reiterating its socialist suspicion of concentrations of wealth, the legislature went after princely families who had exerted their power over the populace through the end of British rule; the so-called privy purses offered to those families in return for their recognizing the sovereignty of the Union of India; and the banks, deemed instruments through which economic power could be concentrated to the detriment of the common people. Overnight, and without compensation, estates were taken and banks nationalized. But the Supreme Court once again upheld property rights and struck down the parliamentary order. Further, the court ruled 10 to 1 that the nationalized banks had not determined compensation properly. The Parliament reacted with equal ferocity. Two amendments in 1971 authorized the Parliament to amend any part of the 16 billions of entrepreneurs This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. constitution and removed from judicial purview the right to question compensation paid to property owners. Another case involved an individual petitioning the Supreme Court to preserve his estate (Keshavananda Bharati v. the State of Kerala) but also spoke to the extent of Parliament’s power to amend the constitution. The verdict was split. “Six voted along what I call British lines. That is, they took the view that elected parliamentarians are the voice of the people, and this voice can move to acquire property. Six voted along what I call American lines, that is, embracing the view that the powers of government should be heavily constrained and individual right to property was paramount. The last, Justice H. R. Khanna, took a courageous stand. He said that some basic rights in the constitution are indeed above laws. But he said there is a separate issue of whether the right to property, until this time thought of as part of Basic Rights, was in fact one. He decided it wasn’t.” So, concluded Dr. Singh, “the operation was successful, but the patient was dead.” As it stands today the right to property is not a part of the inviolable basic structure. “But India is a land of paradoxes,” he also advised. In 1978, the Supreme Court focused on the scope of Article 21, which says that “no person shall be deprived of his life or personal liberty except according to procedure established by law.” It interpreted “liberty” expansively, including the right to live with human dignity. And it insisted on reasonable, just, and fair procedures, and ruled against arbitrary action, preferring instead the American “due process” clause. Thus what Parliament took away in 1978 by deleting Article 31 (right to property) from the list of fundamental rights, it brought back through judicial interpretation under Article 21 (right to life and liberty). The net result is that the right to property can be protected as a fundamental right. “But whether it is America or India, there is no free lunch. One has to be extremely resourceful because it costs property to protect your property rights, even in democracy,” warned Dr. Singh humorously. Thus property rights in India are unclear because of the very institutions meant to guarantee them. This includes not just the courts and the legislatures but also bureaucracies. The role of the latter is apparent in another Singh story—a story both incredible and true. I ran into the second Mr. Singh in Vasant Vihar, an upscale Delhi residential area. The former CEO of British Oxygen in India, this Mr. Singh rents the upper half of his two-story house to an American journalist and his Indian wife. Unable to save much in the cash-poor, perk-rich era of his working life, the Singhs use the rental income from the house to maintain a comfortable way of life. So it came as a surprise when Mr. Singh received f i at a n d fa i r n e s s 17 This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. a letter from the court saying that his house would be seized by the court, apparently because he had not paid back a loan on which the house was listed as collateral. “I had never put up the house for anything. We don’t need any loans, thanks to the house,” he assured me. After some investigating, Mr. Singh unearthed a bizarre scandal. From the records kept by the Delhi Development Authority (DDA), a government body that oversees all urban development projects in Delhi, his neighbor had acquired a copy of all legal papers pertaining to the house and used the house as collateral to take out a loan on which he neglected to repay. The notorious DDA had required copies of the papers during a pro forma change of the house’s status. “How the neighbor got access to these papers, who was complicit in DDA, I don’t quite know, but I suspect even the bank was involved,” explained Mr. Singh. The discovery pushed the eighty-three-year-old into high gear. “You see, first, I contacted my brother—a well-known Supreme Court lawyer—and he assured me that that the matter would be solved, because the city does maintain proper records on homes, it takes a while to unearth them, but they have them and with his contacts, we didn’t need to oil any palms. Plus, I keep Xeroxes of everything. When the local court did not respond, my lawyer-brother threatened to take the matter to the high court, and that is how we got a hearing. Eventually we won the case. What I still don’t get is how the bugger had the guts to forge the deed and how the bank failed to verify ownership. He still greets me in the park like nothing happened.” A series of mild and hilarious English curses, reminiscent of his British education and British bosses, followed. From Private Ownership to Party Ownership and Back Again in China To guide me through the thickets of Chinese property law, I turned to Katherine Wilhelm, a lawyer in the Beijing office of a New York law firm. She readily agreed to assist, saying “the whole question of what you