Lee Kuan Yew on India — Part 4

[Continued from Part 3.]

Give me six hours to chop down a tree and I will spend the first four sharpening the axe, said Abe Lincoln. Astonishing how much profoundly practical wisdom is packaged into that simple declaration. Time spent in sharpening the tool is time well-spent; so is time spent in thinking through a problem and thoroughly understanding the problem before rushing off to solve it. And in most cases, since there is almost nothing new under the sun, there are already known solutions to many problem. So the most efficient method to solve a problem is to first seek the solution that someone may have figured out already.

The problem of economic development is multifaceted and complex, taken as a whole. But the problem can be effectively partitioned into simpler subunits that are more tractable. Then solutions for these can be sought—right out of the grab-bag of existing solutions or if needed, solved for the first time.

There are important lessons in Singapore’s development experience, if one cares to observe very carefully. To learn from the person who engineered Singapore’s transformation from a backward poor city-state to a vibrant developed economy is a blessing. It fills my heart with hope that transformation is indeed possible, and it restores my faith in the conviction that powerful individuals are the only agents of deep transformation—both for good as well as ill—of society.

I read Lee Kuan Yew’s address to the 37th Jawaharlal Memorial Lecture on 21st Nov 2005 in New Delhi very carefully and with deep interest. I found that his wide ranging analysis of India’s economy incisively accurate. I annotated his speech in parts (parts one, two, and three) and this one is the concluding summary of what I gather from his talk.

In a sense, I did not find anything that he said even remotely surprising. I had pretty much reached the same conclusions independently. Why, one may wonder, don’t the leaders of India see what LKY so easily sees? Are they merely incapable of clear thought, or is it that they think but are prevented from acting due to circumstances, or is it a combination of both? Surely, one would think, that if the Indian leaders are not competent thinkers, they would at least have the intelligence to hire intelligent advisors to figure out the problems. So what is the problem?

I think the answer lies in what economists call the objective function. Individuals have a certain goal which can be stated as the maximization of a function given a set of constraints. For instance, for someone maximizing the amount of money given the constraints of time and effort may be the objective function; for another it could be to maximize leisure given the constraint of a reasonable income and time; for another, it could be to do social work subject to leisure, time and money constraints.

LKY’s objective function, I believe, was to rapidly develop Singapore. He was not looking to win elections, or to maximize his personal wealth, or to be a mahatma, etc. Given that he is a man of amazing practical genius, he figured out the sequence of interventions and implemented them. Under his autocratic rule, he did what India’s autocrats have been either unwilling or unable to do.

India’s autocrats have had different objective functions. I suspect that to a first approximation, their objective function have been to maximize personal wealth, not the development of the economy, through corruption, nepotism and bribery. Of course there was the matter of elections every so often and funding this costly farce required even more corruption.

Different objective functions lead to different perceptions which in turn lead to different understandings, and so on to different actions and ultimately to different outcomes.

My objective function is to figure out what exactly is wrong and how to solve the problem of India’s economic growth and development. I am not trying to win elections and therefore am not forced to bribe some voting block or the other with hare-brained schemes that ultimately harm not just the economy but even harm those vote blocks. I am not trying to fatten my numbered Swiss bank account and so I don’t have to implement any asinine license-control-quota-permit industrial policy. I am not trying to promote the members of my family as the only enlightened beings on the planet capable of ruling India, and so I don’t have to ruthlessly eliminate any opposition. I am not wedded to any ideology such as monotheism or communism, and so I can advocate the use of any idea as long as it makes sense.

The reason I arrive at similar conclusions as does LKY is that our objective functions are similar, we are sufficiently intelligent, have learnt from others’ experiences, and we have thought sufficiently long about the problem. I am sure that LKY has spent a lot of time polishing the ax before he struck the first blow.

There are differences, of course, between a LKY and me. For instance, I am as lazy as they come and he is a hard-working achiever. But the most significant is this: he is a dispassionate observer of India’s development while I am not. I sincerely care about what happens to India personally; LKY cares to the extent that India’s economic performance has a bearing on Singapore’s welfare, but he does not have a personal stake in India’s successes or failures. If what LKY tells India is just a lot of water off a duck’s back, he would sleep soundly. And that is why I believe that what he says should be taken very seriously. He has no reasons to sugar-coat his conclusions or misrepresent his recommendations.

Dispassionate observers must be trusted more than those who have a stake in the game. I would trust LKY more than I would trust someone like Dr Manmohan Singh when it comes to an honest assessment of India’s strengths, weaknesses, prospects and possibilities. Dr Singh has a boss and various constituencies that he has to please; LKY has to please no one. (The same holds for me: I don’t have to please anyone. I don’t have to please an editor and if the reader does not like what I scribble, it just takes one click and I am history.)

So with that preamble, let me try to summarize what LKY said.

1. India has missed the bus too many times and this time around, it should look sharp and get on the bus.

It could not jump on the bus because it was tied hand and foot by those with different objective functions than economic growth and development. Now we need to unshackle the economy. They call it liberalization. Of course, you can only liberalize a shackled economy. I think it is time to enquire why the economy was chained in the first place. Will this be done? No, because it may turn out the holy cows being worshipped were in fact asses. Best to keep quite and move on. But then of course we run the risk of chanting the same old mantra in worship of the old “holy cows” and end up precisely where we are. Insanity, it is said, is doing the same thing and expecting different results. Let’s stop this insanity.

2. Production precedes distribution. If you don’t produce, even after equitable distribution, you would still be dirt poor.

LKY put is thus: Before distributing a pie, I had to first bake it.

Simple isn’t it? But this simple truth eludes the communists and socialists. They want to distribute first and then perhaps maybe produce some stuff if they feel like it. They have not figured out that poverty is lack of what I call “stuff.” If you don’t have stuff, you are poor. Producing sufficient amounts of stuff is a necessary condition; the sufficient condition is to distribute it equitably.

When production is insufficient, then there is a mad scramble for the limited production. The powerful get hold of this stuff, and the majority of the people have to eat dirt. That is, a very lop-sided economy develops when there is insufficient production of stuff: a few very rich people lording it over hoards of abjectly poor people.

So the lesson is simple: make the production of stuff the first priority. Therefore

3. Manufacturing has to be the base upon which India’s growth must be based.

Which means that all this talk about a service economy is a lot of stuff and nonsense. India is a large economy (in terms of population numbers) and like any other large economy, it has to be largely self-sufficient in that what is consumes, it has to produce itself. Small economies can specialize and import the other stuff they need, but India cannot. In other words, India has to grow its own food (and therefore must have a large agricultural sector), must manufacture its own stuff (and therefore have large manufacturing sector), and provide its own services. “Large” here means production capacity, not necessarily employment capacity.

I am not in favor of employment; I am in favor of producing stuff. If you produce enough stuff, you can give stuff away to “unemployed” people. On the other hand, if the obsession is with employment, and if this employed population produces zilch, then all can be employed and yet all can be dirt poor.

4. To produce stuff, you have to have infrastructure. Build infrastructure first.

You cannot produce much with your bare hands. So you need factories, You need power to run those factories. You have to have roads and ports and airports to bring inputs to the factory and take the output out. Invest in infrastructure.

And you don’t need to bring out the excuse that the government does not have the capacity to fund the infrastructure. The private sector at home and abroad is more than eager to build them, provided the asinine policies blocking this investment were discarded.

5. Learn from you mistakes.

Of course, to do so, one has to admit that one has made mistakes. Flatly denying that would not accomplish much. China learnt from its mistakes and has changed course.

I have my doubts whether we can learn from our mistakes because it is not politically correct to point out that mistakes were made. Goring of holy cows is not taken very lightly by the worshippers of holy cows.

Thank you, Mr Lee Kuan Yew, for speaking to the Indian leaders. I am not sure that you have not wasted your time.

Author: Atanu Dey


24 thoughts on “Lee Kuan Yew on India — Part 4”

  1. Why would people producing “stuff” simply give it away to “Unemployed” people? People would burn the “stuff” rather than donate it freely to someone. But i believe that once India gets into the business of producing “stuff”, there wouldnt be many unemployed.

