On Environmentalism, Global Warming, and the Tata Nano
A few days ago, we were witness to a a spectacular event - the unveiling by Tata Motors of the world’s cheapest car ever, the Nano, which has a base price of just Rs. one lakh (Rs.100,000 or US$2,500). When, amidst unprecedented hype and anticipation, the “people’s car” was unveiled, it exceeded all expectations. What we saw was the cutest little car ever, with room for four adults, and with adequate power for Indian city roads.
What the Nano Means for India
The Indian middle class has already fallen in love with the Nano. Some two hundred thousand people thronged the Auto Expo in New Delhi to get their first glimpse of the car (link). And no wonder! According to the rating agency CRISIL, “the new price point translates into a 65% increase in the number of Indian families that can afford a car” (link).
Millions of Indians look to the Nano to fulfil their dreams of car ownership, and most importantly, to provide safe transportation. In Delhi alone about 1,800 people die on on the roads each year - about one-third of them on two-wheelers, while only 5% die in cars (link). In Mumbai more than 3,000 die every year in the city’s dangerously overcrowded commuter rail system alone (link). While unveiling the Nano, the chairman of Tata Motors, Ratan Tata, explained the motivation for developing this car, “I observed families riding on two-wheelers – the father driving the scooter, his young kid standing in front of him, his wife seated behind him holding a little baby. It led me to wonder whether one could conceive of a safe, affordable, all-weather form of transport for such a family.”
The World Takes Note
One of the most remarkable aspects of the Tata Nano has been the very high level of prominence it has received in the world media. This is possibly the first time ever that an Indian product developed by an Indian company has been seen as a worldwide leader in innovation and technology. (see for examples, the New York Times, Businessweek, the Economist, ABC News).
Typical was an article entitled “Can Detroit be Relevant?” in the New York Times, which said,
This week, Rick Wagoner, chief executive of General Motors, was at the Consumer Electronics Show in Las Vegas talking about driverless cars and the Cadillac Provoq, a concept vehicle powered by a fuel cell. But bigger news came half a world away, at the New Delhi Auto Expo in India. Tata Motors was unveiling the Nano. Nicknamed the People’s Car, the Nano is a small $2,500 car that is expected to revolutionize the auto industry, in India, at least (link).
An Article in a British newspaper actually speculated on the possibility of the Tata Nano ushering in world peace,
Perhaps the idea of the car industry succeeding in bringing peace and prosperity to parts of the developing world where countless governments and other institutions have failed is just too fanciful, but if it ever happens, just remember that it all started with the little Indian (link).
While the Tata Nano has already become India’s pride and joy, and is seen as a world leader in technology and innovation, it does have its share of detractors.
Land Acquisition for the Manufacturing Plant
When Tata Motors was looking for a site to locate a new manufacturing plant for its small car, the state government of West Bengal government successfully persuaded Tata to choose Singur, near Kolkata, as their site. In order to make space for the plant, the West Bengal government had to acquire land from farmers in Singur - a small part of it forcibly. This land acquisition has now snowballed into a major controversy.
While I realize that the West Bengal government could perhaps have done a better job in dealing with the land acquisition at the local level, I fully support their basic idea of turning Singur into an industrial area. It is clear that compared to agriculture, the auto industry in Singur will generate a much higher volume of economic activity, and will also create many more man-days of gainful employment - employment that is likely to be much better in terms of pay, benefits, etc. I do believe that generous compensation should be provided to those who have lost their land, and help and training should be provided as well, to enable them to adjust to their new lives and take advantage of the new economic opportunities that open up.
The Tata Nano and Oil Prices
Some commentators have criticized the Tata Nano on the grounds that widespread car ownership in India will push up the worldwide price of oil (link). This is really an absurd argument. After all, don’t people in India have the right to buy petroleum products (or in economic terms, “create demand” for oil), just as people in the United States or Europe do? It is like criticizing ordinary middle-class families for buying homes and driving up land prices, thereby making it more difficult for the rich to buy their mansions.
