Saturday, December 14, 2013

Asian Tiger Dictators Brought Prosperity; Democracy Followed

Taiwan, Singapore and South Korea  experienced a dramatic rise under authoritarian regimes from 1960s through 1990s. The dictators who led these states also showed the way to fellow Asian dictators in Indonesia, Malaysia, Thailand and China who also industrialized and prospered using the same formula that rejected the Washington Consensus of democracy and free markets as the basis for development of all nations.

Per Capita GDP (Constant 2000 US$) Source: World Bank


East and Southeast Asia:

The Asian Tigers have managed their massive growth mainly through export-driven economies that catered to the industrialized West. Each of them has built huge trade surpluses to fund their growth. These countries have invested in  improving education and training to build significant human capital in a couple of decades.

The improved productivity of the workforce, coupled with relatively low wages in Asia's developing economies, have resulted in enormous foreign investments. The large amount of foreign capital has allowed for massive growth. Their export-driven industry has spawned finance and service based industries that we now see, allowing the Tigers to maintain their high GDP. With rapid economic growth and human development, each has built a large middle class, paving the way for democracy to take root. As a result, dictatorships have given way to democracy in recent decades in most of these nations.

South Asia's Performance:

South Asia has been a laggard in economic development when compared with countries in East Asia and South East Asia. No South Asian nation has seen comparable growth in human and economic development. China, a country of 1.4 billion people run by one-party system, is far ahead of India, an equally large country run as a multi-party parliamentary democracy.

Source: Where Are the Poor and Where Are the Poorest?
A billion people were lifted from abject poverty between 1980 and 2010. China accounts for nearly three quarters of these, or 680 million people brought out of misery, by reducing its extreme-poverty rate from 84% in 1980 to 10% now, according to a report in The Economist.  The report adds that with "poorer governance in India and Africa, the next two targets, means that China’s experience is unlikely to be swiftly replicated there".

India: 

As China's share of the world's extreme poor (living below $1.25 per day per person level) has dramatically declined, India's share has significantly increased.  India now contributes 33% (up from 22 % in 1981). While the extreme poor in Sub-Saharan Africa represented only 11 percent of the world’s total in 1981, they now account for 34% of the world’s extreme poor, and China comes next contributing 13 percent (down from 43 percent in 1981), according to the World Bank report titled State of the Poor.

The share of poverty in  South Asia region excluding India has slightly increased from 7% in 1981 to 9% now, according to the report. India now has the world's largest share of the world's poor, hungry, illiterate and sick who still lack access to very basic sanitation.

In a recent book "Street Smarts", a hedge fund Manager Jim Rogers makes some important points to explain how East Asians have succeeded in rapidly developing while others have failed:

 "Many Asians say that the Asian Way is first to open your economy, to bring prosperity to your country, and then, only after that, to open up your political system. They say that the reason the Russians failed is that did it the other way around. Russia opened up its political system in the absence of a sound economy, everybody bitched and complained, and chaos inevitably ensued. As an example of the Asian path to political openness, they point to South Korea and Taiwan, both of which were once vicious dictatorships supported by the United States. Japan was at one time a one-party state supported by the US military. Singapore achieved its current status under one-party, authoritarian rule. All these countries have since become more prosperous and more open. 

Plato, in The Republic, says that the way societies evolve is by going from dictatorship to oligarchy to democracy to chaos and back to dictatorship. It has a certain logic, and Plato was a very smart guy. I do not know if the Asians ever read The Republic, but the Asian way seems to suggest that Plato knew whereof he spoke." Not only is the Asian model different from that of the Soviets, it stands China in marked contrast to those thirty-year dictatorships previously mentioned. Chinese leaders have put a high premium upon changing the country's economy, presumably to seek prosperity for the 1.3 people who live there." 

"And yet,in 1947, when it achieved independence, India was one of the more successful countries in the world, a democratic country. But despite democracy, or maybe because of it, India has never lived up to its potential. China was a shambles as recently as 1980. India was far ahead of it. Bt since then China has left India, literally in the dust....As China rises, India continues to decline relatively. Its debt-to-GDP ratio is now 90 percent, making a strong growth rate virtually impossible."

