Used cars and used computers

From Rajesh’s Emergic weblog an item on second hand Japanese cars in the third world. I am reproducing my comment on Rajesh’s blog here for the record.

The apparent contradiction between the policies for used cars and used computers can be explained by understanding the political economy of the segments of the population which would benefit from the two different policies. Cars — used or new — are primarily demanded by the upper middle class, the same segment which can afford new computers. Used computers imported duty-free would allow the lower middle class access to IT solutions. This is not seen as a priority since the policy makers don’t fall in this category. This policy is short-sighted at best, but a more sinister reading of the policy would imply that the movers and shakers of India gain from the permanent underclass they help perpetuate. The long term growth prospects of India is being severely undermined by the sheer ignorance and intransigence of the politicians, bureaucrats, and big business interests.

Enlightened self-interest of those who direct the ship of state should persuade them that not empowering the lower classes of society is tantamount to keeping India a third-world country of little significance, notwithstanding all the hype that surrounds the BPO and ITES gains. These gains look impressive in absolute terms but translate into nearly negligible figures per capita.

Let’s keep one more distinction in mind. Cars are almost pure consumption goods for the rich. Very low cost computers, on the other hand, are goods that facilitate not just production by the masses, but also their education. Properly used, computers have the potential to create a more productive population. And finally, it is increased productivity which leads a way out of poverty. Our task is to somehow convince those who make policy that we need to worry about production and productivity a lot more, and to go easy on congratulating ourselves for becoming the world’s back-office chaprasis.