Tuesday, November 10, 2009

Facts and Myths in Globalization Debate

It is becoming increasingly important for nations to build knowledge-based economies to effectively compete and win in a globalized world. Here is a presentation by Vivek Wadhwa, a Duke professor, discussing facts and myths in the globalization debate:

Related Links:

Dr. Ataur Rehman Defends Higher Education Reforms

Higher Education Transformation in Pakistan

Pakistan's Choice: Globalization or Talibanization

Pakistan's $2.8 Billion IT Industry

President Musharraf's Legacy

Education in Pakistan

Reforms? What Reforms? by Pervez Hoodbhoy

India's New Millennium in Science

Higher Education Transformation in Pakistan

Nature's Coverage of Higher Education Reform

Asia Gains in World's Top Universities

Poor Quality of Higher Education in South Asia

Dr. Pervez Hoodbhoy's Letter to Nature


Anonymous said...


I am surprised that you had used your skills of blogging indirectly to give credit to india.

Thanks the presentation is very good and knowledgeable. India needs to work to increase the quality of the engineers.

Riaz Haq said...

For some of the posters here, let me share with you what Sean-Paul Kelly, a traveler-blogger, thinks of India, based on the recent NY Times story on "India's Innovation Envy":

Indians, it seems, aren’t lacking in the hyper-patriotic, and India certainly doesn’t lack its boosters in the West. Alas, some folks are beginning to see the light:

"BANGALORE, India — In the United States and Europe, people worry that their well-paying, high-skill jobs will be, in a word, “Bangalored” — shipped off to India.

People here are also worried about the future. They fret that Bangalore, and India more broadly, will remain a low-cost satellite office of the West for the foreseeable future — more Scranton, Pa., in the American television series “The Office,” than Silicon Valley."

Stephen Roach of Morgan Stanley-Asia has called this wage arbitrage (Roach happens to be one of the few American economists that gets it right on India). And Americans are right to worry about this. It’s put downward pressure on services as varied as call-centers and tech support, to financial news reporting, X-ray and MRI interpretation and accounting. I would be especially worried if I were an accountant. But then again, many of the big firm accountants need not be worried, as their shilling game for Wall Street will protect them. For a time.

"Even as the rest of the world has come to admire, envy and fear India’s outsourcing business and its technological prowess, many Indians are disappointed that the country has not quickly moved up to more ambitious and lucrative work from answering phones or writing software. Why, they worry, hasn’t India produced a Google or an Apple?"

Wait a second. India does not have any technological prowess in the true sense of the word. After all, if they did, why would the Ambassador, a car model over fifty years old, made of the heaviest steel imaginable, and horribly inefficient be the best selling domestically produced car in India, still. The Nano notwithstanding.

"Innovation is hard to measure, but academics who study it say India has the potential to create trend-setting products but is not yet doing so. Indians are granted about half as many American patents for inventions as people and firms in Israel and China. The country’s corporate and government spending on research and development significantly lags behind that of other nations. And venture capitalists finance far fewer companies here than they do elsewhere."

Re-read that graph closely and you’ll begin to get an idea of the hurdles India faces. And hurdles it is doing nothing, absolutely nothing to overcome. Instead of using its domestic capital for something like infrastructure building, local elites continue to siphon it all off and live behind huge fenced in compounds paying dalits pitiful, barely life-sustaining wages.

Riaz Haq said...

Here are "Reflections on India" published by an American traveler-blogger:

First, pollution. In my opinion the filth, squalor and all around pollution indicates a marked lack of respect for India by Indians. I don't know how cultural the filth is, but it's really beyond anything I have ever encountered. At times the smells, trash, refuse and excrement are like a garbage dump. Right next door to the Taj Mahal was a pile of trash that smelled so bad, was so foul as to almost ruin the entire Taj experience. Delhi, Bangalore and Chennai to a lesser degree were so very polluted as to make me physically ill. Sinus infections, ear infection, bowels churning was an all to common experience in India. Dung, be it goat, cow or human fecal matter was common on the streets. In major tourist areas filth was everywhere, littering the sidewalks, the roadways, you name it. Toilets in the middle of the road, men urinating and defecating anywhere, in broad daylight. Whole villages are plastic bag wastelands. Roadsides are choked by it. Air quality that can hardly be called quality. Far too much coal and far to few unleaded vehicles on the road. The measure should be how dangerous the air is for one's health, not how good it is. People casually throw trash in the streets, on the roads. The only two cities that could be considered sanitary in my journey were Trivandrum--the capital of Kerala--and Calicut. I don't know why this is. But I can assure you that at some point this pollution will cut into India's productivity, if it already hasn't. The pollution will hobble India's growth path, if that indeed is what the country wants. (Which I personally doubt, as India is far too conservative a country, in the small 'c' sense.)

