On a more positive note.... City Journal has a review of a fantastic new book chronicling the untold education successes in the 3rd world - "The Beautiful Tree".

University of Newcastle professor James Tooley journeyed to Hyderabad, India in early 2000 at the behest of the World Bank, to study private schools there. Or, more specifically, to study familiar private schools--that is, those that served the children of middle-class and wealthy families.

But while on a sightseeing excursion to the city's teeming slums, Tooley observed something peculiar: private schools were just as prevalent in these struggling areas as in the nicer neighborhoods. Everywhere he spotted hand-painted signs advertising locally run educational enterprises. "Why," he wondered, "had no one I'd worked with in India told me about them?"

The reason no one had "told him about them" was because these private schools were non-chartered, private enterprises operating under the government's radar -- aka "unrecognized institutions." Instead of the sometimes hundreds of dollars charged by yuppy private schools, these unrecognized institutions often charged as little as $1-$2 per child per month.

I suppose before we get into any other details about these schools, question #1 is - "so how good are they?" And it turns out they are astonishly good -

Would you take financial advice from a 26-year-old whose book is called “I Will Teach You To Be Rich”? For the readers who helped blogger Ramit Sethi’s book climb onto The New York Times best-seller list and those who regularly visit his web site or pay to subscribe to his Scrooge Strategy newsletter, the answer is yes. You may have seen Sethi on TV news shows commenting on personal finance matters or read his answers at The Times “Your Money” column. Last week on ABC he elaborated on the differences between frugal and cheap.

Slate’s Explainer series had an article last week that attempted to get to the bottom of the following question (a version of which some of you may have also wondered about in the past):

Recent news reports about the Congress Party’s election victory note that two-thirds of Indians live on less than $2 per day. How far does two bucks take you in India? [Link]

The answer cites the “basket of goods” concept::

Not far in Mumbai, but it’s a living in the villages. The people who get by on less than $2 don’t even qualify as being in poverty, according to the Indian government’s own definition…

India, like the United States, uses a “basket of goods” approach to define its poverty threshold. The cost of a minimally adequate diet is multiplied by a set amount to account for the cost of food and other essentials. (The United States multiplies by three, because the average American family spends one-third of its post-tax income on food.) The European Union uses a different method, based on relative income: The poverty line is set at a certain percentage of median income.

Neither of these methods works on a global scale, though, which explains why the World Bank has its own system. The “basket of goods” approach can be confusing, since every country uses different goods in their equations, based on local dietary habits. [Link]

In a new book titled Portfolios of The Poor - How the World’s Poor Live on $2 a Day, authors Daryl Collins et al. explored the daily economics of the poorest of the poor with some insightful results. EconLog reviewed the book:

I really liked Portfolios of the Poor: How the World’s Poor Live on $2 A Day. Westerners tend to think of the world’s bottom billion as charity cases. The harsh and amazing reality, though, is that they largely stand on their own two feet. The ultra-poor not only feed, house, and clothe themselves; they raise children and work hard to give them a better life. Portfolios shows us how they do it, relying heavily on financial diaries kept by villagers and slum dwellers in South Africa, India, and Bangladesh. [Link]

It's been pointed out that when it comes to capitalism, there are often many cases where the poor can teach the rich a thing or 2. In the past, we profiled private education available even in slums. A few weeks ago, the Economist had a great article about the innovative entrepreneurship that's starting to deliver healthcare to millions of previous unserved desis.

As the patient was chatting away, Vivek Jawali and his team had nearly completed his complex heart bypass. Because such "beating heart" surgery causes little pain and does not require general anaesthesia or blood thinners, patients are back on their feet much faster than usual. This approach, pioneered by Wockhardt, an Indian hospital chain, has proved so safe and successful that medical tourists come to Bangalore from all over the world.

This is just one of many innovations in health care that have been devised in India. Its entrepreneurs are channelling the country's rich technological and medical talent towards frugal approaches that have much to teach the rich world's bloated health-care systems.

There are hundreds of ways to slice and dice "innovation" but one of favorites buckets stuff into 2 broad categories -

On our shiny new news tab, someone posted a link to a Rush Limbaugh transcript, where Rushbo uses “slumdog” as something akin to an ethnic slur:

CALLER: Perseverance. America, you have to persevere, you have to be patient. … What really irks me is with corporate America, people saying, “Rush, can I get my job back? Are you going to be able to get my job back from something that’s been outsourced and the corporations are going all over, out of the country.” Why don’t these people invest in America, invest in corporate America, become stockholders. The CEOs and the boards of directors pay lip service to their shareholders. Invest in America and invest in yourself by investing in corporate America. Wouldn’t that help?

RUSH: It might. No question about it. But the whole thing about outsourcing, even President Obama slipped up. I love this, ‘cause the teleprompter, that teleprompter sometimes sneaks things in there that are not in Obama’s best interests to say, but the teleprompter nevertheless makes him say them. Obama got a call during his virtual town meeting about outsourcing jobs, he said, “Look, those jobs aren’t coming back.” There’s a reason they aren’t coming back. They’re outsourced for a reason, an economic reason, and they’re not coming back. If you’re sitting out waiting for a job that’s now being done by a slumdog in India, and you’re waiting for that job to be canceled, for the slumdog to be thrown out of work, and you to get the job, it ain’t going to happen. It’s not the way economics works. Even Obama’s teleprompter got him to admit that. (link)

Monday was the debut of the long awaited Tata Nano, India’s answer to the Model T. Initial reviews are favorable, with reviewers impressed by how normal a car the Nano seems to be, given its small size, engine and cost (via anatha):

Even the green crowd seems accepting of the new vehicle. While Greenpeace protestors picketed the announcement of the car, Ratan Tata claims that the Nano is less poluting than many two wheel vehicles on the market and even UN Framework Convention on Climate Change executive secretary Yvo de Boer said,

“I am not concerned about it (the Tata Nano) because people in India have the same aspirational rights to own cars as people elsewhere in the world.” [link]

In addition, the Nano already gets 70mpg, and there are discussions of an electric model in the future.

So it’s a lot of car for the money and it’s green. What I don’t understand is the business side of the equation. Can Tata make money on this car? And if not, will the Nano and Tata motors survive?

When our parents ask “Beta/i, why aren’t you settled yet?” We like to respond that it’s just much harder to find somebody in American than it was back in the desh. Well, it seems that men and women in India don’t have it so easy either.

Consider the eligible bachelors of Barwaan Kala who remain unmarried because the ladeez (and their parents) consider the village a tad too rustic:

Some 121 villagers aged between 16 and 80 remain bachelors, they say, because of the remoteness of the village. The last wedding in the village was reportedly 50 years ago… the reason for the high number of bachelors is not because they lack eligibility but because there is no approach road to the village. [link]

After 100 50 years of solitude, they were given hope that the government would listen to their pleas when a politician asked for their votes and promised that he wouldn’t get married either unless he could get them a road. Unfortunately, that hope was cruelly dashed the next year:

But, after winning, the new Member of the Legislative Assembly not only got married the next year but, in the villagers’ eyes, added insult to injury by making the event a gala affair. He is now the proud father of a two-year-old daughter. When the villagers approached him to remind him of his promise to them, they say he asked them if they really believed that he too should remain a bachelor forever. [link]

So now the villagers have decided to take the grasp the problem firmly with their own two hands, and are laboring furiously to produce a solution. In the past six weeks half the road has gotten laid, with an equivalent amount of laying still to be done.

“Who among you,” she asked “will donate to me your sperm?”The story is pure Bolly. You have desperate villagers, a perfidious politician, and an epic effort by the men to build a bridge to romance, much like Rama building a bridge to Lanka to rescue Sita.

There’s even a Jindalesque moment in the plot where the villagers are told that they cannot build the road themselves, because they are in a protected wildlife area and they have to satisfy the red tape! (We’re currently at the cliffhanger moment right now … )

There’s one problem - I don’t believe it. If nobody has gotten married in 50 years, then how are there 16 year old boys in the village?

I was recently talking to a financial consultant visiting from India about the state of the Indian economy (she recently married my cousin; congrats. P & S!). She seemed to think that, despite how gloomy the Indian television news analysts tend to be, the Indian economy is actually continuing to grow somewhat even as western economies are sliding into a deepening recession. A quick look at the Economist’s latest country data for India seem to confirm that outlook: India’s economy is still forecast to grow at a 5% rate this year. That’s down from 9-10% in the past few years, but growth is growth. (She suggested that Indian business news analysts might be channeling the gloom of their western counterparts, rather than using actual data particular to the Indian economy.) Have readers seen other data about the state of the Indian economy as a whole?

That might lead us to Amartya Sen. Sen has an essay re-appraising of the works of Adam Smith in light of the current global economic recession in a recent New York Review of Books. His basic point seems to be that Adam Smith was right, though perhaps hardcore free market types today tend to misread Smith as advocating unregulated free markets. Sen also notes that Keynes is currently more popular than ever, though he argues that Keynes’ contemporary at Cambridge, Arthur Cecil Pigou, might be more helpful to us today because of the latter’s work on the role of behavior in shaping markets (behavioral economics), as well as welfare economics.

In a discussion of the possible role that reforming health care might play in government-supported economic recovery programs, Sen makes an interesting side-note about health care in Kerala as compared to China:

A crisis not only presents an immediate challenge that has to be faced. It also provides an opportunity to address long-term problems when people are willing to reconsider established conventions. This is why the present crisis also makes it important to face the neglected long-term issues like conservation of the environment and national health care, as well as the need for public transport, which has been very badly neglected in the last few decades and is also so far sidelined—as I write this article—even in the initial policies announced by the Obama administration. Economic affordability is, of course, an issue, but as the example of the Indian state of Kerala shows, it is possible to have state-guaranteed health care for all at relatively little cost. Since the Chinese dropped universal health insurance in 1979, Kerala—which continues to have it—has very substantially overtaken China in average life expectancy and in indicators such as infant mortality, despite having a much lower level of per capita income. So there are opportunities for poor countries as well. (link)

Interesting that Sen singles out Kerala; I wonder where he got that information from. Also, I wonder what the differences are between Kerala’s current health care policy and that of other Indian states. (Or, is this just yet another case of “everything is better in Kerala”?)

Also see: Wikipedia on Health Care in India, Palliative Care in Kerala

One of the things Slumdog Millionaire does a great job of is implicitly portraying is the economic seachange in India over the past 20 years - a rising tide may not do it equally, but it does eventually lift all boats including Jamal Malik's. Reason.tv dug into this a bit more & came away with lessons about India's economy and hopefully ours as well -

"One IT company doesn't just employ computer professionals," says Dalmia. "It also needs landscaping services, cleaning services, and restaurants. There was this tremendous spillover effect that allowed people to lift themselves out of poverty."

With politics & conventional wisdom in the US tipping towards equating deregulation with financial ruin (contrary to the the actual Bush legacy) it's nice to see the gains from liberalizing markets celebrated elsewhere.

SM enjoys occasionally keeping tabs on diaspora members worldwide and the brothers-in-arms in the Gulf are a particularly interesting, if occasionally sad case. Lured by much greater economic opportunity but often forced to deal with 2nd class citizen status (and worse) - their tales really help show the lengths some folks will go to to eke out a few bucks for the fam.

Fewer Lights in the Future?

For many expatriate workers in Dubai it was the ultimate symbol of their tax-free wealth: a luxurious car that few could have afforded on the money they earned at home.

Now, faced with crippling debts as a result of their high living and Dubai's fading fortunes, many expatriates are abandoning their cars at the airport and fleeing home rather than risk jail for defaulting on loans.

Police have found more than 3,000 cars outside Dubai's international airport in recent months. Most of the cars - four-wheel drives, saloons and "a few" Mercedes - had keys left in the ignition. Some had used-to-the-limit credit cards in the glove box. Others had notes of apology attached to the windscreen.

Not surprisingly, Desis are a large % of the folks fleeing-

On Wednesday’s NYTimes op-ed page Tom Friedman forwarded on a novel solution to our financial mess and housing crisis:

Leave it to a brainy Indian to come up with the cheapest and surest way to stimulate our economy: immigration.

”All you need to do is grant visas to two million Indians, Chinese and Koreans,” said Shekhar Gupta, editor of The Indian Express newspaper. “We will buy up all the subprime homes. We will work 18 hours a day to pay for them. We will immediately improve your savings rate — no Indian bank today has more than 2 percent nonperforming loans because not paying your mortgage is considered shameful here. And we will start new companies to create our own jobs and jobs for more Americans.” [Link]

Once you get past the model minority stereotyping in the first paragraph, he does have a good point. In all the talk of bailouts, stimulus, bad banks, etc., the one thing nobody is talking about (not even the Obama administration) is immigration policy. Now may be the best time to swing the doors open so highly skilled immigrants can enter the U.S. and help stimulate the economy:

… the U.S. Senate unfortunately voted on Feb. 6 to restrict banks and other financial institutions that receive taxpayer bailout money from hiring high-skilled immigrants on temporary work permits known as H-1B visas.

Bad signal. In an age when attracting the first-round intellectual draft choices from around the world is the most important competitive advantage a knowledge economy can have, why would we add barriers against such brainpower — anywhere? That’s called “Old Europe.” That’s spelled: S-T-U-P-I-D…

If there is one thing we know for absolute certain, it’s this: Protectionism did not cause the Great Depression, but it sure helped to make it “Great.” From 1929 to 1934, world trade plunged by more than 60 percent — and we were all worse off.

We live in a technological age where every study shows that the more knowledge you have as a worker and the more knowledge workers you have as an economy, the faster your incomes will rise. Therefore, the centerpiece of our stimulus, the core driving principle, should be to stimulate everything that makes us smarter and attracts more smart people to our shores. That is the best way to create good jobs. [Link]

The "Kerala model of development" is often cited as a path for developing nations to secure strong human development indices (literacy, health, etc.) but without first adopting the "Washington Consensus" (essentially higher, per capita GDP via free markets). Today's Economist Blog has a brief update on the model and the risk posed to it by the global economy and it reminded me of an old-ish article I never got around to blogging...

Back in September '07, NYT described the Kerala model and its adherents this way -

TRIVANDRUM, India -- This verdant swath of southern Indian coastline is a famously good place to be poor. People in the state of Kerala live nearly as long as Americans do, on a sliver of the income. They read at nearly the same rates.

With leftist governments here in the state capital spending heavily on health and schools, a generation of scholars has celebrated the "Kerala model" as a humane alternative to market-driven development, a vision of social equality in an unequal capitalist world.

...It also gained a reputation as a place hostile to business, with heavy regulation, militant unions and frequent strikes. There are fishing jobs but little industry and weak agriculture. Government is the largest employer; many people run tenuous businesses like tea shops or tiny stores.

However, if there's one thing economists of all stripes agree on, there's no such thing as a free lunch. They further note -

...far from escaping capitalism, they say, this celebrated corner of the developing world is painfully dependent on it.

The Economist recently posted its newest "bright young economists to watch" list. In addition to the tremendous visibility given by a top tier pub like The Economist, past list alumni have gone one to great things -

Raj Chetty

TWENTY years ago The Economist wrote about eight young economists who were making a big splash in their discipline and beyond. One of them, Paul Krugman, recently won the Nobel prize for his models of international trade and economic geography. Ten years later we tried to repeat the trick, identifying another eight young stars, many of whom were taking their discipline far off-piste. One has since achieved even greater fame than anticipated. Steven Levitt of the University of Chicago became a household name as co-author of "Freakonomics", a bestselling book published in 2005.

This year, 2 economists of mutinous importance made the cut.

The NYT has an interesting story on how the US’s recession will affect the folks in the Desh most directly linked to our economy -

The DJ ain’t gettin’ as much play

BANGALORE, India — After years of being blamed for job losses in America and elsewhere, India’s high-tech companies and outsourcing firms are going through a downturn of their own. The global slowdown is forcing them to reduce hiring, freeze salaries, postpone new investments and lay off thousands of software programmers and call center operators.

Of course, as with many things in life, an economic “crisis” is often a relative thing. In the 70s & 80s, for example, the Natural and NAIRU rates (essentially the lowest possible unemployment rate w/o screwing other things up) were widely thought to be around 6%. Our recent 6.5% uptick in unemployment, by those standards, would have been seen as a blessing. And in a global context, the most recent US unemployment rate would literally be a godsend. For ex., France’s official unemployment rate - even in boom times - is way above this and the unofficial rate is probably closer to 10%.

So with that economic relativism in mind, what does a crisis look like through the eyes of Infosys? A mere 13-15% growth -

At times, it must be done. It simply must.

What is “it”? Honest reflection. Meditation. The potentially uncomfortable exercise of asking difficult questions…questions like…”Is Neel Kashkari a CHUMP?”

Elijah Cummings, breakin’ it down Bodymore-style. A friend of mine whom I had forwarded that clip to told me that Cummings is a genuinely nice guy, which makes it all the more hilarious for him to be the one questioning our boy Neel. Find a previous SM post about the sacrificial lamb Kashkari by our Vinod, here.

(Hmm. I thought the name of the author of that ThinkProgress piece sounded familiar…then I realized it was erstwhile WLPer/reader Satyam, whom I was introduced to by mutineer Harin at the Kal Penn event held in support of our President-elect. :) I love how accomplished and brainy you smurfs mutineers are.)

As the world hopes / prays / waits for an impending Obama Presidency, OpEds like this one are surfacing asking “what would it mean for us over here?” Writing for the Times of India, the wonderfully multi-syllabically-named Swaminathan S Anklesaria Aiyar takes a look at how Obamanomics might affect the Desh -

What They Are Wishing For….

Barack Obama looks certain to beat John McCain and become the next US president. Most Indians will be delighted. An Obama victory will symbolise the vanquishing of racism and the dismal Bush legacy.

…Yet, a look at the voting record and campaign content of the two candidates suggests that McCain might in many ways be better for India than Obama, especially on economic issues.

One of Aiyar’s biggest fears is resurgent protectionism within the anchor tenant for world trade -

…pressures will mount for protectionist measures and beggar-thy-neighbour policies in the US, hurting countries like India. Apart from erecting import barriers and subsidising dumped exports, US politicians will seek to curb the outsourcing of services to India. Visa curbs will slow the movement of skilled workers and their dollar remittances back to India. McCain is one of the few American politicians in either party with the courage and conviction to stand up to protectionist populism. By contrast, Obama embodies protectionism.

This post is intended as a discussion post, inspired by a recent Tehelka article posted on our news tab, entitled, A Lifeline of Red Tape?. The thesis of the article is this: while India’s stock market may be in free fall (it’s already lost 50% of its value from a year ago), the economic fundamentals of the country remain somewhat solid. The crisis in the global economy may not be devastating across the board, because India’s domestic economy is sheltered from world markets:

For economies such as India, the domestic growth is real and reasonably steady. But the impact of the recession in the US and the global credit freeze has meant that stockmarkets are in turmoil as foreign institutional investors (FIIs) sell equity in domestic stocks to meet liquidity needs back home; companies which had raised funds abroad now see the money supply dry up; and lack of liquidity impinges on Indian banks’ ability to lend. Wharton business professor Mike Useem says this is the world’s worst financial crisis. “Unlike the US, the world will not see an immediate impact on the surface, but the pain will be felt slowly,” Useem told TEHELKA (link)

Unfortunately, after that, the Tehelka article doesn’t really add much more meat to the thesis (though it’s still worth reading). But I think it’s an interesting point to discuss, and it’s one that my friend Rajeev, a software guy who lives in Bangalore, also suggested to me recently when he was visiting: India’s slow path to liberalization/privatization and relatively conservative rules for foreign investors will protect it from the worst of the current global financial crisis.

(Note: that is NOT the same as saying we need a return to 1970s socialism. Rather, the thesis is simply that caution in reforming and “modernizing” the Indian economy seems much more attractive at times like these.)

Obviously, the foreign institutional investors who had been propping up the Indian stock market in particular will be pulling back (they already have, as I understand it). And the IT industry, which is so heavily oriented to the global economy, is going to be feeling pain.

But while those are parts of the Indian economic boom we have been hearing the most about here in the U.S., they actually remain relatively small parts of the broader Indian economy, which is still based, first and foremost, in agriculture. The fact that most Indians owe relatively little (many Indians still prefer to pay for their homes in cash, and do not heavily rely on credit cards) also helps them weather the storm. But is that enough to keep the Indian economy moving forward?

I am less clear on what is happening with the Indian real estate bubble; I have read some things that suggest the market is on the verge of collapse, but anecdotally, friends and family in Delhi and Bombay tell me prices are still quite high. Do readers have any data on this? Also, what impact is the devaluation of the Rupee likely to have?

This Wired piece manages to combine 4 of my favorite topics into a single article -

• Who You Gonna Call? The Medicine Man - Lokesh “Mulama”

  Law and Economics
• Indian Governance & Modernization
• The Tech Boom
• Goondas

The story? The crazy things Bangaloreans have to do to establish title to a piece of property.

Let’s say that you or your company wants to build a tech office building on a piece of land currently occupied by a house in Bangalore. Normally, you’d just pay the homeowner for the property and tear down the house to start constructing your office building.

The problem is that actual legal title to land is a pretty murky problem in India (as well as many other parts of the 3rd world). In other words, the guy you bought the land from might not have owned it in a legally clear manner to begin with. His father may have simply squatted on it, and later his eldest son decided to build a nicer house on his boyhood plot of land. Or perhaps his backyard garden - the one you planned on turning into a Nano parking lot for employees - actually belongs to his neighbor?

What impact will the banking crisis and subsequent stock market collapse have on the developing countries of South Asia? According to one economist, not much. According to Michael Clemens at the Center for Global Development, no economic crisis has been very consequential in the medium to long term:

In historical perspective, many of the most worrisome recent crises are small bumps on a very long road. The entire effect of the 1994 so-called “Tequila” Crisis on per-capita real income of the average Mexican… was erased in exactly three years. In Thailand, epicenter of the 1997 Asian Financial Crisis, it took all of six years. In Indonesia, the poverty rate in the population was back to its pre-crisis level within just three years. Even the big, bad 1982 Latin American debt crisis … [had no long term effect]

Bad years are typically followed by offsetting good years, and good years by bad. The good years get smaller headlines, or none at all. The point is that in the long march of development, some financial crises amount to rounding error relative to the real economy, and the real economy affects welfare. [Link]

Clemens claims this is even true about the mother of all financial crisies, the Great Depression. Even this seemingly cataclysmic event, he argues, had no real impact on long term American growth.

Since we’ve been talking Indian banking lately, a friend forwarded me this old-ish blogpost at MIT’s Technology Review magazine outlining one way that tech is helping roll out rural banking in India -

An ATM for the next Billion?

Kasaghatta, India: It’s a 90-minute walk from this southern Indian village—one of 730,000 in India—to Doddabenavengala, the nearest town with a bank branch. Until a few months ago, Karehanumaiah, a 55-year-old agricultural laborer, had no bank account, which also meant he had no access to formal credit. (He would have to pay 10 percent monthly interest to informal lenders to, say, borrow $45 to buy a goat.) But that all changed in recent months.

Karehanumaiah uses a desktop terminal to deposit 150 rupees (about $3.50) into his new account at Corporation Bank, with help from Muniyamma Ramanjanappa, a village resident who conducts these transactions in her concrete house as a bank representative. First, a smart card and a thumbprint scan prove his identity. Next, Ramanjanappa updates the bank balance information on his smart card by connecting the terminal to the bank database with a cell phone. Finally, Karehanumaiah hands Ramanjanappa the cash and gets a receipt for his deposit (which brings his balance up to 160 rupees)….now that Karehanumaiah has a bank account, he can borrow money from the bank at rates of between 8.5 and 13 percent annually—far less than in the informal system—and gain a toehold into the formal economy.

Ninety percent of India’s rural residents lack bank accounts, and a variety of technologies are being applied to the problem. Other efforts include using cell phones to make payments and execute bank transactions in a nation that is enrolling a staggering eight million new cell-phone accounts monthly, many of them in rural areas.

For me, the article really highlights what real, “bottoms up” econ & tech development is supposed to look like…

You’ve read by now that prominent economist, NYT columnist, and fierce Bush administration critic Paul Krugman was recently awarded the 2008 Nobel Prize for Economics (possibly to the detriment of Jagdish Bhagwati & Avinash Dixit)

Mr. Krugman received the award for his work on international trade and economic geography. In particular, the prize committee lauded his work for “having shown the effects of economies of scale on trade patterns and on the location of economic activity.”

He has developed models that explain observed patterns of trade between countries, as well as what goods are produced where and why. Traditional trade theory assumes that countries are different and will exchange different kinds of goods; Mr. Krugman

Although most of Krugman’s groundbreaking work was in trade theory, and despite the Rise of India being one of the biggest trade stories of the last decade, I wasn’t able to dig up too many comments from him about the Desh. The exceptions, however, are pretty interesting…

Today, Paul Krugman won the “Nobel prize” in Economics. At the same moment, Jagdish Bhagwati and Avinash Dixit probably lost their best chance of getting one.

Bhagwati

You see, Bhagwati and Dixit are the scholars whose work immediately preceded Krugman’s, the ones who made Krugman’s (admittedly important) contributions possible. (The NYT has a nice summary of his scholarly accomplishments)

Bhagwati was Krugman’s teacher mentor at MIT, a scholar whose name was regularly mentioned as a likely winner of the Nobel prize in his own right. Bhagwati’s mentor was Robert Solow, who also received the Nobel in Economics in 1987. In other words, the Nobel skipped a generation in the scholarly lineage, something that must really sting.

Krugman’s main scholarly contributions have been in the area of trade theory, making him the first scholar to receive a Nobel for scholarship on International Trade in 30 years. Trade is also what Bhagwati’s scholarship is best known for, a contribution that the Swedes chose not to recognize.

Here’s a painfully embarrassing story of how Krugman’s scholarship on International Trade came to overshadow Bhagwati’s, even at an occasion celebrating Bhagwati’s contributions:

Some years ago I was at a Festschrift conference for Jagdish Bhagwati at Columbia—Paul’s teacher at MIT and himself a frequently mentioned name in connection with the Nobel prize. One of the speakers was Paul Samuelson. Now the usual drill on such occasions is to toast the man of the moment with a combination of wit and eloquence. I don’t recall if Samuelson even mentioned Bhagwati. What I recall is that Samuelson spent his whole time on a detailed exegesis of Paul’s work on trade. I should have known then that if the Nobel committee were to give another prize in international trade, it would go to Krugman. [Link]

I wanted to share a couple of maps from The Atlas Of The Real World [via BoingBoing]. The first is a map of net forest depletion, measured as

the dollar value of wood that is not sustainably harvested… Almost half of the world total (46%) occurs in India, where the annual timber depletion exceeds that of the next 25 countries combined, although the population of India is also almost as large as the combined population of those 25 other territories. [Link]

Forest Depletion: The size of each territory indicates the annual rate of depletion of forests, measured in terms of US dollar value

The second is a map of poverty around the world, in terms of the number of people living under $2/day

The size of each territory shows the number of people living on US$2 a day or less, adjusted for local purchasing power: barely enough to survive, let alone thrive

Late last week we received our usual dose of hate mail. It read as follows:

Question: Why aren’t you guys covering this emerging economic crisis?. Each time I eagerly come on this site to check out the latest blog, I get disappointed to see it’s about fluff…

This is a huge enough story that I know you can find some ways of relating it to the Indian or Indian-American diaspora.

Even hate-mailers need love from time to time so I thought I would oblige with a bit of an omnibus economic meltdown post that was shaded with a tinge of brown. First up, wanna-be gangsta Sudhir Venkatesh wonders, “with Wall Street tanking, who will think of the prostitutes?”

There are some people who might just benefit from the current turmoil in the financial markets. One probably won’t surprise: lawyers. The other might: sex workers…

I came across these women when I began studying New York’s sex industry at the end of the 1990s. Mayor Rudy Giuliani, in an effort to clean up Manhattan’s neighborhoods, forced sex off the streets of Times Square and other Midtown neighborhoods. In the process, his administration created a new economic sector. I’ve been following the lives of more than 300 sex workers—in New York and Chicago, in high and low ends of the income spectrum since 1999…

One thing I’ve learned is that economic downturns can be boom times for high-end sex workers. Sex workers of the past waited on street corners, outside bars, and around parks, and their transactions were fleeting and usually for a few dollars. Today’s high-end sex workers see themselves as therapists, part of a vast metropolitan wellness industry that includes private chefs and yoga teachers. Many have regular clients who visit them several times per month, paying them not only for sex but also for comfort and affirmation.

That’s probably not all Jean did for her clients. But, as I reported in Slate a few months ago, about 40 percent of high-end sex transactions do not involve a sexual service. It’s not difficult to imagine that a man’s need for positive reinforcement is amplified when a pink slip lands on his desk.[Link]

And speaking of pink slips landing on desks, along with doctors, lawyers, and engineers, the hottest desi profession in the U.S. right now is what I like to generically term: “finance guy/girl.” Many of these finance guys/girls can’t really describe to you what it is they do without using the words “hedge, asset, or capital,” and by that time you are already half asleep. In truth, they may not even know what they really do (but the little bastards make three times my salary with one third the education ). In all seriousness though, I think a disproportionate number of our community in the “white collar end” of this turmoil is an example of how the current credit crisis will affect South Asian Americans (but please stay away from the prostitutes!). What about the blue collar South Asian American?

A new study out in India claims that “in the last decade, at least one-fifth of the country’s electorate was paid cash for their votes.” [HT MR] The study also claims that this percentage (unsurprisingly) is far higher amongst those living below the poverty line, with as many as 94% of Andhra voters below the poverty line alleged to have sold their votes. The side of the bribe varies from around $3/voter up to (and this I find hard to believe) $25:

The bribe money varies from state to state. It may be Rs100-150 (a voter) in some states and it can go up to Rs1,000 in some constituencies [link]

[Huge graphic of findings below the fold]

I don’t have a problem believing that there is vote buying in India - there’s huge corruption throughout the electoral system. Furthermore, vote buying is common behavior in many democracies, including when America was younger.

Washington and Jefferson bought elections using alcohol; Washington paid 40 pounds (a huge sum in those days) to win an election against a more popular rival for the VA legislature in 1758. These practices continued after the founding of the Republic:

Some politicians had been known to buy votes and pay repeat voters. In 1823 the price of a vote in New York City was $5 and for repeat voters, went as high as $30. [link]

I’m also not surprised that poor people who are willing to sell their labor and their bodies just to stay alive might be willing to take a payment.

No, what I have trouble with is the fact that the article reports the conclusions of this study while waving their hands concerning how these numbers were estimated:

Explaining the methodology for the study, Rao said CMS used a perception, experience and estimation method to arrive at its conclusions. “Not many will admit they have been bribed to cast their vote,” he said. “But, in confidence, they would let you know if they knew someone who has taken money.” [link]

Finally. An actual reason to care about your rep in the NRI community.

It seems banks are sprouting up in the US that cater specifically to Indians, according to this Hindustan Times article, which says a dozen such already exist. Indians sans credit history who might be viewed unfavorably at the big banks - where sub-prime angst runs thicker than unclarified butter - turn to these Amma and Appa joints to be properly judged.

Sushil Patel, son of Chan Patel (founder, president, chairman and CEO of the State Bank of Texas) explains:

“Ethnic banks avoid bad loans as they take decisions based on factors like culture, background, social status. They are able to judge a person’s character better than regular American banks, who don’t know their clients as well. We are able to check the guy’s character because of the close-knit Indian community in the US.”

Hmm. So the aggressive pursuit of social standing produces real results these days, not just the downfall of budding young novelists.

Hey folks - been on the road the past few weeks so haven’t had a chance to post. But, I did like this nugget from Tyler Cowen on one of the reasons Microcredit works -

If you don’t pay up, your associate has to. The reality is that the person left holding the bag — who knows you well — will come seize your TV set or in some cases the process is a bit less pleasant. Part of the efficiency of microfinance is simply the separation of the lending and the “thug” functions.

I’m a Microcredit fan overall but like Cowen, instead of seeing it as a whole new way of doing business, I see it as an interesting alternative to traditional charity for a very underserved margin. However, even at this margin, many of the old rules of capitalism still apply. So I look forward to the day when Microcredit as well as its borrowers grow up, credit becomes more formal, and hopefully the “thug function” becomes the final reserve of the state.

The grandaddy of welfare economists, Amartya Sen, chimes in with his view on the causes of the Food Price Kerfuffle in an NYT OpEd. Sen identifies 3 factors behind the global rise in food prices (and no, none of ‘em are “Americans need to go on a diet”)

(1) Short term (supply shocks) -

The recent rise in food prices has largely been caused by temporary problems like drought in Australia, Ukraine and elsewhere.

(2) Longer term (new wealth = increased demand; the argument that got dubya in so much trouble with the Indian Press & Politicians) -

The rapid economic expansion in countries like China, India and Vietnam tends to sharply increase the demand for food.

(3) Politics (US Ethanol mandate) -

Misdirected government policy plays a part here, too. In 2005, the United States Congress began to require widespread use of ethanol in motor fuels. This law combined with a subsidy for this use has created a flourishing corn market in the United States, but has also diverted agricultural resources from food to fuel. This makes it even harder for the hungry stomachs to compete.

Sen & I generally agree about these causes but differ on the solutions… probably reflecting our different political proclivities. True to his intellectual roots, Sen tends to recommend intervention on the consumption / demand side (“find effective policies to deal with the consequences of extremely asymmetric expansion of the global economy”). That type of attack could be things like food vouchers for the extremely poor, potentially rations for the rich, and other forms of direct welfare, for ex.

By contrast, I tend to focus on the production / supply side. That’s more stuff like finding ways to replicate Brazil’s food production miracle in other countries and bring down prices via the market so even the extremely poor can afford food.

In either case, it’s a good OpEd and makes a bunch of interesting points (his summation of his Nobel Prize winning theory on the Bengal famine, for ex., is particularly concise and readable).

