Shiners versus Whiners; it’s Economics, Stupid

Ref Romair #39

[``These phenomena must be looked from what economy needs. It needs, stability and ability to create markets. Asian tigers provided stability and the U.S. first and later Europe provided the market. Both Pakistan and Turkey failed to follow this paradigm of stability and market creation. Both are emotional countries, unlike muslim Malayasia, where economic development was left in the hands of Chinese and Indian entreprenuers first. Can Paksitan leave its economy in the hands of entreprenuers?``

This is a comment, bordering on racism.

Malaysians were and are successful because of Muhathir`s leadership, and sound economic policies. If it was due to Indian and Chinese entreprenuers, than one would think that those entrepreneurs would have been successful in India and China first. Any entreprenuer of any ethnicity will be successful, anywhere, provided he/she is given the right environment. It has nothing to do with his Indainness or Chineseness.]

Malaysia`s growth was due to oil and natural resources. Without oil from Sarawak, Malaysia would be another third-rate, third-world backwater.

Why is it that you cite the progress of Malaysia but not that of Brunei? Brunei is floating on oil and has been pumping it out as fast as it can. Its per capita income is probably higher than that of Malaysia.

In case you didn`t know it, Brunei is ruled by a Muslim sultan.

So start quoting Brunei in the future.

#39..romair..i agree with you...you have made an objective assessment...however as far as malaysia is concerned it is a democracy...malaysia is much smaller than india though it too follows a policy of integration rather than exclusion based on race or religion...the tamils from india form the largest indian minority and have representation in govt. and tamil is considered an official language along with malay, chinese and english...same in singapore...the president is a tamil...the tamils trace their ancestry to the state of tamilnadu in india...the indian experiment is a gigantic, multiracial and complex one..that we have survived so long as one nation is in itself a triumph for all to see...that stability has to be maintained regardless of govt. change is a concept that only now has seeped into the consiousness of the political class...right now we see manipulation of the market and threatening utterances by the BJP...you will see that as time goes things will settle down till the next round comes about...multinationals rule the seas and that is something that we in south asia have yet to come to grips with...we like all the nice things that modernity might bring , yet we rarely seem to be willing to pay the price...the west made its` peace with progress a long time ago...

the best road to take is always the middle road and any govt. that wants to survive has to pursue a policy of aggressive liberalization tempered with sops to those sectors such as agriculture and public sector undertakings....these sops are the cost of doing business and a portion of that cost can be passed on or absorbed by the multinationals that profit tremendously by investing in huge markets such as india,brazil and china...look at the subsidies awarded to the agricultural sector in the US...pure pork as they say here...the BJP govt. missed the wood for the trees and they surely paid the price for it..i hope the congress doesn`t repeat the same mistake all over again...

Re : sadna # 34
I think the best-case scenario is that the communist are not in a position to bring the govt., that might happen if all the other parties join the congress bandwagon. On the other hand the communist have been trying to attract industry to west Bengal.