1960s Pakistan:

Pakistan was on a similar trajectory as the Asian Tigers during 1960s under Gen Ayub Khan's rule. GDP growth in this decade jumped to an average annual rate of 6 percent from 3 percent in the 1950s, according to Pakistani economist Dr. Ishrat Husain. Dr. Husain says: "The manufacturing sector expanded by 9 percent annually and various new industries were set up. Agriculture grew at a respectable rate of 4 percent with the introduction of Green Revolution technology. Governance improved with a major expansion in the government’s capacity for policy analysis, design and implementation, as well as the far-reaching process of institution building.7 The Pakistani polity evolved from what political scientists called a “soft state” to a “developmental” one that had acquired the semblance of political legitimacy. By 1969, Pakistan’s manufactured exports were higher than the exports of Thailand, Malaysia and Indonesia combined."




Bangladesh:

Some argue that it was Ayub Khan's rule in 1960s that resulted in the loss of Pakistan's eastern wing and the creation of Bangladesh. I strongly disagree with this view. I believe that ill-conceived general elections of 1970 gave the opportunity to Pakistani politicians to lie to mostly poor and illiterate electorate of the time to win their votes. Shaikh Mujib exploited normal regional economic disparities that can be found in any country, including India and US, to argue that Bengalis were unfairly treated. Just look at the income data for various states in US or in India and you'll see huge gaps in incomes and standards of living. Indian Punjab's per capita income of Rs. 88,783 is 1.4 times higher than West Bengal's Rs. 62,831. Bihar's per capita income of Rs. 28,317 is less than a quarter of Haryana's Rs. 122,660. New Jersey's per capita income of  $53,628 is much higher than Mississippi's $33,073. 

In the end, Zulfikar Ali Bhutto refused to sit down and talk with Shaikh Mujib and forced the split. Here's how one of Bhutto's friends late Gov Salman Taseer offered his view in his book "Bhutto: A Political Biography"

"Blame can never be satisfactorily or finally apportioned to the major players in this grisly drama, but that Bhutto, Mujibur Rahman and Yahya Khan share responsibility there can be no doubt. Many, indeed, are inclined to the view that Bhutto, as the most sure-footed politician of the three and thus the best equipped to assess the consequences of his actions, must accept the lion's share of the blame. Argument on this point will remain one of the central themes of Pakistani politics, perhaps for decades."

The fact is that economic gap between former East Pakistan and Pakistan has grown over the last 40 years, and the per capita income in Pakistan now stands at more than twice Bangladesh's in 2012 in nominal dollar terms,  higher than 1.6X in 1971.



 Here are some figures from Economist magazine's EIU 2013:

Bangladesh GDP per head: $695 (PPP: $1,830)

Pakistan GDP per head: $1,410 (PPP: $2,960)

Pakistan-Bangladesh GDP per head Ratio: 2.03 ( PPP: 1.62)

Pakistan's Economic History:

Since 1947, Pakistan has seen three periods of military rule: 1960s, 1980s and 2000s. In each of these decades, Pakistan's economy has performed significantly better than in decades under political governments.



In a 10/12/1988 interview with Professor Anatol Lieven of King's College and quoted in a book "Pakistan-A Hard Country", here is how eminent Pakistani economist Dr. Mabubul Haq explained lower economic growth under "democratic" governments:


"..every time a new political government comes in they have to distribute huge amounts of state money and jobs as rewards to politicians who have supported them, and short term populist measures to try to convince the people that their election promises meant something, which leaves nothing for long-term development. As far as development is concerned, our system has all the worst features of oligarchy and democracy put together.

That is why only technocratic, non-political governments in Pakistan have ever been able to increase revenues. But they can not stay in power for long because they have no political support...For the same reason we have not been able to deregulate the economy as much as I wanted, despite seven years of trying, because the politicians and officials both like the system Bhutto (Late Prime Minister Zulfikar Ali Bhutto) put in place. It suits them both very well, because it gave them lots of lucrative state-sponsored jobs in industry and banking to take for themselves or distribute to their relatives and supporters."
Human and Economic Development under Musharraf:

Pakistan saw yet another confirmation of accelerated economic and human development under military rule in years 2000-2007.
Pakistan's HDI grew an average rate of 2.7% per year under President Musharraf from 2000 to 2007, and then its pace slowed to 0.7% per year in 2008 to 2012 under elected politicians, according to the 2013 Human Development Report titled “The Rise of the South: Human Progress in a Diverse World”.

