The Indian Economy Blog

January 13, 2006

Lee Kuan Yew on India – Part 4

Filed under: Basic Questions,Miscellaneous — Atanu Dey @ 12:04 pm

Give me six hours to chop down a tree and I will spend the first four sharpening the axe, said Abe Lincoln. Astonishing how much profoundly practical wisdom is packaged into that simple declaration. Time spent in sharpening the tool is time well-spent; so is time spent in thinking through a problem and thoroughly understanding the problem before rushing off to solve it. And in most cases, since there is almost nothing new under the sun, there are already known solutions to many problem. So the most efficient method to solve a problem is to first seek the solution that someone may have figured out already.

The problem of economic development is multifaceted and complex, taken as a whole. But the problem can be effectively partitioned into simpler subunits that are more tractable. Then solutions for these can be sought—right out of the grab-bag of existing solutions or if needed, solved for the first time.

There are important lessons in Singapore’s development experience, if one cares to but observe very carefully. To learn from the person who engineered Singapore’s transformation from a backward poor city-state to a vibrant developed economy is a blessing. It fills my heart with hope that transformation is indeed possible, and it restores my faith in the conviction that powerful individuals are the only agents of deep transformation—both for good as well as ill—of society.

I read Lee Kuan Yew’s address to the 37th Jawaharlal Memorial Lecture on 21st Nov 2005 in New Delhi very carefully and with deep interest. I found that his wide ranging analysis of India’s economy incisively accurate. I annotated his speech in parts (parts one, two, and three) and this one is the concluding summary of what I gather from his talk.

In a sense, I did not find anything that he said even remotely surprising. I had pretty much reached the same conclusions independently. Why, one may wonder, don’t the leaders of India see what LKY so easily sees? Are they merely incapable of clear thought, or is it that they think but are prevented from acting due to circumstances, or is it a combination of both? Surely, one would think, that if the Indian leaders are not competent thinkers, they would at least have the intelligence to hire intelligent advisors to figure out the problems. So that is the problem?

I think the answer lies in what economists call the objective function. Individuals have a certain goal which can be stated as the maximization of a function given a set of constraints. For instance, for someone maximizing the amount of money given the constraints of time and effort may be the objective function; for another it could be to maximize leisure given the constraint of a reasonable income and time; for another, it could be to do social work subject to leisure, time and money constraints.

LKY’s objective function, I believe, was to rapidly develop Singapore. He was not looking to win elections, or to maximize his personal wealth, or to be a mahatma, etc. Given that he is a man of amazing practical genius, he figured out the sequence of interventions and implemented them. Under his autocratic rule, he did what India’s autocrats have been either unwilling or unable to do.

India’s autocrats have had different objective functions. I suspect that to a first approximation, their objective function have been to maximize personal wealth, not the development of the economy, through corruption, nepotism and bribery. Of course there was the matter of elections every so often and funding this costly farce required even more corruption.

Different objective functions lead to different perceptions which in turn lead to different understandings, and so on to different actions and ultimately to different outcomes.

My objective function is to figure out what exactly is wrong and how to solve the problem of India’s economic growth and development. I am not trying to win elections and therefore am not forced to bribe some voting block or the other with hare-brained schemes that ultimately harm not just the economy but even harm those vote blocks. I am not trying to fatten my numbered Swiss bank account and so I don’t have to implement any asinine license-control-quota-permit industrial policy. I am not trying to promote the members of my family as the only enlightened beings on the planet capable of ruling India, and so I don’t have to ruthlessly eliminate any opposition. I am not wedded to any ideology such as monotheism or communism, and so I can advocate the use of any idea as long as it makes sense.

The reason I arrive at similar conclusions as does LKY is that our objective functions are similar, we are sufficiently intelligent, have learnt from others’ experiences, and we have thought sufficiently long about the problem. I am sure that LKY has spent a lot of time polishing the ax before he struck the first blow.

