Slum lords as entrepreneurs

By Alice Heathcote

Annawadi sits beside the road to the Mumbai airport, on “a stretch where new India and old India collided and made new India late”

Behind the Beautiful Forevers, Katherine Boo

After much insistence my mother, I recently started reading ‘Behind the Beautiful Forevers’,a non-fiction work from Pulitzer prize-winning journalist Katherine Boo. The book follows the lives of the inhabitants of Annawadi, a slum settlement in the shadow of luxury hotels near the Mumbai airport. The main character, Abdul Hussain, is a Muslim teenager who turns an increasingly success profit through reselling the recyclable garbage that richer people throw away. He begins to dream of a life outside of Annawadi, and even a wife who ‘does not care that he smells’. His success catches up to him however, when his next-door neighbor attempts suicide and he is falsely accused of her murder.

At this point, the true tragedy begins to unfold. In the legal vacuum of Annawadi, the Indian police are anything but a force for good. Despite the fact there are hundreds of residents to prove his innocence, Abdul is charged. The police know his family has money stored away and they have an angle now for getting a slice. Police officers arrest the accused and demand bribes; when Abdul’s mother refuses to pay most bribes, family members are imprisoned and beaten. The story gives us an inside view of the Indian criminal justice system, in which success will attract resentment, unwanted attention from authorities and a higher price tag to buy yourself out of jail.

In these settings, in Annawadi and elsewhere, a type of entrepreneur emerges; a savvy business person who sees the opportunity present when people live in a legal vacuum – the slum lord. There’s no doubt these slum lords provide valuable services – protection from the police, arbitration for neighborhood disputes. It’s no coincidence that in ‘Behind the Beautiful Forevers’, it’s only Asha, the rising slum lord of Annawadi, who can offer Abdul potential protection from the police. Of course, she demands a price. But then again, nothing’s for free. Why do you think we pay taxes for our police and courts?

In the West, the slumlords are personification of evil: they are thugs against the state; mafia breaking the law. Yet from the Brazilian favelas to the Indian slums, people in illegal settlements know who they most have to fear. The slumlords may break the law, but the system was never designed for them anyway.

This is an often overlooked fact when contemplating slum redevelopment. You are essentially moving people from one legal system to another as slumlords lose their power and constituents. You are taking people from one informal system, which despite its unpleasantness, may at least engender some of their trust; to the formal system, which has been a fierce and terrifying enemy. Hopefully these same people now effectively get protection if their property rights are clear. But if you’ve lived your life seeing the police as the vicious playground bully, it’s going to be awhile before you can trust them as a friend.

One thought on “Slum lords as entrepreneurs

  1. By John Macomber

    Well, yes, the slumlords and mafias and drug cartels are a kind of entrepreneurs. They definitely will step in when there is a lack of state security or organization. See related post about the lower quadrant and real estate developers:

    But these kinds of entrepreneurs and thugs filling a power vacuum don’t particularly add value; one could argue that their presence is a tax (or worse) on everyone. The most exciting new business models with respect to economic payoff AND human development in the “organize chaos into structure” space are those which rely on advances in communication technology to promote transparency, accountability, and clear consequences – and so MITIGATE the inefficiency of life in these situations (compounded by the thug-tax). The point is to allow everyone to use their limited resources of time, electricity, and water MORE effectively, not to rob them.

    Sarvajal does that with off-the-grid community based water provisioning, facilitated by a franchise model and with communication technology. Alibaba in China does that by being a platform for commerce that boots out the bad actors. Arguably the Singapore investors in Suzhou and Tianjin do this by bringing Singapore laws and markets to those locations. EMBARQ did this by organizing buses in Colombia and beyond so that more value was created; then the parties could worry about dividing the new value. In a banal example, Morningstar and Lipper did this 20 years ago in the realm of financial services chaos by being the first sources of transparent, actionable information in the prior sea of unmeasurable mutual fund companies! But their presence caused more money to flow to the space and also caused money to flow to the high performers rather than to those with the best song and dance or the most baseball tickets to give away to the retirement committee members.

    Arguably this is elitist too: the people who like transparency and accountability best are the ones who are high performers. The ones who like opacity and obfuscation and intimidation, less so.

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