do with property rights in a fast-changing economy is a major issue.”20 Wilhelm began by explaining that private land ownership and transactions came to an end under Mao. In rural areas all land was acquired by the government and placed under collectives. Every peasant received a rural hukou, a license to live in a particular village. In cities almost all land became the property of the government. In line with its social agenda, the CCP subsequently allocated land use rights, free of charge, to the danwei, the state-owned work units around which urban social and economic life was organized.21 18 billions of entrepreneurs This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. The constitution mandated that the danwei not transfer those rights. Through the 1970s housing was almost completely socialized. City rents were ridiculously low, and the danwei bore the lion’s share of housing costs, which amounted to roughly a quarter of total labor costs for a typical stateowned enterprise.22 Thus the danwei and the hukou system, rather than the market, allocated land and housing. “The situation changed with the reforms in 1978,” continued Wilhelm. Deng transformed moribund land around Shenzhen into an economic laboratory. This included the creation of the first market for land use rights and housing. Deng allowed rent increases, sold public housing to private individuals, allowed commercial construction by private developers, and promised to protect private property rights.23 Yet the state did not let go of its land. To eliminate possible ambiguity, the 1982 constitution set the record straight by declaring that all urban land belonged to the state and all rural land belonged to collectives. Further, classes of property rights were created as a way of managing the transition. According to Wilhelm, “The state’s ownership rights were absolute; but agricultural collectives could have their land requisitioned by the state in the public interest.”24 Foreign investors’ rights were also protected.25 Economic realities necessitated this. For example, it became a problem when the only thing a Chinese partner was contributing to a Sino-foreign joint venture was land that ultimately belonged to the state, not the partner. A simple chronological reading of land reform laws reveals that the contributions of property made by the Chinese joint venture partners were not entirely legal; they predated the land legislation of the 1980s that allowed legal transferability of land rights. Before the 1980s, most-state owned enterprises (which later became partners in joint ventures) applied to the government to use land that was not transferable and could not be leased or mortgaged. Wilhelm emphasized that today there are two issues. “One is of scope and one is of enforcement,” she said. Referring to the 1982 constitutional amendment she added, “The problem of scope has gone away, as much can be privately owned. But the problem of enforcement remains.” It is in the mechanisms of enforcement that one can most clearly see the Chinese government’s stance on questions of individual versus collective rights. One example is the problem of demolition and relocation that is part of any urban redevelopment effort. Wilhelm explained how relocation often plays out in China: “[R]elocation and demolition licenses are meant to be won via public auctions, but everyone knows it’s largely done privately. If a developer has got a chai qian [demolition and relocation] license for where you live, the city government puts up signs telling you exactly that. Then someone from the local government will pay you a visit to estimate the value of your f i at a n d fa i r n e s s 19 This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. home. Sometimes these folks don’t let the appraisers in, so the appraisers make estimates from standing outside the house.” She laughed at the absurdity. “It’s a black box, in that no one really knows how the compensation figure is determined. Some say it’s the cost of replacing the home—the cost of the wood and steel, et cetera. But anyone knows that the intrinsic value of material is hardly the way to arrive at compensation—they don’t take into account, for example, that the wood used in your house dates back to the Qing era. Or location. As you know, in real estate location is everything. So compensation varies significantly.” Indeed, some scholars have pointed out that the range of compensation is wide, from more than $750,000 for a high official’s home, to between $10,000 and $50,000 for some affected families, and finally, to nothing for residents who did not cooperate with the redevelopment process.26 Examples of ad hoc and inadequate compensation abound. In one resettlement project in Beijing that required the resettlement of 3,328 families, only 14 percent of the families were paid, and compensation ranged from $12,500 to $50,000 instead of the expected $67,500 for each family. Further, 86 percent of the families were assigned to apartments in remote suburbs for which they paid rent—even though one-third had owned their original houses.27 Wilhelm then explained the final punch in property compensation procedures: “Once you are told the amount [of compensation] you can either take it or leave it. If you take it, you get paid from designated banks, and during this stage, a significant amount of the money can ‘disappear.’ Sometimes they offer you alternative homes—but you may find that a few months into moving to your new home you are asked to pay rent. Now if you refuse to leave, if you become one of the nail-head families—what the Chinese call a dingzihu, basically a stubborn nail that needs to be hammered in—they harass you.” I asked if she could clarify who constituted “they.” She elaborated: “They are often developers who were formerly running state-owned construction companies in the early 1990s. They can also be real estate firms run by the sons and daughters of former high-ranking CCP leaders; here we call them the Red Princes. The lines are not really clear. Essentially, private developers exercise eminent domain rights of the state.” In recent years scores of stories on the plight of urban Chinese residents caught the government’s attention and resulted in a few resident-friendly edicts. In March 2005 the Shanghai city government improved the management of relocations by forbidding resettlement companies from stopping water or electricity supplies to force people off their property. Wilhelm acknowledged the change of heart. “It’s my sense that the forced nature of these relocations has caught the government’s attention and has decreased. Now officers of the law must be present when the eviction process is taking place.” 20 billions of entrepreneurs This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. I wondered whether that made the relocation process more just. “Well,” Wilhelm mused, “they have added more process, but the substance of the law remains the same. In reality, you still can’t petition the courts on property matters, the courts are not independent. Under Chinese law, the People’s Supreme Court works as a ministerial-level organization, which makes it equal, not superior, to the Ministry of Construction granting these licenses. But people continue to petition the justice ministry under the age-old xinfang petitioning system that is outdated and ineffectual.” Why do people continue to petition and protest if the justice system offers no respite? Wilhelm had a ready response: “If a newspaper story or a journalist reports on one of these forced relocations, they can sometimes get a better deal and the government realizes that they can’t afford this to be a destabilizing issue.” Wilhelm’s explanation was echoed in my meeting with a Yale-educated expatriate lawyer in Beijing: “Street protests,” he assured me, “are really street theater. They are not really about whether it’s fair to tear down my home or not. The owner knows that he can’t hold up the developer once the process is under way. The best he can do is become inconvenient and extract some money or concessions from the developer. So he does perform, and is better off as a result of doing so. But doing something extreme like standing in front of the bulldozer can only earn him the right to be carted away by state police, that’s all.” Twisting Fate of the Siheyuan Not long after talking with Wilhelm I found myself walking Beijing’s maze of narrow footpaths, the hutongs, where the boxy courtyard houses known as siheyuan are still found. The courtyard garden served as an open-air living room where family members met to converse. In feudal times the courtyard dwellings were built according to the strict rules and hierarchies of feng shui; for example, the gate was at the southeast corner, which was the Wind corner, and the main building was on the north side, which was believed to belong to Water, the element that quenches fire. A wall or curtain over the entrance kept out evil spirits. The lord and lady of the house lived in the northern, sunny main building and their children in the side chambers. The southern row on the opposite side, those nearest to the entrance gate, was generally used as the study, the reception room, and the servants’ dwelling. In fact, Beijing’s siheyuan, with their strict rules and forms, closed to the outside and open on the inside, are seen by some as an expression of the Chinese character. Regarded with nostalgia, the twisting fate of the siheyuan pointedly embodies China’s changing property laws. Before 1949 the size and grandeur of a siheyuan denoted the social and financial status of its owner. f i at a n d fa i r n e s s 21 This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. When Mao Zedong outlawed private property, all siheyuan became the property of the state. Unsurprisingly, Mao lived in a coveted courtyard house, as do many of today’s Chinese Party leaders. During the Cultural Revolution most Beijing siheyuan were owned by the local residence bureau, which could allocate as many as a dozen families to live in one house; overcrowding and poverty then caused the houses to deteriorate. The most recent twist occurred in 2004, when the Beijing government allowed foreigners to buy siheyuan. They have quickly become a trendy piece of real estate. Billionaire media mogul Rupert Murdoch plunked down $1.2 million for his property. Negotiations can involve as many as thirty families claiming ownership of the previous cramped residence and entitled to compensation for moving out. Less well known, however, is that the official government policy is to return the siheyuan to their original pre-1949 owners. The catch is that many of the original owners’ descendants hold no property titles or papers to prove their claims. As I walked toward the Forbidden City, its grandeur preserved as a historical anomaly, I thought about the last part of my conversation with Wilhelm. How and why has the Chinese government gotten away with trampling private property rights during the last three decades? Wilhelm sounded a prophecy and a warning: “When experiencing intense economic growth, it appears that society as a whole is benefiting, and the problems are not immediately perceptible. But property rights are the foundation on which efficient markets are built. Currently uncertain property rights are just a part of the larger ‘China risk packet,’ and so investors are able to justify it. But at some point the Chinese government’s attempt to create a top-down market for property won’t work. At some point the middle class is going to ask why they cannot pass on their property to their children, why they can’t pass on the wealth that for the first time in history they are being asked to