Wednesday, May 06, 2015

Instead of imitating others just take from them.

Will India become like China or Mexico economically, asks a thought provoking article. We do not want to become a brutal, uncivilised country like China, with systematic grabbing of land from poor peasants, melamine in baby milk and secret black jails to detain people indefinitely to prevent them from petitioning the government in Beijing, for justice. We do not want to become like Mexico where drug gangs have divided the country into fiefs and 43 students were killed last September after police handed them over to a drug gang on the order of the Mayor of Iguala. China achieved its remarkable growth by providing a vast army of cheap labor for industries, by releasing women from household chores by enforcing a one child policy since 1979, and by building a modern infrastructure by buying up commodities from all over the world. There were great expectations that the Mexican economy would boom after it joined the North American Free Trade Agreement, or NAFTA, in 1994 as US businesses shifted across the border to take advantage of cheaper labor. That did not happen. From 1994 to 2014 Mexico's growth rate has been a meager 2.4%, whereas it was growing by 7% from 1961 to 1970, by 6.5% from 1970 to 1975 and 6.9% from 1976 to 1981 by supporting local industries through import substitution policies. Instead NAFTA destroyed its agriculture and led to young men joining drug gangs. The US wants India to cut subsidies to farmers while continuing to pay over $20 billion of taxpayer money to its own farmers. We have enormous problems. Our roads are narrow and broken, electricity supply is dodgy, government schools teach nothing and we are high on the list of black money. The population continues to grow unchecked and hundreds of millions are born with a sense of entitlement to government handouts without any responsibility towards reducing the numbers of children they produce. But it is not just the poor who have a sense of entitlement. Our business fellows are equally dependent on government handouts in the form of licenses to exploit natural resources and contracts to exploit Indian consumers with high prices and shoddy goods. There is no research or innovation because that takes time and costs money. Lack of innovation means that our productivity is very low compared to our competitors. Chinese imports have taken 60% of certification by the Bureau of Indian Standards. Majority of women cannot or choose not to work. This is because too many children harm the health of women and never ending housework takes all the time. Poor infrastructure makes commuting to work difficult and the cost may make it unprofitable. While learning from China and Mexico we should not forget Brazil where excess of social spending is causing severe economic stress. Perhaps the only way is to exploit others, which is how the west has been so rich for so long.

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