Sunday, June 15, 2008

Look East, Not West

There is this tendency among a lot of well-to-do Indians of looking at America as a model of development. This could owe a lot to the US' pre-eminence as a super-power on this planet; its (relatively) liberal immigration policy (creating a million or so Indian immigrants); mind-boggling technological breakthroughs in its universities and corporations and the perception of glamour (a "sexiness", if you will) associated with all things American (such as Hollywood and the ipod).

Americans are a pampered lot. They have a lot of area for each person (there's only 36 people per square kilometer here: that's 10 times area per person than India) - which makes being an American an inherently prosperous proposition.

A more relevant model of development can be found further to the west of the US - across the international date-line. Japan.

With 330 people per square kilometer - the same as the Indian population density - Japan is the world's third largest economy in absolute terms (China replaced Japan in the second spot a few years ago). With the same amount of "geographical luck" as an Indian has, the Japanese have managed to make their people some of the most prosperous in the world.

Japan's per capita GDP (ppp) is $33k per year. Japan's energy consumption is ~4000 kgoe/year (kilo-grams of oil-equivalent/year), whereas the American values are $45k per year and 8000kgoe/year. Simply put, the average Japanese person is twice as green and twice as lean as the average American. (Links to GDP and kgoe data)

There's this interesting metric to measure how "energy-efficiently" each dollar of GDP is produced. It's the GDP per-capita on the ordinate and the GDP per MBTU on the abcissa plot, which is reproduced below:

Japan is clearly more efficient than the US even this perspective. (If you ask me, this perspective is skewed in measuring efficiency. Supposing a nation were to grow a lot of crops and throw them away in trash cans (like the US does - check out any fast food chain trash cans!), the above metric of energy efficiency would consider the energy in growing the crops energy well spent. As a matter of fact, I consider this a garbage metric for this very reason).

Japan's economic growth was characterized by decades of 10% + GDP growth (fueled by a cocktail of government protectionism and foreign investment). This was called the "Japanese Economic Growth Miracle", for that it was. This period of stellar growth culminated in a major recession - and finally in a hopelessly inverted population pyramid. It is unlikely that Japan will achieve significant growth again: but Japan is still an extremely prosperous nation. A Japan (or an America or a Europe) in recession is still in a much better shape than a 10% per-year growing India (or China) from the most important perspective: the social perspective.

Indian development will be more like Japan's than America's. (China's, on the other hand is more likely to be like a more slightly efficient version of America's - China lot more people (130) per square kilometer than the US (36)).

When this optimistic argument about India's future is made in front of people, they come up with a ridiculous theory of the Japanese being "genetically industrious" and that the Indians are "genetically lethargic". I think this is a load of poppycock. The Indian economy has grown leaps and bounds after Dr. Singh set it free in 1991; poverty has fallen (though the rich have become a tad bit richer) beyond what people could contemplate in the 1980s. (Yes, there are still pockets of poverty in India - farmers still keep committing suicide - but it is indeed becoming an actual electoral issue. This is exactly the kind of issue that populism can solve, I believe.).

And the next time people tell me that compared with democracies in the developed world, Indian democracy is too ugly: I have a few aces up my sleeve. I will tell them about the incredibly stupid gridlock in the Japanese parliament that let a $1 per gallon petrol tax expire for a few days - dropping the price of petrol ("gas") at the pump immediately. (Yes, this did happen! And the prime minister apologized for this retrograde step.).


Anonymous said...

Your last but one paragraph was tricky, I feel we Indians ARE lazy or atleast not as induxtrious as Japan, so if your trying to tell that all Indians should start working hard to make India a mega Japan, then I should say it is not possible, not atleast in next 20 years.

Rap said...


With all due respect, I would beg to disagree.

The Indian economy is just beginning to be set free from the shackles of a confused license raj - a regime which removed all incentives from being productive. Show me someone who is productive without any incentive, and I will show you proof that god exists (as evolution just can't come up with people like that).

And already, Indians have responded with REAL growth rates of 8%+, which is just 2%per annum short of the Japanese in their "miracle" years.

We are still not entirely free: look at the number of public sector enterprises. But profitability is actually becoming a priority even for there concerns.

Perhaps there will be other reasons why we might not become as prosperous as the Japanese in the long run. Competition for global resources right now is at an all time high in the history of the planet (look at fuel prices right now!). But surely, people are never the reason.

In my eyes, saying that Indians are inherently more lazy than the Japanese reeks of uninformed defeatism.