Outsourcing to India is nearly limitless in potential, both boosters and opponents alike claim. As evidence, they point to the proliferation of services that are currently being performed in India. No longer limited to programmers and call centers, outsourcing has grown to encompass BPO, medical transcription, tax return preparation, and concierge services. The latest frontier is the legal profession

In the past three years, the legal outsourcing industry here has grown about 60 percent annually. According to a report by research firm ValueNotes, the industry will employ about 24,000 people and earn revenue of $640 million by 2010. Indian workers who once helped with legal transcription now offer services that include research, litigation support, document discovery and review, drafting of contracts and patent writing. The industry offers an attractive career path for many of the 300,000 Indians who enroll in law schools every year. [Link]

This perspective is based on a vision of India as having a nearly limitless pool of cheap labor, which isn’t true. While there are a lot of Indians, those actually qualified to hold these jobs are fewer in number and competition for these workers is increasing:

Young people say it is no longer worthwhile going through sleepless nights serving customers halfway around the world. They have better job opportunities in other fields… The complaints come at a time when the Indian information technology sector, which includes companies that run call centers and do other outsourced work like medical transcription and claims processing, is facing a dearth of skilled labor… India faces a potential shortage of 500,000 professional employees in the information technology sector by 2010… [Link]

And wages in India for the most qualified workers has increased to the point where there are little to no cost savings for companies:

India’s software-and-service association puts wage inflation in its industry at 10% to 15% a year. Some tech executives say it’s closer to 50%. In the U.S., wage inflation in the software sector is under 3%, according to Moody’s Economy.com…while most Indian technology workers’ wages remain low — an average $5,000 a year for a new engineer with little experience — the experienced engineers Silicon Valley companies covet can now cost $60,000 to $100,000 a year. “For the top-level talent, there’s an equalization,” [Link]

Last week’s Economist had an interesting blurb on the disagreements within the Microloan community around Compartamos bank in Mexico -

SINCE CompartamosBanco, a Mexican lender to the poor, went public a year or so ago, a rift has been growing in the booming microfinance industry. To supporters of traditional charitable microfinance—providing loans and other financial services to help lift people out of extreme poverty—the Compartamos initial public offering has come to symbolise an aggressive move by capitalists to profit from the poor. To its backers, on the other hand, the success of Compartamos, despite the recent lacklustre performance of its shares, symbolises how the profit motive can help lift many more people out of poverty than charity alone could ever do.

In an earlier Sepia Mutiny piece, I noted that while nearly all parties heap praise on the specific mechanisms of microcredit, there is some interesting dissonance around the narrative and goals of the system -

While I’m a huge fan of microloans in general, I fear that for many, the lesson drawn is that micro-loans somehow subvert “traditional” capitalism (whatever that may be). It’s a flame that Yunus certainly fans and that many, but clearly not all, boosters latch onto…instead of reenginering capitalism to help the poor, microloans are far more profoundly reengineering charity to help the poor help themselves. Why point out this seemingly semantic difference? It’s about identifying the long term goal and the moral high ground…. Microloans are ideally a new on-ramp helping these individuals participate in the virtues of Global Capitalism (and eventually graduate into traditional banking) rather than some sort of bypass.

And sure enough, the High Priest of Microloans, Mohammed Yunus, is one such critic who seeks the “bypass from capitalism”….

Earlier this week, one-man blogging machine Amardeep put up a post on the Food Price Kerfluffle asking Why Do Americans Get to Eat More than Indians?

While I agree with Amardeep that there are a couple funny / snarky jabs in the piece, I’ve got pretty much the polar opposite opinion on the situation. So, I figured it would be worth writing up and tossing up my usual, contrarian view in part because it touches on so many of the meta-issues I’ve been writing about here for the past few years.

For example, the first paragraph in his piece highlights the classic Consequentialist vs. Intentionalist divide -

The Source of the World Food Crisis?

On May 2, George W. Bush explained that the current spike in food prices worldwide is primarily a consequence of rising demand from China and India: “when you start getting wealth, you start demanding better nutrition and better food, and so demand is high, and that causes the price to go up.” The quote was widely seen in the English-language Indian media as “blaming” Chindia for the problem, and was met with outrage.

Bush’s assessment for why food prices are higher is econ centered and consequentialist — more demand, relatively static short run supply = higher prices as an emergent property of a world where millions are making independent decisions. The process is detached, impersonal, and decentralized and perhaps most importantly, true regardless of who this basket of newly richer folks are.

The Indian Media’s (& politician’s) response, however, was dramatically intentionalist. By pointing out this relatively straightforward economic model, Bush was somehow turning the issue into a Morality Play and personally “blaming” the racial other. Same facts, different frame, different narrative. So how does this sort out?

On May 2, George W. Bush explained that the current spike in food prices worldwide is primarily a consequence of rising demand from China and India: “when you start getting wealth, you start demanding better nutrition and better food, and so demand is high, and that causes the price to go up.” The quote was widely seen in the English-language Indian media as “blaming” Chindia for the problem, and was met with outrage.

Some of that outrage is collected in a recent IHT article on the President’s controversial statement. Some of the best, most snarky comments are by Pradeep Mehta, who works for a private economic research organization in India:

The food problem has “clearly” been created by Americans, who are eating 50 percent more calories than the average person in India, said Pradeep Mehta, the secretary general of CUTS Center for International Trade, Economics and Environment, a private economic research organization based in India with offices in Kenya, Zambia, Vietnam and Britain.

If Americans were to slim down to even the middle-class weight in India, “many hungry people in sub-Saharan Africa would find food on their plates,” Mehta said. The money Americans spend on liposuction to get rid of their excess fat could be funneled to famine victims instead, he added. (link)

And somewhat more measured comments, along with some more statistics on caloric consumption, are here:

Americans eat an average of 3,770 calories per capita a day, the highest amount in the world, according to data from the UN Food and Agricultural Organization, compared to 2,440 calories in India. They are also the largest per capita consumers in any major economy of beef, the most energy-intensive common food source, according to the U.S. Department of Agriculture. The United States and Canada top the world in oil consumption per person, according to the U.S. Energy Information Administration.

“George Bush has never been known for his knowledge of economics,” Jairam Ramesh, the minister of state for commerce, told The Press Trust of India after Bush’s remarks, which he said proved again how “comprehensively wrong” Bush is.

“To say that demand for food in India is causing increase in global food prices is completely wrong,” Ramesh said.

Politicians and academics in India cite various other reasons: diversion of arable land in the United States and Europe into ethanol production; trade subsidies by the United States and Europe; and the dollar’s decline. (link)

Those latter factors (ethanol production, trade subsidies, dollar’s decline) have also been cited by a number of economists in the west. Still, the President and Condoleezza Rice (who made a similar statement a couple of weeks ago) are presumably right when they say that there has been a rise in global demand, though I have a strong feeling that that demand started to rise more than a decade ago. It’s those other factors that, as I understand it, have really converged this year to drive up prices. (Does anyone really know? Is this an economics problem that can be solved?)

Consumption-wise, I admittedly look like an ordinary American: my own caloric intake is probably closer to 3000 than 2000 (though I’ve admittedly never been able to count it out… how many calories in roti? rajma-chaval? chicken biryani?). Still, on this issue, I can’t help but see things from the Indian point of view: “Why do Americans think they deserve to eat more than Indians?”

In a rather surprising move, British Airways announced this week that it will no longer be serving beef aboard its (often Hindu-filled) flights in economy (a.k.a. “cattle”) class:

What will become of me now? What will they pay me in if not in beef?

British Airways has ditched beef for economy class passengers this summer in an attempt to appeal to a more international passenger base.

The familiar cabin crew inquiry of “chicken or beef?” will not be heard in economy after the airline ditched the national dish in favour of what it calls a lighter, healthier option.

Critics will suspect that the relentless pressure to cut costs that all airlines are facing is behind the move, although BA said cost was not a factor…

“We can only serve two options and beef and pork obviously have religious restrictions,” the spokesman added. BA’s second-biggest long-haul market, after transatlantic routes, is to India. [Link]

As might be expected, many Brits were not happy about this. For one thing, what the hell are all the Beefeaters going to do?

The decision to scrap the nation’s favourite fare was described as a “great shame” by the English Beef and Lamb Executive, formerly part of the Meat and Livestock Commission.

A spokesman said: “It is regrettable that Britain’s flag carrier is not proposing to serve Britain’s national dish.

“It is a meal we are rightly proud of. Roast beef and beefeaters are symbols or Britain used to promote tourism.

“Our beef is also much in demand overseas. It is predominately grass fed and highly praised for its flavour. [Link]

Though I’ve often disagreed with Fareed Zakaria on specific policy questions, I’ve always been challenged and interested by his way of thinking about big issues. Like some of my colleagues here at Sepia Mutiny, I found his book The Future of Freedom stimulating, if imperfect. Zakaria seems to be especially good at synthesizing complex issues under the umbrella of a signature “big idea,” without choking off qualifications or complexities. He still may a little too close to the buzzword-philia of Thomas Friedman for some readers, but in my view Zakaria’s book-length arguments are a cut above Friedman’s “gee whiz” bromides. (Zakaria’s weekly Newsweek columns do not always rise to this bar.)

Zakaria’s latest big concept is The Post-American World, a just-released book whose argument he summarizes in a substantial essay in this week’s Newsweek. The basic idea is, the world is becoming a place where the U.S. is not a solo superpower, but rather a complex competitive environment with multiple sites of power and influence. Even as China and India (“Chindia”?) rise, it’s not clear that the U.S. or Europe will fall; rather, everyone can, potentially, rise together — or at least, compete together. Zakaria argues that despite hysterical anxieties figured in the mass media regarding the threat of terrorism and economic crisis, the world has rarely been more peaceful — and that relative peace and stability has created the opportunity for the unprecedented emergence of independent and rapidly expanding market economies in formerly impoverished “Chindia.”

There’s more to it (read the article), but perhaps that is enough summary for now. There are a couple of passages I thought particularly interesting, which I might put out for discussion. First, on India:

During the 1980s, when I would visit India—where I grew up—most Indians were fascinated by the United States. Their interest, I have to confess, was not in the important power players in Washington or the great intellectuals in Cambridge.

People would often ask me about … Donald Trump. He was the very symbol of the United States—brassy, rich, and modern. He symbolized the feeling that if you wanted to find the biggest and largest anything, you had to look to America. Today, outside of entertainment figures, there is no comparable interest in American personalities. If you wonder why, read India’s newspapers or watch its television. There are dozens of Indian businessmen who are now wealthier than the Donald. Indians are obsessed by their own vulgar real estate billionaires. And that newfound interest in their own story is being replicated across much of the world. (link)

This last insight seems dead-on to me, and it’s the kind of thing I think Zakaria appreciates precisely because he was raised in India (no matter how many times he says “we” when talking about American foreign policy, he still carries that with him). This is one of the spaces where Zakaria’s status as an “Indian-American” is a real asset, as it gives him a simultaneous insider-outsider “double consciousness” — he has the ability to see things from the American/European point of view, but also know (remembers?) how the man on the street in Bombay or Shanghai is likely to see the world. [Note: I did an earlier post on Zakaria’s complex perspective here]

(As a side note — for the academics in the house, isn’t the narrative Zakaria is promoting in the passage above a “pop” version of what postcolonial theorists have been talking about for years — what Ngugi called “The Decolonization of the Mind”?)

Secondly, another passage, which I think addresses what might be the biggest hindrance to the multi-nodal global society Zakaria is interested in:

Can you imagine a world without any boys named Abhishek or girls named Puja? I simply can’t! It is too horrible and sad to even contemplate (unless it raises the worth of existing Abhisheks and Pujas). A generation from now, that’s where we might be headed if these crazy food prices don’t start to come down and these rituals become obsolete. The Washington Post on Wednesday described the growing problem in sad detail:

Every morning, Hindu devotees haul buckets of fresh, creamy milk into this neighborhood temple, then close their eyes and bow in prayer as the milk is used to bathe a Hindu deity. At the foot of the statue, they leave small baskets of bananas, coconuts, incense sticks and marigolds… But recently, Ram Gopal Atrey, the head priest at Prachin Hanuman Mandir, noticed donations thinning for the morning prayers. He knew exactly why: inflation.

With prices soaring for staples such as cooking oils, wheat, lentils, milk and rice across the globe, priests like Atrey say they are seeing the consequences in their neighborhood temples, where even the poorest of the poor have long made donations to honor their faith.

“But today the common man is tortured by the increases in prices,” Atrey lamented during one early morning prayer, or puja, adding that donations of milk were down by as much as 50 percent. [Link]

Without milk you cannot shower the Siva Lingam properly (hence, no Abhishek). Blame it on gas prices. The main reason that milk is becoming so expensive in India is because it costs more to ship that milk around by automobile. Dudhwallas no longer carry as much straight from the local cow.

In New Delhi, the price of rice rose by 20 percent and the price of lentils by 18 percent in the past year. Cooking oil prices have climbed by 40 percent over the same period. The price of milk, which is essential in both diets and religious rituals, rose more than 11 percent in the past year.

Milk is literally the nectar of gods in India. Most temples in the south use it at least twice a day to bathe Hindu statues, since it symbolizes the eternal goodness of human beings and is seen as a generous offering to the faith. [Link]

In rough times like this you can begin to see part of the origin of vegetarianism in Hinduism. If you ate cows then the precious milk which sustains so much of the malnourished population would become even more scarce. Better to “make” beef sacrilegious lest you fall up hard times like these and be without. Now if we could have a reformation where the use of gasoline was deemed by many religions as being sacrilegious as well.

All humor aside, the food crisis is increasingly worrisome. Poor people spend a vastly greater portion of their earnings on food than people who are better off. If you squeeze them even more AND you take away their ability to pray in a traditional manner at the same time, that’s a powder keg of misery just waiting to go off, not just in India, but in many parts of this world.

On the News Tab, KXB posted a link to an article in Time about the skyrocketing global price of rice, which has the potential to destabilize economic conditions (and governments) all over Asia. For those who haven’t been following it, the price of rice has more than doubled in the past six months, peaking recently at more than $23.00 per hundred pounds. (See this Guardian article for more detailed numbers. Incidentally, the rising price of food has already led to riots in Haiti.)

The Time article points out that the problem isn’t that rice production has fallen (though part of the reason for the tight supply in Bangladesh in particular is the destruction caused by last year’s cyclone). Rather, the global demand simply seems to be rising faster than the supply, and many individual nations have been banning rice exports, destabilizing the market.

In India, the interaction between state regulators and the recently liberalized market is particularly complex:

Take India, for example, where rice prices are rising fast, contributing to 7% inflation last month, the highest in more than three years. The country is not suffering from a classic case of tight supplies. National rice production this year should hit 94 million metric tons, up more than 2 million metric tons from last year and more than 20 million metric tons from 2003’s crop, which was devastated by a bad monsoon. Nor have shortages hit a government-run rice-distribution program that helps feed India’s poor. That program bought 20.6 million metric tons last year. This year, procurement, from both domestic growers and importers, is expected to rise to 25 million metric tons, according to Manoj Pandey, a senior government official. “It’s not a question of low production or low procurement,” says Pandey.

What has changed is that, because of economic reform, the government has gradually eased its control over the rice trade during the past 15 years. India is now more open to the world — and more exposed to global price fluctuations. Farmers and traders across India are now selling to the highest bidder. That means a lot of Indian rice that was once sold domestically is instead sold abroad for higher prices — which in turn drives up domestic prices. The government, in an effort to keep as much rice as possible at home to quell inflation, has banned exports of nonbasmati rice and adjusted price controls to discourage exports of aromatic basmati rice.

(link)

The measures aren’t working. As the article goes on to state, instead of pushing the price of rice back down, the government’s ban on exports has led to hoarding on the part of sellers, who would rather not sell than sell at reduced prices.

The question I have for those who understand these issues better than myself is this: what should the Indian government do, keeping in mind that the vast majority of Indian consumers of rice cannot afford the current price?

Especially if you are a smart, attractive, single desi woman. Seriously. This isn’t about desi women in particular but you’ll see how this information could be used for evil especially by desi parents. I know some of you forward posts to your parents but don’t do it with this one. You’ve been warned. NSFP=Not Safe for Parents.

Ok, now that I’ve cleared my conscience let’s get to the article at hand shall we? Slate.com recently published, The Eligible-Bachelor Paradox, which makes use of game theory to explain why the best women often end up single and alone if they wait “too long” to get married. We’ll save judgement for the end:

The shortage of appealing men is a century-plus-old commonplace of the society melodrama. The shortage—or—more exactly, the perception of a shortage—becomes evident as you hit your late 20s and more acute as you wander into the 30s. Some men explain their social fortune by believing they’ve become more attractive with age; many women prefer the far likelier explanation that male faults have become easier to overlook.

The problem of the eligible bachelor is one of the great riddles of social life. Shouldn’t there be about as many highly eligible and appealing men as there are attractive, eligible women?…

Actually, no—and here’s why. Consider the classic version of the marriage proposal: A woman makes it known that she is open to a proposal, the man proposes, and the woman chooses to say yes or no. The structure of the proposal is not, “I choose you.” It is, “Will you choose me?” A woman chooses to receive the question and chooses again once the question is asked. [Link]

So what have we learned so far? Despite the fact that men usually propose, it is the woman that typically dictates if and when a marriage will occur. In a free and modern society (meaning no forced or pressured marriages) the real power rests with the woman. Let’s go on then:

You can think of this traditional concept of the search for marriage partners as a kind of an auction. In this auction, some women will be more confident of their prospects, others less so.In game-theory terms, you would call the first group “strong bidders” and the second “weak bidders.” Your first thought might be that the “strong bidders”—women who (whether because of looks, social ability, or any other reason) are conventionally deemed more of a catch—would consistently win this kind of auction.

But this is not true. In fact, game theory predicts, and empirical studies of auctions bear out, that auctions will often be won by “weak” bidders, who know that they can be outbid and so bid more aggressively, while the “strong” bidders will hold out for a really great deal. [Link]

James Suroweiki of “Wisdom of the Crowds” fame has a piece that tries to reality check the current enthusiasm for micro-loans.

Mohammed Yunus. Good vibes.