Source: Human Development Report 2013-Pakistan



 At 0.515, Pakistan's HDI is lower than the average HDI value of 0.558 for South Asia which is the second lowest among the various regions of the world tracked by UNDP. Between 2000 and 2012, the region registered annual growth of 1.43% in HDI value, which is the highest of the regions. Afghanistan achieved the fastest growth (3.9%), followed by Pakistan (1.7%) and India (1.5%), according to the United Nations Development Program.

Overall, Pakistan's human development score rose by 18.9% during Musharraf years and increased just 3.4% under elected leadership since 2008. The news on the human development front got even worse in the last three years, with HDI growth slowing down as low as 0.59% — a paltry average annual increase of under 0.20 per cent.

 Who's to blame for this dramatic slowdown in the nation's human development?  Who gave it a low priority? Zardari? Peoples' Party? Sharif brothers? PML (N)? PML (Q)? Awami National Party? Muttahida Qaumi Movement?  The answer is: All of them. They were all part of the government. In fact, the biggest share of the blame must be assigned to PML (N).



Sharif brothers weren't part of the ruling coalition at the center. So why should the PML (N) share the blame for falling growth in the nation's HDI? They must accept a large part of the blame because education and health, the biggest contributors to human development, are both provincial subjects and PML(N) was responsible for education and health care of more than half of Pakistan's population.

Pakistan R&D as Percentage of GDP Source: World Bank


Going further back to the  decade of 1990s when the civilian leadership of the country alternated between PML (N) and PPP,  the increase in Pakistan's HDI was 9.3% from 1990 to 2000, less than half of the HDI gain of 18.9% on Musharraf's watch from 2000 to 2007.



Acceleration of HDI growth during Musharraf years was not an accident.  Not only did Musharraf's policies accelerate economic growth, helped create 13 million new jobs, cut poverty in half and halved the country's total debt burden in the period from 2000 to 2007, his government also ensured significant investment and focus on education and health care. In 2011, a Pakistani government commission on education found that public funding for education has been cut from 2.5% of GDP in 2007 to just 1.5% - less than the annual subsidy given to the various PSUs including Pakistan Steel and PIA, both of which  continue to sustain huge losses due to patronage-based hiring.

Source: Pew Surveys in Pakistan

Summary: 

Looking at examples of nations such as the Asian Tigers which have achieved great success in the last few decades, the basic ingredient in each case has been large social sector investments they have made. It will be extremely difficult for Pakistan to catch up unless similar investments are made by Pakistani leaders.



Had Pakistan's development continued on the 1960s trajectory, it is quite conceivable that Pakistan would be a prosperous democracy like the Asian Tigers today.

Related Links:

Haq's Musings

Challenges of Indian Democracy

Pakistan's Economic History

Comparing Bangladesh with Pakistan

Economic and Human Development in Musharraf Years

India's Share of World;s Poor Up from 22% to 33%

Why is Democracy Failing in Pakistan?

Musharraf Era Higher Education Reforms in Pakistan

Comparing 30-Year Dictatorships in Indonesia and Pakistan

23 comments:

Anonymous said...

Singapore and Hong Kong are city states and not really comparable.

The export to west led industrialization works if the west opens its markets wide for you and lets you run blatantly mercantalist policicies of exporting yet protecting your industry behind high tarrif and non tarriff walls.

This is due to the exegencies of the cold war all the tiger economies Taiwan,South Korea,China(then a front line ally against the USSR) were helped by the US due to the then geopolitical circumstances.

The more typical example of 3rd world dictatorships were the numerous countries of latin america and the middle east.

In any case dictatorships only work reasonably well in uniracial countries.

Riaz Haq said...

Anon: "In any case dictatorships only work reasonably well in uniracial countries"

Do you really think that China, Indonesia, Malaysia and Singapore are uni-racial countries?

In addition to the majority Han Chinese, there are 55 other ethnic groups are recognized in mainland China by the PRC government.

In addition to substantial Chinese minority, Indonesia is made up of over 13,000 islands speaking different languages.

Malaysia and Singapore have Chinese, Indians and Malays.

The Cold War lasted until 1980s. It would have given Pakistan the decade of 1970s and 1980s in addition to 1960s. Bhutto did the most damage by reversing Ayub's policies of economic and human development by nationalizing industries and taking over private schools.

Kadir said...

That's a basic premise of Milton Friedman and the Chicago School of Economics. Economic freedom precedes political freedom.

Anonymous said...

In 2010 I calculated the Pakistan GDP if the growth rate had been struck at 8.4% as in 2004 till 2010.

the number we came to was 296billion dollars vis a vis 210billion dollars in real by 2010-11

Or may be now in 2013 as 350-60billion dollars atleast.

In short this is a direct loss of 100billion dollars under the PPP govt.

Salahuddin Khawaja said...

Nice post. I just finished a presentation around "Why Invest in Pakistan?" - maybe growth is in our future again - http://decklaration.com/whypakistan

Kadeer said...

This is just an academic exercise in the Ivory Towers which ignores the realities on the ground. Dictatorships marginalizes many in the society and factionalizes it. Military dictatorships suck up lot of resources and weakens the social fabric. One may see a positive outcome in the short term 10 years or so but over the long run you run the risk of violence due to factionalization of groups.

Each country is different. What worked for a oligarchic dictatorship in S Korea will not work in a military dictatorship like Pakistan.

Riaz Haq said...

Kadeer: "Dictatorships marginalizes many in the society and factionalizes it. Military dictatorships suck up lot of resources and weakens the social fabric."

To the contrary, it's "democracy" like India's and of other poor third world countries which marginalizes people by inflicting on them daily indignities of hunger, poverty, illiteracy, disease, open defecation and helplessness.

D said...

Everything that Musharraf did has been undone as soon as he left.

Riaz Haq said...

D: "Everything that Musharraf did has been undone as soon as he left."

Not all changes undone.

Scores of new universities are still there as are thousands of new graduates contributing in an economy 4X the size it was when Musharraf took over in 1999.

New telecom and independent media sectors are still there and growing albeit slowly.

Cement factories are still there producing 3X the amount of cement they were back in 1999.

Tens of thousands of tractors built and sold to farmers are still there helping produce a lot more crops with fewer workers.

Greatly expanded middle class is still there contributing to $240 billion economy, 4X the size it was in 1999.

What is different is that growth has dramatically slowed under new management by politicians.

Anonymous said...

The problem is that with a western mindset it is difficult to understand eastern philosophy. If you think that USD alone is a sign of prosperity then yes the asian countries are poor. If you can understand that our culture had thought us to live with nature then your metrics are not applicable. Also your continous praise for china and US is misplaced. They see poverty as a measure of USD. Do they ever know the value of lentils, pulses, and coarse grains like jowar, bajra etc and various other plants and herbs that asia has been consuming for 1000's of years. If you think Unani is cheap and english medicine is better, they we have different views. If you understand that they have their system while we have ours then we are on the same plank.

Suhail said...

In the summary conclusion, you've missed out (or deliberately omitted) the main point. All the nations that have progressed, including Pakistan in the Ayub and Musharraf period, had authoritarian regimes where the leadership was focused on economic development. In third world countries wanting to industrialize to progress from the third world to second world, the transition has to be under an authoritarian regime. One person one vote democracy cannot do that because bulk of the population is under the influence of the agrarian (or tribal) establishment so a democratic set up is bound to impede (rather destroy) the progress of a modern industrial elite. Examples are:
- Pakistan under the PPP regime spent huge funds on Benazir income support program which is just a handout to the rural vote bank to assure their continuing support, besides easy money for the corrupt politicians. The amounts were handed out from the tax payers money which is almost completely from the urban industrial and services sector; rural economy is exempt from taxes. Nawaz Sharif thinks he has limited time to rule so better make money to succeed in the next elections rather than take long term measures towards industrialization and economic development.
- Thailand is experiencing the same phenomenon as Thaksin's party is bent on distributing the huge funds from its big industrial and services sector's earnings as handout to rural poor forming bulk of Thaksin's vote bank, and still in majority. However, in Thailand the urban establishment, supported by royalty and bureaucracy, is trying its best to stop this descent into primitive times. No such progress oriented resisting force is effective in Pakistan thus our continued descent from bad to worse.

