Tuesday, June 12, 2007

Have we overlooked India?

Indian respondents to Mr Venkatesh's article worry about the movement of the dollar relative to the rupee. But just as America's problem is not the dollar but its national economic fundamentals, so perhaps India should raise her eyes to a more distant prospect. The country has a well-established democracy and an independent judiciary; respect for law, family and property rights; many millions of fluent English speakers (don't worry, the call centres will eventually overcome problems of Western vernacular); and a famously entrepreneurial culture.

India may not be sitting on a vast coalmine, like China, but natural resources aren't everything. It's not natural resources (other than mountain ranges) that preserved Swiss independence, but the history and character of the Swiss. As to commerce, I forget which mega-businessman said he could lose all he had, but so long as he kept his staff he'd get it all back again.

If India avoids over-reliance on its low wage advantage and continues towards more intensively capitalised production, then it too can be a powerhouse in the new world economy. Remember that recently, the British Swan Hunter shipyard has itself been shipped to India.

2 comments:

Anonymous said...

I am wondering where we are heading in so called modern era. Example in textile machinery, one airjet can replace 100 handlooms, this means 100 peolple are displaced by a single machine. I am from Handloom city of Panipat (India). Earlier a person with 20 handlooms was happy and feeded his family well. Now even 50 looms are not enough because of the increased cost of living in so called modern era and people are getting trapped in vicious cycle of high cost, loans and increasing capacity.

Keshav Gupta (keshav78@yahoo.com)

Sackerson said...

Yes, I am sure that this is extremely difficult and in fact English weavers suffered the same way nearly 200 years ago, which is why some of them turned to wrecking the machines that were harming their trade. But it didn't succeed in halting the changes.

On the other hand, people in Britain are now materially much better off, so in the long run industrialisation is to everyone's advantage.

I suppose that the best thing that can be done is for government to support people who have been affected by modernisation, and help them to re-train in new areas of work. If you look at the next post after this, "Cafe Hayek" points out that if saris can be made more cheaply, then sari-buyers will have more money left over to buy other things, so there will be demand for items that they could not have afforded before. I think you cannot stop change happening, but governments can help manage the transition and far-sighted individuals can take advantage of new business opportunities.