Historical “what-if’s” are notoriously difficult to prove but also notoriously delicious to discuss. Would WWII have happened if Hitler had been killed in the trenches of WWI? [W]ith earlier reform, 14.5 million more children would have survived, 261 million more Indians would have become literate, and 109 million more people would have risen above the poverty line.Would there have been a WWI if Franz Ferdinand survived the assassination attempt? What if Al Gore got his Florida recount? What would have become of Sonam Kapoor’s career if she skipped the flop that was Saawariya?
Arguably, while many of the most famous what-if’s focus on chance events in history, prominent Indian econ journalist Swaminathan Aiyar, writing for the Cato Institute, decided to take on a far more considered, deliberate economic policy “what-if”. He asks “what if India liberalized its economy 10 yrs earlier
?” Put differently, what if 1970s India followed the economic path pursued by Korea, Japan, and Taiwan?
Until the 80s/90s rounds of liberalization, India followed a Soviet-inspired economic model resulting in stuff like this –
India’s per capita GNP growth was only 1.49 percent in the three decades from 1950 to 1980. In this period, socialism was the avowed policy of the government, the peak income-tax rate rose to a record 97.75 percent, several industries were nationalized, and the government sought to capture the commanding heights of the economy.
To answer his alternative history question, Aiyar does two interesting things. First, instead of trying to come up with a hypothetical “Korean policy mapped to India”, Aiyar simply remaps the growth rates across different decades within India itself –
This paper considers what would have happened if reforms had begun in 1971. It projects an early-reform, high-growth scenario in which the per capita GNP growth rate in each decade would have been as high as that actually achieved one decade later. That is, this scenario envisages that the trend per capita GNP growth rate actually achieved in the 1980s (2.89 percent per year) would have been achieved in the 1970s; the trend rate actually achieved in the 1990s (4.19 percent per year) would have been achieved in the 1980s; and the trend rate actually achieved in the early 21st century (6.78 percent per year) would have been achieved in the 1990s.
While there are a hundred possible issues with remapping growth rates like this, I think Aiyar’s approach is likely the “least bad hack” for estimating some numbers.
Second, while growth rates and their inherent compounding are important academic subjects, they leave the lay audience a little, shall we say, underwhelmed. So, Aiyar mapped those growth rates to a few classic human development indices – infant mortality, literacy, and poverty rates – to guesstimate what the India of today might look like –
…with earlier reform, 14.5 million more children would have survived, 261 million more Indians would have become literate, and 109 million more people would have risen above the poverty line.
As Aiyar notes, even if a later, more sophisticated model cuts his projections by half, these results are still in a league of their own. These numbers dwarf the proposed outcomes of even the most optimistic charity / foreign aid / econ development / govt-led initiative / NGO / UN program in existence and demonstrate just how pervasive & important bottoms-up GDP growth is for a population. As Aiyar concludes –
The delay in economic reform represents an enormous social tragedy. It drives home the point that India’s socialist era, which claimed it would deliver growth with social justice, delivered neither.
On a sidenote – India’s first liberalisation move was in, 1966, I think, when it devalued the rupee under pressure from the United States government after two consecutive bad monsoons had caused a need for aid. the resulting political furor was so great that the Indira Gandhi government had to undo it.
In any case, I’m not going to take up this enormously counterfactual argument but just point out some basic disagreements I have –
growth is not the measure of industrialisation – productivity growth is, alongside such things as diversification, increases in high-end technology use in industry, etc.
the period 1950 to 1980 needs to be broken up into two – there are differences between 1950-1965 or so and 1965 and 1980 that are stark – both politically and economically.
Also, India’s industrial policy is better characterised as state capitalist, not socialist, from 1950 to 1965, and planning had essentially broken down by the 1960s.
One would have to assess to what extent the gains from the 1950 to 1965 period in creating certain areas of competence and providing subsidies to businesses like Tata that helped them later become multinationals had in fact ended by 1971.
Finally, as with most countries, one needs to look at what one means by ‘liberalisation’ – it is not a singular thing, and the means, timing, and statging of adoption has a lot of relevance in terms of how one understands what happens economically later. india remains significantly ‘unliberalised’ by 1980s IMF standards and has achieved extremely high growth rates – as such, it seems, again to make more sense to look at what HAS happened, rather than to chart numbers for what might have happened, assuming all of one’s assumptions are true and one has not missed anything in a political economy with a billion people in it.