The second issue, infrastructure, can be divided into four subcategories: roads, rails and ports and the electrical grid. The electrical grid is a joke. Load shedding is all too common, everywhere in India. Wide swaths of the country spend much of the day without the electricity they actually pay for. With out regular electricity, productivity, again, falls. The ports are a joke. Antiquated, out of date, hardly even appropriate for the mechanized world of container ports, more in line with the days of longshoremen and the like. Roads are an equal disaster. I only saw one elevated highway that would be considered decent in Thailand, much less Western Europe or America. And I covered fully two thirds of the country during my visit. There are so few dual carriage way roads as to be laughable. There are no traffic laws to speak of, and if there are, they are rarely obeyed, much less enforced. A drive that should take an hour takes three. A drive that should take three takes nine. The buses are at least thirty years old, if not older. Everyone in India, or who travels in India raves about the railway system. Rubbish. It's awful. Now, when I was there in 2003 and then late 2004 it was decent. But in the last five years the traffic on the rails has grown so quickly that once again, it is threatening productivity. Waiting in line just to ask a question now takes thirty minutes. Routes are routinely sold out three and four days in advance now, leaving travelers stranded with little option except to take the decrepit and dangerous buses. At least fifty million people use the trains a day in India. 50 million people! Not surprising that waitlists of 500 or more people are common now. The rails are affordable and comprehensive but they are overcrowded and what with budget airlines popping up in India like Sadhus in an ashram the middle and lowers classes are left to deal with the overutilized rails and quality suffers. No one seems to give a shit. Seriously, I just never have the impression that the Indian government really cares. Too interested in buying weapons from Russia, Israel and the US I guess.

Riaz Haq said...

The Russian Kommersant has it right when it says: "India has had little success with military equipment production, and has had problems producing Russian Su-30MKI fighter jets and T-90S tanks, English Hawk training jets and French Scorpene submarines."

And here's how blogger Vijainder Thakur sees India's loose meaning of "indigenous" Smerch and other imports:

The Russians will come here set up the plant for us and supply the critical manufacturing machinery. Indian labor and technical management will run the plant which will simply assemble the system. Critical components and the solid propellant rocket motor fuel will still come from Perm Powder Mill. However, bureaucrats in New Delhi and the nation as a whole will be happy. The Smerch system will be proudly paraded on Rajpath every republic day as an indigenous weapon system.

A decade or so down the line, Smerch will get outdated and India will negotiate a new deal with Russia for the license production of a new multiple rocket system for the Indian Army.

China will by then have developed its own follow up system besides having used the solid propellant motors to develop other weapon systems and assist its space research program.

Riaz Haq said...

India's IT sector business is essentially driven by low-cost call centers, first-line tech support, simple repetitive code writing, and execution of pre-defined test suites. A typical Indian IT worker is increasingly being called a "cyber coolie" or sometimes a "code coolie", the former term having been coined by an astute Indian columnist Praful Bidwai back in 2003.

India has become the world’s top provider of business-process-outsourcing (BPO) call centers, with revenues nearing $50 billion a year by selling cheap back-office services. The call center revenue constitutes the bulk of India's IT exports.

Harish Trivedi of Delhi University has characterized India's call centers as "brutally exploitative" and its employees as "cyber coolies of our global age, working not on sugar plantations but on flickering screens, and lashed into submission through vigilant and punitive monitoring, each slip in accent or lapse in pretence meaning a cut in wages."

An Indian blogger Siddarth Singh says that "one cannot dispute the fact that our IT industry is at best a glorified labor provider, and our feted “IT Giants” have failed to provide even a single proprietary product which could create waves in the global IT industry (perhaps except Finacle, a banking and finance solution by Infosys, and which is used by a number of MNC banks around the globe).