Regards,

Faruk

Romiar (#39):

````...unlike muslim Malayasia, where economic development was left in the hands of Chinese and Indian entreprenuers first. Can Paksitan leave its economy in the hands of entreprenuers?...``

``This is a comment, bordering on racism.``

Since when leaving economy in the hands of entreprenuers is racist? I thought you knew about Malayasia a little more than you showed in your comment ``... bordering on racism``. You might like to read the history of Malayasia, and wil find that British, there had a very deliberate policy to develop Chinese as entreprenuers and Indians as babus (who by default got educated and became entreprenuers sooner than bumi-putra Malays), and also brought plantation workers from South India. According to Malayasian Chinese, one would have hard time finding a Malay entreprenuer. They joke their that IC industry stands for Indian and Chinese industry. Now this is certainly racist, would you agree?

It probably will come as a rude shock to you that majority of Malayasia`s private industrial base is owned by these Chinese entreprenuers. Believe it or not, even as of late 90s, the last time I visited that part, the bulk of private wealth in Malayesia was still in the hands of Chinese entreprenuers. Even before Mahathir there was a leader named Tunku Abdul Rehman, both Malayesian leaders followed policy to provide stability that economy needs. My question, Can Pakistan leave its economy to entreprenuers was intentional (certainly not racist) in ommission of ethnicities.

Provide stability and tools for market creation, and let entreprenuers do the job.

``Turkey is still much wealthier, on a per capita basis, than Pakistan and India. And Pakistan`s privatization collapsed because Bhutto was voted in on, ``roti kapra makan`` and nationalized everything. It didn`t have anything to do with emotionalism. He was just pleasing the poor voters, much like the Congress may have to.``

Turkey is much wealthier beacuse it had Ottoman Empire doing what you suggested elsewhere European Empire did with their occupied colonies. Study how much new wealth Turkey has created, remarkably you will find notoriously very little new wealth, just as you will discover French economy created very little new wealth since the loss of their colonies. Allow me to share an anectodal account. P. Chidambaram, being HBS alumni, had come to meet an alumni group in Silicon Valley, while he was in power at the beginning of the Indian reforms and commerce minister of India. He commented that he and Turkey`s commerce minster were talking, and Turkish minister was commenting on Indian reform process that just wait till Indian rupee keeps devaluing and inflation sky rockets due to reforms, just as it has happened in Turkey. Do you know why India did not follow Turkey instead followed China on macro indicators? India like China showed real growth in GDP, whereas Turkey could not. That is because of internal markets of India and China are quite massive. Per capita GDP is good, but to total is GDP is true wealth of a nation.

``Have you done any research on Pakistan`s economy in the 60s, or are you just shooting from the hip (also)?``

I do not know what ``.... the hip (also)?`` means here. I would suggest that please keep your private parts to yourself.

My comment about Pakistan and Turkey being emotional countries is a comment of my Professor at HBS during his BGIE (Big Government and Industrial Economies) class during which he asked class to discuss Turkey and Korea`s development. Pakistan discussion was not a subject but was in context of Turkey. Likewise Taiwan, Hong Kong and Singapore were not subjects but were discussed in contrast to Korea. However Taiwan and Hong Kong were entreprenuer driven, whereas earlier Japan, later Korea, and Singapore were not entreprenuerial in the early stage of their development.

Regarding, stability and market creation is basic economics, coming from producer-consumer model. One cannot produce at a place which is not place is not stable. The same is true on the consumer side of the equation also.

``In the 60s, Pakistan was booming. But the rich got richer, and the poor did not, or got poorer. Eventually the poor would have gotten richer also. But the cycle was broken, because the poor were fed-up and could not wait. So Bhutto came in with a socialist agenda, and nationalised everything. Pakistan has yet to recover from that.``

Ten year is too short in nations economic development for to say whether Pakistan was booming. Just as 13 years in India is too short to say economic development has arrived. However, there are indeed certain macro and micro indicators that point to a trend. Chinese economy continues to create the rich-poor gap wider than probably Pakistan`s entire economy. Jobs are the mechanism to distribute wealth. This also creates a middle class that strengthens the economy and political process of democracy however defective that may be.

Whippinized (#37) has said that job creation by the left. Wealth creation has to follow by the job creation for distribution followed by more wealth creation and more job creation. So does the economic up turn cycle goes. The economic down turn, follows the reverse, jobs disappear first. About three years ago, my friend, Kanwal Rekhi, an avid pro-marketer had predicted a left of center government to come in power in India. Distribution of wealth is important part of the ballot power of democratic process.

Communist vote in India will have less influence than the communist have on Chinese economy. Their staying out of government, in my view, is healthy for India. They do not have the power to bring the government down, Congress`s rigid policies in the past brought their down fall. Congress and BJP can very easily cooperate to keep stbility going for job creation momentum going. Even Congress selectively supported BJP, when Jaya Lalitha (I believe) bolted out.

Elections don`t help or hinder economic boom. They are merely an a method of distribution of power and wealth. I do ardently believe in them. Greece was run by Colonels, and Spain was run by a dictator, and so was Portugal. These three are among the poorest of the European countries and distribution of wealth is very skewed as well. Italy on the other hand have not been able to provide stabile government despite being democratic, and suffers from animic growth in GDP. These amplify that stability is more important.