So is Japan’s, Korea’s, and even Germany’s. The issue isn’t state centered capitalism, it’s the objective to which it is employed. Countries that went whole-hog for import substitution schemes like India, Egypt, Argentina, and so on failed hard. Countries that strove to make their industries internationally competitive rather than merely “self-reliant” took off like rockets. So yea, governments with nationalist agendas delivered results and governments with socialistic ones continue to be mired in poverty.
The downside to the state capitalist approach as practiced by the successful East Asian economies, however, was that once they caught up to the OECD, they really couldn’t direct all the money to go anywhere else. They ended up with a lot of investment capital flying around that produced no net increases in total factor productivity. But those problems didn’t really start to kick in until the late 80s/early 90s when all the money started getting poured into real estate rather than industry.
Reminds me of something.
Makes for good reading, thanks for posting…though gruesome in its number of missing children, literates, non-poor & Sonam Kapoor’s career.
Dr. A, Aiyar specifically mentions in his study that he choose the year 1971, as the beginning of his counter-factual conjecture, to drive home the point that by that time it was evident that socialism, or state capitalism or whatever you want to call it, was not working as the SE Asian tigers had already demonstrated their tigerish growth rates in the previous decade following very different policies. Whatever worked in the 50s and early 60s (and, btw, forced currency devaluations, on the backs of international aid, are not liberalization), it was very evident, and not just in hindsight, that things were falling apart very badly, because of wrong policies.
One thing to keep in mind when making comparisons against the East Asian countries, though, is that they had different political dynamics. Immediately after independence the emphasis of the state was, rightly, on preserving what was left of the Union. India is much more diverse than Japan and Singapore.
Resultantly, India had some unique difficulties in maintaining and building it’s identity as a nation and much of that was done by basically bribing local leaders with patronage politics to hold the country together. Such is the pre-Indira Gandhi Congress party’s legacy. The post-Indira Gandhi legacy is, of course, bribing local leaders with patronage to hold the Congress party together.
Yoga Fire — Yes, India was very different, both in it’s composition and circumstances from which it arose, in the early decades of independence. But the fact that Aiyar “backpolates”, if I may invent a word, just the following decade’s growth rate to the previous decade, shows that incremental reform, of these later decades when India did hold together, onto one decade earlier would have not resulted in the tragedy suggested by his numbers.
because why not? it is a hideous way of reasoning. which is not to say there were tons of problems in the 70s and 80s. but cato rewards these kinds of outrageous hacks when it is in service of their agenda, and swaminathan aiyar has always been ready to oblige.
Looking back is worth it if there are things that we can use today to make better decisions. There is no point in looking back if all you’re going to do is regret. It won’t change the past and doesn’t really help either the present or the future.
I agree with Sameer..should now concentrate on what needs to be done..I just came back from Punjab..looking just at that state, cultural changes not occuring, but economic development continuing as it is, within 20 years the richest states will almost be in line with the other Tiger Economies..within 30 possibly better place to live than all Non American western countries..
Also the legal system needs to improve. It takes way too long. A legal system is supposed to provide justice equally and enforce accountability.
India just lacks law and order ( chah day paisa system) and cleaniness..maybe it has too much religion ??
this is exactly the kind of reasoning that is needed – to look at what has actually happened, consider political and economic factors together, understand social structure, look at how they interplay with each other, etc. one can have a legitimate debate about the extent to which ideology, patronage, and force played parts in the Nehru and post-Nehru Congress parties; same applies to many of the other arguments you’ve made above – they are serious arguments.
they do not make such claims as – if, contrary to actual history, the indian government had managed to transport exactly the same conditions that existed in 1991 back to 1971, and then instituted the same policies, less children would have died between 1971 and 2009. it’s a bit disgusting. where does such a conversation lead? a back and forth argument over relative consensus like india’s gdp structural break happened in 1980, not 1991? what’s the point?
‘The’ issue is a lot of things. one of the issues is the one you raise, but whether it is among the more relevant or less relevant ones is arguable. Pakistan had similar industrial policies to Korea in the 1950s and 1960s and a somewhat similarly positioned autonomous state and it resulted in the civil war. So the objective is only one aspect of the problem, and creating industrialiation is far more difficult (whcih i think you appreciate) than most people believe. it also takes far longer than most people think of – the ‘industrial revolution’ in britain was – what – decades long? and finally, it is accompanied by massive, massive violence, and it is at best a mixed blessing DURING the process – or another way to put it is that the benefits to future generations is born of the blood of the people who live during industrialisation.