There are differences, of course, between a LKY and me. For instance, I am as lazy as they come and he is a hard-working achiever. But the most significant is this: he is a dispassionate observer of India’s development while I am not. I sincerely care about what happens to India personally; LKY cares to the extent that India’s economic performance has a bearing on Singapore’s welfare, but he does not have a personal stake in India’s successes or failures. If what LKY tells India is just a lot of water off a duck’s back, he would sleep soundly. And that is why I believe that what he says should be taken very seriously. He has no reasons to sugar-coat his conclusions or misrepresent his recommendations.

Dispassionate observers must be trusted more than those who have a stake in the game. I would trust LKY more than I would trust someone like Dr Manmohan Singh when it comes to an honest assessment of India’s strengths, weaknesses, prospects and possibilities. Dr Singh has a boss and various constituencies that he has to please; LKY has to please no one. (The same holds for me: I don’t have to please anyone. I don’t have to please an editor and if the reader does not like what I scribble, it just takes one click and I am history.)

So with that preamble, let me try to summarize what LKY said.

1. India has missed the bus too many times and this time around, it should look sharp and get on the bus.

It could not jump on the bus because it was tied hand and foot by those with different objective functions than economic growth and development. Now we need to unshackle the economy. They call it liberalization. Of course, you can only liberalize a shackled economy. I think it is time to enquire why the economy was chained in the first place. Will this be done? No, because it may turn out the holy cows being worshipped were in fact asses. Best to keep quite and move on. But then of course we run the risk of chanting the same old mantra in worship of the old “holy cows” and end up precisely where we are. Insanity, it is said, is doing the same thing and expecting different results. Let’s stop this insanity.

2. Production precedes distribution. If you don’t produce, even after equitable distribution, you would still be dirt poor.

LKY put is thus: Before distributing a pie, I had to first bake it.

Simple isn’t it? But this simple truth eludes the communists and socialists. They want to distribute first and then perhaps maybe produce some stuff if they feel like it. They have not figured out that poverty is lack of what I call “stuff.” If you don’t have stuff, you are poor. Producing sufficient amounts of stuff is a necessary condition; the sufficient condition is to distribute it equitably.

When production is insufficient, then there is a mad scramble for the limited production. The powerful get hold of this stuff, and the majority of the people have to eat dirt. That is, a very lop-sided economy develops when there is insufficient production of stuff: a few very rich people lording it over hoards of abjectly poor people.

So the lesson is simple: make the production of stuff the first priority. Therefore

3. Manufacturing has to be the base upon which India’s growth must be based.

Which means that all this talk about a service economy is a lot of stuff and nonsense. India is a large economy (in terms of population numbers) and like any other large economy, it has to be largely self-sufficient in that what is consumes, it has to produce itself. Small economies can specialize and import the other stuff they need, but India cannot. In other words, India has to grow its own food (and therefore must have a large agricultural sector), must manufacture its own stuff (and therefore have large manufacturing sector), and provide its own services. “Large” here means production capacity, not necessarily employment capacity.

I am not in favor of employment; I am in favor of producing stuff. If you produce enough stuff, you can give stuff away to “unemployed” people. On the other hand, if the obsession is with employment, and if this employed population produces zilch, then all can be employed and yet all can be dirt poor.

4. To produce stuff, you have to have infrastructure. Build infrastructure first.

You cannot produce much with your bare hands. So you need factories, You need power to run those factories. You have to have roads and ports and airports to bring inputs to the factory and take the output out. Invest in infrastructure.

And you don’t need to bring out the excuse that the government does not have the capacity to fund the infrastructure. The private sector at home and abroad is more than eager to build them, provided the asinine policies blocking this investment were discarded.

5. Learn from you mistakes.

Of course, to do so, one has to admit that one has made mistakes. Flatly denying that would not accomplish much. China learnt from its mistakes and has changed course.

I have my doubts whether we can learn from our mistakes because it is not politically correct to point out that mistakes were made. Goring of holy cows is not taken very lightly by the worshippers of holy cows.

Thank you, Mr Lee Kuan Yew, for speaking to the Indian leaders. I am not sure that you have not wasted your time.