There’s no doubt that microfinance does a tremendous amount of good, yet there are also real limits to what it can accomplish. Microloans make poor borrowers better off. But, on their own, they often don’t do much to make poor countries richer.

This isn’t because microloans don’t work; it’s because of how they work. The idealized view of microfinance is that budding entrepreneurs use the loans to start and grow businesses—expanding operations, boosting inventory, and so on. The reality is more complicated.

The core issues are 2 fold. First, Microloans generally don’t go into job-creating ventures. Second, the ventures that really do create jobs are often far outside of micro-loan territory and subject to many other local constraints (for ex., corruption, infra, etc.)….

Suroweiki touches only a bit on a more subtle issue, however — the “meta-narrative” and lessons learned from microfinance on capitalism and charity. This last issue has sorta been nagging at me since I saw Muhammed Yunus speak in San Francisco back in January (its worth ipod-ing the MP3) and I’ve been reading up on microloans quite a bit since Yunus won his Nobel Prize.

“The eye of the tiger” takes on new symbolism on the cover of this week’s Economist which asks the question: “What’s Holding India Back?”

Using India’s finance minister P. Chidambaram’s recent statement that the “tiger is under grave threat” as a clever segue, the Economist takes a close look at India’s “tigerish economy,” arguing that it’s 9% a year average growth is under threat “because it has failed to reform its public sector.” Here’s a quickie roundup of the news package to start off your week.

The lead story “India’s Civil Service: Battling the babu raj” takes a critical look at India’s hardworking “armies of clerks” (IAS officers), concluding that “India’s malfunctioning public sector (and civil service adminstration) is India’s biggest obstacle to growth”:

Indeed, all India’s administration is inefficient. According to the Congress-led government’s own estimate, most development spending fails to reach its intended recipients. Instead it is sponged up, or siphoned off, by a vast, tumorous bureaucracy.

This is not new news. Rajiv Gandhi,, as Prime Minister of India, once lamented helplessly that out of every rupee spent for development only 17 per cent actually reached the poor. But the following explanation about the ineffective reforms of India’s bureaucracy from author of an IAS history, Sanjoy Bagchi, certainly caught my attention:

“Overwhelmed by the constant feed of adulatory ambrosia, the maturing entrant tends to lose his head and balance. The diffident youngster of early idealistic years, in course of time, is transformed into an arrogant senior fond of throwing his weight around; he becomes a conceited prig.”

Regular SM favorite Amit Varma has a great, highly readable article on Econlib tracing modern Indian economic history -

‘Free’ India’s early leaders distrusted profit and free enterprise. They fought long, courageous battles to gain political freedom for their countrymen, but did not have quite the same respect for economic freedom.

India’s history of colonialism was one reason for this. Trade brought imperialism to India. First, the East India Company arrived, ostensibly as peaceful traders. Then, with just a flip of the page in a book of history, the British took over. After a long and bloody freedom struggle, who could blame Indians for being distrustful of trade?

Amit Varma recently won the Bastiat prize in economics at a ceremony in New York. Modulo the recent popularity of Freakonomics and the like, way too much economic literature tends to be PhD’s talking to other PhD’s. The Bastiat award, on the other hand, recognizes econ writers who reach out to the intelligent EveryMan with a day job rather than the Ivory Tower. And Varma’s latest piece delivers on this promise well.

For example, he captures well the underlying emotional / philosophical biases many have with market vs. government action -

There’s an article in the January/February issue of The Atlantic about Bangladesh. Authored by Robert D. Kaplan, it’s called “Waterworld,” and it starts out with a long, perhaps sensationalist account of what Bangladesh might have to look forward to because of global warming — a scenario which wasn’t very surprising to me at least. (This much we knew from Al Gore.) There is also a bit about the growth of Islamic extremism — and that too wasn’t at all surprising for those of us who have followed Bangladesh even off-and-on.

What was interesting, however, was Kaplan’s account of the role NGOs play in making an otherwise dysfunctional country work. To begin with, Kaplan argues, central government has always been rather weak in Bangladesh because of the geography and climate:

Yet Bangladesh is less interesting as a hydrologic horror show than as a model of how humankind copes with an extreme natural environment. Weather and geography have historically worked here to cut one village off from another. Central government arrived only with the Turkic Moguls in the 16th century, but neither they nor their British successors truly penetrated the countryside. The major roads were all built after independence in 1971. This is a society that never waited for a higher authority to provide it with anything. The isolation effected by floodwaters and monsoon rains has encouraged institutions to develop at the local level. As a result, the political culture of rural Bangladesh is more communal than hierarchical, and women play a significant role.

Four hours’ drive northwest of Dhaka, the capital, I found a village in a Muslim-Hindu area where the women had organized themselves into separate committees to produce baskets and textiles and invest the profits in new wells and latrines. They had it all figured out, showing me on a crude cardboard map where the new facilities would be installed. They received help from a local nongovernmental organization that, in turn, had a relationship with CARE. But the organizational heft was homegrown. (link)

First the world’s richest supermodel stopped taking the dollar as payment for services rendered:

The catwalk star’s twin sister and manager Patricia told Bloomberg in September that: “Contracts starting now are more attractive in euros because we don’t know what will happen to the dollar…” [Link]

Rupees only please - this is a quality establishment, we only take hard currencies here

Jay-Z … is seen cruising the streets of New York in Bentleys and Rolls Royces (now owned by Germany’s Volkswagen and BMW) with a briefcase of 500 euro notes. [Link]

But now comes the final low blow for the beleaguered greenback - you can no longer use it to pay the white man’s tax at Mumtaz’s tomb:

Foreign tourists to many of India’s most famous landmarks will no longer be able to pay the entrance fee in dollars, the government says. The ruling is aimed at safeguarding tourism revenues following the recent falls in the dollar. Until now, foreign tourists to sites such at the Taj Mahal have had the option of paying in dollars or rupees. The ruling will affect nearly 120 sites of interest run by the Archaeological Survey of India (ASI). [Link]

That’s right gringos - put away your cheddar and feed sarkar some paneer, you gotta use rupees if you wanna license to skrill.

One of the great and tragically misunderstood virtues of capitalism is Creative Destruction. Joseph Schumpeter and others famously pointed out that, perhaps perversely, one of the real measures of dynamism in an economy is the rate of failure. Firm failure (and, the symbiotically related measure “ease of entry”) is important for rejiggering the status quo and setting the stage for testing new ideas, structures, and, most importantly, people.

The Next Head of Citibank? Vikram Pandit

A longtime banking analyst said late last night that Citigroup may be forced to cut its dividend or sell assets to stave off what she said was a $30 billion capital shortfall, moves that could pull down its shareholder returns for several years.

…”We believe the stock will be under significant pressure and could trade in the low $30s,” she wrote. That would be as much as a 28 percent decline from yesterday’s $41.90 closing price for Citigroup shares.

If correct, the findings could be yet another blow to Citigroup’s chairman and chief executive, Charles O. Prince III, who has endured a barrage of criticism in the last few years for his failure to control costs and improve results.

If Prince is forced out, as Wall Street odds makers strongly believe, one of the top internal candidates for replacing Prince will be superstar Investment Banker and minor legend on the Street - Vikram Pandit.

A hearty SM congrats to Amit Varma of India Uncut who, last night, won this year’s Bastiat Prize.

Pict courtesy of Ultrabrown; Rockstars get bra-throwing female fans; Real rockstars like Amit Varma get Manish Vij as an entourage for the evening.

The Bastiat Prize for Journalism was established by International Policy Network to encourage, recognise and reward writers around the world whose published works elucidate the institutions of the free society.

In the enduring spirit of the Prize’s namesake Frédéric Bastiat, the Prize is given to writers who employ eloquent and witty explanations of complex ideas, combined with a clear understanding of markets and their underlying institutions -property rights, the rule of law, freedom of contract, free speech and limited government. 2007 marks the sixth year of the Bastiat Prize.

Varma’s work has been featured on SM many times before. In addition, his articles have been carried in a number of publications including the Asian Wall Street Journal and, local Indian biz rag, Mint. A collection of his published work can be found here.

Interestingly, while focusing on “old journalism” Varma and at least one other contender for the prize - Jonah Goldberg of National Review’s Corner - are possibly more well known in the blogosphere than they are on dead trees. Varma even credits blogging as the first step on a long path towards press geekdom -

As I mentioned in my post about being nominated, it all began with India Uncut. The blog led to the column, and made me grow as a writer. And I wouldn’t have bothered if no one was reading me. So thank you—you are more a part of this than you realise!

The always interesting Freakonomics Blog, hosted on the New York Times website, asked its readers a very critical question Wednesday (one I’ve laid awake many a night thinking about as I carefully weighed my career options): Why aren’t there more Indian American Professional Poker Players?

Whenever I see a poker tournament on TV or wander through a casino, I am always struck by a particular absence: there seem to be very few Indian-Americans playing poker. Considering that there are so many Indians of poker age in this country who thrive in finance, computer science, engineering, and other fields that incorporate math, probability, risk, etc. — i.e., the kind of fields that produce a lot of amateur and pro poker players — why should this be so?

I guess there are two separate questions:

1. Am I right in my perception that Indians are underrepresented?

2. If so, why is that the case?… [Link]

The author of the post, Stephen J. Dubner, first asks three people, including two “notable” Indians, to break it down for the audience:

Rafe Furst, our poker-playing friend, truth-seeker, and all-around smart guy; Sudhir Venkatesh, our sociologist friend who isn’t a big gambler (as far as I know), but is an Indian immigrant and perceptive observer; and Shubhodeep Pal, an 18-year-old from Dehradun, India, now studying at Singapore Management University (and who just happened to recently send in an interesting question by e-mail, having nothing to do with the topic of gambling). [Link]

Unfortunately, both Venkatesh and Pal give the obvious-half-of-the-answer without digging below the immediate surface. Also, from Pal’s answer it is clear that he is thinking like an Indian (which he is) and not an Indian American, a critical difference to this particular query that I hope is not lost on Dubner or his readers. Here are their responses:

Amit Varma, of India Uncut, has an OpEd up in the Asian WSJ chastising the National Rural Employment Gaurantee Act (NREGA) in India -

Politics is often about grand gestures, and the Congress Party’s 37-year-old new general secretary, Rahul Gandhi, understands this perfectly. Shortly after landing his position last month, Mr. Gandhi demanded that Prime Minister Manmohan Singh extend a massive cash redistribution scheme, the National Rural Employment Guarantee Act (NREGA), to all 593 districts of the country…

As wth most political gestures, the goal of NREGA is certainly well intentioned. In many ways, it’s a more energetic / invasive version of the goal pursued by “living wage” advocates in the US. While our economic interventionalists wish to push incomes higher by raising the cost to employers (invisible unemployment be damned), Indian politicians go many steps further, take the nasty employers out of the question altogether, and directly (attempt to) provide 100 days of government employment a year.

The problem, as Varma dutifully notes, is that a nasty bureaucrat can be far worse than a nasty capitalist -

It’s pretty much a staple of Econ Development 101 that all economies start with crap jobs and that, overtime, competition for workers grows, productivity grows, and thus salaries grow. The amazing thing about India is how quickly we’re seeing it work right before our eyes -

Young people say it is no longer worthwhile going through sleepless nights serving customers halfway around the world. They have better job opportunities in other fields.

…As recently as four years back, the choice was pretty clear,” Karnik said. “Either you got a high paying, good job at a call center or no job at all. Today, not only are there other options, but they are pretty close to the call centers [in terms of salaries].”

“Earlier it was considered cool to work at a call center,” said Nishant Thakur, 19, after the group had dispersed. “That died out quite quickly.” Added Thakur’s friend, Vishal Lathwal, 19, “If you work at a call center today people will think you don’t have anything else to do or were a bad student.”

From wired to tired in 4 years…. wild stuff.

I had a relatively traditional Punjabi wedding 4+ years ago; gold was involved. Not a lot, mind you (we’re no Chatwals). But my wife did get some heavy-looking gold necklace-and-earring ‘sets’ from both her own family and my extended family at the time of the wedding. Later, I came to wonder about the point of it all, since the majority of that jewelry simply can’t be worn ever again. (You’d look silly wearing such heavy jewelry at anything but your own wedding.)

Amongst urban Indians, gold is going out of fashion in general:

“My daughters keep saying, ‘Nothing yellow, nothing yellow.’ For them, gold is old,” Bhardwaj said in her living room while sporting three gold rings, bangles, a chain and earrings. A painting of a 16th-century Mughal empress embellished with 24-karat gold decorated the wall.

Her 21-year-old daughter, Sonam Bhardwaj, has had it up to here with gold. “I think it is too gaudy and chunky,” she said with a look of disgust. “Look at my mother.”

In India, where an economic boom has taken hold and tastes are noticeably shifting, Sonam represents one of the newest consumers on the block — a young urban woman who has distanced herself from India’s deep-rooted gold tradition.

Today there are legions of young Indians whose eyes twinkle not at the sight of gold but at the sight of luxury goods. Sonam, for example, is hoping for a new Nokia Nseries phone next month for Diwali, the Hindu festival of lights. She already has a pair of Versace sunglasses and a Guess bag in her collection of fineries. (link)

For me, this transition seems to be an interesting case of a changing economic structure leading to unconscious changes in cultural values and practices. Insofar as most Indians used to be suspicious of banks and credit, gold was the central denomination in life’s most important rituals. New brides were given jewelry in gold partly because the gold itself was a rock-solid economic asset, and I gather the jewelry was usually considered a part of the dowry ‘trousseau’ as well. In a more “liquified” consumer driven system, on the other hand, gold seems dull — static and dusty, like the Gold Standard itself.

Am I speculating too much here, or is there really some sort of unconscious connection between the psychology of the change in fashion and the changing macroeconomic paradigm?

Secondly, does anyone want to defend gold wedding jewelry, and the traditionalism it represents? (Would you rather have gold, diamonds, or something entirely different — say, a Blackberry ‘Pearl’ — as a wedding present?)

The Rupee has been surging against the dollar again (it’s approaching 39:1; see an earlier discussion here), and according to the New York Times, the instability in the U.S. market in recent months has led investors to pour money into Indian corporations:

Fueled in part by overseas investors seeking refuge from America’s subprime mortgage mess, share prices in India’s markets have outpaced other Asian markets in recent weeks. The Bombay Stock Exchange’s Sensex index set records on 10 of the last 11 days, before closing slightly lower on Thursday at 17,777.14.

The Sensex is up 14.6 percent since Sept. 17. That follows months of somewhat slower gains — the index is up 28.9 percent so far this year, according to Bloomberg Data, and up 102 percent (0r more than double) over the past 24 months.

The real estate company DLF, for example, which had a $2.3 billion initial public offering in July, now has market capital of more than $37 billion — making it roughly the size of Marriott International and Hilton Hotels combined. On Thursday, the company said it would consider overseas acquisitions and offshore fund-raising at its next board meeting.

Reliance Industries, the largest publicly traded company in India, reached a market cap of more than $85 billion this week, up from $6.5 billion in January 2003. Reliance, an oil, chemical and manufacturing company, is now about double the size of Dow Chemical. The market cap of Bharti Airtel, a telecommunications giant, nearly reached $46 billion this week, making it triple the size of Qwest and larger than Telecom Italia. (link)

Those are undeniably impressive gains — and it’s interesting to see companies most Americans have never heard of reaching “blue chip” valuation levels (for more on market capitalization, see Wikipedia).

But — am I right to be worried about a possible bubble?

The American magazine has been running a series of profiles of the newest crop of bright, young economists. Their latest profilee is Raj Chetty, associate professor of Econ at Berkeley (although now on loan to Stanford’s Hoover Institution).

Raj Chetty

Raj began his promising econ career by proposing and investigating - at a wee age - an intriguing thesis: in some situations, the demand curve for capital might be upward sloping -

Raj Chetty, now 28, was a sophomore at Harvard University when he came up with the theory that higher interest rates sometimes lead to higher investment. It was a counterintuitive idea. Usually, companies invest less when rates rise because the higher rates increase the cost of capital. But Chetty found that some companies, in fact, invest more because they want to get revenue-generating projects off the ground sooner, rather than later, in order to pay down that costly capital more quickly.

Put another way - when money is more expensive, and the time crunch is on, firms actually accelerate investments in certain, less risky, faster time-to-revenue projects. It’s sort of a “Sorry boys, the first bank payment is due next next week, so stop planning a coast to coast franchise, and start building the first, local Bombay Palace right now….” And building costs more (in the short run) than planning….

Gregory Clark is quickly becoming the economist du jour due to his recently published (and quite controversial) A Farewell to Alms. Late last year, Sepia Mutiny had a preview of some of the book’s content and, as schedule permits, we will likely cover more of it moving forward. As we said back then, for Mutineers Clark is definitely an economist to watch relative to others due to his outsized focus on Indian economic history.

So, until we get a chance to dive into more of the detail here, GNXP (Razib’s home when he’s not a 1-man comments machine on SM) has a great interview with Clark up right now and question #1 hits squarely into desi territory -

1) In some early work, you wondered why workers in British cotton mills were so much more productive than workers in Indian cotton mills. You discuss this in the last chapter of A Farewell to Alms. You looked at a lot of the usual explanations-incentives, management, quality of the machines-and none of them really seemed to explain the big gap in productivity. Finally, you seemed to turn to the idea that it’s differences between the British and Indian workers themselves-maybe their culture, maybe their genes-that explained the difference. How did you come to that conclusion?