Siddarth asks the question, "So, what does Indian industry actually excel at?" Then he offers the following answer: "Well, we are the leaders in the so called IT Enabled Services, or ITES. These are basically services such as BPOs, call centers, KPOs etc, which extensively use IT to provide backend and customer services to primarily overseas customers. That our ITES industry is hugely dependent on foreign clients is also not a secret anymore, with hardly any Indian company enlisting the services of such companies".

Riaz Haq said...

Can China rekindle its innovation spirit? Here's a piece on it published by OECD Observer:

The great 20th century sinologist, Joseph Needham, once drew up a list of 24 technical innovations brought from China to the West. They ranged from gunpowder and the wheelbarrow to printing, cast iron, the magnetic compass and the chain suspension bridge. By 1600 the torch of innovation had passed to the West.

Could it now be returning? In 2003 China became the third nation to put a man into space, and has busily launched satellites since. On the ground, communications companies such as Huawei and ZTE now compete head-on with the likes of Ericsson and Nokia.

Against this background, it is no wonder that China is one of the world’s largest investors in research and development. Spending on R&D has climbed by 19% per year since 1995 to reach US$30 billion in 2005, putting China sixth in world ranking. That is at current exchange rates; if these were adjusted for purchasing power parity between different countries, then China would rank third!

However, according to a new report examining Chinese innovation, some of this progress flatters to deceive: R&D spending is still low as a share of GDP per capita and far lower than the OECD average. Consider also the number of researchers in China, which while second in the world only to the US, is still very low for China compared to OECD countries, given the size of the country’s labour force. Chinese researchers may have contributed 6.5% of research articles to scientific publications in 2004, up from just 2% a decade earlier, and are second after the US in nanotechnology research publishing, for instance, but their innovation system still shoots below potential.

Safeguarding intellectual property rights is the soft belly here. China is well in line with international regulations as a signatory of TRIPS (the Agreement on Trade-Related Aspects of Intellectual Property Rights), but despite clearer and tighter regulation, infringement still dogs the system. The difficulty is enforcement. This discourages domestic investors as much as investors from abroad. Worse, IPR infringement poses health and safety risks for consumers, and damages the reputation of Chinese firms. The government, as well as the Chinese Patent Office, is toughening up on IPR, though fixing the system will take time and effort.

For many historians and scientists, what makes Chinese civilisation so brilliant is that it had “another way” of doing science. According to Joseph Needham, Chinese innovators simply did not translate their knowledge into mathematics. This left them remote from ensuing scientific dialogue. Whether or not this is true, the global economy has now changed and so has China. In the end, the Chinese are set to reinforce the country’s innovative capabilities both by trying out their own approach and looking to advanced OECD countries for inspiration. If the underlying systemic shortfalls are also corrected, then China may soon be in a position not only to push to the heart of scientific discussion, but to lead the world to new frontiers of knowledge as well.

Riaz Haq said...

US and EU farm subsidies to their cotton growers are hurting Africa's poor. Here's a report on it:

West Africa rises up to end $31.4 bn rich world cotton subsidies

Dakar, 10 February 2011 – High-level West African political leaders are joining forces with a broad coalition of African and South American smallholder and global farmer organisations to launch a huge new offensive demanding the phasing out and elimination of rich world trade distorting subsidies in cotton.

The release this week (Wednesday 9th February) at the World Social Forum of a new updated version of the Great Cotton Stitch-Up report by Fairtrade reveals that in the nine years since the Doha Development Round was launched in 2001, the United States and the European Union paid out a staggering USD 31.4 BILLION in subsidies to its farmers so squeezing out 10 million West African cotton farmers from trading their way out of poverty.

In addition, the West African Economic and Monetary Union (UEMOA) is also prioritising and upgrading the cotton subsidy issue and will shortly be unveiling its own offensive in Brussels as the European Parliament prepare to vote on the €55 billion Common Agricultural Policy reform in June.

2011 is a crucial year for the global trading system. This summer the European Parliament will begin reform of the €55 billion Common Agricultural Policy subsidy regime, the US Congress begin work in framing a new Farm Bill while attempts to revive the stalled Doha Development Round culminate in a World Trade Organisation Ministerial, expected in November.

Kwame Banson, Fairtrade Africa Regional Coordinator for West Africa, comments:

‘This is the crunch year for rich-world subsidies, with the EU and US at a genuine crossroad. One way leads to more misery for African farmers, the other to fairer way of doing trade. This coalition demands that they take the right path because African farmers can no longer be the casualties of the politics of the North.’

