--- Velho writes: > > I just have one question for Mr. Mario Goveia (in > particular) and other netters too. As the Indian > economy progresses at this overheated pace, what > should we do to ensure that the rural-urban divide > does not cause this country to erupt in chaos. The > previous economic models we followed were no good > for economic progress but went a long way to > maintaining social order in a democratic setup. > Swaminathan wrote in the TOI a few weeks ago that 1 > in 3 districts in India is affected by Naxal > violence. I myself was laghing at his article at > first and then I remembered the Saleli incident..... > Mario responds: > Velho, To begin with I am a student of Adam Smith, Joseph Schumpeter, John Mill and Milton Friedman, not Karl Marx. > In my ideal world, the government focuses on safety, security, infrastructure [roads, bridges, airwaves, airports - not railways and airlines], foreign policy and national defense and in removing, not adding, any major obstacles to what the citizens want to freely buy or sell. Open competition and changing prices always equalize demand and supply AS TIMES GOES BY, as long as there is no coercive interference by the government. Higher wages and benefits do not evolve from government mandates but from education, training and mobility of the worker, always enhanced by the right attitude. > The only lasting solution to the rural-urban conundrum and the Naxalite problem, at least the economic component, is growing prosperity for all, not necessarily comparative prosperity that the socialists obsess on. For example, the growing disparity between the wealth of Bill Gates and Laksmi Mittal and my own does not bother me as long as they are expanding the economic pie for everyone. If I'm any good I'll get my fair share sooner or later. > Since you clearly appreciate what Shri Singh, Sinha and Chidambaram have done for India, you must know that this included dumping the mindless and destructive socialism of the Nehru era, to the extent that they could. However, in my never humble opinion, they have not gone far enough and paranoia of foreign investment and resistence to foreign ownership remain entrenched among the army of Indian bureaucrats, encouraged by the communist obstructionists in the governing coalition. > Did the old order really maintain social order, or did it provide a false facade over monumental economic waste and inefficiency which was headed inexorably for disaster under the surface? I worked as an engineer in India for L&T and Telco in the 60's, and many of my classmates worked for government boondoggles, so I have experienced the waste and inefficieny at first hand. I migrated in 1971 because I saw no end in sight, and now I am very pleased to see that Indian brains and initiative don't have to leave home to realize their potential. > Here is my solution to the urban-rural conundrum. India needs to use the investment potential and self interest of foreign investors to help itself. For example, while Krishnayya is waiting patiently for the "suicidal" US economy to implode, the US has created the world's most productive large economy by using relatively low taxes, relatively fewer government mandates, and the brains and investments of the rest of the world, by making it relatively more safe and worthwhile for the brains and investors to bring their assets here than somewhere else, including their place of origin. When we need physicians and engineers, Indians and Chinese flood in. When we need rural laborers Mexicans may do so, etc. Everyone makes good money by selling their products to us and then invest most of the proceeds right back here and buy our products as well. > While we are obviously more vigilant since 9/11 immigrants come and go as it suits them, many have dual citizenships. Investors rarely leave. The economy is highly competitive and dynamic, the only certainty is that things will change. GM and Ford are struggling to survive while Honda and Toyota are building new plants and Chrysler belongs to Daimler-Benz. One of our biggest chains of petrol stations, Citgo, belongs to hostile and socialist Venezuela. > What we call individual and independent "enlightened self interest", and the greedy socialist elites call "greed", benefits everyone, whereas the socialist elites benefit mostly themselves. Look what happens. American companies are "outsourcing" jobs to Indians, and foreign manufacturers are "insourcing" even more jobs to the US. > In addition to accelerating "liberalization" and removing all barriers to foreign capital investment to create more jobs, India should embark on a massive national highway building system patterned after the German Autobahn or US Freeway systems. I expect that private contractors will use a healthy percentage of freely available rural labor in addition to equipment. > This will unclog the country, create a need for rural labor on a massive scale, create a need for equipment and automotion that will create more jobs, and rural and other currently disadvantaged Indians will also benefit from the education and training that will be required. An economic tsunami will follow. > The government would need to build in some checks and balances to handle the inevitable corruption, but that is a problem even now. > I have no facile solution to change the culture of corruption and the lack of civic sense and consideration for others in the short run. One hopes that this will subside with time and education and the narrowing of the economic gap with the economic growth such a plan will create. > The biggest obstacle? It's too simple, and needs a minimum of government bureaucrats and needs nothing from private do-gooders. >
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