I do not think privatization will slow down. The center in India controls only 50% of the GDP, the rest of the GDP is controlled by the states. Reforms at state level are needed, especially among the laggard states like Bihar, U.P., and Orissa with negative growth rate in GDP. Laloo Prasad and others from the laggard states may be needed. Ram Vilas Paswan, a union leader, when made the telecommunications minister, helped in privatization and break up of telecommunication monopoly without a strike. In democracy many times, Labor in England could do what Tories could not do with the unions. Similarly, I feel, making Mehbooba Mufti the home minister would be right to restore and bring Indian Kashmiris back with dignity into the Indian tent.

Anil

Romair,
All this has been well studied and we do not need to re invent the wheel. An economic model built around dictatorships or its various shades is a case of pure economics that concentrates on growth at one hand and leaves out the people at another. It curbs the evolution of a strong civil society and therefore is not sustainable. When you talk of Japan, South Korea etc then do not forget the role of IBRD, Marshal Plan and the huge influx of grants and Aid from the West. These models and that of Pakistan in the 60s were primarily promoted to contain communism. I feel, discussing such airy fairy concepts is now totally out of place.

Economics and civil society have to go togather and this has always been my theme of Socio Economic Development. 90s onwards, India has made strides in vertical pockets and somehow the electorate feels dissatisfied. What need discussion is why so, and would there be a propensity for the new government to dilute the present pace and divert more to the common man.Would the non productive public sector units still be privatised and would productivity and the lower strata of society be granted subsidy. Coupled is also the political economy of religion, economic classes, caste system and fundamentalism.

Should we also conclude that the Indian success story was blown a bit out of propotion. After all on Fox News we only saw a makeshift Juggat Vehicle, use of calculaters for weighing milk and cane sugar, and softwares for Pooja as the forebearers of revolution. This may be some indication.

Ijaz_Gul #23: ``It is Bhutto who rolled back the decade of progress from which we are still to recover......Yes I tend to agree with your suggestion of the Oligo Economic model......The new Government will have to face the dilemma, but I feel there will be no major reversal. They have Pakistan to learn from.``

I think this is an area that needs to be studied. I wonder if any detail research has been done into it.

Traditionally economic progress has been a very slow phenomenon. It took Western civilizations genarations, over centuries, to go from being poor to get to a point where everyone was looked after. During this process, the established democracy also. Perhaps democracy assisted in the economic growth, albeit at a very slow pace. In addition, they had a lot of income coming in from their dictatorships in their colonies also.

However, after WWII, we saw countries come out of the third world, very quickly, within decades. There are two trends that seem to stand out, in this. One group progressed due to oil wealth, i.e. they struck the lottery. This included Saudi Arabia, UAE. The other group made genuine economic progress, to came out of the third world. This includes the Asian Tigers, and China. All of these did so under civilian or military dictatorships.

The third world countries that have successfully or unsuccessfully tried democracy, before getting economic stability, are still stuck in poverty. This includes countries like India, Pakistan, Bangladesh etc. Even Cuba, with its communist dictatorship is so far ahead of Pakistan and Indian on the HDI, that it isn`t even funny (I don`t know if Indians and Pakistanis realize this).

Is the above a mere coindence? Or does it indicate something? That is not to say that all dictatorships lead to economic progress. Most probably do not. But all third world democracies certainly have not, led to economci progress. At least, not yet.

I think third world democracies, even succesful ones like India`s, by design, can only guarantee slow, though steady, progress. But not quick progress. They have too many in-built contradictions, to allow that.

For a country to get rich quickly, first and foremost there has to be a way for the rich to get richer. They will only set up big business houses if they know they can get richer faster in their home country, than abroad. These business houses will employ the middle educated and uneducated class, and it will get richer in the next stage. Only after all of this has happened, will the country have enough money to ensure that all the poor get rich also.

This is a long process, and in it, the poor eventually get frustrated, because they see the gap between them and the rich growing. Poor people don`t get angry, if everyone is poor, or as poor as them, in a society. They get angry, when they see some people are rich in a society. Non-democratic govts. like China`s, have been able to get their countries through this hump, through force. They did not let the poor or the revolutionaries rise and break this cycle, through their, ``Tianimun Squares.`` Cbina will now soon reach the stage where the poor will benefit also.

However, democratic or semi-democratic ones like India and Pakistan, have not been able to do so. Pakistan was almost through the stage by the late 60s. However, Bhutto, came in democratically, and to satisfy the voters, had to nationalize everything. Had that not happened, regardless of ethnic violence, dictatorships, Islamism and what not, Pakistan would have been Malysia, or somewhere close by. And then violence etc. would have automatically come down, minoriteis would have gotten more rights etc. because the pie would be bigger.

India, being more democratic, reached this take-off stage thirty years after Pakistan. Pakistan reached it quicker, because of a dictatorship. But India`s situation, one would assume, is based on more stable social structures, because it reached it with democracy.

