There is an increasing understanding that while institutions of socialism are totally destructive of wealth, institutions and incentives of capitalism (property rights, rule of law, etc.) do NOT necessarily increase wealth significantly.
There is an X-factor involved in this whole thing, as it is in beauty contests! It is about culture.
This is not as fuzzy at it sounds. It has a precise meaning.
This new understanding of the cultural drivers of wealth is growing largely because of the work of Deirdre McCloskey. In particular, McCloskey has proposed a potent hypothesis about dignity. The more I think about it the more sense it makes. That surely is the PRIMARY REASON why Hindu capitalism has performed badly over the past 2000 years (particularly the last 200 years), even though many of the other institutions of capitalism were often present in India's history.
And although we had Arthashastra, the world's first and one of the most potent analyses of wealth.
Capitalism is, in the end, a state of mind. In particular, it requires a sense of equality, a sense of dignity, of equal competition
When we talk about equal liberty, we must really mean it. Liberty means giving everyone equal dignity.
Recently FTI member Harsh Vora wrote on his Facebook page:
Today's TOI issue (25 August 2012, pg. 2) discusses why Indian students excel abroad, but not at home – why Homi Bhabha, Amartya Sen, and Ramanujan became big stars in foreign universities! The reason is foreign universities don't require students to be servants. Students are not required to use the word 'sir'. Above all, there is freedom of individual thought. Please read this amazing piece!
There's NO logical reason why we must use suffixes such as 'ji' or 'sir' or 'uncle' in our daily conversations (instead of only first names). Using such suffixes only creates an unequal playing field. Much better to recognize individuals as persons worthy of regard in their own might!
Well, this actually holds the key!
Because that’s where the poor quality of Indian labour comes from.
I recall the equal competitions we had with school classmates (1965-1976). A good number of these classmates are highly qualified professionals settled abroad in the academia or private sector. There was never any question about our “equality” or "equal dignity". We competed on everything, including academia, sports, dramatics, quiz; but also collaborated. THAT culture was responsible for creating a hugely aspirational upwardly mobile middle class in India.
On the other hand, there were those who “served” us. The maids and gardeners at home, the drivers, the vendor who sold vegetables at the doorsteps of our house. These people were NOT EQUAL. These people were not part of the game. These people were tools, meant to serve our needs. They were not regarded as independent humans with the same dignity that was available to our fellow classmates or teachers.
This unequal hierarchy and different levels of dignity among people continues in India.
Take the example in 2010 of a prominent Indian who comes regularly on TV to promote self-respect. I really appreciate his work and suggested that he make it a practice of having coffee with his staff, on rotation (e.g. his driver) in a restaurant to discuss their life and career aspirations.
That was the test. Whether we pay lip service to equality or we really mean it.
He balked at this suggestion and said that doing such a thing would send the wrong signal to people.
This is about 2010. This says it all. Therefore, when some Indians are heads of multinational companies and leaders in the academia, others continue to perform dismally. They just don't have the self-regard and dignity.
Let me show what others think about Indian labour productivity. In a second post I’ll publish my brother’s experiences with Indian labour. (I'd also like to note, here, the low quality of office assistants in most government offices in India.)
Please note that I’m NOT being critical of Indian labour. It is NOT their fault. I’m being critical of educated Indians who've not yet broken down the “status” barriers between them and their staff. We need to ACTUALLY DELIVER EQUALITY if we want India to achieve its potential.
The Indian Factory Labour Commission report of 1909 is full of testimony by employers regarding conditions in the mills. A substantial fraction of workers were absent on any given day, and those at work were often able to come and go from the mill at their pleasure to eat or to smoke. Other workers would supervise their machines while they were gone, and indeed some manufacturers alleged that the workers organized an informal shift system among themselves. The mill yards would have eating places, barbers, drink shops, and other facilities to serve the workers taking a break. Some mothers allegedly brought their children with them to the mills. Workers’ relatives would bring food to them inside the mill during the day. “There was an utter lack of supervision in the Bombay mills.” One manager even stated that the typical worker “washes, bathes, washes his clothes, smokes, shaves, sleeps, has his food, and is surrounded as a rule by his relations.” Source: Gregory Clark, A Farewell to Alms: a brief economic history of the world, p.363.]
In some cases, high levels of technical expertise are required, and some of the New Zealand companies experience difficulty in accessing local people with the requisite skills. Two approaches are used to counter this problem: training local people, either in India or in New Zealand, and using expatriate staff from New Zealand to conduct or supervise the skilled work.
Both of these approaches add significant cost to the operation (with expatriates costing four-six times as much as local staff), but are considered necessary until local skills develop to higher standards. One New Zealand company that manufactures specialised equipment is concerned about the quality of labour in India, noting that it does not employ local people for this reason.
“We wouldn’t employ local people in India – only New Zealanders, or Europeans. The reason – we feel that the work ethic is poor, labour laws v restrictive (can’t sack people), graduate-level education not very good; if you get the wrong person, you can’t do anything about it – high risk!” Tait Radio Communications [Source: http://www.asianz.org.nz/sites/asianz.org.nz/files/India_Opportunity.pdf]
If you found this post useful, then consider subscribing to my blog by email: