Wednesday, May 28, 2008

In this tech-driven world, we can’t be asleep at the wheel

Arun Shourie, Tuesday, September 12, 2006

The cost of squandering resources on populist schemes will be paid not just in missed advantages but also in the resulting social unrest. First in a three-part series
Among the propellers that are driving the world, technology is one of the most forceful. Six features about its advance have far-reaching consequences for India:

To start with, what has seemed impossible suddenly begins to seem possible

Second, whatever seems possible comes to pass

Third, it comes to pass sooner than anyone had thought possible

Fourth, with each decade, it comes to pass sooner and sooner. And there is good reason for that: the advances are cumulative

Fifth, the advances are interdependent. Today, drug discovery is becoming critically dependent on biotechnology. Biotechnology, in turn, is critically dependent on advances in other technologies — DNA could not have been decoded but for advances in IT.

Sixth, each advance has effects that spread farther than anyone had imagined. Today, the technologies that rivals have mastered are a major influence on the balance of power between countries. Companies rise and, just as swiftly are wiped out by some new Bill Gates working out of a garage. The livelihood of thousands disappears overnight as entire professions are wiped out and new ones appear.

Till just the other day in India, telephony was confined to fixed line instruments; PCOs were a leap forward — they provided unimagined access to those who could not get fixed line connections, and thousands got a new way of earning a living; today, with millions having mobiles, fewer go to PCOs.

Nor are we anywhere near the end: there is intense competition among service providers, each has invested crores in infrastructure; but now, thanks to advances in internet telephony, you can call the US or Europe for almost nothing. What will that do to the thousands of crores invested by companies in setting up telecom infrastructure?

The effects on national security are even more evident, just as they are of even greater consequence. Terrorists remind us every day of the consequences of the miniaturization and increased lethality of the technologies of violence. But the lesson is not lost on states. As technology advances, economies become progressively integrated. That induces the Chinese to acquire capabilities to hurl what they call “the assassin’s mace” at the “acupuncture points” of other, modern, integrated societies — national power grids, air-traffic control systems, rail-traffic control systems, financial and banking operations, communication networks — so that, by disrupting and corrupting them simultaneously, the societies are thrown into disarray for those few vital moments.


For us in India, pushed around as we are ever so often by Luddites, these features of technological change hold several lemmas.

First, as a consequence of technological and economic changes, every country is bound to be buffeted by massive dislocations. Take what is today the most successful example of propelling and managing change: China. According to official Chinese estimates, the “floating population” is anywhere between 120 and 140 million. As they lose rights to medical treatment and education once they leave their place of residence, the 20 million children in tow are now bereft of these services. And this is the situation in a country that has today the most purposive government among emerging economies.

So massive dislocations are inevitable. But equally important is the related lesson: the march of technology will not be slowed down just because we have not been able to handle the dislocations or are paralysed by the fear of them. A country paralysed by fear of such dislocations, unable to decide which of competing courses to adopt, which stops change, will not just fall behind. It will be wiped out. And for a simple reason: its rivals won’t slow down for it to solve its problems.

Third, as change is so rapid, as it is cumulative, falling behind for a while makes catching up very difficult. When affairs are stationary or change is slow, even if we falter for a while, we can catch up soon enough. But when change is rapid, once we falter, the one who has captured the lead is able to go on lengthening the distance. China and India were at par in the mid- and late seventies. China began reforms in 1978. Our political class — weak, imprisoned in slogans of the past — had to wait for a breakdown in 1991 to initiate reforms. That lapse has made all the difference. Today, even in the Indian market, in an industry like electronics, many of our manufacturers are traders in Chinese products.

Nor is one leap enough. One has to keep forging ahead. Again, the contrast is evident; China has sustained its momentum of reforms for 25 years; in India, splintered “coalitions” give everyone enough power to block everything, they leave no one with sufficient power to push anything.

Nor is it enough to catch change by the forelocks. As advances are interdependent, if we falter in one discipline, we will be drowned in a cascade.

Fifth, keeping up requires huge investments. We have had one major electronics complex — in Mohali, near Chandigarh. Even to this day it is not able to fabricate chips and the like at the submicron levels that have become customary. Building a new fab with the requisite capability costs $3-4 billion a piece. China is building six of them in one go. Countries that cannot muster up that kind of investment will have to forego those technologies or become hopelessly dependent on others for them.

The effects will not be just on consumer items, and exports. The fabs are vital for national security. Not being able to construct the latest ones is to put the country in danger. Countries which waste resources on boondoggles - like the Employment Guarantee Scheme, or unaccounted subsidies - don’t just put themselves at a competitive disadvantage but at risk.

Next, the new technologies require ever higher, ever more complex and ever changing skills. “The masses”, “the common man” just do not have them, and are not going to have them in the foreseeable future. It follows that countries which allow standards of higher education to fall; countries which do not institute systems to continually upgrade skills; countries which appoint and promote personnel on considerations other than merit (e.g., birth); countries which lose their best minds to others, will fall behind.

The technologies that are revolutionising the world today are developed by minuscule minorities, by microscopic scientific and engineering elites. To fail to value these elites, to trample in the name of “equality” the incentives and work-environment that would spur them to do their best in our country is to forfeit our future. One has only to bear two facts from recent history in mind as an antidote to the nonsense which progressives feed us so often. One, the leaders and movements that have shouted the most about “equality” are the very ones who set up the most tyrannical regimes, the ones that came to be marred by the most brazen inequalities — who has not read of the nomenklatura that came to rule, and eventually ruin, the USSR?

Second, when you are accosted for being an elitist on this score, when you are lectured about the “revolutionary creativity of the masses”, remind yourself of the fate of Mao’s Great Leap Forward, of those backyard steel furnaces, so idolised by our revolutionaries.

We thus have a duality. On the one side are two facts: without the new technologies, the country will be endangered; and these technologies will be developed by tiny elites. On the other side is the equally undeniable fact: the new technologies will just not provide the massive employment that the growth in population and labour force necessitate in India. Even a factory producing automobile parts looks like a Japanese “lights-out” factory. There are few persons on the shop floor: production is all CAD-CAM. The precision that is today demanded by manufacturers who will use these components in their cars and trucks is measured in microns; the dimensions have to be measured by laser beams. This means that for the kind of numbers that need to be absorbed - we need to create 80 million jobs in the next five years — we have to put massive resources into the only activities which can absorb such numbers: agriculture and infrastructure.

Thus, as Deng would have said, we have to walk on two legs. And that reinforces the point we glimpsed earlier: the cost of squandering resources on wasteful, populist schemes will not just be that we will not have those fabs, and thereby forfeit both competitive advantage and national security; we will foment social unrest.

Given these truisms, what must we be doing?

(To be continued)

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