A strengthened public sector will create more opportunities for private businesses
Every time a technology giant chooses an India-born techie as its leader, there is a justifiable swelling of pride in the country, but also some disappointment. Despite having so many celebrated technologists around the world, why is India still not a major player in technology? India has the potential to occupy the upper echelons of the global technology ladder if only it identifies its shortcomings and acts upon them urgently.
The popular narrative is that India’s failures are linked to its inability to make use of the market-driven growth opportunities. The country’s earlier commitment to planning and the public sector continues to damage its chances, so the argument goes, even after the 1991 economic reforms. And so, the talented left the country in droves for the U.S. Indeed, as of 2019, there were 2.7 million Indian immigrants in the U.S. They are among the most educated and professionally accomplished communities in that country.
An invisible hand
No doubt, the U.S. is a country of fabled opportunities. However, what is less known is than an invisible hand of the government has been there to prop up each of the so-called triumphs of enterprise and the free market. Research by Mariana Mazzucato shows that the state has been crucial to the introduction of the new generation of technologies, including the computers, the Internet, and the nanotech industry. Public sector funding developed the algorithm that eventually led to Google’s success and helped discover the molecular antibodies that provided the foundation for biotechnology. In these successful episodes, the governmental agencies were proactive in identifying and supporting the more uncertain phases of the research, which a risk-averse private sector would not have entered into.
The role of the government has been even more prominent in shaping the economic growth of China, which is racing with the U.S. for supremacy in technology. A little over a decade earlier, China was known for its low-wage manufacturing. Even while being hailed as the ‘factory of the world’, China had been stuck at the low value-adding segments of the global production networks, earning only a fraction of the price of the goods it manufactured. However, as part of a 2011 government plan, it has made successful forays into ‘new strategic industries’ such as alternative fuel cars and renewable energy.
The Chinese experience
China’s achievements came not because it turned ‘capitalist’, but instead by combining the strengths of the public sector, markets and globalisation. China’s state-owned enterprises (SOEs) were seen as inefficient and bureaucratic. However, rather than privatising them or letting them weaken with neglect, the Chinese state restructured the SOEs. On the one hand, the state retreated from light manufacturing and export-oriented sectors, leaving the field open for the private sector. On the other, SOEs strengthened their presence in strategically important sectors such as petrochemicals and telecommunication as well as in technologically dynamic industries such as electronics and machinery.
When India inaugurated planning and industrialisation in the early 1950s, it was possibly the most ambitious of …….