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Friday, October 31, 2003

Thanks, Edward, for the post "Gazing into the Future". I have a lot of respect for Thurow and I agree with him on his analysis about the future of China and India. I know that Thurow is good at arithmetic and as my good old friend John McCarthy of Stanford used to say, "Those who refuse to do arithmetic are doomed to speak nonsense."

I recently posted an article on my blog titled Use it, not just export it where I argue that the benefits of ICT acrue from using ICT tools rather than just exporting it, as India does. And one of the most important uses of ICT is in education. The goal should be universal primary education. To manage that herculean task, you need to train about 7 million primary school teachers and provide them with teaching aids. I see ICT as the primary device for training the teachers. If India does not get its act together in the primary education field, there is no hope for India. If it cannot find the national will -- political, economic, institutional -- the road will lead to a slow and painful national suicide.

The Chinese leadership seems to have its act together. The Chinese lucked out. It is India's karma that it got saddled with a bunch of self-serving narrow-minded weak-kneed myopic corrupt criminals as its leaders. A bunch of half-wits ruling over the totally witless.

Just How Competitive Do You Feel?

The latest edition of the Global Competitiveness Report is out. Finland is in at No1, and Italy down at 41. I don't know how much importance to put on this kind of thing, but the rankings look more or less OK to me. India slipped in the growth competitiveness rankings, and didn't move up the business competitiveness index. This means that there is little room for complacency: as Vivek was saying on Monday. Reform, Reform, Reform!

The latest Global Competitiveness Report by the World Economic Forum has sprung a surprise. It sees Finland racing ahead of the United States as the world's most competitive economy, with Sweden and Denmark tying up third and fourth spots on the annual listing, the World Economic Forum said in a report on Thursday. India slipped a little in the growth competitiveness index rankings as it occupied the 56th in growth competitiveness index rankings compared to 54th in 2002.

In the business competitiveness index rankings, however India continued in the same position, 37th, as the year before. This means India continues to be below Brazil but above China which languished in the 46th position, a fall from its 38th position in 2002. Neighbour Pakistan was 73rd in the growth competitiveness index rankings and 72nd in the business competitiveness index rankings. To calculate the growth competitiveness index, the WEF assessed statistics and surveys of business leaders on each country's technology, public institutions and macroeconomic factors. Taiwan, Singapore, Switzerland, Iceland, Norway and Australia filled in the next five slots in the survey.
Source: Times of India

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

Dowry and Female Infanticide

I thought I was going to pontificate about how can we hold on to the IT boom in India. But instead I came here and got distracted.

My read on the subject of dowry and female infanticide is slightly different from that of Atanu's and Prashant's. I think it is important enough to follow through.

Firstly, I have my doubts about whether the percentage of Indians that have access to doctors/technology that can determine foetus's sex beforehands and the percentage of people who can get a proper abortion is statistically significant. Likely, a good percentage of deaths are occuring after the childbirth. I would be happy to be corrected on this score. But I think we are talking about some truely sick stuff here.

It also took 10 years for the national average of girls to drop from 945 to 927 per 1000 of boys. At this rate, we'll have to go through at least 50 years of female infanticide (which happens at least in some cases against the wishes of the mother) before we have people worrying at a level where we can potentially have national impact.

Of course, the Indian Express article also says that the problem is most accentuated in states like Haryana, Punjab etc. which has a sex ratio of less than 800 women for every 1000 men. Haryana incidentally, is also the state where in some parts they have started this wonderful social practice of getting the wife of the elder son married to the younger son when the older one dies (In post independent India, property now goes to the wife). Knowing rural Jats, I doubt anyone bothers to ask the woman before the second marriage. You guys honestly think that this society left unchanged will evolve rationally?

In Bihar, there is this place called Saurastra. Every year, they have a mela (a fair) there called Suarastra Sabha for the express purpose of holding an auction. The fathers sit there along with the priests (and sometimes the potential groom) and apparently they shout out the groom's qualifications -' IAS officer! A minimum of Rs 4 lakhs!!" etc. etc. to the interested parties. The fathers of the daughters bid. When two parties close a deal and a good price is reached, they go over to collect the bride who is all made up and ready to get married. They get her married off right away and a good fun is had by all.