    Atanu’s reply: Praveen, I would like to reiterate that we are worrying about the wrong thing if we are worrying about “employment” or “unemployment.” What we should be worried about is production. If we produce enough stuff, we would not be poor.


  2. Praveen,
    People who produce “stuff” give it away all the time, in the form of taxes paid to government who in turn help the needy.
    But I think the larger point Atanu is making is what’s vital here (addressing the Communists, no doubt) — income redistribution cannot come when there’s no income.


  3. Great Post But,

    “I am not wedded to any ideology such as monotheism or communism, and so I can advocate the use of any idea as long as it makes sense.”

    So, is atheism tautology or just negation of idealogy 😉


    “Dispassionate observers must be trusted more than those who have a stake in the game.”

    Usually it is a trade-off , you are assuming that outsider (dispassionate observer)has perfect knowledge of the system, which is never possible. However as long as it means bigger picture thing , I agree with you. In order for bigger picture thing to work, “hands on” experience s crucial.
    That is where insiders like you come into the picture , atleast when you are not advocating flogging bureaucrats or putting politicians on rake 😉

    Atanu’s response: I don’t know what you mean when you write “So, is atheism tautology or just negation of idealogy ;-)”.

    I am merely against monotheism and communism: the former because it leads to intolerance and hatred, and the latter because it is fundamentally silly. Both lead to untold misery in the world. Atheists and polytheists are willing to live and let live and not go about killing people merely because of some silly belief system.

    About dispassionate observers. Dispassionate observers don’t have to be uninformed observers, or outsiders. One can be an insider and still be a dispassionate observer. The reason I stress dispassionate is that being too involved in the situation can cloud one’s judgement. My father, a fine physician in his own right, never treated us when we fell sick. He would always have a colleague of his examine us and prescribe a course of treatment.

    LKY is a very informed and knowledgeable person and when it comes to India, I don’t think he would be swayed by emotions, misrepresent the past, entertain false hopes, or attempt to curry favor by painting a rosy picture.

    I am an insider and I am emotionally involved with the problem in India. It is possible that my passion could cloud my judgement but not to the extent that I behave like a monkey. It is a combination of stupidity and passion that landed us in this mess.


  4. While i understand the need for Manufacturing base, i just don’t understand why Services AND Manufacturing cannot work hand it hand. Everyone knows that India is Unique to make a jump from Agri to Service economy skiping manufacturing.

    I think india stands an great chance of getting benifits of manufacturing by using its service expertise. I believe this is an advantage (if used properly).

    Atanu’s response: Pavan, even if “everyone knows that India is Unique to make a jump from Agri to Service economy skiping manufacturing”, everyone could still be wrong. India cannot make that jump any more than pigs can fly. I may one of these days argue why but for now I recommend my article on ploughs and keyboards.


  5. Dr. Atanu,
    Why is it that when you write on your own blog, you are always well-reasoned & make arguments that are economically sound & informative, but when you participate in a group blog ie. indianeconomy.org, you allow complete nonsense to get by without objection ? Are you scared that you shouldn’t trample upon your colleagues there ? Or are you simply exercising discretion ?

    For instance, your blog Deeshaa has time & again viewed the IT service sector as “stuff snd nonsense” ie. irrelevant in the big scheme of things – you have even written a splendid article “The plough & the keyboard”, which I have forwarded to countless people who tout Indian IT as the only solution to India’s prosperity.

    But on indianeconomy.org, which is basically a shill for the IT/BPO industry in India, every other post revolves around ACL-type logic by the cartelians, propping up the IT industry as a shining example & looking the other way when the reality is presented. The ACL gang think large population in India is an asset & not something to worry about – your 32 blogs on population go into great depth on why population is a problem, but the ACL gang simply shrugs it off & says, more population, more labor for BPOs – how can you just sit by on the same panel & let this simplistic nonsense prevail ?

    In point of fact, why are you, as a doctor of Philosophy in Economics, sharing the same forum as a bunch of juvenile jokers, one of whom writes for some cricketing rag, the other unemployed after unnecessary ruckus with some ponytail over dubious claims of free-speech violation, third a CEO of some startup BPO with obvious vested interest, fourth…I could go on and on but you get my point. Why do you want to allow your brand dilution by associating with a bunch of shysters ?

