I am teaching during this Summer term at UC Berkeley starting Monday 20th June. Summer courses are hard, both for the teacher and the students since a regular course of 17 weeks is squeezed into 8 weeks. I was foolish enough to agree to teach not one but two courses. That’s a stupid thing to do but in my case it’s par for the course. Still, teaching is always fun and instructive.
The two courses are Econ 171 — Economic Development, and Econ 121 — Industrial Organization and Policy. IO is easier to teach since the structure is more or less dictated by the book I am planning on using: Carlton and Perloff’s Modern Industrial Organization. I like that book because that was my introduction to IO and it was taught by Perloff (later he was on my thesis committee.)
Development economics is a much harder subject to teach. Unlike IO, development is a more complex subject to get your arms around. If development economics had been easy, it would not have been so hard for economies to develop. In IO, the theory and practice are well understood and there’s general agreement on what it is all about. Not so in the case of development. Expert opinion differs on what is important in development, what works and what does not, how does development happen, what should be done and what can be done.
Today I had lunch with an old professor of mine, Prof Irma Adelman. Born in 1930, she is retired now, and although physically frail, she lives alone and she still drives. But she continues to be an awesome intellect and her mind is as sharp as a tack. She entered the field when women were unheard of in it. A born maverick, she has often gone against conventional wisdom and triumphed.
When import substitution industrialization was the prescription for developing countries, she proposed a different path for South Korea. Fortunately for the S Koreans, the leadership paid attention to her. She stressed export-oriented growth for them. Why, I asked her.
Of course, I knew the answer. I had heard it from her many times before. But, you know like that little kid who says, “Grandpa, tell me how you climbed that mountain” even though he has heard the story dozens of times, the thrill of listening once again to an amazing tale is too much to resist. I must tell you that story one of these days.
We touched on many other topics. I asked her, “Professor, I want to ask three questions in the final exam of the development course. What should they be? I want the kids to be able to answer those questions, and that will direct how I structure the course and how I will approach the class.”
The convention in the US is that one addresses faculty by their first names. Practically no one says “sir” or “professor.” I follow that convention too but I make three specific exceptions. Irma is always “Professor” to me. (The other two? Pranab Bardhan and Peter Berck.) For the rest, first names do just fine — Jeff, David, Brad, Brian, Larry, etc.
It was a beautiful day. Quite warm. We were sitting outside The Cheeseboard Collective with our lunch. The musicians were playing. The sidewalk was crowded and it was noisy. She spoke softly, as she always did. The vice-president of S Korea had once remarked that “she speaks very softly but carries a big stick.” I had a hard time hearing her but I got the important bits. Later, when I dropped her home, I got out my note pad and discussed the important bits again.
One of these days, I will have to explore those questions. Perhaps from time to time, I will record on this blog some of the topics we touch upon in the development class. Looking back, I note that I have not paid much attention to development on this blog for a while.
Anyway, Prof Adelman’s advice helped create the modern industrial state of S Korea. One part of her advice was ADLI — agricultural demand led industrialization. (I wrote briefly about it in Dec 2003.) The other part was export-led growth. She recognized that S Korea was too poor for it to go for import substitution industrialization (ISI). Its economy in the 1950s was so small that its purchasing power was roughly equivalent to that of Detroit. The economy could not have supported industrialization because domestic demand would have been too little for achieving scale economies that are so important for industries to survive. They needed foreign markets to export to.
The second act of that drama is better known to us all. China. The Chinese leaders figured out S Korea’s secret of success and copied it. Irma tried to tell the Indians but then if the Indians (actually, Indian “leaders” like the cha-cha) were that smart as to understand her prescription, India would not be a desperately poor nation, would it?
I said, “secret of success” but that is strictly incorrect. There are no secrets when it comes to development. For anyone who cares to learn, all the various recommendations are there for the taking. All you have to do is to choose wisely. It is the wisdom of the leaders and their motivation that determines what is chosen, and that choice is what makes a country (such as S Korea) successful or a dismal failure (take your pick.)