This is of course an extreme example.

But I think it is important to think about it for a moment to feel the outrage of it. The best way to fight stuff like this is really to bring back the practice of horsewhipping. Since that is not feasible, we need to start by stop being rational about it. RamMohan Roy did not stop the practice of Sati in eighteenth century Bengal by waiting for the light of Renaissance to penetrate India. I have a huge amount of respect for what he, one man, achieved in the face of overwhelming social disapproval on one hand and British disinterest on the other. We already have the law. Indian really needs someone of national stature with an organization behind him that would go out of its way to socially ostracize people who are trying to get a dowry and who would try to change the law to make dowry related prosecutions easier.

We need to get the fear of god into people. Until a momentum for that builds up, we should support whatever NGO is doing anything worthwhile in this direction and start turning our faces from people who we know took dowries. Stop going to marriages where you know someone took a dowry. We all probably shy away from people who take dowry. But do we make them feel like shit? That's a hard choice I have never made either. It is so much easier to conform .....

But the Indian society is changing. It is changing every day in ways we can not measure and (I would be the first to admit) not always for the better. But some of the change is really for the good. I wrote in a mail to Edward quite some time back:

"It was not socialism, which eradicated odious social practices in India. It lived on in various guises. It was the kids who are subverting it. It is the engineering schools, the medical schools etc. which require you to stay in a hostel for 4 years, that in India is creating a generation that in twenty years will create an affluent, educated, largely secular work force the dimension of which we don’t know yet." I think it is still our best bet.

We may not need to wait for enough female infanticide (as I said, I have reservation over what really is going on here) over the next 50 years to end this madness. I dont think dowry is going to completely go away at least in our lifetime. But I think, I hope, that in the next 20 to 30 years we would reach a place where most Indians will look at people who knowingly took a dowry and wrinkle their noses in disgust.

The Lop-sided Sex Ratio (revisited)

Vivek's reaction to my position on the lop-sided sex ratio is curious. He writes:

"I find it impossible not to breast beat, bitch and moan about the murder of innocent girls because their 'net present value' is lower than that of boys. I am wierd that way. Yes, I think the foetuses has rights. Not neccessarily all rights. But the right to life except under well defined circumstances."

One should not only breat beat and bitch and moan about murder of innocent girls, one should actively fight with all one's might to prevent that. Why stop at girls, one should oppose all murders, period. Anyone who advocates the murder of anyone based on low net present value should be considered deranged and dealt suitably.

My position is that the fact is that some people value female children less than male children. This is a lamentable fact but a fact nonetheless. I did not dictate that people value girls less. I am taking that as given and (at least for the present) unalterable fact. Breast beating may feel good but will do little to alter that fact. Altering that fact would be an end that all right-thinking people devoutly wish for. It may take a few generations. Until then, what is the most humane way to deal with the problem. Do millions of unwanted girl children have to suffer inhuman neglect? Can society protect the rights of children with as much gusto as the protection of foetuses? Which is the lesser evil: the aborting of female foetuses or the terrible fate of an unwanted girl child?

How would I feel if I were in the place of a girl who was beaten, malnourished, worked nearly to death, neglected, not loved, not had even the shadow of the prospect of a decent human existence? I would rather that I was never born. The suffering of a human being is a lot worse in my estimation than the aborting of a female foetus.

Your view of which is better would vary and therefore your policy prescription would also vary. I stand by my position that it is a second best world and the prohibition of sex-based abortion is a first best prescription that does more harm than good. It merely addresses the consequence and does nothing to address the underlying causes, many of which are economic.

Meena Auntie and the fiscal deficit

So I have an article in the Business Standard today.

