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Re: Indiresan: a critique



Kush's view:
------------
> I think that is a critical point.  Yes, to some extent you can borrow
> and have a cookie cutter assembly line producing similar products and
> can find success because of low labor costs.  But once your labor
> costs go up and you start loosing that edge the only way you can keep
> up is through innovation as Japan has.   China is probably realizing
> that now.  They know that shoes, toys and stuffed animals can take
> them only so far.  That is what japan realized in the early sixties. 

The comparative advantage India has is in a) cheap labor and b) high
quality brain power. Therefore the only sensible thing that we can do
today is to do what Japan did for 85 years before it started innovating,
or that China has been doing for 20 years. I am happy to let all of our
incomes grow at 10% in real terms per year for 20 years, at this stage,
and forgeo the "dream" of a Nobel Prize in Chemistry for about 20 years.

Japan did not "realize" in the early 60s that it had to do better than
copy goods. It was economically **ready** to take up that challenge. We
all could "realize"  that innovation is better than mere copying, but that
won't help us one bit, since we do not possess any way on earth to beat
the mighty IBM or Boeing today. Neither our private nor our public sector
can come anywhere close to the level of research that these organizations
are able to churn out daily (often using Indian brains!). We are simply
not "ready" for that. We are only ready for imitation, and producing
cheap, high quality goods, like bicycles. Why we don't produce the best
bicycles in the world is another issue that I'll try to tackle below.

Once we are at a middle level in income, and poverty does not haunt every
policy maker (and every discussion list!), we can try to boost our
research to a much higher level, as well as ensure that all our engineers
work in India (voluntarily), and also attract the best brains from Africa,
or even the USA.

> When by early seventies Japan entered the US auto market, the US
> automakers laughed.  By Mid eithties they were not laughing but
> bitterly complaining that Japan through "unfair" trade practices had
> taken up one third of the US auto market.   All that could not have
> happened without innovation.

As mentioned above, this stage did not miraculously come into Japan: the
ability to beat America in car production. They earned it by producing
lower level of technological goods, in a better and more efficient manner,
first, for decades. And ensuring that all their people were not only
literate, but highly educated. A child cannot become a Ravi Shankar
overnight. 

A few IIT engineers (those that remain behind in India) cannot beat IBM or
Boeing, straightaway. They first have to learn to produce and sell simple
camcorders and maybe bicycles. The best camcorders and best bicycles in
the world, though. Only the best sell in this competitive market. Once
rich enough, they can move on to bigger and yet bigger tasks like
producing the biggest airplanes in the world. Today, our top engineers
cannot even produce the world's best toy airplane, what to talk of a real
Boeing! (Ouch! that hurts, you'll say, but you know in your heart of
hearts: it is true. Today, it is China that produces the best toy
airplanes, not India: our toy planes fall apart the moment you touch
them!) 

> Coming back to the same question (and I know we are digressing here) I
> do not know why the Indian private sector has shown no innovative
> spirit.  I find that  dangerous as well as disturbing.

This is the question that we have attempted to answer through much debate
on the economic policy issue. The lack of competition, in one word, is the
answer to this question. 

We did not allow the Atlas and Hercules (or whatever) companies to compete
against the best in the world. We blocked off all entry by "foreigners"
(we are always scared of competition because we tend to quickly lose! We
were always afraid of losing our sovereignty, again, to these merchants
who produce better bicycles and toys!).

The time has come to play by the rules of the game, which means, to
participate in the competition of the world to SELL goods, not simply talk
about big research and big inventions. Wealthy people can afford the
luxury of further research. We simply need to produce the best goods that
will sell (meaning, in the K-Marts of the world). That will provide us
with foreign exchange, jobs, and completely eliminate poverty. Well,
that's a bit too simplistic, but such a generalization will suffice for
now. 

Hope I am not off the track! We can further discuss this vital issue, if
you like.

Sanjeev