Tuesday, June 27, 2006

All That Glitters is not Gold Pt. 2

This definitely seems like a comparison that has far exceeded a reasonably valid scope - Chennai being a threat to Detroit. The article talks about the infrastructural revolution taking place in Chennai and how it is fast becoming a center for automotive and manufacturing excellence, how government has reformed policy to make all this happen and how the doors are opening but not open yet amd how ever increasing international recognition is transforming the manufacturing landscape in Chennai.It is here that this comparison (with Detroit's might) takes flight. The tone and the comparison with Detroit and the suggestion that Detroit's auto manufacturers are shaking in their boots because Chennai exports engine valves seems a little far fetched (though I am not excluding this future possibility) and designed just to fill the Indian balloon with more hot air. As always, a comparison with China follows suit.

[Warning! ONLY interested readers and insomniacs proceed]
In September 2005, I had linked to a tangible statistical comparison between China and India vis a vis their trade volumes as percentage of GDP, sectors that contribute most to trade (export and import) and finally a look at social indices such as literacy rate (adult and more importantly, women), poverty rates etc. The numbers speak for themselves.
[Link] to my earlier post and to save you, my assiduous reader, the trouble of an extra mouse click I will reproduce all the relevant links in this post. [Link] article by Shankar Acharya, the Chief Economic Advisor to the Govt. of India. He rules this as a no contest in favor of China. Not to worry though, James Waterton says the future is indeed colored saffron. His a case against China is [here] and one for India is [here]. As the adage goes, "A picture is worth a thousand words" comes to mind as these numbers are visually pie charted in this [report] by Deutsche Bank. [hat tip: New Economist]. I urge the reader to take some time out to carefully read these documents and as a thought experiment, introspect on the state of India's society and economy. Read this Deutsche Bank [report] on their thoughts on India becoming a major economic powerhouse. Though all this reading is quite involved, it will lend some form and structure to the opinions you may have formed while going through Shankar Acharya's column and Deutsche Bank's visual comparison of the two economies.

The sad state of the much lauded "world's largest democracy" is on full display - The hindu [reports] that the DMK government in Tamil Nadu is actually making good on its poll promise of dishing out free color TVs. The "beneficiaries" have also been identified. I cant think of which is worse - the DMK actually fulfilling their promise or that the next time around the shrewd public will want more thereby raising the ante for electorate sellouts. Since this largesse comes at the expense of tax payers, maybe I should be thankful that the AIADMK wasnt elected - they had free computers as part of their electoral bribe, I mean promise. The immaturity of our democracy is reminiscent of cargo cults in the Pacific says Atanu Dey. To learn more, visit these links [1] and [2]

[Update: Atanu's blog seems to acting all of a sudden, will let you know when it behaves]

[Update 07/05/06: Atanu informs us that his blog is back up!]

Saturday, June 24, 2006

All that glitters is not gold Pt. 1

I am, quite frankly, tired of reading and hearing about how India and China are the next global economic superpowers - the cliched contrasts of abject poverty juxtaposed to astounding wealth, how inspite of the education and health sectors being in disarray India churns out "world class" graduates who are spearheading this breakout. But what exactly are these graduates good for? For joining the workforce as customer service agents? For seemingly to shine as part of technical support? Thats the impression I get from reading all thats out there on India's economic boom. I know better than to believe everything I read but in order to improve the abysmal signal to noise ratio I have decided to link to articles/commentary/essays/blogs of eminent scholars who call it like it is.

Tomes have been written about their socio-economic growth and scholars have endlessly exchanged letters and written countless books opining what they see about their (India and China) future. Though all this makes for fascinating reading, most of the recent ones have become rather cliched and often just regurgigate thoughts and ideas that have long since been accepted as the state of affairs. Of course, once an objective effort is made into investigating the claims to superior economic status of the two nations, social indices and a whole lot of other measures of development in industrial and allied areas follow suit. It is in these numbers and their interpretations that the truth lies. Hope follows closely.

