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.