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?