Thursday, September 22, 2005
Last night, India's finance minister P. Chidambaram was the guest on The Charlie Rose Show. He conducted a thoroughly riveting and very articulate hour-long conversation with Rose, in which he touched upon numerous topics -- ranging from the emergence of India and China as economic powerhouses, India's relationship with Pakistan, the importance of investing in infrastructure (and not just physical infrastructure), India's handling of the AIDS crisis, Iran's nuclear ambition, etc. What impressed me most was his ability to not stray off-topic and wander into self-promotion. He graciously mentioned that one of the reasons why he and Manmohan Singh were able to carry out various economic reforms in India was simply being at the right place at the right time.
Two aspects of the interview where I felt he could've fared better were:
(1) On discussing the question of outsourcing, he drew a distinction between "outsourcing of jobs" and "outsourcing of work", and claimed that what is happening is the latter, not the former. He went on to argue that India, in fact, outsources significantly to the U.S. in the areas of design, technology, etc. Absolutely true. He also pointed out to the significant investment opportunity in India that arises from infrastructure building. He seemed to imply (without ever saying so) that the task of converting profits from investments and selling of design and technology into jobs and well-being for the American masses is something that American businesses and Government need to figure out how best to address. That is a rather tricky problem, and personally, I don't think "trickle down" isn't going to cut it.
(2) To me, it seemed like he underplayed the importance of Gandhian economics (a very tight, but essentially very "local", network of farming and trading communities across the geo-social landscape of India) in keeping the country fairly stable through rather difficult global economic climate. While the U.S., Europe, and the richer Asian countries struggled massively during the economic downturn of 2001 (well before the September 11 attacks), India's economic base was solid, and this was not just because of any delays in ripple effect. In terms of going forward, I am concerned about his vision to translate massive investments, especially foreign direct investments, into the elimination of poverty -- he didn't seem to offer any clue about how that might happen (again, I am inferring that he is relying upon "trickle down"). That worries me. Trickle down has not proven to be a successful strategy in wealth distribution in a very large scale (where the number of "leaf nodes" is in the order of a billion).
The following excerpt from an earlier interview of Chidambaram by NPR (Feb 2001) is a good starting point to addressing this concern.
To the vast majority of Indians who are poor, and clearly to the 30 percent who are below the poverty line, globalization means nothing so far. In fact, they want to be integrated with the Indian economy. They're outside the production processes here because they have no skills, they've no capital, they've no jobs, they've no property. They really have to be integrated with the Indian economy first. They have to be brought into the Indian production stream. To them globalization means nothing.