21 Comments »

  1. great post atanu. Couldnt agree more…just wanted to mention that your post has been picked up at SlashIndia.org

    Comment by neeraj — January 13, 2006 @ 4:26 pm

  2. Excellently written.

    I share your fandom of LKY.

    Comment by AC — January 15, 2006 @ 10:27 am

  3. Lee Kwan Yew, when asked whether Confucision model can work for India, repeat his “culture will determin fate” theory.

    “It’s more applicable to Vietnam than to India. The Indians haven’t got the Confucian culture. Without being imbued in a culture that enjoins you to endure hardship and have the stamina to struggle on in a cohesive society where the individual subsumes himself for the benefit of the family and his society, it’s difficult to expect that degree of sacrifice.”

    see “Lee Kwan Yew: Confucian model won’t work for India” in my blog for comments.

    Comment by R-Squared — January 21, 2006 @ 9:47 am

  4. I like Point (3) very much. Very insightful: what you only need to care is how much “stuff” you can create for your people, not to get all people “employed” to do nothing (i.e., not to produce “stuff”)

    Comment by R-Squared — January 27, 2006 @ 11:26 am

  5. Mr. Atanu,

    Appropos to:
    I am not in favor of employment; I am in favor of producing stuff. If you produce enough stuff, you can give stuff away to “unemployed” people. On the other hand, if the obsession is with employment, and if this employed population produces zilch, then all can be employed and yet all can be dirt poor.

    Could you please elaborate more on why growth in manufacturing has to preceede services ? We hear all this talk that it is not possible to become developed economy without having a strong manufacturing base. But if some fictitious economy is very good at providing services (comparitive advantage) then i fail to understand why is that not good ? could you pls share additional insights in a column ?
    Regards- hemant

    Comment by Hemant — January 29, 2006 @ 9:27 pm

  6. I dont really agree with LKY statements i have been a student in singapore for quiet some time and if you were there you would also notice how he chokes the people of the country his visions are applicable to capsize country with 4 mil population but place like India no ways .
    There are so many issues to be addressed in his own country leave India alone.Singapore govt is sacred with rise of India and china they will be sidelined in next 3 -4 years and more so there free trade treaty with India has failed in many ways than one.economic success is not all needed it needs a lot more to run a country i would say singapore is cuba of asia ……

    Comment by SOMEONE — January 30, 2006 @ 9:45 am

  7. Someone
    I know singapore is afraid to some extent with the rise of india, but
    over all the average singapore(and the elitist singapore chinese more importantly)
    is wealthier when compared to india. That makes a huge difference. The smart ones have chosen to invest in education as well as the fellow has more cushion to screwup
    and still live an ok life.
    No economist measures this factor. Ie the luxury brought on by having more than what you can consume allows you to certain flexibility where you wont go hungry if you make a wrong turn.
    Singapore aint the cuba of asia by any longshot!
    With that said I dont like singapore, culturaly its dead as a dodo.
    I also think(this is very hard to prove so i wont bother trying) that there are cultural traits(please see thomas sowell on how he defines culture ie no song dances of food but patterns especialy in business economic sense that are repeated through generation) which will be a bit of handicap for the current generation of singapore fellas.
    Ie they are never going to act and behave like a really wealthy society they have a bit of noralgia about money. A lot of them dont realize that they are wealthy and they should invest in real education rather than rely on ‘contacts’ for business.
    This is why i think there is going to be NO biotech revolution coming out of singapore no matter what the sg government promotes.
    Putting india througth the sowellian culture definations i am not that much optimistic
    in the near haul.
    Also i think atanu has idolized LKY
    He should meet some singapore trained fellas on his next trip to US and see how badly they perform especialy when you compare them to the relative affluence with which they have grown up with. The human capital coming out of singapore is good but not that great, despite having one of the worlds best infrastructure.
    This is also an LKY legacy there is not intellectual life in sg.
    But i could care less about sg, I am not going to live there.

