Perception and reality are two different things, of course, but they do influence each other. How India is perceived by the US (and vice versa) matters. A significant shift in that perception is clearly visible, going by the writings of observers of the developing India-US relationship. John Mauldin’s Thoughts from the Frontline carries an analysis by George Friedman titled India the Next Big Player.
Never underestimate the power of incentives, is what my economics guru used to say all the time. Economics is at its most generalized form the study of incentives. Positive analysis involves digging below the surface to uncover the incentives of the concerned economic agents (people) with the aim of explaining why things are they way they are. It is not just out of intellectual curiosity that one wishes to figure out why things are way they are. It is only the first step to the ultimate goal of obtaining a more desireable outcome. Of course, determining what is a desireable outcome involves value judgements and therefore dependent again on the concerned economic agents and necessarily subjective. But there is nothing subjective about the incentive schemes that need to be implemented in moving from the present state to the desired future state.
Books influence us profoundly, of course. But for a book to work its magic on you, you have to be ready. The Buddhist have a saying that when the student is ready, the teacher appears. Actually, what that means is that when the student is ready, the presence of the teacher becomes known to the student. The teacher has been around all along but the student did not have the faculty to recognize the teacher. The prepared mind is a necessary condition for books to have any impact.
I make no representations about the authenticity of the picture above. Any idiot can doctor up a photo these days. Even then, it is funny. Kind of goes with the image that one has of the
prime chimp President of the United States of America.
Once, as punishment for disobeying his mother, Sam Clemens was made to paint a fence. Like all boys he disliked being forced to do chores. He began to think of some way to get out of it. When his friend John showed up and declared that while he was going for a swim, Sam will have to continue his work. “Work?” said Sam, “A boy does not get to paint a fence everyday.” Sam continued to appear to be enjoying his painting and soon enough John was pleading to take a turn at it. Sam says, “No, it is skilled work.” Finally, John bribes Sam with part of an apple to have the privilege of painting the fence. By the end of the day, Sam gathers a whole bunch of toys and all his friends end up doing the painting and thank him for the opportunity.
Years later Sam, writing as Mark Twain, included that in the story of Tom Sawyer’s adventures.
What brought that story to mind was the recent jubilation amongst some commentators and political observers of the US-India partnership in defense, trade, and other matters international highlighted by Prime Minister Manmohan Singh’s visit to the US. The US will — among other deals — sell arms to India.
I am delighted whenever barriers to trade — political, physical, philosophical, ideological, or merely idiotic — come down because in general there are gains from voluntary trade of goods and services. The gains from trade are well understood enough that there is little point in flogging that horse. Except for the corner cases, of course. Does trade in “bads,” in contradistinction to “goods,” such a great idea? The natural instincts of an economist is to reply “it depends.” It depends on what the “bad” is I suppose and on what sort of externalities arise from such trade.
Take, for instance, trade in weapons of mass destruction. Is it welfare enhancing? The seller of these weapons clearly profits from the trade. What about the buyer? Does it really promote the security of the buyer? These questions bear investigation. While the answers may all be very trivially obvious for some, it is not at all clear to me. Though the perception may be widely shared that buying weapons is good use of scarce resources, it could also be wildly incorrect.
The reluctance of the US when it comes to selling arms to developing countries is like Sam’s reluctance to let his gullible friends paint the fence for him. When he finally relents, the friends are happy and suitably grateful to him for his magnanimity. Only in few trades are all the gains one-sided but trade such as these are exemplars of that set.
My concern here is development and the factors that lead to development. In an interdependent world, India’s development is connected with the state of development (or underdevelopment) of other parts of the world. The state of development of the global economy is of course geographically diverse, but it also has a temporal component to it. Some countries developed earlier than others. And this has some interesting implications.
One of the implications of being a late-comer in economic development is that one has the advantage of being able to adopt advanced technologies from developed economies. By judicious adoption of imported technology related to economic goods, development can be accelerated.
Information and communications technologies (ICT) developed by the US is available to India at a much earlier stage of its development than was the case for the US. Catching up is quicker. That is the happy part of the story. But when it comes to economic “bads,” the story is equally depressing. Adopting advanced weapon technology is extremely costly for developing nations and can hobble development immensely.
The US had passed its age of being a subsistence economy for a long time before it started on its path to developing weapons of mass destruction. Its agriculture was booming, it had a huge manufacturing base, its people were literate and educated, it had a massive stock of housing, its institutions were mature, and so on. Given that foundation, it could afford the luxury of going into the research and development of weapons, and built the most advanced and expensive military hardware in world. The unfortunate part is that there are countries like India which have hundreds of millions of people stuck in the subsistence phase of development. And the leaders of these under-developed countries eye the expensive military hardware and salivate. They are forced to attempt to keep up with their neighbors in their competition to get as many shiny nuclear-tipped missiles as possible.
If I was made the global dictator temporarily, and was given the power to make only one absolutely binding and enforceable global law, it would be to ban weapons trade altogether. If neither India nor Pakistan could buy nuclear subs and missiles, fighter jets and bombers, the ordinary people of these countries might have a better shot at a human existence.
From this point of view, the tragedy of the world is not so much that there are so many poor countries, but that there are those rich countries that have surplus resources to devote to developing weapons that ultimately starve the poor. And the leaders of these poor countries fall all over themselves in praising the foresight and the wisdom of the leaders of the rich countries for giving them the opportunity to buy these weapons.
Mark Twain had unusually praiseworthy words for India. He would have been pleased by the increased tries between India and the US. But I am sure that he would have been saddened by the irony in the celebration of some in India at the chance to buy American weapons.