India’s thinking is dominated by English, and it’s time to undo this: Zoho’s Sridhar Vembu

1/ India’s thinking is dominated by English, which means it is shaped by what goes on in the US and UK. I will explore some consequences here.

First let’s come to economics. Both the US and UK are highly financialized, “post-industrial” or “post- manufacturing” economies.

2/ US/UK run massive trade deficits in manufactured goods & export services (intellectual property or financial services) to partly balance the goods deficit, but the resulting net trade deficit is still huge and has kept growing.

How do they pay for this ever-growing deficit?

3/ They issue *bonds denominated in their own currencies* to pay for imports. This is very crucial and has allowed them to continue to issue debt far beyond what countries like India can do.

This “privilege” came at the huge price tag of decimating their manufacturing sectors.

4/ Economists like Rajan think of US/UK manufacturing decline as the norm and advice India to seek to export services, to become more like them.

The assumption is “IP/Finance jobs pay well and manufacturing jobs will disappear” even for India because that happened in the US/UK.

5/ They never questioned whether “IP/Finance pay well” is some kind of immutable law of economics or merely an artifact of running massive trade deficits for decades, which entirely distorted their domestic economies.

Manufacturing decline created massive increase in inequality.

6/ Manuf. decline increased inequality by lowering real wages for former factory workers forced to seek alternative low end services jobs.

Finance industry benefited massively from recycling bonds issued to foreigners to domestic asset markets and so Finance paid good wages.

7/ This recycling of trade deficits to domestic asset markets also caused massive asset bubbles in US/UK & mainstream economists celebrated that as increasing “wealth”.

Asset bubbles increased inequality even further & it was already increasing due to manufacturing decline.

8/ Indian-origin mainstream economists came of age during this era. Their entire conceptual framework, all their models, were dominated by these decades of US/UK experience.

It is this experience we risk over-learning from in India.
Now token-distribition jobs and their effect.

9/ US/UK created a huge number of “token distribution jobs” whose purpose is to create income to claim imported goods. Simply distributing printed money would have worked just as well, as demonstrated during the pandemic.

College majors like Psychology rose to feed these jobs.

10/ Indian elite has overlearned from the US/UK experience & India’s upper middle class kids want to spend lots of money getting degrees in basically bullshit (to get those “token distribution jobs” like their cohorts in the US/UK).

Now the “cousin abroad syndrome”.

11/ What influnces the educational choices of upper middle class kids in India? The cousin abroad syndrome. They want to emulate their cousins abroad and study Psychology, Sociology, Economics and not be caught dead studying uncool Mechanical/Electrical/ Aerospace Engineering.
12/ Summary: we have overlearned & overapplied the experiences of US/UK in our thinking. The effect is subconscious & deep. It is in the very air we breathe, so to speak.

We have to undo this distortion of our very thought patterns and that is hard. That is why I write.

🙏

Follow: @svembu

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