Moussa Doubia, Small-hold Malian Cotton Farmer, speaking of the impact of competing against subsidised cotton, adds:

‘Sometimes I can’t sleep. Sometimes it’s hard and unbearable… The cotton price is not enough for farmers to cover our needs including school fees and health.’

The report’s launch comes as Mali Minister of Industry, Investment and Commerce, Ahmadou Abdoulaye Diallo confirmed his country is seriously considering taking the US to the WTO Disputes Panel Settlement over its USD 24.45 billion subsidies, potentially leading to retaliatory action against the US by suspending protection of US intellectual property. He also states Mali will veto the entire Doha Trade deal over the issue so further reigniting what is the most vivid example of trade injustice.

Riaz Haq said...

Here's a Wall Street Journal story titled "India Graduates Millions, But Too Few Are Fit to Hire":

BANGALORE, India—Call-center company 24/7 Customer Pvt. Ltd. is desperate to find new recruits who can answer questions by phone and email. It wants to hire 3,000 people this year. Yet in this country of 1.2 billion people, that is beginning to look like an impossible goal.

So few of the high school and college graduates who come through the door can communicate effectively in English, and so many lack a grasp of educational basics such as reading comprehension, that the company can hire just three out of every 100 applicants.

India projects an image of a nation churning out hundreds of thousands of students every year who are well educated, a looming threat to the better-paid middle-class workers of the West. Their abilities in math have been cited by President Barack Obama as a reason why the U.S. is facing competitive challenges.

Yet 24/7 Customer's experience tells a very different story. Its increasing difficulty finding competent employees in India has forced the company to expand its search to the Philippines and Nicaragua. Most of its 8,000 employees are now based outside of India.

In the nation that made offshoring a household word, 24/7 finds itself so short of talent that it is having to offshore.

"With India's population size, it should be so much easier to find employees," says S. Nagarajan, founder of the company. "Instead, we're scouring every nook and cranny."

India's economic expansion was supposed to create opportunities for millions to rise out of poverty, get an education and land good jobs. But as India liberalized its economy starting in 1991 after decades of socialism, it failed to reform its heavily regulated education system.

Business executives say schools are hampered by overbearing bureaucracy and a focus on rote learning rather than critical thinking and comprehension. Government keeps tuition low, which makes schools accessible to more students, but also keeps teacher salaries and budgets low. What's more, say educators and business leaders, the curriculum in most places is outdated and disconnected from the real world.

"If you pay peanuts, you get monkeys," says Vijay Thadani, chief executive of New Delhi-based NIIT Ltd. India, a recruitment firm that also runs job-training programs for college graduates lacking the skills to land good jobs.

Muddying the picture is that on the surface, India appears to have met the demand for more educated workers with a quantum leap in graduates. Engineering colleges in India now have seats for 1.5 million students, nearly four times the 390,000 available in 2000, according to the National Association of Software and Services Companies, a trade group.

But 75% of technical graduates and more than 85% of general graduates are unemployable by India's high-growth global industries, including information technology and call centers, according to results from assessment tests administered by the group.

Another survey, conducted annually by Pratham, a nongovernmental organization that aims to improve education for the poor, looked at grade-school performance at 13,000 schools across India. It found that about half of the country's fifth graders can't read at a second-grade level.

Riaz Haq said...

The jobs stolen by Indian and other foreign IT firms to hire code coolies in their country have cost the US middle class many many trillions of dollars and decimated their std of living in America.

Even Andy Grove, former Intel CEO, believes outsourcing has been a disaster for America:

Such evidence stares at us from the performance of several Asian countries in the past few decades. These countries seem to understand that job creation must be the No. 1 objective of state economic policy. The government plays a strategic role in setting the priorities and arraying the forces and organization necessary to achieve this goal. The rapid development of the Asian economies provides numerous illustrations. In a thorough study of the industrial development of East Asia, Robert Wade of the London School of Economics found that these economies turned in precedent-shattering economic performances over the '70s and '80s in large part because of the effective involvement of the government in targeting the growth of manufacturing industries.


However, our pursuit of our individual businesses, which often involves transferring manufacturing and a great deal of engineering out of the country, has hindered our ability to bring innovations to scale at home. Without scaling, we don't just lose jobs -- we lose our hold on new technologies. Losing the ability to scale will ultimately damage our capacity to innovate.