…When I set out in my PhD thesis to try and explain differences in income internationally in 1910 I found that asking simple questions like “Why could Indian textile mills not make much profit even though they were in a free trade association with England which had wages five times as high?” led to completely unexpected conclusions. You could show that the standard institutional explanation made no sense when you assembled detailed evidence from trade journals, factory reports, and the accounts of observers. Instead it was the puzzling behavior of the workers inside the factories that was the key.

What was this “puzzling behavior”? Well, unfortunately, it appears a good chunk of it was IST.

Read the rest, let it whet your appetite for more, and expect to see Clark here on SM in the near future

Over at Marginal Revolution Tyler is putting his money where his mouth is. He has just published a book where he makes an argument for how to best help people. Now he wants to follow through and give money to people in India. They don’t have to be engaged in charitable work at all, they just have to do something with it that helps India, and they get the money no strings attached:

2. Send your email to DiscoverYourInnerEconomist@gmail.com. Only emails to this address will be considered. The email must contain the legal name (as documented on ID papers) of a person who will receive the money, his or her state in India, and the city of his or her local Western Union branch. You can be the person yourself, or you can send the information on behalf of someone you know.

3. With your email, send a one sentence proposal of how the money will help India… Proposals of all kinds are eligible, including using the funds to help expand your steel factory, and yes using the money to open a new call center. But you must not give the money to beggars.

4. Only one email per person is allowed.

5. By the end of the week I will send $1000 to India, via Western Union. One person will receive $500, the other recipients will get $100 a piece; I will email the wire numbers to each approved person… If/when Discover Your Inner Economist is published in India, further names will receive transfers. I will send at least the net, post-tax value of my Indian advance. [Link]

An anonymous tipster (thanks!) updated our news tab with the following story, which I found quite interesting:

After the Chinese-made kirpans (daggers) nearly wiped out local manufacturers of one of the five ‘K’s of Sikhism, it is the turn of Guru Nanak Dev’s idols with ‘Chinese characteristics’ to flood shops across Punjab. [link]

Yes, apparently the figurines make the Guru look like a “Lama”, i.e. Tibetan. But more on that (and the Kirpans!) later.

The figurines, which have been in the market for some time, are available for Rs 100-150. They are popular gift items, with the smaller ones finding a perch on car dashboards “since it reassures the driver of divine protection”, as one user put it.

The larger versions are seen in restaurants, stacked along with statuettes of deities of other faiths. Not everybody, though, is pleased. In fact, the Sikh clergy have issued directions to the community to refrain from buying these idols.

The order ostensibly stems from the fact that idol worship is banned in Sikhism. Idol worship, including performing of ‘aarti’, was prohibited by Guru Nanak himself, while Guru Gobind Singh even declared that those indulging in such practices would be ostracized from the faith. [link]

The fantastically-named Sikhi Wiki has this to say regarding idolatry:

Idol worship was heavily discouraged by all sikh Guru’s. This was believed to have been a manipulation by the preistly (sic…no pun intended) caste to keep the power in their hands. The concept of ‘worship’ does not exsist (sic) in Sikhism, sikhs may only bow down to Guru Granth Sahib for respect, and may mediate on God’s name (nam simran). [link]

What I’m wondering is, who is buying these figures? Maybe they aren’t Sikh? Or is that irrelevant?

Is this the real source of conflict and potential teeth-gnashing:

Moreover, the Chinese-made idols sport a Chinese look, like slanted eyes and Mongoloid features. [link]

I generally cover the “economics beat” here on SM and one of my favorite nuggets is the complex interplay between econ and culture. There’s a certain non-PC’ness there that I love to indulge although it admittedly leaves many feeling a tad uneasy. Why non-PC? Well, if culture and economics are intertwined…. and since econ outcomes are (generally) measurable…. and it (generally) ain’t too hard to say that richer is better than poorer…. you end up treading dang close to quantifying how one culture might (generally) be better than another.

A purveyor of oppressively unrealistic bourgeois imagery or the fountain of liberation? The numbers are starting to come in…

There are a couple of important “pressure escape valves”to keep in mind though. First, cultures are as non-uniform as they are notoriously difficult to define (“model minority” discussions - for ex here - usually wade deep into this territory). Second, and in our case perhaps more importantly, the economic + technology machine’s dynamism necessarily turns around and affects the host culture. This impact is both for better and for worse with a range of attitudes on where it all nets out (shouldn’t be hard to figure out where I land )

While we’re quick to note the emergence of social networking or blog culture on the Internet, the real, important change happens at a comparatively more pedestrian level, and often with far less cutting edge tech. This latter effect is profoundly visible in India (and, of course, China) and is now yielding some fascinating new research looking at the effects of a liberalized television market on rural Indian women…

On July 25th, Pratibha Patil became India’s first female President. Because the Presidency is largely a ceremonial position, this is less significant than Indira’s ascension to the PM’s throne over 40 years ago.

Patil may be far from an exemplary figure, dogged by a long list of controversies including her advocacy of eugenic sterilization, allegations that she protected her brother from a murder charge, and her habit of speaking to dead people without being Haley Joel Osment, but at least she can do little harm as President.

What interests me more is the general question of whether the gender of a politician matters. Certainly, it’s hard to argue that there was anything about Indira’s reign that would reveal her gender.

However, at least at the village level, there is some compelling evidence that gender does indeed matter, but that female performance is unappreciated. Economists examined the effects of a 1993 constitutional change that reserved one third of village council leader positions (randomly allocated) in Bengal and Rajasthan for women. This is what they found:

• Female pradhans spent more on public goods preferred by women. [Link]
• Female pradhans are objectively better - they provide more public goods, the quality of these goods is at least as good as elsewhere, and villagers are less likely to pay bribes. [Link]
• Despite that, “voters are less satisfied with the performance of female pradhans than with that of male pradhans in providing all services, including drinking water, for which quantity and quality is objectively better … Surprisingly, those unhappy with women leaders include both men and women, and they blame women even for the service levels of those goods that the GP doesn’t provide.” [Link]

That’s right - women’s performance on the job is objectively better, they are less corrupt, but even so male and female voters are less happy with their performance and blame them for things entirely outside their control. While President Patil may have come to disfavor based on her own actions, in general it’s the story of Fred and Ginger for women politicians - they have to do everything that men do, but backwards and in heels.

I wanted to write a quick follow-up post to this one I wrote last year about the micro-credit organization Kiva.org. In May of this year I lent $100 to Farzhana Mosah Khan, a tailor in Afghanistan:

Farzhana lives in district 17 of Kabul, Afghanistan. She is a tailor. She is married and lives with members of her family and she wants to help her husband support her family. She wants to take a group loan to expand her business and buy new machines because she wants to send her children to good schools to be educated. She hopes that if she works hard to be a good business dealer in the future she will make a good monthly income for her family. [Link]

The total loan amount requested by Farzhana was actually $175, which means that another lender provided the difference. Farzhana needs about a year to pay back my loan (interest free). This isn’t a charity. You get your money back but simply have to forgo the interest. What that means is that if you already have a “charity portfolio” that you give to every year this isn’t really another charity to spread you thin.

I decided to check out who the other lender was and his page documents the tremendous success he has seen during his involvement with Kiva. He gets paid.

Farzhana posted the first installment of her loan ($22) in June. I think I am going to make some more loans. Need a demo? Check it:

An interesting set of stats posted on the SM news tab talks about workforce participation amongst South Asians in the UK -

Six million Britons are living in households where nobody works - costing the taxpayer almost £13 billion a year in benefits alone, a spending watchdog report reveals today.

…The problem is concentrated in cities including inner London - where one in four households are workless - Birmingham, Liverpool and Manchester, and is worse among some ethnic groups. Pakistani and Bangladeshi households are the most likely to be workless at 22.3 per cent, while Indian households are the least likely, at 6.8 per cent.

Internationally Britain has one of the worst rates of worklessness. Around 13.5 per cent of the UK population live in workless households, compared with compared with 11 per cent in France, five per cent in the United States and less than 3 per cent in Japan.

For next door neighbors to be both the worst and the first on this sort of distribution is pretty interesting. Anyone (Razib?) know what diffs in immigration patterns b/t Pakistani & Bangladeshi’s vs. Indian’s to the UK might be?

Ah, I love being from Kerala. Now I can claim genetics as the reason for my refusing to shop at Wal-mart. Ha!

The Communist government of Kerala is threatening to ban “retail giants” from setting up shop in the Indian state. The measure, which appears to be backed by all the major political parties in Kerala, is chiefly aimed at India’s version of Wal-Mart, Reliance Industries. The concern is that a proliferation of large retail outlets would drive tens of thousands of mom-and-pop shop operators out of business. [Salon.com]

Hmmmm. That last sentence explains why I prefer Olsson’s > Borders, too.

Kerala made headlines not so long ago for attempting to ban Coca-Cola; the state has a long history of pursuing its own unique path to development. Naturally, the more gung-ho-for-capitalism elements of Indian society aren’t mincing their deprecating words: An editorial in the Indian Express made no attempt to restrain its sarcasm:

Coke poisons people. Highway tolls exploit them. Fiscal discipline starves projects that can better their lives. So, of course, big retail chains, as Kerala’s Left explained to this newspaper on Monday, are anti-people … Food minister … C. Divakaran is ever so bold in proposing to ban a business activity permitted almost everywhere bar places like North Korea. [Salon.com]

Yo, I totally feel exploited by highway tolls. It’s the only thing I don’t miss about driving to NYC. Anyway, I think it is a bold move, and an interesting one at that. Salon’s Andrew Leonard raises a sobering point:

Let’s switch venues. The safety of Chinese-made products is in the news again today, as China’s government announced that a whopping one-fifth of the products on the shelves of Chinese stores were found to be substandard or tainted. The immediate, and understandable impulse, is to blame the health hazards of Chinese products on the lack of regulatory enforcement in China, a state of affairs exacerbated by state corruption, a weak judiciary, and a general absence of effective checks and balances in Chinese society. But that’s only one-half of the picture. The other half is the imperative, in the biggest markets for Chinese exports, that demands ever-lower prices for everything.

In “The Wal-Mart Effect,” Charles Fishman makes a compelling argument that Wal-Mart’s market power inevitably forces its suppliers to cut corners on quality in order to deliver the lower and lower prices that Wal-Mart demands. So those suppliers close their American manufacturing facilities and start sourcing their products in China — if they don’t, they’ll lose their place on Wal-Mart’s shelves. [Salon.com]

Mein Gott, I’m starting to feel like a very pink democrat…

But the symbolism of Kerala’s “bold” move, however quixotic, is still potent. Markets left to themselves do not deliver perfect outcomes. Sometimes government has to push back.

Indeed, especially since those sell-outs in Bengal don’t have the stones to do so. ;)

Interestingly, in the other Left-ruled state of West Bengal, Chief Minister Buddhadeb Bhattcharjee has rolled out the red carpet to Mukesh Ambani’s ambitious retail initiative, though coalition partners have expressed their reservations on the issue. [CNN-IBN]

Compare that reaction to THIS thenga-flavored one:

“The public mood is against Reliance, so we will stop them in their tracks,” Food and Civil Supplies Minister, C Divakaran said. [CNN-IBN]

I’ve been watching with a mixture of excitement and unease this past year as the Rupee has edged up on the Dollar; earlier this spring, the Rupee/Dollar ratio reached close to 40:1 (right now it’s dropped back to about 41:1). Now, I understand this could have all sorts of implications for the Indian economy, some good (it’s a sign of a strong economy) and some bad (it could discourage foreign investment) — but I’d better leave it to the economists in the house to sort out “what it all means.”

What I’m interested in today is an entirely different kind of Rupee inflation, specifically the repurposing of Indian Rupee coins in eastern India. BBC reports that 1 Rupee, 2 Rupee, and 5 Rupee coins are being melted down and turned into razors, at which point they are smuggled into Bangladesh:

Police in Calcutta say that the recent arrest of a grocer highlights the extent of the problem. They seized what they said was a huge coin-melting unit which he was operating in a run-down shack.

The grocer confessed to melting down tens of thousands of Indian coins into razor blades which were then smuggled into Bangladesh, police said.

“Our one rupee coin is in fact worth 35 rupees, because we make five to seven blades out of them,” the grocer allegedly told the police. “Bangladeshi smugglers take delivery of the blades at regular intervals.”(link)

The problem is worst in West Bengal and Assam, which border Bangladesh. The BBC article describes some of the details of the problem — touts who buy coins operate with impunity right in front of the Reserve Bank where new coins are issued. And the coin depletion problem persists, even though the Mint has now reduced the metal content of the coins. (You can see a nice group of diagrams describing the constitution of the coins at the RBI website. 1 Rupee coins are made from stainless steel, while 2 and 5 Rupee coins are made of a copper-nickel alloy.)

Normally the metal in coins is worth less than the cost of melting them down and turning them into something else; it has to be that way, for the system to work. But apparently that’s no longer the case in eastern India. Indeed, unless the market in razor blades made from Rupee coins becomes saturated, causing the price of razors to drop, I can’t see how or why the current black market in coins should lose steam.

An anonymous tipster posted a fascinating story on the SM News Tab about the underground economy in the Dharavi slums outside Mumbai.

Poor but far from Idle

Dharavi, considered Asia’s biggest shantytown, two square km (0.8 square miles) [consists] of open sewers, muddy lanes and ramshackle tenements that is home to almost a million people.

But strip away its squalid veneer and Dharavi bares a unique entrepreneurial spirit, and multi-million dollar micro-businesses, that breaks all the stereotypes of a slum.

…Arguably the most prosperous among the world’s biggest shantytowns, Dharavi has about 5,000 single-room factories and hundreds of cottage industries that together have a turnover of around $1 billion.

Practically every home here produces something to sell - incense sticks, poppadoms, pickles, soft toys and candles among the many crafts.

Much like the startling statistics about the face of poverty in the US, a similar spate of data about Dharavi lifestyles showcases accoutrements which would have been decidedly middle and perhaps even upper class just a few decades ago -

…In recent years, prosperity has been trickling down to Dharavi’s residents. There is 24-hour electricity and running water, and 2006 research shows 85 percent of households have a television, 56 percent a gas stove and 21 percent own a telephone.

So if they’re so productive and have such amazing turnover, the obvious question is why is the place a slum?

Lately it seems like everywhere you look people are starting to move up as fast as George and Weezy. Prices on typically expensive goods are coming down so that companies can make a play for the disposable income of the world’s vast middle class. Monday’s L.A. Times brought us word of a ridiculously priced car out of India:

Tata Motors Ltd. is set to unveil the world’s cheapest car as early as January as it takes the growing interest in low-cost vehicles to a new extreme.

The Indian carmaker will launch its $2,467 vehicle by the third quarter of 2008 and may unveil it at January’s Auto Expo in New Delhi, Managing Director Ravi Kant said.

Separately, Tata Motors is developing a line of small hatchbacks and mid-size sedans to be introduced next year. India produces 1.3 million cars a year. With the market growing at 10% to 12% per year, this could reach 3 million within a decade.

The four-door car — a pet project of Tata Group Chairman Ratan Tata — would be the cheapest by far in its class. The current cheapest, the Maruti 800 produced by Suzuki Motor Corp., sells for more than $4,000. [Link]

Just to clarify, I don’t think that a really cheap car is ridiculous. No. What I find crazy is the exact price. Somewhere there was a room full of marketers that decided that $2,467 was the exactly right price for this car! I mean, why not $2,499? But this is going to be a hooptie right?

Competitors are skeptical about the price and quality of the car, which the group says will have a 600-cubic-centimeter engine and come in a range of models.

However, [Managing Director Ravi ] Kant said: “It will be a good-looking car which you will want to purchase…” [Link]

Well, okay then. The Christian Science Monitor had an article last week that hinted at how owners of such a cheap car might immediately seek to pimp their ride:

While its materialistic glamour revolution is still in its infancy, the new capitalist India is all about keeping up with the Kumars. At all socioeconomic levels, Indian shoppers are becoming more “aspirational,” using their new wealth to buy status in a country where social cachet is a vital commodity.

When I was little, I went to India for my Mamaji’s wedding. At that point, we still drank the water, although it was very the last time we did so. I got very sick and lost enough weight that my ribs were visible. In fact, I became so emaciated that I could tickle my bottom few ribs from the inside, much to the horror of my parents. To make things worse, it was hot in Amritsar that year, over 100 degrees, and we were in an old house without air conditioning.

Throughout it all, as the adored foreign child, I was coddled and comforted. It wasn’t that bad for me. Still, it gave me some compassion for those who have to drink water far worse, such as the 2 million children who die each year for want of proper water and sanitation.

The big policy debate over water privatization seems to have ground to a halt. In poor countries, governments do a lousy job of getting water to their people (maybe 30% of Indians have access to clean water), and while de facto privatization proceeds apace, formal privatization schemes seem to have done poorly enough to reduce earlier corporate enthusiasm.

Still, two of the more imaginative schemes I’ve seen in the past year have argued for extreme privatization, decentralizing the provision of clean water down to the sub-village, or even personal level.

For example, the Lifestraw is designed to give each person their own personal water purification system:

… a plastic tube with seven filters: graduated meshes with holes as fine as 6 microns (a human hair is 50 to 100 microns), followed by resin impregnated with iodine and another of activated carbon. It can be worn around the neck and lasts a year.