create.” Most scholars who study the link between property rights and economic growth argue that the more clearly defined are the former, the greater the possibility of the latter. But in China economic growth has occurred without formal property rights of the sort familiar to and lauded by the West. Property rights in India, too, are ill defined, overlapping, and ambiguous. Although in China these ambiguities have not prevented the state from building a dam or a city, in India the ambiguity of rights inevitably leads to an impasse. Indians never know who will win a battle of disputed property rights. They only know that the battle will play out against the setting of overburdened court systems, free and noisy press, vibrant civil society, and of course India’s legislative and electoral systems that laud the right of the individual and deplore development without a human face. 22 billions of entrepreneurs This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. NOTES Chapter 4 1. “Pudong Development: The Last Opportunity for Developing Shanghai,” New Capital Newspaper, August 20, 2004. 2. By some estimates, these totaled $1.12 billion in the first five years. Compiled by Richard Holman, “World Wire” column, Wall Street Journal (Eastern Edition), March 12, 1992. 3. Trish Saywell, “Pudong Rises to the Task,” Far Eastern Economic Review 163, no. 44 (2000): 56–58. 4. “Shanghai Announces Plans to Develop Pudong New Area,” East Asian Executive Reports, May 1990. 5. Salman Rushdie, Midnight’s Children (New York: Knopf, 1981), 105. 6. Ramnath, interview by research associate Namrata Arora, Machimaar Village, Mumbai, March 2007. 7. Harekrishna Debnath, “Charter of Demands of the Indian National Fishworkers’ Forum,” Library of the Turtle, December 6–19, 2001, http://www.voiceoftheturtle.org/library/nff.php. 8. This would require amending Coastal Regulatory Zones and increasing the controversial Floor Space Index. 9. DLF went public in June 2007 with a market capitalization of $22 billion. 10. The Urban Land (Ceiling and Regulation) Act of 1976 imposed a limit on the agglomeration of vacant land in urban areas, regulates the acquisition of such vacant land, and controls the disposal of vacant land. It was repealed by the Urban Land (Ceiling and Regulation) Repeal Act of 1999. 11. “Premier Zhu Rongji on Three Gorges Project Construction Quality,” People’s Daily Online, June 19, 2000, http://english.people.com.cn/english/200006/19/eng20000619_43308.html. 12. “China’s Dam Fills to Target,” BBC News Online, June 11, 2003, http://news.bbc.co.uk/2/hi/ asia-pacific/2977404.stm. 13. International Rivers Network (Yi Ming, primary author), “Human Rights Dammed Off at Three Gorges: An Investigation of Resettlement and Human Rights Problems in the Three Gorges Dam Project.” Report published January 2003, http://www.irn.org/pdf/threeg/3gcolor.pdf. 14. Sarvepalli Gopal, Jawaharlal Nehru: A Biography, vol. 3 (New Delhi: Oxford University Press, 1984). “Nehru was now more aware than he had been in earlier years of the possible ‘disease of gigantism.’ He had said to himself while surveying the large Bhakra-Nangal dam in 1956, ‘These are the new temples of India where I worship.’ ” 15. In Indian law any civic-minded person can approach the courts, not just an aggrieved party. 16. Friends of River Narmada, (Medha Patkar, primary author), “Without Considering Basic Issues, Supreme Court Surrenders to the Pressures by Power Holders. Unfettered Dam Construction and Displacement Allowed: Assault on People and Constitution,” Narmada Bachao Andolan press release, October 18, 2000, http://www.narmada.org/nba-press-releases/october-2000/sc.judgement.html. 17. Articles 19(1)(f ), 19(5), 31, 32, 39(b) and (c), 226 and 265 of the Indian Constitution accord the status of Fundamental Right on matters related to property. 18. Dr. Surat Singh, interview by author, New Delhi, March 2005. 19. The term surplus is used when private property is taken over for a public purpose. The meaning of the word implies that this property “is providing a surplus for all members of society including the person whose property is being taken albeit minus the loss of his property for which he should be compensated at least to maintain status quo.” See Jaivir Singh, (Un)Constituting Property: The Deconstruction of 23 This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016. For the exclusive use of Y. Liu, 2015. Right to Property in India (New Delhi: Center for Study of Law and Governance, Jawaharlal Nehru University, 2004). 20. Katherine Wilhelm, interview by research associate Vinati Dev, New York, March 2005. See also K. Wilhelm, “Rethinking Property Rights in Urban China,” UCLA Journal of International Law and Foreign Affairs, 9, no. 2, (fall/winter 2004: 19). 21. Chengri Ding, “Land Policy Reform in China: Assessment and Prospects,” Land Use Policy 20 issue 2, (2003): 109–120. 22. Songsu Choi, “A Housing Market in the Making: Zhu Rongji Jumpstarts China’s Stalled Housing Reforms,” China Business Review, November 2, 1998, http://www.chinabusinessreview.com/public/ 9811/choi.html. 23. Chengri Ding and Gerrit Knaap, “Urban Land Policy Reform in China,” Land Lines 15, no. 2 (April 2003), http://www.lincolninst.edu/pubs/PubDetail.aspx?pubid=793 24. Wilhelm, “Rethinking Property Rights in Urban China. 25. Chengri Ding, “Land Policy Reform in China: Assessment and Prospects,” Land Use Policy 20, no. 2 (2003): 109–20. 26. Karl Moore and David Lewis, Foundations of Corporate Empire: Is History Repeating Itself? (London Financial Times Prentice Hall, 2000). 27. Ke Fang, “Housing Relocation and Housing Property in Beijing,” China Lawyers 17, no. 5 (1999): 33–36. 24 billions of entrepreneurs This document is authorized for use only by Yucheng Liu in Comparative Policy Process taught by Simone Bunse, Georgetown University from September 2015 to February 2016.