Saturday, April 18, 2009

Right Brain Leap: What the Conceptual Age may mean to backward economies

The idea of a Conceptual Age, as described in Daniel Pink's A Whole New Mind or in Howard Gardner's Five Minds For The Future, has significant implications in policy making in developing countries. The current orthodoxy in development planning is indeed that an economy must go through stages - from manufacturing to services and up the value chain - and therefore most developing economies today compete to attract western firms to shift their manufacturing bases. Obviously, this policy has startling successes, like China, which dominates the store shelves across the world. This sequential thinking, indeed a result of our left brain orientation, dominates the economic science, and possibly one gift that Karl Marx passed on to his successors. And, because of its origin, there is a broad consensus between the left and the right on this issue of steps in development process.

However, if we step aside economics and infuse the paradigm of business in development policy-making, the flaw in this logic becomes obvious. If I start a business today, I shall not look at my competitors and see how they moved during their lifetime. Instead, I shall try to see what they are trying to achieve from this point on, and how they are trying to achieve it, and model my strategies to get there faster, cheaper and better.

Obviously, a country is not a business and a country is not run for more profits, but the well-being of its citizens. This is an important difference, and this consideration should surely be weighed in deciding the policy direction. One key consideration in manufacturing focus of the developing economies were the creation of jobs which can absorb the unskilled underemployed agricultural labour, thereby reducing the incidence of poverty. This surely makes sense from this point of view, but this does not rule out the imperative to take a long term view of the world economy and setting a strategy to move up the value chain.

The other important difference between national policy making and that in a business is that the national policy making must have a longer term perspective than businesses, especially when we are talking about publicly traded businesses. The twin forces of joint stock and professional management, which make the modern business competitive and driven for innovation, essentially make the planning horizon relatively shorter term as well. However, the country must be governed with a longer term in mind, as it is important to ensure that the path we take creates a sustainable future for our children too. One of the key problems of democratic model is that it unsettles the short term/ long term balance in the policy making, and creates what one will call a 'term bias' in policy making. Of course, many emerging country democracies have strong dynastic tendencies and that help to soften the 'term bias' somewhat; however, in these democracies, the policy making still gets focused by the attention of the prime time TV than of any longer term consideration of the country's future.

However, as we discard the notion of a predictable future forever, both in the world of business [where the current refrain is how difficult it is draw up budgets and develop strategies] and in governance, there must be a future focus of the executive and the changing world must be understood and factored in policy making at all levels.

So, what does the Conceptual Age mean for developing economies? Clearly, just developing manufacturing operations and attracting investment to create jobs is not good enough; there needs to be an active and aggressive redesign of the education system to meet the challenges of the future and emerge as a competitive economy. This is obviously understood, as we watched many a developing economy introducing a good amount of computer exposure and training in their education system over last two decades. However, the point is that the world is already shifting beyond computers and it is not enough to go sequentially in terms of education policy.

Let me talk about one economy I know well, that of West Bengal. This is possibly politically incorrect to talk about one Indian state in isolation, but that is precisely the point. As India develops, the economic competition between the states is getting fiercer, and today it is not very unlike the competition between companies for greater share of customer dollars. Now, West Bengal has already lost the race. It has lost the race in manufacturing irretrievably, as its labour laws remain most antiquated and its labour unions most obstructive in the whole country. It has also lost the race for the information economy, as political considerations limited education opportunities in the state and handed the advantage to other states which happily provided the engineering and medicine study opportunities to Bengali graduates.

The current West Bengal government is trying to recreate its image as an industry-friendly government. They must. The current government, which was in power for last 32 hours uninterruptedly, and had only two Chief Ministers during this period, primarily survived on the goodwill it generated through its land ownership reform and the rural jobs and prosperity it generated. However, the state's economy, which has improved significantly since then in terms of agriculture, needs industrial employment now to absorb the surplus labour from the villages. So, the State Government has now adapted a policy of industry friendliness, and inviting various industrialists to set up manufacturing units in the state. They have also shown some interest in courting IT companies and allowing them favourable terms to invest in the state. These policies may create some jobs in the state and solve the government's problems in the next election, but it is evident that the state government does not have a long term development plan in place.

For example, it continues to ignore the issue of environmental pollution in its biggest city, Kolkata. They are unable to remove old, polluting vehicles from the street, unaware that this issue is intricately linked to the expansion of investment in the state. It is failing to reform and create new education opportunities, which it must, in order to catch up on its more successful neighbours. And, its government must be one of the key advocates of a common South Asian market, as it stands to gain the most with a tremendous expansion of the market to Bangladesh and from greater trade with Nepal and Bhutan, two landlocked countries dependent on the port of Kolkata.

However, this aside, the economy of West Bengal is uniquely poised for a Right Brain leap, to the leadership position in the creative industries in the country and in the wider South Asian region. Its people are already known for their creativity and thinking, and the education in West Bengal, for all its faults, is still intellectually poised. An expansion of market into Bangladesh, with its 150 million people to add with West Bengal's almost 90 million, will create a great common market for creative products from West Bengal and give it the essential base to create World Class R-directed businesses. What the government needs is an active Creative Industries policy, a open mind to attract India's brightest creative thinkers to set up shop in Bengal, promotion of its institutions, particularly Viswa Bharati, to the rest of the country and the region. It must show intent and action to take the right brain leap. It surely will appear a smart policy and the state does not have to play catch up with others in this area.

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