Lifestraw isn’t perfect, but it filters out at least 99.99 percent of many parasites and bacteria, the demons in most fatal cases of diarrhea. [Link]

The original Lifestraw was field tested amongst the earthquake refugees in Kashmir.

Although the idea is pretty cool, it has its detractors. Critics argue that there is no market for such a product - that at $3.50 (or possibly even $2), it is still multiple days work to pay for each person’s straw, and it still only lasts a year. They also argue that it doesn’t reduce the long distances people have to travel to get water, thus reducing its appeal, and that local water projects are more effective because of economies of scale [Link].

A fascinating group of news stories discusses the goal many auto companies have of building the next generation of really cheap cars for the 3rd world mass market.

Singing and Dancing into the Future

Renault-Nissan Chief Executive Carlos Ghosn is betting that for autos, the magic number is under $3,000. At a plant-opening ceremony in India Apr. 4, he was already talking up the industry’s next challenge: a future model that would sport a sticker price as low as $2,500—about 40% less than the least expensive subcompact currently on the market. Renault-Nissan is the first global automaker to take up the gauntlet thrown down in 2003 by India’s Tata Motors, which plans to launch a $2,500 car next year.

India is target #1 on all fronts — design, manufacturing, marketing, and, of course, the ultimate consumer. Instead of looking outside for economic growth, this is a story of internally sourced, created, and most importantly executed growth.

A great OpEd quoted (in full?) at the IndianEconomy blog talks about the “Unknown Education Revolution” in India -

Ain’t IIT But It Gets the Job Done

Walking around the hot summer streets of Sangam Vihar—Delhi’s largest slum colony sprawled over 150 acres and home to 4 lakh people—in 2005, Aditi Bhargava noticed that almost every street had a school…These schools were often just holes in the wall or a room with a few benches populated by eager children.

And in case you’re wondering if these schools are any good -

Studies carried out in India all share the common conclusion that private-school students outperform their government-school counterparts. For example, in a 2005 Delhi study [11], James Tooley found that children in low-budget unrecognized private schools did 246% better than government school children on a standardized English test, with around 80% higher average marks in mathematics and Hindi…more than 80% of government-school teachers send their own children to a private school…

As noted in an earlier post about private education in India, when it comes to capitalism the poor often have much to teach the rich. In this particular case, the lessons from the piece seem directly targeted at some of the biggest dogmas which dominate education reform debates here in the US.

Two stories have caught my attention in the past two days, and both deal with everyone’s favorite subject: dating! Or rather, I should say the stories are more about the lack of suitable mating options that has resulted from the intersection of two topics we blog about quite often on SM: 1) the growing new economies of India and China; and 2) the messed up sex ratio resulting from female foeticide and infanticide.

Yesterday, PRI’s Marketplace sent a reporter in to the heart of “Parent’s Matchmaker’s Corner” in Shanghai. The corner is basically a trading floor where worried Chinese parents gather to trade biodata on their late-twentysomething children, mostly without the knowledge of said children. The story was set in Shanghai but it might as well have been Delhi, as almost identical market forces are at work. Among the many great insights (some humorous) in the radio story (please listen) are the following:

1) Chinese A-list men date B-list women because they don’t want someone as smart as them. They want a trophy wife.

2) Many Chinese A-list men go abroad to seek their fortune, thus restricting supply.

3) Chinese A-list women get screwed because they are in high demand (since there is an overall shortage of women), but only have B and C-list men to choose from.

4) A-list women throw themselves into work and/or fool around waiting for an A-list man that might never materialize.

5) B and C-list men grow increasingly bitter and frustrated because all the B and C-list women have traded up and the A-list women only want them for their bods.

This chain of events is set into motion for two reasons: 1) there is a skewed sex ratio; and 2) in the “new” economies you have as many or more educated women as men. Again, everything above seems to apply to India as well. You’ll also note that in America reason #2 is already applicable, but what saves us from the same spiral is that we don’t perform sex selection.

I’m not sure what the hell is going on with the world these days. First there was a daal shortage. More recently, word has gotten out that the corn tortilla population is in decline and at serious risk:

MANY DEMOCRATS and some Republicans applauded President Bush’s State-of-the-Union proposal for a 20 percent reduction in gasoline use over the next 10 years, largely through greater reliance on ethanol.

Bush’s idea, however, is adding corn-based fuel to protests in Mexico City. Existing federal laws that mandate ethanol in U.S. gasoline have diverted trainloads of corn from America’s food supply-chain to ethanol factories. This boosted U.S. corn prices nearly 80 percent in 2006.

That’s bad enough if you buy corn on the cob for a weekend barbecue. But it’s much worse if you are a poor Mexican surviving on corn tortillas. A kilo (2.2 pounds) of tortillas recently has shot up 55 percent, from 5.5 to 8.5 pesos. Poor Mexicans are not taking this sitting down. [Link]

Look, I know that wheat tortillas are “healthier” for you and that flour tortillas are less soggy. But come on. Nothing but a hot corn tortilla smothered in enchilada sauce should be wrapped around spinach and cheese filling. Via BoingBoing we now learn that “famed” investor Vinod Khosla is going to build an ethanol plant in Georgia that will use waste wood instead of corn to produce the fuel:

We knew it was coming. Vinod Khosla has finally made a bold move to back up industry-wide speculation that cellulosic ethanol would soon emerge as the next phase in ethanol production. The surprise is that wood would be the feedstock of choice given the vast headstart of corn-based biorefineries in the country and the obvious synergy of basing corn stover conversion technologies near sugar fermentation plants.

However, the high energy potential of wood cellulose, the ready availability of cheap waste, and the search for a renaissance of forestry-based industries makes the announcement a welcome one to the “nation’s woodpile” in the southeastern states. [Link]

To put it more simply, why kill tortillas to make fuel for your car when instead you could use the scrap wood from all the post consumer waste you produce? I for one am glad that investors like Khosla have the foresight to pump money into alternative sources of fuel while big oil keeps reaping record profits from our pockets.

And before anyone accuses me of being a bad Indian, I like rotis too.

This is a week of good news and bad. The good news is that Goldman Sachs thinks the Indian economy is growing even faster than previously expected:

India could overtake Britain and have the world’s fifth largest economy within a decade as the country’s growth accelerates, a new report says… By 2050 India’s economy could be larger even than America’s, only China’s will be bigger, the bank predicts. [Link]

The bad news is that child malnutrition rates are still startling high in India. This week the PM felt a need to deal out thapars:

“Our prevalent rate of under-nutrition in the 0-6 age group remains one of the highest in the world,” Mr Singh said. “These are startling figures and the situation calls for urgent action.” [Link]

The situation remains astonishingly dire:

Last year the UN children’s agency, Unicef, said that the average malnutrition rate in some Indian states - such as densely populated Uttar Pradesh - was 40%. That is higher than sub-Saharan Africa where it is around 30%, Unicef said. [Link]

… Unicef report said half of the world’s under-nourished children live in South Asia….”South Asia has higher levels of child under-nutrition than Sub-Saharan Africa, but Sub-Saharan Africa has higher rates of child mortality…” [Link]

Most striking is the fact that the economic growth of the past 15 years hasn’t necessarily translated into better child nutrition, and that malnutrition has actually risen in some places:

A recent health ministry survey said that the number of undernourished children below the age of three had actually risen in some states since the late 1990s, despite higher incomes and rapid economic growth. [Link]

“The Wire meets academia” is how Slate describes Off the Books: The Underground Economy of the Urban Poor, the fascinating new book by Sudhir Alladi Venkatesh. Here’s Emily Bazelon’s summary:

Venkatesh, who is now a professor of sociology and African-American studies at Columbia, spent 1995 to 2003 following the money in 10 square blocks of the Chicago ghetto. He finds an intricate underground web. In it are dealers and prostitutes—and also pastors who take their money, nannies who don’t report income, unlicensed cab drivers, off-the-books car mechanics, purveyors of home-cooked soul food, and homeless men paid to sleep outside stores. Venkatesh’s insight is that the neighborhood doesn’t divide between “decent” and “street”—almost everyone has a foot in both worlds.

Readers of Freakonomics will remember Venkatesh as the University of Chicago graduate student whose fieldwork in the ghetto led him to realize why, for instance, drug dealers still live with their mothers. But his really important previous credit is his first book, American Project (2000), which intricately described the life within, and the social and physical disintegration of, several large blocks of South Side housing projects. Like Mitchell Duneier’s Sidewalk (1999), which investigated the social and economic life of the brothers who sell used books and miscellany on Sixth Avenue in Greenwich Village, Venkatesh’s projects are urban sociology of the most compelling type, and well written to boot.

Yesterday Sudhir was on the Brian Lehrer show on WNYC [disclosure: I work for WNYC] and you can hear the conversation, punctuated by some interesting listener calls, here. But all y’all macacas might also enjoy taking a look at the prologue and first chapter of the book, which Harvard University Press makes available on its website. Here’s a quick excerpt from the prologue that points out, among other things, a desi angle:

Prashant points us at yet another interesting, Desi economic history piece by Gautam Bastian. In it, Gautam quotes a provocative Telegraph OpEd that discusses a surprising diversity in the Desi Intellegentsia’s attitudes towards the market. Instead of the uniform, Pavlovian rejection Uncle Milt experienced, the Telegraph’s Ramachandra Guha points at a specific braindrain of Guju econ knowledge -

Back in the Sixties, it used to be said that India’s most successful export were economists. Our economy was resolutely insulated from the rest of the world, but our economists occupied high posts in famous universities in Europe and America. Later, the joke was amended to say that the reason India’s economy was mediocre was because its economists were world-class. No South Korean was a professor of political economy at Cambridge; no Malaysian had been awarded the Nobel Prize. But their economies grew at an impressive 8 per cent, whereas ours stayed stuck at 3.5 per cent, also known as the “Hindu” rate of growth.

My own theory about Indian economists is more specific and hopefully less facetious. It runs as follows; Gujarati economists place faith in the market, while Bengali economists are prone to trust the state. In the Fifties, when P.C. Mahalonobis drafted the Soviet-inspired second five year plan, A.D. Shroff responded by starting the Forum of Free Enterprise. In the Sixties and the Seventies, about the only economist of pedigree advocating Indian integration with the world economy was the Gujarati, Jagdish Bhagwati. He was opposed by an array of Marxists, many of whom (naturally) were Bengali.

As Gautam notes, several prominent thinkers have attacked the the broad question of “if intellectuals are so smart, how come so many have been so wrong about markets?” (Heck, little old me, in my blogging youth tried to add on to Nozick). But by slicing and dicing across socio-cultural lines within India, Guha takes the question in a different direction. While I’d heard the stereotype of Bengali Marxists (keep in mind that my homestate - Kerala - has its fair share as well) I wasn’t aware that Guju’s were responsible for the counter pole. Biz friendly Gujus, eh? I suppose many stereotypes start with a grain of truth somewhere….

The award ceremony of the 2006 Nobel Peace Prize took place today. Muhammad Yunus was accompanied by nine village women, elected representatives of Grameen Bank’s borrowers. The full text of his speech is an interesting read. He re-tells the story of the founding of the bank and describes the different ways it has branched out, from its program for beggars to its mobile phone, food, and medical care initiatives. He also gives a sense of his personal economic philosophy, which he grounds in an embrace of the free market and globalization. It’s an argument similar to that made for “double bottom line” or “triple bottom line” investment and accounting, which seeks social or environmental value creation along with financial profit. It’s a good read; you can find it here.

THE VIRUS. The fever. The disease. The cocktail. The alphabet soup. The death. By any other red ribbon or name, today is December 1, World AIDS Day, and much of the day’s significant news on the topic comes, for better or worse, from India. (Photo: “An Indian sex worker wears AIDS symbols as she takes part in a rally in Siliguri,” AFP via Yahoo! News.)

For better, former US president Bill Clinton announced yesterday in Delhi a deal to dramatically reduce the price of effective treatment for children with HIV/AIDS. Among other things this is a fascinating example of a new approach to achieving health outcomes that combines public action with market tools. With funding from five countries, three European and two South American, the foundation has negotiated volume discounts on behalf of 40 destination countries. Thanks to the bulk purchase, the Indian generic manufacturers Cipla and Ranbaxy can sell single-pill tri-therapy drugs at 460 for a whole year’s supply. So the $35 million put up by France, Britain, Norway, Brazil and Chile ends up going a long, long way. $35 million! That’s NOTHING. Imagine if, say, the United States tossed in a little spare change from its daily Iraq expenditure. Grrrrr…..

Anyway, here’s a news story with details:

Only about 80,000 of the 660,000 children with AIDS who need treatment now get it, the United Nations AIDS agency estimates, and half the children who do not get the drugs die by the time they turn 2 years old. The United Nations Children’s Fund, or Unicef, has described children as the invisible face of the AIDS pandemic because they are so much less likely than adults to get life-saving medicines. …

Cipla and Ranbaxy Laboratories, Indian generic drug manufacturers, will be providing pills that combine three antiretroviral drugs into a single tablet, a formulation that is easier to transport, store and use than multiple pills and syrups. The combination tablets also need no refrigeration, an important advantage in poor countries lacking electricity, and can be dissolved in water for babies and infants too young to swallow pills.

Sandeep Juneja, the H.I.V. project head for Ranbaxy, said in a telephone interview that the company was able to provide the lower prices because of the larger volume of sales and because the Clinton Foundation, buying on Unitaid’s behalf, would consolidate many small purchases. He explained that the market for pediatric AIDS drugs was relatively small, fragmented and spread thinly across many countries.

“It would be a nightmare handling those small orders,” he said.”Imagine 40 to 60 countries buying a few hundred bottles individually, with no way to predict how many bottles would be needed.”

The new prices for 19 pediatric AIDS drugs are on average 45 percent less than the lowest rates offered to poor countries in Doctors Without Borders’ listing of AIDS drug prices, and were more than 60 percent lower than the prices the World Health Organization reported were actually paid by developing countries, the foundation said.

On the other hand — and here’s the “for worse” part — even the most abundant supply of inexpensive drugs can’t overcome poor distribution networks and, even worse, bonehead ignorance, especially when it comes from the people in charge of administering AIDS programs. Here’s a horror story this week from rural Gujarat:

A friend working in public health once told me that while mortality rates were highest in Africa, morbidity rates (the rate of non-fatal illness) were highest in India. If I remember correctly, she told me that this had to do with relatively high rates of innoculation - which cut all the nasty childhood diseases that lead to low life expectancy at birth - but a poor health system over all.

While I’m not sure if this is still true, what I do know is that getting sick is expensive, anywhere. Consider the impact of illness on financial health in the USA:

50 percent of all bankruptcy filings were partly the result of medical expenses… Every 30 seconds in the United States someone files for bankruptcy in the aftermath of a serious health problem. [Link]

And this is even though “68 percent of those who filed for bankruptcy had health insurance” [Link].

If illness wipes out the savings of relatively high (by world standards) earning Americans, you can imagine what it does to the poor in India. While the cost of medical care is cheaper in absolute terms in India, it is still a large share of already meager resources. Couple that with lost earnings, and the impact can be dire.

About one-fourth of hospitalized Indians fall below the poverty line as a direct result of their hospital expenses, according to a 2002 World Bank report. Many people take out steep loans or sell their homes in order to pay. And for the poor, losing even a day’s wages while waiting in the hospital can be devastating.

“A health event is a bigger risk to farmers than an unsuccessful crop. Once they sell their land or livestock, they become indentured laborers. That takes a generation to fix,”… [Link]

It should be no surprise to most here that I’m a strident fan of Milton Friedman and that his passing was quite a bit more than a garden variety celeb obit for me. While I’m a geek of rather high proportions, there are quite a few of us for whom the loss left an almost personal hollowness.

“The current danger is that India will stretch into centuries what took other countries only decades” - Milton Friedman, 1963Because he called San Francisco home, I actually had the honor of seeing Uncle Milt speak in person about 2 years ago at a benefit gala for a thinktank I’m a contributor to.

And earlier this spring, I had another opportunity to see Milton & Rose Friedman in person at the unveiling of a PBS documentary on his life and times. At the time, I implored several friends to join me with the argument that “at 94, homey ain’t gonna be around too much longer - see him while you can.” Unfortunately, a bout of flu kept Friedman from joining us that evening (Rose did, however make it) and alas, my words were sadly prophetic.

Interestingly, at that event, Gary Becker was on tap for Milton & Rose’s intro. In nearly any other context, Becker’s own Nobel Prize would have garnered him a headline act. But given Friedman’s ginormous stature, Becker’s intro speech was instead somewhat rudely met with idle chatter from the back of the banquet hall. You’d think scoring a Nobel prize would earn a little more respect - apparently not so when you’re between an audience and the Friedman’s.

‘Tis the curse of the passage of a generation that we take for granted previous, hard fought accomplishments - both material and intellectual. In its extreme, we just assume that he world we see around us had to be rather than recgonize the role of volition, creativity, and intellectual accomplishment which enabled it to be.

In Friedman, India, and recent economic history, we see all this wrapped up in a neat tidy little package. So much that seems obvious now was contrarian then. And so many of the arguments we use to excuse and ignore the outcome of disastrous policy was plainly predicted and evident decades ago.

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?

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.

Harvard Business School Ain’t What It Used To Be….

BusinessWeek is currently featuring a story on the purported influx of Desi inspired ideas into cutting edge American capitalism. Paint me a cynic but the piece takes a simplistic view of 1) what really happens in business or 2) what’s really uniquely desi philosophy or 3) both. The result is a mass of ethnic feel-goodness but not enough of a structured explanation to satiate a, uh, cynic like myself.