Meena auntie and the fiscal deficit
Should we still cherish the social security conceived in Nehruvian socialism? Vivek Oberoi finds out
Published : October 29, 2003

Meena auntie died a few months ago after a prolonged battle with throat cancer and asthma. She had a tough life and the end wasn't much better. I have thought of her quite a bit in the last few months.
Every time I think of her, I think about the fiscal deficit. The International Monetary Fund (IMF) and gang (various economists affiliated to colleges, think tanks, financial markets) have been pressuring the Indian government to reduce the deficit.


In Honor of a True Prophet

Milton Friedman's Remarkable Prescience (on India, among other things)
The Federal Reserve Bank of Dallas (Wall Street Journal: subscription required) recently paid homage to Milton Friedman's life & work with a conference titled "Free to Choose: Economic Liberalism at the Turn of the 21st Century."

I'm not a professional economist, and have read only a smattering of Milton Friedman's academic papers. However, I've read a goodly portion of his non-academic output -- books, essays and interviews. While some of his ideas are a bit radical, I am firmly convinced that Friedman is a true giant -- one of the most influential economists and intellectuals of the 20th century.

Back in the 1950s and 1960s Friedman was consistently ignored and relegated to the fringes (in public debate and academia). It's amazing how, over time, most of the world has moved closer and closer to what he said -- the aforementioned essay on India is a prime example.

Sidebar: Friedman is one of the three people alive that I would most love to have dinner with -- the other two are Nelson Mandela and Aishwarya Rai.

Tuesday, October 28, 2003

Atanu Dey's Girl Child problem

So I am going to be the first person to start a fight on this blog. God willing there will be many more!

I have to say, I am absolutely shocked to read Atanu Dey's post about the girl child the other day. Atanu writes:

The breast beating about the skewed sex ratio in India has always puzzled me. What is all this bitching and moaning about, really? Why don't these people analyse the situation in its entirety?
Consider the facts:

A. India is overpopulated.
B. Girls are valued less than boys.

C. Neglect of an unwanted child is a greater evil than the aborting of a foetus.

D. The lower supply of women of marriagable age will increase their 'price' leading to a 'negative dowry'.

E. The lower supply of women would retard population growth.

Firstly, I find it impossible not to breast beat, bitch and moan about the murder of innocent girls because their 'net present value' is lower than that of boys. I am wierd that way.

Yes, I think the foetuses has rights. Not neccessarily all rights. But the right to life except under well defined circumstances.

I wrote about this a few days ago. The EPW article I linked to made it amply clear that female infanticide did nothing to increase the utility ('price') of females and a cursory look at population figures will make it clear it did nothing to dent the population growth rate.

Besides, the preference for girls spills over to the women who do make it out of the womb. The girl-child is typically given less nourishment compared to the boy and consequently there is an adverse effect of the development of her cognitive skills and immune system. What is the utilitarian advantage of having a little less than half your population unable to participate fully in the economy?

I could go on. However, I don't want to make this an utilitarian argument. This is about liberty. Female infanticide and discrimination is against the principles of liberty. The contradictions between utilitarianism and liberalism are well understood. Atanu should try re-reading Sen's paradox.

The point is not that Atanu is at all sympathetic to discrimination against women. I feel quite sure he isn't.

But the point is that his argument is reductionist, wrong and dangerous.

Stop Gloating Mr. Jaitley

It's time for Arun Jaitely to stop lapping up the applause and find a way to get the WTO going again. It's important to stop grandstanding--free trade is in our national self-interest. As the article things are already getting bad:

The Europeans have fired the first salvo. It hurts. India's textile industry is in a tizzy as new duties on bed linens and other textile products will hurt textile majors with considerable clout. Eight Indian cotton textile exporters were told that their products would face an 8.4 percent duty in the European and the US market under the anti-dumping law. The textile industry is not optimistic of a favorable outcome at the October 30-31 meeting they sought with the European Union and the US representatives.

India has taken serious note of the European decision to impose 8.4 percent duty on Indian textile products as, with a European Union custom tariff of 9.6 percent, the duty on Indian products rise to 18 percent. Among the eight Indian companies affected are textile majors Bombay Dyeing, Prakash Cotton, Vigneswara Mills, Brijmohan Tex, Divya Textiles and Purushotam Das.