If society had been honest, the way up would’nt be so hard!

Surely any economy will benefit from having the correct ‘mix’ of large-scale industry and small scale industry. But the correctness of the ‘mix’ should only be determined by the marketplace. i.e. if Indians are going to benefit from large-scale ‘labor-intensive’ industry the market will ‘on its own’ create conditions to favor such industries. It is imperative that ‘society’ in any way shape or form, other than private enterprise, does NOT start ‘start supporting large, labor-intensive industries.’ In fact this is exactly the sort of backwards economic thinking that got India started of on the wrong foot.

The problem is whether the Government of India prevents the market from creating the optimal mix. They could inhibit this directly (e.g. corruption & demanding bribes) or indirectly ( lack of infra, licensing, etc. that increase the cost of firm creation).

Both of these create a bias towards the very large firms (who can afford full time staff to deal with bribes, etc.) and VERY small firms (who stay under the govt radar & don’t require as much support infra like roads, electricity, etc.)

Vinod, how does your idea re: microloans subverting capitalism jive with groups like Compartamos?

err… I’m not saying that microloans subvert capitalism. In fact, I’m arguing the opposite, they work so well because they reengineer charity by adding capitalist principles to it.

I’m a fan of them.

Are you only counting “job creation” as those endeavors that lead to the creation of a physical plant with a manager/employee structure (e.g., a factory)?

I’m citing the evidence from several sources that, in all developed economies, most people – particularly those above the poverty line – are employees of a larger organization rather than sole proprieter entrepreneurs.

The world needs both for sure but the evidence is that it needs more of the former to bring a country out of poverty.

This is the segment Microloans “miss”.

I can’t understand how gross human rights violations and slave wage economies (which may subvert also very low paying but subsistence economies or non-extractive/abusive alternate industries) are inherently more virtuous or preferred because of their purported scale.

because 1) not all companies commit “gross human rights violations” and pay “slave wages” (reportage aside, in the grand scheme of things as long as the cost of starting a firm is small, and employment is at-will, it’s a woefully small % of companies that truly engage in those shenanigans…. )

2) as the evidence notes above, economies that have firms (particular mid-size) emerge out of poverty. And getting out of poverty is incredibly virtuous.

see, sepiamutiny = 1 blog employing 10 bloggers. now, do i want to click on 10 individual blogs or go to 1 blog ?

similarly, factory = 1 workplace employing 1000 employees whereas microfinance = 1000 housewives with 1000 sewing machines do i want to buy from 1 factory or go door to door checking out 1000 housewives & their wares, especially when their husbands aren’t home ?

I met Mohammed Yunus a few years ago when he visited my business school, before he won the Nobel. I specifically asked him if he thought micro-credit would work in India. He said that what India needs is not micro-credit, but micro-finance, a much larger suite of financial services that encompasses the former.

Roger23 (post #21): Good point. I am hopeful that the GoI will react in the same way it did with the IT boom, which is to take a passive support role, and let the private sector work its magic.

Dont you think that it might be harder now for poor countries to make it? This world is so connected that as soon as a rich guy from the west hears about a new way to make money in some poor country then he is the one that ends up making all of the money and not the poor people. Are the folks that make Nike shows painting the town red were they live? Are the kids that make the shirt I am wearing now buying fancy cars and partying with the finest strippers?