A front-page top-half story in today's Hindu is on Ratan Tata's comments on the Singur controversy:
Tata Group chairman Ratan Tata on Wednesday blamed competitors for ``fuelling'' the controversy over the proposed Rs. 1 lakh car project at Singur in West Bengal ...
The Hindu story doesn't mention who the 'competitors' are. With a lot of hard work -- not! -- and hours of intense internet search -- not! -- nanopolitan has learnt the identity of at least one of Tata's competitors. It's none other than Professor Joseph Stiglitz, one of the 2001 Nobel winners in economics! You want evidence? Here it is, from the same newspaper:
One of the paradoxes of market `reform' in India is that if you are a big company and are planning to set up a factory, you want a free market to buy equipment and hire workers but expect government intervention to acquire land. Can this be justified on the basis of first principles?
There is a general view that where there are large externalities — urban renewal programmes, for instance — there may be grounds for government to try and buy land and help renew a city or part of a city. But the dangers of doing this when there is a single firm without externalities are enormous. This is because the government often uses the right of eminent domain with compensation below market price.
So future rents are shared between the firm for whom land is acquired and the original land owners in a very unequal way...
That's right, exactly, and that's why these firms turn to the government. In general, there is a price at which people would sell their land. The reason these firms ask the government to do it is because they don't want to pay that market price. So once you get into that mindset, it becomes a very dangerous precedent.
The argument made in India is that land holdings are fragmented, that there is no land market.
You have a problem when land is fragmented, or there are land market inefficiencies, and difficulties in getting clear title. Markets might be so poorly developed that businesses can't acquire land and that becomes an impediment to development. Of course, the right answer is to solve the problem of the land market and not to solve it for this particular person by taking over that particular piece of property!