This can be the starting point for someone looking for the briefest history of Japan. Having read more detailed works such as Bending Adversity and Embracing Defeat, the book might seem superficial but it extends the range from prehistoric to 2024. Commendable job by the author.
1. can india achieve a rapid and meaningful economic transformation without enhancing citizen freedoms and making knowledge institutions freer and more vibrant?
2. The authors rightly celebrate the achievements of the indian economy while pointing to the difficult road ahead—on the opportunities that shifting global supply chains present for indian manufacturing, the need to export high-value services and the urgent necessity to generate jobs. in these polarized times, Breaking the Mould makes for clear and calm, if cautionary, reading’—Vinay sitapati
3. Too many of our youth don’t have jobs and don’t have a hope of getting one. So they stop looking.
4. India wastes too much of its human capital and is in danger of frittering away its demographic dividend—the supposed dividend from having a growing share of working-age population—because it is not creating enough jobs.
5. The move to develop smart cities that are sustainable and citizen-friendly; the production-linked incentives (PLI) to increase manufacturing in India; the reforms to agricultural markets; the dramatic demonetization of Rs 500 and Rs 1000 notes in November 2016— have ranged from the ineffectual to the truly damaging.
6. In the early years of China’s liberalization in the 1980s, global firms compared its cheap albeit low-skilled workers with expensive American and European workers when deciding where to produce. It made sense to outsource low-skilled manufacturing—essentially, the task of assembling together imported parts to make final products, like radios and televisions— to China.
7. Since such an export-led manufacturing path, starting with low-skilled assembly, also worked for other East Asian countries, like Japan, Korea and Taiwan, it is natural, then, that India’s current government should think of following this path.
8. China went from poor to middle income in less than four decades.
9. Unfortunately for would-be late developers like India and Indonesia who want to follow the China path, the labour cost advantage no longer exists.
10. The value added in the early services segments of a supply chain, including the R&D and design that go into a product, is very high. The middle segments of the supply chain, that is, the actual manufacturing, adds only a modest amount of value. The end services segments of the supply chain before the product reaches the customer—branding, marketing, advertising, sales, financing and product content—once again constitute a lot of value added.
11. When an iPhone is bought in the store, only about one-third of the value-added is manufacturing, of which a small fraction is assembly, and the profit for this step of the production chain is tiny because it is so competitive.
12. growing rich is not just about services or manufacturing but about acquiring the core aspect of a valuable business around which everything else is built.
13. Ownership of intellectual property, including R&D, design and software that goes into the product, is the high ground in today’s business battles, from which everything else is controlled.
14. In the last full year before the pandemic, agricultural employment increased by 3.4 crore while industry and services employment only grew by 93 lakh, so the share of workers in agriculture actually increased, a rarity for a fast-developing country.
15. Note that this is envisaged to be assembly and some testing, not R&D.8 Even if this leads eventually to some chip manufacture—and that will require significantly more subsidies—it will not be the kind of sophisticated logic chips that power your mobile phone, and India will still be dependent on wafer imports and on imported machinery for chip making.
16. Study after study shows that authoritarianism suppresses innovative thinking—whether in the political arena, where it could challenge the existing power structure, or within research laboratories, where it could subvert the dominant scientific paradigm.
17. Most Indians are like you, enduring the present while hoping for something better.
18. If, instead, we allow our thinking to be moulded by the past experiences of other countries, without accounting for how India is different and how the world has changed, it will be left to our children to lament as they think of the India that might have been.
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20. Historically, services have been hard to export,
21. we will argue that it is a mistake to elevate manufacturing over all else as the means for India to grow. It can also grow by expanding service exports as well as services oriented at the domestic market.
22. What does it mean for a country to be rich? Broadly speaking, richer countries produce more economic output per person—more food, such as grains and milk; more goods, such as cars, clothes, electronics and oil and natural gas; and more services, such as haircuts, doctor consultations, restaurant meals, hotel stays, films and software code.
23. the key to greater incomes is greater production per person, also called productivity.
24. French economist, Jean-Baptiste Say, pointed out that the income from selling all that production becomes the means to buy that production.
25. What allows a worker to produce more? First of all, tools or machines. In preparing the ground for a building’s foundations, a labourer with a spade digs more slowly than the operator of an earth mover.
26. the earth mover operator’s labour is augmented by capital, the earth mover itself.
27. Productivity is much higher in the latter operation, not just because workers use machines but also because workers specialize, and specialists are typically better at their specific tasks than generalists.
28. technology refers to the quality of the capital that augments labour.
29. Labour needs to be educated or trained so that human capital improves; it should be supported with more equipment or capital; the equipment has to get better through technological improvements; and institutions have to be created and strengthened, all with the aim of enhancing production and productivity (the value of production per worker).
30. The use of fertilizers, irrigation, tractors and even giant combines can increase yields, but ultimately there is only so much land.
