Tyler Cowen: Forget Europe. Worry About India.

… these economically segregated islands of higher productivity suggest that success is achieved by separating oneself from the broader Indian economy, not by integrating with it.

India continues to have very sticky institutional problems. So argues Tyler Cowen in this NYT op-ed. Standout examples:

  • the reluctance to wholeheartedly embrace advanced agriculture, including GMO opportunities
  • the “license Raj” seems to be returning to “one of the world’s most unwieldy legal systems”
  • free markets are more the exception – example Wal-Mart has been given the cold shoulder

 Imagine how Wal-Mart would stimulate logistics and retail innovation! On agriculture Tyler wrote:

Agriculture employs about half of India’s work force, for example, yet the agricultural revolution that flourished in the 1970s has slowed. Crop yields remain stubbornly low, transport and water infrastructure is poor, and the legal system is hostile to foreign investment in basic agriculture and to modern agribusiness. Note that the earlier general growth bursts of Japan, South Korea and Taiwan were all preceded by significant gains in agricultural productivity.

For all of India’s economic progress, it is hard to find comparable stirrings in Indian agriculture today. It is estimated that half of all Indian children under the age of 5 suffer from malnutrition.

This is fundamentally the outcome of a dysfunctional political scheme. One possible way out is to launch one, hopefully several, of Paul Romer’s Charter Cities. The hungry, hard-working labor is certainly nearby and eager to migrate into such cities for better jobs. Is there suitable coastal land, appropriate for new links to global trade?

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