Our no-doubt well-intentioned writer christens the movement “Karma Capitalism” -

You might also call it Karma Capitalism. For both organizations and individuals, it’s a gentler, more empathetic ethos that resonates in the post-tech-bubble, post-Enron zeitgeist….while it used to be hip in management circles to quote from the sixth century B.C. Chinese classic The Art of War, the trendy ancient Eastern text today is the more introspective Bhagavad Gita.

BizWeek quotes different folks who take stabs at identifying what “it” is -

…One key message is that enlightened leaders should master any impulses or emotions that cloud sound judgment. Good leaders are selfless, take initiative, and focus on their duty rather than obsessing over outcomes or financial gain. “The key point“The key point is to put purpose before self”,” says Ram Charan, a coach to CEOs such as General Electric Co.’s (GE ) Jeffrey R. Immelt, “is to put purpose before self. This is absolutely applicable to corporate leadership today.”

…”The best way to describe it is inclusive capitalism,” says Prahalad, a consultant and University of Michigan professor who ranked third in a recent Times of London poll about the world’s most influential business thinkers. “It’s the idea that corporations can simultaneously create value and social justice.”

I’m sure many readers saw the article in the New York Times on the coming skills gap in the IT sector in India. The basic gist is this:

Software exports alone expanded by 33 percent in the last year.

The university systems of few countries would be able to keep up with such demand, and India is certainly having trouble. The best and most selective universities generate too few graduates, and new private colleges are producing graduates of uneven quality.

With the number of technology jobs expected to nearly double to 1.7 million in the next four years, companies are scrambling to find fresh engineering talent and to upgrade the schools that produce it. (link)

A shortage of 500,000 high tech workers is predicted for 2010. Perhaps the only way to forestall a huge wasted opportunity would be if the government were to liberalise its policy on foreign universities, and allow for-profit foreign institutions to open up campuses — with some regulation. According to this Rashmi Banga editorial in the Financial Express, the many thousands of Indian students who don’t go to IIT currently spend $3 billion on education in the U.S. — money which could be spent in India itself. Banga also outlines some of the basic problems in the Indian system as it operates from an insider’s perspective.

This is not a new idea. Proposals have been floated, committees have reported, and bills have been passed — though none of it has really led to anything. The many U.S. universities that have pondered building campuses in India (including both Stanford and Yale) have all been repulsed by the continuing ban on for-profit enterprises and the miles of regulations, regulations, regulations. (You can follow the saga on the T. Satyanarayan’s excellent Education in India blog) The arguments against liberalization seem weak. Standards are really not that hard to ensure, and a set of simple regulations or guidelines to ensure an orderly process shouldn’t be that hard. The charge of “cultural sensitivities” is raised, but are cultural sensitivities served by the current system, where thousands of students go abroad to study? (And many of them end up sticking around in the places where they get their degrees?)

It also needn’t be solely about filling the voracious staffing needs of the big consulting, outsourcing, and banking companies; I imagine that a Yale or Stanford campus in India would be much more than that. I’m sure many U.S. academics in the social sciences and humanities would jump at the chance to have rich, lively intellectual exchanges with Indian students and researchers — without having to go through a lot of bureaucracy.

A fine, fine choice for the Nobel Peace prize! Mohammed Yunus and the pioneering micro-credit institution he founded, Grameen Bank. More on this as we get time to put together a full post, but here is the Nobel Peace Prize committee press release:

The Norwegian Nobel Committee has decided to award the Nobel Peace Prize for 2006, divided into two equal parts, to Muhammad Yunus and Grameen Bank for their efforts to create economic and social development from below. Lasting peace can not be achieved unless large population groups find ways in which to break out of poverty. Micro-credit is one such means. Development from below also serves to advance democracy and human rights.

Muhammad Yunus has shown himself to be a leader who has managed to translate visions into practical action for the benefit of millions of people, not only in Bangladesh, but also in many other countries. Loans to poor people without any financial security had appeared to be an impossible idea. From modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed micro-credit into an ever more important instrument in the struggle against poverty. Grameen Bank has been a source of ideas and models for the many institutions in the field of micro-credit that have sprung up around the world.

Every single individual on earth has both the potential and the right to live a decent life. Across cultures and civilizations, Yunus and Grameen Bank have shown that even the poorest of the poor can work to bring about their own development.

Micro-credit has proved to be an important liberating force in societies where women in particular have to struggle against repressive social and economic conditions. Economic growth and political democracy can not achieve their full potential unless the female half of humanity participates on an equal footing with the male.

Yunus’s long-term vision is to eliminate poverty in the world. That vision can not be realised by means of micro-credit alone. But Muhammad Yunus and Grameen Bank have shown that, in the continuing efforts to achieve it, micro-credit must play a major part.

The Public Policy Institute of California released a survey today that is making all sorts of headlines. The survey sheds light on voting trends in the most populous state in the Union. Given the coming demographic shifts within the U.S., it is fair to wonder if these results apply to the rest of the nation as well. From the San Francisco Chronicle:

The growing diversity of California’s population isn’t showing up in the voting booth, where people who are richer, older and whiter than their nonvoting neighbors are making the decisions that will shape the state’s future, a new study shows.

Further, the plans and priorities of the Californians most likely to vote and those of the nearly 50 percent of adults who don’t participate in elections are as different as their bank accounts and racial backgrounds, said Mark Baldassare, a pollster who conducted the study released Wednesday by the Public Policy Institute of California.

“About 15 percent of adult people make the decisions, and that 15 percent doesn’t look much like California overall,” he said. “And that’s even more problematic here because so much public policy is made at the ballot box via initiatives…” [Link]

What these results seem to indicate is that if a larger portion of the population simply registered to vote and showed up on election day, you could throw conventional wisdom out the window. Want an example?

Take the issue of taxes, for example. Gov. Arnold Schwarzenegger and his Republican allies in the Legislature argue incessantly that Californians are adamantly opposed to new or increased taxes.

A poll last May showed that when likely voters were asked whether they would prefer higher taxes and more services or lower taxes and fewer state services, they split on the issue — 49 percent favored more services, and 44 percent called for lower taxes.

But Californians not registered to vote have far different views. More than two-thirds of those residents welcomed higher taxes and more services, while less than 30 percent called for less government.

“The size and role of government is hugely determined by the shape of the likely voter electorate today,” Baldassare said. [Link]

It’s been a little while since we last had a good dust-up about illegal immigration. Thankfully the U.S. Government’s Office of Immigration Statistics has some fresh material for us to chew on. (Thanks to SAJA for the tip.) It has just released a report estimating the number of illegal immigrants residing in the U.S. in 2005 by period of entry, state of residence, and country of origin. Here are the big-picture findings:

Mexico was the leading source country for unauthorized immigration with nearly 6.0 million residents in the United States in 2005. El Salvador, Guatemala, India, and China were the next leading source countries, accounting for a combined total of nearly 1.4 million unauthorized immigrants. Among the 10 leading source countries, the annual average increase in the unauthorized population from 2000 to 2005 was greatest among Mexican immigrants (260,000). However, the greatest percentage increase in the unauthorized immigrant population from 2000 to 2005 occurred among immigrants from India (133 percent) and Brazil (70 percent).

Interesting! Illegal immigrants from India more than doubled in the last five years, the fastest growth of all source countries; and it’s not a trivial number, since India ranks fourth, ahead of China, in total number of illegals. Of course these estimates are complicated to produce — the study gives details of the methodology — but clearly we are looking at a substantial trend.

Back in April when the big immigration marches were taking place, we noticed that South Asian organizations, especially Indian-American ones, didn’t seem to be much involved, and a number of commenters argued that, by and large, illegal immigration wasn’t much of a desi issue. At a minimum, these numbers suggest that we think again.

Here’s a key question: Who are these new illegal immigrants? Where do they live, what do they do for work? Where in India do they come from? I know we have plenty of readers who work “in the trenches” who could share some insight, even if it’s imcomplete or anecdotal.

Beyond that, what does this massive rise in illegals from India tell us about the Indian economy, given that it occurred during the much-vaunted time of “India Shining?”

And what about the desi community and the organizations and leaders who claim to represent it? It may serve the public image of Indian immigration to keep the rise of the illegal population out of view, but does that serve the community as a whole?

Bernard Gordon at the Wall Street Journal criticizes India’s trade representative, Kamal Nath, in a recent Op-Ed:

Surprise, surprise, the WTO talks in Geneva are “suspended.” But in truth, hardly a surprise, since in May France’s agricultural minister said, “I would prefer that the negotiations fail rather than … raise questions about … agriculture.” At the G-8 summit this month President Jacques Chirac backed him up: “Only Europe has moved [and] gone to the extreme limits.”

Both were responding to America’s insistence that Europe do more to match its offer to cut farm subsidies — in order to break the logjam at the heart of the now-collapsed Doha Round. But Europe had a partner in its “my way or the highway” approach. India’s Commerce Minister Kamal Nath, presumably speaking for the developing nations, said more “flexibility” was needed, and then gave his definition of the word: “We can’t negotiate subsistence and livelihood … we should not even be asked to do that.”

Mr. Nath had walked out of earlier trade talks, arguing “there was no point” in continuing, which prompted the press at home to fault him for throwing a “temper tantrum.” Not a bad label in this case, since India in 2004 accounted for less than 1% of world trade. And speaking after the collapse, which Mr. Nath characterized as “between intensive care and the crematorium,” he sharply singled out the U.S. as the sole culprit: the “mind-set” of the Americans was “inverted … they’re thinking only of market access.” (link; subscription required)

(Note that he’s not inventing the phrase “temper tantrum,” only citing the Indian media’s use of the term approvingly.) Gordon goes on to try and poke holes in Nath’s criticism of the U.S. for the fact that the Doha round has gone aground. Gordon mentions that the Brazil representative was actually more critical of Europe than the U.S., and cites President Bush’s promise to reduce U.S. farm subsidies by 60% in keeping with the opening of U.S. markets.

While the intricacies of world trade agreements and the workings of the WTO are, admittedly, not my area of expertise, one does note that Kamal Nath actually has plenty of company in blaming the U.S. primarily for the collapse of the talks.

I’m sure we are all praying right now that humanitarian supplies including food and medicine are able to reach the civilian Lebanese population. Not to take away at all from that situation but since it is being thoroughly discussed elsewhere in the news and on the web, I thought I would divert the attention of SM readers for just a few minutes by speaking out about the looming crisis here in America and among other Diasporic desi communities. Folks, we have a daal shortage that hasn’t received nearly enough attention and it’s not going to be pretty when it all plays out. India West reports:

Soon to be more precious than gold?

Faced with an unexpected crunch in supply of dal and lentils, the staple item of the Indian meal, that’s the advice hapless store owners are giving to worried customers after an Indian ban on exports of lentils (I-W, June 30) has sent prices soaring and supplies dwindling. The Indian government has banned the export of dals and lentils until March 2007 to curb rising commodity prices.

”We advise customers to concentrate more on the vegetable than the dal,” Dinesh Kumar of India Cash and Carry, a busy Indian grocery store in Sunnyvale, Calif., told India-West.

No Indian meal is complete without dal, and it is a critical source of protein for vegetarians. Over the weekend, customers have been flocking to the aisle that stores dal, Kumar said. [Link]

The advice they are giving us is to “concentrate more on the vegetable than the dal?” That’s like asking someone to concentrate more on their job than on love, or to concentrate more on a blogger instead of the doctor or the finance guy. It just isn’t going to happen. As the article points out, daal is a CRITICAL source of protein for vegetarians. Is this some sort of bad karma for when all the vegetarians poked fun at the beef eaters for their mad-cow friendly ways? Now the chief protein source of vegetarian desis has come under threat.

“People are in a little panic for dals right now, even though we are requesting them to not take too many packets,” said Kumar, whose store has set a limit of a four-pound pack per household. People were cooperating, he said.

Prices have shot up. Toor dal, which retailed for less than a dollar a pound a couple of weeks ago, has shot up to almost two dollars a pound. [Link]

When I went to the Indian grocery store on my block last weekend I saw a little boy get trampled by three aunties who all reached for the same package of daal on the shelf. As the paramedics loaded him onto the ambulance he kept crying, “why Bhagwan, why?”

“Demands have gone up way high. Everybody is looking for dal and there is not enough in the market,” Parmar told India-West. “We have to supply each and every store; we have limited quantity to supply…” [Link]

Because of my blogging duties I knew about this looming crisis before most in the media and public. I have been steadily stocking up on daal by filling up one of the storage rooms here in our North Dakota bunker. Even my co-bloggers have remained in the dark about my grand designs. My power and influence in the blogosphere and the world in general will no doubt rise as knowledge of my new wealth spreads.

It’s hard to tell how this would play out, he said. “As of now, the market is in a period of uncertainty,” Soni said. “Nobody knows what’s going to happen in the course of the next month…” [Link]

In a post-apocalyptic world where daal is scarce I will have my choice of a beautiful desi bride in search of protein…or perhaps several brides.

My whole life I have secretly admired the profession of the loan shark. You know the guy I am talking about right? The big knuckled, leather jacket wearing thug in the movies that walks softly, carries a BIG ASS stick, and every so often utters phrases like:

You’d piss your pants if you saw me come calling for my money

“B*tch, you better give me my money”

or

‘Da f*ck you mean you ain’t got my money yet? muthaf*cka you best be comin’ up wit’ my cash or else you know what I’m sayin?… [Link]

Admit it. Even the nice guys/gals among our SM readers have wondered at least once in their lives what it would be like to collect on debts as part of their daily routine, to have people scared out of their minds and start to stutter when you came a calling for yo’ money.

In truth, despite the fact that my wallet does have the words “bad ass motherf*cker” embroidered on it, I am a sweet and non-violent guy. I just don’t have the disposition to be a loan shark, nor do I own a gun with which I can pistol whip anyone…not even some annoying commenters. :)

What I can do however is help to change the world one loan at a time. Sitting behind my computer I can provide loans…without being a shark. There is a great new service that has been started by former Paypal employee Premal Shah and others, called Kiva. Kiva allows people like you and I to make loans directly to small business owners in the developing world. By loaning them money you will be helping them to take care of themselves and their family through sustainable means. If the working class entrepreneur that you lend money to succeeds, then it is likely that the economic impact of their business will propagate to some extent throughout their community. At the end of loan period it is likely that you will get your money re-paid in full without having to break anyone’s arm.

Yesterday Sudesh Mahto (pictured), the home minister of Jharkhand, wed fiancee Neha, a law student, in her home village of Dimbudih. The “VVIPs” were out in force:

Many of the ‘Who’s who’ of the state along with some of the political bigwigs of the country including Union Home Minister Shivraj Patil, Railway Minister Lalu Prasad [Yadav] and senior BJP leader L K Advani graced the occasion but, Jharkhand Chief Minister Arjun Munda did not attend the function as he was indisposed.

State Road Construction officials worked overtime to construct new roads, Energy Department employees erected electric poles, intelligence sleuths and senior police personnel made tight security arrangements at the venue, which falls in the Naxal-infested zone, with STF jawans keeping a hawk eye vigil.

The festivities, which continue tomorrow with a reception for 50,000 in Mahto’s village Lagam, have brought a flurry of rural development activity to the area. To accommodate the minister’s 300-vehicle motorcade, an all-weather road was constructed between the two hamlets. Places along the route have received electricity for the first time.

‘Thanks to the marriage of the minister our village got connected with roads and we saw electricity,’ said Ganesh Mahto, a resident of Silli.

The villagers are happy for more than one reason. Besides roads and power, many have also got short-term employment thanks to the construction work. Incidentally, the home minister is also in charge of road and construction, so there was no problem in getting funds.

‘We had been making rounds of offices to get electricity connection for the past decade. But the minister’s marriage brought electricity to the village,’ said another villager.

Indeed, the wedding has alerted villagers to a whole new development strategy:

But the best part of the marriage was the glittering, almost blinding electric lights, which villagers saw for the first time since Independence. “May every daughter of this village be married to a VIP,” prayed one of them.

The villagers should not to count on those lights glittering too often. Jharkhand’s power situation is dire. The state electricity board is mired in dispute over reforms, and its two thermal plants generate no more than 10% of their installed capacity. Even importing power from outside, Jharkhand is plagued with power cuts.

Then again, Mahto, a former footballer, has also vowed to “wipe out Naxalism through games and sports.” So perhaps he has an integrated theory of social progress, not just an over-reliance on pixie dust. Social scientists would be wise to stay on the case.

This week’s edition of Time Magazine includes a cover story about the world’s next great economic superpower: India (via the News Tab). The cover features a worker from the industry that Americans are most familiar with. She is a representative from the ranks of those much abused call center workers. Similar to Manish’s fine entry, The Anatomy of a genre, I thought I’d take a shot at examing the nuances of this cover picture.

From the always interesting Marginal Revolution -

One third of the value of Indian fruits and vegetables ends up destroyed or spoiled on the way to market, mostly because of bad infrastructure, most of all bad roads.

A commentor @ Marginal Revolution notes that the “spoilage” rate in the US is 1/10 of this - or nearly 30% more food available en toto for a given amount of production. As Amartya Sen famously pointed out, modern hunger ain’t about growing more food, it’s about getting it to the market.