It is true that demand for oil has been rising because of economic growth in China, India, etc. However, it is important to note that this is not the only factor driving up the price of oil. The increase in the price of oil has been disproportionately larger than the growth in demand. Today, the price of oil is far far higher than the economic cost of its extraction. The main reason for this is the monopolization of the crude oil market by a cartel of sellers – the Organization of Petroleum Exporting Countries (OPEC). It is well known that when monopolies exist, markets cease to function effectively. That is why most countries have anti-monopoly laws. Unfortunately, no such laws exist for sovereign states. As a consequence, OPEC has been able to indulge in the worst kind of price gouging. In order to counter OPEC’s monopoly, I feel that oil importing countries should organize themselves into a buyers’ cartel. The combined buying power of an anti-OPEC buyers’ cartel should be used to bargain effectively with OPEC and drive down the price of oil, much like what Wal-Mart does with its suppliers.
Opposition by Environmentalists
Some environmentalists have severely criticized the Tata Nano, for its perceived negative impact on the environment. One of the most prominent of these is Sunita Narain of the Center for Science and Environment (CSE), who has called for the Tata Nano to be “taxed like crazy”. Another prominent environmentalist, Dr. Rajendra Pachauri, who chairs the Intergovernmental Panel on Climate Change (which won the 2007 Nobel Peace Prize, along with Al Gore) remarked that he is “having nightmares” about the Tata Nano.
I think these environmentalists have got it completely wrong.
The Tata Nano and Mass Transit
Some have put forward the argument that instead of small cars, Indians should concentrate on mass transit. I agree that India should indeed invest heavily in mass transit. However, I do not think that this calls for severe curbs (“tax it like crazy”) on the auto industry. This is not a zero-sum game. This is not an “either-or” situation.
Among Indian cities, Delhi has a much more extensive mass transit system than, say, Kolkata. But Delhi also has a higher rate of car ownership than Kolkata. In reality, car ownership is much more closely tied to peoples’ incomes than to the presence or absence of mass transit.
A few months ago I was in France on vacation. I was most impressed with the excellent public transport system there. However, in spite of an impressive mass transit system, car ownership in France is high - almost 500 cars for every 1000 people (India has 7 cars for every 1000 people) (link, link). Car ownership in France is high, not because the mass transit system there is bad, but simply because peoples’ incomes are high.
Had widespread car ownership spelt doom for public transportation (i.e., buses), the introduction of the Tata Nano would surely have been bad news for Indian bus manufacturers. But guess who is India’s largest bus and truck manufacturer? Tata Motors itself! It does not appear that Tata Motors is the slightest bit concerned that sales of the Nano will cannibalize its bus sales, even though Tata’s profit margin on buses is probably larger than it’s going to be on the Nano. Clearly this is not a zero-sum game. The automobile industry in India is not fundamentally opposed to the idea of mass transit. On the contrary, a healthy and growing economy, of which the auto industry forms an important component, is necessary to pay for large mass transit projects.
The Tata Nano and Global Warming
Some environmentalists have denounced the Tata Nano on the grounds that widespread car ownership in India will worsen global warming. While I do recognize the necessity of dealing with global warming, I feel that the environmentalists’ whole approach to dealing with this issue is fundamentally flawed.
Many environmentalists take the view that human civilization and development have been unmitigated disasters for the planet. In this view, human activities such as economic development, industrialization, consumerism, car-ownership, etc., have been guilty of destroying the environment and causing global warming. Supposedly the only way out is to curb these human activities and abandon our vain attempts to achieve progress and “growth”. In this view, an ideal society is one that is based on limited ambition, limited needs and subsistence production.
Based on the core idea that human activities are inherently bad for the planet, the solutions that environmentalists propose generally involve imposition of limits, quotas, punitive taxes, restrictions, etc., with the aim of curbing human activities and human initiative.
The Problem With the Limits and Quotas Approach
Limits and quotas can certainly lead to some modest incremental reductions in energy consumption. However, to address major environmental problems such as global warming, it is necessary to achieve not just modest reductions, but fundamental paradigm-changing shifts in energy usage. In other words, key breakthroughs in energy technology are needed. It is extremely unlikely that such key breakthroughs can ever be achieved through the limits-and-quotas approach. Consider the following.
- None of the key breakthroughs in computer technology can be attributed to the effect of quotas or limits. As authors Ted Nordhaus and Michael Shellenberger point out, it is highly unlikely that simply introducing restrictive quotas for typewriters would have instigated critical breakthroughs in computer technology. Rather, public investment in science and technology research played a huge role in ushering in the computer age – by nurturing once fledgling technologies such as the silicon chip, the internet, etc.