In any case, my main point was simply that India never attempted a fullly redistributionary agenda at all – let alone a socialist one. the period of the 1960s has been identified as one in which specific classes – not the relatively very poor, but not the relatively very rich – were able to demand a greater share of resources, but that is a far cry from ‘socialism’ and even if this is the case, it is still an argument to be made as to how and why this impacted the political economy of india. there are so many different takes on why india stagnated in the 1960s, from arguments based in inequaltiy to arguments based on a deadlocked and fractured ruling class to arguments based on a misdirected policy agenda as you’ve made (but the, why was it so?) to others…it’s not a simple thing, especially when you consider that productivity collapsed in pakistan and bangladesh as well – personally i lean towards a geographic/world systems theory type analysis, but in concert with other things, but it’s not simple.
point being, if words like ‘socialistic’ are going to be used, it’s important to be clear about what they mean, because some of us actually do believe in some form of social democracy – as a political end, with the economic evaluation still tbd 😀 the nehruvian high caste, upper class dominated pyramid of factions with entrenched landlord power at the lower levels is not exactly what i would consider socialism. and as we saw, nor was it stable.
I want what you’re smoking, Wanderer. Maybe the Punjab will be a great place to live for gay men, given the screwed up sex ratio of those geniuses. . . .
If India had liberalized it’s economy 10 years ago, I would not be sitting in a cube in a mid tier US company worried that my job will be outsourced to India after having so hard to get my H1, then my green card and eventually my US citizenship. Instead I would be working in Bangalore with a high tech company drinking mocha during my break, hanging out with the cool crowd and laughing about how I took over some hapless American’s job. Screw you India for not having liberalized earlier.
I can’t help but think that this whole argument is pointless… Building an economy requires natural resources, and China has enough to build 2-3 coal-fired power plants per WEEK. I wonder how much is left in India right now?
if this evidence is as forceful, why would there still be Indians with a progressive/socialist bent?
one thing i can think off is that the domestic industries like tatas, birlas and reliance might not have been able to sustain their business competing against MNCs that have flooded the indian market now, if it had happened earlier – i dont know whether it is 10 years or 20 years, but i think the protectionist measures did help in that front.
Its interesting that an economist decided to engage in what clearly is a creative exercise for its own sake. Obviously engaging in what if’s is ….fairly pointless but fun. Clearly he is more conservative in terms of government involvement with the economic, sympathizing with laissez-faire. But I wonder what he feels about the view of many economic analysts that India was able to better shelter its political situation and its still tenacious nationalism with conservative economic policies. Widespread poverty generally breeds discontent and the common man is less likely to be sympathetic to a government spouting laissez-faire, when he is still unable to afford regular meals. I recently have just finished reading articles that advocated the viewpoint that African nations adopting America-brand liberalism had a much harder time consolidating their nation, building centralization, and nationalism due the government not drastically intervening in a socialist way. Poorer populations generally prefer socialism – only the rich and upper middle classes are critical of government handouts and assistance. So the response to this huge “what if” is:
again obviously the man was engaging in a creative exercise but it would have been even more challenging if instead of just reporting possible happy results he went on to consider the possible non-economic and possibly bad ramifications
7*6 #16:
And then the libertarian historian disappeared in a poof of logic
why does Palin believe in evolution?
I wonder what he feels about the view of many economic analysts that India was able to better shelter its political situation and its still tenacious nationalism with conservative economic policies.
The same “analysts” advised India to go the Soviet Way and ended up consigning India to the third world for 50+ years
Widespread poverty generally breeds discontent and the common man is less likely to be sympathetic to a government spouting laissez-faire, when he is still unable to afford regular meals.
Laissez-faire promotes job creation and enables the common man to find regular meals. On the other hand, Socialism breeds a permanent underclass
I recently have just finished reading articles that advocated the viewpoint that African nations adopting America-brand liberalism had a much harder time consolidating their nation, building centralization, and nationalism due the government not drastically intervening in a socialist way.