What makes development economics so fascinating is that it is a matter of life and death. That expression — matter of life and death — is heard often enough but nowhere does it assume the proportions it does than in economic development where we are talking about the lives and deaths of hundreds of millions of people.
The Chinese leaders changed course and copied S Korea. Between 1995 and 2010, around 450 million Chinese climbed out of poverty. I leave it as an exercise for the reader to figure out what happened in India’s case during the same period.
Anyway, as I was saying, the development course will be a challenge but I will learn a great deal. I have always found that you can never revisit the fundamentals too much. For a real understanding of the subject, keep going back to the basics. Humility in the face of such an important and gigantic matter is wise.
I keep wondering: What would India have been like today if one particular leader of India had had the wisdom to realize that he did not have all the answers and had studied the fundamentals diligently, even perhaps asked Irma Adelman and looked around at what others similarly placed were doing?
I think India would have been a developed nation by now. Sixty years is more than sufficient for that. India would have had a head-start over China, instead of the other way around. And India today would have been about 10 times richer than China, instead of being four times poorer.
C’est la vie. Or more poignantly, it’s all karma, neh?
Atanu Dey : Life is a Random Draw 
Once I heard a well-respected psychologist say that the indigents of Dharavi giggle, smile, laugh, and guffaw quite as often per day as the middle class or business executive American. Happiness is very local and relative in time and space. If you are in Dharavi and your son is driving a BEST bus as against delivering LPG cylinders, you are as happy and proud as a middle class society dweller whose child just got into IIT. So this whole subcontinent of people have tuned their happiness to a different, vastly more modest frequency than Westerners. I have felt miserable about India for years and years, but now I realize I have no business (and indeed, no capability) to change the happiness channel of billions of people just because our genes are somewhat similar. Another wise man once told me that majestic trees fall in a storm, but grass is far more robust. I asked if living like grass instead of a redwood is worth it, and he said that’s just a matter of conceit.
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TiredProf, people can be happy because their aspirations are adapted to the environment they live in, because they do not even know that they are entitled to aspire to higher human possibilities that are routinely available to folks in other environments.
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Dear TiredProf,
I heard a well-respected psychologist say ……
Just AN OBSERVATION.
I’ve been only once to Dharavi & sorry, I disagree with you.
The very struggle to survive is so tuff, that people have no other option but to smile.
The too-hard lifestyle leaves with no choice, but to co-operate, feel-proud or …what ever.
Wouldn’t on any day, we prefer to stay at our homes, than as hunter-gatherers in caves?
It takes so much to put up a home & all that going into that are what Atanu Dey stresses here.
Policy-Change-….all that big words which are only TALKED by government, not done.
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Hi Atanu
It might sound presumptuous to suggest using one’s own book, but I suggest providing it as reading material to your students on development.
I’m not aware of any other book on economic analysis that explains how the incentives for corruption built into India’s governance machine (outdated administrative machinery and poor electoral laws) have harmed its growth potential.
The reality is that development is not just about policy. It is about governance, as well. Unfortunately I’ve not come across ANY book written by an economist that displays any understanding of the institutional issues that surround under-development. That means most of their prescriptions are pie in the sky. Anyway, that’s just my two bits.
Sanjeev
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Oldtimer and Mallikarjuna: I agree that to middle class Indians (and certainly most “prosperous” foreigners), life in slums or Indian villages look and feel pathetic. I was making two points. 1. our reality is not the only one, and it isn’t a reality we can expect billions to adopt just because we say so, and 2. even if doing so would be good for them, this has to come out from within them, and cannot be done from the outside, even charitably.
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There is no doubt that Nehru’s policies have failed and had he followed something similar to S. Korea, India might have been a middle income country. However, I think we should at least consider the influence of USSR.
USSR grew from a bloody revolution in 1917 to a super power in the 1950’s. By 1917, USSR was one of the poorer regions of Europe. It took 30 years to make up for more than 100-150 years of economic growth achieved by USA and clearly dominate the other European countries.
Most Indian leaders felt we should replicate the success of USSR. We were a large country with poor population (similar to Russia). It is the fault of our leaders in the 1970’s onwards who were blind to see the failure of our economic planning.