- One of the greatest achievements of the twentieth century was the Green Revolution, a paradigm-changing transformation of agriculture in countries like India. It dramatically increased food production, thereby avoiding the Malthusian catastrophe of a global “gigantic inevitable famine” caused by population growth outstripping food supply. During the Green Revolution new high yielding varieties (HYV) of seeds were developed, and technologies and infrastructure such as pesticides, fertilizers, and irrigation systems were made available to farmers. Just like the Computer Revolution, it was not primarily the introduction of quotas and limits (say food quotas), but rather, large public investments and human ingenuity that made the Green Revolution possible.
At its core, the world-view held by many environmentalists is deeply conservative. They wish to conserve - to preserve - the world as it was before large scale human intervention in nature. Human society too, they argue, should revert back to the way it was before modern development and industrialization. People are urged to preserve traditional hereditary occupations and traditional means of organizing society. In their view, farmers (and farmers’ children too) should forever remain farmers and never seek better paying industrial jobs. Moreover, farmers are urged to shun modern technologies such as genetically modified seeds, irrigation canals, chemical fertilizers, mechanization, etc., in favor of traditional technologies and subsistence agriculture. In this view, the millions of poor in India should always maintain their traditional way of life, and should always be satisfied with whatever standard of living is achievable through their traditional occupations and traditional technologies. They should never even aspire to possess consumer goods like cell phones, cars, etc. As writer and activist Arundhati Roy puts it, “the idea of turning one billion people into consumers is terrifying... are you going to starve to death dreaming of a mobile phone or are you going to have control of the resources that are available to you and have been for generations....?” (link)
I completely reject this conservative environmentalist world-view. My world-view is a progressive one. I believe that while we should seek to mitigate the negative side-effects of development such as environmental over-exploitation and global warming, the emphasis must be on moving forward, on further human progress. Human civilization and development have been wonderful. People today live longer, fuller, lives, with more prosperity, freedom, opportunity, and choice, than ever before. How can this be a bad thing? The world needs more progress and development, not less.
How to Solve Global Warming
The way I see it, the solution to global warming lies not in restricting, but rather, in encouraging human ingenuity and human initiative to develop new innovative clean energy technologies. For example, Tata Motors, the maker of the Tata Nano, is also investing in clean energy technologies such as cars running on compressed air (link) and cars powered by hydrogen fuel cells (link). Unfortunately, while environmentalists are very vocal in criticizing of the Nano, they fall completely silent when it comes to praising Tata Motors for its clean energy efforts.
While it is important that private companies invest in clean energy technologies, these may not be enough. In order to solve the problem of global warming, it is necessary to develop fundamental paradigm-changing new energy technologies. It is not enough to just depend on free market mechanisms and private companies for this. While free markets and private enterprises work well to incrementally refine technology, giving birth to revolutionary new technologies may not be possible without large public investments. In my view, any program to deal with global warming must have, as its central component, large-scale public investment for research into new innovative clean energy technologies.
At its core, our approach to dealing with global warming must articulate a positive vision that people can embrace, not just a nightmare that people need to be scared of. As authors Ted Nordhaus and Michael Shellenberger point out, the great American Civil Rights leader, Rev. Martin Luther King, Jr., is remembered not for his “I have a Nightmare” speech, but for his “I have a Dream” speech.
Imagine if, instead of criticizing the Tata Nano as a “nightmare”, Dr. Pachauri, the eminent environmentalist, had said something like this: “I have a dream that one day every Indian family will be able to afford a car that runs on clean energy. This can never happen by making cars prohibitively expensive through high taxes, but this dream can become a reality if technological innovations make clean energy affordable to all. I call upon the United Nations to fund a massive international effort to develop new affordable clean energy technologies”.
Now, that would have been a vision I’d have loved to embrace. Dreams, Dr. Pachauri, are more powerful than nightmares!
[Added Later] I have written another article on the Tata Nano that can be found here. This article, for a slightly different audience, is for the Breakthrough Institute Blog. Founded by Michael Shellenberger and Ted Nordhaus, the Breakthrough Institute is a progressive think tank focusing on environmental issues.
Some of the ideas on environmentalism expressed here have been inspired by reading the book “Breakthrough” by Ted Nordhaus and Michael Shellenberger, and attending their talk at Berkeley, California. For more about the book, click here. A recording of the talk is available here.