Tuesday, November 20, 2007
Thursday, October 18, 2007
Microscope on the miracle - livemint
it is no surprise that China has opted for an exchange rate- dependent, export-led growth model when its size and scale cry out for a domestic demand-led model. South-East Asian nations and China have something in common. They realize that a vibrant domestic economy with a strong and dispersed entrepreneurial class is a threat to established interests. Such an economy would see the fruits of success dispersed among many, not few. Hence, a strong domestically led economy is not encouraged. In these countries dominated by a few players and defined by narrow interests, corruption, cartels and conglomerates belonging to the oligarchs have combined to expropriate wealth from minority shareholders. A paper published in the American Economic Review in 2001 observed that the problems of East Asian corporate governance were more severe and intractable than suggested at the time of the financial crisis. Without credible regulatory reforms, the risk is that South-East Asia will go the way of Latin America, a region that continues to perform well below its potential. Once the recent, uninterrupted, unprecedented global growth becomes history, weak economic and societal foundations would come to the fore here.
Dear Rahul Gandhi - livemint
the best way to do so would be to remove the barriers to private enterprise that exist in this country. Put an end to the licence and inspection raj, reform our labour laws, abolish the laws that agricultural land can only be used for agricultural purposes, remove the restrictions on many goods being manufactured by anyone other than “small scale units”, and welcome foreign investment. All of these will provide far more employment than the well-intentioned but ill-conceived NREGS.
Wednesday, October 17, 2007
India’s Insulated Economy | Newsweek International Edition | Newsweek.com
While China's boom was planned from the center and executed by state companies, India's welled up from the private entrepreneurial and business classes, set loose by market reforms in the early '90s. Unlike China, India never forced consumers to funnel their savings to state export industries. The result is more flexibility and more balance, with India's GDP growth running at a 9 percent pace in 2007 for the third year running, sustained mainly by domestic consumption and a burgeoning middle class.
India's domestic market is larger than South Korea's, at about $370 billion. By 2025, concludes a recent study by the McKinsey Global Institute, its consumer class will swell tenfold from today's tally of 50 million, making it the fifth largest market on the planet. This year India's per capita income will break through the $1,000 threshold on its way to tripling by the late 2020s. "India's lower level of investment relative to GDP has meant that consumption has played a bigger role in its growth story," says the McKinsey study. "Consumption in India is closer, proportionally, to developed countries such as Japan and the United States than it is to China."
Monday, October 08, 2007
Congress dynasty matrix
Thursday, September 20, 2007
The myth of India’s liberalization
Mommy-Daddy, go away!
Saturday, August 25, 2007
A beast called government
But the incentives in government are different, and they do not drive a bureaucrat to work in the public interest. This is superbly illustrated in C Northcote Parkinson’s delightful classic, Parkinson’s Law: The Pursuit of Progress. Parkinson, examining the British civil service, found that it tended to expand by a predictable percentage every year, “irrespective of any variation in the amount of work (if any) to be done.” He explained this with “two almost axiomatic sentences”: “(1) “An official wants to multiply subordinates, not rivals” and (2) “Officials make work for each other.”
In other words, it is in bureaucrats’ interest to expand their departments and get greater budgets allocated to them so as to increase their sphere of power. Indeed, mandarins who solve problems and increase efficiency actually risk making themselves, or their departments, redundant. Do we really expect them to be like the proverbial fool on the tree, who cuts the branch he sits on?
The Devil’s Compassion
Humans, you see, are fooled by appearances. Come to them as a wrinkled monster with horns, and they recoil. Pretend to be a loving grandpa, and their defences are down. We senior demons realised long ago that to hurt the humans, we have to pretend to care for them. Even as we have nothing but their marination in mind, we must appear compassionate. Stating the most noble intent, we must unleash the very worst of policies. Even better, we must fool some humans, who themselves wish to appear compassionate, into pushing these very policies.
And how we have succeeded! Everywhere there are politicians sincerely pushing well-intentioned policies that are disastrous for the people they are supposed to help. Of course, some people see through our evil designs and protest, but they are dismissed as cruel and uncaring, for they are questioning compassion itself. The irony!
Ah, Maharashtra! Mumbai is particularly dear to me as a demonstration of what compassion can achieve: Just see the misery rent control has inflicted there. It was supposed to protect tenants from evil landlords, but by restricting the supply of housing, has driven up rents, made affordable housing scarce, and made slums inevitable. Even more, it has disincentivised landlords from looking after rent-controlled houses, some of which are close to falling apart. Gravity is an invention of hell, I am proud to remind you!
India has many such price controls, which inevitably distort our enemy, the free market. These apply not just to goods but also to labour – how noble these legislators feel when they bring about a minimum wage, or support labour laws that dry up the supply of jobs and hurt the ones they’re supposed to help: the workers.
India’s redistributive schemes are also a devilish masterstroke, based on the principle, “Steal from the Rich and Pretend to Give to the Poor.” Actually our unknowing stooges, India’s well-meaning and compassionate politicians and bureaucrats, steal from everybody, and the money they steal has a cost: It acts as a disincentive to those it is stolen from, and would often have helped the poor more if simply left with the taxpayer.
Friday, August 24, 2007
The Nehru-Gandhi legacy of shame - The India Uncut Blog - India Uncut
Jawaharlal Nehru was one of our foremost freedom fighters, but the freedom he fought for was restricted to the political domain. Once the British had been ousted, he replaced them with a new oppressor: the Indian government. He distrusted free trade, and once famously told JRD Tata that profit was “a dirty word.” He shackled private enterprise with a license-and-regulation raj and tried to build a command economy where the state was all-powerful. His fatal conceit, to borrow Friedrich Hayek’s phrase, ensured that India limped into the modern age while other Asian countries, once behind us, leaped ahead.
One can be charitable and say that the well-intentioned Nehru was a creature of his times. It is hard to give his daughter similar benefit of the doubt. Indira Gandhi not only took Nehru’s policies forward at a time when it should have been obvious that they weren’t working, she systematically began to strip away the little economic freedom that existed in the country. In colleges it would make good material for a course titled “How To Savage An Economy 101.”
She nationalised all our big banks. She stopped foreign exchange from kick-starting the country’s development, and thus creating employment and productive growth, with the Foreign Exchange Regulation act in 1973. The Urban Land Ceiling Act of 1976 distorted land markets, thus raising land prices and aggravating the problem of slums in cities. The Industrial Disputes act (1976 and 1982) distorted labour markets and acted as a disincentive to industrial expansion. And so on and on.