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TiredProf,
I’ll posit that the happiness of slum dwellers is due to ignorance. Then, I’ll let a few quotes make the point:
1. Ignorance is bliss.
2. A person is never happy except at the price of some ignorance. ~Anatole France
3. It’s innocence when it charms us, ignorance when it doesn’t. ~Mignon McLaughlin
4. Never forget public ignorance is the government’s best friend. Anon
5. Ignorance is like a delicate fruit; touch it, and the bloom is gone. Oscar Wilde
Quote 2 implies that happiness (defined superficially as giggling and laughing) as a metric is overrated.
———-
And, some in favor of your points:
6. A learned blockhead is a greater blockhead than an ignorant one. Benjamin Franklin
7. In the battle for survival the ignorant man has a considerable advantage. Anon
8. What you don’t know can’t hurt you.
9. Life is a never-ending struggle between the burden of
knowledge and the emptiness of ignorance.
10. The happiest life consists in ignorance, Before you learn to grieve and to rejoice. Sophocles
———–
At the end of the day, if a slum dweller looks happier than a more well off person, it says more about the well off person and what he is doing wrong than about what the slum dweller is doing right. Romanticizing blissful ignorance is perverse. Its somewhat similar to the nostalgia and longing one has about the innocence and worry-free nature of childhood. But, you can’t/shouldn’t go back.
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This modern house Negro loves his master. He wants to live near him. He’ll pay three times as much as the house is worth just to live near his master, and then brag about “I’m the only Negro out here.” “I’m the only one on my job.” “I’m the only one in this school.”
You’re nothing but a house Negro. And if someone comes to you right now and says, “Let’s separate,” you say the same thing that the house Negro said on the plantation. “What you mean, separate? From America, this good white man? Where you going to get a better job than you get here?”
– Malcolm X
for the west-influenced, salvation is in slavery to communist Russia/China or capitalist Amrica.
>>>>“And India today would have been about 10 times richer than China, instead of being four times poorer.”
we would all have been in Kingdom of Gawd instead of sitting on earth. There would have been angels and fairies and milk and honey around. Yeah.
All you had to do was serve the Umma. be a good church member, so to speak.
be a vassal to the Amrica.
Make things for them to consume. They will give you paper money, dollars, that they print. Therein lies our salvation.
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x,
Are you Quanell X??
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MJ
“”Romanticizing blissful ignorance is perverse. Its somewhat similar to the nostalgia and longing one has about the innocence and worry-free nature of childhood. But, you can’t/shouldn’t go back””
Great. Very well said. One should be practical.
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X
“” Make things for them to consume. They will give you paper money, dollars, that they print. Therein lies our salvation.””
You are right. But before paying you paper money they borrow from
you the same. In effect we give them goods to consume and
they borrow from us to pay for those goods.
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@MJ — I am not justifying ignorant bliss. I am just saying that the indigent class does not only distrust the creamy layer but they also greatly distrust intellectuals and reformists. They do not buy our version of reality and do not buy our prescriptions of reform, because their life has diverged so greatly and irreversibly from ours. In today’s terminally cynical India even a Gandhi or Patel would not gather the support they did in their version of India. So any reform must come from within their class and cannot be imposed on them, even by supposedly well-meaning people. At the very least, a reformist has to live their lives for a substantial number of years before they will even give him/her some air time. The danger is that, by the end of that internship, the reformists usually see sense in everything they do, including having six children each.
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TiredProf, I agree, a wound allowed to fester for too long turns into a cancer. Gradually, there will be no sense of societal cohesion (in any case social consciousness takes a backseat to family values) because of the widespread mistrust in the rogue, hypocritical, corrupt elite who also lack any sense of a shared future with the rest. Any true intellectuals and reformists are few and far between and they too miss the point that the standard prescriptions won’t do – it needs to be much stronger – i.e.; antibiotics that have worked in other cases won’t work anymore, chemotherapy is needed.
History of civilizations has shown that the possibility of both an optimistic and pessimistic outcome exists – we’ll find out soon enough where we are headed. I’m optimistic merely because of the existence of technologies like the internet (and hence, access to information) and globalization.
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