    Comment by Guru Gulab Khatri — January 30, 2006 @ 10:38 pm

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    Comment by superman-tattoo-pics — December 13, 2006 @ 3:55 am

  11. Hai,
    I lived in singapore for some time before I move to Holland.I dont think Singapores way of development is something a democratic country like India can adapt or its not something fits into our culture. Development or Industry in Singapore is a family business and if you have been to singapore you will know that living in singapore is as like as working in a factory. Singapore has the objective of making the money and nothing else. Whats singapores position in Sports, Culture, Literature??. They have a good percentage of Indians in their society, do they have a national cricket team?. And the economy, despite everything singapore is still a cheap labour driven economy with zero potential to become anything else. The things is that bad aspects of singapore is often covered up by the gouvernment.When we listen to some one from Singapore never forget that singapore is a country which rely so much on intelligence than any other country and politically singapore is keeping a dangerous strategic balance with US and China. I think we have a better culture and potential than any other nation and all we need is to polish it a little bit and have some pride.

    Comment by Dil — August 24, 2007 @ 10:41 pm

  12. Dil, after years staying in Singapore, that’s all you have to say about Singapore?

    “Whats singapores position in Sports, Culture, Literature?? They have a good percentage of Indians in their society, do they have a national cricket team?”

    Who cares about cricket? What’s india’s medal count in the Olympics? We have a great Chinese culture and literature scene, but unfortunately you are not able to get it. We export hundreds of TV series to other Chinese-speaking countries. Our singers are top pop stars in China and Taiwan. Chinese readers read books written by singaporean writers. Singapore is a Chinese country, not a hindu one dont get it wrong.

    “I think we have a better culture and potential than any other nation and all we need is to polish it a little bit and have some pride.”

    Tell that to the Chinese, or the British, or the Russians, or the Brazilians, they will all laugh the crap out at you. Dont bully our small no-culture island country, ok?

    “And the economy, despite everything singapore is still a cheap labour driven economy with zero potential to become anything else.”

    Then why did you come to Singapore at the first place? We offered you a good job and a good living condition your home country could not offer. And after you left our country, this is all you have to say?

    Comment by T-Sek — August 25, 2007 @ 1:18 am

  13. Indians are great at math., they invented the zero. Don’t you forget that!
    Indians are creative and imaginative, look at all the news from india media about how India is IT superpower and about to overtake the world. It really take a country of vivid imagination to dream up something like that.
    Indian are tolerant. Castes prejudice, corruption and extreme wealth/poverty. Most people would agree indian can indeed tolerated some of the most intolerable conditions.
    Singapore is about 699.3 square kilometres in area, and four millions population. it is the world’s fourth largest foreign exchange trading centre after London, New York City and Tokyo. Its government is one of the most efficient and cleanest government in the world. Singapore may not have much, but her people make the most out of it. Can indian say the same thing about india?
    one fifth of humanity cannot get a gold medal in olympic. Cannot even beat england and Australia in cricket, a sport which almost nobody in the world really care about. Indians should stop belittling others achievement while bragging about how much potential india have.

    Comment by Eric — August 25, 2007 @ 3:41 am

  14. Dil, T-Sek, Eric

    Can everybody please calm down?

    This blog does not take kindly to chest-thumping, or running down any group/ country — whoever does this.

    Any signs of this degenerating into one of those petty debates (my country is so better than your country) and the delete function will kick in.

    Comment by Prashant — August 25, 2007 @ 5:05 am

  15. Brilliant!

    Comment by Anirudh — February 9, 2008 @ 11:01 am

  16. Great article

    but stil doubtful to invest in India cos black market growth is more than India economy growth,

    as you say everyone is working towards their individual wealth starting from small Church pastor to bigger politicians. Corruption and cheating is in the blood of ordinary Indians.Poor remains the poor.

