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"Technology: A modern-day eve who defines the world"

5/1/2005 Commentary Archives

Decades of stagnant economic growth, not withstanding, India is poised to leave its third-world status behind. From a borrower nation to a lender of loans to Africa  and a growing middle class. Though  these new fortunes haven't reach the low caste. This is India's next big hurdle, but she's attacking it through education.

Here in Philadelphia over the years, when it wasn't some rant about the immigration of Indians (among others) to fill voids in our school system, it turned to American corporations shipping American jobs to India through the use of technology. I'm sure by now you've encountered these accents through your use of technical support. Now what did India do to deserve this?

My fascination with the transformation that's going on in India considering her rigid caste structure. Stems from what we in the Caribbean can learn from it. Why did India  fail the Industrial revolution, but was positioned to reap the benefits of the information technology? The fastest growing technology sector.

The Technological Genesis

Despite my best efforts I could not help laying the background for this discussion on India without a book I bought back in the 1990s that predicted everything we're seeing now in the global economy and got it right.

Back in the 1990's a Wharton school Graduate right here in Pennsylvania Paul Zane Pilzer wrote a piece called  Unlimited Wealth: The theory and Practice of Economic Alchemy. In which he explained that we are living in a world where physical resources is not a formula for wealth anymore.

In what Pilzer refers to as "the supply-side three laws of Alchemy: (1) Technology
determines the nature of physical resources. (2) determines the supply of physi-
cal resources. (3) What control the advance of technology -- and hence contains
the key to wealth."

The genesis of all this started with the advance in computers which enable the design of better micro-chip technology which led to more advance computers. by which we were then able to make more efficient use of raw materials. It all
seems so obvious now.

Pilzer was on the economic policy council during the Reagan administration He confesses that they were taken back by the robust increase in the gross national product (GNP). Despite a ballooning federal deficit.

The supply-siders who dominated the Reagan Administration theorized, that "increase work incentives resulting from lower tax rates will lead to increase economic activity, which in turn will more than offset the the reduction in federal revenue that tax cuts will normally  be expect to produce. "

...in 1982 the rise in GNP was a  surprise to the supply-siders, but by 1984 with the record growth of the federal deficit they began to question their theories. Through 1988 the deficit almost double but GNP continued to grow and no one on either side of the economic spectrum could explain it. Not even the supply-siders, according to Pilzer.

Technology Gap

The reason for this impressive growth as Pilzer puts it, had to do with the technology gap. Not between countries e.g., {the industrial and third world countries), but between the best technology currently available and the less advance technology in use. (the difference between the best practice possible with current knowledge and the practice usually in use).

It was mere coincidence says Pilzer that Reagan's Economic Recovery Tax Act in 1981 that gave business a subsidy of  58percent of the cost of new equipment. Was enacted at the very moment the computer made its move into the productive sector of the economy.

In the alchemic equation the size of the technology gap -- that is, the amount of available but unimplemented technology -- is the greatest determinant of economic growth....The speed at which technology advances is primarily determined by the speed by which we exchange and process information...all modern advances in technology are dependant on other technological advances....

Of all of the enormous technological gains we have witness in recent years, advances in information processing have been the most impressive.

Why India missed the Industrial Revolution

 The delayed rise in the fortunes of India is a good example of how Xenophobia  and ignorance of the world can keep a good resource of human skills tied down. Well not just India, it happened to China until she moved from a centrally-planned to a market economy, then she cut loose. Now so has India.

India Unbound: From Independence to the global Information Age. by Gurcharan Das. Written in the first person, his contempt for the Nehru era government closed economy and what they did to India is ever present. Government rules that did not permit foreign operations, own equity in foreign companies, import components at a reasonable tariff, expand capacity at will, or buy new technology without a lengthly approval  process.

Within the context of these constraints he suggest that India's higher merchant caste system who shied away from manual labor and technology. Regulating labor to the lower caste, who were also denied knowledge.

Das sees this as one reason why India did not produce innovations and failed to produce an industrial revolution. Due to a lack of product innovation. He then goes on to make the case for India's success by leading examples of what he calls "open" trade policies, and what these practices did for East Asia.

Leveling the playing field

One of the principle reasons for the West Indian Federation failure was the fear of the larger economies carrying the weight of the smaller ones. Today the whining is about not being ready to compete. There's no reason if the Caribbean community can come together as a single market economy with the right infrastructure, establish their place in the global economy. Das evokes Adam Smith in stating that:

If a rich country and a poor country are linked by trade their standard of living should converge in the long run. It makes intuitive sense, because standard of living depends on productivity, and productivity in turn depends on technology. When a poor nation is connected it merely adopt the technological innovations of the rich ones without having to reinvent the wheel. Thereby it grows faster and eventually catches up.

Das points out that "the lack of convergence between rich and poor countries in the past fifty years was as a result of not being joined." Third world countries open to world trade grew 6 times faster per capita per year than those that were not joined. These were primarily East Asian countries.  India was not in the "joined" column.

These countries not only grew rapidly, but also ameliorate poverty at the same time. But let us not loose sight in the fact that the ground work for this growth was established  in part by their investment in education and health of their people. Which prepared them to take advantage of the job opportunities that comes with economic growth.

What Gurcharan Das has expressed here is an Indian plan that emulates the East Asian successes.

India's poverty is a symbol of poverty on our planet, and if India can hope to make a significant dent, so can most of the Third World....The Indian state's biggest failure has been in building human capability. We have now realized that primary education and primary health care are the two most powerful ways to eradicate poverty.

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Gross national product (GNP) per capita: The dollar value of a country’s final output of goods and services in a year, divided by its population. It reflects the average income of a country’s citizens.