Kerabu

Europe, Innovation and the C Word

Umair Haque thinks Europe is poised to be the next "fountain of innovation", now that it's time to fill up all that new space we've made online with content:

Europe needs structures which create more liquid markets for entrepreneurship, sure. But that's a very small part of the next great economic game, truth be told; and Eurocrats are working to build them, in their own ponderous way.

But to focus solely on entrepreneurship is to miss the bigger picture. I think Europe is poised to be the world's next fountain of innovation; far more so than the US. Here's why.

Europe has two huge capital stocks that no one else in the world does: social and cultural capital.

I agree with Umair that Europe is a nice place to live, because of its superior cultural environment (as opposed to the mini-mall wasteland of the US). Yet... I think that Europe defines culture too narrowly, and too aesthetically. To me, the fact that Europe does not have an entrepreneurial ethos is itself a cultural shortcoming--if you define culture the way I do. I have lived in Europe, and in India back in the days of the closed economy, both places with rich cultures if your definition of culture favors the arts over commerce. But in both places, there's a quiet brutality to the socialist ethic that culture belongs strictly to the social and the artistic spheres.

Europe is responsible for this secularization (I mean this in the broadest sense) and subsequent ghettoisation of the arts--for making culture precious, and toothless. (Des Esseintes anyone?) The result is downright dissociative, a cultural sensibility marked by self-defeating superiority--paired with a sweet-and-sour cocktail of economic snobbery and self-pity.

Culture is about context and meaning, and should be expressed in the context of our economic life, where most of us spend the majority of our productive energies. And right now, the US is the world leader in business culture--more and more, we create, innovate and engage, rather than merely "working". It's the only place where work and commerce are talked about in terms of fulfillment, idealism and even pleasure. This, to me, is where the cultural innovations are occurring. Not in the arts, which are geared toward creative iteration, but not necessarily innovation. And not in Europe.

Tags: Europe, innovation

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It's the Rule of Law, Stupid

There's an excellent post on Rule of Law in India and its Economic Implications by Naveen Mandava at The Indian Economy Blog, which explains succinctly why a responsive and responsible judicial system is essential to a healthy economy.  Mandava cites two studies that show that the strength of the judiciary system in various states and territories in India correlates strongly with the regions' economic robustness. He then cites an alarming statistic: the Indian government itself is a party to 60% of all civil suits. In other words, the goverment can't get out of its own way. India's economy is booming. Imagine how strong it would be if the country aggressively pursued judicial reform?

This adds a dimension to something I've been writing and thinking about for a while now: that the rule of law, not democracy, is the necessary and sufficient condition for the emergence of an entrepreneurial economy. Democracy follows on both of those.

This means that judicial corruption and inefficiency is far more damaging to emerging economies than corruption in other branches of government.

It also means, dare I say it, that most of our foreign-policy activism that is aimed overtly at promoting "democratic" reform is wasted effort, in the absence of a foundation of judicial and economic reform.  One need only look at the absurdist "democratic" rise of Hamas to see that democracy can't really function properly in a corrupt legal and economic system.

While you were sleeping

From George Eby Mathew's Bangalore blog, Guruspeak:

I read three nuggets of data recently that prompted me to put this up for everyone:

Patent applications in China, India, Singapore, South Korea and Taiwan grew sevenfold between 1989 and 2001. During that same time, the U.S. increased its patent portfolio by only 116 percent.

The Economist Intelligence Unit, the research arm of The Economist magazine, published a survey in September 2004 showing that global executives plan to make more R&D investments in China than anyplace else over the next three years. The U.S. finished a distant second, followed closely by India.

In 2000, Asian universities accounted for nearly 1.2 million science and engineering degrees, compared to 850,000 in Europe and 500,000 in North America, according to the NSF. And in 2001, more than half the science and engineering postdoctoral positions in the U.S. were held by foreign-born scholars.

India, economics and me

Here is a speech by the Globalization Institute's Alex Singleton, delivered in April and addressed "to the Trade Justice Movement" at a debate organized by Christian Aid and Oxfam, two big proponents of "fair trade."  Singleton offers a succinct summary of the reasons "fair trade" isn't nearly so fair as free trade.  Singleton's writing, as always, is refreshingly dogma-free. 

He mentions India's former closed economy, where no foreign imports of any kind were allowed.  I lived in India for a couple of years (1988-89) with my Indian (now ex-)husband during that era and experienced firsthand the stultifying effect of such a bizarrely hermetic trade policy. The idea was that the absence of imports would keep domestic markets for Indian producers.  However, the meddlesome socialist government was reluctant to allow for any kind of domestic competition, either.

My ex-husband came from an entrepreneurial family, and his life's ambition was to build a food processing plant in his native state of Orissa, bringing jobs to the area, purchasing crops from local farmers, and earning India foreign exhange through the export of processed tomato and mango pulp.  All good, right?  A business plan even a communist could love. But the red tape involved in getting the project approved was overwhelming. It took him (if I remember correctly) around eight years to even break ground--or four times the length of our marriage.  If I'm honest, I'll admit that part of my disillusionment with him came from my dismay at what I took to be his foolishness in persisting--after two years, I did not really think the factory would ever be built, and came to see him as a self-indulgent Don Quixote.  I had a father with a startup in Silicon Valley, and the idea of spending years to to launch an extremely simple business--a ketchup factory!--struck me as absurd and loony. 

It's only a slight stretch to say that the Indian economy was what did in our marriage.  Looking back, though, I think that my frustrations at living there really could be summarized by the general suppression of opportunity and creativity on the part of the Indian government.  I knew how intrinsically entrepreneurial Indians really were back when Thomas Friedman was still in diapers--for all the good it did them. 

Most Indians who studied abroad during that era chose not to come back for the same reasons I eventually left--there wasn't anything there for them to do, no way to engage meaninfully in the project of society-building, which is, I believe, a basic human impulse.  Now, of course, all that has changed, and entrepreneurialism is taking off in India.  You can also buy a Coke now, though the closed-economy Indian equivalent, Thumbs Up, is better if you like a spicy cola, as do I.