In summary, the huge funds intended for social sector development are channelized into the maintenance and well being of politicians in a "democratic" third world country. If more funds are available to the country, these will go down the same route.

Asian Tigers are all very structured under authoritarian establishments, committed to the country's industrialization and economic progress. Parliament and voting system is there but with limited authority so as not to change the track of development. Same was the case under Ayub and Musharraf regimes.

Nisar said...

Not too long ago; we had a very lively debate at our NEDian monthly meeting.
And I was saying same things that during the last so called "dictatorship" we had much
more progress on economic front than the previous so called "democracy" rule.

I was asked specific examples of it; I tried my best :) but as usual was given re-buttle,
same old "I am not going to believe you".

Answer this "how does democracy or no democracy affect an average citizen??". As long as average citizen is feeling secure, life and property, and then some hope of things are getting better, who cares who is looting??

Daily life is free of thugs and ever demanding money/bribe for everything you have to do, from phone
bills to driving on street to setting up businesses. If democracy was the only answer China would not
be on the way to becoming a economic super-house and be the first in some 70 countries tests on math,
science and landing (man-less) on moon.

All are corrupt military or non-military. First thing needed for democracy to work is education, and then
honest/fair people. It is the love-more for your country than just MYSELF. If politicians were so much
for democracy then why not allow local body-elections in Sindh for so long? NO it is because only certain
party/thugs want to control all the funds. Have they no fear?? Will they take all this with them ???? Surely they will meet their fate if not now or today; then on that day when no in-justice will be done.

I must say I felt more love-country with last so called "dictator" than those last five year's of politicians,
who just looted and plundered (as you can see almost all of them are going to NAB).

No one can deny that in the last "dictatorship" (if I only talk about what I saw in Karachi) it was calm, no
every day couple of killings, not that much of sectarian violence, and so much of work done on roads/bridges, and highways that I never saw anytime before. At least some public works done. Yes not everything was rosy. Yeah I know this is not enough. I would take ANY progress for all public to see and feel over nothing.

HopeWins Junior said...

^^Anon: "The problem is that with a western mindset it is difficult to understand eastern philosophy"
--------

40% of children in India are malnourished, says the Government of India.

The sheer scale of this deprivation is difficult for people with "Western Mindsets" to understand.

What does "Eastern Philosophy" have to say about this?

HopeWins Junior said...

^^RH:: "The Asian Tigers have managed their massive growth mainly through export-driven economies that catered to the industrialized West. Each of them has built huge trade surpluses to fund their growth.."
-----

Could you explain a little more about how "huge trade surpluses" can "fund growth"?

In addition, South Korea mostly ran trade DEFICITS from 1960 to 1997 when it was industrializing very rapidly. Same is true of the ASEAN countries during their high-growth phase.

Please explain this discrepancy.

Riaz Haq said...

HWJ: "In addition, South Korea mostly ran trade DEFICITS from 1960 to 1997 when it was industrializing very rapidly. Same is true of the ASEAN countries during their high-growth phase."

South Korea's and other Asian Tigers growth was led by exports and investments which started producing large trade surpluses in 1980s. Today, they have accumulated large foreign reserves from such surpluses.

China has followed a similar path with large trade surpluses.

Riaz Haq said...

Here's a Deccan Chronicle Op Ed by Kuldip Nayar:

That India is an economic mess is known all over the world. What is not yet public is that the malaise was because of the wrong decisions which president Pranab Mukherejee took when he was Union finance minister from January 2009 to mid-2012 and also when finance minister P Chidambaram was heading the ministry nearly till the end of 2008 and before.

Mukherjee lives in the luxuries of Rashtrapati Bhavan and Chidambaram shields himself behind tall promises he still makes to mend the economy. Both of them are accountable. They should tell why they took the steps which disturbed the rhythm of progress. Because of lack of transparency in the affairs of government, only a handful of people know about the blunders the two committed.