31. One estimate suggests the share of labour in agriculture in England shrank steadily from around 63 per cent in the 1550s to 35 per cent in the 1750s.
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33. Perhaps most important for longer-run growth was technological progress.
34. So countries grew richer. Between 1820 and 1870, income per person in Western Europe and the United States grew at a rate of 1–1.3 per cent a year. This was painfully slow compared to the growth of per capita incomes in China and India in recent years, but spectacularly fast compared to the previous 5000 years of human history.
35. Why could the early industrializing countries not grow faster? Even though large-scale production was more efficient in the past, a factory owner could not simply set up a gigantic factory and produce at scale.
36. For one, he might not have had the funds or financing to make the investment.
37. In the long run, imperialism was not a sustainable source of demand growth.
38. The starting point was land reform, which distributed land ownership (or rights to its produce in China) to the tiller.
39. This allowed the small farmer to thrive, generating surpluses that could be deployed in manufacturing.
40. Therefore, economies of scale in manufacturing could be achieved by targeting world markets where the developing country’s initial comparative advantage was the cheap labour that richer industrialized countries no longer had.
41. Workers learnt by doing and became more skilled, with more pieces produced per hour, and error rates and spoilage coming down.
42. Managers also learnt by doing, figuring out new and better ways to incentivize workers, configure assembly lines, and manage the logistics of supplies and dispatches. Foreign producers set up base domestically, bringing their productive practices to the country, allowing domestic producers to learn by imitation.
43. First manufacturing expands, drawing workers from agriculture, accounting for a greater share of the total economic output of the country.
44. In short, productivity growth in manufacturing increases the demand for services and eventually reduces the need for workers in manufacturing.
45. In 1961, India’s income per person was $86, South Korea’s was $94 and China’s was $76.
46. India’s income per person today is around $2300, China’s is around $12,500 and Korea’s is around $35,000.
47. Between 1980 and 2018, India’s GDP per capita grew at an average of 4.6 per cent per annum, and the decadal average never fell below 3 per cent.
48. 2.9 per cent, only nine countries make the cut, and only Botswana, other than India of course, comes close to being a persistent democracy.
49. There is another aspect of growth worth noting. We mentioned earlier that the share of workers in manufacturing typically peaks at some point in a country’s development, and then falls.
50. Roughly speaking, China started modernizing its economy a decade before India did in the late 1970s.
51. India’s total economic output today is where China’s was in 2007, so India is about sixteen years behind, even if, going forward, it grows at the same pace that China grew at. Of course, such high growth rates may now be elusive, and catching up will require yet more time even if all goes well for India, since China will not remain stagnant.
52. Communist regimes in the twentieth century typically invested heavily in basic education, partly because of their emphasis on equality, and perhaps also because widespread literacy allowed common people to get acquainted with the Communist scriptures.
53. It takes a certain amount of literacy, numeracy and basic accounting to run a small business, and more Chinese had that when their economy was liberalized. India invested more in education only when liberalization gradually highlighted the need for more educated workers.3 Why did India fare poorly on mass
54. As India liberalized its economy in the 1990s, average years of education moved up rapidly in the population, so that India was only 1.5 years behind China in 2015.
55. Now that India has got the vast majority of its children into schools, it has to improve the quality of their learning.
56. In the case of General Motor’s Shanghai joint venture, assistance included ensuring that all the taxis operating in the city were GM cars.
57. India, by contrast, always had a more centralized system of governance.
58. Local government at the city, municipality or village level was initially neither empowered nor funded nor adequately staffed,
59. Even after constitutional amendments created a third tier of government, too little power has been decentralized thus far.
60. China also needed to give its firms, especially those in the export sector, an edge. There
61. Starting in the 1990s, China worked to keep its exchange rate from appreciating even as its exports and trade surpluses increased. What does this mean?
62. China’s strategy was to keep this exchange rate low, typically through the central bank buying up dollars in the market, so that fewer dollars were being offered to the broader public against renminbis.
63. Of course, this also meant Chinese households would find it
64. Of course, this also meant Chinese households would find it very costly to buy imported goods, which limited their imports and made them buy mainly Chinese goods.
65. The government told banks to set a low bank deposit interest rate for households, which allowed the largely state-owned banks in turn to offer firms cheap loans without losing money on them.
66. The Communist Party controlled the labour unions, and ensured that wages did not keep pace with labour productivity.
67. Ultimately, Chinese households paid the price, because their wages and the returns on their deposited savings were artificially low.
68. in 2010, China’s household consumption as a share of GDP was 34 per cent. The same number for a poorer India was 54 per cent, a richer America was 68 per cent, and somewhat more comparable Korea and Thailand were around the 50 per cent mark.
69. Rich Indians do not want the rupee to be undervalued, hampering their purchase of imported goods, increasing the cost of their children’s tuition in colleges abroad and making foreign vacations more expensive.
