Marginal Revolution’s Tyler Cowen has a (p)review of Gregory Clark’s “A Farewall to Alms: A Brief Economic History of the World” in today’s NYT.

It takes 3 men to replace one good woman?

Unfortunately, the book isn’t available quite yet but, interestingly, the full manuscript is available on the web (not anymore!)

Clark follows in the footsteps of recent mass market developmental econ books such as Jared Diamond’s Pulitzer-winning Guns, Germs and Steel and William Easterly’s The Elusive Quest for Growth. All three attempt to tease apart resources, institutions, culture, money, colonialism, and the like in trying to answer the age old question of why some nations are rich and others are poor.

Clark comes down firmly in favor of culture while using the somewhat oblique, econ-centric term “Quality of Labor”. The example Cowen chooses to excerpt in his NYT review comes from India -

…A simple example from Professor Clark shows the importance of labor in economic development. As early as the 19th century, textile factories in the West and in India had essentially the same machinery, and it was not hard to transport the final product. Yet the difference in cultures could be seen on the factory floor. Although Indian labor costs were many times lower, Indian labor was far less efficient at many basic tasks.

For instance, when it came to “doffing” (periodically removing spindles of yarn from machines), American workers were often six or more times as productive as their Indian counterparts, according to measures from the early to mid-20th century. Importing Western managers did not in general narrow these gaps. As a result, India failed to attract comparable capital investment.

Contrary to the “race to the bottom” thesis, Clark argues that the real driver of globalization is interconnectedness amongst others who’ve mastered the strange calculus of economic growth rather than simple exploitation of the poorest -

Professor Clark’s argument implies that the current outsourcing trend is a small blip in a larger historical pattern of diverging productivity and living standards across nations. Wealthy countries face the most serious competitive challenges from other wealthy regions, or from nations on the cusp of development, and not from places with the lowest wages. Shortages of quality labor, for instance, are already holding back India in international competition.

Sparking my curiosity, I dug into the original manuscript online to learn a bit more about the delta’s that Cowen summarized above. Interestingly, unlike Guns, Germs and Steel which gives rather cursory treatment of India, Clark’s book has an outsize focus on it.

But, let’s start with some interesting data on the comparative rate of “doffing” and how productivity differences became more pronounced over time - Figure 15.1.

Your Grandmother was a Doffer! And a bad one at that!

It’s interesting to note that even with the innumerable advances from the turn of the century to 1978, the Indian doffer only improved productivity by about 40% from a very low baseline. More importantly, the productivity growth gap of 6:1 presumably growing to over 10:1 between the US and India by 1959 would readily drive the capital flows that Clark notes earlier.

So why the delta? — [pg 409]

The cotton mills in England were noted for their early introduction of strict systems of factory discipline. Workers, even those who were on the piece rate, were expected to appear at the opening time each morning, to work all the hours the mill was open, to stay at their own machines, and to refrain from socializing while working.

Uh oh, can’t you feel Indian Standard Time (IST) about to rear its ugly head?

Indian mills by comparison were very undisciplined…substantial fraction of workers would be absent on any given day…[nearby] eating places, barbers, drink shops [catered to workers on break]… relatives of workers would bring food to them…. those at work were often able to come and go from the mill at their pleasure to eat or to smoke…10-30% of work time was spent in the yard (not working)

…as well we a host of other issues. A quote from an exasperated mill manager in India summarizes the situation well [p 410]

…the worker “washes, bathes, washes his clothes, smokes, shaves, sleeps, has his food, and is surrounded as a rule by his relations.”

Of course, living / working in San Francisco, that description sounds an awful lot like the bohemian dotcom worklife ideal today. And therein lies two sources of hope. The first one is that work requirements really do change as tech transforms the office - less discipline, more creativity; less brawn, more brain; fewer humans serving machines, more machines serving humans, and so on. BUT, and perhaps more importantly given the relatively miniscule number of folks employed in SoMa and Wipro, underlying cultures - particularly in India - are undergoing rapid change and far more readily embracing an economic growth oriented mindset.

Figure 13.6 from the manuscript plots US vs. India and UK vs. India GDP over time and the author is forced to note the dramatic post 1991 inflection point in income ratios.

But 1991, as Clark would argue, wasn’t merely a point change in policy but rather a convenient marker for a broader gradual change in cultural attitudes towards capitalism and productivity. For ex., folks tracking desi productivity growth see an interesting inflection point starting as early as 1980.

A different NYT article from several years ago had a few interesting quotes -

..The change in values, habits and options in India — not just from his day,but from a mere decade ago — is undeniable, and so is the sense of optimism about India’s economic prospects.

…”The culture is changing,” she said. “People are becoming more broad-minded.”

…before economic liberalization began in 1991, “there was a great deal of guilt associated with spending of any kind; saving was the done thing.” But today’s youth — those born in the 1980’s — never experienced either the shortages or the psychological constraints of the country’s socialist, Soviet-oriented past, he said.

“Consumerism as a term is no longer seen as a bad word,” Mr. Samat observed,”and the acquisition of material things is no longer seen as going against Indian traits.”

While technology has ensured that the call center workers interviewed are far from toiling over “doffs”, underlying cultural changes in India have also ensured that they are no longer washing, bathing, shaving, sleeping and surrounded by relatives in the workplace. Well, the relatives might still be there - they are Desi after all.