In response to Smitha's comment and before I introduce commentary on developmental policies, I reiterate the importance of hanging back a second to take a closer look at various indices of social and economic development will give us a better picture than just outrightly denouncing India's apparent economic advances (whether it is as notable as it is made out to be is a matter to be seen). India is a nation that houses most of the world's poor people, life in India is stained with poverty but when a country makes rapid strides (India's growth being a documented 7% - 8%) it is important that this growth be reflected in all sections of society. Policies that try to ensure that this growth be reflected more or less equally across social strata rein in the growth rates of forward sections and invest more resources (effort, money and time) in trying to improve the lot of the lower classes.But there exist certain drawbacks of equality centric policies as they aim to improve the lot of the masses under the working assumption that the masses can be banded together as a collective. It is my personal opinion that there are deepset inherent inequalities in Indian society that preclude any attempt to address the society as though it was one. Also judging by the sheer mass of Indian society, lifting them collectively out of poverty is a monumental task both effort and time wise. As opposed to equality centric policies there exist progressive policies that recognize that rapid growth first benefits only certain sections of society and only certain regions of the country but they aim to share this growth and wealth by allowing it percolate down to the lowest classes. These policies work on the assumption that no section of sociey is denied access to this growth or denied partaking in it. The reservation I have about these policies is that by ensuring that all sections partake in the nation's growth they might be able to lift the lower sections out of poverty (poverty as defined by world bodies), but since they don't ensure equal access to growth/wealth the more progressive sections, on account of their greater accessibilty to wealth and resources pull away much faster from other poorer sections resulting in greater inequality - greater inequality even though the masses are progressively moving out of poverty. A little irony eh?

[hat tip: The Middle Stage, Pankaj Mishra's resistance to temptation]
With that I introduce few links to some excellent commentary on the very same topic. To coincide with the release of his book "Temptations of the West : How to Be Modern in India, Pakistan, Tibet, and Beyond", Pankaj Mishra argues that the value system of the free market model that heralds us as emerging economic powers is a western one that assumes that the end result of economic growth is a western lifestyle with its attendant consumerism. Though his arguments get a little less convincing as he progresses, The Middle Stage attributes this to the difficulty of a comprehensive analysis of a topic of this magnitude. In reponse to Mishra's column, Salil Tripathi replies with his own piece arguing for a progressive economic policy. Mishra replies and Tripathi counters. I urge everyone to carefully read these essays/letters and follow up on most if not all embedded links so that you are aware of the complete picture. These essays are instructional to the novice (like me) and showcase opposing theories of India's (and China's) economic explosion.
More articles by Pankaj Mishra and Salil Tripathi.

[cross posted on Frost Bite]

Wednesday, June 21, 2006

The free market economics of "justice"

I've read enough free market 101 books to understand and appreciate its (free markets') philosophy and do lean towards a liberal view that the government is responsible for maintaining an atmosphere condusive to engaging in trade, one can consider this atmosphere as consequence of maintaining law and order. I have a few misgivings, unlike true free market liberals, of the morality of totally free markets and their apparent self correcting nature. I do believe that the government, as part of its responsibility in maintaining law and order, ought to protect the interests of the minorities without, I repeat for emphsasis, without getting regulatory in nature. Though the government represents the majority, the rights and interests of the minority have to be protected keeping in mind that policies framed by the majority can be very well done at the expense of minorities. Just because the majority wants it doesn't make it right. Though I have used the example of policy framing in order to make a point, the analogy can be easily extended to protecting (without getting protectionist) minorities (economically speaking) in a free market that potentially could get immoral. This fine line within which a government must confine itself is transgressed so often that it doesnt exist anymore, much like the case of many a socialist Indian government. It is when the government's policy becomes regulatory and when the markets march to the beat set by the government that everything starts to fall apart. There has been so much said about the detrimental nature of socialist indian policies that nothing I say can add any fresh perspective nor can I say it any better.

Yazad Jal presents us with a free market look at how justice will prevail in a true free market.[Link] The central idea of this post comes from the ideas proposed in "The Market For Liberty" by Linda and Morris Tannehill. The authors being true libertarians re-think the role of government in a revoultionary way and in the book, deal with "private arbitration agencies in managing with disputes and criminality, the role of insurers in providing profitable incentives for security, and private agencies in their capacity as protection services." [book review]

Though I tend to be liberal, being a total libertarian and actually believe heart and soul in the spirit of the said post is a little hard for me. Maybe reading the book and thinking of counter arguments will give me a better perspective and a convert I may become. Time (and the markets) will tell.