Great divides and wide contrasts economy

Every billion-people economy that humanity has yet produced shows within itself wide contrasts and great divides. The larger than something is, necessarily, the more extreme the opposites it generates, regardless of the underlying reality. In the eyes of the outside world, however perhaps nowhere shows greater polarization than India today.

The cutting-edge dynamism, cool success, and global impact of high-tech, plugged-in globalize India are lauded in reports ranging from Thomas Friedman’s The World is Flat and numerous articles in Wired magazine., to regular features in The Economist and almost daily accounts in the Wall Street Journal.

In the East Asia and Pacific region, overall, starting a business takes 55 days — not as good as in the rich economies but better than in India. And, although this will soon change, of India’s $250billion retail sector sales, 97% are transacted in inefficiently tiny sole-proprietor, neighborhood outlets.

By coincidence or otherwise, all the successes on which India has taken global lead concern digital technologies: computer software, business processing, pharmaceuticals, Bollywood movies.

These successes are all about creating, storing, and manipulating strings of 1s and 0s – whether kept in order in a database, wrapped together to make computer code, encoded in chemical formulas, or sequenced so they make an image on-screen that edifies and entertains.

All these successful industries have been facilitated by dramatically falling prices on relevant tools, driven by creativity and brainpower, and enabled by job reorganization. Large projects in these industries can be dissembled, have their component parts worked on independently and asynchronously in spatially remote locations, and transported back over fiber-optic cable, to be re-assembled.

By doing well for themselves, these successes have done well for the world. It took no trumpeting of an overarching grand global political design, no obvious big push on national policy simultaneous with international agreement. A need arose in the world; brainy enterprising individuals from the IITs and elsewhere stepped up to the challenge. In the process they created wealth, jobs, and opportunity for countless others within India.

Infrastructure reform needs to pay mind to these emerging patterns of private entrepreneurship, and make their operation even more straight–lined. Public goods in the form of top-class education, regimes of intellectual property rights that encourage rather than restrict competition, are critical. These areas of an economy work best when those knowledgeable in them are allowed to follow their own counsel. On the other hand it is dead easy to destroy a knowledge economy: 14th century Sung Dynasty China did precisely that by discouraging knowledge dissemination through interventionist top-down management.