A short century ago the US and Argentina were rivals. Both were riding the first wave of globalisation at the turn of the 20th century. Both were young, dynamic nations with fertile farmlands and confident exporters. Both brought the beef of the New World to the tables of their European colonial forebears. Before the Great Depression of the 1930s, Argentina was among the 10 richest economies in the world.
Information technology (IT) is arguably one of the more remarkable products of the advanced industrialized countries (AIC). Its development in the AICs and subsequent widespread use there indicates that IT tools are not only a consequence of economic growth and development, but is also the cause of further economic growth. Developing countries such as India are attempting to catch up and they are fortunate to have the use of IT at an earlier stage of their development than the currently developed countries had when they were developing.
I am pleased to note that the BJP believes in the use of technology for development. The BJP recognizes that IT enhances productivity and increases production. Their press release on the IT vision document is unequivocal and clearly lays out the components of the policy. It should be required reading for pundits and lay persons alike. Their policy declaration “IT for All” is bold, visionary, timel and ambitious. It is also fatally flawed and wrong-headed.
Pranab Bardhan on why any Indian government’s claim that it supports reforms is not credible:
. . . it is anomalous to expect reform to be carried out by an administrative setup that for many years has functioned as an inert heavy-handed, corrupt, over-centralized, and uncoordinated monolith. Economic reform is about competition and incentives, and a governmental machinery that does not itself allow them in its own internal organization is an unconvincing proponent or carrier of that message.
There can be no doubt that Australia is looming larger and larger on the Indian horizon. Speaking personally, thanks to my participation with the LAFIA2008 — Leading Australia’s Future in Asia-Pacific — delegation in July, I have gained an increased appreciation of the issues that will draw Australia and India into a deeper strategic and economic relationship.
Markets Work, Incentives Matter
The two broadest generalizations one arrives at from a study of economics are that markets work and that incentives matter. People respond to incentives because that is at the core of what it means to be rational. To the extent that humans are rational, their behavior is predictably in the direction that existing incentives point to. Trade between humans is rational because both parties in any voluntary trade benefit. The abstract mechanism which enables trade is called the market. Markets work in the sense that they maximize the gains from trade among an arbitrary number of entities. There are other methods of enforcing trade among people, such as the command and control mechanism often employed by communist governments. But they are at a distinct disadvantage relative to the market because the latter is based on the premise that rational actors respond to incentives.
I have argued in the past that India is poor by choice — not by necessity, nor by a heavenly compulsion, or a divine thrusting upon, or an enforced obedience of planetary influences .
“Of course, that does not mean that every poor Indian has chosen to be poor. Someone else in a position of power made choices whose consequences are evident. India’s leaders – past and present – have consistently made choices that have had, and are having, a disastrous effect on the lives of hundreds of millions of human beings.” [From a post made in June five years ago.]
This is a true story. The faculty member involved emailed me yesterday. Scene: an IIT professor interviewing a potential candidate for PhD in a technical subject.
B-Span is “an internet-based broadcasting station that presents World Bank seminars, workshops, and conferences on a variety of sustainable development and poverty reduction issues.”
A recent video Some Lessons from Economic Reforms in India features Montek Singh Alhuwalia, and has Brad DeLong, Richard Eckaus, and Nurul Islam as discussants. From the site, here is what I gather.