The problem was government backed crony corporatism is often confused with the free market
I hope you learn better before you finish an econ phd (assuming you are one)
one thing i can think off is that the domestic industries like tatas, birlas and reliance might not have been able to sustain their business competing against MNCs that have flooded the indian market now, if it had happened earlier – i dont know whether it is 10 years or 20 years, but i think the protectionist measures did help in that front.
Umm, India’s private sector was enormously inefficient and bloated pre-1991. It is only after being exposed to foreign competition and better ways of doing business from the West that they became world-class. If no liberalization had happened, Ambassador would be the only car still plying over the pot-holed Indian roads. Besides, if the socialist way of doing things was so much better, why did many Indians (including the parents of the kids spouting Marxist nonsense here) immigrate to the west
In any case, my main point was simply that India never attempted a fullly redistributionary agenda at all – let alone a socialist one. Sky-high tax rates on private business, government deciding what you can buy, who you can do business with is not socialism, what is socialism then,enlighten us
the period of the 1960s has been identified as one in which specific classes – not the relatively very poor, but not the relatively very rich – were able to demand a greater share of resources
Inevitable result of socialism, where the government elite loot the nation, while the peasants wallow in mud-huts, in-spite of its “pro-poor” rhetoric
but that is a far cry from ‘socialism’ and even if this is the case What India did from 1948 to 1991 is socialism and the results are exactly the same as documented in Eastern Europe and Maoist China
, it is still an argument to be made as to how and why this impacted the political economy of india. there are so many different takes on why india stagnated in the 1960s, from arguments based in inequaltiy
Inequality which went from bad to worse, due to the government elite enriching themselves at the expense of the proles
to arguments based on a deadlocked and fractured ruling class
Congress had a monopoly on power from 1948 to 1991, what fractured ruling class are you talking about
to arguments based on a misdirected policy agenda as you’ve made (but the, why was it so?) to others
Misdirected policy agenda, a PC lib-speak for socialism
It makes me sick to see the children of the immigrant Indians that fled their socialist hell-hole praising the very same policies that made a mess of their ancestral homeland.
why did many Indians (including the parents of the kids spouting Marxist nonsense here) immigrate to the west
why should they do what their parents did; that’s being conservative isn’t it. Besides circumstances change; their kids are richer and have more time to think and can better understand the current world perhaps. The economic rules that seemingly ruined India two decades back could well lead to prosperity in the US now. In fact, what’s to say a more progressive/socialist economy wouldn’t lead to riches now in India itself; hasn’t it liberalized enough?
why should they do what their parents did; that’s being conservative isn’t it.
Precisely, therefore if they immigrated to the west, which means the western economic system is better is it not?
Besides circumstances change; their kids are richer and have more time to think and can better understand the current world perhaps.
The kids would not been richer, had their their parents stayed in their socialist paradise. Sadly, looks like they do not understand the world better
The economic rules that seemingly ruined India two decades back could well lead to prosperity in the US now. Yeah, pigs can fly too
In fact, what’s to say a more progressive/socialist economy wouldn’t lead to riches now in India itself; hasn’t it liberalized enough
An Indian who wastes a week to get a DL without paying a hefty bribe might have something to say on that. China has followed the free market and boomed while Burma and Vietnam followed the “progressive” path and remained stunted.
oops. i meant the other theory
oops. i meant the other theory
well the fossils merely indicate that it was dinosaurs in some eons earlier age that did any evolving if any. Circumstances and time change. What’s to say that creationism did not play a role in humans in the near past (4000 years back) What’s to say it is not playing a role now. Creationism for an initial period of time could also have allowed the domestic evolution to grow for all we know.
Right, now that capitalism is working, lets go back to an overregulated license raj. Sounds like a brilliant plan!
I am constantly amazed by the degree of self-denial required to hold far-left views.
Thanks for the laughs, bud…that roar you hear from the other side of the world is the Chinese Communist Party Politburu yukking it up over some Krug and caviar, paid for by the resources of yet another African country they bought last week!
Oh, 7*6 your sarchasm is a thing to behold…well done:)
This whole thread is seriously misframed. You should all read Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism by Ha-Joon Chang.
Personally I think had India never been created by the British and instead numerous different states taken its place, atleast a few of all those different states would have pursued the policies needed for explosive growth and we would have one or more brown Tigers for the rest of the states to emulate. Sort of like how Japan influenced the thinking processes of much of the East Asian leadership
wow. what a spectacularly rubbish piece of work aiyar has churned out. but his paymasters at cato must be proud because this kind of “scholarship” is par for the course from cato hacks.
before everything it needs to address its population growth. Population & poverty are the biggest polluters. I can’t still digest how a vibrant democracy like India lags way behind the authoritarian China.
