'What India needs is fewer jobs': The case for killing small retailers

'What India needs is fewer jobs': The case for killing small retailers

India preserves small shops, like these in Dehli, in part by restricting foreign investment in retail grocers. Photo: <a href="http://www.flickr.com/photos/62223880@N00/296150321/">Villie Miettinen (Flickr)</a>
India preserves small shops, like these in Dehli, in part by restricting foreign investment in retail grocers. Photo: Villie Miettinen (Flickr)

Killing jobs: underrated.

Amid warnings that megaretailers drive small shops and farms out of business, India is backing off from a plan to let WalMart, Tesco and other foreign firms open domestic grocery stores.

Today, American economist Alex Tabarrok mounts a simple, fearless response: Yes, the plan would replace many poorly-paid jobs with fewer poorly-paid jobs. And that, he says, is exactly what India needs.

What India needs is fewer jobs; fewer jobs in retail, fewer jobs in apparel and, most of all, fewer jobs in farming. India cannot become even a middle income country if most of its workers, for example, are farmers. To improve its standard of living, India must use fewer people to produce more agricultural output.

Fewer workers in farming (or retail) means more workers producing more goods in other industries. The same basic lesson holds throughout an economy, it is the declining sectors that allow other sectors to advance.

Tabarrok's case is deeply optimistic: Idle humans don't stay idle. If megaretailers drive out their competition by helping hundreds of millions of Indians save a little money on groceries, the economy will have that much more to create the middle-class jobs of tomorrow: fixing computers, building bicycles, assisting childbirths.

In the long run, Tabarrok suggests, killing an inefficient job only frees a worker to find a better one.

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