One of the decisions taken by Mukherjee was to impose the Rs 1200 crore tax with retrospective effect on a foreign mobile company. After having lost the case in the Supreme Court on September 8, 2010, the government promulgated an ordinance before amending the Finance Act 2012. The retrospective clause in the act has scared away foreign investment which India badly needs. A bagful of concessions has not brought the Walmart yet to the Indian soil. Foreign investors have withdrawn a large sum of money which they had invested. In a few weeks, as much $ 200 billion has reportedly gone out. The outflow has not stopped yet.


Prime minister Manmohan Singh did not anticipate the repercussions. In fact, after seeing the mess Chidambaram had created in 2008, the prime minister should have taken over the finance ministry himself because of his expertise in economic matters. Unfortunately, his own record as coal minister does not hold promise but the prime minister would have done better in finance. India should have been exporting coal, as it did, instead of importing it. Manmohan Singh may not be personally responsible for the corruption in the allotment of coal blocks. But the bungling runs into thousands of crores of rupees. The full story may not yet come out because some files are missing. The government has admitted this before the Supreme Court.

According to CBI as many as 157 files are missing. The missing files reportedly have some letters and noting on the allotment of coal blocks. The prime minister cannot absolve himself of the responsibility that he was not the custodian of the files. He was in charge of the coal portfolio. A top CBI official, who is probing into the scandal, has said that there may be a need to ‘examine’ the prime minister, who was in charge of the ministry from 2006 to 2009. Could the prime minister have connived at what the ministry had been doing because his personal integrity is beyond reproach?

http://www.deccanherald.com/content/355537/is-india-story-over.html

Riaz Haq said...

In the first 25 days of 2014 (in Delhi), 197 thumbnail images have gone up in the gallery of nameless dead.

Everyday, an average of seven people are dying unidentified and unclaimed in Delhi's winter. But what may be even more heart-rending is that such deaths are not limited to this season. As police data shows, they are an all-weather phenomenon. Around 2,900 died unidentified in Delhi last year. 241 perished in January; 225 in April; 279 in July; and, 238 in October.

The highest deaths, 323, took place in May. Data for last three years shows that unidentified deaths peaked in summer and monsoon. A majority of such deaths were of able-bodied men. http://timesofindia.indiatimes.com/city/delhi/The-everyday-tableau-of-Delhis-nameless-dead/articleshow/29430667.cms

Riaz Haq said...

Democracy in #Pakistan: GDP grew avg 2.9% rate since 2008, less than half of 7% on @P_Mushharaf's watch until 2007. http://www.dailytimes.com.pk/business/27-Feb-2014/pakistan-s-gdp-grow-2-9-in-5-years

Kiran said...

Did the developed countries of the world have dictatorships when they were developing? And what in your opinion is the time frame of development? How many of the developed countries of the world had dictators?

The arguement you make of continuous military rule can also be turned on its head and said, if the military had not stepped in every now and then Pakistan would be much better place. And for this, I would place USA, England, France and the rest. From developing to developed, could you please highlight when they had dictatorships?

Riaz Haq said...

Kiran: "Did the developed countries of the world have dictatorships when they were developing?"

Unlike Asian Tigers, the developed countries took centuries to develop. Democracy does not promote rapid growth as is obvious by the huge and growing gap between China and India.

As China's share of the world's extreme poor (living below $1.25 per day per person level) has dramatically declined, India's share has significantly increased. India now contributes 33% (up from 22 % in 1981). While the extreme poor in Sub-Saharan Africa represented only 11 percent of the world’s total in 1981, they now account for 34% of the world’s extreme poor, and China comes next contributing 13 percent (down from 43 percent in 1981), according to the World Bank report titled State of the Poor.

http://www.riazhaq.com/2013/06/indias-share-of-worlds-poorest-jumped.html

Riaz Haq said...

Every Aussie who takes an interest in such matters knows how a country goes from being undeveloped to developed. We've been watching our neighbours do the trick for years. It's called export-oriented growth.
It's all about building a big manufacturing sector. You encourage under-employed rural workers to move to the city and take jobs in factories.
Because your one big economic advantage is an abundant supply of cheap labour, you start by concentrating on making low-cost, simple, labour-intensive items such as textiles, clothing and footwear.
Since the locals don't have much capacity to buy this stuff, you concentrate on exporting it. Foreigners will lap it up because to them it's so cheap.

