To lighten up and relax, or to use the contemporary slang, that is, the ‘in thing, chillax, I scoured a list of items. A friend suggested that I buy an MP3 player. Being a technophobe and a technological neophyte, I did not know what an MP3 player was. Overcoming my embarrassment, I asked the friend to explain to me the device. He said that it was small device on which music could be uploaded and then conveniently listened to. I formed a mental image of the device and held it to be akin to what I was used to in my younger days: a Walkman. In the evening, I ambled into a store and asked for an MP3 player. I pretended to be a knowledgeable person in terms of technology and technological gadgets and asked for an MP3 player. The sales assistant, could barely, hide his surprise, when he handed me the device. I asked,’ Is this it?’.I was referring to the size of the device and was surprised that an MP3 player was the size of a pen drive.
I took a trip down the memory lane and thought once again about the path breaking book written by the NY Times columnist, Thomas Friedman. (I apologize to my readers for referring to the book and the columnist again). Friedman , in his book, had among other things posited that in the era dominated by Keynesianism( economics attributed to the great economist, John Maynard Keynes), it was the heaviness and scale economies that informedeconomic theory and practice. However, in the current phase of globalization, which he referred to as the Schumpeterian era, it was the size and speed that determined the health, vibrancy and productivity of economies. Miniaturization,digitization , and speed were the mantras and buzzwords of this era.
This is almost a veritable truth. Gone are the days when heavy industry was the hallmark of an industrial and industrialized or even an emergingeconomy. Today the health, vibrancy and productivity of an economy is determined by innovation, connectivity (both technological and economic), and linkages to the global economy. The competition is informed by how lighter, smaller, user friendly and effective and efficient your product or service is. Everything is commoditized. (My more environmentally minded and romantic friends will take exception to this and argue with me). The rate and speed of obsolescence is stupendous. In Schumpeter’s phrase, ‘creative destruction’speaks eloquently to this condition. And to quote a business guru, in this environment, ‘only the paranoid may survive’
This is the hard reality of our times. The question then is: what are the implications of this for states like Jammu and Kashmir? How can we find a niche in this competitive atmosphere where speed and lightness are the requisites for success?
Given the nature of our political economy, it would appear that we may be lagging behind in these indicators and benchmarks of success. Our economy, still more or less an agrarian economy supplemented by centre state fiscal transfers and crafts oriented may even be said to be stuck in a bit of a pre –industrial paradigm. This, however, does not mean we are condemned to this state of affairs. It is globalization and the global economythat offers the antidote to our economic problems. The question now is what can be done to integrate the state into the sinews of the global economy?
The answer lies in the domain of public policy and an enabling environment that assists and nurtures individual initiative, entrepreneurship and innovation. The state may have to re-orient itself , focus on areas where it is indispensable and make room and space for the private sector in areas where the private sector can do a better job. This sounds like a typical World Bank prescription and may be attacked as a ‘neo liberal’approach. In fact, it is neither. It is an eclectic solution that acknowledges and encourages a role for the states and a role for the markets. In, then , is a synthesis. Or , more colourfully, it is where Keynes meets Schumpeter.
In this schema, the state can and should focus its energies on developing and nurturing human capital. This approach has been tried and implemented very successfully in the South East Asian countries which have consequently reaped great dividends from this. By making people skilled and empowering them through education, the state then leaves space and makes room for the magic of markets to work through.
This approach may then be supplemented by developing niche industries that have a premium in the global economy. This, in effect , means a tightened, and reinvigorated industrial policy where targeted subsidies and support may be given to promising and profitable industries.
The banks also have another role to play: that of vigorously supporting new entrepreneurship and funding ideas- even crazy ones. It is in combination and in sync that these policies can reorient our political economy and lead to both a qualitative and quantitative shift of our economy. It is then that we may be able to compete and flourish in an environment where speed and miniaturization and economies of scope triumph over size, heaviness andeconomies of scale. It is about time that we choose the latter. In the meantime, I will enjoy the range of music available on my MP3 player while doing other stuff simultaneously and acknowledge my debt to Schumpeter and Friedman.
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