Wednesday, January 16, 2013

Digitization. Miniaturization and the Economy: the story of an MP3 Player


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.

Thursday, January 10, 2013

Global Kashmir: Possibility or a Pipedream?

Global Kashmir: A Possibility or a Pipedream?
Many months ago, when I had freshly arrived from the West, I was thinking of setting up a business in Kashmir- the kind which would enable me to reap the benefits of globalization or what Anthony Giddens has called ‘time space’ compression. Inherent in Giddens’phrase or coinage was the revolution induced by the Information, Communications and Technology (ICT) revolution which had compressed both time and space. I can, for instance, talk to my sister living seven seas away and in a different time zone at the click of a mouse or touching the buttons of my mobile phone. Similarly, Australia, mention of which evokes great distance in peoples’ minds, is just a plane ticket away. The conjunction of advances in information technology, communications and transportation, in a nutshell, have brought about this structural transformation.
Coming to my now aborted business venture, I conceived and developed a robust business plan and I dare say elegant business model. The model, conceptually, was built to take advantage of this time and space compression. Alas, the plan and the model hit reality and floundered on its rocks. The structural conditions that obtain in Kashmir- landlocked place, distant from ports and lack of critical infrastructure – gave short shrift to my goal of profiting from globalization and I then thought of carving out a nice in what is a very traditional business in Kashmir: tourism. To cut a long story short, none of this transpired and I find myself doing what is close to my heart.
I, however, have not given up on formulating and devising a plan to help Kashmir globalize. It is desirable and eminently doable. How? The answer is simple. Kashmir’s tryst with globalization can be made possible if the infrastructural deficit in India is obviated. This means according impetus and momentum to the 3rd generation reforms in India. If India embarks on an infrastructural overdrive, this would mean better, world class ports, airports, cargo facilities or , in short, the critical infrastructure and logistical superstructure essential for taking advantage of globalization.
How can Kashmir benefit from this? Kashmir can tap into what are called global supply chains wherein a product is made in multiple locations and nodal points in the world. Take your laptop or mobile phone: it stands as a metaphor and living symbol of the globalization and the magic of capitalism. It may be designed in the US , its components made in China , and its frame may be made in Taiwan where it may be put together as well. The firm is no longer a black box and is defined contemporarily by vertical disintegration and is spread across the globe. So if Kashmir can find a niche product and specialize in making that , the finished product can then be sent to China Taiwan or Europe or the United States. What is critical here is logistical support, critical infrastructure and access to world markets.
Here there is a role for powers that be in Kashmir. They can pitch in politically and support the reform process and use their voice in taking the reform process forward. This then needs to be buttressed by a vigorous , supportive and up to date industrial policies that helps entrepreneurs and industries to find a niche and help them. The government or the state can enter the picture by helping in skill upgradation and development. The name of the game for entrepreneurs would then be developing and conceiving ideas and work vigorously in drawing , say, Volvo, or Marks and Spencer or even enter into tie ups with behemoths like Wal Mart.
Wal Martization of Kashmir would axiomatically mean globalization of Kashmir. The state could then be part of the global economy and find a niche for itself in the sinews of the global economy. This can be an unalloyed good and would also impart pride and vigour to people. This is besides the very important economic benefits that would accrue to the people of Kashmir. The default fall back on handicrafts or tourism- important sectors in their own right- would be given short shrift and Kashmir would begin its tryst with industrialization and build an industrial base by following a template that would have stupefied the best of economists only a few years ago. Let then the powers that be in Kashmir offer their support to economic reforms in India , take advantage of coalition politics and lend their weight and voice to this. The benefits can only be salubrious. I can then, in the meantime, draw satisfaction from the fact that my hard work did not go in vain.