As the plan works and the country's income rises, you plough a fair bit back into raising the education level of your workers, which allows you to move to making more elaborate goods and to paying higher wages. You're on the way to being a developed country.
Over the decades we've seen a succession of countries climb this ladder: Japan, Hong Kong, South Korea, Taiwan, China and now even Vietnam and Bangladesh at the bottom. It's like pass-the-parcel: as each country's labour gets too expensive to be used to produce low-value thongs and T-shirts, some poorer country takes over and starts the climb to prosperity.
That's the way it's always done. Except for one country: India. Its economy started growing strongly in the 1990s and now it's the world's third-biggest (provided you measure it correctly, allowing for differences in purchasing power).
India has got this far without building a big, export-oriented manufacturing sector. It's done something that's probably unique: skipped the manufacturing stage and gone straight to the rich-country stage, in which most growth in jobs and production comes from services.
The Indians have done it by being so good with software and other information and communications technology and the things that hang off it, such as call centres. It's a big export earner.
It's an impressive effort, and there's no reason a developing country shouldn't have a big tech sector.
But, even so, the experts are saying India would be a lot better off if it had a bigger, more vibrant manufacturing sector, employing a lot more people who, by Indian standards, would be on good wages. This is a key theme in the Organisation for Economic Co-operation and Development's report on the Indian economy, issued this week.
The report offers suggestions on what could be done to encourage the growth of manufacturing, which go a fair way towards explaining why manufacturing never really got going the way it did in other "emerging market economies".
First, some basic facts. India has a population of 1250 million and before long it will overtake China's. About 29 per cent of the population is younger than 15.
Manufacturing accounts for only 13 per cent of India's gross domestic product, which is low compared with the other BRIICS emerging economies Brazil, Russia, Indonesia and China, but not South Africa.
Indian manufacturing probably accounts for a slightly smaller share of its total employment. Huh? It's normally the other way round. You'd expect it to be quite labour intensive. But despite abundant, low-skilled and relatively cheap labour, Indian manufacturing is surprisingly capital and skill intensive, the report says.
Almost two-thirds of manufacturing employment is in companies with fewer than 10 employees. That compares with Brazil's 9 per cent. This tells us the sector's many small firms mean it isn't exploiting its potential economies of scale.


Read more: http://www.smh.com.au/business/comment-and-analysis/india-developing-despite-ignoring-manufacturing-sector-20141121-11r4xo.html

http://www.oecd.org/economy/economic-survey-india.htm

Riaz Haq said...

Like oil painting or Olympic spirit, democracy exists in large part as a function of its announced demise. We know that there are artists happily wielding palettes, and committed amateur high-jumpers out there, and so there must likewise be unconflicted democrats, eager servants of the popular will.

But you wouldn’t know it from the reigning political discourse, which throbs with dire warnings about parliamentary puppetry, centralized power in staff offices, and election campaigns run entirely on spin and prevarication, nowadays known by the bland euphemism of “media lines.”

Like any sane political theorist observing the passing scene, I have issued such warnings myself. South of the border, the U.S. Supreme Court’s Citizens United decision, which equates money with political speech, seemed to most critics a crowning dunce cap on a broken system. Presidential elections are now nearly continuous circuses of irrelevant bickering fronting for backroom financial interests.

In that spirit, the best insight current Republican front-runner Donald Trump has so far delivered is that, in the spirit of the current arrangement, he, too, is a speechifying mannequin backed by a self-interested billionaire. In his case, though, the candidate and the bag-man are the same person.

In Canada, which we must now call, courtesy of Scott Walker and Game of Thrones, the Land Beyond the Wall, the most glaring offence to democratic ideals is not actually a bumptious PMO or magic e-mails written in invisible ink. It is, instead, the antiquated first-past-the-post electoral scheme that forever dooms us to non-representative government. It’s bad enough that MPs are subject to party discipline that melts all backbones; it’s worse that those MPs might represent only a third of the voters in their ridings. The King Beyond the Wall rules because he can.

All of this is standard stuff, repeated and ignored in routine cycles. But there are new voices in the chorus of democratic lament, and their message is different.