Obviously economists are definitively affected by their liberal and conservative leanings. So Matt…please don’t give yourself an aneurysm, that too over a ………..blog………..of people who don’t live in India……………… econ is a SOCIAL science…..so no definitive answer like math. So its suffice to say – Mr. Aiyer is clearly a conservative economist- also ….he’s being bankrolled by Cato… which is obviously conservative so if he spouted the pro’s of India not-liberalized- it would not have ended well for him. Also the point of his paper was a what if- I just personally think he should have been a bit more fair and explored the what if a bit further. He basically made the overall paper sound like “if india liberalized earlier……there would be more rainbows and sparkles” It is ridiculously to assume only good outcomes- I would have liked to hear the bad and possible rebuttals to my previously mentioned liberal concerns. To definitively argue/ truly regret India not liberalizing is pointless and akin to arguing that if China hadn’t gone isolationist in the Zhou Dynasty- China and India would have still had the old world order. As for India and its adoption of conservative and liberal policies- we may never know as political scientists and economists still struggle to find why the some countries of the third world ended up the way they did, particularly since India is one of the largest exception to most classic theories and rules and policies. (A trend that seems to exist in all disciplines- Indus Valley civ’s don’t fit any of the classic theories of early state formation)
p.s. def. not an econ ph.d- simply a pretentious elitist teacher who reads blogs to procrastinate writing high school lesson plans!
Dividing India into many different states would only result in socialist paradises in those very states and would be disastrous in regards to foreign policy. No Tigers then, only cows.
I would appreciate it if we can address the substance of Aiyar’s actual thesis instead of attacking his affliation (CATO) which is no worse from writing from ThinkProgress or any other think tank. I am learning a lot more everyday because of this website so I do hope the thread does not get derailed over Aiyar’s affiliation with CATO.
“Dividing India into many different states would only result in socialist paradises in those very states and would be disastrous in regards to foreign policy. No Tigers then, only cows.”
Given the unbelievable heterogeneity of India I doubt all of the states would have followed the same economic policies. Amongst the multitude of states, I’m sure a diverse range of economic policies would have been tried, and given competitive forces the failing policies within states that are behind economically after a decade or two would give way to the policies of states that are ahead. Maybe one or so Tigers within the first few decades and then all Tigers after wards.
That’s a lot of hackery to make a simple point that India already seems to agree with. I smell a neocon propaganda campaign to convince poor countries to take shitty IMF loans and cede effective control of their economies to Ayn Rand loving assholes under the guise of embracing the market economy, thereby ensuring said assholes remain the boss of us.
Or maybe I’m paranoid.
was pakistan socialist through the same period? if not, what accounts for its worse indicators?
Well put – these issues are complicated. Arvind Panagariya’s recent work really adds a lot of dimension to the simplistic old narratives about Nehruvian socialm vs. neoliberal reform – I think he even has a chapter comparing the Korean and Indian experience. Like it or not, Nehru did a great deal of good for the economy and it was growing well until the mid-sixties. The economy’s progress got detrailed for political reasons (Indira Gandhi consolidating her power by going Left). But even she bactracked by the 1980s, when India expeirenced more industrial growth than even the post-reform period (except ’93-’96).
Well Mr. Aiyar, given what’s happening in large parts of the north and east of the country I’d say that the reforms aren’t really delivering either!
Apologies in advance for the length of this comment.
I agree with the commenter above who put into far fewer words than I’ve used what I believe – this whole discussion is hideously misframed. Just for our collective benefit (and feel free to contest – the whole point of all this is to say that actually trying to understand INdia’s post independence political economy is HARD):
With regard to India from the 1950s to the mid 1960s, what you had was heavy investment by the state in the capital goods sector (e.g. steel, etc.). This was an effective subsidy for private business. You also had a stable political arrangement in which the Congress was able to haev complete control through factions which made up larger factions which made up larger factions. It ultimately depended on that social stability, given the size of the palce and how heterogeneous it was, benefited from the honeymoon period for Congress following idnependence, and other had an elaborate system of links between people at different levels of the factions to allow some sense of overall coherence. You can see some of the successes in things like the linguistic reorganisation in 1957 – which is a masterstroke of politics that, since we’re going wtih counterfactuals, might ahve saved India. at the same time, you DON’t have any fundamental challenge to the landholding class though some people have argued that it was a ‘war of maneouevre’ between capitalists and landholders.