    I hope your new year resolution is to blog more on your own site & stay away from this shady indianeconomy. I recommended indianeconomy to a bunch of journalists and it has come to bite me on the ass. The journos point out so many fallacies in the simplistic juvie posts by the ACL bloggers on that site, I’m ashamed to have told them about it.

    Atanu’s response:
    Dear “You know who”:

    I really don’t know who you are but it does not matter. I must confess that I rarely find time to read all the stuff that I ought to be reading. So often times, I neglect to read the India Economy Blog (IEB) even though I contribute to it sporadically. I know and respect many of the IEB contributors. But that does not mean that I agree with all their views and analysis. For instance, the matter of India’s population problem which you point out: I differ with one of the contributors. I am fine with a diversity of views being expressed and debated. I wish I had the time to take on all arguments that are worth taking but I plead laziness and lack of time.

    To be honest, I do not write for IEB. I write for my blog and sometimes re-post stuff from my blog to IEB. So my IEB posts are a subset of my own blogs posts.

    Thanks for your comment. I wish you had written to me directly instead of posting a comment. In any event, thank you for your kinds words about my writing. I hope not to disappoint.


  6. I don’t think India will adopt any of the five measures suggested by LKY. I can actually see it NOT happening at all.

    And I think too that you have said too much in this post regarding the objectivity of LKY which someone else like you might slightly lack.

    IMO anyone with a little intelligence can see whether someone talks sense or not, whether someone’s words actually help in providing ideas or solutions or not, without needing a preamble as to the person’s qualifications of objectivity or subjectivity.

    Even if Lalloo Prasad Yadav had miraculously managed to spew out these words (of LKY), I am sure with whatever initial misgivings, even Atanu Dey would have applauded enthusiastically and written a post on it!

    Atanu’s reply: Parvati, the preamble was to examine the witness and figure out whether his testimony was worth recording. I place a lot of weight on the question of whether the witness has an axe to grind or not. For instance, I would take George W Bush’s assessment of how the US is doing with a large helping of salt since he has an incentive to paint a rosy picture of the economy.

    You are right: I would not dismiss Lalloo Prasad Yadav’s recommendations if they made sense. But the chances of that are somewhat along the lines of my winning the Miss Universe crown; it is not whether I am pretty or not, but the fact that I am male that makes my winning unlikely. As they say, pigs would fly sooner than LPY makes sense.


  7. And one more thing – I think that being involved, having a personal interest in or concern for the welfare of one’s own country, its prosperity etc. can too more often than not, manage to provide a deep insight into special solutions which are way better than those given by a detached observer like in this instance, LKY. The emotional sincerity in you could well be a light thrower than a blinding film of subjectivity.
    It happens all the time in life. What is needed in the subjective or objective observer or exegete is sincerity, whether of thought, intelligence or emotion. This will lead straight to solution methinks.


  8. On the mark. Especially #2, #3 and #4 too. Very few people can make so strong a case as you do. Sometimes I feel, no correct that, I am convinced that a collection of yr articles would make an excellent Econo-101 textbook for schools. Atleast it is for me.

    I totally agree with you, there’s this shortsighted euphoria of IT/BPO/services which is clouding our collective judgements. But let the Chinese/Phillipines catch up, and all these jobs would move there. Maybe a decade more. China is already making a concerted effort at a national level to ramp up on their language skils. There are already signs of some of this work moving to China which earlier Indian SW managers took for granted.

    By the way, why do you think there is a surge of events and actions which one would associate with socialism (in recent times the NY MTA union strike, and LA? hotel employess union’s strike) in US? It’s perplexing.

    Atanu’s reply: Suhail, I am working on the book 🙂 It will be called “The World is Mad,” the title obviously inspired by dear old Tom Friedman’s “The World is Flat.”

    I would not go so far as to equate labor strikes with socialism. True, in India the commies are prone to go on strike at the drop of a hat, but strikes and a capitalistic market society are quite compatible. So why is it happening now? Wage negotiations stumble when the economy is not doing too well. The strikes are a symptom of a possible decline of real incomes.