A big current international business story is the attempted takeover of Arcelor, a Luxembourg-based steel manufacturer, by London-based, desi-owned Mittal Steel, the voraciously successful family business of Lakshmi Mittal. Arcelor is itself the result of a merger of European steel firms, a logical consolidation in its day since steel is a sunset industry in Western Europe and many firms enjoyed protections of state ownership or subsidies that EU rules no longer permit. However, European politicians have retained a bit of a proprietary cultural interest, as it were, in firms like Arcelor, since even without state ownership they possess a sort of vestigial patriotic value as “national champions,” and they still employ a fair number of people, if far fewer than before, in depressed industrial areas.

Well, ever since Mittal made his first overtures to Arcelor shareholders (which Manish blogged here in January), followed by a formal takeover bid once he got permission from competitive authorities, Arcelor has done everything possible to wriggle away from its suitor. Fair enough – that’s what companies threatened by hostile takeovers do, especially when it becomes clear that their management don’t enter into the buyer’s plans for the future. But with investment analysts lining up in favor of the Mittal bid, there’s also been, of course, speculation that even though Mittal is a London-based, London-quoted firm, it may just be a little too brown for the comfort of the European industrial bourgeoisie.

All this could be dismissed as reading-ethnicity-into-everything, and to some extent probably is. (Though…) Still, it’s remarkable to see that this week the board of Arcelor found themselves rushing into the arms of what is known in business lingo as an, ahem, white knight, in the form of a Russian firm of the new-oligarch variety. The merger deal with Severstal is framed as a purchase by Arcelor… except that it is funded by an increase in Arcelor’s capital via investment by Alexei Mordachov, Severstal’s 38-year-old chairman. By funding Arcelor’s purchase of his firm, Mordachov takes a 32 percent interest in the merged firm, which would become the world’s largest steel producer, ahead of Mittal.

The London business writers are having a field day with this one. “The putrid stink of hypocrisy hangs in the air,” says The Observer’s Richard Wachman, noting that Arcelor, having criticized Mittal for non-transparency in past business dealings, has found its savior in the land where opaqueness and favoritism are essential components of business success. And The Independent’s business columnist Jeremy Warner cold lays down the card:

Is it cos I’s brown? The Arcelor board appears so appaled at the prospect of takeover by the Indian-born steel magnate, Lakshmi Mittal, that it will do almost anything to avoid his clutches - right down to surrendering control to the Kremlin. Okay, so I’m exaggerating to make the point, but only a little.

A ToI editorial today bemoans the instability of the U.S. dollar and suggests creating a unified Asian currency as an alternative to the euro. Several years ago, Asiaweek suggested the same:

… it took Europe 10 years to produce the euro, building on three decades of efforts at economic integration. An Asian currency would probably have to be grounded in the yen, while China, because of the socialist foundations of its economy, might need to stay on the sidelines for some time. And the political, economic and cultural differences among Asian nations are greater than those within Western Europe. [Link]

I think the asio is a wonderful idea. Here’s how we’ll get there:

• India and Pakistan agree to merge economies
• Japan decides it’s willing to merge the yen with the rupee
• China and India drop all vestiges of socialist economic intervention
• Japan, China, India, the Philippines, Malaysia, Indonesia and so on get their economies into the same narrow band of inflation, debt and other key economic indicators
• China, Korea and Japan allow an Asian Economic Zone common passport and migration without work permits
• The asio countries choose a bland, centrally-located capital and characterless symbols for the currency which evoke no sense of history or nationalism
• A new pan-Asian parliament and central bank are created
• The parliament is held hostage to petty provincial issues by a nation deeply convinced of its innate cultural superiority

The French government has announced it will rate bureaucratic red tape using a ‘Kafka index’:

France has created a “Kafka index” that measures the complexity of a project or law against its usefulness to cut red tape. The index - referring to Franz Kafka’s The Trial, which describes one man’s fight against a nightmarish bureaucracy - is a scale of one to 100 measuring how many hurdles, from forms to letters or phone calls, are needed to win state permits or aid for a project.

“It is an indicator to measure as objectively as possible the most complex procedures so that we can then simplify them,” said a government spokesman. [Link]

I’d have suggested a Brazil index had I not witnessed the following exchange at a Reliance Mobile branch in Bombay last week:

Customer: I closed my account a month ago, but you billed me another thousand bucks.

Rep: Saar, you have to clear an additional 80 rupee charge.

Customer: Where do I go to get the account permanently closed?

Rep: Saar, you must go to the Lilavati branch.

Customer: I’ve been going there for four days now. Every day they say their systems are down.

Rep: Saar, that is the only branch which can close accounts.

Customer: I just came from there!

Rep: You must go there only.

Customer: I just came from there!

Rep: You must go there only.

Customer: I just came from there!

Rep: You must go there only.

Every time someone claims that there are no communists left in China, or that the Chinese economy will surpass India’s in the long term, I point out the latest example of China micro-managing its most entrepreneurial sectors. (In contrast, India tends to overregulate old sectors and jumps into new ones, which government babus comprehend dimly, only when the moral police perceive political advantage.)

The Chinese government has now inserted itself into multiplayer game design. Gamers who spend more than three hours online will be stripped of points. Gamers who spend more than five hours online will be kicked off entirely:

The government in Beijing is reported to be introducing the controls to deter people from playing for longer than three consecutive hours… The new system will impose penalties on players who spend more than three hours playing a game by reducing the abilities of their characters. Gamers who spend more than five hours will have the abilities of their in-game character severely limited. Players will be forced to take a five-hour break before they can return to a game. [Link]

… there’s the [South Korean] couple whose infant expired as they played games in an Internet cafe; there is the [South Korean] death that occurred from exhaustion; and there are even murders that have resulted from feuds begun online… [Link]

Even the U.S. may succumb, though more to tax than to nag:

In the near future, the IRS could require game developers to keep records of all the transactions that take place in virtual economies and tax players on their gains before any game currency is converted into dollars. [Link]

I actually see the wisdom in this. Maybe they can implement a one-hour cutoff on bad first dates, a two-hour cutoff on crappy TV, and a six-month term limit on despotic nanny regimes.

Personally I spend too much time in front of my PC. I look forward to the day when they send my ass a parking ticket. On Tuesdays and Thursdays, I’d have to park it on alternate sides of the apartment for seat-sweeping.

This week, the UK implemented two anti-globalization regulations so anti-Indian in effect that they could’ve been written by the BNP.

First, they’re making Indian companies pay off British workers who lose their jobs to overseas outsourcing — but not to those who lose jobs to Ireland or to automation. Who’s really going to end up paying for this incredible, extrajudicial bit of socialism: British consumers.

New rules on Britain’s existing Transfer of Undertakings (Protection of Employment) regulation or TUPE, will now slap overseas contractors with legal and financial responsibility for the British workers who lost their livelihood when jobs were transferred overseas…

Indian contractors accepting outsourcing contracts from British companies would now be forced to negotiate a proper indemnity against legal challenges for redundancy payments.

… the Indian firm would have to build into its cost structure the risk of being sued in a British court by redundant employees or unions.

The new rules on Britain’s Transfer of Undertakings (Protection of Employment) regulation (TUPE) would result in Indian outsourcing contracts becoming more expensive, thus hacking at India’s definite cost-advantage. [Link]

Hey, I just read a good blog post from London which competes with us for reader attention. Who do I sue for my check?

Second, they’ve banned the National Health Service from training Indian doctors without work permits, unless the NHS proves it couldn’t find a Brit. And the ban is immediate with no phase-in, hosing doctors already in training:

… doctors from outside the EU, including from India, were able to take up NHS jobs under what was called ‘[work] permit free training’ schemes. Their jobs were considered part of training that did not require work permits.

Thousands of Indian doctors were employed under the permit free training scheme and were usually hired for short-term periods of one or two years.

… employers now need to obtain work permits before employing these doctors after making a case to prove that no British or EU doctor can perform the same job. This rule effectively rules out any chance of employment for non-EU doctors. [Link]

In the new coolie economy, you can hire ‘em, use ‘em and dump ‘em the same day.

This NYT story on the reimportation of cheap college textbooks from India misses the entire, delicious point: Americans line up as huge fans of globalization when the money saved goes to them rather than their employers (thanks, WGIIA).

Over the last few years, many American students… have been buying American textbooks printed in India, as word has spread of the larger savings available… The textbooks are printed legally in India under copyright arrangements worked out over the last decade by American and British publishers. Americans are huge fans of globalization — when they’re making the moneyUsing tax breaks and cheap labor, Indian companies publish the books in black-and-white, low-quality paperback editions, and sell them for as little as 10 percent of the cost of the same book in the United States. But under the licensing agreement, the books may be sold only on the Indian subcontinent and in surrounding countries…

There are no penalties for students who import books for their own use, under a 1998 Supreme Court decision that ruled that manufacturers who sell goods more cheaply overseas than in the United States have no protection against having their products sold back to the American market. [Link]

The other interesting point here is the same problem intellectual property publishers have been facing for decades: differential pricing is not sustainable in an efficient market. You can’t sell Microsoft Windows for 10% the cost in India because Americans will import the lower-price version. And you can’t sell it at full cost and expect decent sales in a developing country, only the rich will buy. All you can do is segment the market with a lower-featured edition.

And that’s exactly what these textbook publishers have done. The problem is, students are satisfied with the lower-quality editions because hardly anyone buys textbooks for pleasure, especially not at $150 a pop.

Related post: Stuck with the 50cc Bajaj

Three million people marched in France today against a labor flexibility bill, possibly the largest protests in the history of modern France. It’s the kind of reaction you’d expect in Bengal:

The marches were part of a nationwide day of action against the Villepin legislation, which was intended to encourage hiring by making it easy for companies to fire workers under age 26 during their first two years on the job. [Link]

“It is a collective failure of the French system,” said Louis Chauvel, a sociologist who studies generational change. “You earn more doing nothing in retirement at the age of 60 to 65 than working full-time at the age of 35…”

… A sweeping survey of people in 22 countries released in January found that France was alone in disagreeing with the premise that that the best economic model is “the free enterprise system and free market economy.” [Link]

According to the poll cited above, more Indians believe in a free market economy than even the Brits, Germans or French. China tops the poll, and France sits at the bottom.

Steven Kull, director of PIPA, comments: “In one sense we are indeed facing what has been called ‘the end of history,’ in that there is now an extraordinary level of consensus about the best economic system.” [Link]

My theory is that rapid development gives people faith in the redemptive power of the invisible hand. The poll was conducted in India’s major cities, so urbanites support liberalization. But the poll says nothing about the voter-heavy heartland.

Dave’s post about the British Raj reminded me about the seamy underside of the British East India Company, namely its business in drugs. Imperial trade in opium was central to the success of the British empire:

Indian opium helped the British rule the world

By the early part of the nineteenth century, British Indian opium had stanched the flow of New World silver into China, replacing silver as the commodity that could be exchanged for Chinese tea and other goods…Opium revenues in India not only kept the colonial administration afloat, but sent vast quantities of silver bullion back to Britain. The upshot was the global dominance of the British pound sterling until World War I… [the] data supports, without opium the British global empire is virtually unimaginable. [Link]

The British energetically encouraged poppy growing, on occasion coercing Indian peasant farmers into going over the crop. By the end of the 1830s the opium trade was already, and was to remain, “the world’s most valuable single commodity trade of the nineteenth century.”(4)… [Link]

The definition of a drug cartel is a group with a monopoly on the distribution of an illegal narcotic. The empire, in the form of the East India Company, fits the bill quite neatlyWithout opium the British global empire is virtually unimaginable:

In 1773, the Governor-General of Bengal was granted a monopoly on the sale of opium, and abolished the old opium syndicate at Patna. For the next 50 years, opium would be key to the British East India Company’s hold on India. Since importation of opium into China was illegal … the British East India Company would … sell opium at auction in Calcutta on the condition it was smuggled to China. In 1797, the company ended the role of local Bengal purchasing agents and instituted the direct sale of opium to the company by farmers.

In 1799, the Chinese Empire reaffirmed its ban on opium imports, and in 1810 the following decree was issued:
“Opium has a very violent effect… Opium is a poison… Its use is prohibited by law.” [Link]

Certainly, the British ended up doing many good things in India. Still, we should acknowledge that the roots of the British Raj lie in something as dirty and illicit as the Medellin cartel. That a bunch of dirty narcoterrorists could give birth to the world’s largest, and (relatively speaking) one of its more humane empires, is perplexing indeed.

It has recently come to my attention that amateur phone sexologist Salman Khan endorses Red Tape shoes:

Try walking a mile in his shoes

Khan launched the new collection from Red Tape… In sync with international fashion trends, Red Tape shoes spell attitude and are a style statement for all those who wear them. [Link]

Oh, they make a style statement, all right:

• You have to apply to own them
• There’s an 18-year waiting list
• You have to bribe a salesman to get them
• Communists prefer them
• The pair delivered is always the wrong size
• They trip you up when you wear them
• They breed in darkness
• You can’t discard them, you can only add to your collection

The Dutch like wooden shoes, Sicilians wear concrete shoes, but India Shines in Red Tape shoes. A spokesman said:

Added Mr. Pant, “… There are synergies between himself and the Red Tape brand and he is the right fit, we believe.” [Link]

Man, talk about bad branding. First of all, where’s Mr. Sandal? And second, I think you’ll agree that Khan makes a better spokesman for Blackbuck Jerky.

Related post: Jail Time for Salman Khan?

Great little article in Newsweek about the short lived fury around the “giant sucking sound” of American jobs to India. We’re all rediscovering that economics (unlike politics) is almost never a zero sum game -

…Not long ago, what seemed most possible was that India would steal the jobs of American workers. But as George W. Bush visits there this week, he’ll find a maturing economy that is no longer all about call centers and basic tech support. Now big American investment banks and drugmakers are joining tech firms on the passage to India. R&D centers are springing up so fast that there’s now a shortage of Indian engineers. And the stigma of outsourcing jobs to India is disappearing.

…What happened to the outsourcing backlash? It has been muted by the fact that India didn’t suck Silicon Valley dry after all. Actually, U.S. tech employment is growing. There are 17 percent more tech workers in the United States today than back in the bubble days of 1999, says a new study by the Association for Computing Machinery. And the Bureau of Labor Statistics predicts that the U.S. economy will add 1 million tech jobs over the next decade, a 30 percent increase. “Everyone was worried about the offshoring bogeyman,” says Moshe Vardi, an author of the ACM study. “But the big whoosh of jobs to India never happened.”

Amen.

Dhaavak and AB tell us that Tamil script is found not just on Indian and Sri Lankan banknotes, but also on those of Singapore and Mauritius:

Anyone know whether other South Asian languages are found on banknotes outside the subcontinent? I would have guessed Trinidad (40% desi), Guyana (44%) and Fiji (38%), but not so.

Trinidad: According to the 1990 census, Indo-Trinidadians make up 40.3% of the population, Afro-Trinidadians 39.5%, Mixed-race people 18.4%, Whites 0.6% and Chinese and others 1.2%. [Link]

Guyana: … the three largest groups are the Indians or Indo-Guyanese (43.5% in 2002) who have remained predominantly rural, the Africans or Afro-Guyanese (30.2%) who constitute the majority urban population, and those of mixed origin (16.7%). [Link]

Fiji: The population of Fiji is mostly made up of native Fijians, a people of mixed Polynesian and Melanesian ancestory (54.3%), and Indo-Fijians (38.1%), descendants of Indian contract labourers brought to the islands by the British in the 19th century… A 1990 constitution guaranteed ethnic Fijian control of Fiji, but led to heavy Indian emigration; the population loss resulted in economic difficulties, but ensured that Melanesians became the majority. [Link]

Guyanese notes carry the signature of Bharrat Jagdeo, former finance minister and current president:

Bharrat Jagdeo (born January 23, 1964) is the socialist president of Guyana (since August 11, 1999). He had previously been a member of Janet Jagan’s cabinet, and became president after Jagan resigned for health reasons. He is the youngest head of state of the Caricom countries…

After obtaining a Master’s in Economics in Moscow in 1990, Jagdeo returned to Guyana and worked as an Economist… In March 2001, Bharrat Jagdeo won a second term in elections that underscored Guyana’s bitter racial tensions. The reelection of Jagdeo, a member of the Indo-Guyanese majority, caused rioting among the minority Afro-Guyanese, who claimed widespread election fraud. [Link]

A business professor at MIT Sloan argues in the Financial Times that India is economically underrated. Yasheng Huang sounds a clarion call for China to relax its financial controls:

Rama vs. dragon? Cake. But Rama vs. Chuck Norris…

From April to June 2005, India’s GDP grew at 8.1 per cent, compared with 7.6 per cent in the same period the year before. More impressively, India is achieving this result with just half of China’s level of domestic investment in new factories and equipment, and only 10 per cent of China’s foreign direct investment…

… in 2003 and 2004, [China] was investing close to 50 per cent of its GDP in domestic plant and equipment - roughly equivalent to India’s entire GDP. That is higher than any other country… China’s growth stems from massive accumulation of resources, while India’s growth comes from increasing efficiency…

While India’s stock market has soared in recent years, the opposite has happened in China. In 2001, the Shanghai Stock Market index reached 2,200 points; by 2005, half the wealth wiped out. In April 2005, the Shanghai index stood at 1,135 points… [Link]

Huang argues against using foreign direct investment as a key measure of economic growth:

Brazil was a darling of foreign investors in the 1960s but ultimately let them down. Japan, Korea and Taiwan received little FDI in the 1960s and 1970s but became among the world’s most successful economies…

With few exceptions, the world-cla