More on India, Outsourcing and Economic Stability

This article by Fareed Zakaria from Newsweek gives us further insight into India. Some excerpts from portions of the article I found interesting are below.

On outsourcing and job loss in the U.S.
Over the last 60 years, manufacturing employment in the United States has plummeted as those industries went abroad—and yet average American incomes have risen to be the highest in the world. Over the last 20 years, as globalization has quickened, American companies have outsourced first goods, then services—and American incomes have risen faster than those of any other major industrial country. Banning auto-parts factories or call centers will not save General Motors. Globalization highlights some problems for America, but the solutions are all at home. As they have in the past, Americans must—and can—make goods and services that people will pay for freely, not because the government forces them to by shutting out the competition. That is the only stable path to economic security.

On India vs. China
There are some who argue that India's path has distinct advantages. MIT's Yasheng Huang points out that India's companies use their capital far more efficiently than China's; they benchmark to global standards and are better managed than Chinese firms. Despite being much poorer than China, India has produced dozens of world-class companies like Infosys, Ranbaxy and Reliance. Huang attributes this difference to the fact that India has a real and deep private sector (unlike China's many state-owned and state-funded companies), a clean, well-regulated financial system and the sturdy rule of law.

On Indian society vs. government
It is not a quiet, controlled, quasi-authoritarian country that is slowly opening up according to plans. It is a noisy democracy that has finally empowered its people economically. In this respect India, one of the poorest countries in the world, looks strikingly similar to the world's wealthiest country, the United States of America. In both places, society has triumphed over the state.

On experimentation with socialism and communism
If the Indian state has succeeded in one crucial dimension, it has failed in several others. In the 1950s and 1960s, India tried to modernize by creating a "mixed" economic model, between capitalism and communism. This meant a shackled and overregulated private sector, and a massively inefficient and corrupt public sector. The results were poor, and in the 1970s, as India became more socialist, they became disastrous. In 1960 India had a higher per capita GDP than China; today it is less than half of China's. That year it had the same per capita GDP as South Korea; today South Korea's is 13 times larger. The United Nations Human Development Index gauges countries by income, health, literacy and other such measures. India ranks 124 out of 177, behind Syria, Sri Lanka, Vietnam and the Dominican Republic. Female literacy in India is a shockingly low 54 percent.

On Indian attitudes towards America
Most Americans would probably be surprised to learn that India is, by all accounts, the most pro-American country in the world. The Pew Global Attitudes Survey, released in June 2005, asked people in 16 countries whether they had a favorable impression of the United States. A stunning 71 percent of Indians said yes. Only Americans had a more favorable view of America (83 percent)...

This may be because for decades India's government tried to force-feed anti-Americanism down people's throats. (Politicians in the 1970s spoke so often of the "hidden hand" when explaining India's miseries—by which they meant the CIA or American interference generally—that cartoonists took to drawing an actual hand that descended every now and then to cause havoc.) [Sound familiar]

On American politicians, populism, and protectionism
In America, there is always the danger that politicians will turn to populism and protectionism as a cheap way to get votes. So far the pandering has been limited and temporary, but as elections approach and politicians grandstand, it's always convenient to find foreigners upon whom to blame your ills.