However, has the same thing just happened in India, that happened in Pakistan in the 70s?

It is all well and good to talk about Manmohan Sing and what not. But what can Manmohan do, if the Communist party withdraws its support if privatization is continued? One could assume that the Communist party changes its thought process, but then it would cease to be Communist. And one could assume that the Congress govt. will ignore its voters. But isn`t that why the voters elected Communists and Congress into power, i.e. they don`t want the rich to get richer, and want their own lot to improve in the short term, even if makes India poorer in the long term, i.e. the same thing that happened to Pakistan in the 70s........

This will be a good case study........

``These phenomena must be looked from what economy needs. It needs, stability and ability to create markets. Asian tigers provided stability and the U.S. first and later Europe provided the market. Both Pakistan and Turkey failed to follow this paradigm of stability and market creation. Both are emotional countries, unlike muslim Malayasia, where economic development was left in the hands of Chinese and Indian entreprenuers first. Can Paksitan leave its economy in the hands of entreprenuers?``

This is a comment, bordering on racism.

Malaysians were and are successful because of Muhathir`s leadership, and sound economic policies. If it was due to Indian and Chinese entreprenuers, than one would think that those entrepreneurs would have been successful in India and China first. Any entreprenuer of any ethnicity will be successful, anywhere, provided he/she is given the right environment. It has nothing to do with his Indainness or Chineseness.

Turkey is still much wealthier, on a per capita basis, than Pakistan and India. And Pakistan`s privatization collapsed because Bhutto was voted in on, ``roti kapra makan`` and nationalized everything. It didn`t have anything to do with emotionalism. He was just pleasing the poor voters, much like the Congress may have to.

Have you done any research on Pakistan`s economy in the 60s, or are you just shooting from the hip (also)?

``Both are emotional countries,`` is an odd analysis. Who do you think controlled Pakistan`s economy in the 60s, other than entreprenuers. Who built the banks and hotel chains and industry houses? It wasn`t the govt.

In the 60s, Pakistan was booming. But the rich got richer, and the poor did not, or got poorer. Eventually the poor would have gotten richer also. But the cycle was broken, because the poor were fed-up and could not wait. So Bhutto came in with a socialist agenda, and nationalised everything. Pakistan has yet to recover from that.

The Communist vote now in India will have a lot of influence. The recent vote has obviously rejected the urban boom. And the stock market has rejected the recent vote. An 11% drop in the Stock market is no joke. 126,000 crore ruppees being wiped off, in hours, is no joke. 100,000 crore being wiped off the day before, is no joke either.

I think the next few years will be interesting for India. Will it slow down privatization, or will it continue.

The world has seen that it is extremely difficult to impose massive privatization in a country, with huge numbers of poor people, and has some sort of democratic system. As Pakistan discovered in the late 60s. India`s difference between rich and poor (Ginni index) is even larger, today, than Pakistan`s.

This is what needs to be studied. How do elections in third world countries help or hinder economic booms. And why is it that the countries that come out of the third world quickly, all happen to have done it without elections? Is it a coincidence?

T-Bhai . . . how it goes is like this:- every once in a while, the brilliance of my leadership shines so vividly that I can not see too well as my sycophants go about giving me selected free prawns at the buffet or placing red and blue lights on top of my car or stuff like that.

This works in management theory, because it is not the blue/red lights but the balance sheet that will bring me down.

This works in dictatorships because soon too there are to many people for too few free prawns.

But in democracy, every now and then, the term as used in Calcutta is `` I will show you rascal fellow you nonsense``.

What happened to the BJP is something like that.

Anil#28 -sayz

{The whiners now have power with all time highest foreign exchange reserves, and the largest job creation process underway in Indian history.

Therefore, their only mission should be ``India Delivers with Honesty``. }

This is the most telling part of it all. Fundementally all right wing govts make the money. the left wingers do the job creation. Thatcher and the tories did it in enGLAND - with labour providing the jobs. Reagan did it with CLinton doing the job creation bit.

Now let us see what the left is made of.....

democracy folks..until the law is changed to prohibit foreign-born persons from holding office there`s nothing that can be done to prevent the same...the commies will have to support the govt. from the outside as they have no choice...joining the govt. would go against their ideology as the new govt. will continue the same policies as set forth by successive govts. since 1990...maybe what has happened in india will force other nations to review or change their policies and allow foreign born citizens to hold high office...whatever way we look at it,india is once again in the news making us more enigmatic and intriging to the rest of this planet...india is a nation of contrasts and contradictions and that`s where its` strength really lies...we defy all predictions and still survive.

Faruk #24
The question now is, is it better if the Left is in the government or outside.

> Pakis who think the NDA lost because of the muslim vote are like pakis who think they make the sun set when they close their eyes....


:)

Dear Anil,

Hi. Hope life is treating you well. Post # 28 was interesting and an informative read.

Regards.

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``With this about 18% or world citizens do not live under democracy. ``

18% should be 28%. My apologies for the typographic mistake.

Anil