This broke down in the 60s through 79 (i’d say basically after the death of nehru and the absence of any other charismatic independence movement figures) and congress itself split in two, with the operatives on one side and indira gandhi (Congress (I)) on the other side. There was also a productivity collapse and industrial stagnation, a few bad harvests, a bad war, and a lot of other factors, but in essence the system collapsed. tehre are a LOT of explanations offered for why this occured, of which, I’ve been trained in one (Mushtaq Khan – that India’s social structure fragmentation reflects itself in unstable political factions and subfactions which allows businesses to convert learning rents to monopoly rents and thereby make themselves immune from the threat of withdrawal of those rents – which basically means that there is no stick left to ensure productivity grwoth and international comptetitiveness). but there are many others. but there is still the argument that overtime, this was a slow process of growth of an indigenous capitalist class. there is also a section betwen the wealthy and the majority of the pouplation that is extremely important (the intermediate classes – or what is the equivalent of middle classes in wealthier countries – clerks, small shop owners, etc.)
It ended with the Emergency and the aftermath adn especially the return of Indira Gandhi and a PRO rich economic policy (there’s a very good article by Atul Kohli on this). India’s growth rates (GDP growth rates taht is) started increasing after 1980, not 1991 – so the argument has to be – did liberalisation start before 1991 and we’re looking at the wrong tme, or were there things besides liberalisation that led to growth. For example, Atul Kohli says from the 1980s you have the gradual development of a pro-wealthy and pro-busienss economic polciy (he also relates this to the need for communal politics, since if you’re going to have pro-rich politics in a liberal democracy, you have to find a way to appeal to voters besides bread and butter). From my standpoint, this unsurprinsingly coincides with the gradual not sudden collapse of the Soviet Union) though India by any measure preseved far more autonomy than places like Pakistan and Bangladesh – and that autonomy is at least as great a raeson for its ability to generate high growth rates – as you can see with other large countries that managed to retain autonomy, like China.
From my standpoint, “liberalisation” in the sense of the ideology of state industrial policy adapted after 1991, would be the RESULT of the class orientation of the state, rather than the cause. I don’t fully understand the 1991 to present era, except from what I have been presented with – which is that the companies that were able to gain some levels of competence under the plannign framework were able to succeed both doemstically and internationally (the tatas of the world) with few exceptions of new companies (e.g. reliance). but it’s a lot more complicated, because you have long term trends (like the children of those wealthy landlords are now more like agricultural or urban capitalists, which lends credence to the idea of ‘slow transformation’). But like I said, I don’t understand it – I only understand that when people say ‘India has high growth rates because of liberalisation’ [and by implication, that This Is Good] they usually are either playing games or they dno’t know much of the history, politics, and economics.
What I found offensive above is that in speaking of a country that has adopted pro-rich and pro-business policies for 25-30 years, where 77% of the population at last count is poor (that’ a billion people), the author of this paper is engaging in games like ‘if you chose my economic policy ideas instead of yours in 1971, then hundreds of millions of chidlren would have lived’ – like i said, it’s crass, in addition to have a really simplistic understanding of what industrialisation means (it doesn’t ONLY mean GDP growth).
That kind of misses the point. It’s like saying “being well fed doesn’t ONLY mean having lots of money.” While growing GDP might not improve your human development levels if you don’t have any social welfare policies, not growing GDP will definitely not improve your human development level.
A really important topic, glad to see at least a few serious responses. Swami Aiyar is a serious dude, he is not some Ayn Rand freak, he has a long history of quality output. I dont see how it matters that Cato has thrown him a few bucks.
He is a journalist, not a phd candidate, so his writing has a more controversial tone than some might like. But in the indian context, where the maa-baap sarkar attitude still prevails, he has been a real dissident and fresh thinker.
Here are some side-notes on the discussion –
1) Cold War – lets not forget the sharp hostility between the indian and US govts during the early 70s. The bangladesh war showcased the worst side of US cold war extremism, through its support of genocide in Dacca, and there was a period of high tension between the two countries. As a direct response to this situation india signed the “Friendship Treaty” with USSR in the 70s and became for a period essentially allied with the soviet union. How could india have reached out to the west for investment and collaboration with this context?
