China's Beauty Problem

India's ugly cities are less cruel to their rural migrants than China's plush ones

I was traveling across Eastern China on a high-speed train last summer when my Chinese host from the U.S.-China Exchange Foundation, who had recently visited India, my native country, asked: "Why are there so many poor people on the streets of Indian cities?" I was taken aback because I had been wondering just the reverse about her country: Why are there so few poor people in Chinese cities?

The visibility of India's poor is a big weakness when it comes to impressing tourists. But from the standpoint of dealing with the poor's plight, it might actually signal Indian democracy's strength.

Compared to Indian cities, China's major cities are a vision of loveliness. It's as if a wave of liberalization swept through them, washed them clean, lifted their residents out of poverty, and saved them from all the intervening ugliness and misery that industrializing societies have historically experienced. They have a balletic freeway system; snazzy shopping malls; stylish skylines. And there are more homeless folks wandering around in New York and Washington D.C. than in Shanghai and Beijing.

By contrast, liberalization has been a mixed blessing for Indian cities, producing both enormous progress and enormous problems. Malls, metros, and freeways are cropping everywhere, as in China. However, for every mall that appears, so does a slum colony—often right next to it. People are getting richer, but their quality of life in some respects is deteriorating as rapid urbanization strains roads and other infrastructure, giving Indian cities the feel of dense concrete jungles choking on their own growth.

One big reason why Chinese cities are in far better shape than India's is that China's autocracy has managed growth far more rationally than India's democracy. It has made a conscious effort to build up urban infrastructure to support China's export-led modernization, investing $116 per head on capital expenditures annually—more than six times India—according to a 2010 McKinsey Global Institute report.

But the darker half of China's beauty secret is that it controls domestic migration through a draconian internal passport system called hukou. Under hukou, every citizen is assigned a status—urban or rural—upon birth, creating a kind of locational apartheid. If people want to move outside their birth hukou, they need official permission, which was virtually impossible to get before liberalization. Now, thanks to the need for cheap labor in China's urban factories, men can get permission by paying a fee. Women have to pay—and take a pregnancy test to prove that they are not moving to evade birth control restrictions!

Once hukou migrants—dubbed the "the floating population"—arrive in cities, their living options are mainly consigned to ghettos, invisible to tourists. Beijing authorities are so determined to keep them sequestered that, on the pretext of dealing with rising crime, last July they began walling off native neighborhoods—erecting fences and posting guards to check identity papers before letting anyone in.

But hukou restricts more than mobility. It restricts social services too. Migrants are not entitled to any of the social services that urban residents get unless they convert their temporary visa to permanent residency, something that is exceedingly hard to do. "They can't get admission in city public schools or get adequate health insurance or other subsidized services or even city bus passes," notes Professor Kam Wing Chan, a hukou expert at the University of Washington. Hukou makes city life so hard that many couples leave their children home to be raised by grandparents, breaking up families.

Just when China embraced hukou, India enshrined freedom of movement in its constitution, empowering rural families to move to cities at will. And once they are there, the government can control neither their social benefits (paltry though they are, consisting mainly of subsidized rations and schools) nor where they live. Any attempt at Chinese-style sequestration would trigger massive protests by activists and the opposition, dooming an administration that even tried. The upshot is that migrants are an ubiquitous presence in Indian cities, densely interwoven into the fabric of life like embroidery in a brocade blouse.

In many respects, Indian migrants are worse off than their Chinese counterparts. Basic amenities—drinking water, sewage facilities, housing—are better in China's ghettos than in India's slums. Worse, the perception that villagers are straining roads and services is triggering an ugly nativist backlash in many cities. A virulent "sons of soil" party in Mumbai has been roughing up slum residents to force them to return home.

But there is one thing Indian migrants have that the Chinese don't: the vote. Before every election, politicians hold voter registration drives in slums, making it hard for nativists to gain political traction. But they won't be permanently defeated unless the country's urban infrastructure is improved. To do that, India will need to up its infrastructure spending from $17 to $134 per head over the next decade—or $1.2 trillion, double what is currently slated, McKinsey estimates. This won't be easy given that influential agrarian activists unhappy with India's urban-centered economic renaissance will fight spending on cities.

But India's infrastructure issues, while difficult, are nothing compared to the problems China faces in assimilating its migrants. That's because half-a-century of social engineering has decimated China's civil society, something that will be much harder to rebuild than roads and power lines.

China's one-child policy has undermined the safety net that the elderly normally rely on in traditional societies. This is one problem India does not have thanks to its democracy that put a decisive end to its brief flirtation with draconian population control through enforced sterilization in the 1970s. Hence, India's tightly-knit extended family structure is largely intact, a gift of freedom to the country's elderly.

Since China no longer has such a private safety net, its aging migrants will need a public one—just what hukou denies them. If China fails to extend hukou benefits, its large and disaffected underclass of deracinated, rural population might become a political tinderbox, ready to explode. Yet doing so won't be easy. The McKinsey study projects that this will require diverting 2.5 percent of China's urban GDP to its migrants by 2025. This means either spending cuts, especially on infrastructure—something that would risk puncturing the asset bubble that many believe has been artificially keeping China's economy afloat. Or trimming the hukou benefits of middle-class natives and extending them to migrants.

Both strategies have massive political downsides—precisely because China does not have a ballot box to resolve them. All its autocracy has is brute force, which might have worked so long as the economic pie was growing. But redistributing that pie coercively is an entirely different matter.

China, then, has not yet fully absorbed the consequences of destroying its civil society—and India hasn't yet fully reaped the rewards of letting its flourish. So when it comes to looking after the most vulnerable, appearances aside, India's pell-mell democracy might yet outperform China's hyper-rational autocracy. 

Shikha Dalmia is a senior analyst at Reason Foundation and a columnist at The Daily, America's first iPad newspaper, where a version of this column originally appeared.