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Wednesday, October 29, 2003

Gazing Into the Future

Lester Thurow's seen the future, and he's not impressed. At least that's the reading I put on this recent talk he gave at a Times of India seminar. He's is pretty much naysaying the strategic importance of the IT sector, and putting India and China's arrival off into the next century. I don't think he understands non-linearities. Things are getting faster, faster. So what may once have taken a hundred years, may now take twenty, or ten. One simple example, the declining fertility in the third world, this is happening much more rapidly than anyone would have foreseen even ten years ago. Explanations? Difficult to say. Certainly our ability to mimic each other is an important factor, and the growing proximity of the various extremities of the planet - mainly via the visual image, but now increasingly via voice communication - is a great facilitator. Another example: look how long it took the US to dig themselves into a hole in Vietnam. Now look at Iraq, and look how quickly things have gone sour. Of course this isn't to say that things couldn't 'turn round' again equally quickly, but this is just the point: acceleration. In addition, when he's entering the numbers in his calculator, I have the impression he doesn't for a moment do the necessary valuation downwards and try to allow for what might be the impact of sustained deflation in the OECD world - just take a look at relative GDP in Japan in the 90's if you want to know what I'm talking about - nor does he consider the demographic panorama facing those same countries.

On another level, Thurow is certainly near to Atanu on the eduction front. And I'm not saying they're wrong. My argument is simply they're both important, the high quality IT and the primary education. I don't think there is a simple 'lump of education' division here. It's not necessary to cut one to fund the other. Fuel growth (which means letting the 'boys on the bench' get on with it), and cut back (as Vivek was suggesting earlier) on waste, and, I believe both can be possible.

Lester Thurow has seen India's programming industry and he's not impressed. Or more to the point, the famed MIT economist is unconvinced that this activity will provide the world's second most populous country with a ticket to the new knowledge economy. Thurow, who was in India recently to lecture at a seminar series organized by Times of India Group (one of India's most powerful media houses), argues that countries today have no choice: they must globalize or be left out. He cites as evidence the case of Central Africa, which has no foreign direct investments, no exports, and very little tourism. "If you don't want to participate, is there any other way to get rich? The answer is no," he says.

In the knowledge economy, Thurow says, countries that wish to stay ahead must pay great attention to education. "Ask yourselves this question - 30 or 50 years from now what job will an illiterate do? By that time you will have robots to do what an illiterate does now. Today, I can get a robot that can mow my lawn and does not cost more than an ordinary lawn mower. Very soon they will be cleaning the house and doing other household chores." Thurow emphasizes that the knowledge economy means more than just information technology and programming. "Every job will have a big knowledge component," he says. A worker in a steel mill, he says, "is more likely to sit behind a computer screen than lift anything physically. When we are talking about knowledge workers, we are talking about any job that has a knowledge component." And fewer and fewer jobs fall outside of that description, he says.

Countries that aim to progress in the global economy therefore have to ensure that everybody becomes literate as fast as possible. As an example of national commitment to the goal of complete literacy, he cites Cuba, the best educated country in Latin America, where every person who can read and write has to prove that he or she has taught another person to read and write in the past year.

According to Thurow, the lack of widespread, basic education in India handicaps the country as it competes with China. "More people are in Chinese grade schools than are in Indian grade schools," he contends. Thurow praises China's approach of getting everybody educated up to the third grade, then to the sixth grade, tenth grade, twelfth grade, and so on. "The worst educated province in China is better than the best educated province in India," he says. While conceding that Indian universities are superior to those in China, he says that India's "top down" strategy for developing its high-tech workforce is not as good as China's "bottom-up" approach. India "cannot allow this to continue in the long run," he warns, adding that the country "better have a strategy that gets everybody educated."

According to Thurow, the hype about "China's Century" was nonsense. China's Century (or India's century) - if it does happen - will much more likely be the twenty-second, not the twenty-first, he says. That's because it takes at least 100 years for another country to catch up with the most developed country. He points out that it took the United States that long to develop an industrial economy on par with that of Britain, which from 1730 to 1910 had the highest per capita income in the world. "Take your calculator out," Thurow directs. "Put in China's per-capita income of $870. The United States per-capita income is $38,000. Put in how fast you think the U.S. is going to grow in the next 100 years. Put in how fast you think China is going to grow in the next 100 years. Unless you put some very crazy numbers for China, and line it out till 2100, you will still not get more than two-third the per-capita GDP of the United States. That's because China has five times as many people."

When it comes to globalization, Thurow says that India is ambivalent. "One of the big factors in attracting foreign direct investment, or FDI, is the speed of making decisions - and China pulls in 30 times the FDI that India does," Thurow says. "The Chinese understand that you have to sell yourself to the foreign corporations as a good place to do business. The truth of the matter is that India has not yet come to that conclusion."

Thurow notes that there were two ways for a country to acquire technology. One is to copy it, as Japan did in the past. But this strategy is becoming increasingly difficult because people are locking up their technology. The other approach is to attract foreign investment, which brings technology with it. "FDI is not just money," he explains. "It's about technology, markets, and hiring scarce managerial and engineering talent."

Striking a cautionary note, Thurow says that India was "quasi-left out" of the global economy. Even the country's much vaunted success in the IT industry needs to be put in perspective, he says. India's software exports last year totaled around $10 billion while Microsoft alone was around $50 billion. If India does not carry its masses along with it, he says, it will not be able to succeed in the knowledge economy.
Source: Technology Review

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