    Comment by anbu jeremiah — February 11, 2008 @ 7:38 am

  17. Hi all,
    Reading the article and all ur comments was quite interesting. There is a lot that has been left out by Dil maybe because he has understood a lot more about the tentacles of Lee Kwan Yiew family and Singapore than T-Sec or Erik. Having been born and brought-up in Singapore, T-Sec and Eric would never understand or be capable of understanding what the real world is like. Singaporeans are like the laboratory specimen. Carefully trained, brain-washed, given just minimal skills that Lee Kwan Yiew’s family thinks is safe and required to go and work in a factory.
    Most Singaporeans will never agree that they are living a life that is very carefully stage-managed by that family. Dont blame them. They are so brain-washed. Have you seen the movie stepford wives? Singaporeans are quite like that. The Government decides all that they will get. And they will get only that.
    Singaporeans are actually scared. You just talk to them about LKY family and see how they run away like chicken. They just dont want to get into trouble. Poor things. They will never know the real meaning of freedom.
    Who says Singapore is corruption-free? And who says LKY did not have to worry about bribes? Singapore has a two-point plan to control corruption.
    1. Punish anyone (other than from the LKY Clan) who takes bribe or accuses the LKY family of taking bribes.
    2. Regularise all of it as Salary, perks, bonus to the Director (usually a member of LKY family/Clan) of GLC (Government-Linked Company! What a term!) and receive everything in white. If only the Indian Politicians can learn this art of defeating corruption… they can pocket a lot more and give India a corruption-free image – The west loves this image.

    Has the writer of the article or anyone ever thought about how much was the LKY family worth when he became the first PM os Singapore and their worth today? (Lot of people in Singapore wonder why they are not on top of world billionnaire list).

    You say Indian Elections are a farce? Hear Hear! Do you know what Singaporean elections are?

    Do u know that politicians are scared to contest elections (as opposition of course) and most Parliament seats are won un-opposed?
    Do u know that voting is compulsory in Singapore, but most Singaporeans have never seen a ballot paper? (because usually elections are won un-opposed).

    Do you know the fate of most opposition leaders like J.B. Jeyaratnam?

    Well before we glorify anyone, let us learn to know atleast something about them.

    As for T-Sec and Erik, I pity you as I pity most Singaporeans. You are like the animals in a zoo. Like ah-meng, your glorified Orangutan. We all come, smile at Ah-meng, take pictures with it, say the zoo was so clean and beautiful. WE have a nice time there and come back. WE feel great. AND YOU feel as if you are on the top of the world. But behold ye master determines when u can take a stroll and when u can pose for pictures. Some visitors try to understand you and pity you. Most do not. They leave with their prized possessions of pictures of Ah-meng and places, goods etc. Those of us who understand the situation pity you just like we pity ah-meng. But Ah-Meng would never understand. He only does as his MASTER (LKY CLAN) commands! BEHOLD YE MASTER!

    I hope I am not hunted down for writing this article, just like they hunt down Singaporeans who write against their GOVT (read LKY Clan) in blogs. Or like the oppostion leaders who become popular.

    Comment by Singaporean — April 14, 2008 @ 11:07 am

  18. Guys, no man including LKY is a super human. Atleast give LKY his due for transforming Singapore to a first world country.

    Comment by cheers LKY — May 16, 2008 @ 12:35 am

  19. Singapore has given and is still giving him & his coterie more than their due… not out of love, but out of fear.

    Guys we have to give Singaporeans their due for putting up with these people.

    Comment by GiveSingaporeansTheirDue — May 16, 2008 @ 6:31 pm

  20. Hi all,

    It is not true that people respect LKY out of fear. It is because he is an elder statesman with futuristic ideas and views. What ever the policy introduced by him, in the beginning has some opposition but later people realise how important it is to them. His ideas about CPF, Medisave, Adopting to Technologies are few examples. Now people are depending upon them for various purposes. Singapore Government never fail to reverse any policy according to the time and circumstances. LKY made sure that people are self dependant and not a burden on the Public

    Comment by Rajan Sharma — June 9, 2008 @ 1:29 am

  21. Hi Singaporean,
    Sad to be see your post. Do you have all the facts for your accusation on LKY?

    Comment by Singaporean2 — February 12, 2009 @ 12:30 pm

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