Not many people outside of Silicon Valley circles knew the name Peter Thiel before he and other members of the so-called PayPal Mafia came to media prominence in the wake of 2008’s Great Recession. Still less well known than fellow space-travel advocate Elon Musk or face-of-Facebook Mark Zuckerberg, Mr. Thiel is the philosopher of the group. He studied the subject in college, as he likes to remind people, and his success in startups has given him an oracular confidence denied lesser mortals.

In college and on Wall Street, he said, there was an emergent digital-economy hierarchy. The higher-IQ conservatives, surveying the shambles of contemporary America, escaped into “heroic drinking,” but the highest-IQ libertarians “had fewer hangups about positive law and escaped not only to alcohol but beyond it.” Liberals and social democrats, drunk or otherwise, do not figure in the pecking order.


These new libertarians, reflecting on their massive brains and the works of Ayn Rand, offered a new critique of the democratic experiment. “I no longer believe that freedom and democracy are compatible,” Mr. Thiel wrote in a 2009 “personal statement” for the conservative Cato Institute. “Since 1920, the vast increase in welfare beneficiaries and the extension of the franchise to women – two constituencies that are notoriously tough for libertarians – have rendered the notion of ‘capitalist democracy’ into an oxymoron.”

To Mr. Thiel’s dismay, his positive proposals – interplanetary emigration, undersea development and paying people to quit college – were overshadowed by denunciations of his views on giving welfare recipients and women the vote. Fools! They will be crushed by the forces of freedom! A clearer flavour of Mr. Thiel’s philosophy is sounded in his favourite quotation, cribbed from Knute Rockne or maybe Vince Lombardi: “Show me a good loser and I’ll show you a loser.”


http://www.theglobeandmail.com/globe-debate/has-democracy-outlived-its-promise/article26227392/

Riaz Haq said...

Departing UNDP Official on Pakistan:

1 Pakistan's Progress on Development Isn't Fast Enough
Mr. Franche is quoted as saying he is frustrated that a country full of “capable and intelligent” people isn’t making more progress on reducing poverty and modernizing the state. “The fact that even in 2016, Pakistan has 38% poverty; it has districts that live like sub-Saharan Africa; that the basic human rights of minorities, women and the people of FATA [tribal regions in the northwest] are not respected; that this country has not been able to get its act together and hold a census; or that it has not been able to push for reforms in FATA, an area that is institutionally living in 17th century. It is extremely preoccupying,” he said.

2 The Country's Political Class 'Uses Its Power to Enrich Itself'
The UNDP official said the country’s elites needed to change their lives to help Pakistan. “You cannot have a political class in this country that uses its power to enrich itself, and to favor its friends and families. This fundamental flaw needs to be corrected if Pakistan is to transform into a modern, progressive developed country,” he is quoted as saying.

He said elites take advantage of cheap labor while partying in London, shopping in Dubai and investing in property abroad: “The elite needs to decide, do they want a country or not,” he is quoted as saying.

Mr. Franche also had a word for the propertied classes. “I have visited some very large landowners, who have exploited the land for centuries, paid nearly zero money for the water, and how they almost sometimes hold people in bondage. And then they come to the United Nations or other agencies and ask us to invest in water, sanitation, and education for the people in their district. I find that quite embarrassing,” he is quoted as sayin
3 Local Governments Need Real Power
Mr. Franche said provincial governments in Pakistan don’t have enough power. “Only KP [the Khyber-Pakhtunkhwa province] has a decent law that gives real power and real money to the local government. Local government does not mean that you just elect them and deny them fiscal resources or power,” he said.


4 Pakistan's Media Is 'Manipulated'
He also said the media should be one of the pillars of democracy, but “unfortunately, the level of dependence of the government on military authorities, and the degree by which a lot of media in this country is manipulated by powerful sources, are sources of erosion of democracy and erosion of the institutions that are the foundations of this country.”
5 Country Needs More Opportunities
“The apartheid of opportunities in Pakistan is horrible, which is why so many young people are trying to leave the country,” Mr. Franche is quoted as saying.

“Pakistan will not be able to survive with gated communities where you are completely isolated from the societies, where you are creating ghettos at one end and big huge malls for the rich at the other end. It is not the kind of society you want your kids to live in.”

http://blogs.wsj.com/briefly/2016/08/30/5-criticisms-un-official-made-of-pakistan/