  9. Suhail, There’s an excellent wsj op-ed here that precisely addresses what you’re getting at. Basically, the article says this –

    1. Socialism+Atheism = Bad idea = Europe,Canada,USA democrats.
    2. Socialism+Theism = Sustainable = India, parts of Asia, Japan
    3. Capitalism+Theism = Good idea = USA republicans
    4. Capitalism+Atheism = Confused souls = The ACL cartel

    Dr.Atanu is trying to take #2 & make it #3 wrt India.
    The cartel is trying to take #2 & make it #4 wrt India.
    Guess who’ll succeed ?
    The irony is that its the cartel ( Amit Varma ) who pointed me to this op-ed 🙂

    Atanu’s reply: Thanks much for the link. I had not seen it. Now I am in the middle of reading it. This one is a must-read. Much appreciated.


  10. Dr. Dey,

    Has India used Private Finance Initiatives as a way to fund any infrastructure projects so far? And are there plans to do so? Also, how would you rate the current government compared to past governments. Is the government moving in the right direction?

    Atanu’s reply: Tim, there is a model which is called “Build, Operate, Transfer” (BTO) which approximates that. The private sector is given the franchise for a specific number of years to create and operate the infrastructure and recover costs and then the infrastructure is transferred to the government.


  11. Atanu, I still think that to judge what a person says, we needn’t know his whole history – be it George Bush or Lalloo Prasad Yadav.

    It is only where putting the words or ideas into action goes, all the preamble of a research and study of his past actions or record has a validity. We can judge a man’s words at their own face value. And freely see whether they make sense or not. Thereafter his sincerity might be in question when it comes to their implementation, if he had just paid lip service to the idea with no intention of seeing them executed or implemented.

    Atanu’s reply:


    May I recommend here an earlier entry titled “The Power of M-type Argument” which may have some bearing on why I insist that examining the witness is important when considering what the witness says?


  12. Atanu,
    Nicely summed up. How I dearly wish Indian politicians realise the correct objective function.

    Oh well, we seem to blame the politicians too easily. What about the ACL guys that “you know who” is mentioning, they also seem to have got the objective function wrong …


  13. Hi Atanu,
    I read your “The plough and the keyboard” yet again today and many questions started pouring out from my mind! I shall ask you the main question – Is this increased euphoria about Indian becoming a services giant in the next few years valid? Given the fact that we didn’t excel in Agriculture (or did we?) and we didn’t excel in Manufacturing too (“We missed the manufacturing bus” is a cliche that even a 6 month old baby in Suratkal or Durgapur would cry about), but how do our honchos feel elated about our excellence in the services sector? The labour force too is not well-trained for the services sector (did I hear someone saying “does one need any training for working in the porn industry?”) and from your explanations, I see a deviation in the way our country is marching ahead? (Not following the Agri – Manu – services) Will we reach our destination safe?
    And, what after services? when services reach a saturation point (won’t they?) what will the economies do that have exhausted their services potential?
    It would be great if you throw some light on this!!
    It may sound cliche again but I repeat, Everytime I read your articles, I think more and ask more questions! Isn’t this how our textbooks were supposed to be??


  14. It is a given that Manufacturing is the saviour for any developing economy e.g India. How is it that people keep forgetting that manufacturing as it is practised currently is mostly unsustainable? There is a finite limit to the amount of metals, oil and their byproducts, and other commodities that can be extracted from the earth.

    What happens if suddenly the world economy which is mostly kept afloat right now by US consumption, has less of a demand for goods? Most of the goods right now are having such a short shelf life, and are supposed to be used only for a very short period. How do you address those concerns and the horrendous effect on the environment? Manufacturing firms typically concentrate a lot of pollution in a small area, and generally leave it worse off. Though, that is beginning to change in the ‘developed’ world, there is no real incentive for those industries in the developing world, as they are not bound by Kyoto. I assume you have heard of cradle to cradle design, which is nothing but plain common sense.

    To illustrate with an analogy with small farmer based agriculture and industrial agriculture. With industrial agriculture, the land breaks down eventually because there are no trees around to hold the topsoil, crop-rotation is not practised properly, and the size of the area involved is huge. Another problem is the inadequate and blind application of fertilizers just become too much after a while.

