China, India and industrial policy

Latest paper on Voxeu by Felipe, Kumar and Abdon from the ADB analyses export data to show that China and India are two outliers, with more sophisticated and diversified export baskets, given their income levels- the paper argues ' that the capabilities that both China and India accumulated before reforms started are vital to understanding their growth later on. While we agree that planning led to mistakes, inefficiencies, and to the mis allocation of resources in both countries, we argue that, given their income per capita, China’s and India’s export baskets are more sophisticated – as measured by the income content of the export basket – and diversified – as measured by the number of products exported with revealed comparative advantage – than might otherwise be expected. Both are far ahead of countries at similar levels of development. This could have been achieved only through planning, industrial policy, and sector targeting.'
Going ahead, this calls for more support from the governments to exploit the advantages in place.

Natural resource or political resource curse?

With Vedanta not getting an environmental clearance for its project in Orissa, one issue that the environment ministry has sidestepped on is the involvement of state and central government officials in granting favours. “The Saxena committee made a number of observations on state officials. I don’t agree with that and believe that they were acting to the best of their ability. There will not be any witch-hunt,”  said Jairam Ramesh the Environment Minister. According to Mr. NC Saxena, whose Report forms the basis of the decision by the government to scrap the project, “I have not given clean certificate to the Union environment officials who too ignored various violations at the site at various times. The report has clearly stated that the State government officials were hand-in-glove with the company in 2005 by ignoring Forest Rights Act,” he told PTI.   Whose responsibility is it now to see that the corruption pointed out by the Saxena Report is dealt with and cleaned up?

This is of course not an issue that is just Indian in nature, it affects countries across the globe, documented in Africa,  in South America.. the term 'natural resource curse' has come up precisely because of this. While more than 40% of the resource rich countries are autocracies, and democracy is preferred to autocracy when it comes to benefiting from resource windfalls, data from Brazil examined by Brollo et al. finds that a 10% windfall in government revenues leads to a 12 percentage point increase in corruption and a 3 percentage point reduction in the probability that politicians have a degree. The chance that an incumbent is reelected raises by over 4 percentage points.They call this the political resource curse. So democracies do provide the necessary checks and balances, compared to autocracies, but there are pitfalls here too.
What about the corporates? As Sudeep Chakravarti says, If the corporation had cared, protests would not have happened. ...,(Perhaps the flaw in the concept of human resource has always been that, it is practised with those under a corporate umbrella, rarely with those adversely affected on account of a company’s activities.) In an earlier column, he writes, Businesses ought typically to be more far sighted, less prone to believing in hype, and more aware of liability.

Here, the problem is compounded because the crucial issue, as Sunita Narain points out,  is that the poorest people in India live on its richest lands. For governments and corporates to rethink the way they manage resources, there has to be a review of growth and development plans, because without understanding and integrating this basic point into our plans for the future, social conflict is inevitable. 

Random thoughts on mosquitoes

With dengue in the family, here are some totally random thoughts generated by mosquitoes on the mind.

• Come monsoon and dengue is hitting the headlines once again, along with malaria in Delhi, Mumbai, and abroad too..near Manila.
• There is no vaccine and no cure for dengue, and one can be cynical and wonder whether the H1N1 vaccine came out so quickly precisely because it affected the richer countries too. 
• Dengue is in fact a part of the list of Neglected Tropical Diseases with the WHO, diseases that affect low income countries the most. Within these countries, the burden of course falls disproportionately on the poorer sections of society, who have to grapple with loss of daily income, low productivity, extra healthcare expenses, family support issues etc.
• But it is true that research in tropical diseases barely gets the kind of attention it deserves. An article by Sandeep Kishore, Gloria Tavera and Peter Hotez talks of the innovation gap in the 'diseases of poverty' asking for universities to step into the breach and work in this area: 'Devising and developing therapies for the diseases of poverty is not profitable, but the dividends of developing life-saving therapies are priceless. If our universities won't deliver, who will?'
• Of course a large part of the problem stems from lack of sanitation and this requires community education and more emphasis on general hygiene, especially in congested urban areas. 
• And last but not the least, what part do mosquitoes play in the ecosystem? This article in Nature debates these points, concluding  " And so, while humans inadvertently drive beneficial species, from tuna to corals, to the edge of extinction, their best efforts can't seriously threaten an insect with few redeeming features. "They don't occupy an unassailable niche in the environment," says entomologist Joe Conlon, of the American Mosquito Control Association in Jacksonville, Florida. "If we eradicated them tomorrow, the ecosystems where they are active will hiccup and then get on with life. Something better or worse would take over."  There are however quite a few many comments at the end of that article left by readers pleading for the right of mosquitoes to live and asking for the eradication of homo sapiens instead, which reminded me of James Thurber's Interview with a Lemming. 

PS. For those who are wondering why a post on mosquitoes should appear in a blog on rethinking development economics, it's because health is by far the most neglected aspect in development and by economists, even though it is so obviously linked to productivity.