70. To keep foreign capital from flowing in and elevating the exchange rate, India
71. To keep foreign capital from flowing in and elevating the exchange rate, India would have to maintain persistently low interest rates.
72. That would upset our middle-class savers. Workers and their unions would also protest quickly about below-productivity wages.
73. The overarching theme here is that any attempt by the government to run roughshod over citizens’ concerns will provoke protests.
74. Korea stayed autocratic for longer in terms of development time—it became a full democracy only when it was richer than the US and the UK.
75. India was unusual in that it started as a democracy even when it was poor.
76. So we cannot conclude that democracy was a mistake in India’s early years, only that it was unusual.
77. Prior to the early 1990s, India, like many other developing countries, attempted an import substitution strategy, where high tariffs (that is, customs duties) kept out imports, leaving the domestic market entirely to Indian producers.
78. The import substitution strategy, a key component of the Licence Raj, or Permit Raj, ensured India stayed poor.
79. Average tariffs came down from 125 per cent in 1991 to 13 per cent in 2014.8
80. Labour laws therefore act as a tax on scale and productivity, ensuring far too many manufacturing firms remain small and unproductive.
81. Most workers thus have precarious temporary work, with firms hesitant to invest in their skills since these workers will have to be let go soon.
82. An important ingredient in making polyester is purified terephthalic acid (PTA). Even while the production of this input by two large producers within India declined, severe import restrictions were imposed on it in 2014.10 Domestic PTA prices shot up, increasing the input costs for Indian polyester textiles manufacturers, making them globally uncompetitive. As a result of such own goals, Bangladesh, Vietnam, and even the Netherlands and Germany have taken up, to a greater extent than India, the global market share that China has given up in textiles and apparel.
83. As farmers grew wealthy, their surpluses set in motion a minor industrial revolution. Ludhiana was locally called the ‘Manchester of the East’. By the early 1980s, it was producing farm implements, hosiery, hydraulic motors, sewing machines, textiles, auto parts, bicycles and more.
84. One of Punjab’s big successes was Hero Cycles, which made reliable, sturdy, popular bicycles.
85. Hero paid suppliers promptly on Saturdays, something unusual in India, where getting paid can be an ordeal in itself.
86. By 1975, Hero was the largest manufacturer of bicycles in India, and had started exporting to much of the world.
87. At the turn of the century, Punjab was the richest state in India in terms of per capita income. Unfortunately, today it doesn’t feature in the top fifteen. What happened?
88. Punjab had a fundamental disadvantage as a location for goods production—given the impaired relations with our neighbouring countries.
89. Punjab is not close to other markets. Consequently, as competition started heating up, Punjab’s higher freight costs started to bite.
90. Agricultural subsidies kept the economic value of growing paddy and wheat artificially high, which prevented a natural transition of small and marginal farmers out of agriculture.
91. The state government further distorted economic choices by offering farmers free power to draw out groundwater, which depleted the water table.
92. In addition to making labour harder to find as fewer farmers left agriculture, power, too, got expensive. Since power supply to agriculture was largely free, the government had to charge higher prices elsewhere to make up for the losses, and industry bore the brunt.
93. One measure of the political apathy towards industry was that between 1960 and 2010, barely 10 per cent of the state assembly debates focused on industry; the main obsession continued to be agriculture
94. ‘We have no money left to invest in the education and skilling of our youth,’ a senior bureaucrat lamented to us. ‘How will you get industry if you don’t have any labour skilled enough to work in
95. In recent years, Punjab’s youths, unable to find options outside agriculture, have started migrating abroad. Among those who have stayed behind, substance abuse has become commonplace.
96. Standardized containers, which are easy to load and unload off ships on to railway wagons and trucks, as well as improvements in logistics and tracking, have reduced the costs of transportation and improved its timeliness
97. According to one estimate, over 10 million lines of programming code went into General Motor’s 2010 car, the Chevrolet Volt, accounting for over 40 per cent of its value.
98. Therefore, as electric vehicles become more like mobile phones, even that most traditional of manufactured exportable products, the automobile, will consist of largely embedded intermediate services.
99. So one reason services have become more tradeable is that they are embedded in tradeable goods. A second reason, however, is that services can now be provided at a distance. Both combine
100. Many high-skilled services are now liberated from the tyranny of space and time.
101. an Italian Dark Roast Americano coffee has a similar taste across the world in every Starbucks franchise, because it is made the same way, using a common recipe, ingredients and equipment.
102. If fixed costs and capital investment requirements are low, scale is not necessary.
103. Not many realize that the largest profit generator in Amazon today is its web services, not its retail business.
104. Since the life of an artisan can be precarious and uncertain, youths are no longer attracted to these crafts.
105. These families had made the jump from lower middle class to upper middle class in one generation, in part because the RBI had employed someone in the family in a low-paying but steady job with decent housing and health-care benefits.
106. There are other problems with generative AI. Its