    Are there any other ways to productively and sustainably occupy a large chunk of the population? Isn’t the whole basis of measuring wealth, or being a ‘developed’ economy, a flawed concept? And that it really needs to be re-evaluated taking into account the impact on environment? All these economic theories were based on the Industrial Revolution and rulers subsequently based their national economies along those lines, but those problems are coming home to roost right now, and hurting us immeasurably in the future.


  15. As many heads, as many ideas.We are so adept at looking at the realty and even better at asessing,analyzing, and making conclusions about it.Is it not that the truth beneath the realty is neglected?
    I wish that the so many erudites would try to see that for once.As for myself, I am not even capable one bit ,to come out with so many solutions.
    You are doing a great job.
    I bow unto you.

    Atanu’s reply:

    The trust beneath the realty? I thought that truth and the reality were congruent.

    On a different topic, the “Sirji” is such an amazing construct. There you have “Sir”, a term of respect, adorned with the Hindi suffix “ji” which itself is a term of respect. I would not be surprised to come across “Sirji-sahib” one of these days, which could then be further embellished into “Shri-Sirji-Sahib”. 🙂


  16. Atanu

    I like your point about holy cows being asses. It is funny and poignantly true. And I learnt more economics reading your posts than in the classroom! The discussion that this post has provoked is also stimulating.



  17. Before distributing a pie, I had to first bake it. Simple isn’t it? But this simple truth eludes the communists and socialists. They want to distribute first and then perhaps maybe produce some stuff if they feel like it.When did communists, socialists and capitalists disagree on the need for production? The contention was with ownership of the means of production. What happened in India, e.g. West Bengal, has to do with its leaders and not the ideology. But look at China and erstwhile Russia.


  18. Atanu, I keep wondering that “Will the rulers & Bureaucrats, who run the country atleast read any of such articles?”

    You are quite right, when you say “Distribution follows Production”.
    Alas, We have a dedicated Public Distribution System, but no Public Production System.

    On top of this, there are so many Controlling & Regulatory Authorities.




  20. We would perhaps need to concentrate on Agro-based industries. Biodiesel production and optimal wasteland optimization may be another idea. India’s social indicators still seem abyssmal.
    Also the states of UP/ Bihar will forever remain a drag on India’s economy. What’s being done about it. These areas are far worse than even Bangladesh.


  21. Atanu, I read it all twice. I feel like crying and wonder whether we are victims of the Gods that we created or our rulers that we elected or the collective oppression of centuries that actually mutated our genetic code to a level thats irreversible. Laloo once aptly put it “kya karegne log develop hokar”

    I guess many a times we try to dissect the intentions, intellect and capabilities and strategies of our leaders while infact they don’t deserve our time as they actually didn’t have any of these virtues even a iota to begin with. The only thing they had in their minds was comfort and restoration of powers to their brethren, create more laws, complicate things, give tensions to people and have sex with the governors wife and sleep, while the rest fight to figure out what went wrong. Simple strategy. nothihg official about it.

    With the diversity interest groups, cultural masala, linguistic identities, caste, sects (sadly each one of us narrated this on assembly grounds at schools for atleast 12 years) etc the easiest way is to divide this nation into coherent countries further to make them more productive. This follows from the basic laws of managing complexity. Break it into simple units and then solve one by ine. I guess we can have US broker this deal for us. May be we can also explore leasing out the nation to efficient administrators like the british. eg. Hongkong Vs. China.

    Atanu is there a way to stop the population from growing further. What shd. we be doing right away to halve the population by say 2025. Every good virtue thats desired is then simply a consequent / resultant i believe. We simply need to chop this population thing to the nip. just chop the dicks. as sanjay gandhi once advocated (and paid his price too) Let me know if any technology or formula 44 exists to make people sterile without their knowledge. I will go and do it myself whether required the most.. to begin with in Bihar and UP. We often accuse muslims as child factories, but statistics don’t convey such. Pakis have lesser population density than us. Muslims continue to constitute 14% of India’s population since last 3 censuses.

    mera bharat ultimate mahaan.

    Loknath Rao

    [Comment posted by Atanu on behalf of Loknath as he could not post due to technical reasons.]


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