This NYT story on the reimportation of cheap college textbooks from India misses the entire, delicious point: Americans line up as huge fans of globalization when the money saved goes to them rather than their employers (thanks, WGIIA).

Over the last few years, many American students… have been buying American textbooks printed in India, as word has spread of the larger savings available… The textbooks are printed legally in India under copyright arrangements worked out over the last decade by American and British publishers. Americans are huge fans of globalization — when they’re making the moneyUsing tax breaks and cheap labor, Indian companies publish the books in black-and-white, low-quality paperback editions, and sell them for as little as 10 percent of the cost of the same book in the United States. But under the licensing agreement, the books may be sold only on the Indian subcontinent and in surrounding countries…

There are no penalties for students who import books for their own use, under a 1998 Supreme Court decision that ruled that manufacturers who sell goods more cheaply overseas than in the United States have no protection against having their products sold back to the American market. [Link]

The other interesting point here is the same problem intellectual property publishers have been facing for decades: differential pricing is not sustainable in an efficient market. You can’t sell Microsoft Windows for 10% the cost in India because Americans will import the lower-price version. And you can’t sell it at full cost and expect decent sales in a developing country, only the rich will buy. All you can do is segment the market with a lower-featured edition.

And that’s exactly what these textbook publishers have done. The problem is, students are satisfied with the lower-quality editions because hardly anyone buys textbooks for pleasure, especially not at $150 a pop.

Related post: Stuck with the 50cc Bajaj

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Three million people marched in France today against a labor flexibility bill, possibly the largest protests in the history of modern France. It’s the kind of reaction you’d expect in Bengal:

The marches were part of a nationwide day of action against the Villepin legislation, which was intended to encourage hiring by making it easy for companies to fire workers under age 26 during their first two years on the job. [Link]

“It is a collective failure of the French system,” said Louis Chauvel, a sociologist who studies generational change. “You earn more doing nothing in retirement at the age of 60 to 65 than working full-time at the age of 35…”

… A sweeping survey of people in 22 countries released in January found that France was alone in disagreeing with the premise that that the best economic model is “the free enterprise system and free market economy.” [Link]

According to the poll cited above, more Indians believe in a free market economy than even the Brits, Germans or French. China tops the poll, and France sits at the bottom.

Steven Kull, director of PIPA, comments: “In one sense we are indeed facing what has been called ‘the end of history,’ in that there is now an extraordinary level of consensus about the best economic system.” [Link]

My theory is that rapid development gives people faith in the redemptive power of the invisible hand. The poll was conducted in India’s major cities, so urbanites support liberalization. But the poll says nothing about the voter-heavy heartland.

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A business professor at MIT Sloan argues in the Financial Times that India is economically underrated. Yasheng Huang sounds a clarion call for China to relax its financial controls:

Rama vs. dragon? Cake. But Rama vs. Chuck Norris…

From April to June 2005, India’s GDP grew at 8.1 per cent, compared with 7.6 per cent in the same period the year before. More impressively, India is achieving this result with just half of China’s level of domestic investment in new factories and equipment, and only 10 per cent of China’s foreign direct investment…

… in 2003 and 2004, [China] was investing close to 50 per cent of its GDP in domestic plant and equipment – roughly equivalent to India’s entire GDP. That is higher than any other country… China’s growth stems from massive accumulation of resources, while India’s growth comes from increasing efficiency…

While India’s stock market has soared in recent years, the opposite has happened in China. In 2001, the Shanghai Stock Market index reached 2,200 points; by 2005, half the wealth wiped out. In April 2005, the Shanghai index stood at 1,135 points… [Link]

Huang argues against using foreign direct investment as a key measure of economic growth:

Brazil was a darling of foreign investors in the 1960s but ultimately let them down. Japan, Korea and Taiwan received little FDI in the 1960s and 1970s but became among the world’s most successful economies…

With few exceptions, the world-class manufacturing facilities for which China is famous are products of FDI, not of indigenous Chinese companies… [Link]

His analysis is that India has a more laissez-faire attitude in both politics and entrepreneurship:

[Infosys] was founded by seven entrepreneurs with few political connections who nevertheless managed, without significant hard assets, to obtain capital from Indian banks and the stock ­market in the early 1990s. It is unimaginable that a Chinese bank would lend to a Chinese equivalent of an Infosys…

China was light years ahead of India in economic liberalisation in the 1980s. Today it lags behind in critical aspects, such as reform that would permit more foreign investment and domestic private entry in the financial sector. [Link]

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Most of H.R. 4437, the “Border Protection, Antiterrorism, and Illegal Immigration Control Act of 2005” discussed in Abhi’s post, looks like the trainwreck that he deems it. Still, I think that the part that amends Section 274A of the Immigration and Nationality Act (8 U.S.C. 1324a) to increase penalties on employers for hiring undocumented workers is a step in the right direction. The United States needs a more honest immigration policy, one that includes neither support for law-breaking nor animus toward immigrants, and as long as employers win on the cost benefit analysis — F x P < S, where F= cost of fines, P= probability of getting caught, and S= saved money from using undocumented labor — we never will have such reforms. Supporting illegal immigration is at best a short term help to such aliens, as they deal with the longterm problems of having to remain invisible and lack access to the safety net for the elderly, i.e. Social Security and Medicare. Whose sympathy for the undocumented cab driver extends far enough to pay for his prescriptions when he’s too old to drive anymore? Continue reading →