2) Indira Gandhi – lets face it, this lady was not a strategic economic thinker in any sense. She was tough and nationalistic – I certainly respect her actions re:bangladesh – but she devoted most of her energies domestically to cynical maneuvering and breakup of state govts. Goverment control of the economy was just a tool to her to destroy her opponents – it is also during this period that govts started to own bakeries and hotel chains. Investment in infrastructure and a broad-based education system was also modest, though again she did emphasize indian autonomy and achievements in science and technology. Some credit for the green revolution of the late 60s must accrue to her as well.
Great post Vinod!!! I think one more point worth noting in this what-if scenario is the fact that India never had a political right-of-center, pro-business (ala the Republican party) party with national reach. This caused the ruling Congress which always has been a socialist party to have a complete unopposed rule until the NDA govt (led by Vajpayee) came to power in later part of nineties. India’s liberalization was FORCED onto her by IMF. This is exactly what happens when there is one party rule. The ruling party has no reason to do anything that may cause a short term turmoil but is very important long term.
That’s why the post election implosion of the BJP is worrisome. Lets hope that recent switch of Kalyan Singh to BJP is suggesting that BJP’s fortunes are improving.
I’m not being clear (as usual). When I’m saying GDP is not a good indicator for measuring industrialisation by itself, I’m not saying ‘in comparision to human development indicators’. That is a separate debate and in some sense a philosophical and ethical one, in addition to a political one. What I am saying is that GDP is not a good indicator for measuring what industrialisation means, economically – diversification, increasing use of high tech in production, global comptetitiveness, a restructuring of the economy, more formalisation, and above all, productivty productivity productivity growth. And if you consider the geopoitics of it, its implication is increasing influence and power in the region and world, and, over time, higher product for the same labour input (in county – global context is different).
That doesn’t mean industrialisation of a particular society is good or bad, positive or negative -i’m trying to offer an empirical description of what it is. Case in point – Britain’s GDP growth during the industrial revolution was something like 2% per annum in one source I read.
But if we can get the (per capita) GDP growth without industrialization why wouldn’t we do it? What I care about is the money and the improvements to social welfare it can buy. If heavy industry is not the tool that gets it to us I don’t much care. Of course, industrialization is the only way we really know of to do this, but I see no point in pursuing some reified notion of an “industrialized economy” as an end in itself. The goal is to get the stuff the industry can generate, not to make industries for fun. Let’s not put carts before horses.
I’m with hack. Methodologically this is f***ed up on so many levels I don’t know where to begin.
Well, it’s useful to push on this front, but it needs to be fleshed out – my issue with gdp per capita is that it simply measures economic activity without accounting for increased amounts of services and goods from the same amount of labour. As a result, you can generate the appearance of an increase in wealth built on increased labour exploitation or an oil boom that doesn’t really seem satisfactory to me as a social solution – though I am glad you opened this up for debate.
From my perspective, if someone could develop a way of improving people’s life chances, sustaining the environment, and not engaging in the violence of industrialisation (or the abuse that capitalism entails), I woudl be all for it. I’m just pessimistic which is why I was using the model of industrialisation 🙁 But, as you point out, I have no rational reason for being so other than the lack of historical examples.
Money is money and productive capacity is productive capacity. The same factory that produces a BMW can be modified to produce a Nano. If you don’t have the factory, though, you have nothing. When you’re a developing country your government’s job should be to increase the capital stock (sustainably.) The only way to do that is to make more money and keep investing it.
Perhaps, ideally. But in regards to foreign policy, most states would become mired in foreign policy tik-for-tak. There would be lots of bandwagoning and the region would become ideal for foreign meddling because of the lack of one strong central authority. If the conflict between India/Pakistan is considered to be bad now, that would be nothing compared to India splitting up into a thousands of different states. The Asian Tigers were able to focus on economically because they were small states spending either comparitively small amounts of money on defense or having a security guarantee due to a deal with the United States. Besides, there have been small states in South Asia that have split up and that did not end up as an economic powerhouse – namely Sri Lanka, Bangladesh and Pakistan which by your standards ought to have much better than they are now, mostly because of political conflicts with their neighbors or civil war. India is more analogous to these three states than the East Asian Tigers.